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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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We do not directly employ any persons responsible for managing or operating the Partnership. The General Partner and UGI provide such services and are reimbursed for direct and indirect costs and expenses including all compensation and benefit costs. See “Certain Relationships and Related Transactions, and Director Independence - Related Person Transactions” and Note 13 to Consolidated Financial Statements.
Board Committees
The Board of Directors of the General Partner has an Audit Committee, a Compensation/Pension Committee, a Corporate Governance Committee and an Executive Committee. The members of each of the Board Committees, with the exception of the Executive Committee, are independent as defined by the New York Stock Exchange listing standards. The Charters of the Audit Committee, the Compensation/Pension Committee and the Corporate Governance Committee can be found on the Partnership’s website,
www.amerigas.com
, under Investor Relations, About AmeriGas, Corporate Governance, or in print, free of charge, by writing to Investor Relations, AmeriGas Propane, Inc., Box 965, Valley Forge, PA 19482.
Audit Committee
: The Audit Committee has the authority to (i) make determinations or review determinations made by management in transactions that require special approval by the Audit Committee under the terms of the Partnership Agreement and (ii) at the request of the General Partner, review specific matters as to which the General Partner believes there may be a conflict of interest, in order to determine if the resolution of such conflict is fair and reasonable to the Partnership. In addition, the Audit Committee acts on behalf of the Board of Directors in fulfilling its responsibility to:
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oversee the accounting and financial reporting processes and audits of the financial statements of the Partnership;
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monitor the independence of the Partnership’s independent registered public accounting firm and the performance of the independent registered public accountants and internal audit staff;
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oversee the adequacy of the Partnership’s controls relative to financial and business risk;
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oversee the partnership’s policies and programs to promote cyber security;
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provide a means for open communication among the independent registered public accountants, management, internal audit staff and the Board of Directors; and
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oversee compliance with applicable legal and regulatory requirements.
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The Audit Committee has sole authority to appoint, retain, fix the compensation of and oversee the work of the Partnership’s independent registered public accounting firm.
The Audit Committee members are Messrs. Marrazzo (Chair), Ford, Hartmann and Turner. The Board of Directors of the General Partner has determined that all members of the Audit Committee qualify as “audit committee financial experts” within the meaning of the Securities and Exchange Commission regulations and all are deemed financially literate under applicable New York Stock Exchange listing standards.
Compensation/Pension Committee
: The Compensation/Pension Committee members are Mrs. Pol (Chair) and Messrs. Marrazzo and Schlanger. The Committee establishes executive compensation policies and programs, confirms that executive compensation plans do not encourage unnecessary risk-taking; recommends to the independent Board members the base salary, annual bonus target levels and long-term compensation awards for the Chief Executive Officer, approves base salary, annual bonus target levels and long-term compensation awards for senior executives (other than the Chief Executive Officer), approves corporate goals and objectives relating to the Chief Executive Officer’s compensation, assists the Board in establishing a succession plan for the Chief Executive Officer, and reviews the General Partner’s plans for senior management succession and management development.
Corporate Governance Committee
: The Corporate Governance Committee members are Messrs. Ramos (Chair), Ford and Schlanger. The Committee identifies nominees and reviews qualifications of persons eligible to stand for election as Directors and makes recommendations to the Board on these matters, advises the Board with respect to significant developments in corporate governance matters, reviews and assesses the performance of the Board and each Committee, and reviews and makes recommendations to the Board of Directors regarding director compensation.
Executive Committee
: The Executive Committee members are Messrs. Schlanger (Chair), Marrazzo and Walsh. The Committee has limited powers to act on behalf of the Board of Directors between regularly scheduled meetings on matters that cannot be delayed.
Code of Ethics
The General Partner has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers that applies to the General Partner’s Chief Executive Officer, Principal Financial Officer and Chief Accounting Officer. The Code of Ethics is included as an exhibit to this Report and is posted on the Partnership’s website, www.amerigas.com; see “Investor Relations, About AmeriGas, Corporate Governance.” Copies of all corporate governance documents posted on the Partnership’s website are available free of charge by writing to Treasurer, AmeriGas Propane, Inc., P. O. Box 965, Valley Forge, PA 19482.
Directors and Executive Officers of the General Partner
The following table sets forth certain information with respect to the directors and executive officers of the General Partner. AmeriGas, Inc., as the sole shareholder of the General Partner, elects directors annually. AmeriGas, Inc. is a wholly owned subsidiary of UGI. Executive officers are elected for one-year terms. There are no family relationships between any of the directors or any of the executive officers or between any of the executive officers and any of the directors.
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Name
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Age
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Position with the General Partner
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John L. Walsh
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63
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Chairman and Director
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Hugh J. Gallagher
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55
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President, Chief Executive Officer and Director
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Roger Perreault
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54
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Director
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Marvin O. Schlanger
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70
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Presiding Director
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Brian R. Ford
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69
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Director
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John R. Hartmann
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55
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Director
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Frank S. Hermance
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69
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Director
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William J. Marrazzo
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69
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Director
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Anne Pol
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71
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Director
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Pedro A. Ramos
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53
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Director
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K. Richard Turner
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60
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Director
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Ted J. Jastrzebski
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57
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Principal Financial Officer
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Troy E. Fee
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50
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Vice President - Human Resources and Strategic Initiatives
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Monica M. Gaudiosi
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55
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Vice President, General Counsel and Secretary
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Anthony D. Rosback
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55
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Vice President and Chief Operating Officer
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Laurie A. Bergman
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41
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Controller and Chief Accounting Officer
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Listed below is the biographical information for each of the Directors of the General Partner, as well as a description of the specific experience, qualifications, attributes and skills that led the Board to conclude that, in light of the Company’s business and structure, the individual should serve as a director. The biographical business experience of the executive officers of the General Partner is also listed below.
John L. Walsh
is a Director (since 2005) and Chairman (since 2016) of the General Partner. He was Vice Chairman from 2005 until his election as Chairman in 2016. He also serves as a Director and President (since 2005) and Chief Executive Officer (since 2013) of UGI Corporation, the General Partner’s parent company. In addition, Mr. Walsh is a Director and Vice Chairman (since 2005) of UGI Utilities, Inc., an affiliate of the General Partner. He served as Chief Operating Officer (2005 to 2013) of UGI Corporation and as President and Chief Executive Officer (2009 to 2011) of UGI Utilities, Inc. Previously, Mr. Walsh was the Chief Executive of the Industrial and Special Products division of the BOC Group plc, an industrial gases company, a position he assumed in 2001. He was also an Executive Director of BOC (2001 to 2005). He joined BOC in 1986 as Vice President - Special Gases and held various senior management positions in BOC, including President of Process Gas Solutions, North America (2000 to 2001) and President of BOC Process Plants (1996 to 2000). Mr. Walsh also serves as Director at Main Line Health, Inc., the United Way of Greater Philadelphia and Southern New Jersey, the World Affairs Council of Philadelphia, the Greater Philadelphia Chamber of Commerce, the Satell Institute, and the Philadelphia Zoo, and as Trustee at the Saint Columbkille Partnership School.
Mr. Walsh’s qualifications to serve as a director include his in-depth knowledge of the Partnership’s business, competition, risks, and health, environmental and safety issues. Additionally, Mr. Walsh’s extensive strategic planning, logistics and distribution, and operational experience, as well as his executive leadership experience and educational background enables him to provide valuable strategic, operational, management development and business leadership as the Partnership’s Chairman.
Hugh J. Gallagher
is President and Chief Executive Officer (since September 2018) and a Director (since October 1, 2018) of the General Partner. Previously he served as Vice President - Finance and Chief Financial Officer of the General Partner (2013 to 2018). He has also served as Treasurer of both UGI Corporation and the General Partner (2011 to 2014), Director - Treasury Services and Investor Relations of UGI Corporation (2009 to 2011) and Director - Treasury Services (2007 to 2009) of UGI Corporation. He has also served as the General Partner’s Director - Business Development (2004 to 2007), Director of Financial Planning and Analysis (2000 to 2004), Financial Manager - Operations (1999 to 2000), Manager of Financial Reporting (1996 to 1999), and Team Leader - Financial Reporting (1995 to 1996). Mr. Gallagher joined UGI Corporation in 1990, serving in various finance and accounting roles of increasing responsibility.
Mr. Gallagher’s senior executive experience as the Company’s President and Chief Executive Officer, and previously as Vice President and Chief Financial Officer, as well as his other leadership positions at both the General Partner and at UGI Corporation, have provided him with executive leadership experience, as well as an in-depth knowledge and understanding of all aspects of the Partnership’s operations, including supply and logistics, risk management, competition and finance.
Roger Perreault
is Executive Vice President, Global LPG of UGI Corporation (since September 2018), President of UGI International, LLC (since 2015), and a Director (since October 1, 2018) of the General Partner. Prior to joining UGI Corporation, Mr. Perreault held various positions at Air Liquide, an industrial gases company he joined in 1994, and served in various leadership positions from 2008 to 2014, including in a global role as President, Large Industries with international responsibilities and, prior to that, in a role with responsibility for Air Liquide’s North American large industries business. Prior to joining Air Liquide, Mr. Perreault was a chemical engineer and operations manager with I.C.I. in Quebec, Canada.
Mr. Perreault’s senior executive experience as UGI Corporation’s Executive Vice President, Global LPG and President of UGI International, as well as his prior leadership positions at Air Liquide, provide him with senior executive leadership experience and a solid understanding of international operations, logistics, supply and distribution, risk management and health, environmental and safety issues.
Marvin O. Schlanger
has been a Director of the General Partner since 2009 and currently holds the position of Presiding Director. Mr. Schlanger is a Principal in the firm of Cherry Hill Chemical Investments, L.L.C., a management services and capital firm for chemical and allied industries (since 1998). Mr. Schlanger previously served as Chief Executive Officer of CEVA Holdings BV and CEVA Holdings, LLC, an international logistics supplier (2012 to 2013). Mr. Schlanger is currently Chairman of the Board (since January 2016) of UGI Corporation, the General Partner’s parent company, where he has been a director since 1998. He serves as a director of UGI Utilities, Inc. (since 1998), an affiliate of the General Partner, CEVA Logistics AG, Hexion, Inc., Momentive Performance Materials, Inc. and VECTRA Company. Mr. Schlanger also serves on the advisory board of the Kleinman Center for Energy Policy at the University of Pennsylvania. Mr. Schlanger previously served as a member of the boards of CEVA Holdings, LLC (2009 to 2018) and CEVA Group, plc (2009 to 2018),
Mr. Schlanger’s qualifications to serve as a director include his senior management, strategic planning, business development, risk management, and general operational experience. Additionally, by virtue of his experience as Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer of Arco Chemical Company, a large public company and his experience serving as chairman, director and committee member on the boards of directors of large public and private international companies, Mr. Schlanger also possesses in-depth knowledge in the areas of executive compensation and corporate governance. The Board also considered Mr. Schlanger’s intimate knowledge and understanding of the Company’s businesses by virtue of his years of serving as a director of the General Partner.
Brian R. Ford
has been a Director of the General Partner since 2013. Mr. Ford served as the Chief Executive Officer of Washington Philadelphia Partners, LP, a real estate investment company (2008 to 2010). Prior to that, Mr. Ford was a partner of Ernst & Young LLP, a multinational professional services firm offering assurance, tax, consulting, and advisory services, where he served in various roles of increasing responsibility from 1971 until his retirement in 2008. Mr. Ford currently serves as a director of NRG Yield, Inc., the primary vehicle through which NRG Energy, Inc. owns, operates and acquires contracted renewable and conventional generation and thermal infrastructure assets, and FSIC BDC, a specialty finance company that invests primarily in the debt securities of private U.S. middle-market companies. Mr. Ford previously served as a member of the board of GulfMark Offshore, Inc. (2009 to 2017).
Mr. Ford’s qualifications to serve as a director include his extensive financial, audit, accounting, and retail experience as a partner of a large public accounting firm. The Board also considered Mr. Ford’s experience as a director and committee member of other public and private companies.
John R. Hartmann
has been a Director of the General Partner since 2016. Mr. Hartmann is Chief Executive Officer and President of True Value Company LLC, a global wholesaler of hardware and related merchandise at retail locations worldwide (since May 2013). Mr. Hartmann previously served as the Chief Executive Officer of Mitre 10 (New Zealand) Limited, a chain of home improvement stores (2010 to 2013). From 2006 to 2010, Mr. Hartmann held a number of senior executive leadership positions at HD Supply, an industrial distributor in North America, including Chief Operating Officer - Electrical & Plumbing/HVAC Divisions, Vice President - Operations and Sourcing, and Director - Strategic Business Development. From 2002 to 2006, he held a number of positions with The Home Depot, including Director of Strategic Business Development, Senior Director of Long-Range Planning & Strategy and Senior Director of Risk Management. Mr. Hartmann also previously served as Vice President, Corporate Services at Cardinal Health, a worldwide healthcare services and products company (1998 to 2002) and was a Supervisory Special Agent and FBI Academy Instructor with the Federal Bureau of Investigation (1988 to 1998).
Mr. Hartmann’s qualifications to serve as a director include his extensive experience and expertise, including as Chief Executive Officer, as well as his valuable management and leadership skills, in the retail and marketing sectors. The Board also considered his strong leadership, strategic planning, business development and risk management expertise.
Frank S. Hermance
was elected a Director of the General Partner on June 15, 2018. Mr. Hermance is the retired Chairman (2001 to 2017) and Chief Executive Officer (1999 to 2016) of AMETEK, Inc., a global manufacturer of electronic instruments and electromechanical devices. He previously served as AMETEK’s President and Chief Operating Officer (1996 to 1999). Mr. Hermance also serves as a Director of UGI Corporation (since 2011), the General Partners’ parent company, and UGI Utilities, Inc. (since 2011), an affiliate of the General Partner, as Director Emeritus of the Greater Philadelphia Alliance for Capital and Technologies, as Vice Chairman of the World Affairs Council of Philadelphia, and as an advisory board member at American Securities LLP, a private equity firm. He previously served as a member of the Board of Trustees of the Rochester Institute of Technology (until 2016).
Mr. Hermance’s qualifications to serve as a director include his extensive senior management experience in the roles of Chairman, Chief Executive Officer, President and Chief Operating Officer of a large global company. The Board also considered Mr. Hermance’s relevant experience in the areas of logistics, distribution, risk management, mergers and acquisitions, corporate governance, human resources management and executive compensation.
William J. Marrazzo
has been a Director of the General Partner since 2001. He is Chief Executive Officer and President of WHYY, Inc., a public television and radio company in the nation’s fourth largest market (since 1997). Previously, he was Chief Executive Officer and President of Roy F. Weston, Inc., a publicly traded corporation (1988 to 1997), served as Water Commissioner for the Philadelphia Water Department (1971 to 1988) and was Managing Director for the City of Philadelphia (1983 to 1984). Mr. Marrazzo previously served as a member of the board of American Water Works Company, Inc. (2003 to 2016).
Mr. Marrazzo’s qualifications to serve as a director include his extensive experience as Chief Executive Officer of both non-profit and public companies, and his city government leadership experience. Mr. Marrazzo’s senior-level executive experience in both the public and private sectors provide him with financial, strategic planning, risk management, business development and operational expertise.
Anne Pol
has been a Director of the General Partner since 2013. Mrs. Pol retired in 2005 as President and Chief Operating Officer of Trex Enterprises Corporation, a high technology research and development company (2001 to 2005). She previously served as Senior Vice President (1998 to 2001) and Vice President (1996 to 1998) of Thermo Electron Corporation, an environmental monitoring and analytical instruments company and a major producer of recycling equipment, biomedical products and alternative energy systems. Mrs. Pol also served as President of Pitney Bowes Shipping and Weighing Systems Division, a business unit of Pitney Bowes Inc., a company that sells mailing and related business equipment (1993 to 1996); Vice President of New Product Programs in the Mailing Systems Division of Pitney Bowes Inc. (1991 to 1993); and Vice President of Manufacturing Operations in the Mailing Systems Division of Pitney Bowes Inc. (1990 to 1991). Mrs. Pol also serves as a Director (since 1998) of UGI Corporation, the General Partner’s parent company, and UGI Utilities, Inc., an affiliate of the General Partner.
Mrs. Pol’s qualifications to serve as a director include her strategic planning, business development and technology experience as a senior-level executive with a diversified high-technology company. Mrs. Pol also possesses an important understanding of, and extensive experience in the areas of executive compensation, human resource management, corporate governance and government regulation.
Pedro A. Ramos
has been a Director of the General Partner since 2015. Mr. Ramos is the President and Chief Executive Officer of The Philadelphia Foundation, a charitable foundation committed to improving the quality of life in the five-county Philadelphia region (since 2015). Previously, Mr. Ramos served as a Partner with the law firm Schnader Harrison Segal & Lewis LLP (August 2013 to July 2015). From June 2009 until the firm’s attorneys joined Schnader Harrison Segal & Lewis LLP in August 2013, he served as a Partner with the law firm Trujillo Rodriguez & Richards, LLC. Prior to that, Mr. Ramos was a Partner with the law firm Blank Rome LLP (2007 to 2009). Mr. Ramos served as Managing Director of the City of Philadelphia (2005 to 2007) and as City Solicitor of the City of Philadelphia (2004 to 2005). Additionally, Mr. Ramos served as Vice President and Chief of Staff to the President of the University of Pennsylvania (2002 to 2004), and prior to that, as a Partner and Associate with the law firm Ballard Spahr LLP (1992 to 2001).
Mr. Ramos was formerly Chairman of the Philadelphia School Reform Commission, a gubernatorial appointment (2011 to 2013). Mr. Ramos also serves as a director of FS Investment Corporation, a publicly traded business development company that provides companies with customized credit solutions, and the Independence Health Group, a private, for-profit health insurance company.
Mr. Ramos’ qualifications to serve as a director include his expertise and extensive business experience as an attorney at various law firms advising clients in the areas of compliance, transactional matters, strategy, risk management, internal investigations, fiduciary responsibility, pension, executive compensation and employee benefits laws. The Board also considered his strong leadership experience by virtue of his varied and extensive civic and community engagement activities, including Managing Director of the City of Philadelphia and Vice President and Chief of Staff to the President of the University of Pennsylvania.
K. Richard Turner
has been a Director of the General Partner since 2012. Mr. Turner is currently Managing Director, Altos Energy Partners, a private equity firm (since 2012), after having retired as Senior Managing Director from the Stephens Group, LLC, a private, family-owned investment firm (1983 to 2011). Mr. Turner previously served as a member of the boards for the general partner of Energy Transfer Equity, L.P. (2002 to 2018), Sunoco LP (2014 to 2018), Energy Transfer Partners, L.P. (2004 to 2011) and North American Energy Partners, Inc. (2003 to 2016).
Mr. Turner’s qualifications to serve as a director include his extensive experience as a private equity executive, including serving in accounting and investment roles. Mr. Turner is a non-practicing certified public accountant and also has public accounting experience. The Board also considered Mr. Turner’s public company directorship and committee experience, including serving on boards and audit committees of other energy companies and master limited partnerships, providing him with significant industry experience.
