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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
460 North Gulph Road, King of Prussia, PA 19406
(ADDRESS OF PRINCIPAL OFFICES) (ZIP CODE)
(610) 337-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
Common Stock, without par value New York Stock Exchange, Inc.
Philadelphia Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of UGI Corporation Common Stock held by nonaffiliates
of the registrant on March 31, 2004 was $1,639,692,923.
At November 1, 2004 there were 51,211,198 shares of UGI Corporation Common Stock
issued and outstanding.
Documents Incorporated By Reference: Portions of the Annual Report to
Shareholders for the year ended September 30, 2004 are incorporated by reference
into Parts I and II of this Form 10-K. Portions of the Proxy Statement for the
Annual Meeting of Shareholders to be held on February 23, 2005 are incorporated
by reference into Part III of this Form 10-K.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
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TABLE OF CONTENTS
Page
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PART I: ................................................................... 1
Items 1. and 2. Business and Properties............................................ 1
Item 3. Legal Proceedings.................................................. 22
Item 4. Submission of Matters to a Vote of Security Holders................ 25
PART II: ................................................................... 25
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.................. 25
Item 6. Selected Financial Data............................................ 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......... 28
Item 8. Financial Statements and Supplementary Data........................ 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................... 28
Item 9A. Controls and Procedures............................................ 28
Item 9B. Other Information.................................................. 29
PART III: ................................................................... 30
Item 10. Directors and Executive Officers of Registrant..................... 30
Item 11. Executive Compensation............................................. 30
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.................................... 30
Item 13. Certain Relationships and Related Transactions..................... 31
Item 14. Principal Accountant Fees and Services............................. 31
PAGE
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PART IV: ................................................................... 35
Item 15. Exhibits and Financial Statement Schedules......................... 35
Signatures......................................................... 48
Index to Financial Statements and Financial Statement Schedules..................................... F-2
(ii)
PART I:
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
CORPORATE OVERVIEW
UGI Corporation is a holding company that distributes and markets energy
products and related services through subsidiaries and joint venture affiliates.
We are a domestic and international distributor of propane and butane, ("LPG");
a provider of natural gas and electric service through regulated local
distribution utilities; a generator of electricity through our ownership
interests in electric generation facilities; a regional marketer of energy
commodities; and a provider of heating and cooling services. Our subsidiaries
operate principally in the following five business segments:
- AmeriGas Propane
- International Propane
- Gas Utility
- Electric Utility
- Energy Services
The AmeriGas Propane segment consists of the propane distribution business
of AmeriGas Partners, L.P., ("AmeriGas Partners" or the "Partnership"), which is
the nation's largest retail propane distributor. The Partnership's sole general
partner is our subsidiary, AmeriGas Propane, Inc. ("AmeriGas Propane" or the
"General Partner"). The common units of AmeriGas Partners represent limited
partner interests in a Delaware limited partnership; they trade on the New York
Stock Exchange under the symbol "APU." We have an effective 46% ownership
interest in the Partnership; the remaining interest is publicly held. See Note 1
to the Company's Consolidated Financial Statements.
The International Propane segment consists of the LPG distribution
businesses of our subsidiaries Antargaz and Flaga, and our joint venture in
China. Antargaz is one of the largest distributors of LPG in France. Flaga is
the largest LPG distributor in Austria and one of the largest suppliers in the
Czech Republic and Slovakia. In China, we participate in an LPG joint venture
business in the Nantong region.
On March 31, 2004, we purchased the approximate 80.5% interest in Antargaz
which we did not already own. This acquisition significantly increased the
Company's international operations, and beginning in fiscal year 2005, will also
significantly increase the percentage of the Company's earnings derived from LPG
distribution. For more information on the Antargaz acquisition, see Note 3 to
the Company's Consolidated Financial Statements.
The Gas Utility segment consists of the regulated natural gas distribution
business ("Gas Utility") of our subsidiary UGI Utilities, Inc. ("Utilities"),
serving approximately 300,000 customers in eastern Pennsylvania. The Electric
Utility segment consists of the regulated electric
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distribution business ("Electric Utility") of Utilities, serving approximately
62,000 customers in northeastern Pennsylvania. Gas Utility and Electric Utility
are regulated by the Pennsylvania Public Utility Commission ("PUC").
The Energy Services segment consists of non-utility, energy-related
businesses conducted by a number of subsidiaries. These businesses include (i)
marketing of natural gas, oil and electricity in the eastern region of the
United States under the trade names GASMARK(R) and POWERMARK(R), and (ii)
operating electric generation assets and liquefied natural gas and propane
peak-shaving plants in eastern Pennsylvania. In November 2004, Energy Services
acquired a propane import and storage facility in Chesapeake, Virginia.
We also own and operate a heating, ventilation, air conditioning and
refrigeration service business serving over 100,000 customers in the
Mid-Atlantic region.
BUSINESS STRATEGY
Since 1999, our strategic direction has focused on growing our propane,
natural gas and electric distribution businesses while seeking additional
related and complementary growth opportunities. We are employing our core
competencies from our existing businesses, as well as using our national scope,
international experience, extensive asset base and access to customers, to
accelerate growth in our existing business, as well as related and complementary
businesses. During fiscal year 2004, we completed a number of transactions in
pursuit of this strategy, most importantly the acquisition of the approximate
80.5% ownership interest in Antargaz which we did not already own.
CORPORATE INFORMATION
UGI was incorporated in Pennsylvania in 1991. UGI Corporation is not
subject to regulation by the PUC. It is also exempt from registration as a
holding company and not otherwise subject to the Public Utility Holding Company
Act of 1935, except for Section 9(a)(2), which regulates the acquisition of
voting securities of an electric or gas utility company. Our executive offices
are located at 460 North Gulph Road, King of Prussia, Pennsylvania 19406, and
our telephone number is (610) 337-1000. In this report, the terms "Company" and
"UGI," as well as the terms "our," "we," and "its," are sometimes used as
abbreviated references to UGI Corporation or, collectively, UGI Corporation and
its consolidated subsidiaries. Similarly, the terms "AmeriGas Partners" and the
"Partnership" are sometimes used as abbreviated references to AmeriGas Partners,
L.P. or, collectively, AmeriGas Partners, L.P. and its subsidiaries.
The Company's corporate website can be found at www.ugicorp.com. The
Company makes available free of charge at this website (under the "Investor
Relations and Corporate Governance-SEC filings" caption) copies of its reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, including its Annual Report on Form 10-K, its Quarterly Reports on
Form 10-Q and its Current Reports on Form 8-K. The Company's Principles of
Corporate Governance, Code of Ethics for the Chief Executive Officer and Senior
Financial Officers, Code of Business Conduct and Ethics for Directors, Officers
and Employees, and charters of the Corporate Governance, Audit and Compensation
and Management Development Committees of the Board of Directors are also
available on the Company's
2
website, under the caption "Investor Relations and Corporate
Governance-Corporate Governance." All of these documents are also available free
of charge by writing to Robert W. Krick, Vice President and Treasurer, UGI
Corporation, P.O. Box 858, Valley Forge, PA 19482.
FORWARD-LOOKING STATEMENTS
Information contained in this Annual Report on Form 10-K may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements use forward-looking words such as "believe," "plan," "anticipate,"
"continue," "estimate," "expect," "may," "will," or other similar words. These
statements discuss plans, strategies, events or developments that we expect or
anticipate will or may occur in the future.
A forward-looking statement may include a statement of the assumptions or
bases underlying the forward-looking statement. We believe that we have chosen
these assumptions or bases in good faith and that they are reasonable. However,
we caution you that actual results almost always vary from assumed facts or
bases, and the differences between actual results and assumed facts or bases can
be material, depending on the circumstances. When considering forward-looking
statements, you should keep in mind the following important factors which could
affect our future results and could cause those results to differ materially
from those expressed in our forward-looking statements: (1) adverse weather
conditions resulting in reduced demand; (2) cost volatility and availability of
propane, butane, oil, electricity and natural gas and the capacity to transport
them to market areas; (3) changes in domestic and foreign laws and regulations,
including safety, tax and accounting matters; (4) competitive pressures from
alternative energy sources, including alternative energy sources becoming
available through, for example, the extension of natural gas lines; (5) failure
to acquire new customers thereby reducing or limiting an increase in revenues;
(6) liability for environmental claims; (7) customer conservation measures and
improvements in energy efficiency and technology resulting in reduced demand;
(8) adverse labor relations; (9) large customer, counterparty or supplier
defaults; (10) liability in excess of insurance coverage for personal injury and
property damage arising from explosions and other catastrophic events, including
acts of terrorism, resulting from operating hazards and risks incidental to
generating and distributing electricity and transporting, storing and
distributing natural gas, propane and LPG; (11) political, regulatory and
economic conditions in the United States and foreign countries; (12) interest
rate fluctuations and other capital market conditions, including foreign
currency rate fluctuations, particularly in the euro; (13) reduced distributions
from subsidiaries; and (14) the timing and success of the Company's efforts to
develop new business opportunities.
These factors are not necessarily all of the important factors that could
cause actual results to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results. We undertake no obligation to
update publicly any forward-looking statement whether as a result of new
information or future events except as required by the federal securities laws.
3
AMERIGAS PROPANE
Our domestic propane distribution business is conducted through AmeriGas
Partners. As of September 30, 2004, the Partnership operated from approximately
650 district locations in 46 states. AmeriGas Propane manages the Partnership.
Although our consolidated financial statements include 100% of the Partnership's
revenues, assets and liabilities, our net income reflects only our 46% effective
interest in the income or loss of the Partnership, due to the publicly-owned
limited partner interest. See Note 1 to the Company's Consolidated Financial
Statements.
GENERAL INDUSTRY INFORMATION
Propane is separated from crude oil during the refining process and also
extracted from natural gas or oil wellhead gas at processing plants. Propane is
normally transported and stored in a liquid state under moderate pressure or
refrigeration for economy and ease of handling in shipping and distribution.
When the pressure is released or the temperature is increased, it is usable as a
flammable gas. Propane is colorless and odorless; an odorant is added to allow
its detection. Propane is clean burning, producing negligible amounts of
pollutants when properly consumed.
The primary customers for propane are residential, commercial,
agricultural, motor fuel and industrial users to whom natural gas is not readily
available. Propane is typically more expensive than natural gas, competitive
with fuel oil when operating efficiencies are taken into account and, in most
areas, cheaper than electricity on an equivalent energy basis.
PRODUCTS, SERVICES AND MARKETING
As of September 30, 2004, the Partnership distributed propane to
approximately 1.3 million customers from locations in 46 states. The Partnership
also sells, installs and services propane appliances, including heating systems.
In certain markets, the Partnership also installs and services propane fuel
systems for motor vehicles. Typically, district locations are found in suburban
and rural areas where natural gas is not available. Districts generally consist
of an office, appliance showroom, warehouse and service facilities, with one or
more 18,000 to 30,000 gallon storage tanks on the premises. As part of its
overall transportation and distribution infrastructure, the Partnership operates
as an interstate carrier in 48 states throughout the United States. It is also
licensed as a carrier in Canada.
The Partnership sells propane primarily to five markets: residential,
commercial/industrial, motor fuel, agricultural and wholesale. Approximately 82%
of the Partnership's fiscal year 2004 sales (based on gallons sold) were to
retail accounts and approximately 18% were to wholesale customers. Sales to
residential customers in fiscal 2004 represented approximately 42% of retail
gallons sold; industrial/commercial customers 33%; motor fuel customers 12%; and
agricultural customers 7%. Transport gallons, which are large-scale deliveries
to retail customers other than residential, accounted for 6% of 2004 retail
gallons. No single customer represents, or is anticipated to represent, more
than 5% of the Partnership's consolidated revenues.
4
The Partnership continues to expand its PPX Prefilled Propane Xchange
program ("PPX (R)"). At September 30, 2004, PPX was available at approximately
21,800 retail locations throughout the United States. Sales of our PPX grill
cylinders to retailers are included in the commercial/industrial market. The PPX
program enables consumers to exchange their empty 20-pound propane grill
cylinders for filled cylinders at various retail locations such as home centers,
mass merchandisers and grocery and convenience stores.
In the residential market, which includes both conventional and
manufactured housing, propane is used primarily for home heating, water heating
and cooking purposes. Commercial users, which include motels, hotels,
restaurants and retail stores, generally use propane for the same purposes as
residential customers. Industrial customers use propane to fire furnaces, as a
cutting gas and in other process applications. Other industrial customers are
large-scale heating accounts and local gas utility customers who use propane as
a supplemental fuel to meet peak load deliverability requirements. As a motor
fuel, propane is burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines. Agricultural uses include tobacco
curing, chicken brooding and crop drying. In its wholesale operations, the
Partnership principally sells propane to large industrial end-users and other
propane distributors.
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,400 to 3,000 gallons of propane, into a stationary storage
tank on the customer's premises. The Partnership owns most of these storage
tanks and leases them to its customers. The capacity of these tanks ranges from
approximately 120 gallons to approximately 1,200 gallons. The Partnership also
delivers propane to retail customers in portable cylinders with capacities of 4
to 24 gallons. Some of these deliveries are made to the customer's location,
where empty cylinders are either picked up for replenishment or filled in place.
PROPANE SUPPLY AND STORAGE
The Partnership has over 200 domestic and international sources of supply,
including the spot market. Supplies of propane from the Partnership's sources
historically have been readily available. During the year ended September 30,
2004, over 90% of the Partnership's propane supply was purchased under supply
agreements with terms of 1 to 3 years. Approximately 83% of the volumes
purchased under those agreements were from 10 suppliers, including BP Products
North America Inc. and its affiliate BP Marketing Inc. (approximately 28%);
Dynegy Midstream Services (approximately 17%); and Enterprise Products Operating
LP and its affiliate Canadian Enterprises Gas Products Ltd. (approximately 14%).
