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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
July 28, 1999
(Date Of Report)
UGI CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 1-11071 23-2668356
(State or other jurisdiction (Commission file (I.R.S. Employer
of incorporation) Number) Identification No.)
460 N. Gulph Road
King of Prussia, Pennsylvania 19406
(Address of principal executive offices) (Zip Code)
(610) 337-1000
(Registrant's telephone number, including area code)
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Item 5. Other Events
On July 28, 1999, the Registrant issued the attached news release
announcing several strategic and financial initiatives designed to increase
shareholder value and position the Company for future growth. The initiatives
include (1) a 2.7 percent increase in the Company's Common Stock dividend to an
annual rate of $1.50 from $1.46, (2) a repurchase of approximately 14 percent of
the Company's outstanding shares of Common Stock using cash on hand, and (3) a
focus on long-term value creation through growth of the Company's existing
propane, natural gas and electric businesses, and, in addition, accelerated
growth in related and complementary businesses. The Registrant also indicated
that it has terminated its previously announced intention to sell its utility
businesses.
The news release is included as an exhibit to this report and is
incorporated in this Item 5 by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
(99) News release dated July 28, 1999.
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 hereunto duly authorized.
UGI Corporation
(Registrant)
By: /s/ Brendan P. Bovaird
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Brendan P. Bovaird
Vice President and General Counsel
Date: July 28, 1999
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EXHIBIT INDEX
Exhibit No. Description
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(99) News release dated July 28, 1999
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Exhibit (99)
July 28, 1999 Immediate
Robert W. Krick, ext. 3141
UGI To Raise Dividend, Repurchase Shares
And Grow Core Businesses
Valley Forge, PA - July 28 - UGI Corporation (NYSE:UGI), announced today several
strategic and financial initiatives designed to increase shareholder value and
position the Company for future growth. The decision to pursue these
initiatives follows completion of the previously reported review by UGI's
management and board of directors of alternative strategies to meet its growth
objectives and maximize value for shareholders.
These initiatives are designed to reconfirm UGI's long-standing goal of
providing superior shareholder returns by reinforcing its commitment to improved
earnings and dividend growth. The Company will focus its efforts on growing its
AmeriGas propane distribution business as well as its existing natural gas and
electric businesses, while it actively seeks out related and complementary
business activities designed to supplement earnings growth.
The initiatives include:
. A 2.7 percent increase in UGI's common stock dividend to an annual
rate of $1.50 from $1.46;
. A repurchase of approximately 14 percent of outstanding shares of
common stock using cash on hand; and
. A focus on long term value creation through growth of UGI's existing
propane, natural gas and electric businesses, and, in addition,
accelerated growth in related and complementary businesses.
Lon R. Greenberg, chairman, president and chief executive officer, said, "We are
pleased to announce these initiatives today which we firmly believe will deliver
value to our shareholders in the near and long term. Our renewed focus on our
core businesses and related growth opportunities - combined with the effect of
reducing the number of shares of common stock outstanding as a result of our
share repurchase - will position us to achieve compound annual earnings per
share growth rates of 6 percent to 10 percent over the next five years. We
expect our higher earnings level and growth rates to support our current
intention to increase the dividend on our common stock at a rate of
approximately three percent annually for the foreseeable future."
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Dividend Increase and Stock Repurchase
As a tangible sign of its confidence in the Company's future, the board of
directors has increased the dividend on UGI's common stock by approximately 2.7
percent. The quarterly dividend will increase to $.375 from $.365, with the
annual dividend rate rising to $1.50 from $1.46.
According to Anthony J. Mendicino, vice president and chief financial officer,
"The Company is targeting a dividend payout ratio of 50 percent to 70 percent.
We believe this ratio is appropriate given our current and expected business
mix. We are confident that under normal weather conditions, the payout ratio
should approach the high end of that range in the near term. As we achieve our
earnings objectives, our payout ratio should fall even as we continue to
increase the dividend."
UGI intends to commence a "Dutch auction" self-tender to repurchase up to 4.5
million common shares, or 14.2 percent of its outstanding shares. The Company
expects the offer to commence on Monday, August 2, 1999 and expire on August 27,
1999. Shareholders will have the opportunity to tender all or a portion of their
shares to UGI at a price not less than $23.00 and not more than $26.00 per
share. The repurchase will be financed from cash balances existing at the parent
holding company and will not affect the capital structures of UGI Utilities or
AmeriGas Partners, L. P. (NYSE: APU). UGI had previously repurchased 1.4 million
shares as part of an open market repurchase program announced on March 1. As of
June 30, there were 31.7 million common shares outstanding.
