Common Stock and Equity-Based Compensation

UGI Common Stock share activity for Fiscal 2010, Fiscal 2011 and Fiscal 2012 follows:



	Issued	Treasury		Outstanding
Balance, September 30, 2009	115,261,294	(6,514,587	)	108,746,707
Issued:
Employee and director plans	139,000	1,390,207		1,529,207
Dividend reinvestment plan	—	97,673		97,673
Balance, September 30, 2010	115,400,294	(5,026,707	)	110,373,587
Issued:
Employee and director plans	106,800	1,263,065		1,369,865
Dividend reinvestment plan	—	92,570		92,570
Balance, September 30, 2011	115,507,094	(3,671,072	)	111,836,022
Issued:
Employee and director plans	117,500	824,925		942,425
Dividend reinvestment plan	—	104,994		104,994
Shares reacquired - employee and director plans	—	(263,020	)	(263,020	)
Balance, September 30, 2012	115,624,594	(3,004,173	)	112,620,421

As a result of the January 2012 issuance of 29,567,362 AmeriGas Partners Common Units to ETP in conjunction with the Heritage Acquisition and related General Partner Common Unit transactions (see Note 4), and the March 2012 issuance of 7,000,000 AmeriGas Partners Common Units pursuant to AmeriGas Partners’ public offering (see Note 14), the Company recorded a $196.3 increase in UGI Corporation stockholders’ equity (which amount is net of deferred income taxes) and an associated $321.4 pre-tax decrease in noncontrolling interests equity.

Equity-Based Compensation

The Company grants equity-based awards to employees and non-employee directors comprising UGI stock options, grants of UGI stock-based equity instruments and grants of AmeriGas Partners Common Unit-based equity instruments as further described below. We recognized total pre-tax equity-based compensation expense of $14.5 ($8.7 after-tax), $15.6 ($10.3 after-tax) and $13.2 ($8.7 after-tax) in Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively.

UGI Equity-Based Compensation Plans and Awards. Under the UGI Corporation 2004 Omnibus Equity Compensation Plan Amended and Restated as of December 5, 2006 (the “OECP”), we may grant options to acquire shares of UGI Common Stock, stock appreciation rights (“SARs”), UGI Units (comprising “Stock Units” and “UGI Performance Units”) and other equity-based awards to key employees and non-employee directors. The exercise price for options may not be less than the fair market value on the grant date. Awards granted under the OECP may vest immediately or ratably over a period of years, and stock options can be exercised no later than ten years from the grant date. In addition, the OECP provides that awards of UGI Units may also provide for the crediting of dividend equivalents to participants’ accounts. Except in the event of retirement, death or disability, each grant, unless paid, will terminate when the participant ceases to be employed. There are certain change of control and retirement eligibility conditions that, if met, generally result in accelerated vesting or elimination of further service requirements.

Under the OECP, awards representing up to 15,000,000 shares of UGI Common Stock may be granted. The maximum number of shares that may be issued pursuant to grants other than stock options or SARs is 3,200,000. Dividend equivalents on UGI Unit awards to employees will be paid in cash. Dividend equivalents on non-employee director awards are accumulated in additional Stock Units. UGI Unit awards granted to employees and non-employee directors are settled in shares of Common Stock and cash. UGI Unit awards granted to Antargaz employees are settled in shares of Common Stock. With respect to UGI Performance Unit awards, the actual number of shares (or their cash equivalent) ultimately issued, and the actual amount of dividend equivalents paid, is generally dependent upon the achievement of market performance goals and service conditions. It is our practice to issue treasury shares to satisfy substantially all option exercises and UGI Unit awards. We do not expect to repurchase shares on the market for such purposes during Fiscal 2013. Beginning during Fiscal 2012, options granted under the OECP may be net exercised whereby shares equal to the option price and grantee's minimum applicable payroll tax withholding are withheld from the number of shares payable ("net exercise"). We record shares withheld under option net exercises as shares reacquired.

UGI Stock Option Awards. Stock option transactions under the OECP and predecessor plans for Fiscal 2010, Fiscal 2011 and Fiscal 2012 follow:



	Shares		Weighted Average Option Price		Total Intrinsic Value		Weighted Average Contract Term (Years)
Shares under option — September 30, 2009	7,501,493		$	22.74	$	23.2	6.4
Granted	1,394,300		$	24.37
Cancelled	(62,501	)	$	25.12
Exercised	(1,276,247	)	$	18.09	$	11.7
Shares under option — September 30, 2010	7,557,045		$	23.81	$	36.2	6.5
Granted	1,443,558		$	31.55
Cancelled	(235,437	)	$	27.79
Exercised	(1,091,987	)	$	20.95	$	11.4
Shares under option — September 30, 2011	7,673,179		$	25.55	$	15.1	6.2
Granted	1,508,050		$	29.26
Cancelled	(321,600	)	$	27.74
Exercised	(801,857	)	$	20.93	$	7.2
Shares under option — September 30, 2012	8,057,772		$	26.62	$	41.4	6.1
Options exercisable — September 30, 2010	4,706,376		$	22.99
Options exercisable — September 30, 2011	4,879,784		$	24.15
Options exercisable — September 30, 2012	5,317,698		$	25.32	$	34.2	5.0
Non-vested options — September 30, 2012	2,740,074		$	29.13	$	7.2	8.3

Cash received from stock option exercises and associated tax benefits were $16.8 and $2.3, $22.9 and $3.8, and $23.1 and $4.3 in Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively. As of September 30, 2012, there was $4.2 of unrecognized compensation cost associated with unvested stock options that is expected to be recognized over a weighted-average period of 2 years.