The availability of propane supply is dependent upon, among other things, the
severity of winter weather, the price and availability of competing fuels such
as natural gas and crude oil, and the availability of imported supply. Although
no assurance can be given that supplies of propane will be readily available in
the future, management currently expects to be able to secure adequate supplies
during fiscal year 2005. If supply from major sources were interrupted, however,
the cost of procuring replacement supplies and transporting those supplies from
alternative locations might be materially higher and, at least on a short-term
basis, margins could be affected. Aside from BP, Dynegy and Enterprise Products,
no single supplier provided more than 10% of the Partnership's total propane
supply in fiscal year 2004. In certain market areas, however, some suppliers
provide
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70% to 80% of the Partnership's requirements. Disruptions in supply in these
areas could also have an adverse impact on the Partnership's margins.
During fiscal year 2004, 92% of the Partnership's supply contracts
provided for pricing based upon (i) index formulas using the current prices
established at major storage points such as Mont Belvieu, Texas, or Conway,
Kansas, or (ii) posted prices at the time of delivery. In addition, some
agreements provided maximum and minimum seasonal purchase volume guidelines. The
percentage of contract purchases, and the amount of supply contracted for at
fixed prices, will vary from year to year as determined by the General Partner.
The Partnership uses a number of interstate pipelines, as well as railroad tank
cars, delivery trucks and barges, to transport propane from suppliers to storage
and distribution facilities. The Partnership stores propane at large storage
facilities in Arizona, Pennsylvania and Virginia, as well as at smaller
facilities in several other states.
Because the Partnership's profitability is sensitive to changes in
wholesale propane costs, the Partnership generally seeks to pass on increases in
the cost of propane to customers. There is no assurance, however, that the
Partnership will always be able to pass on product cost increases fully,
particularly when product costs rise rapidly. Product cost increases can be
triggered by periods of severe cold weather, supply interruptions, increases in
the prices of base commodities such as crude oil and natural gas, or other
unforeseen events. The General Partner has adopted supply acquisition and
product cost risk management practices to reduce the effect of volatility on
selling prices. These practices currently include the use of summer storage,
forward purchases and derivative commodity instruments such as options and
propane price swaps. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Market Risk Disclosures."
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The following graph shows the average prices of propane on the propane
spot market during the last five fiscal years at Mont Belvieu, Texas and Conway,
Kansas, two major storage areas.
AVERAGE PROPANE SPOT MARKET PRICES
[AVERAGE PROPANE SPOT PRICES CHART]
Mont Belvieu Conway
Oct-99 45.4550 43.3900
Nov-99 43.4410 38.7780
Dec-99 42.9532 35.2314
Jan-00 56.1090 42.2140
Feb-00 59.7500 47.2630
Mar-00 51.1820 47.8180
Apr-00 46.88 43.64
May-00 51.31 50.81
Jun-00 55.47 56.22
Jul-00 54.88 56.29
Aug-00 58.54 63.52
Sep-00 64.21 70.95
Oct-00 61.82 64.05
Nov-00 60.71 60.45
Dec-00 77.63 79.75
Jan-01 77.27 83.03
Feb-01 59.39 63.03
Mar-01 54.94 57.12
Apr-01 54.37 60.26
May-01 51.20 56.90
Jun-01 43.17 47.70
Jul-01 38.87 43.27
Aug-01 41.54 45.71
Sep-01 41.67 46.53
Oct-01 39.48 44.19
Nov-01 33.04 35.19
Dec-01 30.43 30.34
Jan-02 29.05 26.60
Feb-02 31.20 27.92
Mar-02 37.95 35.93
Apr-02 41.52 40.07
May-02 40.69 38.09
Jun-02 37.51 35.25
Jul-02 37.19 35.47
Aug-02 41.49 41.53
Sep-02 47.17 45.93
Oct-02 47.95 47.12
Nov-02 47.26 48.01
Dec-02 52.40 52.32
Jan-03 60.38 57.70
Feb-03 77.30 73.03
Mar-03 62.77 57.09
Apr-03 50.42 50.28
May-03 54.09 55.41
Jun-03 55.98 59.71
Jul-03 53.01 58.90
Aug-03 54.84 63.63
Sep-03 52.00 59.44
Oct-03 55.44 65.21
Nov-03 54.66 58.12
Dec-03 62.87 64.15
Jan-04 74.35 67.56
Feb-04 69.98 61.99
Mar-04 58.64 56.35
Apr-04 60.62 58.55
May-04 67.65 64.37
Jun-04 67.12 64.27
Jul-04 74.21 71.65
Aug-04 83.84 86.44
Sep-04 80.18 81.98
COMPETITION
Propane competes with other sources of energy, some of which are less
costly for equivalent energy value. Propane distributors compete for customers
against suppliers of electricity, fuel oil and natural gas, principally on the
basis of price, service, availability and portability. Electricity is a major
competitor of propane, but propane generally enjoys a competitive price
advantage over electricity for space heating, water heating and cooking. Fuel
oil is also a major competitor of propane and is generally less expensive than
propane. Operating efficiencies and other factors such as air quality and
environmental advantages, however, generally make propane competitive with fuel
oil as a heating source. Furnaces and appliances that burn propane will not
operate on fuel oil, and vice versa, and, therefore, a conversion from one fuel
to the other requires the installation of new equipment. Propane serves as an
alternative to natural gas in rural and suburban areas where natural gas is
unavailable or portability of product is required. Natural gas is generally a
less expensive source of energy than propane,
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although in areas where natural gas is available, propane is used for certain
industrial and commercial applications and as a standby fuel during
interruptions in natural gas service. The gradual expansion of the nation's
natural gas distribution systems has resulted in the availability of natural gas
in some areas that previously depended upon propane. However, natural gas
pipelines are not present in many regions of the country where propane is sold
for heating and cooking purposes.
In the motor fuel market, propane competes with gasoline and diesel fuel
as well as electric batteries and fuel cells. Wholesale propane distribution is
a highly competitive, low margin business. Propane sales to other retail
distributors and large-volume, direct-shipment industrial end-users are price
sensitive and frequently involve a competitive bidding process.
The retail propane industry is mature, with only modest growth in total
demand for the product foreseen. Therefore, the Partnership's ability to grow
within the industry is dependent on its ability to acquire other retail
distributors and to achieve internal growth, which includes expansion of the PPX
program (through which consumers can exchange an empty propane grill cylinder
for a filled one) and Strategic Accounts program (through which the Partnership
encourages large, multi-location propane users to enter into a supply agreement
with it rather than with many small suppliers), as well as the success of its
sales and marketing programs designed to attract and retain customers. The
failure of the Partnership to retain and grow its customer base would have an
adverse effect on its results.
The domestic propane retail distribution business is highly competitive.
The Partnership competes in this business with other large propane marketers,
including other full-service marketers, and thousands of small independent
operators. In recent years, some rural electric cooperatives and fuel oil
distributors have expanded their businesses to include propane distribution and
the Partnership competes with them as well. The ability to compete effectively
depends on providing high quality customer service, maintaining competitive
retail prices and controlling operating expenses.
Based on the most recent annual survey by the American Petroleum
Institute, the 2002 domestic retail market for propane (annual sales for other
than chemical uses) was approximately 11.9 billion gallons and, based on LP-GAS
magazine rankings, 2003 sales volume of the ten largest propane companies
(including AmeriGas Partners) represented approximately 36% of domestic retail
sales. Management believes the Partnership's 2004 retail volume represents 9% of
the domestic retail market.
PROPERTIES
As of September 30, 2004, the Partnership owned approximately 89% of its
district locations. In addition, the Partnership subleases three one-million
barrel underground storage caverns in Arizona to store propane and butane for
itself and third parties. The Partnership also owns a 600,000 barrel
refrigerated, above-ground storage facility located on leased property in
California. The California facility, which the Partnership operates, is
currently leased to several refiners for the storage of butane.
8
The transportation of propane requires specialized equipment. The trucks
and railroad tank cars utilized for this purpose carry specialized steel tanks
that maintain the propane in a liquefied state. As of September 30, 2004, the
Partnership operated a transportation fleet with the following assets:
APPROXIMATE QUANTITY & EQUIPMENT TYPE % OWNED % LEASED
430 Trailers 94 6
240 Tractors 39 61
180 Railroad tank cars 0 100
2,600 Bobtail trucks 19 81
350 Rack trucks 20 80
2,150 Service and delivery trucks 21 79
Other assets owned at September 30, 2004 included approximately 900,000
stationary storage tanks with typical capacities of 121 to 2,000 gallons and
approximately 2.3 million portable propane cylinders with typical capacities of
1 to 120 gallons. The Partnership also owned approximately 5,300 large volume
tanks which are used for its own storage requirements. The Partnership's
subsidiary, AmeriGas Propane, L.P. ("AmeriGas OLP") has debt secured by liens
and mortgages on its real and personal property. AmeriGas OLP owns approximately
67% of the Partnership's property, plant and equipment.
TRADE NAMES, TRADE AND SERVICE MARKS
The Partnership markets propane principally under the "AmeriGas(R),"
"America's Propane Company(R)" and "PPX Prefilled Propane Xchange(R)" trade
names and related service marks. UGI owns, directly or indirectly, all the
right, title and interest in the "AmeriGas" and related trade and service marks.
The General Partner owns all right, title and interest in the "America's Propane
Company" and "PPX Prefilled Propane Xchange" trade names and related service
marks. The Partnership has an exclusive (except for use by UGI, AmeriGas, Inc.
and the General Partner), royalty-free license to use these names and trade and
service marks. UGI and the General Partner each have the option to terminate its
respective license agreement (on 12 months prior notice in the case of UGI),
without penalty, if the General Partner is removed as general partner of the
Partnership other than for cause. If the General Partner ceases to serve as the
general partner of the Partnership for cause, the General Partner has the option
to terminate its license agreement upon payment of a fee equal to the fair
market value of the licensed trade names. UGI has a similar termination option,
however, UGI must provide 12 months prior notice in addition to paying the fee.
SEASONALITY
Because many customers use propane for heating purposes, the Partnership's
retail sales volume is seasonal, with approximately 59% of the Partnership's
fiscal year 2004 retail sales volume occurring during the five-month peak
heating season from November through March. As a result of this seasonality,
sales are higher in the Partnership's first and second fiscal quarters
9
(October 1 through March 31). Cash receipts are greatest during the second and
third fiscal quarters when customers pay for propane purchased during the winter
heating season.
Sales volume for the Partnership traditionally fluctuates from
year-to-year in response to variations in weather, prices, competition, customer
mix and other factors, such as conservation efforts and general economic
conditions. For historical information on national weather statistics, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENT REGULATION
The Partnership is subject to various federal, state and local
environmental, safety and transportation laws and regulations governing the
storage, distribution and transportation of propane and the operation of bulk
storage LPG terminals. These laws include, among others, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA" or, the "Superfund Law"), the Clean Air
Act, the Occupational Safety and Health Act, the Homeland Security Act of 2002,
the Emergency Planning and Community Right to Know Act, the Clean Water Act and
comparable state statutes. CERCLA imposes joint and several liability on certain
classes of persons considered to have contributed to the release or threatened
release of a "hazardous substance" into the environment without regard to fault
or the legality of the original conduct. Propane is not a hazardous substance
within the meaning of federal and state environmental laws. However, the
Partnership owns and operates real property where such hazardous substances may
exist. See Notes 1 and 12 to the Company's Consolidated Financial Statements.
All states in which the Partnership operates have adopted fire safety
codes that regulate the storage and distribution of propane. In some states
these laws are administered by state agencies, and in others they are
administered on a municipal level. The Partnership conducts training programs to
help ensure that its operations are in compliance with applicable governmental
regulations. With respect to general operations, National Fire Protection
Association ("NFPA") Pamphlets No. 54 and No. 58, which establish a set of rules
and procedures governing the safe handling of propane, or comparable
regulations, have been adopted as the industry standard in a majority of the
states in which the Partnership operates. The latest version of NFPA Pamphlet
No. 58, adopted by a number of states, requires certain stationary cylinders
that are filled in place to be re-qualified periodically. Management believes
that the policies and procedures currently in effect at all of its facilities
for the handling, storage and distribution of propane are consistent with
industry standards and are in compliance in all material respects with
applicable environmental, health and safety laws.
With respect to the transportation of propane by truck, the Partnership is
subject to regulations promulgated under the Federal Motor Carrier Safety Act
and the Homeland Security Act of 2002. These regulations cover the security of
and transportation of hazardous materials and are administered by the United
States Department of Transportation ("DOT"). The Natural Gas Safety Act of 1968
required the DOT to develop and enforce minimum safety regulations for the
transportation of gases by pipeline. The DOT's pipeline safety code applies to,
among other things, a propane gas system which supplies 10 or more customers
from a single source and a propane gas system any portion of which is located in
a public place. The code requires operators of all gas systems to provide
training and written instructions for employees, establish
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written procedures to minimize the hazards resulting from gas pipeline
emergencies, and keep records of inspections and testing. Operators are subject
to the Pipeline Safety Improvement Act of 2002, which, among other things,
protects from adverse employment actions employees who provide information to
their employers or to the federal government as to pipeline safety.
EMPLOYEES
The Partnership does not directly employ any persons responsible for
managing or operating the Partnership. The General Partner provides these
services and is reimbursed for its direct and indirect costs and expenses,
including all compensation and benefit costs. At September 30, 2004, the General
Partner had approximately 6,100 employees, including approximately 330 temporary
and part-time employees, working on behalf of the Partnership. UGI also performs
certain financial and administrative services for the General Partner on behalf
of the Partnership and is reimbursed by the Partnership.
INTERNATIONAL PROPANE
We conduct our international LPG distribution business principally in
Europe through our wholly owned subsidiaries Antargaz and Flaga. In March 2004,
we purchased the remaining approximate 80.5% equity interest in Antargaz which
we did not already own. Antargaz operates in France; Flaga operates in Austria,
the Czech Republic and Slovakia. During fiscal year 2004, Antargaz and Flaga
sold approximately 336 million and 35 million gallons of LPG, respectively. Our
joint venture in China sold approximately 22 million gallons of LPG during
fiscal year 2004.
