<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 1-11071
UGI CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2668356
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
UGI CORPORATION
460 North Gulph Road, King of Prussia, PA
(Address of principal executive offices)
19406
(Zip Code)
(610) 337-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At April 30 1998, there were 33,036,394 shares of UGI Corporation
Common Stock, without par value, outstanding.
<PAGE> 2
UGI CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1998,
September 30, 1997 and March 31, 1997 1
Condensed Consolidated Statements of Income for the three,
six and twelve months ended March 31, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows for the
six and twelve months ended March 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 27
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 28
Signatures 29
</TABLE>
<PAGE> 3
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 78.4 $ 64.0 $ 85.9
Short-term investments, at cost which approximates market value 70.0 65.4 67.8
Accounts receivable (less allowances for doubtful accounts of
$13.1, $11.3 and $13.6, respectively) 167.5 110.6 205.0
Accrued utility revenues 13.8 7.7 18.2
Inventories 62.2 95.6 56.7
Deferred income taxes 24.5 20.3 22.9
Prepaid expenses and other current assets 20.8 40.3 22.7
----------- ----------- -----------
Total current assets 437.2 403.9 479.2
Property, plant and equipment, at cost (less accumulated depreciation
and amortization of $436.5, $410.1 and $395.1, respectively) 992.6 987.2 977.4
Intangible assets (less accumulated amortization of $129.3, $116.7 and
$104.5, respectively) 669.1 677.9 682.6
Regulatory income tax asset 45.2 44.4 43.3
Other assets 40.1 38.3 37.5
----------- ----------- -----------
Total assets $ 2,184.2 $ 2,151.7 $ 2,220.0
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long-term debt - Propane $ 6.7 $ 6.7 $ 9.8
Current maturities of long-term debt - Utilities 7.1 17.1 17.1
Current maturities of long-term debt - other 0.4 0.4 0.4
Current portion of UGI Utilities redeemable preferred stock 15.2 3.0 -
Bank loans - Propane - 28.0 -
Bank loans - Utilities 42.9 67.0 95.0
Accounts payable 75.9 103.2 81.3
Other current liabilities 205.3 179.1 196.3
----------- ----------- -----------
Total current liabilities 353.5 404.5 399.9
Long-term debt - Propane 695.2 684.4 687.8
Long-term debt - Utilities 187.2 152.2 139.3
Long-term debt - other 8.0 8.2 8.4
Deferred income taxes 156.9 152.5 152.4
Other noncurrent liabilities 75.8 75.1 75.8
Commitments and contingencies
Minority interest in AmeriGas Partners 275.8 266.5 304.7
UGI Utilities redeemable preferred stock 20.0 32.2 35.2
Common stockholders' equity:
Common Stock, without par value (authorized - 100,000,000 shares;
issued - 33,198,731 shares) 393.8 393.7 392.3
Retained earnings (accumulated deficit) 22.4 (9.2) 26.7
----------- ----------- -----------
416.2 384.5 419.0
Less treasury stock, at cost 4.4 8.4 2.5
----------- ----------- -----------
Total common stockholders' equity 411.8 376.1 416.5
----------- ----------- -----------
Total liabilities and stockholders' equity $ 2,184.2 $ 2,151.7 $ 2,220.0
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE> 4
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
---------------------- ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Propane $ 306.2 $ 371.2 $ 609.1 $ 731.3 $ 955.6 $1,083.9
Utilities 152.3 173.2 287.8 307.4 441.6 464.3
Energy marketing 29.8 32.0 62.6 67.3 98.3 105.9
--------- --------- --------- --------- --------- ---------
488.3 576.4 959.5 1,106.0 1,495.5 1,654.1
--------- --------- --------- --------- --------- ---------
Costs and expenses:
Propane cost of sales 146.8 215.8 310.0 420.5 489.9 618.2
Utilities - gas, fuel and purchased power 80.7 94.3 153.2 163.6 228.6 242.9
Other cost of sales 28.2 31.3 59.8 65.4 93.8 102.5
Operating and administrative expenses 117.0 113.9 226.0 227.1 438.7 439.3
Depreciation and amortization 21.9 22.0 43.5 43.7 85.9 86.7
Miscellaneous income, net (4.0) (8.6) (8.3) (11.6) (19.3) (18.1)
--------- --------- --------- --------- --------- ---------
390.6 468.7 784.2 908.7 1,317.6 1,471.5
--------- --------- --------- --------- --------- ---------
Operating income 97.7 107.7 175.3 197.3 177.9 182.6
Interest expense (21.5) (21.4) (42.9) (42.5) (83.5) (82.2)
Minority interest in AmeriGas Partners (17.7) (20.2) (28.8) (36.9) (10.2) (12.5)
--------- --------- --------- --------- --------- ---------
Income before income taxes and
subsidiary preferred stock dividends 58.5 66.1 103.6 117.9 84.2 87.9
Income taxes (26.6) (29.6) (46.2) (52.8) (37.0) (37.7)
Dividends on UGI Utilities Series
Preferred Stock (0.7) (0.7) (1.4) (1.4) (2.8) (2.8)
--------- --------- --------- --------- --------- ---------
Net income $ 31.2 $ 35.8 $ 56.0 $ 63.7 $ 44.4 $ 47.4
========= ========= ========= ========= ========= =========
Earnings per share:
Basic $ 0.95 $ 1.08 $ 1.70 $ 1.92 $ 1.35 $ 1.43
========= ========= ========= ========= ========= =========
Diluted $ 0.94 $ 1.08 $ 1.69 $ 1.92 $ 1.34 $ 1.43
========= ========= ========= ========= ========= =========
Average common shares outstanding:
Basic 33.059 33.122 32.992 33.131 32.979 33.118
========= ========= ========= ========= ========= =========
Diluted 33.248 33.255 33.183 33.246 33.139 33.231
========= ========= ========= ========= ========= =========
Dividends declared per share $ 0.36 $ 0.355 $ 0.72 $ 0.71 $ 1.44 $ 1.42
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 5
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
March 31, March 31,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 56.0 $ 63.7 $ 44.4 $ 47.4
Reconcile to net cash provided by operating activities:
Depreciation and amortization 43.5 43.7 85.9 86.7
Minority interest in AmeriGas Partners 28.8 36.9 10.2 12.5
Deferred income taxes, net (1.9) (2.9) (1.2) 8.4
Other, net 4.4 (0.4) 8.9 (5.2)
--------- --------- --------- ---------
130.8 141.0 148.2 149.8
Net change in:
Accounts receivable and accrued utility revenues (68.6) (107.0) 31.6 (0.7)
Inventories and prepaid propane purchases 55.4 56.8 (5.0) 13.9
Deferred fuel adjustments 11.7 13.9 2.4 (3.0)
Accounts payable (27.7) (13.4) (5.8) (7.8)
Other current assets and liabilities 12.2 18.7 4.4 (4.8)
--------- --------- --------- ---------
Net cash provided by operating activities 113.8 110.0 175.8 147.4
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (31.3) (31.8) (68.3) (62.9)
Net proceeds from disposals of assets 3.8 8.1 10.1 10.3
Acquisitions of businesses, net of cash acquired (5.6) (2.7) (14.5) (22.1)
Short-term investments increase (4.6) (44.6) (47.4) (44.7)
Other, net (3.5) 0.5 38.9 0.5
--------- --------- --------- ---------
Net cash used by investing activities (41.2) (70.5) (81.2) (118.9)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on Common Stock (23.7) (23.5) (47.4) (46.8)
Distributions on Partnership public Common Units (19.5) (19.4) (38.9) (38.7)
Issuance of long-term debt 48.0 7.7 69.2 30.7
Repayment of long-term debt (12.8) (20.3) (21.9) (29.2)
Propane bank loans decrease (28.0) (15.0) (7.0) -
UGI Utilities bank loans increase (decrease) (24.1) 44.5 (52.1) 69.5
Issuance of Common Stock 6.0 6.2 11.5 10.9
Repurchases of Common Stock (4.1) (7.8) (15.5) (11.1)
--------- --------- --------- ---------
Net cash used by financing activities (58.2) (27.6) (102.1) (14.7)
--------- --------- --------- ---------
Cash and cash equivalents increase (decrease) $ 14.4 $ 11.9 $ (7.5) $ 13.8
========= ========= ========= =========
Cash and cash equivalents:
End of period $ 78.4 $ 85.9 $ 78.4 $ 85.9
Beginning of period 64.0 74.0 85.9 72.1
--------- --------- --------- ---------
Increase (decrease) $ 14.4 $ 11.9 $ (7.5) $ 13.8
========= ========= ========= =========
</TABLE>
During the twelve months ended March 31, 1998 and 1997, UGI Utilities, Inc. paid
cash dividends to UGI of $12.6 and $45.4, respectively. During the twelve months
ended March 31, 1998 and 1997, AmeriGas, Inc. paid cash dividends to UGI of
$56.5 and $49.0, respectively. During those same periods, UGI paid cash
dividends to holders of Common Stock of $47.4 and $46.8, respectively. The
ability of UGI to declare and pay cash dividends on its Common Stock is
dependent upon its cash balances and the receipt of cash dividends from its
wholly owned subsidiaries, principally UGI Utilities, Inc. and AmeriGas, Inc.
