| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Pennsylvania (State or other jurisdiction of incorporation or organization) |
23-2668356 (I.R.S. Employer Identification No.) |
| PAGES | ||||||||
| Part I Financial Information | ||||||||
| Item 1. | Financial Statements (unaudited) |
|||||||
| 1 | ||||||||
| 2 | ||||||||
| 3 | ||||||||
| 4 - 19 | ||||||||
| Item 2. | 20 - 33 | |||||||
| Item 3. | 33 - 35 | |||||||
| Item 4. | 36 | |||||||
| Part II Other Information | ||||||||
| Item 1A. | 37 - 38 | |||||||
| Item 6. | 38 - 39 | |||||||
| Signatures | 40 | |||||||
| Exhibit 10.1 | ||||||||
| Exhibit 10.2 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32 | ||||||||
-i-
| June 30, | September 30, | June 30, | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 170.9 | $ | 186.2 | $ | 276.3 | ||||||
Restricted cash |
21.0 | 14.2 | 16.3 | |||||||||
Short-term investments (at cost, which approximates fair value) |
5.7 | 0.6 | 115.0 | |||||||||
Accounts receivable (less allowances for doubtful accounts of
$46.0, $38.0 and $37.5, respectively) |
509.9 | 387.2 | 421.6 | |||||||||
Accrued utility revenues |
21.0 | 16.6 | 12.2 | |||||||||
Inventories |
249.6 | 340.4 | 217.2 | |||||||||
Deferred income taxes |
40.2 | 55.9 | 31.4 | |||||||||
Prepaid expenses and other current assets |
24.5 | 39.5 | 42.7 | |||||||||
Total current assets |
1,042.8 | 1,040.6 | 1,132.7 | |||||||||
Property, plant and equipment, at cost (less accumulated depreciation
and amortization of $1,344.8, $1,246.6 and $1,065.4, respectively) |
2,303.6 | 2,214.7 | 1,832.2 | |||||||||
Goodwill |
1,441.3 | 1,418.2 | 1,240.9 | |||||||||
Intangible assets (less accumulated amortization of
$77.4, $62.8 and $59.2, respectively) |
163.2 | 163.3 | 168.1 | |||||||||
Utility regulatory assets |
82.6 | 72.9 | 61.3 | |||||||||
Investments in equity investees |
61.2 | 58.2 | 57.7 | |||||||||
Other assets |
128.3 | 112.6 | 124.8 | |||||||||
Total assets |
$ | 5,223.0 | $ | 5,080.5 | $ | 4,617.7 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Current maturities of long-term debt |
$ | 14.3 | $ | 31.9 | $ | 78.6 | ||||||
UGI Utilities bank loans |
108.0 | 216.0 | 112.1 | |||||||||
Other bank loans |
9.0 | 9.4 | 15.1 | |||||||||
Accounts payable |
350.4 | 373.0 | 306.4 | |||||||||
Deposits and advances |
84.0 | 145.0 | 77.9 | |||||||||
Other current liabilities |
240.4 | 251.3 | 205.8 | |||||||||
Total current liabilities |
806.1 | 1,026.6 | 795.9 | |||||||||
Long-term debt |
2,012.6 | 1,965.0 | 1,642.7 | |||||||||
Deferred income taxes |
528.7 | 491.5 | 496.3 | |||||||||
Deferred investment tax credits |
6.5 | 6.8 | 6.9 | |||||||||
Other noncurrent liabilities |
367.6 | 351.5 | 332.9 | |||||||||
Total liabilities |
3,721.5 | 3,841.4 | 3,274.7 | |||||||||
Commitments and contingencies (note 9) |
||||||||||||
Minority interests |
201.0 | 139.5 | 201.3 | |||||||||
Common stockholders’ equity: |
||||||||||||
Common Stock, without par value (authorized - 300,000,000 shares;
issued - 115,152,994 shares) |
825.3 | 807.5 | 805.1 | |||||||||
Retained earnings |
506.8 | 370.0 | 392.6 | |||||||||
Accumulated other comprehensive income (loss) |
34.2 | (3.8 | ) | 18.6 | ||||||||
| 1,366.3 | 1,173.7 | 1,216.3 | ||||||||||
Treasury stock, at cost |
(65.8 | ) | (74.1 | ) | (74.6 | ) | ||||||
Total common stockholders’ equity |
1,300.5 | 1,099.6 | 1,141.7 | |||||||||
Total liabilities and stockholders’ equity |
$ | 5,223.0 | $ | 5,080.5 | $ | 4,617.7 | ||||||
- 1 -
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenues |
$ | 1,076.8 | $ | 919.1 | $ | 4,542.1 | $ | 4,342.5 | ||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales |
726.8 | 611.6 | 3,094.0 | 3,059.3 | ||||||||||||
Operating and administrative expenses |
261.2 | 236.2 | 813.0 | 735.9 | ||||||||||||
Utility taxes other than income taxes |
4.2 | 3.2 | 13.9 | 10.2 | ||||||||||||
Depreciation and amortization |
42.1 | 36.5 | 125.6 | 108.7 | ||||||||||||
Other income, net |
(9.1 | ) | (6.9 | ) | (23.8 | ) | (32.9 | ) | ||||||||
| 1,025.2 | 880.6 | 4,022.7 | 3,881.2 | |||||||||||||
Operating income |
51.6 | 38.5 | 519.4 | 461.3 | ||||||||||||
Loss from equity investees |
(0.9 | ) | — | (2.2 | ) | (1.2 | ) | |||||||||
Interest expense |
(33.9 | ) | (29.1 | ) | (105.0 | ) | (92.1 | ) | ||||||||
Loss on early extinguishments of debt |
— | — | — | (18.5 | ) | |||||||||||
Income before income taxes and minority interests |
16.8 | 9.4 | 412.2 | 349.5 | ||||||||||||
Income tax expense |
(8.3 | ) | (2.1 | ) | (122.3 | ) | (105.0 | ) | ||||||||
Minority interests, principally in AmeriGas Partners |
3.0 | 11.4 | (96.3 | ) | (64.3 | ) | ||||||||||
Net income |
$ | 11.5 | $ | 18.7 | $ | 193.6 | $ | 180.2 | ||||||||
Earnings per common share: |
||||||||||||||||
Basic |
$ | 0.11 | $ | 0.18 | $ | 1.82 | $ | 1.71 | ||||||||
Diluted |
$ | 0.11 | $ | 0.18 | $ | 1.80 | $ | 1.69 | ||||||||
Average common shares outstanding (millions): |
||||||||||||||||
Basic |
106.655 | 105.603 | 106.304 | 105.374 | ||||||||||||
Diluted |
107.973 | 106.850 | 107.704 | 106.585 | ||||||||||||
Dividends declared per common share |
$ | 0.1850 | $ | 0.1763 | $ | 0.5375 | $ | 0.5138 | ||||||||
- 2 -
| Nine Months Ended | ||||||||
| June 30, | ||||||||
| 2007 | 2006 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 193.6 | $ | 180.2 | ||||
Adjustments to reconcile to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
125.6 | 108.7 | ||||||
Provision for uncollectible accounts |
24.2 | 21.3 | ||||||
Minority interests |
96.3 | 64.3 | ||||||
Deferred income taxes, net |
7.2 | 6.4 | ||||||
Loss on early extinguishments of debt |
— | 18.5 | ||||||
Net change in settled accumulated other comprehensive income |
27.0 | (17.7 | ) | |||||
Other, net |
11.8 | 22.7 | ||||||
Net change in: |
||||||||
Accounts receivable and accrued utility revenues |
(137.0 | ) | 26.3 | |||||
Inventories |
96.1 | 24.4 | ||||||
Deferred fuel costs |
(4.9 | ) | (18.0 | ) | ||||
Accounts payable |
(34.3 | ) | (134.3 | ) | ||||
Other current assets and liabilities |
(48.8 | ) | (110.6 | ) | ||||
Net cash provided by operating activities |
356.8 | 192.2 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Expenditures for property, plant and equipment |
(153.8 | ) | (132.8 | ) | ||||
Net proceeds from disposals of assets |
1.8 | 7.4 | ||||||
Net proceeds from sale of Energy Ventures |
— | 17.7 | ||||||
Investment in Flaga joint venture |
— | (10.1 | ) | |||||
Acquisitions, net of cash acquired |
(27.8 | ) | (3.5 | ) | ||||
PG Energy Acquisition working capital settlement |
23.7 | — | ||||||
Short-term investments increase |
(5.1 | ) | (45.0 | ) | ||||
Increase in restricted cash |
(6.8 | ) | (11.4 | ) | ||||
Other, net |
0.4 | 0.7 | ||||||
Net cash used by investing activities |
(167.6 | ) | (177.0 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Dividends on UGI Common Stock |
(57.1 | ) | (54.1 | ) | ||||
Distributions on AmeriGas Partners publicly held Common Units |
(57.2 | ) | (54.9 | ) | ||||
Issuances of debt including bank loans with maturities greater than three months |
20.1 | 863.4 | ||||||
Repayments of debt including bank loans with maturities greater than three months |
(25.4 | ) | (897.4 | ) | ||||
Other bank loans decrease |
(1.1 | ) | (2.1 | ) | ||||
(Decrease) increase in Utilities bank loans with maturities of three months or less |
(108.0 | ) | 80.9 | |||||
Issuance of UGI Common Stock |
14.0 | 9.3 | ||||||
Other, net |
5.1 | 0.8 | ||||||
Net cash used by financing activities |
(209.6 | ) | (54.1 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
5.1 | 5.1 | ||||||
Cash and cash equivalents decrease |
$ | (15.3 | ) | $ | (33.8 | ) | ||
Cash and cash equivalents: |
||||||||
End of period |
$ | 170.9 | $ | 276.3 | ||||
Beginning of period |
186.2 | 310.1 | ||||||
Decrease |
$ | (15.3 | ) | $ | (33.8 | ) | ||
- 3 -
| 1. | Basis of Presentation |
|
UGI Corporation (“UGI”) is a holding company that owns and operates natural gas and electric
distribution utilities, electricity generation, retail propane distribution, energy
marketing and related businesses in the United States. Through foreign subsidiaries and
joint-venture affiliates, UGI also distributes liquefied petroleum gases (“LPG”) in France,
central and eastern Europe and China. |
||
We conduct a national propane distribution business through AmeriGas Partners, L.P.