ANTARGAZ
PRODUCTS, SERVICES AND MARKETING
Antargaz's customer base consists of residential, commercial, agricultural
and motor fuel customer accounts that use LPG for space heating, cooking, water
heating, process heat and transportation. Antargaz sells LPG in cylinders, and
in small, medium and large bulk volumes stored in tanks. Sales of LPG are also
made to service stations to accommodate vehicles that run on LPG ("LPGc").
Antargaz sells LPG in cylinders to approximately 28,000 retail outlets such as
supermarkets, individually owned stores and gas stations. At September 30, 2004,
Antargaz had approximately 211,000 bulk customers and approximately 5 million
cylinders in circulation. Approximately 66% of Antargaz' sales (based on
volumes) for the 12 months ended September 30, 2004 were cylinder and small
bulk, 13% medium bulk, 19% large bulk, and 2% to service stations for
automobiles. Antargaz also engages in wholesale sales of LPG and provides
logistic, storage and other services to third-party LPG distributors. No single
customer represents, or is anticipated to represent, more than 5% of total
revenues for Antargaz.
Sales to small bulk customers represent the largest segment of Antargaz's
business in terms of volume, revenue and margin. Small bulk customers are
primarily residential and small business users such as restaurants that use LPG
mainly for heating and cooking. Small bulk customers also include
municipalities, which use LPG for heating sports arenas and swimming pools, and
the poultry industry, for use in chicken breeding.
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The principal end-users of cylinders are residential customers who use LPG
supplied in this form for domestic applications such as cooking and heating.
Butane-filled cylinders accounted for approximately 62% of LPG cylinders for
fiscal year 2004, with propane-filled cylinders accounting for the remainder.
Propane-filled cylinders are also used to supply fuel for forklift trucks. The
demand for butane-filled cylinders has been declining, due to customers
gradually changing to other household energy sources for heating and cooking,
such as natural gas. Antargaz is seeking to increase demand for propane-filled
cylinders through marketing and product innovations.
Medium bulk customers use propane only, and consist mainly of large
residential developments such as housing projects, hospitals, municipalities and
medium-sized industrial and agricultural enterprises. Large bulk customers are
primarily companies that use LPG in their industrial processes, and large
agricultural companies.
LPG SUPPLY AND STORAGE
Antargaz has an agreement with Totalgaz for the supply of butane and
propane, with pricing based on internationally quoted market prices. Under this
agreement, 80% of Antargaz's requirements for butane are guaranteed until June
2006 and 50% of its requirements for propane are guaranteed until June 2007.
Requirements are fixed annually, and Antargaz is free to develop other sources
of supply. For the 2004 fiscal year, Antargaz purchased approximately 95% of its
butane needs and 25% of its propane needs from Totalgaz. Antargaz also purchases
propane on the international market and, to a lesser degree, purchases butane on
the domestic market, under term agreements with international oil and gas
trading companies such as SHV Gas Supply and Trading, Shell International
Trading and Shipping Company Ltd. ("Stasco") and Vitol S.A. In addition,
purchases are made on the spot market from international oil and gas companies
such as Den Norske Stats Oldeselshap ("Statoil") and Sonatrach BV, and to a
lesser extent from domestic refineries, including those operated by BP France
and Esso SAF.
Antargaz has five primary storage facilities, including three which are
located close to deep sea harbor points, and 26 secondary storage facilities. It
also manages an extensive logistics and transportation network. Access to harbor
points allows Antargaz to diversify its LPG supplies through imports. LPG stored
in primary storage facilities is transported to smaller storage facilities by
rail, sea and road. At the secondary storage facilities, LPG is filled into
cylinders or trucks equipped with tanks and then delivered to customers.
COMPETITION
The LPG market in France is mature, with limited future growth expected.
Sales volumes are affected principally by the severity of the weather and
customer migration to alternative energy forms, including natural gas and
electricity. Antargaz competes in all product markets on a national level
principally with three LPG distribution companies, Totalgaz (owned by Total
France), Butagaz (owned by Societe des Petroles Shell) and Compagnie des Gaz de
Petrole Primagaz (an independent supplier owned by SHV Holding NV), as well as
with a smaller competitor, Vitogaz. On a regional level, Antargaz competes with
Repsol France S.A., in markets other than LPGc. Antargaz's competitors are
generally affiliates of its LPG suppliers. As a result, its competitors may
obtain product at more competitive prices.
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SEASONALITY
Because a significant amount of LPG is used for heating, demand is
typically higher during the colder months of the year. Approximately 65% of
retail sales volume for fiscal year 2004 occurred during the six months of
October through March.
GOVERNMENT REGULATION
Antargaz's business is subject to various laws and regulations at the
national and European levels with respect to protection of the environment, the
storage and handling of hazardous materials, the discharge of contaminants into
the environment and the safety of persons and property. Following an explosion
in 2001 at Grande Pariosse's chemical factory in Toulouse, France new
regulations were adopted relating to the safety risks of operations such as
Antargaz's, which involve the storage of large amounts of flammable substances.
PROPERTIES
Antargaz has five primary storage facilities consisting of underground
caverns in geological formations, with the exception of Norgal, which is a
refrigerated facility. The table below sets forth details of each of these
facilities.
Antargaz Storage Antargaz Storage
Capacity - Propane Capacity - Butane
Ownership % (m3) (m3)
----------- ------------------ -----------------
Norgal 52.7% 22,600 8,900
Geogaz Lavera 16.7 17,400 32,500
Donges 50.0(1) 30,000 0
Geovexin 44.9 54,000 0
Cobogal 15.0 1,300 900
(1) Pursuant to a contractual arrangement with the owner.
Antargaz has 26 secondary storage facilities, 14 of which are wholly-owned. The
others are partially-owned, through joint ventures.
EMPLOYEES
At September 30, 2004, Antargaz had approximately 1,200 employees.
FLAGA
FLAGA distributes LPG principally in Austria, the Czech Republic and
Slovakia for residential, commercial, industrial and autogas applications.
During fiscal year 2004, FLAGA distributed approximately 33 million gallons of
LPG. FLAGA operates from 5 distribution
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locations in Austria, 2 in the Czech Republic and 2 in Slovakia. In addition,
FLAGA has 6 sales offices in the Czech Republic. As of September 30, 2004, FLAGA
had a total of 359 employees.
FLAGA is the market leader for propane distribution in Austria with an
estimated 28% overall market share, serving residential, commercial and
industrial customers. The retail propane industry in Austria is mature, with
slight declines in overall demand in recent years, due primarily to the
expansion of natural gas. Competition for renewals and for new customer
installations is based on the terms and conditions of tank leases as well as on
product prices. Much of FLAGA's Austrian cylinder business is conducted through
approximately 600 neighborhood resellers with whom FLAGA has a long business
relationship. FLAGA competes with other propane marketers, including competitors
located in other eastern European countries. FLAGA also competes with providers
of other sources of energy, principally natural gas and wood.
The market in the Czech Republic for LPG represents approximately 30% of
FLAGA's total volume. FLAGA entered the Czech market in 1994 when it purchased a
portion of the formerly state-run LPG company from the Czech government as part
of its privatization plan. FLAGA's main facility in the Czech Republic is its
bulk storage and cylinder filling and repair plant in Hustopece, located in the
southeast quadrant of the Czech Republic. Effective September 1, 2004, FLAGA
acquired the LPG business of BP in the Czech Republic. Giving effect to this
acquisition, FLAGA expects to be the market leader in the Czech Republic with
approximately 24% market share. FLAGA estimates that its share of the LPG market
in Slovakia is 24%, ranking it second in the country. During fiscal year 2004,
FLAGA expanded its LPG cylinder business to Switzerland.
GAS UTILITY
SERVICE AREA; REVENUE ANALYSIS
Gas Utility distributes natural gas to approximately 300,000 customers in
portions of 14 eastern and southeastern Pennsylvania counties through its
distribution system of approximately 4,900 miles of gas mains. The service area
consists of approximately 3,000 square miles and includes the cities of
Allentown, Bethlehem, Easton, Harrisburg, Hazleton, Lancaster, Lebanon and
Reading, Pennsylvania. Located in Gas Utility's service area are major
production centers for basic industries such as specialty metals, aluminum and
glass.
System throughput (the total volume of gas sold to or transported for
customers within Gas Utility's distribution system) for the 2004 fiscal year was
approximately 82.2 billion cubic feet ("bcf"). System sales of gas to
firm-residential, commercial and industrial ("retail core-market") customers
accounted for approximately 42% of system throughput, while gas delivery service
(gas transported for residential, commercial and industrial customers who bought
their gas from others) accounted for approximately 58% of system throughput.
Based on the most recent available industry data (2002), residential customers
account for approximately 35% of total system throughput by natural gas
distribution companies in the United States. By contrast,
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for the 2004 fiscal year, Gas Utility's residential customers represented 26% of
its total system throughput.
SOURCES OF SUPPLY AND PIPELINE CAPACITY
Gas Utility meets its service requirements by utilizing a diverse mix of
natural gas purchase contracts with producers and marketers, and storage and
transportation service contracts. These arrangements enable Gas Utility to
purchase gas from Gulf Coast, Mid-Continent, Appalachian and Canadian sources.
For the transportation and storage function, Gas Utility has agreements with a
number of pipeline companies, including Texas Eastern Transmission Corporation,
Columbia Gas Transmission Corporation and Transcontinental Gas Pipeline
Corporation.
GAS SUPPLY CONTRACTS
During fiscal year 2004, Gas Utility purchased approximately 50 bcf of
natural gas for sale to retail core market and off-system sales customers.
Approximately 77% of the volumes purchased were supplied under agreements with
ten major suppliers. The remaining 23% of gas purchased was supplied by
approximately 20 different producers and marketers. Gas supply contracts are
generally no longer than one year.
SEASONAL VARIATION
Because many of its customers use gas for heating purposes, Gas Utility
sales are seasonal. Approximately 59% of fiscal year 2004 throughput occurred
during the winter season from November through March.
COMPETITION
Natural gas is a fuel that competes with electricity and oil, and to a
lesser extent, with propane and coal. Competition among these fuels is primarily
a function of their perceived reliability, comparative price, and the relative
cost and efficiency of fuel utilization equipment. Electric utilities in Gas
Utility's service area are seeking new load, primarily in the new construction
market. Fuel oil dealers compete for customers in all categories, including
industrial customers. Gas Utility responds to this competition with marketing
efforts designed to retain and grow its customer base.
In substantially all of its service territory, Utilities is the only
regulated gas distribution utility having the right, granted by the PUC or by
law, to provide gas distribution services. Since the 1980s, larger commercial
and industrial customers have been able to purchase gas supplies from entities
other than Gas Utility. As a result of Pennsylvania's Natural Gas Choice and
Competition Act ("Gas Competition Act"), which became effective July 1, 1999,
all of Gas Utility's customers, including residential and smaller commercial and
industrial customers, have been afforded this opportunity.
A number of Gas Utility's commercial and industrial customers have the
ability to switch to an alternate fuel at any time and, therefore, are served on
an interruptible basis under rates which are competitively priced with respect
to their alternate fuel. Profitability from these
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customers, therefore, is affected by the difference, or "spread," between the
customers' delivered cost of gas and the customers' delivered alternate fuel
cost, and the frequency and duration of interruptions. See "Gas Utility and
Electric Utility Regulation and Rates - Gas Utility Rates." Commercial and
industrial customers representing 22% of total system throughput have locations
which afford them the opportunity, although none have exercised it, of seeking
transportation service directly from interstate pipelines, thereby bypassing Gas
Utility. The majority of customers in this group are served under transportation
contracts having three- to twenty-year terms. Included in these two groups are
Gas Utility's ten largest customers in terms of annual volume. All of these
customers have contracts, eight of which extend beyond fiscal year 2005. No
single customer represents, or is anticipated to represent, more than 5% of the
total revenues of Gas Utility.
OUTLOOK FOR GAS SERVICE AND SUPPLY
Gas Utility anticipates having adequate pipeline capacity and sources of
supply available to it to meet the full requirements of all firm customers on
its system through fiscal year 2005. Supply mix is diversified, market priced,
and delivered pursuant to a number of long- and short-term firm transportation
and storage arrangements, including transportation contracts held by some of Gas
Utility's larger customers.
During fiscal year 2004, Gas Utility supplied transportation service to
two major cogeneration installations and three electric generation facilities.
Gas Utility continues to pursue opportunities to supply natural gas to electric
generation projects located in its service territory. Gas Utility also continues
to seek new residential, commercial and industrial customers for both firm and
interruptible service. In the residential market sector, Gas Utility connected
approximately 10,600 new residential heating customers during fiscal year 2004,
which represented a record annual increase. Of those new customers, new home
construction accounted for over 8,000 heating customers. Customers converting
from other energy sources, primarily oil and electricity, and existing
non-heating gas customers who have added gas heating systems to replace other
energy sources, accounted for the balance of the additions. The number of new
commercial and industrial customers was approximately 1,200.
Gas Utility continues to monitor and participate extensively in rulemaking
and individual rate and tariff proceedings before the Federal Energy Regulatory
Commission ("FERC") affecting the rates and the terms and conditions under which
Gas Utility transports and stores natural gas. Among these proceedings are those
arising out of certain FERC orders and/or pipeline filings which relate to (i)
the pricing of pipeline services in a competitive energy marketplace; (ii) the
flexibility of the terms and conditions of pipeline service tariffs and
contracts; and (iii) pipelines' requests to increase their base rates, or change
the terms and conditions of their storage and transportation services.
Gas Utility's objective in negotiations with interstate pipeline and
natural gas suppliers, and in proceedings before regulatory agencies, is to
assure availability of supply, transportation and storage alternatives to serve
market requirements at the lowest cost achievable for reliable and secure
supplies. Consistent with that objective, Gas Utility negotiates the terms of
firm transportation capacity on all pipelines serving it, arranges for
appropriate storage and peak-shaving resources, negotiates with producers for
competitively priced gas purchases and
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aggressively participates in regulatory proceedings related to transportation
rights and costs of service.
