-----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, FvOKukBdbUlWTOUJqRJ7tnnrx3W1pjvHIZLg7mMd6+GZ4ZirzrDS8fO+k++GJzn0 FRkfEkGmWdFnjU+1kAnfUg== 0000893220-99-000592.txt : 19990517 0000893220-99-000592.hdr.sgml : 19990517 ACCESSION NUMBER: 0000893220-99-000592 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: SEC FILE NUMBER: 001-01398 FILM NUMBER: 99624192 BUSINESS ADDRESS: STREET 1: 100 KDACHEL 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 FORM 10-Q UGI UTILITIES 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 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 April 30, 1999, 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. 2 UGI UTILITIES, INC. TABLE OF CONTENTS
PAGES ----- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1999, September 30, 1998 and March 31, 1998 1 Condensed Consolidated Statements of Income for the three, six and twelve months ended March 31, 1999 and 1998 2 Condensed Consolidated Statements of Cash Flows for the six and twelve months ended March 31, 1999 and 1998 3 Notes to Condensed Consolidated Financial Statements 4 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 19 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 - 20 PART II OTHER INFORMATION Item 1. Legal Proceedings 20 Item 5. Other Information 20 - 21 Item 6. Exhibits and Reports on Form 8-K 21 Signatures 22
-i- 3 PART I FINANCIAL INFORMATION UGI UTILITIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Thousands of dollars)
March 31, September 30, March 31, 1999 1998 1998 -------- -------- -------- ASSETS Current assets: Cash and cash equivalents $ 4,221 $ 4,720 $ 4,095 Accounts receivable (less allowances for doubtful accounts of $2,034, $1,373 and $3,457, respectively) 59,660 20,258 59,178 Accrued utility revenues 14,386 6,745 13,838 Inventories 10,554 28,460 9,213 Deferred income taxes 9,281 4,070 12,022 Prepaid expenses and other current assets 10,642 6,556 9,685 -------- -------- -------- Total current assets 108,744 70,809 108,031 Property, plant and equipment, at cost (less accumulated depreciation and amortization of $263,041, $253,608 and $246,470, respectively) 548,770 543,913 533,200 Regulatory assets 59,906 59,318 48,676 Other assets 16,958 16,277 17,125 -------- -------- -------- Total assets $734,378 $690,317 $707,032 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 7,143 $ 7,143 $ 7,143 Current portion of redeemable preferred stock -- -- 15,187 Bank loans 72,800 68,400 42,900 Accounts payable 32,004 38,847 25,491 Other current liabilities 61,872 29,720 63,346 -------- -------- -------- Total current liabilities 173,819 144,110 154,067 Long-term debt 180,037 180,027 187,161 Deferred income taxes 109,211 105,734 103,440 Other noncurrent liabilities 27,645 29,204 19,680 Commitments and contingencies Redeemable preferred stock 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 68,559 68,559 68,249 Retained earnings 94,848 82,424 94,176 -------- -------- -------- Total common stockholder's equity 223,666 211,242 222,684 -------- -------- -------- Total liabilities and stockholders' equity $734,378 $690,317 $707,032 ======== ======== ========
The accompanying notes are an integral part of these financial statements. -1- 4 UGI UTILITIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Thousands of dollars)
Three Months Ended Six Months Ended Twelve Months Ended March 31, March 31, March 31, ---------------------- ----------------------- ---------------------- 1999 1998 1999 1998 1999 1998 --------- --------- --------- --------- --------- --------- Revenues $ 167,692 $ 152,333 $ 280,462 $ 287,797 $ 414,948 $ 441,547 --------- --------- --------- --------- --------- --------- Costs and expenses: Gas, fuel and purchased power 87,449 80,661 142,785 153,158 204,258 228,513 Operating and administrative expenses 30,937 29,841 57,391 56,916 111,650 114,825 Operating and administrative expenses - related parties 1,297 1,291 2,469 2,389 4,917 5,298 Depreciation and amortization 5,912 5,510 11,389 10,861 22,571 21,020 Other income, net (1,077) (1,120) (2,198) (2,006) (5,185) (3,370) --------- --------- --------- --------- --------- --------- 124,518 116,183 211,836 221,318 338,211 366,286 --------- --------- --------- --------- --------- --------- Operating income 43,174 36,150 68,626 66,479 76,737 75,261 Interest expense 4,324 4,385 8,762 8,706 17,639 17,022 --------- --------- --------- --------- --------- --------- Income before income taxes 38,850 31,765 59,864 57,773 59,098 58,239 Income taxes 14,683 11,766 22,664 21,566 22,554 22,269 --------- --------- --------- --------- --------- --------- Net income 24,167 19,999 37,200 36,207 36,544 35,970 Dividends on preferred stock 387 691 775 1,382 1,553 2,764 --------- --------- --------- --------- --------- --------- Net income after dividends on preferred stock $ 23,780 $ 19,308 $ 36,425 $ 34,825 $ 34,991 $ 33,206 ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. -2- 5 UGI UTILITIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Thousands of dollars)
Six Months Ended Twelve Months Ended March 31, March 31, --------------------- -------------------- 1999 1998 1999 1998 -------- -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 37,200 $ 36,207 $ 36,544 $ 35,970 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,389 10,861 22,571 21,020 Deferred income taxes, net (3,677) (2,782) 4,573 2,022 Other, net 1,061 2,377 4,357 5,152 -------- -------- -------- -------- 45,973 46,663 68,045 64,164 Net change in: Accounts receivable and accrued utility revenues (49,012) (42,889) (4,172) 5,466 Inventories 17,906 21,432 (1,341) (335) Deferred fuel costs 12,250 11,727 (4,643) 2,456 Accounts payable (6,843) (19,876) 6,457 (1,678) Other current assets and liabilities 15,815 3,122 1,722 (589) -------- -------- -------- -------- Net cash provided by operating activities 36,089 20,179 66,068 69,484 -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment (16,042) (15,615) (37,646) (38,676) Net proceeds (costs) of property, plant and equipment disposals (171) (165) 305 (849) -------- -------- -------- -------- Net cash used by investing activities (16,213) (15,780) (37,341) (39,525) -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of dividends (24,775) (14,017) (35,851) (15,398) Issuance of long-term debt -- 35,000 -- 55,000 Repayment of long-term debt -- (10,000) (7,143) (18,980) Bank loans increase (decrease) 4,400 (24,100) 29,900 (52,100) Redemption of Series Preferred Stock -- -- (15,507) -- -------- -------- -------- -------- Net cash used by financing activities (20,375) (13,117) (28,601) (31,478) -------- -------- -------- -------- Cash and cash equivalents increase (decrease) $ (499) $ (8,718) $ 126 $ (1,519) ======== ======== ======== ======== CASH AND CASH EQUIVALENTS: End of period $ 4,221 $ 4,095 $ 4,221 $ 4,095 Beginning of period 4,720 12,813 4,095 5,614 -------- -------- -------- -------- Increase (decrease) $ (499) $ (8,718) $ 126 $ (1,519) ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. -3- 6 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 its wholly owned subsidiary UGI Development Company (collectively, "the Company" or "we"). We eliminate all significant intercompany accounts and transactions when we consolidate. UGI Utilities is a wholly owned subsidiary of UGI Corporation (UGI) and operates a natural gas distribution utility (Gas Utility) in parts of eastern and southeastern Pennsylvania and an electric utility (Electric Utility) in northeastern Pennsylvania. The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission. They include all adjustments which 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. 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, 1998. 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. Management makes estimates and assumptions when preparing financial statements in conformity with generally accepted accounting principles. 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. On October 1, 1998, we adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income includes net income and all other nonowner changes in equity. SFAS 130 also requires reclassification of financial statements of earlier periods provided for comparative purposes. UGI Utilities' comprehensive income was the same as its net income for all periods presented. 2. SEGMENT INFORMATION On October 1, 1998, we adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards for -4- 7 UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued) (unaudited) (Thousands of dollars) reporting information about operating segments as well as related disclosures about products and services, geographic areas, and major customers. In determining our reportable segments under the provisions of SFAS 131, we examined the way we organize our businesses internally for making operating decisions and assessing business performance. Because our gas utility and electric utility operations are organized and managed as strategic business units offering different products and services, we have determined that UGI Utilities has two reportable segments comprising Gas Utility and Electric Utility. Although Electric Utility's June 1998 Restructuring Order provides for the unbundling of prices for electric generation, transmission and distribution services, we currently manage and evaluate our electric generation, transmission and distribution operations together. Accordingly, these operations are combined for segment reporting purposes. The accounting policies of the two segments are the same as those described in the Significant Accounting Policies note contained in our Annual Report on Form 10-K for the year ended September 30, 1998. We evaluate each segment's performance principally based upon its earnings before interest expense, income taxes, depreciation and amortization (EBITDA). Although EBITDA is used internally to evaluate segment performance, it should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not a measure of performance or financial condition under generally accepted accounting principles. No single customer represents more than 5% of the total revenues of either Gas Utility or Electric Utility. Financial information by business segment follows: -5- 8 UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 2. SEGMENT INFORMATION (continued) THREE MONTHS ENDED MARCH 31, 1999:
Reportable Segments Inter- ------------------------ segment Gas Electric All Total Eliminations utility utility other ---------------------------------------------------------------- Segment revenues $ 167,692 $ -- $ 147,623 $ 20,069 $ -- Segment profit (loss): EBITDA $ 49,086 $ -- $ 44,045 $ 5,049 $ (8) Depreciation and amortization (5,912) -- (4,777) (1,135) -- ---------------------------------------------------------------- Operating income (loss) 43,174 -- 39,268 3,914 (8) Interest expense (4,324) -- (3,730) (594) -- ---------------------------------------------------------------- Income (loss) before income taxes $ 38,850 $ -- $ 35,538 $ 3,320 $ (8) ================================================================ Segment assets (at period end) $ 734,378 $ (101) $ 636,335 $ 97,881 $ 263 ================================================================
THREE MONTHS ENDED MARCH 31, 1998:
Reportable Segments Inter- ------------------------- segment Gas Electric All Total Eliminations utility utility other ---------------------------------------------------------------- Segment revenues $ 152,333 $ -- $ 133,226 $ 19,107 $ -- Segment profit: EBITDA $ 41,660 $ -- $ 37,166 $ 4,265 $ 229 Depreciation and amortization (5,510) -- (4,516) (994) -- ---------------------------------------------------------------- Operating income 36,150 -- 32,650 3,271 229 Interest expense (4,385) -- (3,794) (591) -- ---------------------------------------------------------------- Income before income taxes $ 31,765 $ -- $ 28,856 $ 2,680 $ 229 ================================================================ Segment assets (at period end) $ 707,032 $ 192 $ 618,113 $ 87,811 $ 916 ================================================================
-6- 9 UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 2. SEGMENT INFORMATION (continued) SIX MONTHS ENDED MARCH 31, 1999:
Reportable Segments Inter- -------------------------- segment Gas Electric All Total Eliminations utility utility other ----------------------------------------------------------------- Segment revenues $ 280,462 $ -- $ 242,201 $ 38,261 $ -- Segment profit (loss): EBITDA $ 80,015 $ -- $ 70,290 $ 9,742 $ (17) Depreciation and amortization (11,389) -- (9,444) (1,945) -- ----------------------------------------------------------------- Operating income (loss) 68,626 -- 60,846 7,797 (17) Interest expense (8,762) -- (7,574) (1,188) -- ----------------------------------------------------------------- Income (loss) before income taxes $ 59,864 $ -- $ 53,272 $ 6,609 $ (17) ================================================================= Segment assets (at period end) $ 734,378 $ (101) $ 636,335 $ 97,881 $ 263 =================================================================
