-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+400BCMvKQvpugZyB6Pnil32TbM7VpaDjSURdb9P+RP4lLzIJlaIedP2j8CHIAq 1owJjPJU8VNLHRcjE+oiVA== 0000893220-03-001447.txt : 20030814 0000893220-03-001447.hdr.sgml : 20030814 20030814142311 ACCESSION NUMBER: 0000893220-03-001447 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UGI UTILITIES INC CENTRAL INDEX KEY: 0000100548 STANDARD INDUSTRIAL CLASSIFICATION: GAS & OTHER SERVICES COMBINED [4932] IRS NUMBER: 231174060 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01398 FILM NUMBER: 03846226 BUSINESS ADDRESS: STREET 1: 100 KACHEL BOULEVARD SUITE 400 STREET 2: GREEN HILLS CORPORATE CENTER CITY: VALLEY FORGE STATE: PA ZIP: 19607 BUSINESS PHONE: 6107963400 MAIL ADDRESS: STREET 1: P O BOX 858 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: UGI CORP DATE OF NAME CHANGE: 19920429 FORMER COMPANY: FORMER CONFORMED NAME: UNITED GAS IMPROVEMENT CO DATE OF NAME CHANGE: 19680911 FORMER COMPANY: FORMER CONFORMED NAME: CONSUMERS GAS CO DATE OF NAME CHANGE: 19660830 10-Q 1 w89125e10vq.txt UGI UTILITIES, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-1398 UGI UTILITIES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-1174060 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
UGI UTILITIES, INC. 100 Kachel Boulevard, Suite 400 Green Hills Corporate Center, Reading, PA (Address of principal executive offices) 19607 (Zip Code) (610) 796-3400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] At July 31, 2003, there were 26,781,785 shares of UGI Utilities, Inc. Common Stock, par value $2.25 per share, outstanding, all of which were held, beneficially and of record, by UGI Corporation. UGI UTILITIES, INC. TABLE OF CONTENTS
PAGES ----- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2003, September 30, 2002 and June 30, 2002 1 Condensed Consolidated Statements of Income for the three and nine months ended June 30, 2003 and 2002 2 Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2003 and 2002 3 Notes to Condensed Consolidated Financial Statements 4-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 Item 4. Controls and Procedures 16 PART II OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 17-18 Signatures 19
-i- UGI UTILITIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Thousands of dollars)
June 30, September 30, June 30, 2003 2002 2002 --------- ------------- --------- ASSETS Current assets: Cash and cash equivalents $ 1,708 $ 6,090 $ 12,113 Accounts receivable (less allowances for doubtful accounts of $6,671, $1,972 and $4,275, respectively) 49,261 38,554 38,180 Accrued utility revenues 7,940 8,069 7,547 Inventories 27,530 38,654 25,564 Deferred income taxes 18,668 2,610 7,563 Deferred fuel costs -- 4,304 -- Income taxes recoverable -- 6,892 -- Prepaid expenses and other current assets 3,049 3,151 4,849 --------- --------- --------- Total current assets 108,156 108,324 95,816 Property, plant and equipment, at cost (less accumulated depreciation and amortization of $296,794, $290,194 and $289,877, respectively) 599,266 593,141 585,715 Regulatory assets 60,062 57,685 54,803 Other assets 29,423 38,973 38,317 --------- --------- --------- Total assets $ 796,907 $ 798,123 $ 774,651 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 50,000 $ 76,000 $ 26,000 Bank loans 2,300 37,200 45,600 Accounts payable 40,731 57,499 40,256 Accrued income taxes 20,064 -- 7,247 Deferred fuel refunds 30,248 -- 2,938 Other current liabilities 40,267 45,518 35,515 --------- --------- --------- Total current liabilities 183,610 216,217 157,556 Long-term debt 172,298 172,369 182,392 Deferred income taxes 138,003 131,483 128,738 Deferred investment tax credits 8,086 8,385 8,485 Other noncurrent liabilities 13,559 11,815 11,878 Commitments and contingencies (note 3) Preferred shares subject to mandatory redemption 20,000 20,000 20,000 Common stockholder's equity: Common Stock, $2.25 par value (authorized - 40,000,000 shares; issued and outstanding - 26,781,785 shares) 60,259 60,259 60,259 Additional paid-in capital 78,057 73,057 72,792 Retained earnings 126,107 107,312 132,727 Accumulated other comprehensive loss (3,072) (2,774) (176) --------- --------- --------- Total common stockholder's equity 261,351 237,854 265,602 --------- --------- --------- Total liabilities and stockholders' equity $ 796,907 $ 798,123 $ 774,651 ========= ========= =========
See accompanying notes to condensed consolidated financial statements. -1- UGI UTILITIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Thousands of dollars)
Three Months Ended Nine Months Ended June 30, June 30, ------------------------- ------------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Revenues $ 121,546 $ 88,249 $ 559,193 $ 409,675 --------- --------- --------- --------- Costs and expenses: Gas, fuel and purchased power 76,489 48,235 350,100 244,493 Operating and administrative expenses 25,303 19,894 71,185 61,568 Operating and administrative expenses - related parties 2,528 1,402 7,498 4,420 Taxes other than income taxes 2,832 2,870 9,200 8,698 Depreciation and amortization 5,304 5,290 15,958 16,934 Other income, net (915) (2,664) (7,032) (8,588) --------- --------- --------- --------- 111,541 75,027 446,909 327,525 --------- --------- --------- --------- Operating income 10,005 13,222 112,284 82,150 Interest expense 3,903 4,054 12,379 12,545 --------- --------- --------- --------- Income before income taxes 6,102 9,168 99,905 69,605 Income taxes 2,462 3,616 40,152 27,459 --------- --------- --------- --------- Net income 3,640 5,552 59,753 42,146 Dividends on preferred stock 388 388 1,163 1,163 --------- --------- --------- --------- Net income after dividends on preferred stock $ 3,252 $ 5,164 $ 58,590 $ 40,983 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. -2- UGI UTILITIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Thousands of dollars)