ELECTRIC UTILITY
SERVICE AREA; SALES ANALYSIS
Electric Utility supplies electric service to approximately 62,000
customers in portions of Luzerne and Wyoming Counties in northeastern
Pennsylvania through a system consisting of approximately 2,100 miles of
transmission and distribution lines and 14 transmission substations. For fiscal
year 2004, about 53% of sales volume came from residential customers, 35% from
commercial customers and 12% from industrial customers. Electricity transported
for customers who purchased their power from other suppliers represented less
than 1% of fiscal year 2004 sales volume.
SOURCES OF SUPPLY
Electric Utility has third-party generation supply contracts in place for
substantially all of its expected energy requirements for fiscal year 2005.
Electric Utility distributes both electricity that it purchases from others and
electricity that customers purchase from other suppliers. At September 30, 2004,
alternate suppliers served customers representing less than 1% of system load.
Electric Utility expects to continue to provide energy to the great majority of
its distribution customers for the foreseeable future.
COMPETITION
As a result of the Electricity Generation Customer Choice and Competition
Act ("ECC Act") that became effective in 1997, all Pennsylvania retail electric
customers have the ability to choose their electric generation supplier. Under
the ECC Act, Electric Utility remains the provider of last resort ("POLR") for
its customers who do not choose an alternate electric generation supplier. The
terms and conditions under which Electric Utility provides POLR service, and
rules governing the rates that may be charged for such service, have been
established in a series of PUC-approved settlements, the most recent of which
became effective in June 2004 (collectively, the "POLR Settlement.") Consistent
with the terms of the POLR Settlement, Electric Utility's POLR rates will
increase beginning January 2005 and Electric Utility is permitted, but not
required, to further increase its POLR rates in January 2006. Electric Utility
is the only regulated electric utility having the right, granted by the PUC or
by law, to distribute electricity in its service territory. Sales of electricity
for residential heating purposes accounted for approximately 20% of total sales
of electricity during the 2004 fiscal year. Electricity competes with natural
gas, oil, propane and other heating fuels for this use.
GAS UTILITY AND ELECTRIC UTILITY REGULATION AND RATES
PENNSYLVANIA PUBLIC UTILITY COMMISSION JURISDICTION
Utilities' gas and electric utility operations are subject to regulation
by the PUC as to rates, terms and conditions of service, accounting matters,
issuance of securities, contracts and other arrangements with affiliated
entities, and various other matters.
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FERC ORDERS 888 AND 889
In April 1996, FERC issued Orders No. 888 and 889, which established rules
for the use of electric transmission facilities for wholesale transactions. FERC
has also asserted jurisdiction over the transmission component of electric
retail choice transactions. In compliance with these orders, the PJM
Interconnection, LLC ("PJM"), of which Utilities is a member, has filed an open
access transmission tariff with FERC establishing transmission rates and
procedures for transmission within the PJM control area. Under the PJM tariff
and associated agreements, Electric Utility is entitled to receive certain
revenues when its transmission facilities are used by third parties.
GAS UTILITY RATES
Effective October 1, 2000, Gas Utility increased its base rates for retail
core-market customers and implemented a credit to its purchased gas cost rates
(described below). Since December 1, 2001, Gas Utility has reduced its purchased
gas cost rates to retail core-market customers by an amount equal to the margin
it receives from customers served under interruptible rates to the extent they
use capacity contracted for by Gas Utility for retail core-market customers. As
a result of these changes in its regulated rates, since December 1, 2001, Gas
Utility's operating results have been more sensitive to heating season weather
and less sensitive to competition from alternative fuels in commercial and
industrial markets.
Gas Utility's gas service tariff contains purchased gas cost ("PGC") rates
that provide for annual increases or decreases in the rate per thousand cubic
feet ("mcf") that Gas Utility charges for natural gas sold by it, to reflect Gas
Utility's projected cost of purchased gas. PGC rates may also be adjusted
quarterly, or, under certain conditions monthly, to reflect the actual cost of
gas. Each proposed annual PGC rate is required to be filed with the PUC six
months prior to its effective date. During this period the PUC holds hearings to
determine whether the proposed rate reflects a least-cost fuel procurement
policy consistent with the obligation to provide safe, adequate and reliable
service. After completion of these hearings, the PUC issues an order permitting
the collection of gas costs at levels which meet that standard. The PGC
mechanism also provides for an annual reconciliation. Gas Utility has two PGC
rates. PGC (1) is applicable to small, firm, retail core-market customers
consisting of the residential and small commercial and industrial classes; PGC
(2) is applicable to firm, contractual, high-load factor customers served on
three separate rates. In addition, residential customers maintaining a high load
factor may qualify for the PGC (2) rate. As described above, Gas Utility's PGC
rates are adjusted to reflect margins, if any, from interruptible rate customers
who do not obtain their own pipeline capacity.
ELECTRIC UTILITY RATES
Electric Utility's POLR rates will increase beginning January 2005 and
Electric Utility is permitted, but not required, to further increase its POLR
rates in January 2006. Pursuant to the requirements of the ECC Act, the PUC is
currently developing POLR regulations that are expected to further define POLR
service obligations and pricing. As of September 30, 2004, fewer than 1% of
Electric Utility's customers have chosen an alternative electricity generation
supplier.
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STATE TAX SURCHARGE CLAUSES
Utilities' gas and electric service tariffs contain state tax surcharge
clauses. The surcharges are recomputed whenever any of the tax rates included in
their calculation are changed. These clauses protect Utilities from the effects
of increases in most of the Pennsylvania taxes to which it is subject.
UTILITY FRANCHISES
Utilities holds certificates of public convenience issued by the PUC and
certain "grandfather rights" predating the adoption of the Pennsylvania Public
Utility Code and its predecessor statutes which it believes are adequate to
authorize it to carry on its business in substantially all the territory to
which it now renders gas and electric service. Under applicable Pennsylvania
law, Utilities also has certain rights of eminent domain as well as the right to
maintain its facilities in streets and highways in its territories.
OTHER GOVERNMENT REGULATION
In addition to regulation by the PUC, the gas and electric utility
operations of Utilities are subject to various federal, state and local laws
governing environmental matters, occupational health and safety, pipeline safety
and other matters. Certain of Utilities' activities involving the interstate
movement of natural gas, the transmission of electricity, transactions with
non-utility generators of electricity, and other matters, are also subject to
the jurisdiction of FERC.
Utilities is subject to the requirements of the federal Resource
Conservation and Recovery Act, CERCLA and comparable state statutes with respect
to the release of hazardous substances on property owned or operated by
Utilities. See ITEM 3. "LEGAL PROCEEDINGS - Environmental Matters-Manufactured
Gas Plants."
EMPLOYEES
At September 30, 2004, Utilities had approximately 1,000 employees.
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ENERGY SERVICES
We operate the non-utility, energy-related businesses described below
through various subsidiaries.
NATURAL GAS AND ELECTRICITY MARKETING
UGI Energy Services, Inc. ("ESI") conducts our non-utility energy
marketing business under the trade names GASMARK(R) and POWERMARK(R). GASMARK(R)
sells natural gas directly to approximately 5,400 commercial and industrial
customers in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, New York,
Ohio, North Carolina and the District of Columbia through the use of the
transportation systems of 32 utility systems. Energy Services also sells fuel
oil, electricity and LPG to commercial and industrial customers in Pennsylvania,
New Jersey and Maryland. During fiscal year 2003, ESI significantly increased
its size by acquiring the northeastern gas marketing operations of a subsidiary
of TXU Corp. This acquisition added approximately 1,000 customers to ESI's
customer base and increased its natural gas sales volume approximately 60%.
The gas marketing business is a high revenue, low margin business. A
majority of GASMARK(R)'s commodity sales are made under fixed price agreements.
ESI manages supply cost volatility related to these agreements by entering into
exchange-traded natural gas futures contracts and fixed-price supply
arrangements with a diverse group of natural gas producers and holders of
interstate pipeline capacity. Exchange-traded natural gas futures contracts are
guaranteed by the New York Mercantile Exchange ("NYMEX") and have nominal credit
risk. ESI also bears the risk for balancing and delivering natural gas to its
customers under various pipelines and utility company tariffs.
Credit is another risk factor in the commodity marketing business. ESI
bears the risks of customer defaults and supplier non-performance on commodity
and pipeline capacity contracts. ESI seeks to mitigate risk of supplier defaults
by diversifying its supply and pipeline transportation purchases across a number
of suppliers. ESI uses credit insurance to mitigate a portion of the risk of
customer defaults. ESI also requires credit support from certain customers in
higher-risk transactions. This credit support can take the form of prepayments,
bonds and letters of credit. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Market Risk Disclosures."
ESI also operates a natural gas liquefaction, storage and vaporization
facility in Temple, Pennsylvania and propane storage and propane-air mixing
stations in Bethlehem, Reading and Steelton, Pennsylvania. In November 2004, ESI
purchased a propane import and storage facility located in Chesapeake, Virginia.
ELECTRIC GENERATION
In June 2003, we increased our ownership interest in the Conemaugh
generating station ("Conemaugh") from 1.11% to approximately 6% (102 megawatts).
Conemaugh is a 1,711 megawatt, coal-fired generation station located near
Johnstown, Pennsylvania. It is owned by a consortium of energy companies and
operated by a unit of Reliant Resources, Inc. In addition, we are a 50% owner of
Hunlock Creek Energy Ventures ("Energy Ventures"). The generation
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assets of Energy Ventures consist of the 48 megawatt, coal-fired Hunlock
generating station, located near Kingston, Pennsylvania, and a 44 megawatt,
gas-fired turbine generator at the same site. We operate these generation
assets. A subsidiary of Allegheny Energy, Inc. is the other general partner in
Energy Ventures. Under the joint venture agreement, we have the right to
purchase one-half the output of Energy Ventures' generation at cost. We also
have the right to require an affiliate of Allegheny Energy, Inc. ("Allegheny")
to purchase our ownership interest in Energy Ventures. Allegheny has a
corresponding call right on our interest in Energy Ventures. These "put" and
"call" rights are effective for a 90-day period commencing January 1, 2006. The
output from these generation assets is sold by our subsidiary UGI Development
Company ("UGID") on the spot market and under fixed-term contracts. UGID has
FERC authority to sell power at market-based rates.
ENVIRONMENTAL FACTORS
The operation of Hunlock Station complies with the air quality standards
of the Pennsylvania Department of Environmental Protection ("DEP") with respect
to stack emissions. Under the Federal Water Pollution Control Act, Hunlock
station has a permit from the DEP to discharge water into the North Branch of
the Susquehanna River. The Federal Clean Air Act Amendments of 1990 (the "Clean
Air Act Amendments") impose emissions limitations for certain compounds,
including sulfur dioxide and nitrous oxides. Both the Conemaugh Station and the
Hunlock Station are in material compliance with these emission standards.
HVAC/R
We conduct a heating, ventilation, air-conditioning and refrigeration
service business ("HVAC/R") serving portions of Utilities' gas service area and
adjacent Mid-Atlantic region market areas, including Philadelphia suburbs and
portions of New Jersey and northern Delaware. This business serves more than
100,000 customers in residential, commercial, industrial and new construction
markets. During fiscal year 2004, HVAC/R generated approximately $58 million in
revenues and employed approximately 400 people.
BUSINESS SEGMENT INFORMATION
The table stating the amounts of revenues, operating income (loss) and
identifiable assets attributable to each of UGI's reportable business segments,
and to the geographic areas in which we operate, for the 2004, 2003 and 2002
fiscal years appears in Note 19 to the Consolidated Financial Statements
contained in our 2004 Annual Report to Shareholders and is incorporated in this
Report by reference.
EMPLOYEES
At September 30, 2004, UGI and its subsidiaries had approximately 9,300
employees.
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ITEM 3. LEGAL PROCEEDINGS
With the exception of the matters set forth below, no material legal
proceedings are pending involving UGI, any of its subsidiaries, or any of their
properties, and no such proceedings are known to be contemplated by governmental
authorities other than claims arising in the ordinary course of business.
ENVIRONMENTAL MATTERS - MANUFACTURED GAS PLANTS
From the late 1800s through the mid-1900s, Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, Utilities owned the stock of subsidiary gas
companies in Pennsylvania and elsewhere and also operated the business of some
gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, Utilities divested all of its utility
operations other than those which now constitute Gas Utility and Electric
Utility.
Utilities does not expect its costs for investigation and remediation of
hazardous substances at Pennsylvania MGP sites to be material to its results of
operations because Utilities is currently permitted to include in rates, through
future base rate proceedings, prudently incurred remediation costs associated
with such sites. Utilities has been notified of several sites outside
Pennsylvania on which private parties allege MGPs were formerly owned or
operated by Utilities or owned or operated by its former subsidiaries. Such
parties are investigating the extent of environmental contamination or
performing environmental remediation. Utilities is currently litigating three
claims against it relating to out-of-state sites.
Consolidated Edison Company of New York v. UGI Utilities, Inc. On
September 20, 2001, Consolidated Edison Company of New York ("ConEd") filed suit
against Utilities in the United States District Court for the Southern District
of New York, seeking contribution from Utilities for an allocated share of
response costs associated with investigating and assessing gas plant related
contamination at former MGP sites in Westchester County, New York. The complaint
alleges that Utilities "owned and operated" the MGPs prior to 1904. The
complaint also seeks a declaration that Utilities is responsible for an
allocated percentage of future investigative and remedial costs at the sites.
ConEd believes that the cost of remediation for all of the sites could exceed
$70 million.
By orders issued in November 2003 and March 2004, the court granted
Utilities' motion for summary judgment and dismissed ConEd's complaint. ConEd
has appealed.