AmeriGas's ability to pay dividends is dependent upon distributions paid by the
Partnership.
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 6
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Millions of dollars, except per share amounts)
1. BASIS OF PRESENTATION
UGI Corporation (UGI) is a holding company with two principal
businesses. UGI's utility business is conducted through a wholly
owned subsidiary, UGI Utilities, Inc. (UGI Utilities), which owns and
operates a natural gas distribution utility (Gas Utility) in parts of
eastern and southeastern Pennsylvania and an electric utility
(Electric Utility) in northeastern Pennsylvania (together referred to
herein as "Utilities"). UGI conducts a national propane distribution
business through AmeriGas Partners, L.P. (AmeriGas Partners) and its
operating subsidiary, AmeriGas Propane, L.P. (the "Operating
Partnership"), both of which are Delaware limited partnerships. The
Operating Partnership is the largest retail propane distributor in
the United States serving residential, commercial, industrial, motor
fuel and agricultural customers from locations in 45 states,
including Alaska and Hawaii. UGI also conducts an energy marketing
business through its wholly owned subsidiary, UGI Enterprises, Inc.
(UGI Enterprises).
At March 31, 1998, UGI, through wholly owned subsidiaries, held an
effective 2% general partner interest and a 56.6% limited partnership
interest in the Operating Partnership. This limited partner interest
is evidenced by common units (Common Units) and subordinated units
(Subordinated Units) representing limited partner interests in
AmeriGas Partners. The remaining 41.4% effective interest in the
Operating Partnership is publicly held. AmeriGas Partners and the
Operating Partnership are collectively referred to herein as the
Partnership. A second-tier subsidiary of UGI serves as the general
partner of AmeriGas Partners and the Operating Partnership.
The condensed consolidated financial statements include the accounts
of UGI and its majority-owned subsidiaries (collectively, "the
Company"). All significant intercompany accounts and transactions
have been eliminated in consolidation. The public unitholders'
interest in AmeriGas Partners' results of operations and net assets
is reflected as minority interest in the condensed consolidated
statements of income and balance sheets. Certain prior-period
balances have been reclassified to conform with the current period
presentation.
The accompanying condensed consolidated financial statements are
unaudited and have been prepared in accordance with the rules and
regulations of the U.S. Securities and Exchange Commission. They
include all adjustments which the Company considers necessary for a
fair statement of the results for the interim periods presented. Such
adjustments consisted only of normal recurring items unless otherwise
disclosed. These financial statements should be read in conjunction
with the financial statements and the
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<PAGE> 7
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
notes thereto included in the Company's Annual Report on Form 10-K
for the year ended September 30, 1997. Due to the seasonal nature of
the Company's businesses, the results of operations for interim
periods are not necessarily indicative of the results to be expected
for a full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
-5-
<PAGE> 8
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
2. SEGMENT INFORMATION
Information on revenues, operating income (loss), depreciation and
amortization, identifiable assets and certain operating statistics by
business segment for the periods presented follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
---------------------- ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
- --------
Propane $ 306.2 $ 371.2 $ 609.1 $ 731.3 $ 955.6 $1,083.9
Gas utility 133.2 153.3 250.1 269.1 370.1 392.8
Electric utility 19.1 19.9 37.7 38.3 71.5 71.5
Energy marketing 29.8 32.0 62.6 67.3 98.3 105.9
--------- --------- --------- --------- --------- ---------
Total $ 488.3 $ 576.4 $ 959.5 $1,106.0 $1,495.5 $1,654.1
========= ========= ========= ========= ========= =========
OPERATING INCOME (LOSS)
- -----------------------
Propane $ 61.0 $ 67.7 $ 106.5 $ 126.9 $ 96.7 $ 102.4
Gas utility 33.7 38.9 62.0 67.5 69.3 74.2
Electric utility 3.5 3.3 6.6 6.3 11.0 10.0
Energy marketing 0.9 0.3 1.4 1.1 2.0 1.6
Corporate general and other (1.4) (2.5) (1.2) (4.5) (1.1) (5.6)
--------- --------- --------- --------- --------- ---------
Total $ 97.7 $ 107.7 $ 175.3 $ 197.3 $ 177.9 $ 182.6
========= ========= ========= ========= ========= =========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Propane - depreciation $ 9.7 $ 9.7 $ 19.3 $ 19.3 $ 38.6 $ 38.5
Propane - amortization 6.6 6.5 13.1 12.9 25.9 25.7
Gas utility 4.6 4.6 9.0 9.2 16.9 18.1
Electric utility 1.0 1.1 1.9 2.1 4.1 4.1
Corporate general and other - 0.1 0.2 0.2 0.4 0.3
--------- --------- --------- --------- --------- ---------
Total $ 21.9 $ 22.0 $ 43.5 $ 43.7 $ 85.9 $ 86.7
========= ========= ========= ========= ========= =========
IDENTIFIABLE ASSETS
- -------------------
(at period end)
Propane $1,323.9 $1,393.3 $1,323.9 $1,393.3 $1,323.9 $1,393.3
Gas utility 617.5 605.7 617.5 605.7 617.5 605.7
Electric utility 87.8 88.2 87.8 88.2 87.8 88.2
Energy marketing 20.1 9.5 20.1 9.5 20.1 9.5
Corporate general and other 134.9 123.3 134.9 123.3 134.9 123.3
--------- --------- --------- --------- --------- ---------
Total $2,184.2 $2,220.0 $2,184.2 $2,220.0 $2,184.2 $2,220.0
========= ========= ========= ========= ========= =========
OPERATING STATISTICS
- --------------------
Propane sales - millions of gallons:
Retail 265.7 267.6 514.3 519.3 802.4 815.1
Wholesale 60.8 73.5 143.5 142.1 220.0 236.6
Natural gas system throughput -
billions of cubic feet 25.9 27.9 48.5 52.5 76.3 82.5
Electric sales and transportation -
millions of kilowatt hours 237.2 248.6 464.9 472.3 861.1 871.4
</TABLE>
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<PAGE> 9
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
3. ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT
On August 7, 1997, Electric Utility filed with the Pennsylvania
Public Utility Commission (PUC) its restructuring plan pursuant to
the Electricity Generation Customer Choice and Competition Act
(Customer Choice Act). The restructuring plan includes a claim for
the recovery of $34.4 million for stranded costs during the period
January 1, 1999 through December 31, 2002. The claim is primarily for
the recovery of: (1) plant investments in excess of estimated
competitive market value and electric generation facility retirement
costs; (2) potential costs associated with existing power purchase
agreements; and (3) regulatory assets (principally income taxes of
approximately $.5 million) recoverable from ratepayers under current
regulatory practice. The claim also seeks to establish a recovery
mechanism that would permit the recovery of up to an additional $28
million of costs associated with the buy out or implementation of a
December 1993 agreement to purchase power from an independent power
producer. The PUC is expected to take action on Electric Utility's
filing during the summer of 1998.
The Customer Choice Act also authorized the PUC to implement pilot
customer choice programs for up to five percent of the peak load of
each customer class. In accordance with PUC directives, Electric
Utility implemented such a pilot program effective November 1, 1997.
The implementation of the pilot program did not have a material
effect on Electric Utility's results of operations.