Ted J. Jastrzebski
is the General Partner’s Principal Financial Officer (since September 18, 2018) and is the Chief Financial Officer of UGI Corporation, the General Partner’s parent company (since May 2018). From 2013 until 2018, Mr. Jastrzebski served as Executive Vice President and Chief Financial Officer of Qurate Retail Group, which is comprised of QVC, HSN, Cornerstone Brands, and Zulily. Previously, Mr. Jastrzebski held various positions at The Hershey Company, including Senior Vice President and President, Hershey Americas (2011 to 2013), Senior Vice President and President, Hershey International (2007 to 2010) and Vice President, Finance, Hershey International (2004 to 2007). Mr. Jastrzebski also served as Senior Vice President, Finance, IT and Administration and Chief Financial Officer of CARE (2002 to 2004) and as Vice President and Chief Financial Officer of Project Hope (1999 to 2002).
Troy E. Fee
is Vice President - Human Resources and Strategic Initiatives of the General Partner (since 2013). Mr. Fee served as Senior Vice President - Human Resources (2007 to 2013) at PEP BOYS, a retail and service chain serving the automotive aftermarket. Prior to joining PEP BOYS, Mr. Fee served as Senior Vice President, Human Resources Shared Services (2006 to 2007) of TBC Corporation, a marketer of tires for the automotive replacement market and as Vice President - Human Resources of TBC Retail Group (2003 to 2006). Mr. Fee also served in various positions at Sears, Roebuck & Company, a nationwide retail company, including as Director Human Resources - Sears Automotive Group (2002 to 2003), Northwest Regional Human Resources Director - Sears Stores (2001 to 2002), Labor Relations Manager - Sears (2000 to 2001), and Regional Human Resources Manager - Sears Automotive (1999 to 2000). Mr. Fee held various positions of increasing responsibility at Sears, Roebuck & Company from 1987 to 1999.
Monica M. Gaudiosi
is Vice President (since 2012), General Counsel (since 2015) and Secretary (since 2012) of the General Partner. Ms. Gaudiosi is also Vice President, General Counsel and Secretary of UGI Corporation, the General Partner’s parent company, and UGI Utilities, Inc., an affiliate of the General Partner (since 2012). Prior to joining the General Partner, Ms. Gaudiosi served as a Senior Vice President and General Counsel (2007 to 2012) and Senior Vice President and Associate General Counsel (2005 to 2007) of Southern Union Company. Prior to joining Southern Union Company in 2005, Ms. Gaudiosi held various positions with General Electric Capital Corporation (1997 to 2005). Before joining General Electric Capital Corporation, Ms. Gaudiosi was an associate at the law firms of Hunton & Williams (1994 to 1997) and Sutherland, Asbill & Brennan (1988 to 1994).
Anthony D. Rosback
is Vice President and Chief Operating Officer of the General Partner (since 2015). Mr. Rosback served as Senior Director, West Region Operations and North American Logistics of Williams Scotsman, Inc., a mobile and modular space and storage solution company (2014 to 2015). He previously served as Senior Vice President, General Manager, West of The Brickman Group Ltd., a commercial landscaping and property maintenance company (2013 to 2014). Previously, Mr. Rosback served as Area President (2012 to 2013), Regional Vice President, Operations (2010 to 2012), Vice President, Operations Support (2008 to 2010) and Vice President, Sales and Marketing (2006 to 2008) at Republic Services, Inc., a provider of recycling and non-hazardous waste services in the U.S. From 1999 to 2006, Mr. Rosback served as an Assistant Vice President at Cintas Corporation, a provider of uniforms, first aid and safety and fire protection products and services.
Laurie A. Bergman
is Controller and Chief Accounting Officer of the General Partner (since May 2016). Ms. Bergman joined the General Partner in 2006 as Manager, Disbursements and has held various positions at the General Partner, including Group Director, Financial Planning and Financial Operations (2013 to 2016), Director-Financial Planning and Analysis (2012 to 2013), Assistant Controller (2011 to 2012), Team Captain - Project Foundation (2009 to 2011), and Director, Revenue Management and Disbursements (2007 to 2009). Previously, Ms. Bergman held various financial positions at CIGNA Corp.
Director Independence
The Board of Directors of the General Partner has determined that, other than Messrs. Gallagher, Perreault and Walsh, no director has a material relationship with the Partnership and each is an “independent director” as defined under the rules of the New York Stock Exchange. The Board of Directors has established the following guidelines to assist it in determining director independence:
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(i)
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service by a director on the Board of Directors of UGI Corporation and its subsidiaries in and of itself will not be considered to result in a material relationship between such director and the Partnership; and
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(ii)
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if a director serves as an officer, director or trustee of a non-profit organization, charitable contributions to that organization by the Partnership and its affiliates that do not exceed the greater of $1,000,000 or two percent of the charitable organization’s total revenues per year will not be considered to result in a material relationship between such director and the Partnership.
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In making its determination of independence, the Board of Directors considered charitable contributions and ordinary business transactions between the Company, or affiliates of the Company, and companies where our Directors are employed or serve as directors, as well as Mr. Ramos’ current service on the board of the parent company of Independent Blue Cross, with which UGI and/or its subsidiaries contracts for employee benefits. All such transactions were in compliance with either the independence rules of the New York Stock Exchange or the categorical standard set by the Board of Directors for determining director independence.
Executive Sessions
Non-management directors meet at regularly scheduled executive sessions without management present. These sessions are led by Mr. Schlanger, who currently holds the position of Presiding Director.
Communications with the Board of Directors and Non-management Directors
You may contact the Board of Directors, an individual non-management director, or the non-management Directors as a group by writing to them c/o AmeriGas Propane, Inc., P.O. Box 965, Valley Forge, PA 19482. These procedures have been posted on the Partnership’s website at
www.amerigas.com
; see “Investor Relations, About AmeriGas, Corporate Governance, Contact AmeriGas Propane, Inc. Board of Directors.”
Any communications directed to the Board of Directors, an individual non-management Director, or the non-management Directors as a group from employees or others that concern complaints regarding accounting, financial statements, internal controls, ethical, or auditing matters will be handled in accordance with procedures adopted by the Audit Committee.
All other communications directed to the Board, an individual non-management Director, or the non-management Directors as a group are initially reviewed by the Corporate Secretary. In the event the Corporate Secretary has any question as to whether the directors should be made aware of any issue raised, the Corporate Secretary shall be entitled to consult with the Chair of the Board in making such determination. The Corporate Secretary will distribute communications to the Board, an individual director, or to selected directors, depending on the content of the communication. The Corporate Secretary maintains a log of all such communications that is available for review for one year upon request of any member of the Board.
Typically, we do not forward to our Board communications from our shareholders or other parties that are of a personal nature or are not related to the duties and responsibilities of the Board, including, but not limited to junk mail and mass mailings, resumes and other forms of job inquiries, opinion surveys and polls, business solicitations or advertisements.
Section 16(a) — Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires directors and certain officers of the General Partner and any 10% beneficial owners of the Partnership to send reports of their beneficial ownership of Common Units and changes in beneficial ownership to the Securities and Exchange Commission. Based on our records, we believe that, during Fiscal 2018, all of such reporting persons complied with all Section 16(a) reporting requirements applicable to them.
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ITEM 11.
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EXECUTIVE COMPENSATION
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation/Pension Committee of the General Partner are Mrs. Pol (Chair) and Messrs. Marrazzo and Schlanger. None of the members is a former or current officer or employee of the General Partner or any of its subsidiaries. None of the members has any relationship required to be disclosed under this caption under the rules of the Securities and Exchange Commission.
REPORT OF THE COMPENSATION/PENSION COMMITTEE
The Compensation/Pension Committee has reviewed and discussed with management the
Compensation Discussion and Analysis.
Based on this review and discussion, the Committee recommended to the General Partner’s Board of Directors, and the Board of Directors approved, the inclusion of the
Compensation Discussion and Analysis
in the Partnership’s Annual Report on Form 10-K for the year ended September 30, 2018.
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Compensation/Pension Committee
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Anne Pol, Chair
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William J. Marrazzo
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Marvin O. Schlanger
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COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this Compensation Discussion and Analysis, we address the compensation paid or awarded to the following executive officers: Hugh J. Gallagher, our President and Chief Executive Officer, since September 18, 2018, and our former Vice President - Finance and Chief Financial Officer until September 18, 2018; Ted J. Jastrzebski, our Principal Financial Officer, since September 18, 2018; John L. Walsh, our Chairman; Monica M. Gaudiosi, our Vice President, General Counsel and Secretary; Anthony D. Rosback, our Vice President and Chief Operating Officer; and Jerry E. Sheridan, our former President and Chief Executive Officer, through September 18, 2018. We refer to these executive officers as our “named executive officers” (“NEOs”) for Fiscal 2018. Messrs. Gallagher, Rosback, and Sheridan are referred to collectively as the “AmeriGas NEOs.”
Compensation decisions for Mr. Gallagher, in his capacity as President and Chief Executive Officer, and Mr. Sheridan were made by the independent members of the Board of Directors of the General Partner, after receiving the recommendation of its Compensation/Pension Committee, while compensation decisions for Mr. Gallagher, in his capacity as Vice President - Finance and Chief Financial Officer, and Mr. Rosback were made by the General Partner’s Compensation/Pension Committee. Compensation decisions for Mr. Walsh were made by the independent members of the UGI Corporation Board of Directors after receiving the recommendations of its Compensation and Management Development Committee, while compensation decisions for Mr. Jastrzebski and Ms. Gaudiosi were made by the UGI Corporation Compensation and Management Development Committee.
For ease of understanding, we will use the term “we” to refer to AmeriGas Propane, Inc. and/or UGI Corporation and the term “Committee” or “Committees” to refer to the AmeriGas Propane, Inc. Compensation/Pension Committee and/or the UGI Corporation Compensation and Management Development Committee as appropriate in the relevant compensation discussions, unless the context indicates otherwise. We will use the term “Company” or “General Partner” to refer to AmeriGas Propane, Inc.
Executive Summary
Objectives of Our Compensation Program
Our compensation program for named executive officers is designed to provide a competitive level of total compensation; motivate and encourage our executives to contribute to our financial success; retain talented and experienced executives; and reward our executives for leadership excellence and performance that promotes sustainable growth in unitholder value.
Fiscal 2018 Components
The following chart summarizes the principal elements of our Fiscal 2018 executive compensation program. We describe these elements, as well as retirement, severance and other benefits, in more detail later in this Compensation Discussion and Analysis.
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Component
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Principal Objectives
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Fiscal 2018 Compensation Actions
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Base Components
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Salary
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Compensate executives as appropriate for his or her position, experience and responsibilities based on market data.
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Merit salary increases ranged from 1.5% to 5.0%.
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Annual Bonus Awards
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Motivate executives to focus on achievement of our annual business objectives.
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Target incentives ranged from 50% to 125% of salary. Actual bonus payouts to our named executive officers was 92% of target for the AmeriGas NEOs and 118% of target for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, primarily based on achievement of financial goals.
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Long-Term Incentive Awards
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Performance Units
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Align executive interests with unitholder and shareholder interests; create a strong financial incentive for achieving long-term performance goals by encouraging total AmeriGas common unitholder return that compares favorably to other energy master limited partnerships and its two propane peer companies (or total UGI shareholder return that compares favorably to other utility-based companies); further align long-term compensation with strategic goals and objectives related to customer gain/loss performance.
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The number of performance units awarded in Fiscal 2018 ranged from 2,400 to 37,000. A portion of the AmeriGas NEOs’ performance units (payable in AmeriGas Partners common units, other than for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi) will be earned based on total unitholder return (“TUR”) relative to master limited partnerships in the Alerian MLP Index, modified by AmeriGas Partners’ TUR performance as compared to the other two propane distribution companies in the Alerian MLP Index, over a three-year period. The remaining portion of performance units awarded in Fiscal 2018 to the AmeriGas NEOs will be payable in AmeriGas Partners common units provided a customer gain/loss metric is met. For Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, performance units will be payable in UGI Corporation common stock based on total shareholder return of UGI stock relative to entities in an industry index over a three-year period.
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UGI Stock Options
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Align executive interests with shareholder interests; create a strong financial incentive for achieving or exceeding long-term performance goals, as the value of stock options is a function of the price of UGI stock.
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The number of shares underlying option awards ranged from 13,000 shares to 260,000 shares.
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Restricted Units
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Attract and retain a new executive.
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In connection with Mr. Jastrzebski’s commencement of employment, he received a restricted unit award of 12,000 shares of UGI Corporation common stock, 6,000 of which will vest on the second anniversary of his date of hire and 6,000 of which will vest on the third anniversary of his date of hire.
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Restricted Units (Discretionary award to Mr. Rosback)
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Retention of key member of the senior management team following organizational changes at the General Partner in Fiscal 2018.
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Mr. Rosback received 2,856 AmeriGas Partners restricted units with a grant date of November 15, 2018 and a vesting date three years from the date of grant, provided Mr. Rosback is an employee as of the vesting date.
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Compensation and Corporate Governance Practices
The Committee seeks to implement and maintain sound compensation and corporate governance practices, which include the following:
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The Committee is composed entirely of directors who are independent, as defined in the corporate governance listing standards of the New York Stock Exchange.
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The Committee utilizes the services of Pay Governance LLC (“Pay Governance”), an independent outside compensation consultant.
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AmeriGas Partners allocates a substantial portion of compensation to performance-based compensation. In Fiscal 2018, 71 percent of the principal compensation components, in the case of Mr. Sheridan, and 53 percent to 81 percent of the principal compensation components, in the case of all other named executive officers, were variable and tied to financial and business performance or total shareholder return.
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AmeriGas Partners awards a substantial portion of compensation in the form of long-term awards, namely stock options and performance units, so that executive officers’ interests are aligned with unitholders and our long-term performance.
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Annual bonus opportunities for the named executive officers are based primarily on key financial metrics. Similarly, long-term incentives for the AmeriGas NEOs were based on the relative performance of AmeriGas Partners common units and customer gain/loss performance. In the case of Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, long-term incentives were based on UGI Corporation common stock values and relative stock price performance.
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We require termination of employment for payment under our change in control agreements (referred to as a “double trigger”). In addition, we require a double trigger for the accelerated vesting of equity awards in the event of a change in control. We also have not entered into change in control agreements providing for tax gross-up payments under Section 280G of the Internal Revenue Code since 2010. See “Potential Payments Upon Termination of Employment or Change in Control - Change in Control Agreements.”
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We have meaningful equity ownership guidelines. See “Equity Ownership Policy” in this Compensation Discussion and Analysis for information on equity ownership.
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We have a recoupment policy for incentive-based compensation paid or awarded to current and former executive officers in the event of a restatement due to material non-compliance with financial reporting requirements.
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We have a policy prohibiting directors and executive officers from (i) hedging the securities of AmeriGas Partners and UGI Corporation, (ii) holding AmeriGas Partners and UGI Corporation securities in margin accounts as collateral for a margin loan, and (iii) pledging the securities of AmeriGas Partners and UGI Corporation.
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The Company’s Board of Directors adopted an annual limit of $400,000 with respect to individual Director equity awards. In establishing this limit, the Board of Directors considered competitive pay levels as well as the need to retain its current Directors and attract new directors with the relevant skills and attributes desired in director candidates.
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The Compensation Committee believes that, during Fiscal 2018, there was no conflict of interest between Pay Governance and the Compensation Committee. Additionally, the Compensation Committee believes that Pay Governance was independent. In reaching the foregoing conclusions, the Compensation Committee considered the factors set forth by the New York Stock Exchange regarding compensation committee advisor independence.
Compensation Philosophy and Objectives
Our compensation program for our named executive officers is designed to provide a competitive level of total compensation necessary to attract and retain talented and experienced executives. Additionally, our compensation program is intended to motivate and encourage our executives to contribute to our success and reward our executives for leadership excellence and performance that promotes sustainable growth in unitholder and shareholder value.
In Fiscal 2018, the components of our compensation program included salary, annual bonus awards, long-term incentive compensation (performance unit awards, restricted unit awards and UGI Corporation stock option grants),
perquisites, retirement benefits and other benefits, all as described in greater detail in this Compensation Discussion and Analysis. We believe that the elements of our compensation program are essential components of a balanced and competitive compensation program to support our annual and long-term goals.
Determination of Competitive Compensation
In determining Fiscal 2018 compensation, the Committees engaged Pay Governance as their compensation consultant. The primary duties of Pay Governance were to:
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Provide the Committees with independent and objective market data;
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Conduct compensation analysis;
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Review and advise on pay programs and salary, target bonus and long-term incentive levels applicable to our executives;
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Review components of our compensation program as requested from time to time by the Committees and recommend plan design changes as appropriate; and
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Provide general consulting services related to the fulfillment of the Committees’ charters.
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Pay Governance has not provided actuarial or other services relating to pension and post-retirement plans or services related to other benefits to us or our affiliates, and generally all of its services are those that it provides to the Committees. Pay Governance has provided market data for positions below the senior executive level as requested by management as well as market data for director compensation, but its fees for this work historically are modest relative to its overall fees.
In assessing competitive compensation, we referenced market data provided to us in Fiscal 2017 by Pay Governance. Pay Governance provided us with two reports: the “2017 Executive Cash Compensation Review” and the “2017 Executive Long-Term Incentive Review.” We do not benchmark against specific companies in the databases utilized by Pay Governance in preparing its reports. Our Committees do benchmark, however, by using Pay Governance’s analysis of compensation databases that include numerous companies as a reference point to provide a framework for compensation decisions. Our Committees exercise discretion and also review other factors, such as internal equity (both within and among our business units) and sustained individual and company performance, when setting our executives’ compensation.
For the AmeriGas NEOs, the executive compensation analysis is based on general industry data in Willis Towers Watson’s 2017 General Industry Executive Compensation Database (“General Industry Database”). For Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, the analysis was based on the General Industry Database and Willis Towers Watson’s 2017 Energy Services Executive Compensation Database (“Energy Services Database”). Pay Governance weighted the General Industry Database survey data 75 percent and the Energy Services Database survey data 25 percent and added the two. For example, if the relevant market rate for a particular executive position derived from information in the General Industry Database was $100,000 and the relevant market rate derived from information in the Energy Services Database was $90,000, Pay Governance would provide us with a market rate of $97,500 for that position (($100,000 x 75 percent = $75,000) plus ($90,000 x 25 percent = $22,500)). The impact of weighting information derived from the two databases is to obtain a market rate designed to approximate the relative sizes of our nonutility and utility businesses. Willis Towers Watson’s 2017 General Industry Database is comprised of approximately 500 companies from a broad range of industries, including oil and gas, aerospace, automotive and transportation, chemicals, computer, consumer products, electronics, food and beverages, metals and mining, pharmaceutical and telecommunications. The Willis Towers Watson Energy Services Database is comprised of approximately 125 companies, primarily utilities.
We generally seek to position a named executive officer’s salary grade so that the midpoint of the salary range for his or her salary grade approximates the 50th percentile of the “going rate” for comparable executives included in the executive compensation database material referenced by Pay Governance. By comparable executive, we mean an executive having a similar range of responsibilities and the experience to fully perform these responsibilities. Pay Governance size-adjusted the survey data to account for the relative revenues of the survey companies in relation to ours. In other words, the adjustment reflects the expectation that a larger company would be more likely to pay a higher amount of compensation for the same position than a smaller company. Using this adjustment, Pay Governance developed going rates for positions comparable to those of our executives, as if the companies included in the respective databases had revenues similar to ours. We believe that Pay Governance’s application of size adjustments to applicable positions in these databases is an appropriate method for establishing market rates. After consultation with Pay Governance, we considered salary grade midpoints that were within 15 percent of the median going rate developed by Pay Governance to be competitive.