City of Bangor, Maine v. Citizens Communications Co. In April 2003,
Citizens Communications Company ("Citizens") served a complaint naming Utilities
as a third-party defendant in a civil action pending in United States District
Court for the District of Maine. In that action, the plaintiff, City of Bangor,
Maine ("City"), sued Citizens to recover environmental response costs associated
with MGP wastes generated at a plant allegedly operated by Citizens'
predecessors at a site on the Penobscot River. Citizens subsequently joined
Utilities and ten other
22
third-party defendants alleging that the third-party defendants are responsible
for an equitable share of costs Citizens may be required to pay to the City for
cleaning up tar deposits in the Penobscot River. Citizens alleges that Utilities
and its predecessors owned and operated the plant from 1901 to 1928. The City
believes that it could cost as much as $50 million to clean up the river.
Utilities believes that it has good defenses to the claim and is defending the
suit.
Atlanta Gas Light Company v. UGI Utilities, Inc. By letter dated July 29,
2003, Atlanta Gas Light Company ("AGL") served Utilities with a complaint filed
in the United States District Court for the Middle District of Florida in which
AGL alleges that Utilities is responsible for 20% of approximately $8 million
incurred by AGL in the investigation and remediation of a former MGP site in St.
Augustine, Florida. Utilities formerly owned stock of the St. Augustine Gas
Company, the owner and operator of the MGP. Utilities believes that it has good
defenses to the claim and is defending the suit.
Savannah, Georgia Matter. AGL previously informed Utilities that it was
investigating contamination that appeared to be related to MGP operations at a
site owned by AGL in Savannah, Georgia. A former subsidiary of Utilities
operated the MGP in the early 1900s. AGL has recently informed Utilities that it
has begun remediation of MGP wastes at the site and believes that the total cost
of remediation could be as high as $55 million. AGL has not filed suit against
Utilities for a share of these costs. Utilities believes that it will have good
defenses to any action that may arise out of this site.
Sag Harbor, New York Matter. By letter dated June 24, 2004, KeySpan Energy
("KeySpan") informed Utilities that KeySpan has spent $2.3 million and expects
to spend another $11 million to clean up an MGP site it owns in Sag Harbor, New
York. KeySpan believes that Utilities is responsible for approximately 50% of
these costs as a result of Utilities' alleged direct ownership and operation of
the plant from 1885 to 1902. Utilities is in the process of reviewing the
information provided by KeySpan and is investigating this claim.
Connecticut Gas Plants Matter. By letter dated August 5, 2004, Yankee Gas
Services Company and Connecticut Light and Power Company, subsidiaries of
Northeast Utilities, (together the "Northeast Companies"), demanded contribution
from Utilities for past and future remediation costs related to MGP operations
on thirteen sites owned by the Northeast Companies in nine cities in the State
of Connecticut. The Northeast Companies allege that Utilities controlled
operations of the plants from 1883 to 1941. According to the letter,
investigation and remedial costs at the sites to date total approximately $10
million and complete remediation costs for all sites could total $182 million.
The Northeast Companies seek an unspecified fair and equitable allocation of
these costs to Utilities. Utilities is in the process of reviewing the
information provided by Northeast Companies and is investigating this claim.
RELATED MATTER
UGI Utilities, Inc. v. Insurance Co. of North America, et al. On February
11, 1999, Utilities filed suit in the Court of Common Pleas of Montgomery
County, Pennsylvania against more than fifty insurance companies, including
Insurance Services, Ltd. (AEGIS). The complaint alleges that the defendants
breached contracts of insurance by failing to indemnify Utilities for certain
environmental costs. Utilities has now settled with all known solvent defendants
and the suit has been dismissed.
23
OTHER
Swiger, et al. v. UGI/AmeriGas, Inc. et al. Plaintiffs Samuel and Brenda
Swiger and their son (the "Swigers") sustained personal injuries and property
damage as a result of a fire that occurred when propane that leaked from an
underground line ignited. In July 1998, the Swigers filed a class action lawsuit
against AmeriGas Propane, L.P. (named incorrectly as "UGI/AmeriGas, Inc."), in
the Circuit Court of Monongalia County, West Virginia (Civil Action No.
98-C-298), in which they sought to recover an unspecified amount of compensatory
and punitive damages and attorney's fees, for themselves and on behalf of
persons in West Virginia for whom the defendants had installed propane gas
lines, allegedly resulting from the defendants' failure to install underground
propane lines at depths required by applicable safety standards. The court
recently granted the plaintiffs' motion to include customers acquired from
Columbia Propane in August 2001 as additional potential class members, and to
amend their complaint to name additional parties consistent with such ruling. In
2003, the defendants settled the individual personal injury and property damage
claims of the Swigers. Class counsel has indicated that the class is seeking
compensatory damages in excess of $12 million plus punitive damages, civil
penalties and attorneys' fees. The defendants believe they have good defenses to
the claims of the class members and intend to vigorously defend against the
remaining claims in this lawsuit.
24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the last
fiscal quarter of fiscal year 2004.
EXECUTIVE OFFICERS
Information regarding our executive officers is included in Part III of
this Report and is incorporated in Part I by reference.
PART II:
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our Common Stock is traded on the New York and Philadelphia Stock
Exchanges under the symbol "UGI." The following table sets forth the high and
low sales prices for the Common Stock on the New York Stock Exchange Composite
Transactions tape as reported in The Wall Street Journal for each full quarterly
period within the two most recent fiscal years:
2004 FISCAL YEAR HIGH LOW
4th Quarter $37.35 $30.46
3rd Quarter 33.40 29.85
2nd Quarter 34.35 31.40
1st Quarter 34.20 28.85
2003 FISCAL YEAR HIGH LOW
4th Quarter $33.45 $28.86
3rd Quarter 35.05 29.00
2nd Quarter 30.57 24.93
1st Quarter 26.99 23.27
25
DIVIDENDS
Quarterly dividends on our Common Stock were paid in the 2004 and 2003
fiscal years as follows:
2004 FISCAL YEAR AMOUNT
4th Quarter $0.3125
3rd Quarter 0.285
2nd Quarter 0.285
1st Quarter 0.285
2003 FISCAL YEAR AMOUNT
4th Quarter $0.285
3rd Quarter 0.285
2nd Quarter 0.275
1st Quarter 0.275
HOLDERS
On November 1, 2004, UGI had 9,479 holders of record of Common Stock.
26
ITEM 6. SELECTED FINANCIAL DATA
Year Ended
September 30,
-------------------------------------------------------------------
2004 2003 2002 2001 (a) 2000 (a)
----------- ----------- ------------ ------------ -------------
(Millions of dollars, except per share amounts)
FOR THE PERIOD:
INCOME STATEMENT DATA:
Revenues $ 3,784.7 $ 3,026.1 $ 2,213.7 $ 2,468.1 $ 1,761.7
=========== =========== ============ ============ ============
Income before accounting changes $ 111.6 $ 98.9 $ 75.5 $ 52.0 $ 44.7
Cumulative effect of accounting changes (b) - - - 4.5 -
----------- ----------- ------------ ------------ ------------
Net income (c) $ 111.6 $ 98.9 $ 75.5 $ 56.5 $ 44.7
=========== =========== ============ ============ ============
Earnings per common share - basic
Income before accounting changes $ 2.36 $ 2.34 $ 1.83 $ 1.28 $ 1.09
Cumulative effect of accouting changes, net - - - 0.11 -
----------- ----------- ------------ ------------ ------------
Net income - basic $ 2.36 $ 2.34 $ 1.83 $ 1.39 $ 1.09
=========== =========== ============ ============ ============
Earnings per common share - diluted
Income before accounting changes $ 2.31 $ 2.29 $ 1.80 $ 1.27 $ 1.09
Cumulative effect of accouting changes, net - - - 0.11 -
----------- ----------- ------------ ------------ ------------
Net income - diluted (c) (d) $ 2.31 $ 2.29 $ 1.80 $ 1.38 $ 1.09
=========== =========== ============ ============ ============
Cash dividends declared per common share $ 1.17 $ 1.13 $ 1.083 $ 1.050 $ 1.017
=========== =========== ============ ============ ============
AT PERIOD END:
BALANCE SHEET DATA:
Total assets $ 4,235.4 $ 2,795.2 $ 2,628.0 $ 2,561.9 $ 2,284.3
=========== =========== ============ ============ ============
Capitalization:
Debt:
Bank loans - AmeriGas Propane $ - $ - $ 10.0 $ - $ 30.0
Bank loans - UGI Utilities 60.9 40.7 37.2 57.8 100.4
Bank loans - other 17.2 15.9 8.6 10.0 4.3
Long-term debt (including current maturities):
AmeriGas Propane 901.4 927.3 945.8 1,005.9 857.2
Antargaz 474.5 - - - -
UGI Utilities 217.2 217.3 248.4 208.4 172.9
Other 76.9 78.9 81.5 80.9 85.5
----------- ----------- ------------ ------------ ------------
Total debt 1,748.1 1,280.1 1,331.5 1,363.0 1,250.3
----------- ----------- ------------ ------------ ------------
Minority interests, principally in AmeriGas
Partners 178.4 134.6 276.0 246.2 177.1
UGI Utilities preferred shares subject
to mandatory redemption 20.0 20.0 20.0 20.0 20.0
Common stockholders' equity 834.1 498.7 313.8 251.0 242.0
----------- ----------- ------------ ------------ ------------
Total capitalization $ 2,780.6 $ 1,933.4 $ 1,941.3 $ 1,880.2 $ 1,689.4
=========== =========== ============ ============ ============
RATIO OF CAPITALIZATION:
Total debt 62.9% 66.2% 68.6% 72.5% 74.0%
Minority interests, principally in AmeriGas Partners 6.4% 7.0% 14.2% 13.1% 10.5%
UGI Utilities preferred shares subject
to mandatory redemption 0.7% 1.0% 1.0% 1.1% 1.2%
Common stockholders' equity 30.0% 25.8% 16.2% 13.3% 14.3%
----------- ----------- ------------ ------------ ------------
100.0% 100.0% 100.0% 100.0% 100.0%
=========== =========== ============ ============ ============
(a) Arthur Andersen LLP audited our consolidated financial statements for 2001
and 2000.
(b) Includes cumulative effect of accounting changes associated with (1) the
Partnership's changes in accounting for tank fee revenue and tank
installation costs and (2) the Company's adoption of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities."
(c) Pro forma net income and diluted earnings per share after applying
retroactively the Partnership's changes in accounting for tank installation
costs and tank fee revenue are as follows: 2000 - $44.6 and $1.09,
respectively.
(d) SFAS No. 142, "Goodwill and Other Intangible Assets," was adopted effective
October 1, 2001. Net income and net income per diluted share adjusted to
reflect the impact of SFAS No. 142 as if it had been adopted at the
beginning of the periods presented are as follows: 2001 - $70.5 and $1.72;
2000 - $59.4 and $1.45, respectively.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, entitled "Financial Review" and contained on pages 13 through 27 of
UGI's 2004 Annual Report to Shareholders, is incorporated in this Report by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
"Quantitative and Qualitative Disclosures About Market Risk" are contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Market Risk Disclosures" on pages 24 and 25 of the
UGI 2004 Annual Report to Shareholders and are incorporated in this Report by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedules referred to in
the Index contained on pages F-2 and F-3 of this Report are incorporated in this
Report by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as of the end of the period covered by this report were designed and
functioning effectively to provide reasonable assurance that the information
required to be disclosed by the Company in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.
Included in the Company's evaluation was consideration of the restatement of
previously issued financial statements due to reconsideration of previous
judgments related to the provision of deferred taxes in connection with gains
recorded in fiscal
28
years 2003 and 2004 in accordance with the guidance in SEC Staff Accounting
Bulletin No. 51, "Accounting for Sales of Common Stock by a Subsidiary." The
Company believes that its reconsideration of previous judgments in the
application of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," was not a result of ineffective internal controls or
procedures. The Company believes that a controls system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of
the controls system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been detected.
(b) Change in Internal Control over Financial Reporting
No change in the Company's internal control over financial reporting occurred
during the Company's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
As described in Note 3 to the Company's Consolidated Financial Statements, on
March 31, 2004, the Company acquired the remaining outstanding 80.5% ownership
in Antargaz that it did not already own. The internal control over financial
reporting of Antargaz is being aligned with that of the Company as part of the
post-acquisition financial integration process. As a result of this continuing
integration process, we have extended internal control procedures over quarterly
financial reporting to include Antargaz.
ITEM 9B. OTHER INFORMATION
Not applicable.
29
PART III:
ITEMS 10 THROUGH 14.
In accordance with General Instruction G(3), and except as set forth
below, the information required by Items 10, 11, 12, 13 and 14 is incorporated
in this Report by reference to the following portions of UGI's Proxy Statement,
which will be filed with the Securities and Exchange Commission by January 28,
2005:
CAPTIONS OF PROXY STATEMENT
INFORMATION INCORPORATED BY REFERENCE
----------- -------------------------
Item 10. Directors and Executive Election of Directors - Nominees; Corporate
Officers of Registrant Governance;
Board Committees and Meeting Attendance;
Securities Ownership of Management - Section
16(a) - Beneficial Ownership Reporting Compliance
The Code of Ethics for the Chief Executive
Officer and Senior Financial Officers of UGI
Corporation is available on the Company's
website, www.ugicorp.com or by writing to Robert
W. Krick, Vice President and Treasurer, UGI
Corporation, P. O. Box 858, Valley Forge, PA
19482.
Item 11. Executive Compensation Compensation of Directors
Compensation of Executive Officers
Item 12. Security Ownership of Certain Beneficial Owners Securities Ownership of Certain Beneficial Owners;
and Management Securities Ownership of Management
30
EQUITY COMPENSATION TABLE
The following table sets forth information as of the end of our 2004
fiscal year with respect to compensation plans under which our equity securities
are authorized for issuance.