The Financial Accounting Standards Board's (FASB's) Emerging Issues
Task Force (EITF) has addressed the appropriateness of the continued
application of Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation" (SFAS
71) by utilities in states that have enacted restructuring
legislation similar to the Customer Choice Act. SFAS 71 permits the
recording of costs (regulatory assets) that have been, or are
expected to be, allowed in the ratesetting process in a period
different from the period in which such costs would be charged to
expense by an unregulated enterprise. The EITF issued its statement
97-4, "Deregulation of the Pricing of Electricity - Issues Related to
the Application of FASB Statements 71 and 101" which concluded that
utilities should discontinue application of SFAS 71 for the
generation portion of their business when a restructuring plan is in
place and its terms are known. For UGI Utilities, this will be upon
the issuance of the PUC's restructuring order which is expected to
occur during the summer of 1998. If pursuant to the restructuring
plan such electric generation assets no longer meet the criteria of
SFAS 71, any related regulatory assets would be written-off unless
the form of transition cost recovery under the plan meets the
requirements under generally accepted accounting principles for
continued accounting as regulatory assets during such recovery
period. Any generation-related, long-lived fixed and intangible
assets would be evaluated for impairment under the
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<PAGE> 10
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Based upon an evaluation of the various factors and conditions
affecting future cost recovery, the Company does not expect the
adoption of a PUC restructuring order to have a material adverse
effect on its financial condition or results of operations.
4. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to certain lease guarantee obligations
of Petrolane Incorporated (Petrolane) relating to Petrolane's
divestiture of nonpropane operations prior to its 1989 acquisition by
QFB Partners. These leases are currently estimated to aggregate
approximately $60 million. The leases expire through 2010, and some
of them are currently in default. The Partnership has succeeded to
the indemnity agreement of Petrolane by which Texas Eastern
Corporation (Texas Eastern), a prior owner of Petrolane, agreed to
indemnify Petrolane against any liabilities arising out of the
conduct of businesses that do not relate to, and are not a part of,
the propane business, including lease guarantees. To date, Texas
Eastern has directly satisfied defaulted lease obligations without
the Partnership having to honor its guarantee. The Partnership
believes the probability that it will be required to directly satisfy
such lease obligations is remote.
In addition, the Partnership has succeeded to Petrolane's agreement
to indemnify Shell Petroleum N.V. (Shell) for various scheduled
claims that were pending against Tropigas de Puerto Rico (Tropigas).
This indemnification agreement had been entered into by Petrolane in
conjunction with Petrolane's sale of the international operations of
Tropigas to Shell in 1989. The Partnership also succeeded to
Petrolane's right to seek indemnity on these claims first from
International Controls Corp., which sold Tropigas to Petrolane, and
then from Texas Eastern. To date, neither the Partnership nor
Petrolane has paid any sums under this indemnity, but several claims
by Shell, including claims related to certain antitrust actions
aggregating at least $68 million, remain pending.
The Company, along with other companies, has been named as a
potentially responsible party (PRP) in several administrative
proceedings and private party recovery actions for the cleanup or
recovery of costs associated with cleanup of various waste sites,
including some Superfund sites. In addition, the Company has
identified environmental contamination at several of its properties
and has voluntarily undertaken investigation and, as appropriate,
remediation of these sites in cooperation with appropriate
environmental agencies or private parties.
At sites in which a former subsidiary of UGI Utilities operated a
manufactured gas plant, UGI Utilities should not have significant
liability because UGI Utilities generally is not
-8-
<PAGE> 11
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
legally liable for the obligations of its subsidiaries. Under certain
circumstances, however, courts have found parent companies liable for
environmental damage caused by subsidiary companies when the parent
company exercised such substantial control over the subsidiary that
the court concluded that the parent company either (i) itself
operated the facility causing the environmental damage or (ii)
otherwise so controlled the subsidiary that the subsidiary's separate
corporate form should be disregarded. There could be, therefore,
significant future costs of an uncertain amount associated with
environmental damage caused by manufactured gas plants that UGI
Utilities owned or directly operated, or that were owned or operated
by former subsidiaries of UGI Utilities, if a court were to conclude
that the level of control exercised by UGI Utilities over the
subsidiary satisfies the standard described above. In many
circumstances where UGI Utilities may be liable, expenditures may not
be reasonably quantifiable because of a number of factors, including
various costs associated with potential remedial alternatives, the
unknown number of other potentially responsible parties involved and
their ability to contribute to the costs of investigation and
remediation, and changing environmental laws and regulations.
The Company's policy is to accrue environmental investigation and
cleanup costs when it is probable that a liability exists and the
amount or range of amounts can be reasonably estimated. The Company
intends to pursue recovery of any incurred costs through all
appropriate means, including regulatory relief, although such
recovery cannot be assured. Gas Utility is currently permitted to
amortize as removal costs site-specific environmental investigation
and remediation costs, net of related third-party payments,
associated with Pennsylvania sites. Gas Utility will be permitted to
include in rates, through future base rate proceedings, a five-year
average of such prudently incurred removal costs.
In addition to these environmental matters, there are various other
pending claims and legal actions arising in the normal course of the
Company's businesses. The final results of environmental and other
matters cannot be predicted with certainty. However, it is reasonably
possible that some of them could be resolved unfavorably to the
Company. Management believes, after consultation with counsel, that
damages or settlements, if any, recovered by the plaintiffs in such
claims or actions will not have a material adverse effect on the
Company's financial position but could be material to operating
results or cash flows in future periods depending on the nature and
timing of future developments with respect to these matters and the
amounts of future operating results and cash flows.
-9-
<PAGE> 12
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
5. EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share" (SFAS 128)
during the quarter ended December 31, 1997. SFAS 128 establishes
standards for computing and presenting earnings per share and
simplifies the previous standards for computing earnings per share
contained in Accounting Principles Board Opinion No. 15. SFAS 128
requires restatement of all prior-period earnings per share data
presented. The following table reflects the reconciliation of the
numerators and the denominators of the basic and diluted earnings per
share computations for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------------ ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Numerator:
Net income (applicable to basic
and diluted earnings per share) $ 31.2 $ 35.8 $ 56.0 $ 63.7 $ 44.4 $ 47.4
========== ========== ========== ========== ========== ==========
Denominator (millions of shares):
Basic earnings per share 33.059 33.122 32.992 33.131 32.979 33.118
Incremental shares issuable upon
exercise of stock options 0.189 0.133 0.191 0.115 0.160 0.113
---------- ---------- ---------- ---------- ---------- ----------
Diluted earnings per share 33.248 33.255 33.183 33.246 33.139 33.231
========== ========== ========== ========== ========== ==========
Basic earnings per common share $ 0.95 $ 1.08 $ 1.70 $ 1.92 $ 1.35 $ 1.43
========== ========== ========== ========== ========== ==========
Diluted earnings per common share $ 0.94 $ 1.08 $ 1.69 $ 1.92 $ 1.34 $ 1.43
========== ========== ========== ========== ========== ==========
</TABLE>
-10-
<PAGE> 13
UGI CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare the Company's results of operations for the three
months ended March 31, 1998 (1998 three-month period) with the three months
ended March 31, 1997 (1997 three-month period); the six months ended March 31,
1998 (1998 six-month period) with the six months ended March 31, 1997 (1997
six-month period); and the twelve months ended March 31, 1998 (1998 twelve-month
period) with the twelve months ended March 31, 1997 (1997 twelve-month period).
The Company's results of operations should be read in conjunction with the
segment information included in Note 2 to Condensed Consolidated Financial
Statements. Due to the seasonality of the Company's businesses, the results of
operations for interim periods are not necessarily indicative of results to be
expected for a full year.
1998 THREE-MONTH PERIOD COMPARED WITH 1997 THREE-MONTH PERIOD
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1998 1997 Decrease
- ----------------------------------------------------------------------------------------------------------
(Millions of dollars, except per share)
<S> <C> <C> <C> <C>
Revenues $ 488.3 $ 576.4 $ (88.1) (15.3)%
Total margin $ 226.5 $ 227.7 $ (1.2) (.5)%
Operating income $ 97.7 $ 107.7 $ (10.0) (9.3)%
Net income $ 31.2 $ 35.8 $ (4.6) (12.8)%
Net income per share (diluted) $ .94 $ 1.08 $ (.14) (13.0)%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The Company's net income in the 1998 three-month period decreased principally
due to the effects of warmer weather on Gas Utility results. In addition, the
Partnership's results reflect the effects of warmer weather, higher expenses
associated with business development activities and a decrease in other income.