Elements of Compensation
Salary
Salary is designed to compensate executives for their level of responsibility and sustained individual performance. We pay our executive officers a salary that is competitive with that of other executive officers providing comparable services, taking into account the size and nature of the business of AmeriGas Partners and UGI Corporation, as the case may be.
As noted above, we seek to establish the midpoint of the salary grade for the positions held by our named executive officers at approximately the 50th percentile of the going rate for executives in comparable positions. Based on the data provided by Pay Governance in July 2017, we increased the range of salary in each salary grade for Fiscal 2018 for each named executive officer, other than Mr. Walsh, by 2 percent. The Committee established Mr. Walsh’s Fiscal 2018 salary grade midpoint at the market median of comparable executives as identified by Pay Governance based on its analysis of the executive compensation databases. For Mr. Walsh, this resulted in an increase of the range of salary in his salary grade from the prior year of 2 percent.
For Fiscal 2018, the merit increases were targeted at 3 percent, but individual increases varied based on performance evaluations and the individual’s position within the salary range. Performance evaluations were based on qualitative and subjective assessments of each individual’s contribution to the achievement of our business strategies, including the development of growth opportunities and leadership in carrying out our talent development program. Messrs. Sheridan and Walsh, in their capacities as chief executive officers of the General Partner and UGI Corporation, respectively, had additional goals and objectives for Fiscal 2018, as established during the first quarter of Fiscal 2018. Mr. Sheridan’s annual goals and objectives for Fiscal 2018 included achievement of annual financial goals, execution of a plan to centralize AmeriGas Propane’s operations, execution of AmeriGas Propane’s safety improvement plan, and implementation of AmeriGas Propane’s growth strategies, including with respect to customer growth and retention and customer service initiatives. Mr. Walsh’s annual goals and objectives included the development of a senior executive succession plan, the enterprise-wide alignment of the Company’s critical processes, the recruitment of experienced individuals to fill key roles within the organization, achievement of annual financial and strategic goals, and leadership in identifying investment opportunities for the Company and its subsidiaries. Mr. Gallagher did not establish additional goals and objectives in Fiscal 2018 in connection with his promotion to the role of President and Chief Executive Officer of the General Partner. Goals and objectives have been established for Mr. Gallagher in his capacity as President and Chief Executive Officer for fiscal year 2019. All named executive officers received a salary in Fiscal 2018 that was within 90 percent to 117 percent of the midpoint for his or her salary range.
The following table sets forth each named executive officer’s Fiscal 2018 salary.
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Name
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Salary
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Percentage Increase
over Fiscal 2017 Salary
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Hugh J. Gallagher (1)
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$354,081
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5.0%
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Ted J. Jastrzebski (2)
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$650,000
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N/A
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John L. Walsh
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$1,196,845
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2.0%
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Monica M. Gaudiosi
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$475,345
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3.5%
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Anthony D. Rosback
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$391,508
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1.5%
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Jerry E. Sheridan
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$563,407
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2.0%
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(1) Effective September 18, 2018, Mr. Gallagher’s base salary increased to $460,000 in connection with his promotion to the role of President and Chief Executive Officer of the General Partner.
(2) Mr. Jastrzebski’s salary was prorated in Fiscal 2018 based on his commencement of employment with UGI Corporation. As a result, Mr. Jastrzebski’s actual salary received in Fiscal 2018 (based on his employment commencement date of May 22, 2018) was $210,000.
Annual Bonus Awards
Our annual bonus plans provide our named executive officers with the opportunity to earn an annual cash incentive, provided that certain performance goals are satisfied. Our annual cash incentive is intended to motivate our executives to focus on the achievement of our annual business objectives by providing competitive incentive opportunities to those executives who have the ability to significantly impact our financial performance. We believe that basing a meaningful portion of an executive’s compensation on financial performance emphasizes our pay for performance philosophy and will result in the enhancement of unitholder or shareholder value. We also believe that annual bonus payments to our most senior executives should reflect our overall financial results for the fiscal year and that the Partnership’s earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted, and UGI’s diluted earnings per share (“EPS”), as adjusted, provide straightforward, “bottom line” measures of performance.
The Partnership’s Fiscal 2018 EBITDA is adjusted to exclude changes in unrealized gains or losses on commodity derivative instruments not associated with current period transactions at AmeriGas Propane and other gains and losses that AmeriGas Propane’s competitors do not necessarily have (“Adjusted EBITDA”) and UGI Corporation’s Fiscal 2018 EPS is adjusted to exclude (i) the impact of changes in unrealized gains and losses on commodity and certain foreign currency derivative instruments not associated with current period transactions, (ii) integration expenses associated with the Finagaz acquisition in France, (iii) losses on extinguishments of debt, (iv) the remeasurement impact on net deferred tax liabilities from a change in French corporate income tax rate and U.S. tax reform legislation, and (v) the impairment of AmeriGas Propane, L.P.’s tradenames and trademarks (“Adjusted EPS”).
In determining each executive position’s target award level under our annual bonus plans, we considered database information derived by Pay Governance regarding the percentage of salary payable upon achievement of target goals for executives in similar positions at other companies as described above. In establishing the target award level, we positioned the amount at approximately the 50th percentile for comparable positions.
The AmeriGas NEOs participate in the AmeriGas Propane, Inc. Executive Annual Bonus Plan (the “AmeriGas Bonus Plan”). For the AmeriGas NEOs, 90 percent of the target award opportunity was based on AmeriGas Partners’ Adjusted EBITDA, subject to modification based on achievement of a safety performance goal, as described below. The other 10 percent was based on achievement of a customer service goal, but contingent on a payout under the financial component of the award. We believe that customer service for AmeriGas Partners is an important component of the bonus calculation because we foresee no or minimal growth in total demand for propane in the next several years, and, therefore, customer service is an important factor in our ability to improve the long-term financial performance of AmeriGas Partners. We also believe that achievement of superior safety performance is an important short-term and long-term strategic initiative and is therefore included as a component of the AmeriGas Propane bonus calculation.
Messrs. Walsh and Jastrzebski and Ms. Gaudiosi participate in the UGI Corporation Executive Annual Bonus Plan (the “UGI Bonus Plan”). For reasons similar to those underlying our use of Adjusted EBITDA as a goal for the AmeriGas NEOs, the entire target award opportunity for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi was based on UGI’s Adjusted EPS, which was then modified based on the achievement of a safety performance goal based on weighted average safety modifier results from AmeriGas Propane, UGI Utilities, Inc., UGI Energy Services, LLC, and UGI International, LLC. We also believe that Adjusted EPS is an appropriate measure for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi because their duties encompass UGI and its affiliated businesses, including the General Partner and AmeriGas Partners. Adjusted EPS is not subject to adjustment based on customer growth or similar metrics, but we believe that achievement of superior safety performance is an important short-term and long-term strategic initiative of UGI Corporation and is therefore included as a component of the UGI Corporation bonus calculation.
Each Committee has discretion under our executive annual bonus plans to (i) adjust Adjusted EBITDA and Adjusted EPS for extraordinary items or other events as the Committee deems appropriate, (ii) increase or decrease the amount of an award determined to be payable under the bonus plan by up to 50 percent, and (iii) review quantitative factors (such as performance) and qualitative factors (such as individual performance and overall contributions to the General Partner and UGI) when determining the annual bonus to be paid to an executive who terminates employment during the fiscal year on account of retirement, death or disability. The AmeriGas Bonus Plan and the UGI Bonus Plan each provides that, unless the Committee determines otherwise, all executive officers who have not fulfilled their respective equity ownership requirements receive as part of their ongoing compliance up to 10 percent of their gross annual bonus in fully vested AmeriGas Partners common units or UGI Corporation stock, as applicable.
As noted above, the 90 percent component of the bonus award opportunity for each of the AmeriGas NEOs was based on Adjusted EBITDA of AmeriGas Partners and structured so that no amount would be paid unless AmeriGas Partners’ Adjusted EBITDA was at least 80 percent of the target amount, while 200 percent of the target bonus could be payable if Adjusted EBITDA equaled or exceeded 120 percent of the target amount. The percentage of target bonus payable based on the level of achievement of Adjusted EBITDA is referred to as the “Adjusted EBITDA Leverage Factor.” The Adjusted EBITDA Leverage Factor is then modified to reflect the degree of achievement of a predetermined safety performance objective tied to AmeriGas Propane’s Fiscal 2018 Occupational Safety and Health Administration (“OSHA”) recordables (“Safety Leverage Factor”). For Fiscal 2018, the percentage representing the Safety Leverage Factor ranged from 80 percent if the performance target was not achieved, to a maximum of 120 percent if performance exceeded the target. We believe the Safety Leverage Factor for Fiscal 2018 represented an achievable but challenging performance target. Once the Adjusted EBITDA Leverage Factor and Safety Leverage Factor are determined, the Adjusted EBITDA Leverage Factor is multiplied by the Safety Leverage Factor to obtain a total adjusted leverage factor (the “Total Adjusted Leverage Factor”). The Total Adjusted Leverage Factor is then multiplied by the target bonus opportunity to arrive at the 90 percent portion of the bonus award payable for the fiscal year. The actual Adjusted EBITDA achieved for Fiscal 2018 was $605.5 million. The applicable range for targeted Adjusted EBITDA for bonus purposes for Fiscal 2018 was $650 million to $690 million. The remaining 10 percent component of the bonus award opportunity was based on customer service goals, but this portion of the bonus award is only payable if there is at least a threshold payout under the Adjusted EBITDA financial component of the award. For Fiscal 2018, AmeriGas Propane engaged a third party company to conduct surveys of the Partnership’s customers in order to better understand customer satisfaction with services provided by the Partnership. Each individual survey is given an overall satisfaction score and the scores are then aggregated by the third party company to calculate a total score known as a net promoter score. The award opportunity for the customer service component for each of the AmeriGas NEOs was structured so that no amount would be paid unless the net promoter score was at least 85 percent of the net promoter score target, with the target bonus award being paid out if the net promoter score was 100 percent of the targeted goal. The maximum award, equal to 150 percent of the targeted award, would be payable if the net promoter score exceeded the net promoter score target. Based on (i) the Adjusted EBITDA Leverage Factor, as modified by the Total Adjusted Safety Leverage Factor (which exceeded the targeted amount), and (ii) the net promoter score (which was slightly below the net promoter score target), the AmeriGas NEOs each received a bonus payout equal to 91.7 percent of his target award for Fiscal 2018.
The bonus award opportunity for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi was structured so that no amount would be paid unless UGI’s Adjusted EPS, as modified based on the achievement of a safety performance goal based on weighted average safety modifier results from AmeriGas Propane, UGI Utilities, Inc., UGI Energy Services, LLC, and UGI International, LLC was
at least 80 percent of the target amount, with the target bonus award being paid out if UGI’s Adjusted EPS was 100 percent of the targeted Adjusted EPS. The maximum award, equal to 200 percent of the target award, would be payable if Adjusted EPS equaled or exceeded 120 percent of the Adjusted EPS target. The targeted Adjusted EPS for bonus purposes for Fiscal 2018 was established to be in the range of $2.45 to $2.65 per UGI common share. Adjusted EPS achieved for Fiscal 2018 was $2.74 and Adjusted EPS for bonus purposes, as adjusted to exclude all current-period impacts of U.S. tax reform legislation and the change in French corporate income tax rate, was $2.55. As a result, Messrs. Walsh and Jastrzebski and Ms. Gaudiosi each received a bonus payout equal to 118.2 percent of his or her target award for Fiscal 2018.
Long-Term Compensation - Fiscal 2018 Equity Awards
Background and Determination of Grants - Stock Options and Performance Units
Our long-term incentive compensation is intended to create a strong financial incentive for achieving or exceeding long-term performance goals and to encourage executives to hold a significant equity stake in our Company in order to align the executives’ interests with shareholder interests. Additionally, we believe our long-term incentives provide us the ability to attract and retain talented executives in a competitive market.
Our long-term compensation for Fiscal 2018 included UGI Corporation stock option grants and either AmeriGas Partners or UGI Corporation performance unit awards. AmeriGas Partners performance units were awarded under the 2010 AmeriGas Propane, Inc. Long-Term Incentive Plan on behalf of AmeriGas Partners, L.P. (the “2010 Plan”). UGI Corporation stock options and performance units were awarded under the UGI Corporation 2013 Omnibus Incentive Compensation Plan (the “2013 UGI Plan”). UGI Corporation stock options generally have a term of ten years and become exercisable in three equal annual installments beginning on the first anniversary of the grant date. The AmeriGas NEOs were awarded AmeriGas Partners performance units tied to (i) a relative TUR metric based on the Alerian MLP Index, as modified by AmeriGas Partners’ TUR performance compared to the other two retail propane distribution companies in the Alerian Index, and (ii) a customer gain/loss metric. Messrs. Walsh and Jastrzebski and Ms. Gaudiosi were awarded UGI Corporation performance units tied to the three-year total shareholder return performance of UGI common stock relative to that of the companies in the Adjusted Russell MidCap Utilities Index. Each performance unit represents the right of the recipient to receive a common unit or share of common stock if specified performance goals and other conditions are met. In addition, Mr. Jastrzebski received a UGI Corporation restricted unit award of 12,000 UGI Corporation restricted stock units, with dividend equivalents, in connection with the commencement of his employment. Each stock unit represents a share of UGI Corporation common stock, 6,000 of which will vest on the second anniversary of Mr. Jastrzebski’s employment commencement date and 6,000 of which will vest on the third anniversary of Mr. Jastrzebski’s employment commencement date.
As is the case with cash compensation and annual bonus awards, we referenced Pay Governance’s analysis of executive compensation database information in establishing equity compensation for the named executive officers. In determining the total dollar value of the long-term compensation opportunity to be provided in Fiscal 2018, we initially referenced (i) median salary information, and (ii) competitive market-based long-term incentive compensation information, both as calculated by Pay Governance.
For the AmeriGas NEOs, we initially applied approximately 30 percent of the amount of the long-term incentive opportunity to UGI Corporation stock options, and approximately 70 percent to AmeriGas performance units (30 percent is applied to AmeriGas Partners performance compared to the Alerian MLP Index, as modified by AmeriGas Partners’ TUR performance compared to the other two publicly traded retail propane distribution companies, Ferrellgas Partners, L.P. and Suburban Propane Partners, L.P. (the “Propane MLP Group”), and 40 percent is tied to a customer gain/loss performance metric). For Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, we initially applied approximately 50 percent of the amount of the long-term incentive opportunity to stock options and approximately 50 percent to performance units. We believe this bifurcation provides a good balance between two important goals. Because the value of stock options is a function of the appreciation or depreciation of stock price, stock options are designed to align the executive’s interests with shareholder interests. As explained in more detail below, the performance units are designed to encourage increased total unitholder or shareholder return over a period of time.
For Fiscal 2018 equity awards, Pay Governance provided the competitive market incentive levels based on its assessment of accounting values. Pay Governance then provided data for our long-term incentive values by utilizing accounting values. Accounting values are reported directly by companies to the survey databases and are determined in accordance with GAAP.
While management used the Pay Governance calculations as a starting point, in accordance with past practice, management recommended adjustments to the aggregate number of UGI Corporation stock options and AmeriGas Partners and UGI performance units calculated by Pay Governance. The adjustments were designed to address historic grant practices, internal pay equity and the policy of UGI that the three-year average of the annual number of equity awards made under the 2013 UGI Plan for the fiscal
years 2016 through 2018, expressed as a percentage of common shares outstanding at fiscal year-end, will not exceed 2 percent. For purposes of calculating the annual number of equity awards used in this calculation: (i) each stock option granted is deemed to equal one share, and (ii) each performance unit earned and paid in shares of stock is deemed to equal 4.67 shares. The adjustments resulted in (i) a decrease in the number of shares underlying options for Mr. Walsh and an increase therein for all other NEOs and (ii) a decrease in the number of performance units awarded to Mr. Walsh and an increase therein for all other NEOs, in each case as compared to amounts calculated by Pay Governance using accounting values.
As a result of the Committee’s acceptance of management’s recommendations, the named executive officers received between approximately 83 percent and 107 percent of the total dollar value of long-term compensation opportunity recommended by Pay Governance using accounting values. The actual grant amounts based on the foregoing analysis are as follows:
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Name
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Shares Underlying Stock Options # Granted
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Performance Units
Alerian MLP Index (as modified)
# Granted
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Performance Units
Customer Gain/Loss # Granted
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Hugh J. Gallagher
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13,000
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1,500
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2,400
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Ted J. Jastrzebski
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155,000
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(1)
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N/A
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John L. Walsh
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260,000
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(1)
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N/A
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Monica M. Gaudiosi
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60,000
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(1)
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N/A
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Anthony D. Rosback
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21,000
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2,450
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4,200
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Jerry E. Sheridan
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50,000
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5,600
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11,250
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(1)
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Messrs. Walsh and Jastrzebski and Ms. Gaudiosi were awarded 37,000, 21,000 and 8,500 UGI performance units, respectively, during Fiscal 2018. Mr. Jastrzebski was also awarded 12,000 UGI Corporation restricted stock units in connection with the commencement of his employment.
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Peer Groups and Performance Metrics
The AmeriGas NEOs were awarded performance unit awards for the period from January 1, 2018 to December 31, 2020 tied to two different metrics: (i) the three-year TUR performance of AmeriGas Partners common units relative to that of the entities in the Alerian MLP Index, as modified based on the three-year TUR performance of AmeriGas Partners common units relative to that of the other companies in the Propane MLP Group, and (ii) a customer gain/loss metric. The Committee determined that a metric directly tied to customer gains and losses would strengthen the link between pay and performance and advance AmeriGas Partners’ long-term strategic goals and objectives.