Nine Months Ended June 30, ------------------------ 2003 2002 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 59,753 $ 42,146 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,958 16,934 Deferred income taxes, net (11,836) 4,389 Other, net 8,541 3,862 Net change in: Accounts receivable and accrued utility revenues (19,972) (753) Inventories 10,885 22,510 Deferred fuel costs 35,858 1,491 Accounts payable (15,022) (27,201) Other current assets and liabilities 22,050 (10,946) --------- -------- Net cash provided by operating activities 106,215 52,432 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment (25,742) (22,374) Net costs of property, plant and equipment disposals (832) (1,330) --------- -------- Net cash used by investing activities (26,574) (23,704) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of dividends (25,551) (12,126) Cash portion of UGID dividend (2,572) -- Repayment of long-term debt (26,000) -- Bank loans decrease (34,900) (12,200) Capital contribution from UGI 5,000 -- --------- -------- Net cash used by financing activities (84,023) (24,326) --------- -------- Cash and cash equivalents (decrease) increase $ (4,382) $ 4,402 ========= ======== CASH AND CASH EQUIVALENTS: End of period $ 1,708 $ 12,113 Beginning of period 6,090 7,711 --------- -------- (Decrease) increase $ (4,382) $ 4,402 ========= ========
See accompanying notes to condensed consolidated financial statements. -3- UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of UGI Utilities, Inc. ("UGI Utilities") and, prior to their transfer to UGI in June 2003 (as further described below), its direct and indirect wholly owned subsidiaries (collectively, "the Company" or "we"). UGI Utilities, Inc. ("UGI Utilities"), a wholly owned subsidiary of UGI Corporation ("UGI"), owns and operates a natural gas distribution utility ("Gas Utility") in parts of eastern and southeastern Pennsylvania; owns and operates an electricity distribution utility ("Electric Utility") in northeastern Pennsylvania; and prior to the distribution to UGI of UGI Development Company ("UGID") and UGID's subsidiaries and joint-venture affiliate (which together with Electric Utility are referred to herein as "Electric Operations"), owned interests in Pennsylvania-based electricity generation assets through UGID. Gas Utility and Electric Utility are subject to regulation by the Pennsylvania Public Utility Commission ("PUC"). UGID was granted "Exempt Wholesale Generator" status by the Federal Energy Regulatory Commission. In June 2003, the Company dividended all of the common stock of UGID to UGI. The net book value of the assets and liabilities of UGID and its subsidiaries totaling $15,407 (including $2,572 of cash) was eliminated from the consolidated balance sheet and reflected as a dividend from retained earnings. UGID and its subsidiaries did not have a material effect on the Company's results of operations for any of the periods presented. Our consolidated financial statements include the accounts of UGI Utilities and its majority-owned subsidiaries. UGID's 50%-owned joint-venture partnership, Hunlock Creek Energy Ventures ("Energy Ventures"), was accounted for under the equity method. We eliminate all significant intercompany accounts and transactions when we consolidate. The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). They include all adjustments which we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. The September 30, 2002 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and the related notes included in our Annual Report on Form 10-K for the year ended September 30, 2002 ("Company's 2002 Annual Report"). Due to the seasonal nature of our businesses, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. -4- UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) COMPREHENSIVE INCOME. The following table presents the components of comprehensive income for the three and nine months ended June 30, 2003 and 2002:
Three Months Ended Nine Months Ended June 30, June 30, --------------------- ----------------------- 2003 2002 2003 2002 ------- ------- -------- -------- Net income $ 3,640 $ 5,552 $ 59,753 $ 42,146 Other comprehensive loss (524) (644) (298) (176) ------- ------- -------- -------- Comprehensive income $ 3,116 $ 4,908 $ 59,455 $ 41,970 ------- ------- -------- --------
Other comprehensive loss comprises changes in the fair value of interest rate protection agreements qualifying as hedges, net of reclassifications to net income. USE OF ESTIMATES. We make estimates and assumptions when preparing financial statements in conformity with accounting principles generally accepted in the United States. These estimates and assumptions affect the reported amounts of assets and liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. 2. SEGMENT INFORMATION The Company has two reportable segments: (1) Gas Utility and (2) Electric Operations. The accounting policies of our two reportable segments are the same as those described in the Significant Accounting Policies note contained in the Company's 2002 Annual Report. We evaluate each segment's profitability principally based upon its earnings before income taxes. No single customer represents more than 10% of the total revenues of either Gas Utility or Electric Operations. There are no significant intersegment transactions. In addition, all of our reportable segments' revenues are derived from sources within the United States. Financial information by reportable segment follows: -5- UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 2. SEGMENT INFORMATION (continued) THREE MONTHS ENDED JUNE 30, 2003:
Gas Electric Total Eliminations Utility Operations ----- ------------ ------- ---------- Revenues $ 121,546 $ -- $ 99,683 $ 21,863 Cost of sales 76,489 -- 65,213 11,276 Depreciation and amortization 5,304 -- 4,541 763 Operating income 10,005 -- 5,544 4,461 Interest expense 3,903 -- 3,434 469 Income before income taxes 6,102 -- 2,110 3,992 Total assets (at period end) 796,907 -- 711,236 85,671
THREE MONTHS ENDED JUNE 30, 2002:
Gas Electric Total Eliminations Utility Operations ----- ------------ ------- ---------- Revenues $ 88,249 $ -- $ 68,100 $ 20,149 Cost of sales 48,235 -- 37,018 11,217 Depreciation and amortization 5,290 -- 4,528 762 Operating income 13,222 -- 10,148 3,074 Interest expense 4,054 -- 3,413 641 Income before income taxes 9,168 -- 6,735 2,433 Total assets (at period end) 774,651 (709) 669,391 105,969
-6- UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 2. SEGMENT INFORMATION (continued) NINE MONTHS ENDED JUNE 30, 2003:
Gas Electric Total Eliminations Utility Operations ----- ------------ ------- ---------- Revenues $559,193 $ -- $484,678 $74,515 Cost of sales 350,100 -- 312,582 37,518 Depreciation and amortization 15,958 -- 13,618 2,340 Operating income 112,284 -- 94,107 18,177 Interest expense 12,379 -- 10,654 1,725 Income before income taxes 99,905 -- 83,453 16,452 Total assets (at period end) 796,907 -- 711,236 85,671
NINE MONTHS ENDED JUNE 30, 2002:
Gas Electric Total Eliminations Utility Operations ----- ------------ ------- ---------- Revenues $409,675 $ -- $347,523 $ 62,152 Cost of sales 244,493 -- 209,038 35,455 Depreciation and amortization 16,934 -- 14,504 2,430 Operating income 82,150 -- 73,490 8,660 Interest expense 12,545 -- 10,690 1,855 Income before income taxes 69,605 -- 62,800 6,805 Total assets (at period end) 774,651 (709) 669,391 105,969
3. COMMITMENTS AND CONTINGENCIES From the late 1800s through the mid-1900s, UGI 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, UGI Utilities owned the stock of subsidiary gas companies in Pennsylvania and elsewhere and also operated the businesses of some gas companies under agreement. Pursuant to the requirements of the Public Utility Holding Company Act of 1935, UGI Utilities divested all of its utility operations other than those which now constitute Gas Utility and Electric Utility. UGI 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 Gas Utility is currently permitted to include in rates, through future base rate proceedings, prudently incurred remediation costs associated with such sites. UGI Utilities has been notified of several sites outside Pennsylvania on which (1) MGPs were formerly operated by it or owned or operated by its former subsidiaries and (2) either environmental agencies or private parties are investigating the extent of environmental -7- UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) contamination or performing environmental remediation. UGI Utilities is currently litigating two claims against it relating to out-of-state sites. Management believes that under applicable law UGI Utilities should not be liable in those instances in which a former subsidiary owned or operated an MGP. There could be, however, significant future costs of an uncertain amount associated with environmental damage caused by MGPs outside Pennsylvania that UGI Utilities directly operated, or that were owned or operated by former subsidiaries of UGI Utilities, if a court were to conclude that (i) the subsidiary's separate corporate form should be disregarded or (ii) UGI Utilities should be considered to have been an operator because of its conduct with respect to its subsidiary's MGP. With respect to a manufactured gas plant site in Manchester, New Hampshire, EnergyNorth Natural Gas, Inc. ("EnergyNorth") filed suit against UGI Utilities seeking contribution from UGI Utilities for response and remediation costs associated with the contamination on the site of a former MGP allegedly operated by former subsidiaries of UGI Utilities. UGI Utilities and EnergyNorth agreed to a settlement of this matter in June 2003. In June 2003, UGI Utilities recorded its estimated liability for contingent payments to EnergyNorth under the terms of the settlement agreement. In April 2003, Citizens Communications Company ("Citizens") served a complaint naming UGI 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, sued Citizens to recover environmental response costs associated with manufactured gas plant wastes generated at a plant allegedly operated by Citizens' predecessors at a site on the Penobscot River. Citizens subsequently joined UGI Utilities and ten other third party defendants alleging that the third party defendants are responsible for an equitable share of any response costs Citizens may be required to pay to the City of Bangor. Investigations of the site conducted to date are insufficient to establish what, if any contamination is related to gas plant wastes. Hence, UGI Utilities is unable to estimate the total cost of cleanup