PROPANE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 1998 1997 (Decrease)
- ----------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Retail gallons sold - millions 265.7 267.6 (1.9) (.7)%
Revenues $ 306.2 $ 371.2 $ (65.0) (17.5)%
Total margin $ 159.4 $ 155.4 $ 4.0 2.6 %
Operating income $ 61.0 $ 67.7 $ (6.7) (9.9)%
EBITDA(a) $ 77.3 $ 83.9 $ (6.6) (7.9)%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE> 14
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(a) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an
alternative to cash flow (as a measure of liquidity or ability to
service debt obligations) and is not a measure of performance or
financial condition under generally accepted accounting principles.
Retail volumes of propane sold during the 1998 three-month period decreased
slightly from volumes sold during the prior-year period. Based upon degree day
information provided by the National Oceanic and Atmospheric Administration
(NOAA) for 335 airports in the continental U.S., weather during the 1998
three-month period was 14% warmer than normal and 8% warmer than last year.
Wholesale volumes of propane sold declined 12.7 million gallons to 60.8 million
gallons in the 1998 three-month period due in part to the warmer weather.
Total revenues from retail propane sales decreased $48.2 million to $260.3
million during the 1998 three-month period reflecting a $46.0 million decrease
as a result of lower average retail propane selling prices and a $2.2 million
decrease as a result of lower volumes sold. The lower average retail propane
selling prices reflect lower 1998 three-month period propane product costs.
Wholesale propane revenues decreased $16.8 million to $27.3 million due to lower
average wholesale propane selling prices and the previously mentioned lower
wholesale volumes sold. Other revenues, principally reflecting terminal and
storage revenues and sales of appliances, were virtually unchanged in the 1998
three-month period.
Total margin increased $4.0 million in the 1998 three-month period as declining
propane product costs resulted in slightly higher retail unit margins. Although
wholesale volumes were lower in the 1998 three-month period, such decrease did
not have a material impact on the change in total margin because wholesale unit
margins are typically very small.
The decrease in EBITDA and operating income during the 1998 three-month period
reflects a $5.8 million decrease in Partnership other income and slightly higher
operating expenses partially offset by higher total margin. Miscellaneous income
in the 1997 three-month period includes $4.7 million of income from the sale of
the Partnership's 50% interest in Atlantic Energy, Inc. (Atlantic Energy), which
owns and operates a liquefied petroleum gas storage terminal in Virginia, higher
finance charge income and higher income from sales of fixed assets. Operating
expenses of the Partnership increased $4.5 million reflecting, among other
things, higher employee compensation and benefit expenses and increased
equipment refurbishment and maintenance expenses due in large part to
acquisitions and new business development activities.
-12-
<PAGE> 15
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
UTILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 1998 1997 (Decrease)
- -------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
GAS UTILITY:
Natural gas system throughput - bcf 25.9 27.9 (2.0) (7.2)%
Degree days - % warmer than normal (24.0) (10.0) - -
Revenues $133.2 $153.3 $(20.1) (13.1)%
Total margin (a) $ 56.2 $ 62.2 $ (6.0) (9.6)%
Operating income $ 33.7 $ 38.9 $ (5.2) (13.4)%
ELECTRIC UTILITY:
Electric sales and transportation - gwh 237.2 248.6 (11.4) (4.6)%
Revenues $ 19.1 $ 19.9 $ (.8) (4.0)%
Total margin (a) $ 9.3 $ 9.4 $ (.1) (1.1)%
Operating income $ 3.5 $ 3.3 $ .2 6.1 %
- -------------------------------------------------------------------------------------------------------
</TABLE>
bcf - billions of cubic feet. gwh - millions of kilowatt hours.
(a) Gas and Electric utilities' total margin represents total revenues
less cost of sales and revenue-related taxes.
GAS UTILITY. Weather in the Gas Utility service area during the three months
ended March 31, 1998 was 24.0% warmer than normal compared with weather that was
10.0% warmer than normal in the prior-year period. As a result, total system
throughput decreased 7.2% during the 1998 three-month period principally
reflecting the warmer weather's effect on firm-residential, firm-commercial and
firm-industrial (collectively, "core market") sales.
The decrease in Gas Utility's total revenues during the 1998 three-month period
is due principally to a $20.7 million decrease in core market revenues resulting
primarily from the lower volumes sold. Cost of gas sold by the Gas Utility was
$71.7 million during the 1998 three-month period, a decrease of $12.9 million
from the prior-year period, reflecting the decrease in core market sales.
Gas Utility total margin during the 1998 three-month period was $6.0 million
lower than in the prior-year period principally reflecting a $6.3 million
decrease in total margin from core market customers. Total margin from Gas
Utility interruptible customers during the 1998 three-month period was slightly
lower than the prior-year period, notwithstanding an increase in throughput, as
the price of alternative fuels, principally oil, declined relative to gas
prices, resulting in lower interruptible transportation rates.
-13-
<PAGE> 16
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Although 1998 three-month period total margin decreased $6.0 million from the
prior-year period, Gas Utility operating income decreased $5.2 million
principally as a result of lower general and administrative expenses and
slightly higher miscellaneous income.
ELECTRIC UTILITY. Electric Utility sales and transportation decreased during the
1998 three-month period on weather which was 18.2% warmer than last year.
Electric Utility revenues decreased $.8 million during the three months ended
March 31, 1998 principally as a result of the warmer weather and customers
choosing alternative electric generation suppliers pursuant to the Customer
Choice Act pilot program. Under transportation service, Electric Utility bills
only for the transportation of electricity but not for the cost of the
electricity itself. Electric Utility cost of sales decreased $.8 million as a
result of the warmer weather and the effects of the pilot program on sales of
electricity. Pursuant to the provisions of the Customer Choice Act, Electric
Utility's rates were capped at levels in effect on January 1, 1997.
Consequently, the rates Electric Utility charged customers were the same in both
periods.
Although Electric Utility sales and transportation were lower in the 1998
three-month period, total margin and operating income were virtually unchanged.
Electric Utility's rates, including rates associated with the recovery of energy
costs, have been capped as of January 1, 1997, but the rate caps did not
materially affect Electric Utility results during the 1998 three-month period.
In addition, the implementation of Electric Utility's pilot program pursuant to
the Customer Choice Act did not have a material effect on Electric Utility's
results of operations.
ENERGY MARKETING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 1998 1997 (Decrease)
- --------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Revenues $29.8 $32.0 $ (2.2) (6.9)%
Total margin $ 1.6 $ .7 $ .9 128.6 %
Operating income $ .9 $ .3 $ .6 200.0 %
- --------------------------------------------------------------------------------------------------
</TABLE>
Total revenues from energy marketing in the 1998 three-month period decreased,
notwithstanding slightly higher billed volumes, due to the effects of lower
natural gas contractual selling prices. The increase in billed volumes was due
principally to an increase in volume from customers outside Gas Utility's
distribution system. Total margin for the 1998 three-month period increased $.9
million to $1.6 million. Total margin during the three months ended March 31,
1997 was negatively impacted by the warm weather's effect on the value of excess
pipeline capacity. Operating income from energy marketing was $.9 million in the
1998 three-month period compared with $.3 million in the prior-year period
principally reflecting the impact of the higher total margin partially offset by
higher operating expenses and lower miscellaneous income.
-14-
<PAGE> 17
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CORPORATE GENERAL AND OTHER
Operating income (loss) from corporate general and other, net, consisting of
expenses incurred by UGI corporate headquarters net of other miscellaneous
income, was $(1.4) million in the 1998 three-month period compared with $(2.5)
million in the prior-year period. The decrease represents higher interest income
on temporary cash investments and lower UGI corporate administrative expenses.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $21.5 million in the 1998 three-month period from
$21.4 million in the prior-year period principally as a result of higher levels
of debt outstanding under the Partnership's Acquisition Facility. The effective
income tax rate on pre-tax income for the three months ended March 31, 1998 was
45.5% compared with a rate of 44.8% for the three months ended March 31, 1997.
1998 SIX-MONTH PERIOD COMPARED WITH 1997 SIX-MONTH PERIOD
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended March 31, 1998 1997 Decrease
- ---------------------------------------------------------------------------------------------------------------
(Millions of dollars, except per share)
<S> <C> <C> <C> <C>
Revenues $ 959.5 $ 1,106.0 $ (146.5) (13.2)%
Total margin $ 424.8 $ 443.7 $ (18.9) (4.3)%
Operating income $ 175.3 $ 197.3 $ (22.0) (11.2)%
Net income $ 56.0 $ 63.7 $ (7.7) (12.1)%
Net income per share (diluted) $ 1.69 $ 1.92 $ (.23) (12.0)%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in the Company's results in the 1998 six-month period reflects the
effects of lower average retail unit margins experienced by the Partnership,
lower total margin experienced by Gas Utility as a result of warmer
heating-season weather, and lower Partnership other income.