With respect to AmeriGas Partners performance units tied to the Alerian MLP Index, we will compare the TUR of AmeriGas Partners’ common units relative to the TUR performance of those entities comprising the Alerian MLP Index as of the beginning of the performance period using the comparative returns methodology used by Bloomberg L.P. or its successor at the time of calculation. The result is then modified based on AmeriGas Partners’ TUR performance compared to the Propane MLP Group. If AmeriGas Partners’ Alerian TUR performance qualifies for a payout at the conclusion of the three-year period ending December 31, 2020, then that payout would be modified as follows: (i) if AmeriGas Partners’ TUR during the three-year period ranks first compared to the other companies in the Propane MLP Group, then the performance unit payout would be leveraged at 130 percent; (ii) if AmeriGas Partners’ TUR during the three-year period ranks second compared to the other companies in the Propane MLP Group, then the performance unit payout would be leveraged at 100 percent; and (iii) if AmeriGas Partners’ TUR during the three-year period ranks third compared to the other Propane MLP Group companies, then the performance unit payout would be leveraged at 70 percent. The overall payout is capped at 200 percent of the target number of performance units awarded. In calculating the TUR for purposes of the modification, we will compare the TUR of AmeriGas Partners’ common units relative to the TUR performance of those entities comprising the Propane MLP Group using the comparative returns methodology used by Bloomberg L.P. or its successor at the time of calculation. In computing TUR, we will use the average price for the calendar quarter prior to January 1 of the beginning and end of a given three-year performance period. In addition, TUR gives effect to all distributions throughout the three-year performance period as if they had been reinvested. If one of the other two companies in the Propane MLP Group ceases to exist as a publicly traded company or declares bankruptcy (“Adjustment Event”) during the first year of the performance period, then the performance units tied to the Propane MLP Group will become payable at the end of the three-year performance period based on AmeriGas Partners’ TUR performance compared to the Alerian MLP Index and no modification will be made. If an Adjustment Event occurs during the second year of the performance period, then one-half of the modifier would be applied to the payout calculated under the Alerian MLP Index. If an Adjustment Event occurs during the third year of the
performance period, then the full Propane MLP Group modifier would be calculated using the TUR as of the day immediately preceding the first public announcement of the Adjustment Event. The entities comprising the Alerian MLP Index as of January 1, 2018 were as follows:
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Alliance Resource Partners, L.P.
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Enterprise Products Partners, L.P.
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Shell Midstream Partners L.P.
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AmeriGas Partners, L.P.
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EQT Midstream Partners, L.P.
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Spectra Energy Partners, LP
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Andeavor Logistics LP
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GasLog Partners LP
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Suburban Propane Partners, L.P.
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Antero Midstream Partners, L.P.
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Genesis Energy, L.P.
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Summit Midstream Partners L.P.
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Boardwalk Pipeline Partners L.P.
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Golar LNG Partners, L.P.
|
|
Sunoco L.P.
|
Buckeye Partners, L.P.
|
|
Holly Energy Partners, L.P.
|
|
Tallgrass Energy Partners L.P.
|
Cheniere Energy Partners, L.P.
|
|
Magellan Midstream Partners, L.P.
|
|
TC Pipelines, L.P.
|
Crestwood Equity Partners L.P.
|
|
MPLX, L.P.
|
|
Teekay LNG Partners L.P.
|
DCP Midstream Partners, LP
|
|
NGL Energy Partners, L.P.
|
|
Valero Energy Partners, L.P.
|
Dominion Midstream Partners, L.P.
|
|
Nobel Midstream Partners LP
|
|
Viper Energy Partners LP
|
Enable Midstream Partners, L.P.
|
|
NuStar Energy L.P.
|
|
Western Gas Partners, LP
|
Enbridge Energy Partners, L. P.
|
|
Phillips 66 Partners, L.P.
|
|
Williams Partners L.P.
|
Energy Transfer Partners, L.P.
|
|
Plains All American Pipeline, L.P.
|
|
|
EnLink Midstream Partners, L.P.
|
|
Rice Midstream Partners, L.P.
|
|
|
The Fiscal 2018 performance units awarded to the AmeriGas NEOs and tied to customer gain and loss performance will be paid at the conclusion of the three-year performance period ending September 30, 2020 (assuming continued employment through December 31, 2020). The overall payout is capped at 200 percent of the target number of performance units awarded. The Committee believes that challenging goals and targets have been established with respect to the customer gain/loss metric for the described performance units. For illustrative purposes, with the exception of Fiscal 2018, there would have been no payout during at least the last five fiscal years had this metric been in place.
With respect to UGI performance units, we will compare the TSR of UGI’s common stock relative to the TSR performance of those companies comprising the Adjusted Russell MidCap Utilities Index as of the beginning of the performance period using the comparative returns methodology used by Bloomberg L.P. or its successor at the time of calculation. In computing TSR, the Company uses the average of the daily closing prices for its common stock and the common stock of each company in the Adjusted Russell MidCap Utilities Index for the calendar quarter prior to January 1 of the beginning and end of a given three-year performance period. In addition, TSR gives effect to all dividends throughout the three-year performance period as if they had been reinvested. If a company is added to the Adjusted Russell MidCap Utilities Index during a three-year performance period, we do not include that company in our TSR analysis. We will only remove a company that was included in the Adjusted Russell
MidCap Utilities Index at the beginning of a performance period if such company ceases to exist during the applicable performance period. Those companies in the Adjusted Russell MidCap Utilities Index as of January 1, 2018 were as follows:
|
|
|
|
Alliant Energy
|
Edison International
|
Pinnacle West Capital Corp.
|
Ameren Corporation
|
Entergy Corporation
|
PPL Corporation
|
American Water Works Company, Inc.
|
Eversource Energy
|
Public Service Enterprise Group
|
Aqua America, Inc.
|
FirstEnergy Corp.
|
SCANA Corporation
|
Atmos Energy Corporation
|
Great Plains Energy
|
Sempra Energy
|
Avangrid
|
Hawaiian Electric Industries, Inc.
|
The AES Corporation
|
Calpine Corporation
|
MDU Resources Group, Inc.
|
Vectren Corporation
|
Centerpoint Energy, Inc.
|
National Fuel Gas Company
|
Vistra Energy Corporation
|
CMS Energy Corporation
|
NiSource Inc.
|
WEC Energy
|
Consolidated Edison, Inc.
|
NRG Energy, Inc.
|
Westar Energy, Inc.
|
DTE Energy Company
|
OGE Energy Corp.
|
Xcel Energy Inc.
|
The Committee determined that the Adjusted Russell MidCap Utilities Index is an appropriate peer group because the companies included in the Russell MidCap Utilities Index generally are comparable to the Company in terms of market capitalization and the Company is included in the Russell MidCap Utilities Index. Beginning in November 2010, the Company, with approval of the Committee, excluded telecommunications companies from the peer group because the nature of the telecommunications business is markedly different from that of other companies in the utilities industry. The minimum award, equivalent to 25 percent of the number of performance units, will be payable if the Company’s TSR rank is at the 25th percentile of the Adjusted Russell
MidCap Utilities Index. The target award, equivalent to 100 percent of the number of performance units, will be payable if the TSR rank is at the 50th percentile. The maximum award, equivalent to 200 percent of the number of performance units, will be payable if the Company’s TSR rank is at the 90th percentile of the Adjusted Russell MidCap Utilities Index.
Each award payable to the named executive officers provides a number of AmeriGas Partners common units or UGI shares equal to the number of performance units earned. After the Committee has determined that the conditions for payment have been satisfied, the General Partner or UGI, as the case may be, has the authority to provide for a cash payment to the named executives in lieu of a limited number of the shares or common units payable. The cash payment is based on the value of the securities at the end of the performance period and is designed to meet minimum statutory tax withholding requirements. In the event that executives earn shares in excess of the target award, the value of the shares earned in excess of target is paid entirely in cash.
All performance units have distribution or dividend equivalent rights, as applicable. A distribution equivalent is an amount determined by multiplying the number of performance units credited to a recipient’s account by the per-unit cash distribution or the per-unit fair market value of any non-cash distribution paid during the performance period on AmeriGas Partners common units on a distribution payment date. A dividend equivalent relates to UGI common stock and is determined in a similar manner. Accrued distribution and dividend equivalents are payable in cash based on the number of common units or UGI common shares, if any, paid out at the end of the performance period.
Long-Term Compensation - Payout of Performance Units for 2015-2017 Period
During Fiscal 2018, we paid out awards to those executives who received AmeriGas Partners’ performance units and UGI performance units covering the period from January 1, 2015 to December 31, 2017. For that period, Messrs. Gallagher, Rosback, and Sheridan received AmeriGas performance units tied to two different metrics: (i) the Alerian Index and (ii) customer gain/loss performance. AmeriGas Partners’ TUR ranked 1st relative to the other companies in the Alerian Index and the Propane MLP Group, placing AmeriGas Partners at the 100th percentile ranking and resulting in a maximum payout of 200 percent of the target award. Because the payout exceeded 100 percent, the AmeriGas 2010 Plan provides that cash will be paid in lieu of units for any amount in excess of the 100 percent target. During Fiscal 2018, we paid out awards to those executives who received UGI performance units covering the period from January 1, 2015 to December 31, 2017. For that period, UGI’s TSR ranked 20th relative to the other companies in the Russell Midcap Utilities Index, placing UGI at the 41st percentile ranking, resulting in a 72 percent payout of the target award. The performance unit payouts for Fiscal 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Performance Unit
Payout (#) (1)
|
|
|
Performance Unit
Payout Value
($) (2)
|
|
|
Cash Payout
($) (3)
|
|
Hugh J. Gallagher (4)
|
|
|
1,097
|
|
|
$
|
73,968
|
|
$
|
109,712
|
|
Ted J. Jastrzebski (5)
|
|
|
N/A
|
|
|
$
|
N/A
|
|
$
|
N/A
|
|
John L. Walsh (6)
|
|
|
21,549
|
|
|
$
|
1,519,067
|
|
$
|
91,483
|
|
Monica M. Gaudiosi (6)
|
|
|
4,823
|
|
|
$
|
318,978
|
|
$
|
19,210
|
|
Anthony D. Rosback (4)
|
|
|
1,403
|
|
|
$
|
92,460
|
|
$
|
133,620
|
|
Jerry E. Sheridan (4)
|
|
|
4,910
|
|
|
$
|
321,299
|
|
$
|
476,561
|
|
|
|
(1)
|
Number of units/shares paid out after withholding taxes.
|
|
|
(2)
|
Payout value based on performance units awarded before withholding taxes.
|
|
|
(3)
|
Includes award in excess of 100 percent and dividend or distribution equivalent payout.
|
|
|
(4)
|
Messrs. Gallagher, Rosback and Sheridan received AmeriGas Partners performance units.
|
|
|
(5)
|
Mr. Jastrzebski did not receive a performance unit payout during Fiscal 2018.
|
|
|
(6)
|
Mr. Walsh and Ms. Gaudiosi received UGI performance units.
|
Perquisites and Other Compensation
We provide limited perquisite opportunities to our named executive officers. We provide reimbursement for tax preparation services (discontinued in Fiscal 2011 for newly hired executives), airline membership reimbursement, and limited spousal travel. Our named executive officers may also occasionally use UGI’s tickets for sporting events for personal rather than business purposes. The aggregate cost of perquisites for all named executive officers in Fiscal 2018 was less than $10,000.
Other Benefits
Our named executive officers participate in various retirement, pension, deferred compensation and severance plans, which are described in greater detail in the Ongoing Plans and Post-Employment Agreements section of this Compensation Discussion and Analysis. We also provide employees, including the named executive officers, with a variety of other benefits, including medical and dental benefits, disability benefits, life insurance, and paid time off for holidays and vacations. These benefits generally are available to all of our full-time employees, although the General Partner provided certain enhanced disability and life insurance benefits to its senior executives, which for the AmeriGas NEOs had a total aggregate cost in Fiscal 2018 of less than $5,000.
Ongoing Plans and Post-Employment Agreements
We have several plans and agreements (described below) that enable our named executive officers to accrue retirement benefits as the executives continue to work for us, provide severance benefits upon certain types of termination of employment events or provide other forms of deferred compensation.
AmeriGas Propane, Inc. Savings Plan (the “AmeriGas Savings Plan”)
This plan is a tax-qualified defined contribution plan for employees of the General Partner. Subject to Code limits, which are the same as described below with respect to the UGI Savings Plan, an employee may contribute, on a pre-tax basis, up to 50 percent of his or her eligible compensation, and the General Partner provides a matching contribution equal to 100 percent of the first 5 percent of eligible compensation contributed in any pay period. Participants in the AmeriGas Savings Plan may invest amounts credited to their account among a number of funds, including the UGI stock fund. Each of the AmeriGas NEOs is eligible to participate in the AmeriGas Savings Plan.
UGI Utilities, Inc. Savings Plan (the “UGI Savings Plan”)
This plan is a tax-qualified defined contribution plan available to, among others, employees of UGI. Under the plan, an employee may contribute, subject to Internal Revenue Code (the “Code”) limitations, up to a maximum of 50 percent of his or her eligible compensation on a pre-tax basis and up to 20 percent of his or her eligible compensation on an after-tax basis. The combined maximum of pre-tax and after-tax contributions is 50 percent of his or her eligible compensation. UGI provides matching contributions targeted at 50 percent of the first 3 percent of eligible compensation contributed by the employee in any pay period, and 25 percent of the next 3 percent. For participants entering the UGI Savings Plan on or after January 1, 2009 who are not eligible to participate in the UGI Utilities Retirement Plan, UGI provides matching contributions targeted at 100 percent of the first 5 percent of eligible compensation contributed by the employee in any pay period. Amounts credited to an employee’s account in the plan may be invested among a number of funds, including the Company’s stock fund. Messrs. Walsh and Jastrzebski and Ms. Gaudiosi are eligible to participate in the UGI Savings Plan.
Retirement Income Plan for Employees of UGI Utilities, Inc. (the “UGI Utilities Retirement Plan”)
This plan is a tax-qualified defined benefit plan available to, among others, employees of UGI and certain of its subsidiaries. The UGI Utilities Retirement Plan was closed to new participants as of January 1, 2009. The UGI Utilities Retirement Plan provides an annual retirement benefit based on an employee’s earnings and years of service, subject to maximum benefit limitations. Mr. Walsh participates in the UGI Utilities Retirement Plan. See Compensation of Executive Officers - Pension Benefits Table - Fiscal 2018 and accompanying narrative for additional information.
UGI Corporation Supplemental Executive Retirement Plan and Supplemental Savings Plan
UGI Corporation Supplemental Executive Retirement Plan
This plan is a nonqualified defined benefit plan that provides retirement benefits that would otherwise be provided under the UGI Utilities Retirement Plan to employees hired prior to January 1, 2009, but are prohibited from being paid from the UGI Utilities Retirement Plan by Code limits. The plan also provides additional benefits in the event of certain terminations of employment covered by a change in control agreement. Mr. Walsh participates in the UGI Corporation Supplemental Executive Retirement Plan. See Compensation of Executive Officers - Pension Benefits Table - Fiscal 2018 and accompanying narrative for additional information.
UGI Corporation Supplemental Savings Plan
This plan is a nonqualified deferred compensation plan that provides benefits that would be provided under the qualified UGI Savings Plan to employees hired prior to January 1, 2009 in the absence of Code limitations. The Supplemental Savings Plan is intended to pay an amount substantially equal to the difference between the Company matching contribution to the qualified UGI Savings Plan and the matching contribution that would have been made under the qualified UGI Savings Plan if the Code limitations were not in effect. At the end of each plan year, a participant’s account is credited with earnings equal to the weighted average return on two indices: 60 percent on the total return of the Standard and Poor’s 500 Index and 40 percent on the total return of the Barclays Capital U.S. Aggregate Bond Index. The plan also provides additional benefits in the event of certain terminations of employment covered by a change in control agreement. Mr. Walsh is eligible to participate in the UGI Corporation Supplemental Savings Plan. See Compensation of Executive Officers - Nonqualified Deferred Compensation Table - Fiscal 2018 and accompanying narrative for additional information.
2009 UGI Corporation Supplemental Executive Retirement Plan for New Employees
The 2009 UGI Corporation Supplemental Executive Retirement Plan for New Employees (the “UGI SERP”) is a nonqualified deferred compensation plan that is intended to provide retirement benefits to executive officers who are not eligible to participate in the UGI Utilities Retirement Plan, having commenced employment with UGI on or after January 1, 2009. Under the UGI SERP, the Company credits to each participant’s account annually an amount equal to 5 percent of the participant’s compensation (salary and annual bonus) up to the Code compensation limit ($270,000 in 2018) and 10 percent of compensation in excess of such limit. In addition, if any portion of the Company’s matching contribution under the UGI Savings Plan is forfeited due to nondiscrimination requirements under the Code, the forfeited amount, adjusted for earnings and losses on the amount, will be credited to a participant’s account. Participants direct the investment of their account balances among a number of mutual funds, which are generally the same funds available to participants in the UGI Savings Plan, other than the UGI stock fund. Mr. Jastrzebski and Ms. Gaudiosi are eligible to participate in the UGI SERP. See Compensation of Executive Officers - Nonqualified Deferred Compensation Table - Fiscal 2018 and accompanying narrative for additional information.
AmeriGas Propane, Inc. Supplemental Executive Retirement Plan
The General Partner maintains a supplemental executive retirement plan, which is a nonqualified deferred compensation plan for highly compensated employees of the General Partner. Under the plan, the General Partner credits to each participant’s account annually an amount equal to 5 percent of the participant’s compensation up to the Code compensation limits and 10 percent of compensation in excess of such limit. In addition, if any portion of the General Partner’s matching contribution under the AmeriGas Savings Plan is forfeited due to nondiscrimination requirements under the Code, the forfeited amount, adjusted for earnings and losses on the amount, will be credited to a participant’s account. Participants direct the investment of the amounts in their accounts among a number of mutual funds. Mr. Sheridan participated in the AmeriGas Propane, Inc. Supplemental Executive Retirement Plan (“AmeriGas SERP”) through September 18, 2018 and the other AmeriGas NEOs currently participate in the AmeriGas SERP. See Compensation of Executive Officers - Nonqualified Deferred Compensation Table - Fiscal 2018 and accompanying narrative for additional information.
AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan
The General Partner maintains a nonqualified deferred compensation plan under which participants may defer up to $10,000 of their annual compensation. Deferral elections are made annually by eligible participants in respect of compensation to be earned for the following year. Participants may direct the investment of deferred amounts into a number of mutual funds. Payment of amounts accrued for the account of a participant generally is made following the participant’s termination of employment. The AmeriGas NEOs are eligible to participate in the AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan. See Compensation of Executive Officers - Nonqualified Deferred Compensation Table - Fiscal 2018 and accompanying narrative for additional information.
UGI Corporation 2009 Deferral Plan, As Amended and Restated Effective June 1, 2010
This plan provides deferral options that comply with the requirements of Section 409A of the Code related to (i) all phantom units and stock units granted to the General Partner’s and UGI’s non-employee Directors, (ii) benefits payable under the AmeriGas Propane, Inc. Supplemental Executive Retirement Plan, (iii) benefits payable under the UGI Corporation Supplemental Executive Retirement Plan, and (iv) the UGI SERP. If an eligible participant elects to defer payment under the plan, the participant may receive future benefits after separation from service as (x) a lump sum payment, (y) annual installment payments over a period between two and ten years, or (z) one to five retirement distribution amounts to be paid in a lump sum in the year specified by the
individual. Deferred benefits, other than stock units and phantom units, will be deemed to be invested in investment funds selected by the participant from among a list of available funds. The plan was closed to new participants in Fiscal 2017.
Severance Pay Plans for Senior Executive Employees
The General Partner and UGI each maintain a severance pay plan that provides severance compensation to certain senior level employees. The plans are designed to alleviate the financial hardships that may be experienced by executive employee participants whose employment is terminated without just cause, other than in the event of death or disability. The General Partner’s plan covers the AmeriGas NEOs and the UGI plan covers Messrs. Walsh and Jastrzebski and Ms. Gaudiosi. See Compensation of Executive Officers - Potential Payments Upon Termination or Change in Control for further information regarding the severance plans.