(“AmeriGas Partners”) and its principal operating subsidiaries AmeriGas Propane, L.P.
(“AmeriGas OLP”) and AmeriGas OLP’s subsidiary, AmeriGas Eagle Propane, L.P. (“Eagle OLP”).
AmeriGas Partners, AmeriGas OLP and Eagle OLP are Delaware limited partnerships. UGI’s
wholly owned second-tier subsidiary AmeriGas Propane, Inc. (the “General Partner”) serves as
the general partner of AmeriGas Partners and AmeriGas OLP. AmeriGas OLP and Eagle OLP
(collectively referred to as “the Operating Partnerships”) comprise the largest retail
propane distribution business in the United States serving residential, commercial,
industrial, motor fuel and agricultural customers from locations in 46 states. We refer to
AmeriGas Partners and its subsidiaries together as “the Partnership” and the General Partner
and its subsidiaries, including the Partnership, as “AmeriGas Propane.” At June 30, 2007,
the General Partner and its wholly owned subsidiary Petrolane Incorporated (“Petrolane”)
collectively held a 1% general partner interest and 42.7% limited partner interest in
AmeriGas Partners, and an effective 44.3% ownership interest in AmeriGas OLP and Eagle OLP.
Our limited partnership interest in AmeriGas Partners comprises 24,525,004 Common Units.
The remaining 56.3% limited partner interest in AmeriGas Partners comprises 32,297,493
publicly held Common Units representing limited partner interests. |
||
Our wholly owned subsidiary, UGI Enterprises, Inc. (“Enterprises”) (1) conducts an LPG
distribution business in France (“Antargaz”); (2) conducts LPG distribution businesses and
participates in an LPG joint-venture business in central and eastern Europe (collectively,
“Flaga”); and (3) participates in an LPG joint-venture business in China. Enterprises’
indirect subsidiary, UGI International Holdings, B.V., holds our interests in Antargaz and
Flaga. We refer to our foreign operations collectively as “International Propane.” In
addition, Enterprises conducts an energy marketing business primarily in the eastern United
States through its wholly owned
first- and second-tier subsidiaries (collectively “Energy Services”). Energy Services owns
and operates liquefied natural gas and propane storage and peak-shaving facilities in
eastern Pennsylvania. Energy Services’ wholly owned subsidiary UGI Development Company
(“UGID”) and UGID’s subsidiaries (1) own and operate a 48-megawatt coal-fired electric
generation station and (2) own a 6% interest in Pennsylvania-based coal-fired electric
generation assets. In addition, Energy Services’ wholly owned subsidiary UGI Asset
Management, Inc., through its subsidiary Atlantic Energy, Inc. (collectively, “Asset
Management”), owns a propane storage terminal located in Chesapeake, Virginia. Through other
subsidiaries, Enterprises owns and operates a heating, ventilation, air-conditioning,
refrigeration and electrical contracting services business in the Middle Atlantic states
(“HVAC/R”). |
- 4 -
Our natural gas and electric distribution utility businesses are conducted through our
wholly owned subsidiary, UGI Utilities, Inc. and its subsidiary, UGI Penn Natural Gas, Inc.
(“UGIPNG”).
UGI Utilities, Inc. owns and operates (1) a natural gas distribution utility in eastern
Pennsylvania (“UGI Gas”), (2) a natural gas distribution utility in northeastern
Pennsylvania (“PNG Gas”) which was acquired effective August 24, 2006 (the “PG Energy
Acquisition”), and (3) an electric distribution utility in northeastern Pennsylvania
(“Electric Utility”). UGI Gas, PNG Gas (collectively, “Gas Utility”) and Electric Utility
are subject to regulation by the Pennsylvania Public Utility Commission (“PUC”). In
addition, both UGI Utilities, Inc. and UGIPNG have wholly-owned subsidiaries that operate
heating, ventilation and air-conditioning services businesses principally within their
natural gas utilities’ service territories. The term “UGI Utilities” is used sometimes as an
abbreviated reference to UGI Utilities, Inc. or UGI Utilities, Inc. and its subsidiaries. |
||
Our condensed consolidated financial statements include the accounts of UGI and its
controlled subsidiary companies, which, except for the Partnership, are majority owned, and
are together referred to as “we” or “the Company.” We eliminate all significant
intercompany accounts and transactions when we consolidate. We report the public’s limited
partner interests in the Partnership and the outside ownership interest in a subsidiary of
Antargaz as minority interests. Entities in which we own 50 percent or less and in which we
exercise significant influence over operating and financial policies are accounted for by
the equity method. |
||
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, 2006 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 related notes included in our Annual
Report on Form 10-K for the year ended September 30, 2006 (“Company’s 2006 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. |
||
Restricted Cash. Restricted cash representing cash deposited in our natural gas futures
accounts to satisfy margin requirements totaled $21.0, $14.2 and $16.3 at June 30, 2007,
September 30, 2006 and June 30, 2006, respectively. |
||
Earnings Per Common Share. Basic earnings per share reflect the weighted-average number of
common shares outstanding. Diluted earnings per share include the effects of dilutive stock
options and common stock awards. |
- 5 -
Shares used in computing basic and diluted earnings per share are as follows: |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Denominator (millions of shares): |
||||||||||||||||
Average common shares
outstanding for
basic computation |
106.655 | 105.603 | 106.304 | 105.374 | ||||||||||||
Incremental shares issuable
for stock
options and awards |
1.318 | 1.247 | 1.400 | 1.211 | ||||||||||||
Average common shares outstanding for
diluted computation |
107.973 | 106.850 | 107.704 | 106.585 | ||||||||||||
Comprehensive Income. The following table presents the components of comprehensive
income for the three and nine months ended June 30, 2007 and 2006. |
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income |
$ | 11.5 | $ | 18.7 | $ | 193.6 | $ | 180.2 | ||||||||
Other comprehensive income |
— | 24.6 | 38.0 | 2.1 | ||||||||||||
Comprehensive income |
$ | 11.5 | $ | 43.3 | $ | 231.6 | $ | 182.3 | ||||||||
Other comprehensive income principally comprises (1) changes in the fair value of
derivative commodity instruments, interest rate protection agreements and foreign currency
derivatives qualifying as hedges, net of reclassifications to net income and (2) foreign
currency translation adjustments. |
||
Revenue-Related Taxes. In June 2006, the Financial Accounting Standards Board (“FASB”)
reached a consensus on Emerging Issues Task Force (“EITF”) Issue No. 06-3, “How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the
Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-3”). EITF 06-3
addresses accounting policies disclosure with respect to revenue-related taxes beginning
with financial reports for interim or annual reporting periods beginning after December 15,
2006. The scope of EITF 06-3 includes any tax assessed by a governmental authority that is
imposed concurrent with or subsequent to a revenue-producing transaction between a seller
and a customer. EITF 06-3 permits entities to adopt a policy of presenting such taxes in the
income statement either on a gross basis within revenue or on a net basis. If such taxes are
significant, and are presented on the income statement on a gross basis, the amounts of
those
taxes should also be disclosed. Our prior and current policy is to present such
revenue-related taxes within the scope of EITF 06-3 on a net basis. |
||
Reclassifications. We have reclassified certain prior-year period balances to conform to
the current-period presentation. |
- 6 -
Income Taxes. Income tax expense is provided on an interim basis using management’s estimate
of the annual effective rate. Due to the seasonality of our earnings, changes in
management’s estimates of income taxes made during the third or fourth fiscal quarter can
have a significant impact on such quarters’ effective tax rates and make the comparisons to
effective tax rates in comparable periods not meaningful. The effective income tax rates for
the three months ended June 30, 2007 and 2006 were 41.9% and 10.1%, respectively. The
effective income tax rates for the nine months ended June 30, 2007 and 2006 were 38.7% and
36.8%, respectively. The differences in our effective tax rates principally reflect the
beneficial effects of changes made during the three months ended June 30, 2006 in
management’s estimate of taxes associated with planned repatriation of foreign earnings. |
||
Use of Estimates. We make estimates and assumptions when preparing financial statements in
conformity with accounting principles generally accepted in the United States of America.