SIX MONTHS ENDED MARCH 31, 1998:
Reportable Segments Inter- ------------------------- segment Gas Electric All Total Eliminations utility utility other ---------------------------------------------------------------- Segment revenues $ 287,797 $ -- $ 250,057 $ 37,740 $ -- Segment profit: EBITDA $ 77,340 $ -- $ 69,007 $ 8,116 $ 217 Depreciation and amortization (10,861) -- (8,991) (1,870) -- ---------------------------------------------------------------- Operating income 66,479 -- 60,016 6,246 217 Interest expense (8,706) -- (7,565) (1,141) -- ---------------------------------------------------------------- Income before income taxes $ 57,773 $ -- $ 52,451 $ 5,105 $ 217 ================================================================ Segment assets (at period end) $ 707,032 $ 192 $ 618,113 $ 87,811 $ 916 ================================================================
-7- 10 UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 2. SEGMENT INFORMATION (continued) TWELVE MONTHS ENDED MARCH 31, 1999:
Reportable Segments Inter- -------------------------- segment Gas Electric All Total Eliminations utility utility other ----------------------------------------------------------------- Segment revenues $ 414,948 $ -- $ 342,298 $ 72,650 $ -- Segment profit (loss): EBITDA $ 99,308 $ -- $ 84,220 $ 15,186 $ (98) Depreciation and amortization (22,571) -- (18,618) (3,953) -- ----------------------------------------------------------------- Operating income (loss) 76,737 -- 65,602 11,233 (98) Interest expense (17,639) -- (15,279) (2,360) -- ----------------------------------------------------------------- Income (loss) before income taxes $ 59,098 $ -- $ 50,323 $ 8,873 $ (98) ================================================================= Segment assets (at period end) $ 734,378 $ (101) $ 636,335 $ 97,881 $ 263 =================================================================
TWELVE MONTHS ENDED MARCH 31, 1998:
Reportable Segments Inter- ------------------------- segment Gas Electric All Total Eliminations utility utility other ---------------------------------------------------------------- Segment revenues $ 441,547 $ -- $ 370,026 $ 71,521 $ -- Segment profit: EBITDA $ 96,281 $ -- $ 81,813 $ 14,199 $ 269 Depreciation and amortization (21,020) -- (16,955) (4,065) -- ---------------------------------------------------------------- Operating income 75,261 -- 64,858 10,134 269 Interest expense (17,022) -- (14,552) (2,435) (35) ---------------------------------------------------------------- Income before income taxes $ 58,239 $ -- $ 50,306 $ 7,699 $ 234 ================================================================ Segment assets (at period end) $ 707,032 $ 192 $ 618,113 $ 87,811 $ 916 ================================================================
-8- 11 UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 3. COMMITMENTS AND CONTINGENCIES The gas distribution business has been one of UGI Utilities' main businesses since it began in 1882. Prior to the construction of major natural gas pipelines in the 1950s, gas used for lighting and heating was produced at manufactured gas plants (MGPs) from processes involving coal, coke or oil. Some constituents of coal tars produced from this process are today considered hazardous substances under the Superfund Law and may be located at these sites. Several private parties have made claims against UGI Utilities to recover costs of investigation or remediation of several MGP sites. In addition, we have identified environmental contamination at several of our properties and have undertaken investigation and, as appropriate, remediation of these sites in cooperation with appropriate environmental agencies or private parties. At sites where a former subsidiary of UGI Utilities operated an MGP, we believe that UGI Utilities should not have significant liability because UGI Utilities generally is not legally liable for the obligations of its subsidiaries. Under certain circumstances, however, a court could find a parent company liable for environmental damage at sites owned by a subsidiary company when the parent company either (1) itself operated the facility causing the environmental damage or (2) otherwise so controlled the subsidiary that the subsidiary's separate corporate form should be disregarded. There could be, therefore, significant future costs of an uncertain amount associated with environmental damage caused by MGPs that UGI Utilities owned or directly operated, or that were owned or operated by former subsidiaries of UGI Utilities, if a court were to conclude that the subsidiary's separate corporate form should be disregarded. In many circumstances where UGI Utilities may be liable, we may not be able to reasonably quantify expenditures because of a number of factors. These factors include the various costs associated with potential remedial alternatives, the unknown number of other potentially responsible parties involved and their ability to contribute to the costs of investigation and remediation, and changing environmental laws and regulations. UGI Utilities has filed suit against more than fifty insurance companies alleging that the defendants breached contracts of insurance by failing to indemnify UGI Utilities for certain environmental costs. The suit seeks to recover more than $11 million in costs incurred by UGI Utilities at various manufactured gas plant sites. 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. Management believes, after -9- 12 UGI UTILITIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars) 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. However, such 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. 