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE REMAINING AVAILABLE FOR
ISSUED UPON EXERCISE OF EXERCISE PRICE OF FUTURE ISSUANCE UNDER EQUITY
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, COMPENSATION PLANS
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY (A) (B) IN COLUMN (A)) (C)
------------- -------------------------- -------------------- -------------------------------
Equity compensation plans 2,291,708 $23.65
approved by security holders (1) 561,454 $ 0 2,508,796
Equity compensation plans not 372,752 $21.97 0
approved by security holders (2) 4,200 $ 0
Total 3,230,114 $23.41 2,508,796
(1) Column (a) represents 2,291,708 stock options under the 1997 Stock
Option and Dividend Equivalent Plan, the 1992 Directors' Stock Plan,
the 2000 Directors' Stock Option Plan, the 2000 Stock Incentive Plan
and the 2004 Omnibus Equity Compensation Plan, and 561,454 phantom
share units under the 2004 Omnibus Equity Compensation Plan and the
2000 Stock Incentive Plan.
(2) Column (a) represents 372,752 stock options under the 1992 and 2002
Non-Qualified Stock Option Plans, and 4,200 one-time bonus awards of
phantom restricted stock. Under the 1992 and 2002 Non-Qualified
Stock Option Plans, the option exercise price is not less than 100%
of the fair market value of the Company's common stock on the date
of grant. Generally, options become exercisable in three equal
annual installments beginning on the first anniversary of the grant
date. All options are non-transferable and generally exercisable
only while the holder is employed by the Company or an affiliate,
with exceptions for exercise following retirement, disability and
death. Options are subject to adjustment in the event of
recapitalization, stock splits, mergers, and other similar corporate
transactions affecting the Company's common stock. The phantom
restricted awards represent the right to receive a share of stock or
an amount based on the value of a share of stock if specified length
of service requirements are met.
CAPTIONS OF PROXY STATEMENT
INFORMATION INCORPORATED BY REFERENCE
----------- -------------------------
Item 13. Certain Relationships and Related Transactions Compensation of Executive Officers - Stock
Ownership Policy and Indebtedness of Management
Item 14. Principal Accountant Fees and Services The Independent Public Accountants
31
The information concerning the Company's executive officers required by
Item 10 is set forth below.
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Lon R. Greenberg 54 Chairman, Director, President
and Chief Executive Officer
Eugene V.N. Bissell 51 President and Chief Executive
Officer, AmeriGas Propane, Inc.
Michael J. Cuzzolina 59 Vice President - Accounting and Financial
Control; Chief Accounting Officer and Chief
Risk Officer
Bradley C. Hall 51 Vice President - New Business Development
Robert H. Knauss 51 Vice President and General Counsel
Anthony J. Mendicino 56 Senior Vice President - Finance
and Chief Financial Officer
David W. Trego 46 President and Chief Executive Officer,
UGI Utilities, Inc.
Francois Varagne 49 Chairman of the Board and
Chief Executive Officer of Antargaz
All officers are elected for a one-year term at the organizational
meetings of the respective Boards of Directors held each year.
There are no family relationships between any of the officers or between
any of the officers and any of the directors.
Lon R. Greenberg
Mr. Greenberg was elected Chairman of UGI effective August 1, 1996, having
been elected Chief Executive Officer effective August 1, 1995. He was elected
Director and President of UGI and a Director of UGI Utilities in July 1994. He
was elected a Director of AmeriGas Propane, Inc. in 1994 and has been Chairman
since 1996. He also served as President and Chief Executive Officer of AmeriGas
Propane (1996 to 2000). Mr. Greenberg was Senior Vice President - Legal and
Corporate Development (1989 to 1994). He joined the Company in 1980 as Corporate
Development Counsel.
32
Eugene V.N. Bissell
Mr. Bissell is President and Chief Executive Officer of AmeriGas Propane,
Inc. (since July 2000), having served as Senior Vice President - Sales and
Marketing (1999 to 2000) and Vice President - Sales and Operations (1995 to
1999). Previously, he was Vice President - Distributors and Fabrication, BOC
Gases (industrial gases) (1995), having been Vice President - National Sales
(1993 to 1995) and Regional Vice President Southern Region for Distributor and
Cylinder Gases Division, BOC Gases (1989 to 1993). From 1981 to 1987, Mr.
Bissell held various positions with the Company and its subsidiaries, including
Director, Corporate Development. Mr. Bissell is a member of the Board of
Directors of the National Propane Gas Association.
Michael J. Cuzzolina
Mr. Cuzzolina was elected Vice President - Accounting and Financial
Control, Principal Accounting Officer and Chief Risk Officer of the Company in
July 2004. He served as President and Chief Operating Officer of Flaga GmbH from
1999 to 2004. Mr. Cuzzolina joined the Company in 1974 and previously served as
Vice President - Accounting and Financial Control (1984 to 1999).
Bradley C. Hall
Mr. Hall is Vice President - New Business Development (since October
1994). He also serves as President of UGI Enterprises, Inc. (since 1994). He
joined the Company in 1982 and held various positions in UGI Utilities, Inc.,
including Vice President - Marketing and Rates.
Robert H. Knauss
Mr. Knauss was elected Vice President and General Counsel on September 30,
2003. He previously served as Vice President - Law and Associate General Counsel
of AmeriGas Propane, Inc. (1996 to 2003), and Group Counsel - Propane of UGI
(1989 to 1996). He joined the Company in 1985. Previously, Mr. Knauss was an
associate at the firm of Ballard, Spahr, Andrews & Ingersoll in Philadelphia.
Anthony J. Mendicino
Mr. Mendicino is Senior Vice President - Finance and Chief Financial
Officer (since December 2002). He previously served as Vice President - Finance
and Chief Financial Officer (September 1998 to December 2002). Mr. Mendicino
served as President and Chief Operating Officer (July 1997 to June 1998) and as
Senior Vice President (January 1997 to June 1997) of Eastwind Group, Inc., a
holding company formed to acquire and consolidate middle-market manufacturing
businesses. Mr. Mendicino was Senior Vice President and Chief Financial Officer
and a director (1987 to 1996) of UTI Energy Corp., a diversified oil field
service company. From 1981 to 1987, Mr. Mendicino held various positions with
UGI, including Treasurer.
33
David W. Trego
Mr. Trego is President and Chief Executive Officer of UGI Utilities, Inc.
(since October 2004). He previously served as Vice President-Electric
Distribution (2002 to 2004). Prior to that assignment, Mr. Trego served in a
number of capacities in the Gas Utility Division, including marketing,
operations, customer relations and engineering. He joined Utilities in 1987.
Francois Varagne
Mr. Varagne is Chairman of the Board and Chief Executive Officer of
Antargaz (since 2001), one of the leading LPG distributors in France. Before
joining Antargaz, Mr. Varagne was Chairman of the Board and Chief Executive
Officer of VIA GTI, a common carrier in France (1998-2001). Prior to that, Mr.
Varagne was Chairman of the Board and Chief Executive Officer of Brink's France,
a funds carrier (1997 to 1998).
34
PART IV:
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
(1) and (2) The financial statements and financial statement
schedules incorporated by reference or included in this report are
listed in the accompanying Index to Financial Statements and
Financial Statement Schedules set forth on pages F-2 through F-3 of
this report, which is incorporated herein by reference.
35
(3) LIST OF EXHIBITS:
The exhibits filed as part of this report are as follows (exhibits incorporated
by reference are set forth with the name of the registrant, the type of report
and registration number or last date of the period for which it was filed, and
the exhibit number in such filing):
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ----------- ------- ---------- ------ -------
3.1 (Second) Amended and Restated Articles of UGI Amendment No. 1 on 3.(3)(a)
Incorporation of the Company Form 8 to Form 8-B
(4/10/92)
3.2 Bylaws of UGI as amended through September UGI Form 8-K 3.2
28, 2004 (9/28/04)
4 Instruments defining the rights of security holders,
including indentures. (The Company agrees to furnish to
the Commission upon request a copy of any instrument
defining the rights of holders of long-term debt not
required to be filed pursuant to Item 601(b)(4) of
Regulation S-K)
4.1 Rights Agreement, as amended as of August UGI Registration 4.3
18, 2000, between the Company and Mellon Statement No.
Bank, N.A., successor to Mellon Bank (East) 333-49080
N.A., as Rights Agent, and Assumption
Agreement dated April 7, 1992
4.2 The description of the Company's Common UGI Form 8-B/A 3.(4)
Stock contained in the Company's (4/17/96)
registration statement filed under the
Securities Exchange Act of 1934, as amended
4.3 UGI's (Second) Amended and Restated
Articles of Incorporation and Bylaws
referred to in 3.1 and 3.2 above
36
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ----------- ------- ---------- ------ -------
4.4 Note Agreement dated as of April 12, 1995 AmeriGas Form 10-Q 10.8
among The Prudential Insurance Company of Partners, L.P. (3/31/95)
America, Metropolitan Life Insurance
Company, and certain other institutional
investors and AmeriGas Propane, L.P., New
AmeriGas Propane, Inc. and Petrolane
Incorporated
4.5 First Amendment dated as of September 12, AmeriGas Form 10-K 4.5
1997 to Note Agreement dated as of April Partners, L.P. (9/30/97)
12, 1995 ("1995 Note Agreement")
4.6 Second Amendment dated as of September 15, AmeriGas Form 10-K 4.6
1998 to 1995 Note Agreement Partners, L.P. (9/30/98)
4.7 Third Amendment dated as of March 23, 1999 AmeriGas Form 10-Q 10.2
to 1995 Note Agreement Partners, L.P. (3/31/99)
4.8 Fourth Amendment dated as of March 16, 2000 AmeriGas Form 10-Q 10.2
to 1995 Note Agreement Partners, L.P. (6/30/00)
4.9 Fifth Amendment dated as of August 1, 2001 AmeriGas Form 10-K 4.8
to 1995 Note Agreement Partners, L.P. (9/30/01)
4.10 Second Amended and Restated Agreement of AmeriGas Form 8-K 3.1
Limited Partnership of AmeriGas Partners, Partners, L.P. (12/1/04)
L.P. dated as of December 1, 2004
4.11 Second Amended and Restated Agreement of AmeriGas Form 10-K 3.1(a)
Limited Partnership of AmeriGas Propane, Partners, L.P. (9/30/04)
L.P. dated as of December 1, 2004
4.12 Amended and Restated Agreement of Limited AmeriGas Form 10-K 3.8
Partnership of AmeriGas Eagle Propane, L.P. Partners, L.P. (9/30/01)
dated July 19, 1999
10.1 Service Agreement (Rate FSS) dated as of UGI Form 10-K 10.5
November 1, 1989 between Utilities and (9/30/95)
Columbia, as modified pursuant to the
orders of the Federal Energy Regulatory
Commission at Docket No. RS92-5-000
reported at Columbia Gas Transmission
Corp., 64 FERCP. P 61,060 (1993), order
on rehearing, 64 FERCP. P 61,365 (1993)
*10.2** UGI Corporation 2004 Omnibus Equity
Compensation Plan Directors Stock Unit
Grant Letter dated as of January 8, 2004
37
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ----------- ------- ---------- ------ -------
*10.3** UGI Corporation 2004 Omnibus Equity
Compensation Plan Directors Nonqualified
Stock Option Grant Letter dated as of
January 8, 2004
*10.4** UGI Corporation 2004 Omnibus Equity
Compensation Plan Utilities Employees
Performance Unit Grant Letter dated as of
January 1, 2004
*10.5** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Stock Unit
Grant Letter dated as of January 1, 2004
10.6** UGI Corporation Directors Deferred UGI Form 10-K 10.6
Compensation Plan Amended and Restated as (9/30/00)
of January 1, 2000
*10.7** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Performance
Unit Grant Letter dated as of January 1,
2004
10.8** UGI Corporation Annual Bonus Plan dated UGI Form 10-Q 10.4
March 8, 1996 (6/30/96)
*10.9** UGI Corporation 2004 Omnibus Equity
Compensation Plan AmeriGas Employees
Nonqualified Stock Option Grant Letter
dated as of January 1, 2004
10.10** UGI Corporation 1997 Stock Option and UGI Form 10-Q 10.4
Dividend Equivalent Plan Amended and (3/31/03)
Restated as of April 29, 2003
10.11** UGI Corporation 1992 Directors' Stock Plan UGI Form 10-Q 10.2
Amended and Restated as of April 29, 2003 (3/31/03)
*10.12** UGI Corporation Senior Executive Employee
Severance Pay Plan as amended December 7,
2004
10.12(a)** AmeriGas Propane, Inc. Executive Employee AmeriGas Form 10-K 10.4
Severance Pay Plan, as amended December 6, Partners, L.P. (9/30/04)
2004.
38
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ----------- ------- ---------- ------ -------
10.13** UGI Corporation 2000 Directors' Stock UGI Form 10-Q 10.1
Option Plan Amended and Restated as of (3/31/03)
April 29, 2003
10.14** UGI Corporation 2000 Stock Incentive Plan UGI Form 10-Q 10.5
Amended and Restated as of April 29, 2003 (3/31/03)
10.15** 1997 Stock Purchase Loan Plan UGI Form 10-K 10.16
(9/30/97)
10.16** UGI Corporation Supplemental Executive UGI Form 10-Q 10
Retirement Plan Amended and Restated (6/30/98)
effective October 1, 1996
*10.17** UGI Corporation 2004 Omnibus Equity
Compensation Plan, as amended December 7,
2004
10.18 Credit Agreement dated as of August 28, AmeriGas Form 10-K 10.1
2003 among AmeriGas Propane, L.P., AmeriGas Partners, L.P. (9/30/03)
Propane, Inc., Petrolane Incorporated,
Wachovia Bank, National Association, as Agent,
Issuing Bank and Swing Line Bank, and certain
banks.
10.19 Amendment No. 1 dated as of August 30, AmeriGas Form 8-K 10.1
2004, to the Credit Agreement dated as of Partners, L.P. (8/30/04)
August 28, 2003 among AmeriGas Propane,
L.P., AmeriGas Propane, Inc., Petrolane
Incorporated, Citicorp USA, Inc., Credit
Suisse First Boston, Wachovia Bank,
National Association, as Agent, Issuing
Bank and Swing Line Bank, and certain
financial institutions named party thereto.