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. |
||
Recently Issued Accounting Pronouncements. In March 2006, the FASB issued Statement of
Financial Accounting Standards (“SFAS”) No. 156, “Accounting for Servicing of Financial
Assets — An Amendment of FASB Statement No. 140” (“SFAS 156”). SFAS 156 requires that all
separately recognized servicing assets and servicing liabilities be initially measured at
fair value, unless it is impracticable to do so. SFAS 156 permits, but does not require, the
subsequent measurement of servicing assets and servicing liabilities at fair value. Our
adoption of SFAS 156 effective October 1, 2006 did not have a material impact on our
Condensed Consolidated Financial Statements. |
||
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets
and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS 159”)
which permits entities to choose to measure certain financial instruments at fair value that
are not currently required to be measured at fair value. Upon adoption, a cumulative
adjustment will be made to beginning retained earnings for the initial fair
value option remeasurement. Subsequent unrealized gains and losses for fair value option
items will be reported in earnings. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007 and should not be applied retrospectively, except as permitted by
certain conditions for early adoption. We are currently reviewing the provisions of SFAS
159. |
||
| 2. | PG Energy Acquisition |
|
On August 24, 2006, UGI Utilities acquired certain assets and assumed certain liabilities of
Southern Union Company’s (“SU’s”) PG Energy Division, a natural gas distribution utility
located in northeastern Pennsylvania, and all of the issued and outstanding stock of SU’s
wholly-owned subsidiary, PG Energy Services, Inc., pursuant to a Purchase and Sale
Agreement, as amended, between SU and UGI dated January 26, 2006 (the “Agreement”). UGI
subsequently assigned its rights under the Agreement to UGI Utilities. On August 24, 2006
and in accordance with the terms of the Agreement, UGI Utilities paid SU $580 in cash.
Pursuant to the terms of the Agreement, the initial purchase price was subject to a working
capital adjustment equal to the difference between $68.1 and the actual working capital as
of the closing date agreed to by both UGI Utilities and SU. In March 2007, UGI Utilities
and SU reached an agreement on the working capital adjustment pursuant to which SU paid UGI
Utilities approximately $23.7 in cash. In addition, in March 2007 UGI Utilities completed
its review and determination of the fair value of the assets acquired and liabilities
assumed. |
- 7 -
The purchase price of the PG Energy Acquisition, including transaction fees and expenses of
$11.0, has been allocated to the assets acquired and liabilities assumed, as follows: |
Working capital |
$ | 47.0 | ||
Property, plant and equipment |
362.3 | |||
Goodwill |
162.6 | |||
Regulatory assets |
15.0 | |||
Other assets |
4.0 | |||
Noncurrent liabilities |
(23.6 | ) | ||
Total |
$ | 567.3 | ||
| 3. | Utility Regulatory Matters |
|
In an order entered on November 30, 2006, the PUC approved a settlement of the base rate
proceeding of PG Energy (PNG Gas). The settlement provided for an increase in natural gas
distribution base rates of $12.5 annually or approximately 4%, effective December 2, 2006. |
||
In accordance with Provider of Last Resort (“POLR”) settlements approved by the PUC,
Electric Utility may increase its POLR rates up to certain limits through December 31, 2009.
In accordance with these settlements, Electric Utility increased its POLR rates by 4.5% on
January 1, 2005 and 3% on January 1, 2006 (a total of 7.5% above the total rates in effect
December 31, 2004). Electric Utility also increased its POLR rates for all metered customers
effective January 1, 2007 which increased the average cost to residential customers by
approximately 35% over such costs in effect during calendar year 2006. |
- 8 -
| 4. | Segment Information |
|
We have organized our business units into six reportable segments generally based upon
products sold, geographic location (domestic or international) or regulatory environment.
Our reportable segments are: (1) AmeriGas Propane; (2) an international LPG segment
comprising Antargaz; (3) an international LPG segment comprising Flaga and our international
LPG equity investment in China (“Other”); (4) Gas Utility; (5) Electric Utility; and (6)
Energy Services. We refer to both international segments collectively as “International
Propane.” |
||
The accounting policies of the six segments disclosed are the same as those described in
Note 1, Organization and Significant Accounting Policies, in the Company’s 2006 Annual
Report. We evaluate AmeriGas Propane’s performance principally based upon the Partnership’s
earnings before interest expense, income taxes, depreciation and amortization (“Partnership
EBITDA”). Although we use Partnership EBITDA to evaluate AmeriGas Propane’s profitability,
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
accounting principles generally accepted in the United States of America. The Company’s
definition of Partnership EBITDA may be different from that used by other companies. We
evaluate the performance of our International Propane, Gas Utility, Electric Utility and
Energy Services segments principally based upon their income before income taxes. |
- 9 -
| Reportable Segments | ||||||||||||||||||||||||||||||||||||
| AmeriGas | Gas | Electric | Energy | International Propane | Corporate | |||||||||||||||||||||||||||||||
| Total | Elims. | Propane | Utility | Utility | Services | Antargaz | Other (a) | & Other (b) | ||||||||||||||||||||||||||||
Revenues |
$ | 1,076.8 | $ | (54.5 | ) | $ | 433.9 | $ | 185.9 | $ | 29.8 | $ | 306.8 | $ | 138.9 | $ | 9.2 | $ | 26.8 | |||||||||||||||||
Cost of sales |
$ | 726.8 | $ | (53.8 | ) | $ | 272.1 | $ | 128.2 | $ | 15.2 | $ | 282.0 | $ | 62.7 | $ | 4.7 | $ | 15.7 | |||||||||||||||||
Segment profit: |
||||||||||||||||||||||||||||||||||||
Operating income (loss) (c) |
$ | 51.6 | $ | 0.3 | $ | 12.1 | $ | 16.0 | $ | 7.6 | $ | 13.9 | $ | 1.7 | $ | (0.3 | ) | $ | 0.3 | |||||||||||||||||
Loss from equity investees |
(0.9 | ) | — | — | — | — | — | (0.4 | ) | (0.5 | ) | — | ||||||||||||||||||||||||
Interest expense |
(33.9 | ) | — | (17.8 | ) | (9.0 | ) | (0.6 | ) | — | (5.8 | ) | (0.5 | ) | (0.2 | ) | ||||||||||||||||||||
Minority interests |
3.0 | (0.1 | ) | 3.2 | — | — | — | (0.1 | ) | — | — | |||||||||||||||||||||||||
Income (loss) before income taxes |
$ | 19.8 | $ | 0.2 | $ | (2.5 | ) | $ | 7.0 | $ | 7.0 | $ | 13.9 | $ | (4.6 | ) | $ | (1.3 | ) | $ | 0.1 | |||||||||||||||
Depreciation and amortization |
$ | 42.1 | $ | — | $ | 19.0 | $ | 9.1 | $ | 0.8 | $ | 1.7 | $ | 10.5 | $ | 0.8 | $ | 0.2 | ||||||||||||||||||
Partnership EBITDA (c) |
$ | 30.9 | ||||||||||||||||||||||||||||||||||
Segment assets (at period end) |
$ | 5,223.0 | $ | (346.2 | ) | $ | 1,591.2 | $ | 1,465.3 | $ | 109.8 | $ | 282.0 | $ | 1,537.3 | $ | 189.3 | $ | 394.3 | |||||||||||||||||
Investments in equity investees (at period end) |
$ | 61.2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 61.2 | $ | — | ||||||||||||||||||
Goodwill (at period end) |
$ | 1,441.3 | $ | (3.9 | ) | $ | 621.8 | $ | 162.6 | $ | — | $ | 11.8 | $ | 598.3 | $ | 43.7 | $ | 7.0 | |||||||||||||||||
| Reportable Segments | ||||||||||||||||||||||||||||||||||||
| AmeriGas | Gas | Electric | Energy | International Propane | Corporate | |||||||||||||||||||||||||||||||
| Total | Elims. | Propane | Utility | Utility | Services | Antargaz | Other (a) | & Other (b) | ||||||||||||||||||||||||||||
Revenues |
$ | 919.1 | $ | (44.3 | ) | $ | 379.1 | $ | 106.3 | $ | 22.9 | $ | 268.7 | $ | 155.9 | $ | 11.5 | $ | 19.0 | |||||||||||||||||
Cost of sales |
$ | 611.6 | $ | (43.3 | ) | $ | 234.4 | $ | 71.6 | $ | 11.2 | $ | 248.4 | $ | 70.8 | $ | 6.5 | $ | 12.0 | |||||||||||||||||
Segment profit: |
||||||||||||||||||||||||||||||||||||
Operating income (c) |
$ | 38.5 | $ | — | $ | 2.9 | $ | 6.6 | $ | 5.2 | $ | 10.4 | $ | 11.4 | $ | 0.2 | $ | 1.8 | ||||||||||||||||||
Interest expense |
(29.1 | ) | — | (17.9 | ) | (4.7 | ) | (0.6 | ) | (0.1 | ) | (5.1 | ) | (0.3 | ) | (0.4 | ) | |||||||||||||||||||
Minority interests |
11.4 | — | 8.3 | — | — | — | 3.1 | — | — | |||||||||||||||||||||||||||
Income (loss) before income taxes |
$ | 20.8 | $ | — | $ | (6.7 | ) | $ | 1.9 | $ | 4.6 | $ | 10.3 | $ | 9.4 | $ | (0.1 | ) | $ | 1.4 | ||||||||||||||||
Depreciation and amortization |
$ | 36.5 | $ | — | $ | 17.8 | $ | 5.6 | $ | 0.8 | $ | 1.6 | $ | 9.6 | $ | 0.8 | $ | 0.3 | ||||||||||||||||||
Partnership EBITDA (c) |
$ | 20.7 | ||||||||||||||||||||||||||||||||||
Segment assets (at period end) |
$ | 4,617.7 | $ | (345.8 | ) | $ | 1,596.5 | $ | 817.5 | $ | 106.5 | $ | 243.4 | $ | 1,494.6 | $ | 155.6 | $ | 549.4 | |||||||||||||||||
Investments in equity investees (at period end) |
$ | 57.7 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 0.5 | $ | 57.2 | $ | — | ||||||||||||||||||
Goodwill (at period end) |
$ | 1,240.9 | $ | (4.0 | ) | $ | 618.3 | $ | — | $ | — | $ | 11.8 | $ | 565.5 | $ | 42.9 | $ | 6.4 | |||||||||||||||||
| (a) | International Propane-Other principally comprises Flaga, including its central and eastern
European joint venture, and our joint-venture business in China. |
|
| (b) | Corporate & Other’s results principally comprise UGI Enterprises’ HVAC/R, net expenses of UGI’s
captive general liability insurance company and UGI Corporation’s unallocated corporate and general
expenses and interest income, and, beginning January 1, 2007, UGI Utilities’ HVAC operations.