4. UGI PROPOSED MERGER WITH UNISOURCE WORLDWIDE, INC. On March 1, 1999, UGI and Unisource Worldwide, Inc. (Unisource) announced that their boards of directors had approved a definitive merger agreement for a stock-for-stock transaction. Under the merger agreement, Unisource would be merged with a wholly owned subsidiary of UGI and UGI would exchange 0.566 common shares of UGI common stock for each common share of Unisource. It is estimated that UGI would issue up to approximately 40 million shares of UGI common stock in the merger. The acquisition of Unisource is subject to the approval of Unisource's shareholders. The issuance of UGI common stock to effect the merger is subject to the approval of UGI shareholders. In addition, the merger is subject to customary regulatory approvals. In connection with the merger, UGI announced its intention to sell UGI Utilities. On May 10, 1999, Unisource announced that it had received an unsolicited written proposal from Georgia-Pacific Corporation (Georgia-Pacific) to acquire Unisource at a price of $12.00 per share in cash and that the Unisource board of directors had authorized management to begin discussions with Georgia-Pacific concerning its proposal. The UGI-Unisource merger transaction is pending. -10- 13 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 March 31, 1999 (1999 three-month period) with the three months ended March 31, 1998 (1998 three-month period); (2) the six months ended March 31, 1999 (1999 six-month period) with the six months ended March 31, 1998 (1998 six-month period); and (3) the twelve months ended March 31, 1999 (1999 twelve-month period) with the twelve months ended March 31, 1998 (1998 twelve-month period). Our results of operations should be read in conjunction with the segment information included in Note 2 to the Condensed Consolidated Financial Statements. Although the adoption of SFAS 131 did not change the operating segments we disclose, Gas Utility and Electric Utility results for all periods presented now include billed UGI corporate overhead costs. 1999 THREE-MONTH PERIOD COMPARED WITH 1998 THREE-MONTH PERIOD
Three Months Ended March 31, 1999 1998 (Increase) - ------------------------------------------------------------------------------------------------ (Millions of dollars) GAS UTILITY: Natural gas system throughput - bcf 29.1 25.9 3.2 12.4% Heating degree days - % warmer than normal (8.4) (24.0) -- -- Revenues $147.6 $133.2 $ 14.4 10.8% Total margin (a) $ 63.2 $ 56.2 $ 7.0 12.5% Operating income $ 39.3 $ 32.7 $ 6.6 20.2% EBITDA (b) $ 44.0 $ 37.2 $ 6.8 18.3% ELECTRIC UTILITY: Electric sales - gwh 255.2 237.2 18.0 7.6% Revenues $ 20.1 $ 19.1 $ 1.0 5.2% Total margin (a) $ 10.2 $ 9.3 $ .9 9.7% Operating income $ 3.9 $ 3.3 $ .6 18.2% EBITDA (b) $ 5.0 $ 4.3 $ .7 16.3% - ------------------------------------------------------------------------------------------------
bcf - billions of cubic feet. gwh - millions of kilowatt hours. (a) Gas and Electric utilities' total margin represents total revenues less cost of sales and revenue-related taxes. -11- 14 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (b) EBITDA (earnings before interest expense, income taxes, depreciation and amortization) should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not a measure of performance or financial condition under generally accepted accounting principles. GAS UTILITY. Weather in the Gas Utility service area in the 1999 three-month period was 8.4% warmer than normal but 20.6% colder than in the comparable prior-year period. Total system throughput increased 3.2 bcf (12.4%) including a 2.0 bcf (16.3%) increase in throughput to our firm- residential, commercial and industrial (collectively, "core market") customers and a 1.3 bcf increase in delivery service volumes. Part of the increase in firm delivery service throughput resulted from some of our industrial core market customers switching to firm delivery service. Under delivery service tariffs, we record revenues for the transportation of gas through our distribution system but not for the gas itself. The increase in Gas Utility's total revenues in the 1999 three-month period is due principally to a $13.5 million increase in core market revenues. These increases were primarily a result of the higher volumes sold to our core market residential and commercial customers. Cost of gas sold was $78.4 million in the 1999 three-month period, an increase of $6.7 million over the 1998 three-month period, principally reflecting the increase in core market sales. Gas Utility total margin for the 1999 three-month period increased $7.0 million (12.5%) resulting from (1) a $5.7 million increase in margin from core market customers and (2) a $2.0 million increase in margin from firm delivery service customers. Total margin from our interruptible customers, who have the ability to switch to alternate fuels, principally oil, decreased $.7 million. The lower interruptible margins in the 1999 three-month period were a result of oil prices declining relative to natural gas prices. As a result of the higher core market and delivery service total margin, Gas Utility operating income and EBITDA for the 1999 three-month period increased $6.6 million and $6.8 million, respectively. Operating and administrative expenses (excluding revenue-related taxes which are included in the analysis of margin above) were comparable with the prior-year period. ELECTRIC UTILITY. Total electric sales in the 1999 three-month period increased 18.0 gwh (7.6%) reflecting the impact of colder weather in the Electric Utility service territory. Although the terms of our Electric Utility Restructuring Order permit all of our customers to choose their electricity supplier effective January 1, 1999, less than 5% of our sales during the 1999 three-month period represents electricity we distributed for alternate suppliers. In accordance with its June 19, 1998 Restructuring Order, in January 1999 Electric Utility began charging customers unbundled rates for generation, transmission and distribution services, and a competitive transition charge (CTC) for the recovery of stranded costs. The increase in Electric -12- 15 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Utility revenues reflects the higher 1999 three-month period total sales partially offset by lower revenues from customers who purchased electricity from other suppliers. Because these customers buy their electricity from others, we record revenues for distributing the electricity over our wires but we do not record revenues related to the electricity itself. Electric Utility cost of sales was $9.0 million in the 1999 three-month period, virtually unchanged from the prior-year period, as the impact of the higher sales was offset by lower per unit purchased power costs. Electric Utility's total margin increased $.9 million reflecting (1) the impact of the higher sales and (2) lower per unit purchased power costs. Electric Utility operating income and EBITDA increased during the 1999 three-month period as a result of the higher total margin partially offset by slightly higher operating expenses. 1999 SIX-MONTH PERIOD COMPARED WITH 1998 SIX-MONTH PERIOD