associated with manufactured gas plant wastes at this site. UGI Utilities believes that it has good defenses to the claim. In addition to these environmental matters, there are other pending claims and legal actions arising in the normal course of our businesses. We cannot predict with certainty the final results of environmental and other matters. However, it is reasonably possible that some of them could be resolved unfavorably to us. Although we currently believe, after consultation with counsel, that damages or settlements, if any, recovered by the plaintiffs in such claims or actions will not have a material adverse effect on our financial position, damages or settlements could be material to our operating results or cash flows in future periods depending on the nature and timing of future developments with respect to these matters and the amounts of future operating results and cash flows. -8- UGI UTILITIES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ANALYSIS OF RESULTS OF OPERATIONS The following analyses compare our results of operations for (1) the three months ended June 30, 2003 ("2003 three-month period") with the three months ended June 30, 2002 ("2002 three-month period") and (2) the nine months ended June 30, 2003 ("2003 nine-month period") with the nine months ended June 30, 2002 ("2002 nine-month period"). Our analyses of results of operations should be read in conjunction with the segment information included in Note 2 to the Condensed Consolidated Financial Statements. 2003 THREE-MONTH PERIOD COMPARED WITH 2002 THREE-MONTH PERIOD
Increase Three Months Ended June 30, 2003 2002 (Decrease) -------------------------------------------------------------------------------------------------- (Dollars in millions) GAS UTILITY: Revenues $ 99.7 $ 68.1 $ 31.6 46.4% Total margin (a) $ 34.5 $ 31.1 $ 3.4 10.9% Operating income $ 5.5 $ 10.1 $ (4.6) (45.5)% Natural gas system throughput-bcf 15.0 14.2 0.8 5.6% Heating degree days-% colder (warmer) than normal 16.3 (5.6) -- -- ELECTRIC OPERATIONS: Revenues $ 21.9 $ 20.1 $ 1.8 9.0% Total margin (a) $ 9.5 $ 7.9 $ 1.6 20.3% Operating income $ 4.5 $ 3.1 $ 1.4 45.2% Electric Utility distribution sales-gwh 216.3 213.0 3.3 1.5%
bcf - billions of cubic feet. gwh - millions of kilowatt-hours. (a) Gas Utility's total margin represents total revenues less cost of sales. Electric Operation's total margin represents total revenues less cost of sales and revenue-related taxes, i.e. Electric Utility gross receipts taxes, of $1.1 million in each of the three month-periods ended June 30, 2003 and 2002. For financial statement purposes, revenue-related taxes are included in "taxes other than income taxes" on the Condensed Consolidated Statements of Income. GAS UTILITY. Total distribution system throughput increased 0.8 bcf or 5.6% as cooler 2003 three-month period weather and customer growth increased firm- residential, commercial and industrial ("core-market") and retail delivery service sales. The increase in Gas Utility revenues during the 2003 three-month period reflects the pass through of higher purchased gas costs to core-market customers and the greater core-market sales as well as a $10.1 million increase in revenues from off-system sales as a result of higher natural gas prices. The greater 2003 three-month period purchased gas cost ("PGC") rates reflect a significant increase in the commodity price of natural gas. Gas Utility cost of gas was $65.2 million in the 2003 three-month period -9- UGI UTILITIES, INC. compared to $37.0 million in the 2002 three-month period reflecting the higher PGC rates and greater core-market and off-system sales. The increase in Gas Utility total margin is principally the result of greater core-market and retail delivery service volumes. Notwithstanding the increase in Gas Utility total margin in the 2003 three-month period, operating income declined $4.6 million reflecting a $6.2 million increase in operating and administrative expenses and a $1.8 million decline in other income. The increase in operating expenses is due in large part to greater litigation-related costs and expenses and, to a lesser extent, higher distribution system maintenance, incentive compensation and bad debt expenses. The decline in other income principally reflects lower pension income and a decline in non-tariff service income. ELECTRIC OPERATIONS. Electric Utility's 2003 three-month period kilowatt-hour sales were slightly higher than in the prior-year period due in part to cooler spring weather. The increase in Electric Operations' revenues reflects greater sales of electricity produced by our electric generation assets to third parties and, to a lesser extent, the greater Electric Utility distribution sales. Electric Operations' cost of sales increased $0.1 million reflecting higher costs associated with greater electric generation third-party sales substantially offset by lower Electric Utility per-unit purchased power costs. In June 2003, the Company dividended all of the Common Stock of UGID to UGI (see Note 1 to Condensed Consolidated Financial Statements). The increase in Electric Operations' total margin in the 2003 three-month period principally reflects the effects of the lower Electric Utility per-unit purchased power costs and increased margin from electric generation sales to third parties. The increase in operating income primarily resulted from the greater total margin partially offset by slightly higher operating and administrative expenses. -10- UGI UTILITIES, INC. 2003 NINE-MONTH PERIOD COMPARED WITH 2002 NINE-MONTH PERIOD