Strategic Direction
Following a comprehensive study, UGI intends to refocus its strategic direction
on growing its existing natural gas, electric and propane businesses while it
actively seeks additional related and complementary growth opportunities.
Greenberg noted, "Today's announcement is intended to clarify our future
strategic direction. We believe that we can achieve our earnings and dividend
growth objectives by following this focused direction. It is a course of action
that is consistent with providing excellent total returns."
Greenberg added, "The actions we are taking are in the best interests of all of
our shareholders. There are occasions when the value of the whole exceeds that
of the sum of the parts. Our examination has caused us to conclude that UGI
represents such an instance." The Company indicated that it has terminated its
previously announced intention to sell its utility businesses.
"We have decided to retain our natural gas and electric businesses and to manage
them for maximum return to our shareholders, customers and employees," stated
Greenberg. "Given their excellent performance over the years, the
predictability of their earnings and their acceptable growth prospects, they
will serve the role of providing a strong foundation upon which to further grow
our earnings. We anticipate that these businesses will be contributors to our
overall earnings growth as well."
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Greenberg noted that the electric utility business was deregulated in
Pennsylvania during 1998. In addition, Pennsylvania recently enacted
legislation which also deregulates the gas utility business. With the
uncertainty associated with deregulation largely behind it, UGI's gas and
electric businesses can focus on growth opportunities which are being spawned by
deregulation.
"We believe the inherent growth rates in our gas and electric businesses,
together with our ability to move quickly to capture new opportunities, will
position us for strong performance over the foreseeable future," continued
Greenberg. "At the same time, we believe there is an opportunity to initiate
programs to improve our productivity and thereby control our costs as we move
forward."
AmeriGas is pursuing strategies to exploit its large, national footprint where
the company has a competitive advantage. The Company expects to achieve
economies of scale in national accounts, alliance marketing and consolidated
national purchasing. "AmeriGas has always been a source of strong cash flow,"
Greenberg stated. "Now it is poised to play a larger role in contributing to
earnings growth as well." He noted that AmeriGas has invested over $10 million
so far this year on growth initiatives and productivity improvements. "The
employees of AmeriGas are finding ways to differentiate us in the marketplace
with continual process innovation and new market initiatives such as our PPX
pre-filled propane cylinder exchange program," said Greenberg. "We expect to
improve performance further by utilizing our new customer profitability system
which allows us to segment customers and pursue those with the best profit
potential."
The Company will accelerate its growth in related and complementary businesses
using its national scope, its extensive asset base and its access to over 1.3
million customers. "While international propane investments, including
acquisitions in growth areas, will continue, we will actively seek additional
investments domestically to supplement that growth as well," continued
Greenberg. "Our retail hearth product superstore investment, Hearth USA, is just
one example. Within three to five years, we expect new businesses to contribute
20 percent of earnings," stated Greenberg.
"In summary, we see excellent business development opportunities before us and
we have an outstanding workforce committed to seizing them. We expect our
efforts to result in sustained increases in shareholder value," concluded
Greenberg.
This news release is neither an offer to purchase nor a solicitation of offers
to sell common stock. The self-tender is being made only by means of an Offer to
Purchase and related documents, copies of which will be mailed to all
shareholders and filed with the Securities and Exchange Commission, and may also
be obtained from the information agent, ChaseMellon Shareholder Services, L.L.C.
UGI has retained Donaldson, Lufkin & Jenrette Securities Corporation to act as
dealer manager for the self-tender.
Statements in this release concerning expectations for the future are "forward-
looking statements" within the meaning of the federal securities laws. UGI's
actual future performance will be affected by a number of factors, risks and
uncertainties. Important factors that could cause actual results to differ
materially from those in the forward-looking statements in this
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release include weather conditions, the timing and extent of changes in
commodity prices for crude oil, propane, natural gas, electricity and interest
rates, the timing and success of UGI's efforts to develop new business
opportunities, political, regulatory and economic conditions in foreign
countries and other factors discussed in UGI's 1998 Annual Report on Form 10-K
filed with the Securities and Exchange Commission which we incorporate by
reference. UGI undertakes no obligation to publicly release any revision to
these forward-looking statements to reflect events or circumstances after the
date of this release.