-15-
<PAGE> 18
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROPANE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Six Months Ended March 31, 1998 1997 Decrease
- ----------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Retail gallons sold - millions 514.3 519.3 (5.0) (1.0)%
Revenues $ 609.1 $ 731.3 $ (122.2) (16.7)%
Total margin $ 299.1 $ 310.8 $ (11.7) (3.8)%
Operating income $ 106.5 $ 126.9 $ (20.4) (16.1)%
EBITDA (a) $ 138.9 $ 159.1 $ (20.2) (12.7)%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an
alternative to cash flow (as a measure of liquidity or ability to
service debt obligations) and is not a measure of performance or
financial condition under generally accepted accounting principles.
Retail volumes of propane sold were slightly lower during the 1998 six-month
period reflecting warmer weather. Based upon degree day information provided by
NOAA for 335 airports in the continental U.S., weather during the peak
heating-season months November 1997 through March 1998 was 9% warmer than normal
and 5% warmer than the prior year. In particular, the period comprising January
and February 1998 was the warmest in the last 104 years. Wholesale volumes of
propane sold increased 1.4 million gallons to 143.5 million gallons in the 1998
six-month period.
Total revenues from retail propane sales decreased $93.8 million to $500.6
million during the 1998 six-month period reflecting an $88.1 million decrease as
a result of lower average retail propane selling prices and a $5.7 million
decrease as a result of the lower retail volumes sold. Wholesale propane
revenues decreased $25.5 million to $64.6 million due to lower 1998 six-month
period selling prices. The lower average retail and wholesale selling prices
resulted from significantly lower propane product costs. Other revenues declined
$2.9 million to $43.9 million reflecting in large part lower terminal and
storage revenues and lower appliance sales revenues.
Total margin declined $11.7 million in the 1998 six-month period reflecting the
impact of significantly lower average retail unit margins early in the 1998
six-month period partially offset by slightly higher unit margins during the
later half of the period. Unit margins in the first half of the prior-year
period benefitted from fuel supply and pricing strategies that were especially
effective during the unique market conditions (characterized by a rapid increase
in propane spot-market prices) that existed at the time. During the second half
of the 1998 six-month period, declining propane product costs resulted in
slightly higher retail unit margins.
-16-
<PAGE> 19
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The decrease in operating income and EBITDA during the 1998 six-month period
principally reflects the decrease in total propane margin, lower miscellaneous
income and slightly higher operating expenses. Miscellaneous income in the
prior-year six-month period includes $4.7 million from the sale of Atlantic
Energy as well as higher customer finance charges and income from sales of fixed
assets. Operating expenses of the Partnership increased $1.8 million reflecting
higher employee compensation and benefit expenses and an increase in equipment
refurbishment and maintenance expense due in large part to acquisitions and new
business development activities partially offset by reduced workers'
compensation expense reflecting the benefits of safety improvement programs
initiated in 1996.
UTILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 1998 1997 (Decrease)
- -------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
GAS UTILITY:
Natural gas system throughput - bcf 48.5 52.5 (4.0) (7.6)%
Degree days - % warmer than normal (14.8) (7.2) - -
Revenues $250.1 $269.1 $(19.0) (7.1)%
Total margin $104.8 $112.8 $ (8.0) (7.1)%
Operating income $ 62.0 $ 67.5 $ (5.5) (8.1)%
ELECTRIC UTILITY:
Electric sales and transportation - gwh 464.9 472.3 (7.4) (1.6)%
Revenues $ 37.7 $ 38.3 $ (.6) (1.6)%
Total margin $ 18.2 $ 18.2 $ - - %
Operating income $ 6.6 $ 6.3 $ .3 4.8 %
- -------------------------------------------------------------------------------------------------------
</TABLE>
GAS UTILITY. Weather in Gas Utility's service territory in the 1998 six-month
period was 14.8% warmer than normal compared with weather that was 7.2% warmer
than normal in the prior-year period. Total system throughput decreased 7.6%
during the 1998 six-month period principally reflecting the effect of the warmer
weather on core market sales as well as a decrease in low-margin interruptible
delivery service volumes resulting from the shut-down of a gas-fired
cogeneration facility.
The decrease in Gas Utility's total revenues reflects a $24.7 million decrease
from lower sales to core market customers and a $1.2 million decrease from lower
sales to interruptible customers partially offset by a $4.8 million increase
from higher average purchased gas cost (PGC) rates and a $2.0 million increase
from greater off-system sales volumes. Cost of gas sold by Gas Utility decreased
$9.9 million to $135.3 million during the 1998 six-month period reflecting the
lower sales to core market customers.
-17-
<PAGE> 20
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The decrease in Gas Utility total margin principally reflects a $6.2 million
decrease from core market customers resulting from the warmer weather and a $1.8
million decrease from interruptible customers.
Gas Utility operating income decreased $5.5 million during the 1998 six-month
period principally reflecting the lower total margin partially offset by lower
operating expenses and higher miscellaneous income. Operating and administrative
expenses during the 1998 six-month period decreased $1.6 million principally as
a result of income from an insurance recovery, a decrease in distribution system
expenses and lower general and administrative expenses partially offset by an
increase in gas supply expenses.
ELECTRIC UTILITY. Electric Utility sales and transportation decreased during the
1998 six-month period on weather which was 7.0% warmer than in the 1997
six-month period. Electric Utility revenues decreased $.6 million reflecting the
warmer weather and the effects of Electric Utility's pilot program on sales of
electricity. Cost of sales decreased to $17.9 million in the 1998 six-month
period from $18.5 million in the prior-year period as a result of the lower
sales.
Electric Utility total margin was $18.2 million during the 1998 six-month
period, unchanged from the prior-year period. However, Electric Utility
operating income increased during the six months ended March 31, 1998
principally as a result of lower operating and administrative expenses and lower
charges for depreciation.
ENERGY MARKETING
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 1998 1997 (Decrease)
- ------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Revenues $62.6 $67.3 $(4.7) (7.0)%
Total margin $ 2.7 $ 1.9 $ .8 42.1%
Operating income $ 1.4 $ 1.1 $ .3 27.3%
- ------------------------------------------------------------------------------
</TABLE>
Total revenues from energy marketing in the 1998 six-month period
decreased compared with revenues during the prior-year period principally
as a result of lower contractual selling prices. Total margin for the 1998
six-month period was $.8 million higher than in the same period last year
reflecting higher average unit margins. Unit margins during the six months ended
March 31, 1997 were negatively impacted by a decline in the value of excess
pipeline capacity. Operating income from energy marketing was $1.4 million in
the 1998 six-month period compared with $1.1 million in the prior-year period
principally as a result of the higher total margin partially offset by higher
operating expenses.
-18-
<PAGE> 21
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CORPORATE GENERAL AND OTHER
Operating income (loss) from corporate general and other, net, was $(1.2)
million in the 1998 six-month period compared with $(4.5) million in the 1997
six-month period. The decrease in operating loss from corporate general and
other principally reflects higher interest income on temporary cash investments,
lower levels of UGI corporate expenses and a $1.2 million pre-tax gain from the
sale of UTI Energy Corp. (UTI) Common Stock received in conjunction with the
mid-1980's disposition of the Company's oilfield service businesses.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $42.9 million in the 1998 six-month period from
$42.5 million in the 1997 six-month period principally as a result of higher
levels of debt outstanding under the Partnership's Acquisition Facility. The
effective income tax rate on pre-tax income for the six months ended March 31,
1998 was 44.6% compared with 44.8% for the six months ended March 31, 1997.
1998 TWELVE-MONTH PERIOD COMPARED WITH 1997 TWELVE-MONTH PERIOD
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Twelve Months Ended March 31, 1998 1997 Decrease
- ----------------------------------------------------------------------------------------------------------
(Millions of dollars, except per share)
<S> <C> <C> <C> <C>
Revenues $1,495.5 $1,654.1 $(158.6) (9.6)%
Total margin $ 666.1 $ 672.2 $ (6.1) (.9)%
Operating income $ 177.9 $ 182.6 $ (4.7) (2.6)%
Net income $ 44.4 $ 47.4 $ (3.0) (6.3)%
Net income per share (diluted) $ 1.34 $ 1.43 $ (.09) (6.3)%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The Company's results in the 1998 twelve-month period reflect lower results from
Gas Utility due in large part to the effects of warmer heating-season weather
and a decrease in other income of the Partnership.