Separation Agreement with Mr. Sheridan
Mr. Sheridan entered into a Separation Agreement and General Release with the General Partner (the “Separation Agreement”) in accordance with the AmeriGas Propane, Inc. Senior Executive Employee Severance Plan, as amended and restated. In accordance with the Separation Agreement, Mr. Sheridan has resigned from all offices held prior to September 18, 2018 and will receive a lump sum payment. Mr. Sheridan remains an employee of the General Partner through January 2, 2019. Mr. Sheridan’s agreement requires that he execute a release discharging the General Partner and its subsidiaries from liability in connection with his separation of service from the Company.
Change in Control Agreements
The General Partner has change in control agreements with each of the AmeriGas NEOs and UGI has change in control agreements with Messrs. Walsh and Jastrzebski and Ms. Gaudiosi. The change in control agreements are designed to reinforce and encourage the continued attention and dedication of the executives without distraction in the face of potentially disturbing circumstances arising from the possibility of the change in control and to serve as an incentive to their continued employment with us. The agreements provide for payments and other benefits if we terminate an executive’s employment without cause or if the executive terminates employment for good reason within two years following a change in control of UGI (and, in the case of the AmeriGas NEOs, the General Partner or AmeriGas Partners). See Compensation of Executive Officers - Potential Payments Upon Termination or Change in Control for further information regarding the change in control agreements.
Equity Ownership Guidelines
We seek to align executives’ interests with unitholder and shareholder interests through our Equity Ownership and Retention Policy (the “Policy”). We believe that by encouraging our executives to maintain a meaningful equity interest in AmeriGas Partners and/or UGI we will enhance the link between our executives and unitholders or shareholders. The Board of Directors approved a new Policy during Fiscal 2017. Under this Policy, an executive must meet 25 percent of the ownership requirement within three years from the date of his or her employment or promotion. For an executive hired or promoted on or after January 24, 2017 and not previously subject to this Policy, the executive must satisfy his or her respective equity ownership requirement in full within six years and will also be subject to the ongoing compliance requirements. Executives subject to the Company’s prior stock ownership policy prior to January 24, 2017 are not required to fully satisfy their equity ownership requirement by the end of a six-year achievement period, but will continue to be subject to the Policy’s ongoing compliance requirements.
The AmeriGas Bonus Plan and UGI Bonus Plan each provides that, unless the Committee determines otherwise, all executive officers who have not fulfilled their equity ownership requirement receive up to 10 percent of their gross annual bonus in fully vested AmeriGas Partners common units or UGI Corporation common stock. In addition, the Policy requires that 50 percent of the net proceeds from a “cashless exercise” of stock options be used to purchase stock until the ownership requirement is met. The Policy also requires that, until the share ownership requirement is met, the executive retain all common units or shares received in connection with the payout of performance units. Executives may not use unexercised stock options, unvested (unearned) performance units, or unvested (unearned) restricted shares, stock units or phantom units to satisfy their equity ownership requirements.
As of September 30, 2018, the equity ownership requirements for the named executive officers were as follows:
|
|
|
Name
|
Equity Ownership Requirement (UGI common stock or AmeriGas Partners common units)
|
Hugh J. Gallagher (1)
|
12,000
|
Ted J. Jastrzebski
|
50,000
|
John L. Walsh
|
225,000
|
Monica M. Gaudiosi
|
30,000
|
Anthony D. Rosback
|
20,000
|
(1) In Mr. Gallagher’s capacity as Vice President - Finance and Chief Financial Officer, his equity ownership requirement was 12,000 AmeriGas Partners common units or UGI common stock. In his current capacity as President and Chief Executive Officer, Mr. Gallagher’s new equity ownership requirement is 30,000.
Executives are permitted to satisfy their requirements through ownership of AmeriGas Partners common units, UGI common stock, or a combination of AmeriGas Partners common units and UGI common stock, with each AmeriGas Partners common unit equivalent to 1.0 share of UGI common stock. Although not all named executive officers have met their respective ownership requirements due to the amount of time they have served in their current positions, all named executive officers were in compliance at September 30, 2018 with the Company’s Policy requiring the accumulation of equity over time. See Security Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters - Ownership of Partnership Common Units by the Directors and Named Executive Officers.
Stock Option Grant Practices
The Committees approve annual stock option grants to named executive officers in the last calendar quarter of each year, to be effective the following January 1. The exercise price per share of the options is equal to or greater than the closing share price of UGI’s common stock on the last trading day of December. A grant to a new employee is generally effective on the later of the date the employee commences employment with us or the date the Committee authorizes the grant. In either case, the exercise price is equal to or greater than the closing price per share of UGI’s common stock on the effective date of grant. From time to time, management recommends stock option grants for non-executive employees, and the grants, if approved by the Committee, are effective on or after the date of Committee action and have an exercise price equal to or greater than the closing price per share of UGI’s common stock on the effective date of grant. We believe that our stock option grant practices are appropriate and effectively eliminate any question regarding “timing” of grants in anticipation of material events.
Role of Executive Officers in Determining Executive Compensation
In connection with Fiscal 2018 compensation, Mr. Walsh, aided by our corporate human resources department, provided statistical data and recommendations to the appropriate Committee to assist it in determining compensation levels. Mr. Walsh did not make recommendations as to his own compensation and was excused from the Committee meeting when his compensation was discussed by the Committee. While the Committees utilized information provided by Mr. Walsh, and valued Mr. Walsh’s observations with regard to other executive officers, the ultimate decisions regarding executive compensation were made by the Committee for all named executive officers, except Messrs. Sheridan and Walsh, for whom executive compensation decisions were made by the independent members of the applicable Board of Directors following Committee recommendations. In connection with his transition to the role of President and Chief Executive Officer, executive compensation decisions for Mr. Gallagher were also made by the independent members of the Board of Directors of the General Partner following Committee recommendation.
Tax Considerations
In Fiscal 2018, we paid salary and annual bonus compensation to named executive officers that may not be fully deductible under U.S. federal tax law. Section 162(m) of the Code sets a $1,000,000 cap on the deduction for compensation paid by a publicly held corporation to a “covered employee,” which includes certain of our named executive officers. Other than certain grandfathered awards, the TCJA eliminated the performance based compensation exception under Section 162(m) for taxable years beginning after December 31, 2017. We will continue to consider and evaluate all of our compensation programs in light of federal tax law and regulations. Nevertheless, we believe that, in some circumstances, factors other than tax deductibility take precedence in determining the forms and amount of compensation, and we retain the flexibility to authorize compensation that may not be deductible if we believe it is in the best interests of our Company.
RISKS RELATED TO COMPENSATION POLICIES AND PRACTICES
Management conducted a risk assessment of our compensation policies and practices for Fiscal 2018. Based on its evaluation, management does not believe that any such policies or practices create risks that are reasonably likely to have a material adverse effect on the Partnership.
SUMMARY COMPENSATION TABLE
The following tables, narrative and footnotes provide information regarding the compensation of our Chief Executive Officer, our Principal Financial Officer, our 3 other most highly compensated executive officers, and one former executive officer in Fiscal 2018.
Summary Compensation Table — Fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal
Position
(a)
|
Fiscal
Year
(b)
|
Salary
($)
(1)(c)
|
Bonus
($)
(2)(d)
|
Stock
Awards
($)
(3)(e)
|
Option
Awards
($)
(3)
(f)
|
Non-Equity
Incentive
Plan
Compensation
($)
(4)
(g)
|
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(5)
(h)
|
All Other
Compensation
($)
(6)
(i)
|
Total
($)
(7)
(j)
|
H. J. Gallagher
|
2018
|
353,433
|
|
0
|
253,488
|
94,380
|
162,346
|
0
|
52,444
|
916,091
|
Vice President - Finance
|
2017
|
336,721
|
|
16,250
|
202,112
|
105,840
|
0
|
16,212
|
65,420
|
742,555
|
Chief Financial Officer
|
2016
|
323,389
|
|
0
|
171,241
|
83,843
|
0
|
56,243
|
32,786
|
667,502
|
T. J. Jastrzebski
|
2018
|
210,000
|
|
0
|
1,958,760 (8)
|
1,257,050 (9)
|
256,100
|
0
|
33,360
|
3,715,270
|
Principal Financial Officer
|
|
|
|
|
|
|
|
|
|
J. L. Walsh
|
2018
|
1,195,943
|
|
0
|
1,994,300
|
1,887,600
|
1,768,338
|
544,481
|
55,997
|
7,446,659
|
Chairman
|
2017
|
1,171,854
|
|
0
|
1,953,960
|
2,041,200
|
1,308,319
|
1,334,584
|
51,795
|
7,861,712
|
|
2016
|
1,132,043
|
|
0
|
1,648,500
|
1,581,030
|
1,159,212
|
2,439,939
|
61,549
|
8,022,273
|
M. M. Gaudiosi
|
2018
|
474,727
|
|
0
|
458,150
|
435,600
|
393,300
|
0
|
82,180
|
1,843,957
|
Vice President, General
|
2017
|
458,833
|
|
0
|
462,780
|
453,600
|
266,281
|
0
|
67,472
|
1,708,966
|
Counsel and Secretary
|
2016
|
447,655
|
|
0
|
362,670
|
335,370
|
238,232
|
0
|
63,956
|
1,447,883
|
A. D. Rosback
|
2018
|
391,295
|
|
0
|
391,940
|
152,460
|
197,457
|
0
|
59,375
|
1,192,527
|
Vice President and
|
2017
|
385,017
|
|
15,000
|
358,800
|
173,880
|
0
|
0
|
69,525
|
1,002,222
|
Chief Operating Officer
|
2016
|
367,128
|
|
0
|
289,655
|
134,148
|
0
|
0
|
53,007
|
843,938
|
J. E. Sheridan
|
2018
|
562,982
|
|
0
|
962,912
|
363,000
|
413,315
|
0
|
97,679
|
2,399,888
|
President and
|
2017
|
551,943
|
|
31,250
|
888,140
|
400,680
|
0
|
0
|
67,742
|
1,939,755
|
Chief Executive Officer
|
2016
|
541,082
|
|
0
|
699,474
|
311,415
|
0
|
0
|
54,108
|
1,606,079
|
|
|
(1)
|
The amounts shown in column (c) represent salary payments actually received during the fiscal year shown based on the
|
number of pay periods within such fiscal year. Mr. Jastrzebski’s Fiscal 2018 salary reflects his employment date of May 22, 2018.
|
|
(2)
|
The amounts shown in column (d) represent discretionary cash bonus awards for Fiscal 2017 to Messrs. Gallagher, Rosback, and Sheridan.
|
|
|
(3)
|
The amounts shown in columns (e) and (f) above represent the fair value of awards of performance units and stock options, as the case may be, on the date of grant. The assumptions used in the calculation of the amounts shown are included in Note 2 and Note 11 to our Consolidated Financial Statements for Fiscal 2018 and in Exhibit No. 99 to this Report. See the Grants of Plan-Based Awards Table for information on awards of performance units and stock options made in Fiscal 2018. The amount shown in this column also represents (1) a discretionary equity award to Mr. Gallagher of 1,095 units representing time-based AmeriGas Partners restricted units with a grant date of November 24, 2017, (2) a discretionary equity award to Mr. Sheridan of 2,106 units representing time-based AmeriGas Partners restricted units with a grant date of November 24, 2017 and (3) a discretionary equity award to Mr. Rosback of 1,011 units representing time-based AmeriGas restricted units with a grant date of November 24, 2017.
|
|
|
(4)
|
The amounts shown in this column represent payments made under the applicable performance-based annual bonus plan. For Fiscal 2018, Mr. Jastrzebski received 10% of his payout in UGI Corporation common stock in compliance with UGI’s
|
ongoing stock ownership requirements and Messrs. Gallagher and Rosback received 10% of their payouts in AmeriGas Partners common units in compliance with UGI’s ongoing stock ownership requirements.
|
|
(5)
|
The amounts shown in column (h) of the Summary Compensation Table - Fiscal 2018 reflect (i) for Mr. Walsh, the change in the actuarial present value from September 30, 2017 to September 30 2018 of his accumulated benefit under UGI’s defined benefit pension plans, and (ii) the above-market portion of earnings, if any, on nonqualified deferred compensation accounts. The change in pension value from year to year as reported in this column is subject to market volatility and may not represent the value that Mr. Walsh will actually accrue under the UGI pension plans during any given year. Mr. Gallagher has a vested annual benefit under the Retirement Income Plan for Employees of UGI Utilities, Inc. based on prior credited service of approximately $37,100. Mr. Gallagher is not currently earning benefits under that plan. Messrs. Jastrzebski, Sheridan and Rosback and Ms. Gaudiosi are not eligible to participate in the UGI Utilities Retirement Income Plan. The material terms of the pension plans and deferred compensation plans are described in the Pension Benefits Table - Fiscal 2018 and the Nonqualified Deferred Compensation Table - Fiscal 2018, and the related narratives to each. Earnings on deferred compensation are considered above-market to the extent that the rate of interest exceeds 120 percent of the applicable federal long-term rate. For purposes of the Summary Compensation Table - Fiscal 2018, the market rate on deferred compensation most analogous to the rate at the time the interest rate is set under the UGI plan for Fiscal 2018 was 3.16 percent, which is 120 percent of the federal long-term rate for December 2017. Earnings on deferred compensation are market-based and calculated by reference to externally managed mutual funds.
|
|
|
(6)
|
The table below shows the components of the amounts included for each named executive officer under the “All Other Compensation” column in the Summary Compensation Table - Fiscal 2018. None of the named executive officers received perquisites with an aggregate value of $10,000 or more during Fiscal 2018.
|
|
|
|
|
|
|
|
|
Name
|
Employer
Contribution to
401(k)
Savings Plan ($)
|
Employer
Contribution
to AmeriGas
Supplemental
Executive
Retirement Plan/UGI
Supplemental Savings Plan ($)
|
Total ($)
|
H. J. Gallagher
|
14,116
|
|
38,328
|
|
52,444
|
|
T. J. Jastrzebski
|
0
|
|
33,110
|
|
33,110
|
|
J. L. Walsh
|
6,112
|
|
49,885
|
|
55,997
|
|
M. M. Gaudiosi
|
8,627
|
|
73,553
|
|
82,180
|
|
A. D. Rosback
|
13,750
|
|
45,625
|
|
59,375
|
|
J. E. Sheridan
|
13,299
|
|
84,380
|
|
97,679
|
|
|
|
(7)
|
The compensation reported for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi is paid by UGI. For Fiscal 2018, UGI charged the Partnership 37 percent of the total compensation expense, other than the change in pension value, for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi.
|
|
|
(8)
|
Includes transition awards granted in connection with Mr. Jastrzebski’s commencement of employment of (i) 4,000 UGI Corporation performance units for the three-year measurement period ending December 31, 2018, (ii) 7,000 UGI Corporation performance units for the three-year measurement period ending December 31, 2019, (iii) 10,000 UGI Corporation performance units for the three-year measurement period ending December 31, 2020, (iv) 6,000 UGI Corporation restricted units with a vesting date of May 22, 2020, and (v) 6,000 UGI Corporation restricted units with a vesting date of May 22, 2021.
|
|
|
(9)
|
Includes 155,000 option awards granted in connection with Mr. Jastrzebski’s commencement of employment which vest in three equal annual installments beginning May 22, 2019.
|
Grants of Plan-Based Awards In Fiscal 2018
The following table and footnotes provide information regarding equity and non-equity plan grants to the named executive officers in Fiscal 2018.
Grants of Plan-Based Awards Table — Fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
|
|
All
Other
Stock Awards:
|
All Other
Option
Awards: Number of
|
Exercise or Base
|
Grant Date Fair Value
|
|
|
Board
|
Non-Equity Incentive Plan
Awards (1)
|
Estimated Future Payouts Under
Equity Incentive Plan Awards (2)
|
Number of
Shares of
|
Securities
Underlying
|
Price of
Option
|
of
Stock and
|
|
Grant
|
Action
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
Stock or
|
Options (#)
|
Awards
|
Option
|
Name
|
Date
|
Date
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
(#)
|
Units (#) (3)
|
(4)
|
($/Sh)
|
Awards
|
(a)
|
(a)
|
(a)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
(m)
|
H. J. Gallagher
|
10/1/2017
|
11/16/2017
|
91,530
|
|
177,041
|
|
354,081
|
|
|
|
|
|
|
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
|
|
|
|
13,000
|
|
46.95
|
|
94,380
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
429
|
|
2,450
|
|
4,900
|
|
|
|
|
93,195
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
1,050
|
|
4,200
|
|
8,400
|
|
|
|
|
110,952
|
|
|
11/24/2017
|
11/16/2017
|
|
|
|
|
|
|
1,095
|
|
|
|
49,341
|
|
T. J. Jastrzebski
|
5/22/2018
|
1/20/2018
|
104,000
|
|
216,667
|
|
433,333
|
|
|
|
|
|
|
|
|
|
5/22/2018
|
1/20/2018
|
|
|
|
|
|
|
|
155,000
|
|
49.19
|
|
1,257,050
|
|
|
5/22/2018
|
1/20/2018
|
|
|
|
1,000
|
|
4,000
|
|
8,000
|
|
|
|
|
317,720
|
|
|
5/22/2018
|
1/20/2018
|
|
|
|
1,750
|
|
7,000
|
|
14,000
|
|
|
|
|
356,860
|
|
|
5/22/2018
|
1/20/2018
|
|
|
|
2,500
|
|
10,000
|
|
20,000
|
|
|
|
|
693,900
|
|
|
5/22/2018
|
2/7/2018
|
|
|
|
|
|
|
12,000
|
|
|
|
590,280
|
|
J. L. Walsh
|
10/1/2017
|
11/16/2017
|
718,107
|
|
1,496,056
|
|
2,992,113
|
|
|
|
|
|
|
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
|
|
|
|
260,000
|
|
46.95
|
|
1,887,600
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
9,250
|
|
37,000
|
|
74,000
|
|
|
|
|
1,994,300
|
|
M. M. Gaudiosi
|
10/1/2017
|
11/16/2017
|
148,308
|
|
308,974
|
|
617,949
|
|
|
|
|
|
|
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
|
|
|
|
60,000
|
|
46.95
|
|
435,600
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
2,125
|
|
8,500
|
|
17,000
|
|
|
|
|
458,150
|
|
A. D. Rosback
|
10/1/2017
|
11/16/2017
|
111,325
|
|
215,329
|
|
430,659
|
|
|
|
|
|
|
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
|
|
|
|
21,000
|
|
46.95
|
|
152,460
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
429
|
|
2,450
|
|
4,900
|
|
|
|
|
152,219
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
1,050
|
|
4,200
|
|
8,400
|
|
|
|
|
194,166
|
|
|
11/24/2017
|
11/16/2017
|
|
|
|
|
|
|
1,011
|
|
|
|
45,556
|
|
J. E. Sheridan
|
10/1/2017
|
11/16/2017
|
233,025
|
|
450,726
|
|
901,451
|
|
|
|
|
|
|
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
|
|
|
|
50,000
|
|
46.95
|
|
363,000
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
980
|
|
5,600
|
|
11,200
|
|
|
|
|
347,928
|
|
|
1/1/2018
|
11/16/2017
|
|
|
|
2,813
|
|
11,250
|
|
22,500
|
|
|
|
|
520,088
|
|
|
11/24/2017
|
11/16/2017
|
|
|
|
|
|
|
2,106
|
|
|
|
94,896
|
|
|
|
(1)
|
The amounts shown under this heading relate to bonus opportunities under the relevant company’s annual bonus plan for Fiscal 2018. See “Compensation Discussion and Analysis” for a description of the annual bonus plans. Payments for these awards have already been determined and are included in the Non-Equity Incentive Plan Compensation column (column (g)) of the Summary Compensation Table - Fiscal 2018. The threshold amount shown for Messrs. Gallagher, Rosback and Sheridan is based on achievement of (i) 80 percent of the financial goal with the resulting amount modified to the extent provided for above or below target achievement of the safety goal, and (ii) 93 percent of the customer service goal. The threshold amount shown for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi is based on achievement of 80 percent of the UGI financial goal with the resulting amount
|
modified to the extent provided for above or below target achievement of the safety modifier goal. The threshold amount shown for Mr. Jastrzebski is prorated to his commencement of employment date.