Nine Months Ended June 30, 2003 2002 Increase -------------------------------------------------------------------------------------------- (Dollars in millions) GAS UTILITY: Revenues $484.7 $347.5 $137.2 39.5% Total margin $172.1 $138.5 $ 33.6 24.3% Operating income $ 94.1 $ 73.5 $ 20.6 28.0% Natural gas system throughput - bcf 70.7 59.7 11.0 18.4% Heating degree days - % colder (warmer) than normal 8.3 (16.5) -- -- ELECTRIC OPERATIONS: Revenues $ 74.5 $ 62.2 $ 12.3 19.8% Total margin (a) $ 33.4 $ 23.6 $ 9.8 41.5% Operating income $ 18.2 $ 8.7 $ 9.5 109.2% Electric Utility distribution sales-gwh 741.8 689.0 52.8 7.7%
(a) Electric Operations total margin represents total revenues less cost of sales and Electric Utility gross receipts taxes of $3.6 million and $3.1 million for the nine months ended June 30, 2003 and 2002, respectively. GAS UTILITY. Weather in Gas Utility's service territory was 8.3% colder than normal during the 2003 nine-month period compared to weather that was 16.5% warmer than normal during the 2002 nine-month period. The significantly colder weather resulted in higher heating-related sales to core-market and retail delivery service customers and, to a lesser extent, greater volumes transported for commercial and industrial delivery service customers. System throughput also benefited from year-over-year customer growth. Gas Utility revenues increased principally as a result of the previously mentioned greater core market and retail delivery service sales and higher average core-market PGC rates resulting from higher natural gas costs. Gas Utility cost of gas was $312.6 million in the 2003 nine-month period, an increase of $103.5 million from the prior-year period, reflecting the higher core-market volumes sold and higher core-market PGC rates. The increase in Gas Utility total margin principally reflects a $30.9 million increase in core-market and retail delivery service total margin as well as higher margin from commercial and industrial delivery service customers. The increase in Gas Utility operating income principally reflects the increase in total margin partially offset by an $11.7 million increase in operating and administrative expenses and lower other income. The 2003 nine-month period operating and administrative expenses include higher litigation-related costs and expenses, greater distribution system maintenance expenses, increased incentive compensation costs and higher bad debt expense. Other income declined $2.1 million principally reflecting a $1.8 million decrease in pension income. -11- UGI UTILITIES, INC. ELECTRIC OPERATIONS. Electric Utility's 2003 nine-month period kilowatt-hour sales increased principally as a result of weather that was 9.5% colder than normal compared to weather that was 13.8% warmer than normal in the prior-year period. The higher Electric Operations revenues reflect greater Electric Utility sales and greater sales of electricity produced by our electric generation assets to third parties. Notwithstanding the significant increase in Electric Operations' revenues, cost of sales increased only $2.1 million in the 2003 nine-month period as the impact on cost of sales resulting from the greater Electric Utility and electric generation third-party sales was partially offset by lower Electric Utility per-unit purchased power costs. The increase in Electric Operations' total margin principally reflects the increased Electric Utility sales and lower Electric Utility per-unit purchased power costs as well as increased margin from electric generation sales to third parties. The higher operating income reflects the greater total margin and higher other income partially offset by slightly higher 2003 nine-month period operating and administrative expenses. FINANCIAL CONDITION AND LIQUIDITY FINANCIAL CONDITION The Company's long-term debt outstanding at June 30, 2003 totaled $222.3 million (including current maturities of $50.0 million) compared with $248.4 million (including current maturities of $76.0 million) at September 30, 2002. On October 1, 2002, the Company repaid $26 million of maturing long-term debt. On August 14, 2003, after the end of the quarter, the Company issued $25 million of ten-year notes at an interest rate of 5.37%, and $20 million of 30-year notes at an interest rate of 6.50%, under its Medium Term Note program. The net proceeds along with existing cash balances will be used to repay the Company's $50 million 6.50% Senior Notes maturing on August 15, 2003. The Company has commitments under revolving credit agreements which provide for borrowings of up to $107 million. These agreements expire in June 2005 and June 2006. UGI Utilities also has a shelf registration statement with the SEC under which it may issue up to an additional $40 million of Medium-Term Notes or other debt securities. CASH FLOWS The Company's cash flows from operating activities are seasonal and are generally greatest during the second and third fiscal quarters when customers pay bills incurred during the heating season and are generally lowest during the first and fourth fiscal quarters. Accordingly, cash flows from operations for the nine months ended June 30, 2003 are not necessarily indicative of cash flows to be expected for a full year. -12- UGI UTILITIES, INC. OPERATING ACTIVITIES. Cash provided by operating activities was $106.2 million during the nine months ended June 30, 2003 