Corporate & Other’s assets principally comprise cash, short-term investments and an intercompany
loan. The intercompany interest associated with the intercompany loan is removed in the segment
presentation. |
|
| (c) | The following table provides a reconciliation of Partnership EBITDA to AmeriGas Propane
operating income: |
| Three months ended June 30, | 2007 | 2006 | ||||||
Partnership EBITDA |
$ | 30.9 | $ | 20.7 | ||||
Depreciation and amortization |
(19.0 | ) | (17.8 | ) | ||||
Minority interests (i) |
0.2 | — | ||||||
Operating income |
$ | 12.1 | $ | 2.9 | ||||
| (i) | Principally represents the General Partner’s 1.01% interest in AmeriGas OLP. |
- 10 -
| Reportable Segments | ||||||||||||||||||||||||||||||||||||
| AmeriGas | Gas | Electric | Energy | International Propane | Corporate | |||||||||||||||||||||||||||||||
| Total | Elims. | Propane | Utility | Utility | Services | Antargaz | Other (a) | & Other (b) | ||||||||||||||||||||||||||||
Revenues |
$ | 4,542.1 | $ | (150.0 | ) | $ | 1,860.3 | $ | 919.3 | $ | 89.6 | $ | 1,095.9 | $ | 625.2 | $ | 32.1 | $ | 69.7 | |||||||||||||||||
Cost of sales |
$ | 3,094.0 | $ | (147.4 | ) | $ | 1,161.1 | $ | 656.2 | $ | 48.2 | $ | 1,017.1 | $ | 300.5 | $ | 17.0 | $ | 41.3 | |||||||||||||||||
Segment profit: |
||||||||||||||||||||||||||||||||||||
Operating income (c) |
$ | 519.4 | $ | — | $ | 226.6 | $ | 132.2 | $ | 20.5 | $ | 46.5 | $ | 92.9 | $ | 0.6 | $ | 0.1 | ||||||||||||||||||
Loss from equity investees |
(2.2 | ) | — | — | — | — | — | (1.5 | ) | (0.7 | ) | — | ||||||||||||||||||||||||
Interest expense |
(105.0 | ) | — | (53.6 | ) | (30.2 | ) | (1.9 | ) | — | (17.1 | ) | (1.5 | ) | (0.7 | ) | ||||||||||||||||||||
Minority interests |
(96.3 | ) | (0.2 | ) | (95.6 | ) | — | — | — | (0.5 | ) | — | — | |||||||||||||||||||||||
Income (loss) before income taxes |
$ | 315.9 | $ | (0.2 | ) | $ | 77.4 | $ | 102.0 | $ | 18.6 | $ | 46.5 | $ | 73.8 | $ | (1.6 | ) | $ | (0.6 | ) | |||||||||||||||
Depreciation and amortization |
$ | 125.6 | — | $ | 56.1 | $ | 28.0 | $ | 2.6 | $ | 5.3 | $ | 30.5 | $ | 2.5 | $ | 0.6 | |||||||||||||||||||
Partnership EBITDA (c) |
$ | 280.4 | ||||||||||||||||||||||||||||||||||
Segment assets (at period end) |
$ | 5,223.0 | $ | (346.2 | ) | $ | 1,591.2 | $ | 1,465.3 | $ | 109.8 | $ | 282.0 | $ | 1,537.3 | $ | 189.3 | $ | 394.3 | |||||||||||||||||
Investments in equity investees (at period end) |
$ | 61.2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 61.2 | $ | — | ||||||||||||||||||
Goodwill (at period end) |
$ | 1,441.3 | $ | (3.9 | ) | $ | 621.8 | $ | 162.6 | $ | — | $ | 11.8 | $ | 598.3 | $ | 43.7 | $ | 7.0 | |||||||||||||||||
| Reportable Segments | ||||||||||||||||||||||||||||||||||||
| AmeriGas | Gas | Electric | Energy | International Propane | Corporate | |||||||||||||||||||||||||||||||
| Total | Elims. | Propane | Utility | Utility | Services | Antargaz | Other (a) | & Other (b) | ||||||||||||||||||||||||||||
Revenues |
$ | 4,342.5 | $ | (110.3 | ) | $ | 1,727.5 | $ | 622.3 | $ | 72.2 | $ | 1,158.9 | $ | 763.1 | $ | 54.0 | $ | 54.8 | |||||||||||||||||
Cost of sales |
$ | 3,059.3 | $ | (107.3 | ) | $ | 1,089.5 | $ | 454.5 | $ | 37.7 | $ | 1,093.5 | $ | 422.8 | $ | 34.6 | $ | 34.0 | |||||||||||||||||
Segment profit: |
||||||||||||||||||||||||||||||||||||
Operating income (c) |
$ | 461.3 | $ | — | $ | 193.9 | $ | 82.2 | $ | 15.0 | $ | 44.7 | $ | 118.6 | $ | 3.1 | $ | 3.8 | ||||||||||||||||||
Loss from equity investees |
(1.2 | ) | — | — | — | — | — | (1.2 | ) | — | — | |||||||||||||||||||||||||
Loss on extinguishment of debt |
(18.5 | ) | — | (17.1 | ) | — | — | — | (1.4 | ) | — | — | ||||||||||||||||||||||||
Interest expense |
(92.1 | ) | — | (56.2 | ) | (14.4 | ) | (1.9 | ) | (0.1 | ) | (18.0 | ) | (1.2 | ) | (0.3 | ) | |||||||||||||||||||
Minority interests |
(64.3 | ) | (0.2 | ) | (67.0 | ) | — | — | — | 2.9 | — | — | ||||||||||||||||||||||||
Income before income taxes |
$ | 285.2 | $ | (0.2 | ) | $ | 53.6 | $ | 67.8 | $ | 13.1 | $ | 44.6 | $ | 100.9 | $ | 1.9 | $ | 3.5 | |||||||||||||||||
Depreciation and amortization |
$ | 108.7 | $ | — | $ | 54.0 | $ | 16.4 | $ | 2.5 | $ | 4.8 | $ | 27.4 | $ | 3.0 | $ | 0.6 | ||||||||||||||||||
Partnership EBITDA (c) |
$ | 229.1 | ||||||||||||||||||||||||||||||||||
Segment assets (at period end) |
$ | 4,617.7 | $ | (345.8 | ) | $ | 1,596.5 | $ | 817.5 | $ | 106.5 | $ | 243.4 | $ | 1,494.6 | $ | 155.6 | $ | 549.4 | |||||||||||||||||
Investments in equity investees (at period end) |
$ | 57.7 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 0.5 | $ | 57.2 | $ | — | ||||||||||||||||||
Goodwill (at period end) |
$ | 1,240.9 | $ | (4.0 | ) | $ | 618.3 | $ | — | $ | — | $ | 11.8 | $ | 565.5 | $ | 42.9 | $ | 6.4 | |||||||||||||||||
| (a) | International Propane-Other principally comprises Flaga, including its central and eastern
European joint venture, and our joint-venture business in China. |
|
| (b) | Corporate & Other’s results principally comprise UGI Enterprises’ HVAC/R, net expenses of UGI’s
captive general liability insurance company and UGI Corporation’s unallocated corporate and general
expenses and interest income, and, beginning January 1, 2007, UGI Utilities’ HVAC operations.