10.20 Partnership Agreement of Hunlock Creek Utilities Form 10-K 10.24
Energy Ventures dated December 8, 2001 by (9/30/01)
and between UGI Hunlock Development Company
and Allegheny Energy Supply Hunlock Creek
LLC
10.21 Amendment No. 1 to Partnership Agreement of UGI Form 10-K 10.21
Hunlock Creek Energy Ventures, dated June (9/30/03)
26, 2003, by and between UGI Hunlock
Development Company and Allegheny Energy
Supply Hunlock Creek, LLC
39
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ----------- ------- ---------- ------ -------
10.22 Notice of appointment of Wachovia Bank, AmeriGas Form 10-K 10.6
National Association as collateral Agent Partners, L.P. (9/30/03)
effective as of August 28, 2003, pursuant
to Intercreditor and Agency Agreement dated
as of April 19, 1995
10.23 Intercreditor and Agency Agreement dated as AmeriGas Form 10-Q 10.2
of April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
Inc., Petrolane Incorporated, AmeriGas
Propane, L.P., Bank of America National
Trust and Savings Association ("Bank of
America") as Agent, Mellon Bank, N.A. as
Cash Collateral Sub-Agent, Bank of America
as Collateral Agent and certain creditors
of AmeriGas Propane, L.P.
10.23(a) First Amendment dated as of July 31, 2001 AmeriGas Form 10-K 10.8
to Intercreditor and Agency Agreement dated Partners, L.P. (9/30/01)
as of April 19, 1995
10.24 General Security Agreement dated as of AmeriGas Form 10-Q 10.3
April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
L.P., Bank of America National Trust and
Savings Association and Mellon Bank, N.A.
10.24(a) First Amendment dated as of July 31, 2001 AmeriGas Form 10-K 10.10
to General Security Agreement dated as of Partners, L.P. (9/30/01)
April 19, 1995
10.24(b) Second Amendment dated as of October 14, AmeriGas Form 10-K 10.10(a)
2004 to General Security Agreement dated as Partners, L.P. (9/30/04)
of April 19, 1995
10.25 Subsidiary Security Agreement dated as of AmeriGas Form 10-Q 10.4
April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
L.P., Bank of America National Trust and
Savings Association as Collateral Agent and
Mellon Bank, N.A. as Cash Collateral Agent
10.25(a) First Amendment dated as of July 31, 2001 AmeriGas Form 10-K 10.12
to Subsidiary Security Agreement dated as Partners, L.P. (9/30/01)
of April 19, 1995
10.25(b) Second Amendment dated as of October 14, AmeriGas Form 10-K 10.12(a)
2004 to Subsidiary Security Agreement dated Partners, L.P. (9/30/04)
as of April 19, 1995
40
INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- -----------------------------------------------------------------------------------------------------------
10.26 Restricted Subsidiary Guarantee dated as of AmeriGas Form 10-Q 10.5
April 19, 1995 by AmeriGas Propane, L.P. Partners, L.P. (3/31/95)
for the benefit of Bank of America National
Trust and Savings Association, as
Collateral Agent
10.27 Trademark License Agreement dated April AmeriGas Form 10-Q 10.6
19, 1995 among UGI Corporation, Partners, L.P. (3/31/95)
AmeriGas, Inc., AmeriGas Propane, Inc.,
AmeriGas Partners, L.P. and AmeriGas
Propane, L.P.
10.28 Trademark License Agreement, dated April AmeriGas Form 10-Q 10.7
19, 1995 among AmeriGas Propane, Inc., Partners, L.P. (3/31/95)
AmeriGas Partners, L.P. and AmeriGas
Propane, L.P.
10.29 Stock Purchase Agreement dated May 27, Petrolane Registration 10.16(a)
1989, as amended and restated July 31, Incorporated/ Statement No. 33-
1989, between Texas Eastern Corporation AmeriGas, 69450
and QFB Partners Inc.
10.30 Pledge Agreement dated September 1999 UGI Form 10-K 10.28
between Eastfield International Holdings, (9/30/99)
Inc. and Raiffeisen Zentralbank Osterreich
Aktiengesellschaft ("RZB")
10.31 Pledge Agreement dated September 1999 UGI Form 10-K 10.29
between EuroGas Holdings, Inc. and RZB (9/30/99)
10.32 Form of Guarantee Agreement dated UGI Form 10-K 10.30
September 1999 between UGI Corporation (9/30/99)
and RZB relating to loan amount of EURO
74 million
10.33 Form of Guarantee Agreement dated UGI Form 10-K 10.33
September 2000 between UGI Corporation (9/30/00)
and RZB relating to loan amount of EURO
14.9 million
10.34 Form of Guarantee Agreement dated UGI Form 10-K 10.34
September 2000 between UGI Corporation (9/30/00)
and RZB relating to loan amount of EURO
9 million
10.34(a) Amendments dated October 11, 2001 to UGI Form 10-K 10.34(a)
September 1999 Guarantee Agreements (9/30/02)
between UGI Corporation and RZB
41
INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- -----------------------------------------------------------------------------------------------------------
10.35** Description of Change of Control UGI Form 10-K 10.33
arrangements for Messrs. Greenberg, (9/30/99)
Cuzzolina, Hall, Knauss and Mendicino
*10.36** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees
Nonqualified Stock Option Grant Letter
dated as of January 1, 2004
*10.36(a)** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Utilities
Employees Nonqualified Stock Option
Grant Letter dated as of January 1, 2004
10.37** Description of Change of Control AmeriGas Form 10-K 10.31
arrangement for Mr. Bissell Partners, L.P. (9/30/99)
10.38** 2002 Non-Qualified Stock Option Plan UGI Form 10-Q 10.7
Amended and Restated as of April 29, 2003 (3/31/03)
10.39** 1992 Non-Qualified Stock Option Plan UGI Form 10-Q 10.6
Amended and Restated as of April 29, 2003 (3/31/03)
10.40 [Intentionally omitted]
10.41 Service Agreement for comprehensive UGI Form 10-K 10.41
delivery service (Rate CDS) dated February (9/30/00)
23, 1999 between UGI Utilities, Inc. and
Texas Eastern Transmission Corporation
10.42 Purchase Agreement dated January 30, AmeriGas Form 8-K 10.1
2001 and Amended and Restated on August Partners, L.P. (8/8/01)
7, 2001 by and among Columbia Energy
Group, Columbia Propane Corporation,
Columbia Propane, L.P., CP Holdings, Inc.,
AmeriGas Propane, L.P., AmeriGas
Partners, L.P., and AmeriGas Propane, Inc.
*10.43** UGI Corporation 2004 Omnibus Equity
Compensation Plan, Sub-Plan for French
Employees Stock Option Grant Letter dated
as of 2004
10.44 Agreement by Petrolane Incorporated and Petrolane Form 10-K 10.13
certain of its subsidiaries party thereto Incorporated (9/23/94)
("Subsidiaries") for the Sale of the
Subsidiaries' Inventory and Assets to the
Goodyear Tire & Rubber Company and
D.C.H., Inc., as Purchaser, dated as of
December 18, 1985
42
INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- -----------------------------------------------------------------------------------------------------------
10.45 Purchase Agreement by and among National Form 8-K 10.5
Columbia Propane, L.P., CP Holdings, Inc., Propane (4/19/99)
Columbia Propane Corporation, National Partners, L.P.
Propane Partners, L.P., National Propane
Corporation, National Propane SPG, Inc.,
and Triarc Companies, Inc. dated as of
April 5, 1999
10.46 Capital Contribution Agreement dated as of AmeriGas Form 8-K 10.2
August 21, 2001 by and between Columbia Partners, L.P. (8/21/01)
Propane, L.P. and AmeriGas Propane, L.P.
acknowledged and agreed to by CP
Holdings, Inc.
10.47 Promissory Note by National Propane L.P., AmeriGas Form 10-K 10.39
a Delaware limited partnership in favor of Partners, L.P. (9/30/01)
Columbia Propane Corporation dated July
19, 1999
10.48 Loan Agreement dated July 19, 1999, AmeriGas Form 10-K 10.40
between National Propane, L.P. and Partners, L.P. (9/30/01)
Columbia Propane Corporation
10.49 First Amendment dated August 21, 2001 to AmeriGas Form 10-K 10.41
Loan Agreement dated July 19, 1999 Partners, L.P. (9/30/01)
between National Propane, L.P. and
Columbia Propane Corporation
10.50 Columbia Energy Group Payment Guaranty AmeriGas Form 10-K 10.42
dated April 5, 1999 Partners, L.P. (9/30/01)
10.51 Keep Well Agreement by and between AmeriGas Form 10-K 10.46
AmeriGas Propane, L.P. and Columbia Partners, L.P. (9/30/01)
Propane Corporation dated August 21, 2001
10.52** AmeriGas Propane, Inc. 2000 Long-Term AmeriGas Form 10-Q 10.2
Incentive Plan on Behalf of AmeriGas Partners, L.P. (6/30/04)
Partners, L.P., as amended December 15,
2003.
10.53 Storage Transportation Service Agreement Utilities Form 10-K 10.25
(Rate Schedule SST) between Utilities and (9/30/02)
Columbia dated November 1, 1993, as
modified pursuant to orders of the Federal
Energy Regulatory Commission
10.54 Gas Service Delivery and Supply Utilities Form 10-K 10.32
Agreement between Utilities and UGI (9/30/04)
Energy Services, Inc. dated August 26,
2004
43
INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- -----------------------------------------------------------------------------------------------------------
10.55 No-Notice Transportation Service Utilities Form 10-K 10.27
Agreement (Rate Schedule CDS) between (9/30/02)
Utilities and Texas Eastern Transmission
dated February 23, 1999, as modified
pursuant to various orders of the Federal
Energy Regulatory Commission
10.56 No-Notice Transportation Service Utilities Form 10-K 10.28
Agreement (Rate Schedule CDS) between (9/30/02)
Utilities and Texas Eastern Transmission
dated October 31, 2000, as modified
pursuant to various orders of the Federal
Energy Regulatory Commission
10.57 Firm Transportation Service Agreement Utilities Form 10-K 10.29
(Rate Schedule FT-1) between Utilities and (9/30/02)
Texas Eastern Transmission dated June 15,
1999, as modified pursuant to various
orders of the Federal Energy Regulatory
Commission
10.58 Amendment No. 1 dated November 1, Utilities Form 10-K 10.26
2004, to the Service Agreement (Rate FSS) (9/30/04)
dated as of November 1, 1989 between
Utilities and Columbia, as modified
pursuant to the orders of the Federal Energy
Regulatory Commission at Docket No.
RS92-5-000 reported at Columbia Gas
Transmission Corp., 64 FERC P 61,060
(1993), order on rehearing, 64 FERC
P 61,365 (1993)
10.59 Firm Transportation Service Agreement Utilities Form 10-K 10.31
(Rate Schedule FT) between Utilities and (9/30/02)
Transcontinental Gas Pipe Line dated
October 1, 1996, as modified pursuant to
various orders of the Federal Energy
Regulatory Commission
10.60 Amendment No. 1 dated November 1, Utilities Form 10-K 10.30
2004, to the No-Notice Transportation (9/30/04)
Service Agreement (Rate Schedule CDS)
between Utilities and Texas Eastern
Transmission dated February 23, 1999, as
modified pursuant to various orders of the
Federal Energy Regulatory Commission
44
INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- -----------------------------------------------------------------------------------------------------------
10.61 Amendment No. 1 dated November 1, Utilities Form 10-K 10.33
2004, to the Firm Transportation Service (9/30/04)
Agreement (Rate Schedule FT-1) between
Utilities and Texas Eastern Transmission
dated June 15, 1999, as modified pursuant
to various orders of the Federal Energy
Regulatory Commission
10.62 Firm Transportation Service Agreement Utilities Form 10-K 10.34
(Rate Schedule FTS) between Utilities and (9/30/04)
Columbia Gas Transmission dated
November 1, 2004
10.63 Amendment Agreement dated June 18, UGI Form 10-Q 10.5
2004, relating to the Senior Facilities (6/30/04)
Agreement dated June 26, 2003, as
Amended and Restated, between AGZ
Holding, as Parent, Antargaz, the Senior
Lenders, (as defined therein) and Calyon, as
Mandated Lead Arranger, Facility Agent
and Security Agent.
10.64 Creditor Accession Agreement dated June UGI Form 10-Q 10.6
18, 2004, between UGI Bordeaux Holding, (6/30/04)
as the New Investor, and Calyon, as
Security Agent.
10.65 Letter of Undertakings dated June 18, 2004, UGI Form 10-Q 10.7
by UGI Bordeaux Holding to AGZ (6/30/04)
Holding, the Parent of Antargaz, and
Calyon, the Facility Agent, acting on behalf
of the Lenders, (as defined within the
Senior Facilities Agreement).
10.66 Tax Consolidation Agreement, dated June UGI Form 10-Q 10.8
18, 2004, entered into by UGI Bordeaux (6/30/04)
Holding and its Subsidiaries named therein.
10.67** AmeriGas Propane, Inc. Executive AmeriGas Form 10-K 10.4
Employee Severance Pay Plan, as amended Partners, L.P. (9/30/04)
December 6, 2004.
10.68 Senior Facilities Agreement dated June 26, UGI Form 10-Q 10.1
2003 as Amended and Restated July 2, (3/31/04)
2003, between AGZ Holding and Antargaz,
Credit Lyonnais, as Mandated Lead
Arranger, Facility Agent and Security
Agent, and the Financial Institutions named
therein.
45
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------
10.69 Form of Amendment Agreement dated UGI Form 10-Q 10.1(a)
January 15, 2004 to Senior Facilities (3/31/04)
Agreement, as Amended and Restated July
2, 2003.
10.70 Pledge of Financial Instruments Account UGI Form 10-Q 10.2
relating to Financial Instruments held by (3/31/04)
AGZ Holding in Antargaz, dated July 7,
2003, between AGZ Holding, as Pledgor,
and Credit Lyonnais, as Security Agent,
and the Senior Lenders.