Increase Six Months Ended March 31, 1999 1998 (Decrease) - -------------------------------------------------------------------------------------------------- (Millions of dollars) GAS UTILITY: Natural gas system throughput - bcf 49.4 48.5 .9 1.9% Heating degree days - % warmer than normal (12.0) (14.8) -- -- Revenues $242.2 $250.1 $ (7.9) (3.2)% Total margin $106.4 $104.8 $ 1.6 1.5% Operating income $ 60.8 $ 60.0 $ .8 1.3% EBITDA $ 70.3 $ 69.0 $ 1.3 1.9% ELECTRIC UTILITY: Electric sales - gwh 478.4 464.9 13.5 2.9% Revenues $ 38.3 $ 37.7 $ .6 1.6% Total margin $ 20.0 $ 18.2 $ 1.8 9.9% Operating income $ 7.8 $ 6.2 $ 1.6 25.8% EBITDA $ 9.7 $ 8.1 $ 1.6 19.8% - -------------------------------------------------------------------------------------------------
GAS UTILITY. Weather in Gas Utility's service territory in the 1999 six-month period was 12.0% warmer than normal compared with weather that was 14.8% warmer than normal in the prior-year period. As a result of the slightly colder weather and an increase in total customers, system throughput increased .9 bcf (1.9%). The decrease in Gas Utility revenues in the 1999 six-month period is principally due to decreases in revenues from off-system sales, core-market industrial customers, and retail interruptible customers. These decreases were partially offset by an increase in revenues from firm delivery -13- 16 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) service customers. Gas Utility's cost of gas was $126.1 million, a decrease of $9.2 million from the prior-year period, reflecting the decline in off-system sales and lower purchased gas cost rates. The increase in the 1999 six-month period total margin principally resulted from (1) a $2.3 million increase in margin from core market residential and commercial customers and (2) a $2.2 million increase in margin from firm delivery service customers. These margin increases were partially reduced by (1) a $1.6 million decline in margin from core market industrial customers (due in large part to customers switching to firm delivery service) and (2) a $1.2 million decrease in margin from interruptible customers. The decline in margin from interruptible customers resulted from a decline in oil prices relative to natural gas prices. Gas Utility operating income and EBITDA were slightly higher in the 1999 six-month period reflecting the increase in total margin. Total operating and administrative expenses, excluding revenue-related taxes, were essentially unchanged from the prior-year period. Operating expenses in the 1999 six-month period reflect lower accruals for uncollectible accounts and medical benefits while operating expenses in the 1998 six-month period are net of $1.6 million of income from an insurance recovery. ELECTRIC UTILITY. Total electric sales were 13.5 gwh (2.9%) higher in the 1998 six-month period on weather that was 2.0% colder than last year. Notwithstanding the colder weather, temperatures were 6.5% warmer than normal in the 1999 six-month period. Electric Utility revenues increased $.6 million in the 1999 six-month period as a result of the higher total sales. The increase in total revenues resulting from the greater total sales was partially reduced by lower revenues from Electric Utility customers who purchase the electric generation portion of their electric service from other suppliers. Electric Utility cost of sales was $16.7 million, a decline of $1.2 million from the prior-year period, as the impact of the higher sales was more than offset by lower per unit purchased power costs. Electric Utility's total margin increased $1.8 million (9.9%) in the 1999 six-month period reflecting the impact of (1) the lower per unit purchased power costs and (2) the higher sales. Operating income and EBITDA were also higher principally due to the increase in total margin. -14- 17 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 1999 TWELVE-MONTH PERIOD COMPARED WITH 1998 TWELVE-MONTH PERIOD
Increase Twelve Months Ended March 31, 1999 1998 (Decrease) - ------------------------------------------------------------------------------------ (Millions of dollars) GAS UTILITY: Natural gas system throughput - bcf 75.8 76.3 (.5) (.7)% Heating degree days - % warmer than normal (13.8) (11.5) -- -- Revenues $342.3 $370.0 $(27.7) (7.5)% Total margin $158.7 $160.7 $ (2.0) (1.2)% Operating income $ 65.6 $ 64.9 $ .7 1.1% EBITDA $ 84.2 $ 81.8 $ 2.4 2.9% ELECTRIC UTILITY: Electric sales - gwh 889.9 861.1 28.8 3.3% Revenues $ 72.7 $ 71.5 $ 1.2 1.7% Total margin $ 35.7 $ 35.2 $ .5 1.4% Operating income $ 11.2 $ 10.1 $ 1.1 10.9% EBITDA $ 15.2 $ 14.2 $ 1.0 7.0% - ----------------------------------------------------------------------------------
GAS UTILITY. Weather in Gas Utility's service territory was 13.8% warmer than normal in the 1999 twelve-month period, slightly warmer than the 11.5% warmer than normal temperatures experienced in the 1998 twelve-month period. As a result, total system throughput declined a modest .5 bcf (.7%). The decrease in Gas Utility's revenues principally reflects (1) a $17.3 million decrease in revenues from core market customers, principally industrial customers, (2) a $10.4 million decrease in revenues from off-system sales and (3) a $3.0 million decrease in revenues from interruptible retail customers. These decreases were partially offset by a $3.0 million increase in revenues from firm delivery service customers. Cost of gas sold for the 1999 twelve-month period was $170.5 million, a decrease of $24.8 million. The decline is a result of the lower off-system sales and lower sales to core market customers. The decrease in 1999 twelve-month period total margin reflects (1) a $2.8 million decline in margin from our core market industrial customers due in large