Corporate & Other’s assets principally comprise cash, short-term investments and an intercompany
loan. The intercompany interest associated with the intercompany loan is removed in the segment
presentation. |
|
| (d) | The following table provides a reconciliation of Partnership EBITDA to AmeriGas Propane
operating income: |
| Nine months ended June 30, | 2007 | 2006 | ||||||
Partnership EBITDA |
$ | 280.4 | $ | 229.1 | ||||
Depreciation and amortization |
(56.1 | ) | (54.0 | ) | ||||
Minority interests (i) |
2.3 | 1.7 | ||||||
Loss on extinguishments of debt |
— | 17.1 | ||||||
Operating income |
$ | 226.6 | $ | 193.9 | ||||
| (i) | Principally represents the General Partner’s 1.01% interest in AmeriGas OLP. |
- 11 -
| 5. | Intangible Assets |
|
The Company’s intangible assets comprise the following: |
| June 30, | September 30, | |||||||
| 2007 | 2006 | |||||||
Goodwill (not subject to amortization) |
$ | 1,441.3 | $ | 1,418.2 | ||||
Other intangible assets: |
||||||||
Customer relationships, noncompete
agreements and other |
$ | 194.6 | $ | 183.0 | ||||
Trademark (not subject to amortization) |
46.0 | 43.1 | ||||||
Gross carrying amount |
240.6 | 226.1 | ||||||
Accumulated amortization |
(77.4 | ) | (62.8 | ) | ||||
Net carrying amount |
$ | 163.2 | $ | 163.3 | ||||
The increase in goodwill during the nine months ended June 30, 2007 reflects the
effects of foreign currency translation and, to a much lesser extent, AmeriGas Propane
business acquisitions partially offset by the working capital adjustment associated with the
PG Energy Acquisition. Changes in intangible assets during the nine months ended June 30,
2007 principally reflect the effects of foreign currency translation. Amortization expense
of intangible assets was $4.2 and $12.4 for the three and nine months ended June 30, 2007,
respectively, and $3.9 and $12.1 for the three and nine months ended June 30, 2006,
respectively. Our expected aggregate amortization expense of intangible assets for the next
five fiscal years is as follows: Fiscal 2007 — $16.4; Fiscal 2008 — $16.1; Fiscal 2009 -
$15.4; Fiscal 2010 — $14.0; Fiscal 2011 — $13.4. |
||
| 6. | UGI Utilities’ Debt |
|
In June 2007, UGI Utilities refinanced $20 of its maturing 7.17% Medium-Term Notes with
proceeds from the issuance of $20 of 6.17% Medium-Term Notes due June 2017. During the nine
months ended June 30, 2007, the termination date of UGI Utilities’ $350 Revolving Credit
Agreement was extended to August 2011. |
||
| 7. | Energy Services Accounts Receivable Securitization Facility |
|
Energy Services has a receivables purchase facility (“Receivables Facility”) with an issuer
of receivables-backed commercial paper expiring in April 2009. The maximum level of funding
available at any one time from this facility is $200. Under the Receivables Facility, Energy
Services transfers, on an ongoing basis and without recourse, its trade accounts receivable
to its wholly owned, special purpose subsidiary, Energy Services Funding Corporation
(“ESFC”), which is consolidated for financial statement purposes. ESFC, in turn,
has sold, and subject to certain conditions, may from time to time sell, an undivided
interest in some or all of the receivables to a commercial paper conduit of a major bank.
ESFC was created and has been structured to isolate its assets from creditors of Energy
Services and its affiliates, including UGI. This two-step transaction is accounted for as a
sale of receivables following the provisions of SFAS No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.” Energy Services
continues to service, administer and collect trade receivables on behalf of the commercial
paper issuer and ESFC. Effective October 1, 2006, we adopted SFAS 156, see Note 1. |
- 12 -
During the nine months ended June 30, 2007 and 2006, Energy Services sold trade receivables
totaling $1,011.0 and $1,073.4, respectively, to ESFC. During the nine months ended June
30, 2007 and 2006, ESFC sold an aggregate $433.5 and $724.5, respectively, of undivided
interests in its trade receivables to the commercial paper conduit. At June 30, 2007, the
outstanding balance of ESFC trade receivables was $90.4 which is net of $5.5 that was sold
to the commercial paper conduit and removed from the balance sheet. At June 30, 2006, the
outstanding balance of ESFC trade receivables was $30.2 which is net of $42.0 that was sold
to the commercial paper conduit and removed from the balance sheet. |
||
In addition, a major bank has committed to issue up to $50 of standby letters of credit,
secured by cash or marketable securities (“LC Facility”) to Energy Services. At June 30,
2007, there were no letters of credit outstanding. Energy Services expects to fund the
collateral requirements with borrowings under its Receivables Facility. The LC Facility
expires in April 2008. |
||
| 8. | Defined Benefit Pension and Other Postretirement Plans |
|
We sponsor two defined benefit pension plans (“Pension Plan”) for employees of UGI, UGI
Utilities, including employees of UGIPNG, and certain of UGI’s other wholly owned
subsidiaries. In addition, we provide postretirement health care benefits to certain
retirees and postretirement life insurance benefits to nearly all domestic active and
retired employees. In addition, Antargaz has retirement obligations and other post
employment benefit commitments associated with certain of its retirees and employees. |
- 13 -
Net periodic pension expense and other postretirement benefit costs include the following
components: |
| Other | ||||||||||||||||
| Pension Benefits | Postretirement Benefits | |||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Service cost |
$ | 1.6 | $ | 1.5 | $ | 0.2 | $ | 0.1 | ||||||||
Interest cost |
4.7 | 3.5 | 0.3 | 0.3 | ||||||||||||
Expected return on assets |
(5.9 | ) | (4.7 | ) | (0.2 | ) | (0.2 | ) | ||||||||
Amortization of: |
||||||||||||||||
Transition obligation |
— | — | 0.1 | 0.1 | ||||||||||||
Prior service cost (benefit) |
0.1 | 0.2 | (0.1 | ) | (0.1 | ) | ||||||||||
Actuarial loss |
0.3 | 0.4 | — | — | ||||||||||||
Net benefit cost |
0.8 | 0.9 | 0.3 | 0.2 | ||||||||||||
Change in regulatory and other assets and
liabilities |
(0.1 | ) | (0.1 | ) | 0.7 | 0.7 | ||||||||||
Net expense |
$ | 0.7 | $ | 0.8 | $ | 1.0 | $ | 0.9 | ||||||||
| Other | ||||||||||||||||
| Pension Benefits | Postretirement Benefits | |||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Service cost |
$ | 4.9 | $ | 4.5 | $ | 0.4 | $ | 0.2 | ||||||||
Interest cost |
14.1 | 10.5 | 1.0 | 0.9 | ||||||||||||
Expected return on assets |
(17.7 | ) | (14.2 | ) | (0.5 | ) | (0.5 | ) | ||||||||
Amortization of: |
||||||||||||||||
Transition obligation |
— | — | 0.2 | 0.2 | ||||||||||||
Prior service cost (benefit) |
0.2 | 0.6 | (0.2 | ) | (0.2 | ) | ||||||||||
Actuarial loss |
0.8 | 1.3 | 0.1 | 0.1 | ||||||||||||
Net benefit cost |
2.3 | 2.7 | 1.0 | 0.7 | ||||||||||||
Change in regulatory and other assets and
liabilities |
(0.2 | ) | (0.3 | ) | 2.1 | 2.1 | ||||||||||
Net expense |
$ | 2.1 | $ | 2.4 | $ | 3.1 | $ | 2.8 | ||||||||
Pension Plan assets are held in trust and consist principally of equity and fixed
income mutual funds. The Company does not believe it will be required to make any
contributions to the Pension Plan during the year ending September 30, 2007 for ERISA
funding purposes. Pursuant to orders previously issued by the PUC, UGI Utilities has
established a Voluntary Employees’ Beneficiary Association (“VEBA”) trust to fund and pay
UGI Utilities’ postretirement health care and life insurance benefits referred to above by
depositing into the VEBA the annual amount of postretirement benefit costs determined under
SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The
difference between the annual amount calculated and the amount included in UGI Gas’ and
Electric Utility’s rates is deferred for future recovery from, or refund to, ratepayers.
Amounts contributed to the VEBA by UGI Utilities were not material during the nine months
ended June 30, 2007, nor are they expected to be material for the year ending September 30,
2007. |
- 14 -
We also sponsor unfunded and non-qualified supplemental executive retirement income plans.