compared with $52.4 million in the prior-year nine-month period. Cash flow from operating activities before changes in operating working capital was $72.4 million in the 2003 nine-month period compared to the $67.3 million in the prior-year nine-month period reflecting the significant increase in 2003 nine-month period net income partially offset by the effects on net income of greater noncash deferred income tax benefits. Changes in operating working capital provided $33.8 million of operating cash flow during the nine months ended June 30, 2003 compared with $14.9 million during the prior-year nine-month period principally reflecting greater cash flow from changes in Gas Utility deferred fuel overcollections, accounts payable and accrued income taxes partially offset by the effects on changes in accounts receivable and inventories resulting from higher 2003 nine-month period natural gas prices. INVESTING ACTIVITIES. Expenditures for property, plant and equipment were $25.7 million in the 2003 nine-month period compared to $22.4 million recorded in the prior-year period principally reflecting higher Gas Utility distribution system expenditures. The lower costs on disposals of property, plant and equipment in the 2003 nine-month period principally reflects lower disposal activity during the 2003 nine-month period. FINANCING ACTIVITIES. During the 2003 and 2002 nine-month periods, we paid dividends of $24.4 million and $11.0 million, respectively, to UGI. In addition, we paid dividends of $1.2 million on our redeemable preferred stock during both periods. During the nine months ended June 30, 2003, UGI made a capital contribution of $5 million to UGI Utilities. In October 2002, we repaid $26 million of maturing Medium-Term Notes and, as a result of the improved 2003 nine-month operating cash flow, reduced our bank loan borrowings $34.9 million during 2003 nine-month period. DIVIDEND OF UGID In June 2003, the Company dividended all of the common stock of UGID to UGI. The net book value of the assets and liabilities of UGID and its subsidiaries totaling $15.4 million (including $2.6 million of cash) has been eliminated from the consolidated balance sheet. The results of operations of UGID through the date of distribution did not have a material effect on the Company's consolidated results of operations for any of the periods presented. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board ("FASB") recently issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150"); No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS 149"); SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"); and FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of the instruments within the scope of SFAS 150 were previously classified as equity. SFAS 150 -13- UGI UTILITIES, INC. is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective for the Company on July 1, 2003. For financial instruments created before May 31, 2003, and still existing on July 1, 2003, transition shall be achieved by reporting the cumulative effect of a change in an accounting principle by initially measuring the financial instruments at fair value or other measurement attribute required by SFAS 150. The Company will be required to present its preferred shares subject to mandatory redemption in the liabilities section of the balance sheet. The initial adoption of SFAS 150 did not affect our financial position or results of operations. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 149 amends SFAS 133 for decisions made (1) as part of the FASB's Derivatives Implementation Group ("DIG") process; (2) in connection with other FASB projects dealing with financial instruments; and (3) in connection with implementation issues raised in relation to the application of the definition of a derivative. SFAS 149 is effective for contracts entered into or modified after June 30, 2003. Based upon the types of contracts currently entered into by the Company, we do not believe SFAS 149 will have a material impact on our financial position or results of operations. SFAS 146 addresses accounting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." Generally, SFAS 146 requires that a liability for costs associated with an exit or disposal activity, including contract termination costs, employee termination benefits and other associated costs, be recognized when the liability is incurred. Under EITF No. 94-3, a liability was recognized at the date an entity committed to an exit plan. SFAS 146 is effective for disposal activities initiated after December 31, 2002. The initial adoption of the provisions of SFAS 146 did not affect our financial position or results of operations. FIN 45 expands the existing disclosure requirements for certain guarantees and requires that companies recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken when issuing the guarantee. The initial recognition and measurement provisions of FIN 45 are effective for guarantees issued or modified after December 31, 2002. The application of FIN 45 did not have a material effect on our financial position or results of operations. -14- UGI UTILITIES, INC. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Gas Utility's tariffs contain clauses that permit recovery of substantially all of the prudently incurred cost of natural gas it sells to its customers. The recovery clauses provide for a periodic adjustment for the difference between the total amount actually collected from customers and the recoverable costs incurred. Because of this ratemaking mechanism, there is limited commodity price risk associated with our Gas Utility operations. Prior to September 2002, Electric Utility purchased all of its electric power needs, in excess of the electric power it obtained from its interests in electricity generation facilities, under power supply arrangements of various lengths and on the spot market. Beginning September 2002, Electric Utility began purchasing its power needs from electricity suppliers under fixed-price energy and capacity contracts and, to a much lesser extent, on the spot market, and our electricity generation business sold its electricity production and capacity on the spot market to third parties. In June 2003, our electricity generation business was dividended to UGI. Prices for electricity can be volatile especially during periods of high demand or tight supply. Although the generation component of Electric Utility's rates is subject to various rate cap provisions, Electric Utility's fixed-price contracts with electricity marketers mitigate most risks associated with offering customers a fixed price during the contract periods. However, should any of the suppliers under these contracts fail to provide electric power under the terms of the power and capacity contracts, increases, if any, in the cost of replacement power or capacity could negatively impact Electric Utility results. In order to reduce this non-performance risk, Electric Utility has diversified its purchases across several suppliers and entered into bilateral collateral arrangements with certain of them. Our variable-rate debt includes borrowings under our revolving credit agreements. These agreements provide for interest rates on borrowings that are indexed to short-term market interest rates. Our long-term debt is typically issued at fixed rates of interest based upon market rates for debt having similar terms and credit ratings. As these long-term debt issues mature, we expect to refinance such debt with new debt having an interest rate that is more or less than the refinanced debt. In order to reduce interest rate risk associated with near-term issuances of fixed-rate debt, we may enter into interest rate protection agreements. At June 30, 2003, the fair value of our unsettled interest rate protection agreements, which have been designated and qualify as cash flow hedges, was a loss of $2.0 million. An adverse change in interest rates on ten-year U.S. treasury notes of 50 basis points would result in a $1.5 million decrease in the fair value of these interest rate protection agreements. -15- UGI UTILITIES, INC. ITEM 4. 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. 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. -16- UGI UTILITIES, INC. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS EnergyNorth Natural Gas, Inc. v. UGI Utilities, Inc. By letter dated October 26, 2000, EnergyNorth Natural Gas, Inc. ("EnergyNorth") notified UGI Utilities that it has filed suit in the United States District Court for the District of New Hampshire, seeking contribution from UGI Utilities for response and remediation costs associated with contamination on the site of a former manufactured gas plant allegedly operated by former subsidiaries of UGI Utilities. In June 2003, UGI Utilities and EnergyNorth agreed to a settlement in exchange for dismissal of the suit. See Note 3 to Condensed Consolidated Financial Statements. City of Bangor, Maine v. Citizens Communications Co. In April 2003, Citizens Communications Company ("Citizens") served a complaint naming UGI 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, sued Citizens to recover environmental response costs associated with manufactured gas plant wastes generated at a plant allegedly operated by Citizens' predecessors at a site on the Penobscot River. Citizens subsequently joined UGI Utilities and ten other third party defendants alleging that the third party defendants are responsible for an equitable share of any response costs Citizens may be required to pay to the City of Bangor. Investigations of the site conducted to date are insufficient to establish what, if any contamination is related to gas plant wastes. Hence, UGI Utilities is unable to estimate the total cost of cleanup associated with manufactured gas plant wastes at this site. UGI Utilities believes that it has good defenses to the claim. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits: 12.1 Computation of ratio of earnings to fixed charges. 12.2 Computation of ratio of earnings to combined fixed charges and preferred stock dividends. 31.1 Certification by the Chief Executive Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2003 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by the Chief Financial Officer relating to Registrant's Report on Form 10-Q for the quarter ended June 30, 2003 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification by the Chief Executive Officer and Chief Financial Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2003 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-17- UGI UTILITIES, INC. (b) The Company filed the following Current Report on Form 8-K during the fiscal quarter ended June 30, 2003.
DATE ITEM NUMBER CONTENT April 30, 2003 7, 9, 12 Press release of UGI Corporation, the parent of UGI Utilities, Inc., reporting financial results for UGI Corporation and UGI Utilities, Inc. for the second fiscal quarter ended March 31, 2003.