part to customers switching to delivery service and (2) a $2.1 million decline in total margin from interruptible customers reflecting a less favorable spread between natural gas and oil prices. These decreases were -15- 18 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) partially offset by (1) a $2.5 million increase in total margin from firm delivery service customers and (2) slightly higher core market residential margin. Operating income and EBITDA in the 1999 twelve-month period were higher than in the 1998 twelve-month period, notwithstanding the lower total margin, reflecting (1) lower operating and administrative costs and (2) a $.6 million increase in other income. Gas Utility's operating and administrative expenses, excluding revenue-related taxes, were $3.7 million lower in the 1999 twelve-month period reflecting (1) the absence of charges for environmental matters recorded in the 1998 twelve-month period, (2) lower distribution system maintenance expenses, and (3) lower accruals for uncollectible accounts. Operating expenses in the 1998 twelve-month period are net of $1.6 million of income from an insurance recovery. ELECTRIC UTILITY. Total electric sales during the 1999 twelve-month period were higher than the prior year reflecting the effects of (1) slightly colder heating-season weather, (2) the warmer summer's effect on electricity used for air conditioning, and (3) an increase in customers. Electric Utility revenues increased $1.2 million as the effect of the higher sales was partially offset by the impact of customers choosing alternate suppliers for the electric generation component of their electric service. Electric Utility cost of sales was $33.8 million in the 1999 twelve-month period, an increase of $.6 million, reflecting the increase in total sales partially offset by lower per unit purchased power costs. Electric Utility operating income and EBITDA were also higher in the 1999 twelve-month period reflecting the higher total margin and higher other income. FINANCIAL CONDITION AND LIQUIDITY CAPITAL STRUCTURE The Company's debt outstanding at March 31, 1999 totaled $260.0 million compared with $255.6 million at September 30, 1998. Included in these amounts are bank loans of $72.8 million and $68.4 million, respectively. We may borrow up to $97 million under our revolving credit agreements. 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 during the six months ended March 31, 1999 are not necessarily indicative of cash flows to be expected for a full year. -16- 19 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OPERATING ACTIVITIES. Cash provided by operating activities was $36.1 million during the six months ended March 31, 1999. In the prior-year period, operating activities provided $20.2 million of cash. Changes in operating working capital during the six months ended March 31, 1999 required $9.9 million of operating cash flow while changes in operating working capital during the six months ended March 31, 1998 required $26.5 million of operating cash flow. Cash generated by operating activities before changes in operating working capital totaled $46.0 million during the six months ended March 31, 1999, comparable to the $46.7 million generated in the prior-year period. INVESTING ACTIVITIES. We spent $16.0 million for property, plant and equipment in the six months ended March 31, 1999 compared with $15.6 million in the six months ended March 31, 1998. FINANCING ACTIVITIES. Cash flows from financing activities for the 1999 six-month period include dividends on preferred stock of $.8 million compared with $1.4 million of such dividends in the 1998 six-month period. The lower preferred stock dividends resulted from the redemption of $15 million face value of Series Preferred Stock in April 1998. During the 1999 six-month period, we paid $24.0 million of dividends to our parent company, UGI. In the prior-year six-month period, we paid $12.6 million of dividends to UGI. UGI Utilities' borrowed a net $4.4 million under its revolving credit agreements in the 1999 six-month period compared with net repayments of $24.1 million in the prior-year period. During the six months ended March 31, 1998, UGI Utilities issued $35 million of notes under its Series B Medium-Term Note program. PROPOSED NATURAL GAS CUSTOMER CHOICE LEGISLATION In March of 1999, proposed legislation was introduced in both houses of the Pennsylvania General Assembly which would extend to all Pennsylvania gas customers the right to choose their natural gas supplier. Senate Bill No. 601 (introduced on March 15, 1999) and House Bill No. 937 (introduced on March 17, 1999) (collectively, the "Competition Bills") contain identical language crafted by a legislative collaborative conducted under the auspices of the Governor of Pennsylvania. The Company was an active participant in this collaborative process and supports the legislation if it is passed in conjunction with companion bills that would repeal Pennsylvania's gross receipts tax on natural gas service. The Company believes that it is likely that natural gas customer choice legislation will be enacted by the Pennsylvania General Assembly in the summer of 1999. The Competition Bills would give all Pennsylvania natural gas consumers the right to choose their natural gas commodity supplier by November 1, 1999. The Pennsylvania Public Utility Commission (PUC) would have the right to extend this deadline for a period of up to eight months. Each Pennsylvania local distribution company (LDC) would be required to file a restructuring plan with the PUC which would be acted upon no later than nine months after the filing date. -17- 20 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Competition Bills avoid the need for recovery of stranded costs associated with interstate pipeline contracts. The Competition Bills would permit each LDC to require energy marketers serving customers on its system to accept an assignment of an appropriate amount of the LDC's interstate pipeline capacity. After July 1, 2002, an energy marketer could petition the PUC to avoid such an assignment, but the PUC could not grant the request unless the LDC is assured of full recovery of interstate pipeline capacity costs. Energy marketers and customers would be given the opportunity to replace expiring contracts or to meet increased