We recorded pre-tax expense for these plans of $0.6 and $1.7 for the three and nine months
ended June 30, 2007, respectively. We recorded pre-tax expense for these plans of $0.5 and
$1.5 for the three and nine months ended June 30, 2006, respectively. |
||
| 9. | Commitments and Contingencies |
|
On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired the propane
distribution businesses of Columbia Energy Group (the “2001 Acquisition”) pursuant to the
terms of a purchase agreement (the “2001 Acquisition Agreement”) by and among Columbia
Energy Group (“CEG”), Columbia Propane Corporation (“Columbia Propane”), Columbia Propane,
L.P. (“CPLP”), CP Holdings, Inc. (“CPH,” and together with Columbia Propane and CPLP, the
“Company Parties”), AmeriGas Partners, AmeriGas OLP and the General Partner (together with
AmeriGas Partners and AmeriGas OLP, the “Buyer Parties”). As a result of the 2001
Acquisition, AmeriGas OLP acquired all of the stock of Columbia Propane and CPH and
substantially all of the partnership interests of CPLP. Under the terms of an earlier
acquisition agreement (the “1999 Acquisition Agreement”), the Company Parties agreed to
indemnify the former general partners of National Propane Partners, L.P. (a predecessor
company of the Columbia Propane businesses) and an affiliate (collectively, “National
General Partners”) against certain income tax and other losses that they may sustain as a
result of the 1999 acquisition by CPLP of National Propane Partners, L.P. (the “1999
Acquisition”) or the operation of the business after the 1999 Acquisition (“National
Claims”). At June 30, 2007, the potential amount payable under this indemnity by the Company
Parties was approximately $58. These indemnity obligations will expire on the date that CPH
acquires the remaining outstanding partnership interest of CPLP, which is expected to occur
on or after July 19, 2009. Under the terms of the 2001 Acquisition Agreement, CEG agreed to
indemnify the Buyer Parties and the Company Parties against any losses that they sustain
under the 1999 Acquisition Agreement and related agreements (“Losses”), including National
Claims, to the extent such claims are based on acts or omissions of CEG or the Company
Parties prior to the 2001 Acquisition. The Buyer Parties agreed to indemnify CEG
against Losses, including National Claims, to the extent such claims are based on acts or
omissions of the Buyer Parties or the Company Parties after the 2001 Acquisition. CEG and
the Buyer Parties have agreed to apportion certain losses resulting from National Claims to
the extent such losses result from the 2001 Acquisition itself. |
||
Samuel and Brenda Swiger and their son (the “Swigers”) sustained personal injuries and
property damage as a result of a fire that occurred when propane that leaked from an
underground line ignited. In July 1998, the Swigers filed a class action lawsuit against
AmeriGas Propane, L.P. (named incorrectly as “UGI/AmeriGas, Inc.”), in the Circuit Court of
Monongalia County, West Virginia, in which they sought to recover an unspecified amount of
compensatory and punitive damages and attorney’s fees, for themselves and on behalf of
persons in West Virginia for whom the defendants had installed propane gas lines, resulting
from the defendants’ alleged failure to install underground propane lines at depths required
by applicable safety standards. In 2003, AmeriGas OLP settled the individual personal injury
and property damage claims of the Swigers. In 2004, the court granted the plaintiffs’ motion
to include customers acquired from Columbia Propane in August 2001 as additional potential
class members and the plaintiffs amended their complaint to name additional parties pursuant
to such ruling. Subsequently, in March 2005, AmeriGas OLP filed a crossclaim against CEG,
former owner of Columbia Propane, seeking indemnification for conduct undertaken by Columbia
Propane prior to its acquisition by AmeriGas OLP. Class counsel has indicated that the class
is seeking compensatory damages in excess of $12 plus punitive damages, civil penalties and
attorneys’ fees. We believe we have good defenses to the claims of the class members and
intend to defend against the remaining claims in this lawsuit. |
- 15 -
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 UGI Gas 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 UGI Gas is currently permitted to include
in
rates, through future base rate proceedings, prudently incurred remediation costs associated
with such sites. |
||
As a result of the PG Energy
Acquisition, UGIPNG became party to a Multi-Site Remediation
Consent Order and Agreement between PG Energy and the Pennsylvania Department of
Environmental Protection dated March 31, 2004 (“Multi-Site Agreement”). The Multi-Site
Agreement requires UGIPNG to perform annually a specified level of activities associated
with environmental investigation and remediation work at eleven currently owned properties
on which MGP-related facilities were operated (“Properties”). Under the Multi-Site
Agreement, UGIPNG is not required to spend more than $1.1 in any calendar year for such
environmental expenditures, including costs to perform work on the Properties. Costs related
to investigation and remediation of one property formerly owned by UGIPNG are also included
in this cap. The Multi-Site Agreement terminates at the end of fifteen years but may be
terminated by either party at the end of any two-year period beginning with the effective
date. |
||
UGI Utilities has been notified of several sites outside Pennsylvania on which private
parties allege MGPs were formerly owned or operated by it or owned or operated by its former
subsidiaries. Such parties are investigating the extent of environmental contamination or
performing environmental remediation. UGI Utilities is currently litigating four claims
against it relating to out-of-state sites. We accrue environmental investigation and cleanup
costs when it is probable that a liability exists and the amount or range of amounts can be
reasonably estimated. |
||
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 (1) the
subsidiary’s separate corporate form should be disregarded or (2) UGI Utilities should be
considered to have been an operator because of its conduct with respect to its subsidiary’s
MGP. |
- 16 -
On September 22, 2006, South Carolina Electric & Gas Company (“SCE&G”), a subsidiary of
SCANA Corporation, filed a lawsuit against UGI Utilities in the District Court of South
Carolina seeking contribution from UGI Utilities for past and future remediation costs
related to the operations of a former MGP located in Charleston, South Carolina. SCE&G
asserts that the plant operated from 1855 to 1954 and alleges that UGI Utilities controlled
operations of the plant from 1910 to 1926 and is
liable for 47% of the costs associated with the site. SCE&G asserts that it has spent
approximately $22 in remediation costs and $26 in third-party claims relating to the site
and estimates that future remediation costs could be as high as $2.5. SCE&G further asserts
that it has received a demand from the United States Justice Department for natural resource
damages. UGI Utilities believes that it has good defenses to this claim and is defending the
suit. |
||
In April 2003, Citizens Communications Company (“Citizens”) served a complaint naming UGI
Utilities as a third-party defendant in a civil action pending in the United States District
for the District of Maine. In that action, the plaintiff, City of Bangor, Maine (“City”)
sued Citizens to recover environmental response costs associated with MGP wastes generated
at a plant allegedly operated by Citizens’ predecessors at a site on the Penobscot River.
Citizens subsequently joined UGI Utilities and ten other third-party defendants alleging
that the third-party defendants are responsible for an equitable share of costs Citizens may
be required to pay to the City for cleaning up tar deposits in the Penobscot River. Citizens
alleges that UGI Utilities and its predecessors owned and operated the plant from 1901 to
1928. Studies conducted by the City and Citizens suggest that it could cost up to $18 to
clean up the river. Citizens’ third-party claims have been stayed pending a resolution of
the City’s suit against Citizens, which was tried in September 2005. Maine’s Department of
Environmental Protection (“DEP”) informed UGI Utilities in March 2005 that it considers UGI
Utilities to be a potentially responsible party for costs incurred by the State of Maine
related to gas plant contaminants at this site. On June 27, 2006, the court issued an order
finding Citizens responsible for 60% of the cleanup costs. On February 14, 2007, Citizens
and the City entered into a settlement agreement, subject to court approval, pursuant to
which Citizens agreed to pay $7.6 in exchange for a release of its liabilities. UGI
Utilities is evaluating what effect, if any, the settlement agreement would have on claims
against it. UGI Utilities believes that it has good defenses to Citizens’ claim and to any
claim that the DEP may bring to recover its costs, and is defending the Citizens’ suit. |
||
By letter dated March 30, 1992, Atlanta Gas Light Company (“AGL”) informed UGI Utilities
that it was investigating contamination that appeared to be related to MGP operations at a
site owned by AGL in Savannah, Georgia. A former subsidiary of UGI Utilities operated the
MGP in the early 1900s. AGL has informed UGI Utilities that it has begun remediation of MGP
wastes at the site and believes that the total cost of remediation could be as high as $55.
AGL has not filed suit against UGI Utilities for a share of these costs. UGI Utilities
believes that it will have good defenses to any action that may arise out of this site. |
||
On September 20, 2001, Consolidated Edison Company of New York (“ConEd”) filed suit against
UGI Utilities in the United States District Court for the Southern District of New York,
seeking contribution from UGI Utilities for an allocated share of response costs associated
with investigating and assessing gas plant related contamination at former MGP sites in
Westchester County, New York. The complaint alleges that UGI Utilities “owned and operated”
the MGPs prior to 1904. The complaint also seeks a declaration that UGI Utilities is
responsible for an allocated percentage of future investigative and remedial costs at the
sites. ConEd believes that the cost of remediation for all of the sites could exceed $70. |
- 17 -
The trial court granted UGI Utilities’ motion for summary judgment and dismissed ConEd’s
complaint. The grant of summary judgment was entered April 1, 2004. ConEd appealed and on
September 9, 2005 a panel of the Second Circuit Court of Appeals affirmed in part and
reversed in part the decision of the trial court. The appellate panel affirmed the trial
court’s decision dismissing claims that UGI Utilities was liable under CERCLA as an operator
of MGPs owned and operated by its former subsidiaries. The appellate panel reversed the
trial court’s decision that UGI Utilities was released from liability at three sites where
UGI Utilities operated MGPs under lease. On October 7, 2005, UGI Utilities filed for
reconsideration of the panel’s order, which was denied by the Second Circuit Court of
Appeals on January 17, 2006. On April 14, 2006, UGI Utilities filed a petition requesting
that the United States Supreme Court review the decision of the Second Circuit Court of
Appeals. On June 18, 2007, the United States Supreme Court denied UGI Utilities’ petition.