|
|
(2)
|
The awards shown for Messrs. Gallagher, Rosback, and Sheridan are performance units under the 2010 AmeriGas Long-Term Incentive Plan, as described in “Compensation Discussion and Analysis.” Performance units are forfeitable until the end of the performance period in the event of termination of employment, with pro-rated forfeitures in the case of termination of employment due to retirement, death or disability. In the case of a change in control, outstanding performance units and distribution equivalents will only be paid for a qualifying termination of employment and will be paid in cash in an amount equal to the greater of (i) the target award, or (ii) the award amount that would be payable if the performance period ended on the date of the change in control, based on the Partnership’s achievement of the performance goal as of the date of the change in control, as determined by the Compensation/Pension Committee. The awards shown for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi are performance units under the 2013 UGI Plan, as described in “Compensation Discussion and Analysis.” Terms of these awards with respect to forfeitures and change in control, as defined in the 2013 UGI Plan, are analogous to the terms of the performance units granted under the 2010 AmeriGas Long-Term Incentive Plan.
|
|
|
(3)
|
The awards shown for Mr. Jastrzebski are restricted stock units granted under the Company’s 2013 Plan in connection with the commencement of Mr. Jastrzebski’s employment on May 22, 2018. Each stock unit represents a share of UGI Corporation common stock, 6,000 of which will vest on the second anniversary of Mr. Jastrzebski’s employment commencement date and 6,000 of which will vest on the third anniversary of Mr. Jastrzebski’s employment commencement date. The awards of Messrs. Gallagher’s, Sheridan’s and Rosback’s 1,095, 1,011 and 2,106 restricted units, respectively, granted under the AmeriGas 2010 Plan represent time-based AmeriGas Partners restricted units with a grant date of November 24, 2017 in recognition of progress made on key operational and organizational initiatives during Fiscal 2017.
|
|
|
(4)
|
Options are granted under the 2013 UGI Plan. Under this Plan, the option exercise price is not less than 100 percent of the fair market value of UGI’s Common Stock on the effective date of the grant, which is either the date of the grant or a specified future date. The term of each option is generally 10 years, which is the maximum allowable term. The options become exercisable in three equal annual installments beginning on the first anniversary of the grant date. All options are nontransferable and generally exercisable only while the optionee is employed by the General Partner, UGI or an affiliate, with exceptions for exercise following termination without cause, retirement, disability and death. In the case of termination without cause, the option will be exercisable only to the extent that it has vested as of the date of termination of employment and the option will terminate upon the earlier of the expiration date of the option and the expiration of the 13-month period commencing on the date of termination of employment. If termination of employment occurs due to retirement, the option will thereafter become exercisable as if the optionee had continued to be employed by, or continued to provide service to, the Company, and the option will terminate upon the original expiration date of the option. If termination of employment occurs due to disability, the option term is shortened to the earlier of the third anniversary of the date of such termination of employment and the original expiration date, and vesting continues in accordance with the original vesting schedule. In the event of death of the optionee while an employee, the option will become fully vested and the option term will be shortened to the earlier of the expiration of the 12-month period following the optionee’s death, and the original expiration date. Options are subject to adjustment in the event of recapitalizations, stock splits, mergers, and other similar corporate transactions affecting UGI’s common stock. In the event of a change in control, unvested options become exercisable only for a qualifying termination of employment.
|
Outstanding Equity Awards at Year-End
The table below shows the outstanding equity awards as of
September 30, 2018
for each of the named executive officers:
Outstanding Equity Awards at Year-End Table — Fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
|
Number of
Securities
Underlying
Options
(#)
|
|
Option
Exercise
Price
|
|
Option
Expiration
|
|
Number of Shares or Units of Stock That Have Not Vested
|
|
Market Value of Shares or Units of Stock That Have Not Vested
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights That Have Not
Vested
|
|
Equity
Incentive
Plan Awards:
Market
or Payout Value
of Unearned
Shares, Units or
Other Rights
That Have Not
Vested
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H. J. Gallagher
|
|
8,250
|
(1)
|
|
|
27.64
|
|
12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(2)
|
|
|
38.05
|
|
1/20/2025
|
|
|
|
|
|
|
|
|
|
|
|
11,666
|
(3)
|
5,834
|
(3)
|
33.76
|
|
12/31/2025
|
|
|
|
|
|
1,750
|
(14)
|
138,285
|
|
|
|
4,666
|
(4)
|
9,334
|
(4)
|
46.08
|
|
12/31/2026
|
|
|
|
|
|
2,800
|
(15)
|
110,628
|
|
|
|
|
|
13,000
|
(5)
|
46.95
|
|
12/31/2027
|
|
|
|
|
|
1,400
|
(16)
|
55,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,300
|
(17)
|
90,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
(18)
|
59,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400
|
(19)
|
94,824
|
|
|
|
|
|
|
|
|
|
|
|
1,095
|
(20)
|
43,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. J. Jastrzebski
|
|
|
|
155,000
|
(6)
|
49.19
|
|
5/21/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(22)
|
441,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
(23)
|
388,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(24)
|
554,800
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
(21)
|
665,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. L. Walsh
|
|
187,500
|
(7)
|
|
|
21.06
|
|
12/31/2020
|
|
|
|
|
|
|
|
|
|
|
|
187,500
|
(8)
|
|
|
19.60
|
|
12/31/2021
|
|
|
|
|
|
|
|
|
|
|
|
178,500
|
(9)
|
|
|
21.81
|
|
12/31/2022
|
|
|
|
|
|
|
|
|
|
|
|
129,000
|
(10)
|
|
|
25.50
|
|
3/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
405,000
|
(1)
|
|
|
27.64
|
|
12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
306,000
|
(11)
|
|
|
37.98
|
|
12/31/2024
|
|
|
|
|
|
|
|
|
|
|
|
220,000
|
(3)
|
110,000
|
(3)
|
33.76
|
|
12/31/2025
|
|
|
|
|
|
50,000
|
|
(22)
|
5,523,000
|
|
|
|
90,000
|
(4)
|
180,000
|
(4)
|
46.08
|
|
12/31/2026
|
|
|
|
|
|
38,000
|
|
(23)
|
2,108,240
|
|
|
|
|
|
260,000
|
(5)
|
46.95
|
|
12/31/2027
|
|
|
|
|
|
37,000
|
|
(24)
|
2,052,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. M. Gaudiosi
|
|
75,000
|
(12)
|
|
|
17.75
|
|
4/22/2022
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(9)
|
|
|
21.81
|
|
12/31/2022
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(1)
|
|
|
27.64
|
|
12/31/2023
|
|
|
|
|
|
|
|
|
|
|
|
63,000
|
(11)
|
|
|
37.98
|
|
12/31/2024
|
|
|
|
|
|
|
|
|
|
|
|
46,666
|
(3)
|
23,334
|
(3)
|
33.76
|
|
12/31/2025
|
|
|
|
|
|
11,000
|
|
(22)
|
1,215,060
|
|
|
|
20,000
|
|
40,000
|
(4)
|
46.08
|
|
12/31/2026
|
|
|
|
|
|
9,000
|
|
(23)
|
499,320
|
|
|
|
|
|
60,000
|
(5)
|
46.95
|
|
12/31/2027
|
|
|
|
|
|
8,500
|
|
(24)
|
471,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. D. Rosback
|
|
12,675
|
(13)
|
|
|
33.48
|
|
3/22/2025
|
|
|
|
|
|
|
|
|
|
|
|
18,666
|
(3)
|
9,334
|
(3)
|
33.76
|
|
12/31/2025
|
|
|
|
|
|
2,750
|
(14)
|
217,305
|
|
|
|
7,666
|
(4)
|
15,334
|
(4)
|
46.08
|
|
|
|
|
|
|
|
5,000
|
(15)
|
197,550
|
|
|
|
|
|
21,000
|
(5)
|
46.95
|
|
12/31/2026
|
|
|
|
|
|
2,400
|
(16)
|
94,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,200
|
(17)
|
165,942
|
|
|
|
|
|
|
|
|
|
12/31/2027
|
|
|
|
|
|
2,450
|
(18)
|
96,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,200
|
(19)
|
165,942
|
|
|
|
|
|
|
|
|
|
|
|
1,011
|
(20)
|
39,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. E. Sheridan
|
|
|
|
21,668
|
(3)
|
33.76
|
|
12/31/2025
|
|
|
|
|
|
6,700
|
(14)
|
529,434
|
|
|
|
17,666
|
(4)
|
35,334
|
(4)
|
46.08
|
|
12/31/2026
|
|
|
|
|
|
12,000
|
(15)
|
474,120
|
|
|
|
|
|
50,000
|
(5)
|
46.95
|
|
12/31/2027
|
|
|
|
|
|
5,500
|
(16)
|
217,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
(17)
|
434,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600
|
(18)
|
444,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
(19)
|
221,256
|
|
|
|
|
|
|
|
|
|
|
|
2,106
|
(20)
|
83,208
|
|
|
|
|
|
Note:
Column (d) was intentionally omitted.
(1) These options were granted effective January 1, 2014 and were fully vested on January 1, 2017.
(2) These options were granted effective January 21, 2015 and were fully vested on January 21, 2018.
(3) These options were granted effective January 1, 2016. These options vest 33 1/3 percent on each anniversary of the grant date and will be fully vested on January 1, 2019.
(4) These options were granted effective January 1, 2017. These options vest 33 1/3 percent on each anniversary of the grant date and will be fully vested on January 1, 2020.
(5) These options were granted effective January 1, 2018. These options vest 33 1/3 percent on each anniversary of the grant date and will be fully vested on January 1, 2021.
(6) These options were granted effective May 22, 2018 in connection with the commencement of Mr. Jastrzebski’s employment. These options vest 33 1/3 percent on each anniversary of the grant date and will be fully vested on May 22, 2021.
(7) These options were granted effective January 1, 2011 and were fully vested on January 1, 2014.
(8) These options were granted effective January 1, 2012 and were fully vested on January 1, 2015.
(9) These options were granted effective January 1, 2013 and were fully vested on January 1, 2016.
(10) These options were granted effective April 1, 2013 in connection with Mr. Walsh’s promotion to Chief Executive Officer in 2013 and were fully vested on April 1, 2016.
(11) These options were granted effective January 1, 2015 and were fully vested on January 1, 2018.
(12) These options were granted effective April 23, 2012 in connection with the commencement of Ms. Gaudiosi’s employment and were fully vested on April 23, 2015.
(13) These options were granted effective March 23, 2015 in connection with the commencement of Mr. Rosback’s employment and were fully vested on March 23, 2018.
(14) The amount shown relates to a target award of AmeriGas Partners performance units granted effective January 1, 2016. The performance measurement period for these units is January 1, 2016 through December 31, 2018. The value of the number of units that may be earned at the end of the performance period is based on the AmeriGas Partners’ TUR relative to that of each of the master limited partnerships in the Alerian MLP Index as of the first day of the performance measurement period, and then modified based on AmeriGas Partners’ three-year TUR relative to the TUR of the other companies in the Propane MLP Group. The actual number of units and accompanying distribution equivalents earned may be higher (up to 200% of the target award) or lower than the amount shown, based on TUR performance through the end of the performance period. This number is then modified as follows: (i) if AmeriGas Partners’ TUR ranks first in the Propane MLP Group for the three-year period, then the performance unit payout will be leveraged at 130%; (ii) if AmeriGas Partners’ TUR ranks second in the Propane MLP Group for the three-year period, then the performance unit payout will be leveraged at 100%; and (iii) if AmeriGas Partners’ TUR ranks third in the Propane MLP Group for the three-year period, then the performance unit payout will be leveraged at 70%. The overall payout is capped at 200% of the target number of performance units awarded. The performance units will be payable, if at all, on January 1, 2019. As of October 31, 2018, AmeriGas Partners’ TUR ranking (10 out of 39 companies in the Alerian MLP Index and 1 out of 3 companies in the Propane MLP Group) would qualify for 200% leverage of the target number of performance units originally granted. See Compensation Discussion and Analysis - Long-Term Compensation - Fiscal 2018 Equity Awards for more information on the TUR performance goal measurements.
(15) The amount shown relates to a target award of AmeriGas Partners performance units granted effective January 1, 2016. The performance measurement period for these units is October 1, 2015 through September 30, 2018, but payable, if at all, on January 1, 2019. The value of the number of units that may be earned at the end of the performance period is based on AmeriGas Partners’ customer gain/loss performance during the three-year performance period. If the three-year cumulative customer gain/loss goal is exceeded, then the maximum leverage will be 200%. If the three-year cumulative customer gain/loss goal is at the threshold, then each year’s individual result will be leveraged at 25%. If the three-year cumulative customer gain/loss goal is below the threshold, then there will be no payout under this grant. Based on customer gain/loss performance during the performance measurement period, the target was not achieved and no payout is expected under this grant. See Compensation Discussion and Analysis - Long-Term Compensation - Fiscal 2018 Equity Awards for more information on the performance goal measurements.
(16) These performance units were awarded January 1, 2017. The measurement period for the performance goal is January 1, 2017 through December 31, 2019. The performance goal is the same as described in footnote 14, but it is measured for a different three-year period. The performance units will be payable, if at all, on January 1, 2020.
(17) These performance units were awarded January 1, 2017. The measurement period for the performance goal is January 1, 2017 through December 31, 2019. The performance goal is the same as described in footnote 15, but it is measured for a different three-year period. The performance units will be payable, if at all, on January 1, 2020.
(18) The amount shown relates to a target award of AmeriGas Partners performance units granted effective January 1, 2018. The performance goal is the same as described in footnote 14, but it is measured for a different three-year period. The performance units will be payable, if at all, on January 1, 2021.
(19) The amount shown relates to a target award of AmeriGas Partners performance units granted effective January 1, 2018. The performance goal is the same as described in footnote 15, but it is measured for a different three-year period. The performance units will be payable, if at all, on January 1, 2021.
(20) These restricted AmeriGas Partners common units were granted effective November 24, 2017 and will fully vest on November 24, 2018.
(21) These restricted units were granted effective May 22, 2018 in connection with the commencement of Mr. Jastrzebski’s employment and will vest 50 percent on each anniversary of the grant date and will be fully vested on May 22, 2020.
(22) The amount shown relates to a target award of performance units granted effective January 1, 2016. The performance measurement period for these performance units is January 1, 2016 through December 31, 2018. The value of the number of performance units that may be earned at the end of the performance period is based on the Company’s TSR relative to that of each of the companies in the Russell Midcap Utility Index, excluding telecommunications companies, as of the first day of the performance measurement period. The actual number of performance units and accompanying dividend equivalents earned may be higher (up to 200% of the target award) or lower than the amount shown, based on TSR performance through the end of the performance period. The performance units will be payable, if at all, on January 1, 2019. As of October 31, 2018, the Company’s TSR ranking (4 out of 30 companies) would qualify for 199.1% leverage of the target number of performance units originally granted. See Compensation Discussion and Analysis - Long-Term Compensation - Fiscal 2018 Equity Awards for more information on the TSR performance goal measurements.
(23) These performance units were awarded January 1, 2017 with the exception of Mr. Jastrzebski who was awarded these units on his commencement date of May 22, 2018. The measurement period for the performance goal is January 1, 2017 through December 31, 2019. The performance goal is the same as described in footnote 21, but is measured for a different three-year period. The performance units will be payable, if at all, on January 1, 2020.
(24) These performance units were awarded January 1, 2018 with the exception of Mr. Jastrzebski who was awarded these units on his commencement date of May 22, 2018. The measurement period for the performance goal is January 1, 2018 through December 31, 2020. The performance goal is the same as described in footnote 21, but is measured for a different three-year period. The performance units will be payable, if at all, on January 1, 2021.
Option Exercises and Stock Vested Table
—
Fiscal 2018
The following table sets forth (1) the number of shares of UGI common stock acquired by the named executive officers in Fiscal 2018 from the exercise of stock options, (2) the value realized by those officers upon the exercise of stock options based on the difference between the market price for UGI’s common stock on the date of exercise and the exercise price for the options, (3) for Messrs. Gallagher, Rosback, and Sheridan the number of AmeriGas Partners performance units previously granted that vested in Fiscal 2018, and (4) for Mr. Walsh and Ms. Gaudiosi, the number of UGI performance units previously granted that vested in Fiscal 2018. For Messrs. Gallagher, Rosback, and Sheridan the value realized was based on the closing price on the NYSE for AmeriGas Partners Common Units, and for Mr. Walsh and Ms. Gaudiosi, the value realized was based on the closing price on the NYSE for shares of UGI common stock, on the vesting date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock/Unit Awards
|
|
|
Number of Shares
Acquired on
Exercise
|
|
Value Realized
on Exercise
|
|
Number of Shares/Units
Acquired on
Vesting
|
|
Value Realized
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
H. J. Gallagher
|
|
20,000
|
|
|
559,536
|
|
|
3,200
|
|
|
183,680
|
|
T. J. Jastrzebski
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
J. L. Walsh
|
|
50,000
|
|
|
1,504,895
|
|
|
32,355
|
|
|
1,610,551
|
|
M. M. Gaudiosi
|
|
0
|
|
|
0
|
|
|
6,794
|
|
|
338,188
|
|
A. D. Rosback
|
|
8,325
|
|
|
134,714
|
|
|
4,000
|
|
|
226,080
|
|
J. E. Sheridan
|
|
103,332
|
|
|
1,301,501
|
|
|
13,900
|
|
|
797,860
|
|
Retirement Benefits
The following table shows the number of years of credited service for the named executive officers under the UGI Utilities, Inc. Retirement Income Plan (which we refer to below as the “UGI Utilities Retirement Plan”) and the UGI Corporation Supplemental Executive Retirement Plan (which we refer to below as the “UGI SERP”) and the actuarial present value of accumulated benefits under those plans as of September 30, 2018 and any payments made to the named executive officers in Fiscal 2018 under those plans.