system requirements. Approximately 75% of the Company's existing pipeline contract capacity commitments will expire by the end of 2003. YEAR 2000 MATTERS The Year 2000 ("Y2K") issue is a result of computer programs being written using two digits (rather than four) to identify and process a year in a date field. Computer programs, computer-controlled systems and equipment with embedded software may recognize date fields using "00" as the year 1900 rather than the year 2000. If uncorrected, miscalculations and possible computer-based system failures could result which might disrupt business operations. We are designating the following information as our "Year 2000 Readiness Disclosure." Recognizing the potential business consequences of the Y2K issue, we conducted a detailed assessment of our critical, date sensitive, computer-based systems to identify those systems that were not Y2K compliant and developed a program to modify those systems that were not otherwise scheduled for replacement prior to the year 2000. Our Y2K compliance efforts focused on our ability to continue to perform three critical operating functions: (1) obtain products to sell; (2) provide service to our customers; and (3) bill customers and pay our vendors and employees. In addition, the PUC ordered that all Pennsylvania utilities' mission critical systems must be Y2K compliant by March 31, 1999. Those systems that we assessed included (1) our information technology ("IT") systems such as computer hardware and software we use in the operation of our business and (2) our non-IT systems that contain embedded systems with potentially date sensitive components such as micro-controllers contained in various equipment and facilities. Among these systems are our customer information systems, financial systems and distribution control systems. In order to identify and modify those systems that we determined were not Y2K compliant, we used internal resources as well as outside consultants and vendor representatives. In addition to assessing, identifying and modifying our own systems, we developed and implemented a program to attempt to determine the Y2K compliance status of third parties, including our key suppliers and vendors, and certain of our customers. As of March 31, 1999, we have successfully completed the modification and testing of all our critical IT and non-IT systems that were not Y2K compliant except for Electric Utility's System -18- 21 UGI UTILITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Control and Data Acquisition (SCADA) system. We anticipate replacing this system with a Y2K compliant system by July 31, 1999. As previously mentioned, in addition to assuring our IT and non-IT systems are Y2K compliant, we developed and implemented a program to assess the readiness of our key suppliers and third-party providers, including suppliers of interstate transportation capacity, natural gas producers and electricity interchange providers. Although none of our products or services are of themselves date sensitive, as a utility company we are dependent upon other companies whose IT and non-IT systems may not be Y2K compliant. We have completed our program to contact and inquire of the readiness of these key suppliers and vendors. We have evaluated the responses received from our critical vendors and suppliers and to the extent we were not satisfied with the responses, or have determined that the responses indicate a lack of Y2K readiness, we have developed contingency plans. The major elements of these contingency plans are based upon the use of manual back-up systems, additional staffing, and alternative supply sources. These contingency plans attempt to mitigate the potential impact of Y2K noncompliance by our key suppliers and vendors. However, these plans cannot assure that business disruptions that may be caused by key suppliers or third-party providers will not have a material adverse impact on our operations. Gas Utility and Electric Utility have completed their contingency plans. In addition, there are other Y2K risks which are beyond our control any of which could have a material adverse impact on our operations. Such risks include, but are not limited to, the failure of utility and telecommunications companies to provide service and the failure of financial institutions to process transactions. Incremental costs associated with our Y2K efforts, which we expense as incurred, have not had a material effect on our results of operations. Because our Y2K compliance program is substantially complete, we do not expect future costs will be significant. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary market risk exposures are market prices for natural gas and electric power and changes in interest rates. Although Gas Utility is subject to changes in the price of natural gas, the current regulatory framework allows Gas Utility to recover prudently incurred gas costs from its customers. Consequently, there currently is limited commodity price risk associated with Gas Utility due to the current rate-making structure. -19- 22 UGI UTILITIES, INC. Because the sources and costs of our electric power vary from period to period and because we no longer defer the difference between actual power costs and amounts included in our rates, Electric Utility's quarterly results may be more volatile in the future. In addition, future financial results will likely depend upon a number of factors including the number of our customers who choose alternative electricity suppliers and our success in producing or purchasing electricity at competitive market prices. If our costs to produce or purchase power exceed the amounts we are able to charge our customers, Electric Utility's results would be adversely affected. We have interest rate exposure associated with borrowings under our revolving credit agreements. These agreements provide for interest rates on borrowings which are indexed to short-term market interest rates. Based upon the level of borrowings outstanding under these agreements at March 31, 1999, an increase in short-term interest rates of 50 basis points (0.5%) would increase annual interest expense by approximately $.4 million. Due to the seasonal nature of our businesses, the level of borrowings outstanding at March 31, 1999 is not necessarily indicative of the level of borrowings throughout the year. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On February 11, 1999, UGI Utilities, Inc. filed suit in the Court of Common Pleas of Montgomery County, Pennsylvania against more than fifty insurance companies, including Insurance Company of North America, The Home Insurance Company, Lloyds of London, and Associated Electric and Gas Insurance Services, Ltd. The complaint alleges that the defendants breached contracts of insurance by failing to indemnify UGI Utilities for certain environmental costs. The suit seeks to recover more than $11 million in costs incurred by UGI Utilities at various manufactured gas plant sites. ITEM 5. OTHER INFORMATION SALE BY UGI CORPORATION On March 1, 1999, UGI Corporation, the parent company of UGI Utilities, announced that it had entered into a merger agreement with Unisource Worldwide, Inc. for a stock-for-stock merger transaction. In connection with the merger, UGI Corporation announced its intention to sell UGI Utilities. On May 10, 1999, Unisource announced that it received an unsolicited written proposal from Georgia-Pacific Corporation to acquire Unisource at a price of $12.00 per share in cash and that the Unisource board of directors had authorized management to begin discussions with Georgia-Pacific concerning its proposal. The UGI-Unisource merger transaction is pending. -20- 23 UGI UTILITIES, INC. MANAGEMENT CHANGES Robert J. Chaney was elected a director of UGI Utilities on February 23, 1999. He was also elected President and Chief Executive Officer of the Company, effective March 1, 1999, succeeding Richard L. Bunn who retired as President and Chief Executive Officer on the same date. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits: 10.1 Amended Change of Control Agreement between UGI Corporation and Robert J. Chaney is incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended September 30, 1998 10.2 Change of Control Agreement between UGI Corporation and John C. Barney is incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended September 30, 1998 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 27 Financial Data Schedule (b) The Company did not file any Current Reports on Form 8-K during the fiscal quarter ended March 31, 1999. -21- 24 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: May 14, 1999 By: J. C. Barney - ------------------- ---------------------------------------- J. C. Barney, Senior Vice President - Finance (Principal Financial Officer) -22- 25 UGI UTILITIES, INC. AND SUBSIDIARIES EXHIBIT INDEX 10.1 Amended Change of Control Agreement between UGI Corporation and Robert J. Chaney is incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended September 30, 1998 10.2 Change of Control Agreement between UGI Corporation and John C. Barney is incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended September 30, 1998 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 27 Financial Data Schedule -23- EX-12.1 2 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 UGI UTILITIES INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - EXHIBIT 12.1 (THOUSANDS OF DOLLARS)
Six Months Ended Year Ended September 30, March 31, -------------------------------------- 1999 1998 1997 1996 1995 ------- ------- ------- ------- ------- EARNINGS: Earnings before income taxes $59,864 $57,007 $63,275 $61,717 $39,759 Interest expense 8,656 17,383 16,696 15,921 16,632 Amortization of debt discount and expense 106 200 176 173 206 Interest component of rental expense 722 1,624 1,887 1,838 1,604 ------- ------- ------- ------- ------- $69,348 $76,214 $82,034 $79,649 $58,201 ======= ======= ======= ======= ======= FIXED CHARGES: Interest expense $ 8,656 $17,383 $16,696 $15,921 $16,632 Amortization of debt discount and expense 106 200 176 173 206 Allowance for funds used during construction (capitalized interest) 18 39 114 107 65 Interest component of rental expense 722 1,624 1,887 1,838 1,604 ------- ------- ------- ------- ------- $ 9,502 $19,246 $18,873 $18,039 $18,507 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 7.30 3.96 4.35 4.42 3.14 ======= ======= ======= ======= =======
EX-12.2 3 COMPUTATION OF RATIO OF EARNINGS TO COMBINED 1 UGI UTILITIES INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS - EXHIBIT 12.2 (THOUSANDS OF DOLLARS)
Six Months Ended Year Ended September 30, March 31, ---------------------------------------- 1999 1998 1997 1996 1995 ------- ------- ------- ------- ------- EARNINGS: Earnings before income taxes $59,864 $57,007 $63,275 $61,717 $39,759 Interest expense 8,656 17,383 16,696 15,921 16,632 Amortization of debt discount and expense 106 200 176 173 206 Interest component of rental expense 722 1,624 1,887 1,838 1,604 ------- ------- ------- ------- ------- $69,348 $76,214 $82,034 $79,649 $58,201 ======= ======= ======= ======= ======= COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS: Interest expense $ 8,656 $17,383 $16,696 $15,921 $16,632 Amortization of debt discount and expense 106 200 176 173 206 Allowance for funds used during construction (capitalized interest) 18 39 114 107 65 Interest component of rental expense 722 1,624 1,887 1,838 1,604 Preferred stock dividend requirements 775 2,160 2,764 2,765 2,778 Adjustment required to state preferred stock dividend requirements on a pretax basis 472 1,304 1,754 1,685 1,164 ------- ------- ------- ------- ------- $10,749 $22,710 $23,391 $22,489 $22,449 ======= ======= ======= ======= ======= Ratio of earnings to combined fixed charges and preferred stock dividends 6.45 3.36 3.51 3.54 2.59 ======= ======= ======= ======= =======
EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from (A) the condensed consolidated balance sheet and income statement of UGI Utilities, Inc. as of and for the six months ended March 31, 1999 and is qualified in its entirety by reference to such (B) financial statements included in UGI Utilities' quarterly report on Form 10-Q for the quarter ended March 31, 1999. 0000100548 UGI UTILITIES, INC. 1,000 6-MOS SEP-30-1998 OCT-01-1998 MAR-31-1999 4,221 0 76,080 2,034 10,554 108,744 811,811 263,041 734,378 173,819 180,037 20,000 0 60,259 163,407 734,378 280,462 280,462 142,785 142,785 0 1,969 8,762 59,864 22,664 37,200 0 0 0 37,200 0 0 There are no publicly held shares outstanding.
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