UGI Utilities is defending the suit. |
||
By letter dated June 24, 2004, KeySpan Energy (“KeySpan”) informed UGI Utilities that
KeySpan has spent $2.3 and expects to spend another $11 to clean up an MGP site it owns in
Sag Harbor, New York. KeySpan believes that UGI Utilities is responsible for approximately
50% of these costs as a result of UGI Utilities’ alleged direct ownership and operation of
the plant from 1885 to 1902. By letter dated June 6, 2006, KeySpan reported that the New
York Department of Environmental Conservation has approved a remedy for the site that is
estimated to cost approximately $10. KeySpan believes that the cost could be as high as $20.
UGI Utilities is in the process of reviewing the information provided by KeySpan and is
investigating this claim. |
||
On September 11, 2006, UGI Utilities received a complaint filed by Yankee Gas Services
Company and Connecticut Light and Power
Company, subsidiaries of Northeast Utilities, (together the “Northeast Companies”) in the
United States District Court for the District of Connecticut seeking contribution from UGI
Utilities for past and future remediation costs related to MGP operations on thirteen sites
owned by the Northeast Companies in nine cities in the State of Connecticut. The Northeast
Companies allege that UGI Utilities controlled operations of the plants from 1883 to 1941.
The Northeast Companies estimated that remediation costs for all of the sites would total
approximately $215 and asserted that UGI Utilities is responsible for approximately $103 of
this amount. Based on information supplied by the Northeast Companies and UGI Utilities’ own
investigation, UGI Utilities believes that it may have operated one of the sites, Waterbury
North, under lease for a portion of its operating history. UGI Utilities is reviewing the
Northeast Companies’ estimate that remediation costs at Waterbury North could total $23. UGI
Utilities believes that it has good defenses to this claim and is defending the suit. |
||
The French tax authorities levy taxes on legal entities and individuals regularly operating
a business in France which are commonly referred to collectively as “business tax.” The
amount of business tax charged annually is generally dependent upon the value of certain of
the entity’s tangible fixed assets. Changes in the French government’s interpretation of the
tax laws or in the tax laws themselves could either adversely or favorably affect our
results of operations. |
- 18 -
In addition to these 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 and result in losses in excess of recorded amounts. We are
unable to estimate any such excess losses. 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. |
||
| 10. | AmeriGas Partners’ Sale of Arizona Storage Facility |
|
In February 2007, AmeriGas Partners signed a definitive agreement with Plains LPG Services,
L.P. to sell its 3.5 million barrel liquefied petroleum gas storage terminal located near
Phoenix, Arizona for approximately $52. The transaction closed in July 2007 and UGI expects
to realize an after-tax gain on this sale of approximately $12 to $13. |
- 19 -
- 20 -
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| (millions of dollars) | (millions of dollars) | |||||||||||||||
Net income (loss): |
||||||||||||||||
AmeriGas Propane (a) |
$ | (1.6 | ) | $ | (4.1 | ) | $ | 46.1 | $ | 32.0 | ||||||
International Propane |
(3.3 | ) | 13.1 | 49.8 | 73.0 | |||||||||||
Gas Utility |
4.3 | 0.8 | 61.8 | 40.7 | ||||||||||||
Electric Utility |
4.0 | 2.7 | 10.8 | 7.7 | ||||||||||||
Energy Services |
8.2 | 6.4 | 27.5 | 26.7 | ||||||||||||
Corporate & Other |
(0.1 | ) | (0.2 | ) | (2.4 | ) | 0.1 | |||||||||
Total net income |
$ | 11.5 | $ | 18.7 | $ | 193.6 | $ | 180.2 | ||||||||
| (a) | Amounts are net of minority interests in AmeriGas Partners, L.P. |
- 21 -
| For the three months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 433.9 | $ | 379.1 | $ | 54.8 | 14.5 | % | ||||||||
Total margin (a) |
$ | 161.8 | $ | 144.7 | $ | 17.1 | 11.8 | % | ||||||||
Partnership EBITDA (b) |
$ | 30.9 | $ | 20.7 | $ | 10.2 | 49.3 | % | ||||||||
Operating income |
$ | 12.1 | $ | 2.9 | $ | 9.2 | 317.2 | % | ||||||||
Retail gallons sold (millions) |
182.1 | 171.1 | 11.0 | 6.4 | % | |||||||||||
Degree days — % (warmer)
than normal (c) |
(6.1 | )% | (21.9 | )% | — | — | ||||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
|
| (b) | Partnership EBITDA (earnings before interest expense, income taxes and 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
accounting principles generally accepted in the United States of America. Management uses
Partnership EBITDA as the primary measure of segment profitability for the AmeriGas Propane segment
(see Note 4 to the Condensed Consolidated Financial Statements). |
|
| (c) | Deviation from average heating degree-days based upon national weather statistics provided
by the National Oceanic and Atmospheric Administration (“NOAA”) for 335 airports in the United
States, excluding Alaska. |
- 22 -
| For the three months ended June 30, | 2007 | 2006 | (Decrease) | |||||||||||||
| (Millions of euros) | ||||||||||||||||
Revenues |
€ | 109.5 | € | 132.9 | € | (23.4 | ) | (17.6 | )% | |||||||
Total margin (a) |
€ | 59.6 | € | 71.5 | € | (11.9 | ) | (16.6 | )% | |||||||
Operating income |
€ | 1.0 | € | 9.8 | € | (8.8 | ) | (89.8 | )% | |||||||
Income (loss) before income taxes |
€ | (4.2 | ) | € | 8.1 | € | (12.3 | ) | (151.9 | )% | ||||||
(Millions of dollars) |
||||||||||||||||
Revenues |
$ | 148.1 | $ | 167.4 | $ | (19.3 | ) | (11.5 | )% | |||||||
Total margin (a) |
$ | 80.7 | $ | 90.1 | $ | (9.4 | ) | (10.4 | )% | |||||||
Operating income |
$ | 1.4 | $ | 11.6 | $ | (10.2 | ) | (87.9 | )% | |||||||
Income (loss) before income taxes |
$ | (5.9 | ) | $ | 9.3 | $ | (15.2 | ) | (163.4 | )% | ||||||
Antargaz retail gallons sold |
49.6 | 54.0 | (4.4 | ) | (8.1 | )% | ||||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
- 23 -
| For the three months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 185.9 | $ | 106.3 | $ | 79.6 | 74.9 | % | ||||||||
Total margin (a) |
$ | 57.7 | $ | 34.7 | $ | 23.0 | 66.3 | % | ||||||||
Operating income |
$ | 16.0 | $ | 6.6 | $ | 9.4 | 142.4 | % | ||||||||
Income before income taxes |
$ | 7.0 | $ | 1.9 | $ | 5.1 | 268.4 | % | ||||||||
System throughput -
billions of cubic feet (“bcf”) |
25.4 | 14.3 | 11.1 | 77.6 | % | |||||||||||
Degree days — % colder (warmer) than normal (b) |
3.8 | % | (13.5 | )% | — | — | ||||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
|
| (b) | Deviation from average heating degree days based upon weather statistics provided by the
National Oceanic and
Atmospheric Administration (“NOAA”) at airports located within our service territory. |
- 24 -
| For the three months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 29.8 | $ | 22.9 | $ | 6.9 | 30.1 | % | ||||||||
Total margin (a) |
$ | 12.9 | $ | 10.5 | $ | 2.4 | 22.9 | % | ||||||||
Operating income |
$ | 7.6 | $ | 5.2 | $ | 2.4 | 46.2 | % | ||||||||
Income before income taxes |
$ | 7.0 | $ | 4.6 | $ | 2.4 | 52.2 | % | ||||||||
Distribution sales — millions of
kilowatt hours (“gwh”) |
231.1 | 222.4 | 8.7 | 3.9 | % | |||||||||||
| (a) | Total margin represents total revenues less total cost of sales and revenue-related taxes,
i.e. Electric Utility gross receipts taxes, of $1.7 million and $1.2 million during the
three-month periods ended June 30, 2007 and 2006, respectively. For financial statement
purposes, revenue-related taxes are included in “Utility taxes other than income taxes” on the
Condensed Consolidated Statements of Income. |
| For the three months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 306.8 | $ | 268.7 | $ | 38.1 | 14.2 | % | ||||||||
Total margin (a) |
$ | 24.8 | $ | 20.3 | $ | 4.5 | 22.2 | % | ||||||||
Operating income |
$ | 13.9 | $ | 10.4 | $ | 3.5 | 33.7 | % | ||||||||
Income before income taxes |
$ | 13.9 | $ | 10.3 | $ | 3.6 | 35.0 | % | ||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
- 25 -
| For the nine months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 1,860.3 | $ | 1,727.5 | $ | 132.8 | 7.7 | % | ||||||||
Total margin (a) |
$ | 699.2 | $ | 638.0 | $ | 61.2 | 9.6 | % | ||||||||
Partnership EBITDA (b) |
$ | 280.4 | $ | 229.1 | $ | 51.3 | 22.4 | % | ||||||||
Operating income |
$ | 226.6 | $ | 193.9 | $ | 32.7 | 16.9 | % | ||||||||
Retail gallons sold (millions) |
835.1 | 804.4 | 30.7 | 3.8 | % | |||||||||||
Degree days — % (warmer)
than normal (c) |