-19-
<PAGE> 22
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROPANE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Twelve Months Ended March 31, 1998 1997 Decrease
- ----------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Retail gallons sold - millions 802.4 815.1 (12.7) (1.6)%
Revenues $955.6 $1,083.9 $(128.3) (11.8)%
Total margin $465.7 $ 465.7 $ - -%
Operating income $ 96.7 $ 102.4 $ (5.7) (5.6)%
EBITDA (a) $161.2 $ 166.6 $ (5.4) (3.2)%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an
alternative to cash flow (as a measure of liquidity or ability to
service debt obligations) and is not a measure of performance or
financial condition under generally accepted accounting principles.
Retail volumes of propane sold decreased in the 1998 twelve-month period
principally reflecting the effects of warmer temperatures. Based upon degree day
information provided by NOAA for 335 airports in the continental U.S., weather
during the peak heating-season months of November 1997 through March 1998
averaged 9% warmer than normal and 5% warmer than the prior year. Wholesale
volumes of propane sold decreased to 220.0 million gallons from 236.6 million
gallons in the prior-year period reflecting in large part the effects of the
warmer weather.
Total revenues from retail propane sales declined $91.8 million to $774.4
million reflecting a $78.3 million decrease as a result of lower average retail
propane selling prices and a $13.5 million decrease as a result of the lower
retail volumes sold. A $33.5 million decrease in wholesale propane revenues to
$100.5 million reflects a $24.1 million decrease as a result of lower average
selling prices and a $9.4 million decrease as a result of the lower volumes. The
higher selling prices in the prior-year period were a result of significantly
higher propane spot-market prices particularly during the three months ended
December 31, 1996. Other revenues decreased $3.0 million to $80.7 million
principally reflecting lower appliance sales revenues and lower terminal and
storage revenues.
Total margin in the 1998 twelve-month period was comparable with the prior-year
period, notwithstanding the lower retail and wholesale volumes sold, reflecting
slightly higher average retail unit margins. Total margin from other sales and
services during the 1998 twelve-month period were virtually unchanged from the
prior-year period.
-20-
<PAGE> 23
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Although total margin during the 1998 twelve-month period was comparable with
the prior-year period, EBITDA and operating income declined principally as a
result of lower miscellaneous income. Miscellaneous income in the 1997
twelve-month period includes $4.7 million of income from the sale of the
Partnership's 50% interest in Atlantic Energy. Miscellaneous income in the
prior-year period also includes higher interest income and income from sales of
fixed assets. Operating expenses of the Partnership were $2.5 million lower
during the 1998 twelve-month period principally as a result of lower required
self-insurance reserves associated with general and automobile liability and
workers' compensation costs.
UTILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 1998 1997 (Decrease)
- -------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
GAS UTILITY:
Natural gas system throughput - bcf 76.3 82.5 (6.2) (7.5)%
Degree days - % warmer than normal (11.5) (6.0) - - %
Revenues $370.1 $392.8 $(22.7) (5.8)%
Total margin $160.7 $168.8 $ (8.1) (4.8)%
Operating income $ 69.3 $ 74.2 $ (4.9) (6.6)%
ELECTRIC UTILITY:
Electric sales and transportation - gwh 861.1 871.4 $(10.3) (1.2)%
Revenues $ 71.5 $ 71.5 $ - - %
Total margin $ 35.2 $ 34.3 $ .9 2.6 %
Operating income $ 11.0 $ 10.0 $ 1.0 10.0 %
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
GAS UTILITY. Weather in Gas Utility's service territory in the 1998 twelve-month
period was warmer than in the 1997 twelve-month period. Total system throughput
declined principally as a result of a decrease in low-margin interruptible
delivery service volumes resulting from the shut-down of a gas-fired
cogeneration facility and the effects of the warmer weather on core market
sales.
Gas Utility revenues were $22.7 million lower in the 1998 twelve-month period as
a result of a $28.8 million decrease in core market revenues due to the lower
volumes sold that was partially offset by a $9.9 million increase in core market
revenues primarily from higher average PGC rates, a $2.6 million decrease in
revenues from off-system sales, and lower revenues from interruptible customers.
Cost of gas sold was $195.3 million during the 1998 twelve-month period, a
decrease of $13.4 million from the same period in 1997, principally reflecting
the reduced core market and off-system sales partially offset by the effects of
higher average PGC rates.
-21-
<PAGE> 24
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Gas Utility total margin decreased in the twelve months ended March 31, 1998
principally reflecting a $7.1 million decrease in total margin from core market
customers and a $1.3 million decrease in total margin from interruptible
customers.
Gas Utility operating income decreased $4.9 million during the 1998 twelve-month
period as the lower total margin was partially offset by a $.9 million decrease
in operating expenses, a $1.2 million decrease in depreciation and amortization,
and higher miscellaneous income.
ELECTRIC UTILITY. Electric Utility sales and transportation were lower during
the twelve months ended March 31, 1998 than in the prior-year period due in part
to warmer heating-season weather. Notwithstanding lower sales, Electric Utility
revenues were essentially unchanged from the prior-year period as the effect of
the lower sales was offset by an increase in base rates effective in July 1996.
Electric Utility cost of sales decreased $.9 million to $33.2 million during the
1998 twelve-month period as a result of the lower sales.
Electric Utility total margin during the 1998 twelve-month period increased
principally as a result of the full year effect of the higher base rates
effective July 19, 1996. The increase in operating income reflects the increase
in total margin.
ENERGY MARKETING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 1998 1997 (Decrease)
- --------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Revenues $98.3 $105.9 $(7.6) (7.2)%
Total margin $ 4.5 $ 3.4 $ 1.1 32.4 %
Operating income $ 2.0 $ 1.6 $ .4 25.0 %
- --------------------------------------------------------------------------------------
</TABLE>
Total revenues from energy marketing in the 1998 twelve-month period decreased
compared with revenues during the prior-year period as a result of lower billed
volumes and lower average selling prices. Total margin and operating income were
higher in the 1998 twelve-month period compared with the 1997 twelve-month
period principally due to higher average unit margins. The lower unit margins in
the 1997 twelve-month period reflected the warm winter weather's effect on the
value of excess pipeline capacity.
CORPORATE GENERAL AND OTHER
Operating income (loss) from corporate general and other, net, was $(1.1)
million in the 1998 twelve-month period compared with $(5.6) million in the 1997
twelve-month period. The decrease in operating loss from corporate general and
other principally reflects $4.7 million in pre-tax gains from the sale of UTI
Common Stock and higher interest income on temporary cash
-22-
<PAGE> 25
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
investments partially offset by higher levels of UGI corporate general expenses.
Corporate general expenses in the prior-year period were lower reflecting
adjustments of incentive accruals recorded in September 1996.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $83.5 million in the 1998 twelve-month period from
$82.2 million in the 1997 twelve-month period principally as a result of higher
Propane and Utilities' bank loans outstanding and higher levels of debt
outstanding under the Partnership's Acquisition Facility. The Company's
effective income tax rate in the 1998 twelve-month period was 43.9% compared
with 42.9% in the 1997 twelve-month period.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Company's debt outstanding at March 31, 1998 totaled $947.5 million, a
decrease of $16.5 million from the amount outstanding at September 30, 1997. The
decrease principally reflects $28 million in net repayments under the
Partnership's Revolving Credit Facility, $24.1 million in net repayments under
UGI Utilities' revolving credit agreements and $10.0 million in UGI Utilities'
long-term debt repayments partially offset by the issuance of a combined $35
million of notes under UGI Utilities' Series B Medium-Term Note program and $13
million under the Partnership's Acquisition Facility.
During the six months ended March 31, 1998, the Partnership declared and paid
distributions on all limited partner units outstanding and the general partner
interests for the quarters ended September and December 1997. The Partnership's
Minimum Quarterly Distribution (MQD) of 55 cents per limited partner unit for
the quarter ended March 31, 1998 will be paid on May 18, 1998 to holders of
record on May 8, 1998.