-18- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UGI Utilities, Inc. ---------------------------------------- (Registrant) Date: August 14, 2003 By: /s/ J.C. Barney - ---------------------- ---------------------------------------- J.C. Barney Senior Vice President - Finance (Principal Financial Officer) -19- UGI UTILITIES, INC. AND SUBSIDIARIES EXHIBIT INDEX 12.1 Computation of ratio of earnings to fixed charges. 12.2 Computation of ratio of earnings to combined fixed charges and preferred stock dividends. 31.1 Certification by the Chief Executive Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2003 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by the Chief Financial Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2003 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification by the Chief Executive Officer and Chief Financial Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2003 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-12.1 3 w89125exv12w1.txt COMPUTATION OF RATIO OF EARNINGS . . . UGI UTILITIES INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - EXHIBIT 12.1 (THOUSANDS OF DOLLARS)
Nine Months Ended June 30, Year Ended September 30, -------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- EARNINGS: Earnings before income taxes .................... $ 99,905 $ 73,665 $ 79,568 $ 82,882 $ 63,139 Interest expense ................................ 12,198 16,365 18,724 18,135 17,317 Amortization of debt discount and expense ....... 181 287 264 218 215 Estimated interest component of rental expense ................................ 1,087 1,563 1,541 1,318 1,539 -------- -------- -------- -------- -------- $113,371 $ 91,880 $100,097 $102,553 $ 82,210 ======== ======== ======== ======== ======== FIXED CHARGES: Interest expense ................................ $ 12,198 $ 16,365 $ 18,724 $ 18,135 $ 17,317 Amortization of debt discount and expense ....... 181 287 264 218 215 Allowance for funds used during construction (capitalized interest) ......... 16 19 12 17 36 Estimated interest component of rental expense .. 1,087 1,563 1,541 1,318 1,539 -------- -------- -------- -------- -------- $ 13,482 $ 18,234 $ 20,541 $ 19,688 $ 19,107 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges .............. 8.41 5.04 4.87 5.21 4.30 ======== ======== ======== ======== ========
EX-12.2 4 w89125exv12w2.txt COMPUTATION OF RATIO OF EARNINGS COMBINED UGI UTILITIES INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS - EXHIBIT 12.2 (THOUSANDS OF DOLLARS)
Nine Months Ended June 30, Year Ended September 30, -------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- EARNINGS: Earnings before income taxes $ 99,905 $ 73,665 $ 79,568 $ 82,882 $ 63,139 Interest expense 12,198 16,365 18,724 18,135 17,317 Amortization of debt discount and expense 181 287 264 218 215 Estimated interest component of rental expense 1,087 1,563 1,541 1,318 1,539 -------- -------- -------- -------- -------- $113,371 $ 91,880 $100,097 $102,553 $ 82,210 ======== ======== ======== ======== ======== COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS: Interest expense $ 12,198 $ 16,365 $ 18,724 $ 18,135 $ 17,317 Amortization of debt discount and expense 181 287 264 218 215 Allowance for funds used during construction (capitalized interest) 16 19 12 17 36 Estimated interest component of rental expense 1,087 1,563 1,541 1,318 1,539 Preferred stock dividend requirements 1,163 1,550 1,550 1,550 1,550 Adjustment required to state preferred stock dividend requirements on a pretax basis 781 1,039 1,012 995 968 -------- -------- -------- -------- -------- $ 15,426 $ 20,823 $ 23,103 $ 22,233 $ 21,625 ======== ======== ======== ======== ======== Ratio of earnings to combined fixed charges and preferred stock dividends 7.35 4.41 4.33 4.61 3.80 ======== ======== ======== ======== ========
EX-31.1 5 w89125exv31w1.txt CERTIFICATION BY CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 I, Robert J. Chaney, certify that: 1. I have reviewed this interim report on Form 10-Q of UGI Utilities, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons fulfilling the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2003 By: /s/ Robert J. Chaney -------------------------------------- Robert J. Chaney President and Chief Executive Officer EX-31.2 6 w89125exv31w2.txt CERTIFICATION BY CHIEF FINANCIAL OFFICER EXHIBIT 31.2 I, John C. Barney, certify that: 1. I have reviewed this interim report on Form 10-Q of UGI Utilities, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons fulfilling the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2003 By: /s/ John C. Barney -------------------------------------- John C. Barney Senior Vice President - Finance and Chief Financial Officer EX-32 7 w89125exv32.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, Robert J. Chaney, Chief Executive Officer, and I, John C. Barney, Chief Financial Officer, of UGI Utilities, Inc., a Pennsylvania corporation (the "Company"), hereby certify that: (1) The Company's periodic report on Form 10-Q for the period ended June 30, 2003 (the "Form 10-Q") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. * * * CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER /s/ Robert J. Chaney /s/ John C. Barney - -------------------------- --------------------------- Robert J. Chaney John C. Barney Date: August 14, 2003 Date: August 14, 2003 A signed original of this written statement required by Section 906 has been provided to UGI Utilities, Inc. and will be retained by UGI Utilities, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----