(5.8 | )% | (10.3 | )% | — | — | ||||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
|
| (b) | Partnership EBITDA (earnings before interest expense, income taxes and 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
accounting principles generally accepted in the United States of America. Management uses
Partnership EBITDA as the primary measure of segment profitability for the AmeriGas Propane segment
(see Note 4 to the Condensed Consolidated Financial Statements). |
|
| (c) | Deviation from average heating degree-days based upon national weather statistics provided
by the National Oceanic and Atmospheric Administration (“NOAA”) for 335 airports in the United
States, excluding Alaska. |
- 26-
| For the nine months ended June 30, | 2007 | 2006 | (Decrease) | |||||||||||||
| (Millions of euros) | ||||||||||||||||
Revenues |
€ | 498.2 | € | 675.9 | € | (177.7 | ) | (26.3 | )% | |||||||
Total margin (a) |
€ | 257.5 | € | 296.7 | € | (39.2 | ) | (13.2 | )% | |||||||
Operating income |
€ | 72.0 | € | 101.8 | € | (29.8 | ) | (29.3 | )% | |||||||
Income before income taxes |
€ | 56.6 | € | 86.6 | € | (30.0 | ) | (34.6 | )% | |||||||
(Millions of dollars) |
||||||||||||||||
Revenues |
$ | 657.3 | $ | 817.1 | $ | (159.8 | ) | (19.6 | )% | |||||||
Total margin (a) |
$ | 339.8 | $ | 359.7 | $ | (19.9 | ) | (5.5 | )% | |||||||
Operating income |
$ | 93.5 | $ | 121.7 | $ | (28.2 | ) | (23.2 | )% | |||||||
Income before income taxes |
$ | 72.2 | $ | 102.8 | $ | (30.6 | ) | (29.8 | )% | |||||||
Antargaz retail gallons sold |
224.8 | 272.1 | (47.3 | ) | (17.4 | )% | ||||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
- 27 -
| For the nine months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 919.3 | $ | 622.3 | $ | 297.0 | 47.7 | % | ||||||||
Total margin (a) |
$ | 263.1 | $ | 167.8 | $ | 95.3 | 56.8 | % | ||||||||
Operating income |
$ | 132.2 | $ | 82.2 | $ | 50.0 | 60.8 | % | ||||||||
Income before income taxes |
$ | 102.0 | $ | 67.8 | $ | 34.2 | 50.4 | % | ||||||||
System throughput -
billions of cubic feet (“bcf”) |
108.6 | 64.4 | 44.2 | 68.6 | % | |||||||||||
Degree days — % (warmer) than normal (b) |
(4.3 | )% | (8.8 | )% | — | — | ||||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
|
| (b) | Deviation from average heating degree days based upon weather statistics provided by the
National Oceanic and
Atmospheric Administration (“NOAA”) at airports located within our service territory. |
- 28 -
| For the nine months ended June 30, | 2007 | 2006 | Increase | |||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 89.6 | $ | 72.2 | $ | 17.4 | 24.1 | % | ||||||||
Total margin (a) |
$ | 36.4 | $ | 30.5 | $ | 5.9 | 19.3 | % | ||||||||
Operating income |
$ | 20.5 | $ | 15.0 | $ | 5.5 | 36.7 | % | ||||||||
Income before income taxes |
$ | 18.6 | $ | 13.1 | $ | 5.5 | 42.0 | % | ||||||||
Distribution sales — millions of
kilowatt hours (“gwh”) |
762.0 | 748.8 | 13.2 | 1.8 | % | |||||||||||
| (a) | Total margin represents total revenues less total cost of sales and revenue-related taxes,
i.e. Electric Utility gross receipts taxes, of $5.0 million and $4.0 million during the nine-month
periods ended June 30, 2007 and 2006, respectively. For financial statement purposes,
revenue-related taxes are included in “Utility taxes other than income taxes” on the Condensed
Consolidated Statements of Income. |
| For the nine months ended June 30, | 2007 | 2006 | Increase (Decrease) |
|||||||||||||
| (Millions of dollars) | ||||||||||||||||
Revenues |
$ | 1,095.9 | $ | 1,158.9 | $ | (63.0 | ) | (5.4 | )% | |||||||
Total margin (a) |
$ | 78.8 | $ | 65.4 | $ | 13.4 | 20.5 | % | ||||||||
Operating income |
$ | 46.5 | $ | 44.7 | $ | 1.8 | 4.0 | % | ||||||||
Income before income taxes |
$ | 46.5 | $ | 44.6 | $ | 1.9 | 4.3 | % | ||||||||
| (a) | Total margin represents total revenues less total cost of sales. |
- 29 -
- 30 -
- 31 -
- 32 -
- 33 -
- 34 -
| Change in | ||||||||
| Fair Value | Fair Value | |||||||
| (Millions of dollars) | ||||||||
June 30, 2007: |
||||||||
Propane commodity price risk |
$ | 3.2 | $ | (17.7 | ) | |||
Natural gas commodity price risk |
(7.6 | ) | (12.1 | ) | ||||
Electricity commodity price risk |
2.6 | (0.6 | ) | |||||
Interest rate risk |
28.2 | (13.2 | ) | |||||
Foreign currency exchange rate risk |
(5.5 | ) | (16.9 | ) | ||||
- 35 -
| (a) | Evaluation of Disclosure Controls and Procedures |
|
The Company’s management, with the participation of the Company’s Chief Executive Officer
and Principal 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 Principal 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 (i) recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and forms, and
(ii) accumulated and communicated to our management, including the Chief Executive Officer
and Principal Financial Officer, as appropriate to allow timely decisions regarding
disclosure. |
||
| (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. |
- 36 -
| • | costs and difficulties in staffing and managing international operations; |
||
| • | tariffs and other trade barriers; |
||
| • | difficulties in enforcing contractual rights; |
||
| • | longer payment cycles; |
||
| • | local political and economic conditions; |
||
| • | potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double
taxation;” |
||
| • | fluctuations in currency exchange rates, which can affect demand and increase our costs; and |
||
| • | regulatory requirements and changes in regulatory requirements, including French and EU competition laws that may
adversely affect the terms of contracts with customers, and strict regulations applicable to the storage and handling
of LPG. |
- 37 -
| EXHIBIT | ||||||||
| NO. | EXHIBIT | REGISTRANT | FILING | EXHIBIT | ||||
10.1
|
Multi-Currency Facility Offer dated May 21, 2007 between Zentraleuropa LPG Holding GmbH and Raiffeisen Zentralbank Österreich Akteingesellschaft. | |||||||
10.2
|
Guarantee Agreement, dated May 21, 2007, between UGI Corporation, as Guarantor, and Raiffeisen Zentralbank Osterreich Aktiengesellschaft, as Beneficiary, relating to the Multi Currency Working Capital Facility dated May 21, 2007 between Zentraleuropa LPG Holding GmbH and RZB. | |||||||
10.3 |
Extension of Guarantee Agreement dated July 26, 2006, between UGI Corporation, as Guarantor, and Raiffeisen Zentralbank Osterreich Aktiengesellschaft (“RZB”), as Beneficiary, relating to the extension of the Working Capital Facility Agreement dated July 26, 2006, between RZB and Flaga GmbH. | UGI Corporation | Form 8-K (7/31/07) |
- 38 -
| EXHIBIT | ||||||||
| NO. | EXHIBIT | REGISTRANT | FILING | EXHIBIT | ||||
31.1
|
Certification by the Chief Executive Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2007, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
31.2
|
Certification by the Principal Financial Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2007, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
32
|
Certification by the Chief Executive Officer and the Principal Financial Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2007, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
- 39 -
| UGI Corporation | ||||
| (Registrant) | ||||
Date: August 9, 2007
|
By: | /s/ John L. Walsh | ||
| John L. Walsh | ||||
| President and Chief Operating Officer | ||||
| (Principal Financial Officer) | ||||
Date: August 9, 2007
|
By: | /s/ Michael J. Cuzzolina | ||
| Michael J. Cuzzolina | ||||
| Vice President-Accounting and Financial Control and Chief Risk Officer | ||||
- 40 -
| 10.1 | Multi-Currency Facility Offer dated May 21, 2007 between Zentraleuropa LPG
Holding GmbH and Raiffeisen Zentralbank Österreich Akteingesellschaft. |
|
| 10.2 | Guarantee Agreement, dated May 21, 2007, between UGI Corporation, as Guarantor, and
Raiffeisen Zentralbank Osterreich Aktiengesellschaft, as Beneficiary, relating to the Multi
Currency Working Capital Facility dated May 21, 2007 between
Zentraleuropa LPG Holding GmbH and RZB. |
|
| 31.1 | Certification by the Chief Executive Officer relating to the Registrant’s Report on Form
10-Q for the quarter ended June 30, 2007, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
| 31.2 | Certification by the Principal Financial Officer relating to the Registrant’s Report on
Form 10-Q for the quarter ended June 30, 2007, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
| 32 | Certification by the Chief Executive Officer and the Principal Financial Officer relating
to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2007, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. |