The ability of the Partnership to continue to pay the full MQD on all of its
units will depend upon a number of factors including the level of Partnership
earnings, the cash needs of the Partnership's operations (including cash needed
for maintenance and growth capital), and the Partnership's ability to finance
externally such cash needs. The Partnership's EBITDA during the 1998 six-month
period was $19.8 million lower than during the 1997 six-month period. Given the
level of EBITDA to date, it is unlikely the Partnership will be able to fund
solely from cash generated from operations during fiscal 1998 payment of the
full distribution on its Subordinated Units for the remainder of calendar year
1998. While the Company believes the Partnership will have sufficient borrowing
capacity to fund all of its cash needs (including amounts for growth capital and
the full distribution on the Subordinated Units) during this period, no
assurance can be given that the General Partner will elect to utilize its
borrowing capacity to fund the full distribution on the Subordinated Units. The
Company expects that the Partnership will generate sufficient cash from
operations during fiscal 1998 to continue to fund the full distribution on the
Partnership's
-23-
<PAGE> 26
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Common Units. Due to the expected receipt of both dividends from UGI Utilities
and distributions on the Partnership's Common Units held by the Company, as well
as UGI's substantial cash balances, a decision of the Partnership not to pay the
full distribution on its Subordinated Units in 1998 will not adversely affect
UGI's ability to pay dividends on its Common Stock.
On February 25, 1998, UGI Utilities announced the early redemption of 120,000
shares of its $8.00 Series Preferred Stock effective April 2, 1998 at a
redemption price of $102.667 per share plus accrued and unpaid dividends. UGI
Utilities also announced the optional redemption of all 7,983 outstanding shares
of its $1.80 Series Preferred Stock on April 1, 1998 at a redemption price of
$23.50 per share plus accrued and unpaid dividends. UGI Utilities used
borrowings under its revolving credit agreements to fund such redemptions.
On April 28, 1998, the Company's Board of Directors increased the quarterly
dividend on the Common Stock to 36.5 cents a share from 36 cents a share,
effective for the dividend payable July 1, 1998.
CASH FLOWS
The Company's consolidated cash and short-term investments totaled $148.4
million at March 31, 1998 compared with $129.4 million at September 30, 1997.
These amounts include $110.8 million and $94.8 million, respectively, of cash
and short-term investments held by UGI. The Company's cash flows are seasonal
and are generally greatest during the second and third fiscal quarters when
customers pay bills incurred during the heating season and are typically at
their lowest levels during the first and fourth fiscal quarters. Accordingly,
cash flows from operations during the six months ended March 31, 1998 are not
necessarily indicative of the cash flows to be expected for a full year.
OPERATING ACTIVITIES. Cash flows from operating activities during the six months
ended March 31, 1998 totaled $113.8 million compared with $110.0 million in the
comparable prior-year period. Cash flows from operations before changes in
operating working capital were $130.8 million in the six months ended March 31,
1998 compared with $141.0 million in the prior-year period. The decrease
principally reflects a reduction in the Partnership's operating income. Changes
in operating working capital during the six months ended March 31, 1998 required
$17.0 million of operating cash flow principally from a $68.6 million seasonal
increase in accounts receivable and accrued utility revenues and a $27.7 million
decrease in accounts payable partially offset by a $55.4 million decrease in
inventories and prepaid propane purchases; $11.7 million in purchased gas cost
overcollections; and $12.2 million in cash from changes in other working capital
accounts. Changes in operating working capital during the six months ended March
31, 1997 required $31.0 million of operating cash flow.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $31.3 million in the six months ended March 31, 1998 compared with $31.8
million in the same period in 1997. The decrease principally reflects lower Gas
Utility capital expenditures partially offset by higher Propane
-24-
<PAGE> 27
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
capital expenditures. Proceeds from disposals of assets totaled $3.8 million
during the six months ended March 31, 1998 compared with $8.1 million in the
same period last year. The 1997 six-month period includes proceeds from the sale
of Atlantic Energy. During the six months ended March 31, 1998, the Partnership
acquired several propane businesses for $5.6 million in cash. During the six
months ended March 31, 1997, the Partnership made acquisition-related cash
payments of $2.7 million. During the six months ended March 31, 1998, the
Company increased its balance of short-term investments by $4.6 million compared
with an increase of $44.6 million in the prior-year period. Cash used for other
investing activities during the six months ended March 31, 1998 includes $3.4
million of loans issued to employees in conjunction with the Company's stock
ownership policy for executives and key employees.
FINANCING ACTIVITIES. During the six months ended March 31, 1998, the Company
paid cash dividends on Common Stock of $23.7 million compared with $23.5 million
of cash dividends in the prior-year period. During the six months ended March
31, 1998 and 1997, the Company issued $6.0 million and $6.2 million,
respectively, of its Common Stock in conjunction with dividend reinvestment and
employee and executive benefit plans. During the six months ended March 31,
1998, the Company repurchased $4.1 million of its Common Stock compared with
$7.8 million in the same period in the prior year. Also during each of the
six-month periods ended March 31, 1998 and 1997, the Partnership paid
distributions of $19.5 million and $19.4 million, respectively, to public
unitholders (and $27.6 million and $27.5 million, respectively, to the General
Partner) representing the MQD on all limited partner units and the general
partner interests.
During the six months ended March 31, 1998, the Company issued $48 million of
long-term debt. This amount includes $20 million of twenty-year 7.25% notes and
$15 million of three-year 6.17% notes issued under UGI Utilities' Series B
Medium-Term Note program (the proceeds of which were used to reduce bank loans).
It also includes $13 million issued under the Partnership's Acquisition Facility
relating to acquisitions made prior to fiscal 1998. During the comparable
prior-year period, the Company issued $7.7 million of long-term debt including
$7 million under the Partnership's Acquisition Facility. During the six months
ended March 31, 1998, the Company repaid $12.8 million of long-term debt
including $10 million of UGI Utilities' 8.70% Notes. In the prior-year six-month
period, the Company made long-term debt repayments of $20.3 million.
The Partnership made net repayments of $28 million under its Revolving Credit
Facility during the six months ended March 31, 1998 compared with $15 million of
net repayments in the same period in 1997. During the six months ended March 31,
1998, UGI Utilities made net repayments of $24.1 million under its revolving
credit agreements compared with net borrowings of $44.5 million in the
prior-year period.
ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT
On August 7, 1997, Electric Utility filed with the PUC its restructuring plan
pursuant to the Customer Choice Act. The restructuring plan includes a claim for
the recovery of $34.4 million
-25-
<PAGE> 28
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
for stranded costs during the period January 1, 1999 through December 31, 2002.
The claim is primarily for the recovery of: (1) plant investments in excess of
estimated competitive market value and electric generation facility retirement
costs; (2) potential costs associated with existing power purchase agreements;
and (3) regulatory assets (principally income taxes of approximately $.5
million) recoverable from ratepayers under current regulatory practice. The
claim also seeks to establish a recovery mechanism that would permit the
recovery of up to an additional $28 million of costs associated with the buy out
or implementation of a December 1993 agreement to purchase power from an
independent power producer. The PUC is expected to take action on Electric
Utility's filing during the summer of 1998.
The Financial Accounting Standards Board's (FASB's) Emerging Issues Task Force
(EITF) has addressed the appropriateness of the continued application of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71) by utilities in states that
have enacted restructuring legislation similar to the Customer Choice Act. SFAS
71 permits the recording of costs (regulatory assets) that have been, or are
expected to be, allowed in the ratesetting process in a period different from
the period in which such costs would be charged to expense by an unregulated
enterprise. The EITF issued its statement 97-4, "Deregulation of the Pricing of
Electricity - Issues Related to the Application of FASB Statements 71 and 101"
which concluded that utilities should discontinue application of SFAS 71 for the
generation portion of their business when a restructuring plan is in place and
its terms are known. For UGI Utilities, this will be upon the issuance of the
PUC's restructuring order which is expected to occur during the summer of 1998.
If pursuant to the restructuring plan such electric generation assets no longer
meet the criteria of SFAS 71, any related regulatory assets would be written-off
unless the form of transition cost recovery under the plan meets the
requirements under generally accepted accounting principles for continued
accounting as regulatory assets during such recovery period. Any
generation-related, long-lived fixed and intangible assets would be evaluated
for impairment under the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Based upon an evaluation of the various factors and conditions affecting future
cost recovery, the Company does not expect the adoption of a PUC restructuring
order to have a material adverse effect on its financial condition or results of
operations.