Pension Benefits Table — Fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Years Credited
Service
|
|
Present Value of
Accumulated Benefit
|
|
Payments
During Last
Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
H. J. Gallagher (2)
|
|
UGI SERP
|
|
11
|
|
|
15,885
|
|
|
0
|
|
|
|
UGI Utilities Retirement Plan
|
|
11
|
|
|
386,240
|
|
|
0
|
|
T. J. Jastrzebski
|
|
None
|
|
0
|
|
|
0
|
|
|
0
|
|
J. L. Walsh
|
|
UGI SERP
|
|
13
|
|
|
8,916,688
|
|
|
0
|
|
|
|
UGI Utilities Retirement Plan
|
|
13
|
|
|
883,144
|
|
|
0
|
|
M. M. Gaudiosi (1)
|
|
None
|
|
0
|
|
|
0
|
|
|
0
|
|
A. D. Rosback (1)
|
|
None
|
|
0
|
|
|
0
|
|
|
0
|
|
J. E. Sheridan (1)
|
|
None
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
(1)
|
Messrs. Jastrzebski, Rosback and Sheridan and Ms. Gaudiosi do not participate in any defined benefit pension plan.
|
|
|
(2)
|
Mr. Gallagher has a vested annual benefit amount under the UGI Utilities, Inc. Retirement Plan based on prior credited service of approximately $37,100. Mr. Gallagher is not currently earning benefits under that plan.
|
Retirement Income Plan for Employees of UGI Utilities, Inc.
UGI participates in the UGI Utilities Retirement Plan, a qualified defined benefit retirement plan, to provide retirement income to its employees hired prior to January 1, 2009. The UGI Utilities Retirement Plan pays benefits based upon final average earnings, consisting of base salary or wages and annual bonuses and years of credited service. Benefits vest after the participant completes five years of vesting service.
The UGI Utilities Retirement Plan provides normal annual retirement benefits at age 65, unreduced early retirement benefits at age 62 with ten years of service and reduced, but subsidized, early retirement benefits at age 55 with ten years of service. Employees terminating prior to early retirement eligibility are eligible to receive a benefit under the plan formula commencing at age 65 or an unsubsidized benefit as early as age 55, provided they had 10 years of service at termination. Employees who have attained
age 50 with 15 years of service and are involuntarily terminated by UGI prior to age 55 are also eligible for subsidized early retirement benefits, beginning at age 55.
The UGI Utilities Retirement Plan’s normal retirement benefit formula is (A) - (B) and is shown below:
A = The minimum of (1) and (2), where
(1)
= 1.9% of five-year final average earnings (as defined in the UGI Utilities Retirement Plan) multiplied by years of service;
(2)
= 60% of the highest year of earnings; and
B = 1% of the estimated primary Social Security benefit multiplied by years of service.
The amount of the benefit produced by the formula will be reduced by an early retirement factor based on the employee’s actual age in years and months as of his early retirement date. The reduction factors range from 65 percent at age 55 to 100 percent (no reduction) at age 62.
The normal form of benefit under the UGI Utilities Retirement Plan for a married employee is a 50 percent joint and survivor lifetime annuity. Regardless of marital status, a participant may choose from a number of lifetime annuity payments.
The UGI Utilities Retirement Plan is subject to qualified-plan Code limits on the amount of annual benefit that may be paid and on the amount of compensation that may be taken into account in calculating retirement benefits under the plan. For 2018, the limit on the compensation that may be used is $275,000 and the limit on annual benefits payable for an employee retiring at age 65 in 2018 is $220,000. Benefits in excess of those permitted under the statutory limits are paid to certain employees under the UGI Corporation Supplemental Executive Retirement Plan, described below.
Mr. Walsh is currently eligible for early retirement benefits under the UGI Utilities Retirement Plan.
UGI Corporation Supplemental Executive Retirement Plan
The UGI Corporation Supplemental Executive Retirement Plan (“UGI SERP”) is a non-qualified defined benefit plan that provides retirement benefits that would otherwise be provided under the UGI Utilities Retirement Plan, but are prohibited from being paid from the UGI Utilities Retirement Plan by Code limits. The benefit paid by the UGI SERP is approximately equal to the difference between the benefits provided under the UGI Utilities Retirement Plan and benefits that would have been provided by the UGI Utilities Retirement Plan if not for the limitations of the Employee Retirement Income Security Act of 1974, as amended, and the Code. Benefits vest after the participant completes 5 years of vesting service. The benefits earned under the UGI SERP are payable in the form of a lump sum payment or rolled over to the Company’s nonqualified deferred compensation plan. For participants who attained age 50 prior to January 1, 2004, the lump sum payment is calculated using two interest rates. One rate is for service prior to January 1, 2004 and the other is for service after January 1, 2004. The rate for pre-January 1, 2004 service is the daily average of Moody’s Aaa bond yields for the month in which the participant’s termination date occurs, plus 50 basis points, and tax-adjusted using the highest marginal federal tax rate. The interest rate for post-January 1, 2004 service is the daily average of ten-year Treasury Bond yields in effect for the month in which the participant’s termination date occurs. The latter rate is used for calculating the lump sum payment for participants attaining age 50 on or after January 1, 2004. Payment is due within 60 days after the termination of employment, except as required by Section 409A of the Code. If payment is required to be delayed by Section 409A of the Code, payment is made within 15 days after expiration of a six-month postponement period following “separation from service” as defined in the Code.
Actuarial assumptions used to determine values in the Pension Benefits Table
The amounts shown in the Pension Benefit Table above are actuarial present values of the benefits accumulated through September 30, 2018. An actuarial present value is calculated by estimating expected future payments starting at an assumed retirement age, weighting the estimated payments by the estimated probability of surviving to each post-retirement age, and discounting the weighted payments at an assumed discount rate to reflect the time value of money. The actuarial present value represents an estimate of the amount that, if invested today at the discount rate, would be sufficient on an average basis to provide estimated future payments based on the current accumulated benefit. The assumed retirement age for each named executive is age 62, which is the earliest age at which the executive could retire without any benefit reduction due to age. Actual benefit present values will vary from these estimates depending on many factors, including an executive’s actual retirement age. The key assumptions included in the calculations are as follows:
|
|
|
|
|
September 30, 2018
|
September 30, 2017
|
Discount rate for UGI Utilities Retirement Plan for all purposes and for SERP, for pre-commencement calculations
|
4.40% (UGI Utilities Retirement Plan) 4.20% (SERP)
|
4.00% (UGI Utilities Retirement Plan) 3.40% (SERP)
|
SERP lump sum rate
|
2.80% for applicable pre-2004 service; 3.10% for other service
|
2.50% for applicable pre-2004 service; 2.30% for other service
|
Retirement age:
|
62
|
62
|
Postretirement mortality for UGI Utilities Retirement Plan
|
RP-2014 blue collar table, adjusted to 2006 using MP-2014 with rates then decreased by 4.3%; projected forward on a generational basis using Scale BB-2D
|
RP-2014 blue collar table, adjusted to 2006 using MP-2014 with rates then decreased by 4.3%; projected forward on a generational basis using Scale BB-2D
|
Postretirement Mortality for SERP
|
1994 GAR Unisex
|
1994 GAR Unisex
|
Preretirement Mortality
|
none
|
none
|
Termination and disability rates
|
none
|
none
|
Form of payment - qualified plan
|
Single life annuity
|
Single life annuity
|
Form of payment - nonqualified plan
|
Lump sum
|
Lump sum
|
Nonqualified Deferred Compensation
The following table shows the contributions, earnings, withdrawals and account balances for each of the named executive officers in the AmeriGas Propane, Inc. Supplemental Executive Retirement Plan (“AmeriGas SERP”), the UGI Corporation Supplemental Savings Plan (“SSP”), and the 2009 UGI Corporation Supplemental Executive Retirement Plan for New Employees (“UGI SERP”).
Nonqualified Deferred Compensation Table — Fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Contributions
in Last Fiscal Year
|
|
Employer
Contributions
in Last Fiscal
Year
|
|
Aggregate
Earnings in Last
Fiscal Year
|
|
Aggregate
Withdrawals/
Distributions
|
|
Aggregate
Balance at Last
Fiscal Year
|
Name
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)(4)
|
(a)
|
|
Plan Name
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
H. J. Gallagher
|
|
AmeriGas SERP
|
|
0
|
|
|
38,328
|
|
(1)
|
2,500
|
|
|
0
|
|
|
139,523
|
|
T. J. Jastrzebski
|
|
UGI SERP
|
|
0
|
|
|
33,110
|
|
|
0
|
|
|
0
|
|
|
0
|
|
J. L. Walsh
|
|
SSP
|
|
0
|
|
|
49,885
|
|
(2)
|
73,767
|
|
|
0
|
|
|
632,388
|
|
M. M. Gaudiosi
|
|
UGI SERP
|
|
0
|
|
|
73,553
|
|
(3)
|
9,559
|
|
|
0
|
|
|
407,636
|
|
A. D. Rosback
|
|
AmeriGas SERP
|
|
0
|
|
|
45,625
|
|
(1)
|
1,558
|
|
|
0
|
|
|
80,230
|
|
J. E. Sheridan
|
|
AmeriGas SERP
|
|
0
|
|
|
84,380
|
|
(1)
|
35,153
|
|
|
0
|
|
|
981,011
|
|
_________________
|
|
(1)
|
This amount represents the estimated employer contribution to the named executive officer under the AmeriGas SERP, which is also reported in the Summary Compensation Table
-
Fiscal 2018 in the “All Other Compensation” column.
|
|
|
(2)
|
This amount represents the employer contribution to the named executive officer under the SSP which is also reported in the Summary Compensation Table
-
Fiscal 2018 in the “All Other Compensation” column.
|
|
|
(3)
|
This amount represents the employer contribution to the named executive officer under the UGI SERP which is also reported in the Summary Compensation Table
-
Fiscal 2018 in the “All Other Compensation” column.
|
|
|
(4)
|
The aggregate balances do not include the Company contributions for Fiscal 2018 set forth in column (c) since the Company contributions occur after fiscal year-end.
|
The AmeriGas SERP is a nonqualified deferred compensation plan that is intended to provide retirement benefits to certain AmeriGas executive officers. Under the plan, AmeriGas credits to each participant’s account annually an amount equal to 5 percent of the participant’s compensation (salary and annual bonus) up to the Code compensation limit ($270,000 in 2018) and 10 percent of compensation in excess of such limit. In addition, if any portion of the General Partner’s matching contribution under the AmeriGas Propane, Inc. qualified 401(k) Savings Plan is forfeited due to nondiscrimination requirements under the Code, the forfeited amount, adjusted for earnings and losses on the amount, will be credited to a participant’s account. Benefits vest on the fifth anniversary of a participant’s employment commencement date. Participants direct the investment of their account balances among a number of mutual funds, which are generally the same funds available to participants in the AmeriGas 401(k) Savings Plan, other than the UGI Corporation stock fund. Account balances are payable in a lump sum within 60 days after termination of employment, except as required by Section 409A of the Code. If payment is required to be delayed by Section 409A of the Code, payment is made within 15 days after expiration of a six-month postponement period following “separation from service” as defined in the Code. Amounts payable under the AmeriGas SERP may be deferred in accordance with the UGI Corporation 2009 Deferral Plan. See “Compensation Discussion and Analysis-UGI Corporation 2009 Deferral Plan.”
The AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan is a nonqualified deferred compensation plan that provides benefits to certain named executive officers that would otherwise be provided under the AmeriGas 401(k) Savings Plan. The plan is intended to permit participants to defer up to $10,000 of annual compensation that would generally not be eligible for contribution to the AmeriGas 401(k) Savings Plan due to Code limitations and nondiscrimination requirements. Participants may direct the investment of deferred amounts into a number of funds. The funds available are the same funds available under the AmeriGas 401(k) Savings Plan, other than the UGI Corporation stock fund. Account balances are payable in a lump sum within 60 days after termination of employment, except as required by Section 409A of the Code. If payment is required to be delayed by Section 409A of the Code, payment is made within 15 days after expiration of a six-month postponement period following “separation from service” as defined in the Code.
The SSP is a nonqualified deferred compensation plan that provides benefits to certain named executive officers that would otherwise be provided under UGI’s qualified 401(k) Savings Plan in the absence of Code limitations. Benefits vest after the participant completes 5 years of service. The SSP is intended to pay an amount substantially equal to the difference between the UGI matching contribution that would have been made under the 401(k) Savings Plan if the Code limitations were not in effect, and the UGI match actually made under the 401(k) Savings Plan. The Code compensation limit for plan year 2018 was $275,000. Under the SSP, the participant is credited with a UGI match on compensation in excess of Code limits using the same formula applicable to contributions to the UGI Corporation 401(k) Savings Plan, which is a match of 50 percent of the first 3 percent of eligible compensation, and a match of 25 percent on the next 3 percent, assuming that the employee contributed to the 401(k) Savings Plan the lesser of 6 percent of eligible compensation and the maximum amount permissible under the Code. Amounts credited to the participant’s account are credited with interest. The rate of interest currently in effect is the rate produced by blending the annual return on the S&P 500 Index (60 percent weighting) and the annual return on the Bloomberg Barclays US Aggregate Bond Index (40 percent weighting). Account balances are payable in a lump sum within 60 days after termination of employment, except as required by Section 409A of the Code. If payment is required to be delayed by Section 409A of the Code, payment is made within 15 days after expiration of a six-month postponement period following “separation from service” as defined in the Code.
The UGI SERP is a nonqualified deferred compensation plan that is intended to provide retirement benefits to executive officers who are not eligible to participate in the UGI Utilities Retirement Plan, having been hired on or after January 1, 2009. Under the UGI SERP, the Company credits to each participant’s account annually an amount equal to 5 percent of the participant’s compensation (salary and annual bonus) up to the Code compensation limit ($275,000 in plan year 2018) and 10 percent of compensation in excess of such limit. In addition, if any portion of the Company’s matching contribution under the UGI Utilities, Inc. 401(k) Savings Plan is forfeited due to nondiscrimination requirements under the Code, the forfeited amount, adjusted for earnings and losses on the amount, will be credited to a participant’s account. Benefits vest on the fifth anniversary of a participant’s employment commencement date. Participants direct the investment of their account balances among a number of mutual funds, which are generally the same funds available to participants in the UGI Utilities, Inc. 401(k) Savings Plan, other than the UGI Corporation stock fund. Account balances are payable in a lump sum within 60 days after termination of employment, except as required by Section 409A of the Code. If payment is required to be delayed by Section 409A of the Code, payment is made within 15 days after expiration of a six-month postponement period following “separation from service” as defined in the Code. Amounts payable under the UGI SERP may be deferred in accordance with the UGI Corporation 2009 Deferral Plan. See Compensation Discussion and Analysis - UGI Corporation 2009 Deferral Plan.
Potential Payments Upon Termination of Employment or Change in Control
Severance Pay Plan for Senior Executive Employees
Named Executive Officers Employed by the General Partner.
The AmeriGas Propane, Inc. Senior Executive Employee Severance Plan (the “AmeriGas Severance Plan”) provides for payment to certain senior level employees of the General Partner, including Messrs. Gallagher, Rosback, and Sheridan in the event their employment is terminated without fault on their part. Specified benefits are payable to a senior executive covered by the AmeriGas Severance Plan if the senior executive’s employment is involuntarily terminated for any reason other than for just cause or as a result of the senior executive’s death or disability. Under the AmeriGas Severance Plan, “just cause” generally means dismissal of an executive due to (i) misappropriation of funds, (ii) conviction of a felony or crime involving moral turpitude, (iii) material breach of UGI’s code of conduct or other written employment policies, (iv) breach of a written restrictive covenant agreement, (v) gross misconduct in the performance of his or her duties, or (vi) the intentional refusal or failure to perform his or her material duties.
Except as provided herein, the AmeriGas Severance Plan provides for cash payments equal to a participant’s compensation for a period of time ranging from 6 months to 18 months, depending on length of service (the “Continuation Period”). In the case of Mr. Gallagher, beginning September 18, 2018, the Continuation Period ranges from 12 months to 24 months, depending on length of service. In addition, a participant may receive an annual bonus for his year of termination, subject to the Committee’s discretion
and not to exceed the amount of his or her bonus under the Annual Bonus Plan, pro-rated for the number of months served in the fiscal year prior to termination. The levels of severance payments were established by the Compensation/Pension Committee based on competitive practice and are reviewed by management and the Compensation/Pension Committee from time to time.
Under the AmeriGas Severance Plan, the participant also receives a payment equal to the cost he or she would have incurred to continue medical and dental coverage under the General Partner’s plans for the Continuation Period (less the amount the participant would be required to contribute for such coverage if the participant were an active employee), provided continued medical and dental coverage would not result in adverse tax consequences to the participant or the General Partner and its affiliates and is permitted under the applicable medical and dental plans. This amount includes a tax gross-up payment equal to 75 percent of the payment relating to medical and dental coverage. The AmeriGas Severance Plan also provides for outplacement services for a period of 12 months following a participant’s termination of employment. Participants, if eligible, are entitled to receive reimbursement for tax preparation services for the final year of employment.
In order to receive benefits under the AmeriGas Severance Plan, a participant is required to execute a release that discharges the General Partner and its affiliates from liability for any claims the senior executive may have against any of them, other than claims for amounts or benefits due to the executive under any plan, program or contract provided by or entered into with the General Partner or its affiliates. Each senior executive is also required to ratify any existing post-employment activities agreement (which restricts the senior executive from competing with the Partnership and its affiliates following termination of employment) and to cooperate in attending to matters pending at the time of termination of employment.
Named Executive Officers Employed by UGI Corporation.
The UGI Corporation Senior Executive Employee Severance Plan (the “UGI Severance Plan”) provides for payment to certain senior level employees of UGI, including Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, in the event their employment is terminated without fault on their part. Benefits are payable to a senior executive covered by the UGI Severance Plan if the senior executive’s employment is involuntarily terminated for any reason other than for just cause or as a result of the senior executive’s death or disability. Under the UGI Severance Plan, “just cause” generally means dismissal of an executive due to (i) misappropriation of funds, (ii) conviction of a felony or crime involving moral turpitude, (iii) material breach of the General Partner’s code of conduct or other written employment policies, (iv) breach of a written restrictive covenant agreement, (v) gross misconduct in the performance of his or her duties, or (vi) the intentional refusal or failure to perform his or her material duties.
Except as provided herein, the UGI Severance Plan provides for cash payments equal to a participant’s compensation for a Continuation Period ranging from 6 months to 18 months. In the case of Mr. Walsh, the Continuation Period is 30 months. In addition, a participant may receive an annual bonus for his or her year of termination, subject to the Committee’s discretion and not to exceed the amount of his or her bonus under the Annual Bonus Plan, pro-rated for the number of months served in the fiscal year prior to termination. The levels of severance payment were established by the Compensation and Management Development Committee based on competitive practice and are reviewed by management and the Compensation and Management Development Committee from time to time.
Under the UGI Severance Plan, the participant also receives a payment equal to the cost he or she would have incurred to continue medical and dental coverage under UGI’s plans for the Continuation Period (less the amount the participant would be required to contribute for such coverage if the participant were an active employee), provided continued medical and dental coverage would not result in adverse tax consequences to the participant or UGI and its affiliates and is permitted under the applicable medical and dental plans. This amount includes a tax gross-up payment equal to 75 percent of the payment relating to medical and dental coverage. The UGI Severance Plan also provides for outplacement services for a period of 12 months following a participant’s termination of employment. Participants, if eligible, are entitled to receive reimbursement for tax preparation services for their final year of employment under the UGI Severance Plan.