10.71 Pledge of Financial Instruments Accounts UGI Form 10-Q 10.3
relating to Financial Instruments held by (3/31/04)
Antargaz in certain subsidiary companies,
dated July 7, 2003, between Antargaz, as
Pledgor, and Credit Lyonnais, as Security
Agent, and the Revolving Lenders.
10.72 Intercreditor Agreement, dated July 7, UGI Form 10-Q 10.4
2003, between AGZ Holding, Antargaz, (3/31/04)
AGZ Finance, the Senior Lenders (as
defined therein), the Investors (as defined
therein), and Credit Lyonnais, as Facility
Agent for the Senior Lenders and as
Security Agent.
10.73 Seller's Guarantee dated February 16, 2001 UGI Form 10-Q 10.5
among Elf Antar France, Elf Aquitaine and (3/31/04)
AGZ Holding.
*13 Pages 13 through 55 of the 2004 Annual
Report to Shareholders
14 Code of Ethics for principal executive, UGI Form 10-K 14
financial and accounting officers (9/30/03)
*21 Subsidiaries of the Registrant
*23 Consent of PricewaterhouseCoopers LLP
*31.1 Certification by the Chief Executive Officer
relating to the Registrant's Report on Form
10-K for the fiscal year ended September
30, 2004 pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
46
INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- -----------------------------------------------------------------------------------------------------------
*31.2 Certification by the Chief Financial Officer
relating to the Registrant's Report on Form
10-K for the fiscal year ended September
30, 2004 pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
*32 Certification by the Chief Executive Officer
and the Chief Financial Officer relating to
the Registrant's Report on Form 10-K for
the fiscal year ended September 30, 2004,
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
* Filed herewith.
** As required by Item 14(a)(3), this exhibit is identified as a compensatory
plan or arrangement.
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: December 7, 2004 By: Anthony J. Mendicino
-----------------------------------
Anthony J. Mendicino
Senior Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on December 7, 2004, by the following persons on
behalf of the Registrant in the capacities indicated.
SIGNATURE TITLE
- --------- -----
Lon R. Greenberg Chairman, President
- ------------------------------------ and Chief Executive Officer
Lon R. Greenberg (Principal Executive Officer)
and Director
Anthony J. Mendicino Senior Vice President - Finance
- ------------------------------------ and Chief Financial Officer
Anthony J. Mendicino (Principal Financial Officer)
Michael J. Cuzzolina Vice President - Accounting and
- ------------------------------------ Financial Control
Michael J. Cuzzolina (Principal Accounting Officer)
Stephen D. Ban Director
- ------------------------------------
Stephen D. Ban
Thomas F. Donovan Director
- ------------------------------------
Thomas F. Donovan
48
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on December 7, 2004, by the following persons on
behalf of the Registrant in the capacities indicated.
SIGNATURE TITLE
- --------- -----
Richard C. Gozon Director
- ------------------------------------
Richard C. Gozon
Ernest E. Jones Director
- ------------------------------------
Ernest E. Jones
Anne Pol Director
- ------------------------------------
Anne Pol
Marvin O. Schlanger Director
- ------------------------------------
Marvin O. Schlanger
James W. Stratton Director
- ------------------------------------
James W. Stratton
49
UGI CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 2004
F-1
UGI CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statements and supplementary data of UGI Corporation
and subsidiaries, together with the report thereon of PricewaterhouseCoopers LLP
dated December 6, 2004, listed in the following index, are included in UGI's
2004 Annual Report to Shareholders and are incorporated in this Form 10-K Annual
Report by reference. With the exception of the pages listed in this index and
information incorporated in Items 7, 7A and 8, the 2004 Annual Report to
Shareholders is not to be deemed filed as part of this Report.
Reference
----------------------------------------
Annual
Report to
Form 10-K Shareholders
(page) (page)
------ ------
Reports of Independent Registered Public Accounting Firm
On Consolidated Financial Statements Exhibit 13 28
On Financial Statement Schedules F-4
Financial Statements:
Consolidated Balance Sheets, September 30,
2004 and 2003 Exhibit 13 30 to 31
For the years ended September 30, 2004, 2003 and 2002:
Consolidated Statements of Income Exhibit 13 29
Consolidated Statements of Cash Flows Exhibit 13 32
Consolidated Statements of Stockholders'
Equity Exhibit 13 33
F-2
UGI CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (continued)
Reference
-------------------------------------
Annual
Report to
Form 10-K Shareholders
(page) (page)
------ ------
Notes to Consolidated Financial
Statements Exhibit 13 34 to 55
Supplementary Data (unaudited):
Quarterly Data for the years ended
September 30, 2004 and 2003 Exhibit 13 53
Financial Statement Schedules:
For the years ended September 30, 2004, 2003 and 2002:
I - Condensed Financial
Information of Registrant
(Parent Company) S-1 to S-3
II - Valuation and Qualifying
Accounts S-4 to S-5
Annual Reports on Form 10-K/A
Annual Reports on Form 10-K/A for the UGI Utilities, Inc., UGI HVAC
Enterprises, Inc. and AmeriGas Propane, Inc. savings plans will be filed
by amendment within the time period specified by Rule 15d-21(b).
We have omitted all other financial statement schedules because the required
information is either (1) not present; (2) not present in amounts sufficient to
require submission of the schedule; or (3) the information required is included
elsewhere in the financial statements or related notes.
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders
of UGI Corporation:
Our audits of the consolidated financial statements referred to in our report
dated December 6, 2004 appearing in the 2004 Annual Report to Shareholders of
UGI Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedules listed in Item 15(a)(2) of this Form
10-K. In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 6, 2004
F-4
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Millions of dollars)
September 30,
Restated
ASSETS 2004 2003
- ------ --------- ---------
Current assets:
Cash and cash equivalents $ 0.7 $ 0.6
Accounts and notes receivable 4.2 1.7
Deferred income taxes 0.2 0.2
Prepaid expenses and other current assets 0.4 0.5
--------- ---------
Total current assets 5.5 3.0
Investments in subsidiaries 956.1 618.2
Other assets 11.4 8.6
--------- ---------
Total assets $ 973.0 $ 629.8
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
- -----------------------------------------------
Current liabilities:
Accounts and notes payable $ 10.2 $ 10.7
Accrued liabilities 5.9 7.7
--------- ---------
Total current liabilities 16.1 18.4
Noncurrent liabilities 122.8 112.7
Commitments and contingencies
Common stockholders' equity:
Common Stock, without par value (authorized - 150,000,000 shares;
issued - 57,576,497 and 49,798,097 shares, respectively) 762.6 511.3
Retained earnings 146.2 90.9
Accumulated other comprehensive income 22.6 4.7
--------- ---------
931.4 606.9
Less treasury stock, at cost (97.3) (108.2)
--------- ---------
Total common stockholders' equity 834.1 498.7
--------- ---------
Total liabilities and common stockholders' equity $ 973.0 $ 629.8
========= =========
Commitments and Contingencies:
In addition to the guarantees of FLAGA debt described in Note 4 to
Consolidated Financial Statements, at September 30, 2004, UGI Corporation had
agreed to indemnify the issuers of $26.7 of surety bonds issued on behalf of
certain UGI subsidiaries. UGI Corporation is authorized to guarantee up to $10.0
in supplier obligations on behalf of UGI Development Company, of which $5.3 of
such obligations were outstanding as of September 30, 2004. UGI Corporation is
also authorized to guarantee up to $265.0 of supplier obligations of UGI Energy
Services, Inc., of which $235.4 of such obligations were outstanding as of
September 30, 2004.
S-1
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF INCOME
(Millions of dollars, except per share amounts)
Year Ended
September 30,
----------------------------------------
2004 2003 2002
------- ------ ------
Revenues $ - $ - $ -
Costs and expenses:
Operating and administrative expenses 24.5 18.6 13.6
Other income, net (24.0) (17.6) (12.4)
------- ------ ------
0.5 1.0 1.2
------- ------ ------
Operating loss (0.5) (1.0) (1.2)
Interest expense on intercompany debt (2.2) (1.5) (1.3)
------- ------ ------
Loss before income taxes (2.7) (2.5) (2.5)
Income tax benefit (1.3) (2.4) (0.9)
------- ------ ------
Loss before equity in income
of unconsolidated subsidiaries (1.4) (0.1) (1.6)
Equity in income of unconsolidated
subsidiaries 113.0 99.0 77.1
------- ------ ------
Net income $ 111.6 $ 98.9 $ 75.5
======= ====== ======
Earnings per common share:
Basic $ 2.36 $ 2.34 $ 1.83
======= ====== ======
Diluted $ 2.31 $ 2.29 $ 1.80
======= ====== ======
Average common shares outstanding (millions):
Basic 47.308 42.220 41.325
======= ====== ======
Diluted 48.341 43.236 41.907
======= ====== ======
S-2
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(Millions of dollars)
Year Ended
September 30,
---------------------------------------
2004 2003 2002
-------- ------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (a) $ 100.2 $ 97.2 $ 113.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated subsidiaries (300.2) (117.1) (101.5)
Net repayments to unconsolidated subsidiary - - 13.0
-------- ------- --------
Net cash used by investing activities (300.2) (117.1) (88.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Common Stock (56.3) (47.8) (44.8)
Issuance of intercompany long-term debt - 44.5 8.0
Issuance of Common Stock 257.0 23.7 11.0
Repurchases of Common Stock (0.6) (0.1) -
-------- ------- --------
Net cash provided (used) by financing activities 200.1 20.3 (25.8)
-------- ------- --------
Cash and cash equivalents increase (decrease) $ 0.1 $ 0.4 $ (0.4)
======== ======= ========
Cash and cash equivalents:
End of period $ 0.7 $ 0.6 $ 0.2
Beginning of period 0.6 0.2 0.6
-------- ------- --------
Increase (decrease) $ 0.1 $ 0.4 $ (0.4)
======== ======= ========
(a) Includes dividends received from unconsolidated subsidiaries of $99.0,
$94.0 and $111.7, respectively, for the years ended September 30, 2004,
2003 and 2002.
S-3
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Millions of dollars)
Charged
Balance at (credited) Balance at
beginning to costs and end of
of year expenses Other year
------- -------- ----- ----
Year Ended September 30, 2004
- -----------------------------
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 14.8 $ 18.7 $ (16.8) (1) $ 22.3
======= =======
$ 5.6 (2)
Other reserves:
Self-insured property and casualty
liability $ 48.4 $ 26.1 $ (17.3) (3) $ 57.8
======= =======
0.6 (4)
Insured property and casualty liability $ 0.6 $ 0.6
======= =======
Environmental, litigation and other $ 15.7 $ 5.7 $ (3.8) (3) $ 30.9
======= =======
$ 13.1 (2)
0.2 (4)
Year Ended September 30, 2003
- -----------------------------
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 11.8 $ 18.5 $ (15.8) (1) $ 14.8
======= =======
$ 0.3 (4)
Other reserves:
Self-insured property and casualty
liability $ 42.7 $ 21.2 $ (15.1) (3) $ 48.4
======= =======
(0.4) (4)
Insured property and casualty liability $ 3.5 $ (2.8) $ (0.1) (4) $ 0.6
======= =======
Environmental, litigation and other $ 13.9 $ 6.0 $ (4.6) (3) $ 15.7
======= =======
0.4 (4)
S-4
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)
(Millions of dollars)
Year Ended September 30, 2002
- -----------------------------
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 15.6 $ 14.2 $ (18.0) (1) $ 11.8
======= =======
Allowance for amortization of
other deferred costs - AmeriGas Propane $ 1.1 $ - $ (1.1) (4) $ -
======= =======
Other reserves:
Self-insured property and casualty liability $ 37.4 $ 19.0 $ (15.6) (3) $ 42.7
======= =======
1.9 (4)
Insured property and casualty liability $ 1.5 $ - $ 2.0 (4) $ 3.5
======= =======
Environmental, litigation and other $ 11.7 $ 3.7 $ (2.6) (3) $ 13.9
======= =======
1.1 (4)
(1) Uncollectible accounts written off, net of recoveries.
(2) Acquisition
(3) Payments, net.
(4) Other adjustments.
S-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.2 UGI Corporation 2004 Omnibus Equity Compensation Plan Directors
Stock Unit Grant Letter dated as of January 8, 2004
10.3 UGI Corporation 2004 Omnibus Equity Compensation Plan Directors
Nonqualified Stock Option Grant Letter dated as of January 8, 2004
10.4 UGI Corporation 2004 Omnibus Equity Compensation Plan Utilities
Employees Performance Unit Grant Letter dated as of January 1, 2004
10.5 UGI Corporation 2004 Omnibus Equity Compensation Plan UGI
Employees Stock Unit Grant Letter dated as of January 1, 2004
10.7 UGI Corporation 2004 Omnibus Equity Compensation Plan UGI
Employees Performance Unit Grant Letter dated as of January 1, 2004
10.9 UGI Corporation 2004 Omnibus Equity Compensation Plan AmeriGas
Employees Nonqualified Stock Option Grant Letter dated as of January
1, 2004
10.12 UGI Corporation Senior Executive Employee Severance Pay Plan
as amended December 7, 2004
10.17 UGI Corporation 2004 Omnibus Equity Compensation Plan, as amended
December 7, 2004
10.36 UGI Corporation 2004 Omnibus Equity Compensation Plan UGI Employees
Nonqualified Stock Option Grant Letter dated as of January 1, 2004
10.36(a) UGI Corporation 2004 Omnibus Equity Compensation Plan UGI Utilities
Employees Nonqualified Stock Option Grant Letter dated as of
January 1, 2004
10.43 UGI Corporation 2004 Omnibus Equity Compensation Plan, Sub-Plan for
French Employees Stock Option Grant Letter dated as of January 1, 2004
50
EXHIBIT INDEX (CONT.)
EXHIBIT NO. DESCRIPTION
- ----------- -----------
13 Pages 13 through 55 of the 2004 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP
31.1 Certification by the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
31.2 Certification by the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act
32 Certification by the Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
51