On March 27, 1997, proposed customer choice legislation was introduced in the
Pennsylvania General Assembly that would, among other things, extend the
availability of gas transportation service to residential and small commercial
customers of local gas distribution companies. It would permit all customers of
natural gas distribution utilities to transport their natural gas supplies
through the distribution systems of Pennsylvania gas utilities by April 1, 1999
and would also require Pennsylvania gas utilities to exit the merchant function
of selling natural gas. Legislative committees have conducted public hearings on
the proposed legislation and the Company has provided testimony on such issues
as the recovery of costs associated with its existing gas supply assets and the
need for standards to assure reliability of future gas supplies. At
-26-
<PAGE> 29
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the request of the Governor of Pennsylvania, in December 1997 a collaborative
group of industry stakeholders was convened to attempt to further develop the
proposed legislation. To date, this group has failed to reach a consensus. The
Company expects the collaborative process to continue, and it will participate
and monitor developments, as appropriate.
YEAR 2000 MATTERS
The Company, in conjunction with outside consultants, has conducted a detailed
assessment of its critical computer-based systems in order to evaluate its Year
2000 ("Y2K") exposure. The Y2K issue is a result of computer programs being
written using two digits (rather than four) to identify and process a year in a
date field. Computer programs having date sensitive software may recognize date
fields using "00" as the year 1900 rather than the year 2000, resulting in
miscalculations and possible computer-based system failures. The Company has
also identified and is contacting major vendors on which it depends for products
or services in order to assess their Y2K compliance readiness and, if necessary,
to develop appropriate contingency plans.
The Company has a number of information system improvement initiatives under way
which include the installation of integrated financial system software that is
Y2K compliant. In addition, the Company, in conjunction with consultants, has
begun modifying its computer-based systems that are not currently Y2K compliant.
The Company anticipates that its critical computer-based systems will be Y2K
compliant by March 31, 1999.
The Company does not expect the costs to modify its computer-based systems,
which will be expensed as incurred, will have a material effect on its results
of operations or cash flows. However, in the event that the Company or its major
suppliers experience disruptions due to Y2K issues, the Company's operations
could be adversely affected.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 24, 1998, the Annual Meeting of Shareholders of UGI was
held. The shareholders elected all seven nominees to the Board of Directors, and
ratified the appointment of Arthur Andersen LLP as independent certified public
accountants. No other matters were considered at the meeting.
The number of votes cast for and withheld from election of each
nominee is set forth below. There were no votes against, abstentions or broker
non-votes in the election of directors.
-27-
<PAGE> 30
UGI CORPORATION AND SUBSIDIARIES
ELECTION OF DIRECTORS:
FOR WITHHELD
--- --------
James W. Stratton 29,073,522 210,763
David I. J. Wang 29,064,811 219,474
Richard C. Gozon 29,073,006 211,279
Stephen D. Ban 29,077,549 206,736
Lon R. Greenberg 29,066,435 217,850
Marvin O. Schlanger 29,034,806 249,479
Thomas F. Donovan 29,041,347 242,938
The number of votes cast for and against, and the number of
abstentions in the ratification of the appointment of Arthur Andersen LLP is as
follows: For, 29,072,199; Against, 67,175; Abstain, 144,911. There were no
broker non-votes.
ITEM 5. OTHER INFORMATION
At the Annual Meeting of Shareholders of UGI Corporation held on
February 24, 1998, Lon R. Greenberg, Chairman, President and Chief Executive
Officer, announced that Charles L. Ladner, Senior Vice President-Finance and
Chief Financial Officer of the Company, would retire on October 1, 1998 and that
Richard L. Bunn, President and Chief Executive Officer of UGI Utilities, Inc.
would retire during 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
27.398 Financial Data Schedule for the six months ended March 31, 1998
27.696 Financial Data Schedule for the nine months ended June 30, 1996
27.697 Financial Data Schedule for the nine months ended June 30, 1997
27.997 Financial Data Schedule for the year ended September 30, 1997
(b) The Company did not file any Current Reports on Form 8-K during the
fiscal quarter ended March 31, 1998.
-28-
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UGI Corporation
---------------------
(Registrant)
Date: May 13, 1998 By: C .L. Ladner
- ------------------- --------------------------------
C. L. Ladner, Senior Vice President - Finance
Date: May 13, 1998 By: M. J. Cuzzolina
- ------------------- --------------------------------
M. J. Cuzzolina, Vice President - Accounting and
Financial Control (Principal Accounting Officer)
-29-
<PAGE> 32
UGI CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
27.398 Financial Data Schedule for the six months ended March 31, 1998
27.696 Financial Data Schedule for the nine months ended June 30, 1996
27.697 Financial Data Schedule for the nine months ended June 30, 1997
27.997 Financial Data Schedule for the year ended September 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT OF UGI CORPORATION AND
SUBSIDIARIES AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN UGI
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31,
1998.
</LEGEND>
<CIK> 0000884614
<NAME> UGI CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 78,400
<SECURITIES> 70,000
<RECEIVABLES> 194,400
<ALLOWANCES> 13,100
<INVENTORY> 62,200
<CURRENT-ASSETS> 437,200
<PP&E> 1,429,100
<DEPRECIATION> 436,500
<TOTAL-ASSETS> 2,184,200
<CURRENT-LIABILITIES> 353,500
<BONDS> 890,400
20,000
0
<COMMON> 393,800
<OTHER-SE> 18,000
<TOTAL-LIABILITY-AND-EQUITY> 2,184,200
<SALES> 959,500
<TOTAL-REVENUES> 959,500
<CGS> 523,000
<TOTAL-COSTS> 523,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,900
<INCOME-PRETAX> 103,600
<INCOME-TAX> 46,200
<INCOME-CONTINUING> 56,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,000
<EPS-PRIMARY> $1.70
<EPS-DILUTED> $1.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000884614
<NAME> UGI CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 40,700
<SECURITIES> 45,200
<RECEIVABLES> 145,900
<ALLOWANCES> 12,200
<INVENTORY> 83,200
<CURRENT-ASSETS> 336,000
<PP&E> 1,316,000
<DEPRECIATION> 356,100
<TOTAL-ASSETS> 2,091,000
<CURRENT-LIABILITIES> 262,100
<BONDS> 829,200
35,200
0
<COMMON> 391,700
<OTHER-SE> 9,200
<TOTAL-LIABILITY-AND-EQUITY> 2,091,000
<SALES> 1,273,600
<TOTAL-REVENUES> 1,273,600
<CGS> 713,400
<TOTAL-COSTS> 713,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,600
<INCOME-PRETAX> 99,200
<INCOME-TAX> 45,000
<INCOME-CONTINUING> 52,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,100
<EPS-PRIMARY> $1.58
<EPS-DILUTED> $1.57
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000884614
<NAME> UGI CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 93,900
<SECURITIES> 43,200
<RECEIVABLES> 144,800
<ALLOWANCES> 12,000
<INVENTORY> 79,700
<CURRENT-ASSETS> 386,900
<PP&E> 1,380,400
<DEPRECIATION> 401,700
<TOTAL-ASSETS> 2,134,700
<CURRENT-LIABILITIES> 316,300
<BONDS> 852,600
35,200
0
<COMMON> 392,700
<OTHER-SE> 6,800
<TOTAL-LIABILITY-AND-EQUITY> 2,134,700
<SALES> 1,390,100
<TOTAL-REVENUES> 1,390,100
<CGS> 800,200
<TOTAL-COSTS> 800,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,800
<INCOME-PRETAX> 117,000
<INCOME-TAX> 52,400
<INCOME-CONTINUING> 62,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,500
<EPS-PRIMARY> $1.89
<EPS-DILUTED> $1.88
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000884614
<NAME> UGI CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 64,000
<SECURITIES> 65,400
<RECEIVABLES> 129,600
<ALLOWANCES> 11,300
<INVENTORY> 95,600
<CURRENT-ASSETS> 403,900
<PP&E> 1,397,300
<DEPRECIATION> 410,100
<TOTAL-ASSETS> 2,151,700
<CURRENT-LIABILITIES> 404,500
<BONDS> 844,800
32,200
0
<COMMON> 393,700
<OTHER-SE> (17,600)
<TOTAL-LIABILITY-AND-EQUITY> 2,151,700
<SALES> 1,642,000
<TOTAL-REVENUES> 1,642,000
<CGS> 938,800
<TOTAL-COSTS> 938,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,100
<INCOME-PRETAX> 98,500
<INCOME-TAX> 43,600
<INCOME-CONTINUING> 52,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,100
<EPS-PRIMARY> $1.58
<EPS-DILUTED> $1.57
</TABLE>