In order to receive benefits under the UGI Severance Plan, a participant is required to execute a release that discharges UGI and its subsidiaries from liability for any claims the senior executive may have against any of them, other than claims for amounts or benefits due to the executive under any plan, program or contract provided by or entered into with UGI or its subsidiaries. Each senior executive is also required to ratify any existing post-employment activities agreement (which restricts the senior executive from competing with UGI and its affiliates following termination of employment) and to cooperate in attending to matters pending at the time of termination of employment.
Change in Control Arrangements
Named Executive Officers Employed by the General Partner.
Messrs. Gallagher, Rosback, and Sheridan each have an agreement with the General Partner that provides benefits in the event of a change in control. The agreements have a term of 3 years with automatic one-year extensions each year, unless in each case, prior to a change in control, the General Partner terminates such agreement. In the absence of a change in control or termination by the General Partner, each agreement will terminate when, for
any reason, the executive terminates his or her employment with the General Partner. A change in control is generally deemed to occur in the following instances:
|
|
•
|
any person (other than certain persons or entities affiliated with UGI), together with all affiliates and associates of such person, acquires securities representing 20 percent or more of either (i) the then outstanding shares of common stock, or (ii) the combined voting power of UGI’s then outstanding voting securities;
|
|
|
•
|
individuals, who at the beginning of any 24-month period constitute the UGI Board of Directors (the “Incumbent Board”) and any new Director whose election by the Board of Directors, or nomination for election by UGI’s shareholders, was approved by a vote of at least a majority of the Incumbent Board, cease for any reason to constitute a majority;
|
|
|
•
|
UGI is reorganized, merged or consolidated with or into, or sells all or substantially all of its assets to, another corporation in a transaction in which former shareholders of UGI do not own more than 50 percent of, respectively, the outstanding common stock and the combined voting power of the then outstanding voting securities of the surviving or acquiring corporation;
|
|
|
•
|
the General Partner, Partnership or AmeriGas Propane, L.P. is reorganized, merged or consolidated with or into, or sells all or substantially all of its assets to, another entity in a transaction with respect to which all of the individuals and entities who were owners of the General Partner’s voting securities or of the outstanding units of the Partnership immediately prior to such transaction do not, following such transaction, own more than 50 percent of, respectively, the outstanding common stock and the combined voting power of the then outstanding voting securities of the surviving or acquiring corporation, or if the resulting entity is a partnership, the former unitholders do not own more than 50 percent of the outstanding Common Units in substantially the same proportion as their ownership immediately prior to the transaction;
|
|
|
•
|
UGI, the General Partner, the Partnership or the Operating Partnership is liquidated or dissolved;
|
|
|
•
|
UGI fails to own more than 50 percent of the general partnership interests of the Partnership or the Operating Partnership;
|
|
|
•
|
UGI fails to own more than 50 percent of the outstanding shares of common stock of the General Partner; or
|
|
|
•
|
AmeriGas Propane, Inc. is removed as the general partner of the Partnership or the Operating Partnership.
|
The General Partner will provide Messrs. Gallagher, Rosback, and Sheridan with cash benefits if we terminate the executive’s employment without “cause” or if the executive terminates employment for “good reason” at any time within 2 years following a change in control of the General Partner, AmeriGas Partners or UGI. “Cause” generally includes (i) misappropriation of funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime involving moral turpitude, or (iv) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the General Partner. “Good reason” generally includes a material diminution in authority, duties, responsibilities or base compensation; a material breach by the General Partner of the terms of the agreement; and substantial relocation requirements. If the events trigger a payment following a change in control, the benefits payable to Messrs. Gallagher, Rosback, and Sheridan will be as specified under his change in control agreement unless payments under the AmeriGas Severance Plan described above would be greater, in which case benefits would be provided under the AmeriGas Severance Plan.
Benefits under this arrangement would be equal to 3 times Mr. Sheridan’s base salary and annual bonus, 2.5 times Mr. Gallagher’s base salary and annual bonus, and 2 times Mr. Rosback’s base salary and annual bonus. Each named executive officer would also receive the cash equivalent of his target bonus, prorated for the number of months served in the fiscal year. In addition, Messrs. Gallagher, Rosback, and Sheridan are each entitled to receive a payment equal to the cost he would incur if he enrolled in the General Partner's medical and dental plans for 3 years in the case of Mr. Sheridan, 2.5 years in the case of Mr. Gallagher, and 2 years in the case of Mr. Rosback (in each case less the amount he would be required to contribute for such coverage if he were an active employee). Messrs. Sheridan, Gallagher, and Rosback would also receive their benefits under the AmeriGas SERP calculated as if they had continued in employment for 3 years as to Mr. Sheridan, 2.5 years as to Mr. Gallagher, or 2 years as to Mr. Rosback. In addition, outstanding performance units, stock units and dividend equivalents will only be paid for a qualifying termination of employment and will be paid in cash based on the fair market value of Common Units in an amount equal to the greater of (i) the target award, and (ii) the award amount that would have been paid if the measurement period ended on the date of the change in control, as determined by the Compensation/Pension Committee. For treatment of stock options, see “Grants of Plan-Based Awards Table
-
Fiscal 2018.”
AmeriGas Propane discontinued the use of a tax gross-up in November of 2010 and, as a result, the benefits for Messrs. Gallagher, Rosback, and Sheridan are not subject to a “conditional gross-up” for excise and related taxes in the event they would constitute
“excess parachute payments,” as defined in Section 280G of the Code.
In order to receive benefits under his change in control agreement, each named executive is required to execute a release that discharges the General Partner and its affiliates from liability for any claims he may have against any of them, other than claims for amounts or benefits due to the executive under any plan, program or contract provided by or entered into with the General Partner or its affiliates.
Named Executive Officers Employed By UGI Corporation.
Each of Messrs. Walsh and Jastrzebski and Ms. Gaudiosi has an agreement with UGI which provides benefits in the event of a change in control. The agreement has a term of 3 years with automatic one-year extensions each year, unless in each case, prior to a change in control, UGI terminates an agreement. In the absence of a change in control or termination by UGI, the agreement will terminate when, for any reason, the executive terminates his employment with UGI. A change in control is generally deemed to occur in the following instances:
|
|
•
|
any person (other than certain persons or entities affiliated with UGI), together with all affiliates and associates of such person, acquires securities representing 20 percent or more of either (i) the then outstanding shares of common stock, or (ii) the combined voting power of UGI’s then outstanding voting securities;
|
|
|
•
|
individuals, who at the beginning of any 24-month period constitute the UGI Board of Directors (the “Incumbent Board”) and any new Director whose election by the Board of Directors, or nomination for election by UGI’s shareholders, was approved by a vote of at least a majority of the Incumbent Board, cease for any reason to constitute a majority;
|
|
|
•
|
UGI is reorganized, merged or consolidated with or into, or sells all or substantially all of its assets to, another corporation in a transaction in which former shareholders of UGI do not own more than 50 percent of, respectively, the outstanding common stock and the combined voting power of the then outstanding voting securities of the surviving or acquiring corporation; or
|
|
|
•
|
UGI Corporation is liquidated or dissolved.
|
UGI will provide Messrs. Walsh and Jastrzebski and Ms. Gaudiosi with cash benefits if UGI terminates his or her employment without “cause” or if he or she terminates employment for “good reason” at any time within 2 years following a change in control of UGI. “Cause” generally includes (i) misappropriation of funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime involving moral turpitude, or (iv) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of UGI. “Good reason” generally includes material diminution in authority, duties, responsibilities or base compensation; a material breach by UGI of the terms of the agreement; and substantial relocation requirements. If the events trigger a payment following a change in control, the benefits payable to Mr. Walsh and Ms. Gaudiosi will be as specified under his or her change in control agreement unless payments under the UGI Severance Plan described above would be greater, in which case benefits would be provided under the UGI Severance Plan.
Benefits under this arrangement would be equal to 3 times Messrs. Walsh’s and Jastrzebski’s and Ms. Gaudiosi’s respective base salary and annual bonus. Each executive would also receive the cash equivalent of his or her target bonus, prorated for the number of months served in the fiscal year. In addition, Messrs. Walsh and Jastrzebski and Ms. Gaudiosi are each entitled to receive a payment equal to the cost he or she would incur if he or she enrolled in UGI’s medical and dental plans for 3 years (less the amount he or she would be required to contribute for such coverage if he or she were an active employee). Messrs. Walsh and Jastrzebski and Ms. Gaudiosi would also have benefits under UGI’s Supplemental Executive Retirement Plan calculated as if he or she had continued in employment for 3 years. In addition, outstanding performance units, stock units and dividend equivalents will only be paid for a qualifying termination of employment and will be paid in cash based on the fair market value of UGI’s common stock in an amount equal to the greater of (i) the target award, and (ii) the award amount that would have been paid if the performance unit measurement period ended on the date of the change in control, as determined by UGI’s Compensation and Management Development Committee. For treatment of stock options, see “Grants of Plan-Based Awards Table - Fiscal 2018.”
The benefits are subject to a “conditional gross up” for excise and related taxes in the event they would constitute “excess parachute payments,” as defined in Section 280G of the Code. UGI will provide the tax gross-up if the aggregate parachute value of benefits is greater than 110 percent of the maximum amount that may be paid under Section 280G of the Code without imposition of an excise tax. If the parachute value does not exceed the 110 percent threshold, the benefits for Mr. Walsh will be reduced to the extent necessary to avoid imposition of the excise tax on “excess parachute payments.” UGI Corporation discontinued the use of a tax gross-up in July 2010 for executives (including Mr. Jastrzebski and Ms. Gaudiosi) who enter into change in control agreements subsequent thereto.
In order to receive benefits under his or her change in control agreement, Messrs. Walsh and Jastrzebski and Ms. Gaudiosi are each required to execute a release that discharges UGI and its subsidiaries from liability for any claims he or she may have against any of them, other than claims for amounts or benefits due to the executive under any plan, program or contract provided by or entered into with UGI or its subsidiaries.
Potential Payments Upon Termination or Change in Control Table
—
Fiscal 2018
The amounts shown in the table below assume that each named executive officer's termination was effective as of September 30, 2018 and are merely estimates of the incremental amounts that would be paid out to the named executive officers upon their termination. The actual amounts to be paid out can only be determined at the time of such named executive officer's termination of employment. The amounts set forth in the table below do not include compensation to which each named executive officer would be entitled without regard to his or her termination of employment, including (i) base salary and short-term incentives that have been earned but not yet paid or (ii) amounts that have been earned, but not yet paid, under the terms of the plans listed under the “Pension Benefits Table - Fiscal 2018” and the “Nonqualified Deferred Compensation Table
-
Fiscal 2018.” There are no incremental payments in the event of voluntary resignation, termination for cause, disability or upon retirement.
|
|
|
|
|
|
|
Potential Payments Upon Termination or Change in Control Table - Fiscal 2018
|
Name & Triggering Event
|
Severance Pay($)(1)(2)
|
Equity Awards with Accelerated Vesting($)(3)
|
Nonqualified Retirement Benefits($)(4)
|
Welfare & Other Benefits($)(5)
|
Total($)
|
H. J. Gallagher
Death
Involuntary Termination Without Cause
Termination Following Change in Control
|
0
1,451,123
1,378,007
|
697,178
0
939,664
|
13,568
15,436
89,602
|
0
92,045
90,056
|
710,746
1,558,604
2,497,329
|
T. J. Jastrzebski
Death
Involuntary Termination Without Cause
Termination Following Change in Control
|
0
666,667
2,816,667
|
1,557,320
0
3,313,983
|
0
0
219,500
|
0
35,332
89,025
|
1,557,320
701,999
6,439,175
|
J. L. Walsh
Death
Involuntary Termination Without Cause
Termination Following Change in Control
|
0
7,213,293
8,611,031
|
11,162,747
0
19,229,446
|
7,464,594
8,928,940
11,344,390
|
0
63,877
57,708
|
18,627,341
16,206,110
39,242,575
|
M. M. Gaudiosi
Death
Involuntary Termination Without Cause
Termination Following Change in Control
|
0
979,211
1,223,202
|
2,494,953
0
4,336,094
|
0
0
186,836
|
0
28,473
31,775
|
2,494,953
1,007,684
5,777,907
|
A. D. Rosback
Death
Involuntary Termination Without Cause
Termination Following Change in Control
|
0
619,110
1,429,004
|
1,133,555
0
1,541,825
|
0
0
92,574
|
0
35,846
47,537
|
1,133,555
654,956
3,110,940
|
_________________
|
|
(1)
|
Amounts shown under “Severance Pay” in the case of involuntary termination without cause are calculated under the terms of the UGI Severance Plan for Messrs. Walsh and Jastrzebski and Ms. Gaudiosi, and the AmeriGas Severance Plan for Messrs. Gallagher and
Rosback
. We assumed that 100 percent of the target annual bonus was paid.
|
|
|
(2)
|
Amounts shown under “Severance Pay” in the case of termination following a change in control are calculated under the officer’s change in control agreement.
|
|
|
(3)
|
In calculating the amounts shown under “Equity Awards with Accelerated Vesting,” we assumed (i) the continuation of AmeriGas Partners’ distribution (and UGI’s dividend, as applicable) at the rate in effect on September 30, 2018; and (ii) performance at the greater of actual through September 30, 2018 and target levels with respect to performance units.
|
|
|
(4)
|
Amounts shown under “Nonqualified Retirement Benefits” are in addition to amounts shown in the “Pension Benefits Table - Fiscal 2018” and “Non-Qualified Deferred Compensation Table - Fiscal 2018.”
|
|
|
(5)
|
Amounts shown under “Welfare and Other Benefits” include estimated payments for (i) medical and dental and life
|
insurance premiums, (ii) outplacement services, and (iii) tax preparation services. In the event of a change in control, no estimated Code Section 280G tax gross-up payment would be triggered.
COMPENSATION OF DIRECTORS
The table below shows the components of director compensation for Fiscal 2018. A Director who is an officer or employee of the General Partner or its subsidiaries is not compensated for service on the Board of Directors or on any Committee of the Board.
Director Compensation Table
—
Fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
or Paid
in Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
|
|
All Other
Compensation
|
|
Total
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
($)
|
|
Earnings
|
|
($)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
B. R. Ford
|
|
112,000
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
186,121
|
|
J. R. Hartmann
|
|
112,000
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
186,121
|
|
F. S. Hermance
|
|
21,832
|
|
|
33,813
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
55,645
|
|
W. J. Marrazzo
|
|
117,000
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
191,121
|
|
A. Pol
|
|
82,500
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
749
|
|
|
0
|
|
|
157,370
|
|
P. A. Ramos
|
|
80,625
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
154,746
|
|
M. O. Schlanger
|
|
91,875
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
165,996
|
|
K. R. Turner
|
|
112,000
|
|
|
74,121
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
186,121
|
|
_________________
|
|
(1)
|
In Fiscal 2018, the General Partner paid its non-management directors an annual retainer of $75,000 for Board service. It paid an additional annual retainer of $10,000 to members of the Audit Committee, other than the chairperson. The chairperson of the Audit Committee was paid an additional annual retainer of $15,000. The General Partner also paid an additional retainer of $7,500 for the chairperson of the Compensation/Pension and the Corporate Governance Committees and paid its Presiding Director a retainer of $15,000 in Fiscal 2018. The General Partner does not typically pay meeting attendance fees to its directors. During Fiscal 2018, pursuant to the Partnership Agreement, the General Partner’s Audit Committee served as a conflicts committee in evaluating a related party transaction with UGI Corporation. In connection with their service on this conflicts committee, the compensation reflected for each of Messrs. Ford, Hartmann, Marrazzo and Turner includes additional fees of $27,000 during Fiscal 2018 ($1,500 per meeting).
|
|
|
(2)
|
All non-employee Directors received 1,550 Phantom Units during Fiscal 2018 as part of their annual compensation, except for Mr. Hermance, who received 775 Phantom Units in connection with his election to the Board on June 15, 2018. The Phantom Units were awarded under the 2010 Plan. Each Phantom Unit represents the right to receive an AmeriGas Partners Common Unit and distribution equivalents when the Director ends his service on the Board. Phantom Units earn distribution equivalents on each record date for the payment of a distribution by the Partnership on its Common Units. Accrued distribution equivalents are converted to additional Phantom Units annually, on the last day of the calendar year, based on the closing price for the Partnership’s Common Units on the last trading day of the year. All Phantom Units and distribution equivalents are fully vested when credited to the Director’s account. Account balances become payable 65 percent in AmeriGas Partners Common Units and 35 percent in cash, based on the value of a Common Unit, upon retirement or termination of service unless otherwise deferred. In the case of a change in control of the Partnership, the Phantom Units and distribution equivalents will be paid in cash based on the fair market value of the Partnership’s Common Units on the date of the change in control. The amounts shown in column (c) above represent the grant date fair value of the awards of Phantom Units. The assumptions used in the calculation of the amounts shown are included in Note 2 and Note 11 to our audited consolidated financial statements for Fiscal 2018. For the number of Phantom Units credited to each Director’s account as of September 30, 2018, see “Securities Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters - Beneficial Ownership of Partnership Common Units by the Directors and Named Executive Officers of the General Partner.”
|
Equity Ownership Guidelines for Independent Directors
: All independent directors are required to hold AmeriGas Partners, L.P. units equal to five times the cash portion of their annual retainer. They have five years to meet this ownership threshold.
CEO Pay Ratio
The Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules adopted by the SEC require disclosure of the ratio of the annual total compensation of its chief executive officer to the annual total compensation of its median employee.
During Fiscal 2018, Mr. Sheridan served as our President and Chief Executive Officer until September 18, 2018, at which time Mr. Gallagher became our President and Chief Executive Officer and served in such capacity for the remainder of Fiscal 2018. As permitted by the SEC rules, we chose to use the annual total compensation of Mr. Sheridan to calculate our pay ratio and have thus annualized his compensation for purposes of the pay ratio estimation. The following table shows the ratio of the annual total compensation of our Chief Executive Officer compared to that of our median employee for Fiscal 2018.
In calculating the pay ratio, we did not utilize the “de minimis” exception, statistical sampling or other similar methods, or any cost-of-living adjustment, as permitted by applicable SEC regulations.
|
|
|
|
|
Annual total compensation of our CEO for Fiscal 2018
|
$
|
2,399,888
|
|
Annual total compensation of our median employee for Fiscal 2018
|
$
|
44,183
|
|
Ratio of annual total compensation of our CEO to the annual total compensation of our median employee for Fiscal 2018
|
|
54 to 1
|
|
Methodology
:
|
|
1.
|
We determined that, as of July 1, 2018, our employee population consisted of approximately 7,800 active employees (including part-time and temporary employees).
|
|
|
2.
|
To identify the “median employee,” we selected Target Total Cash Compensation (base salary equivalent and overtime, plus incentive compensation and commissions) as our consistently applied compensation measure.
|
|
|
3.
|
With respect to the annual total compensation of the “median employee,” we identified and calculated the elements of such employee’s compensation for Fiscal 2018 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
|
|
|
4.
|
With respect to the annual total compensation of our Chief Executive Officer, we used the amount reported in the “Total column (column (j))” of our FY 2018 Summary Compensation Table included in this Proxy Statement.
|