The following table presents additional information relating to stock options outstanding and exercisable at September 30, 2012:



	Range of exercise prices
	Under $20.00		$20.00 - $25.00		$25.01 - $30.00		Over $30.00
Options outstanding at September 30, 2012:
Number of options	162,300		2,996,470		3,529,044		1,369,958
Weighted average remaining contractual life (in years)	1.5		5.3		6.3		7.8
Weighted average exercise price	$	16.92	$	23.29	$	27.99	$	31.53
Options exercisable at September 30, 2012:
Number of options	162,300		2,546,170		2,164,909		444,319
Weighted average exercise price	$	16.92	$	23.12	$	27.26	$	31.60

UGI Stock Option Fair Value Information. The per share weighted-average fair value of stock options granted under our option plans was $4.31 in Fiscal 2012, $5.40 in Fiscal 2011 and $4.49 in Fiscal 2010. These amounts were determined using a Black-Scholes option pricing model which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments and the risk-free interest rate over the expected life of the option. The expected life of option awards represents the period of time during which option grants are expected to be outstanding and is derived from historical exercise patterns. Expected volatility is based on historical volatility of the price of UGI’s Common Stock. Expected dividend yield is based on historical UGI dividend rates. The risk free interest rate is based on U.S. Treasury bonds with terms comparable to the options in effect on the date of grant.

The assumptions we used for valuing option grants during Fiscal 2012, Fiscal 2011 and Fiscal 2010 are as follows:



	2012	2011	2010
Expected life of option	5.75 years	5.75 years	5.75 years
Weighted average volatility	24.7%	24.3%	24.0%
Weighted average dividend yield	3.5%	3.4%	3.3%
Expected volatility	24.7%	23.8% - 24.3%	24.0%
Expected dividend yield	3.3% - 3.7%	3.1% - 3.4%	3.3% - 3.4%
Risk free rate	0.8% - 1.1%	1.2% - 2.4%	1.7% - 3.1%

UGI Unit Awards. UGI Stock Unit and UGI Performance Unit awards entitle the grantee to shares of UGI Common Stock or cash once the service condition is met and, with respect to UGI Performance Unit awards, subject to market performance conditions. UGI Performance Unit grant recipients are awarded a target number of Performance Units. The number of UGI Performance Units ultimately paid at the end of the performance period (generally three years) may be higher or lower than the target amount, or even zero, based on UGI’s Total Shareholder Return (“TSR”) percentile rank relative to companies in the Standard & Poor’s Utilities Index for grants prior to January 1, 2011 and the Russell Midcap Utility Index (excluding telecommunication companies) for grants on or after January 1, 2011 (“UGI comparator group”). Based on the TSR percentile rank, grantees may receive 0% to 200% of the target award granted. If UGI’s TSR ranks below the 40th percentile compared to the UGI comparator group, the employee will not be paid. At the 40th percentile, the employee will be paid an award equal to 50% of the target award; at the 50th percentile, 100%; and at the 100th percentile, 200%. The actual amount of the award is interpolated between these percentile rankings. Dividend equivalents are paid in cash only on UGI Performance Units that eventually vest.

The fair value of UGI Stock Units on the grant date is equal to the market price of UGI Stock on the grant date. Under GAAP, UGI Performance Units are equity awards with a market-based condition which, if settled in shares, results in the recognition of compensation cost over the requisite employee service period regardless of whether the market-based condition is satisfied. The fair values of UGI Performance Units are estimated using a Monte Carlo valuation model. The fair value associated with the target award is accounted for as equity and the fair value of the award over the target, as well as all dividend equivalents, is accounted for as a liability. The expected term of the UGI Performance Unit awards is three years based on the performance period. Expected volatility is based on the historical volatility of UGI Common Stock over a three-year period. The risk-free interest rate is based on the yields on U.S. Treasury bonds at the time of grant. Volatility for all companies in the UGI comparator group is based on historical volatility.

The following table summarizes the weighted average assumptions used to determine the fair value of UGI Performance Unit awards and related compensation costs:



	Grants Awarded in Fiscal
	2012		2011		2010
Risk free rate	0.4	%	1.0	%	1.7	%
Expected life	3 years		3 years		3 years
Expected volatility	22.2	%	27.6	%	28.0	%
Dividend yield	3.5	%	3.2	%	3.3	%

The weighted-average grant date fair value of UGI Performance Unit awards was estimated to be $27.25 for Units granted in Fiscal 2012, $35.19 for Units granted in Fiscal 2011 and $22.51 for Units granted in Fiscal 2010.

The following table summarizes UGI Unit award activity for Fiscal 2012:



	Total				Vested				Non-Vested
	Number of UGI Units		Weighted Average Grant Date Fair Value (per Unit)		Number of UGI Units		Weighted Average Grant Date Fair Value (per Unit)		Number of UGI Units		Weighted Average Grant Date Fair Value (per Unit)
September 30, 2011	900,283		$	24.13	598,955		$	21.41	301,328		$	29.56
UGI Performance Units:
Granted	197,400		$	27.25	33,518		$	29.16	163,882		$	26.86
Forfeited	(51,411	)	$	27.94	—		$	—	(51,411	)	$	27.94
Vested	—		$	—	110,083		$	29.04	(110,083	)	$	29.04
Performance criteria not met	(170,481	)	$	27.82	(170,481	)	$	27.82	—		$	—
UGI Stock Units:
Granted (a)	42,445		$	29.69	40,945		$	29.53	1,500		$	34.06
Vested	—		$	—	—		$	—	—		$	—
Unit awards paid	(32,898	)	$	26.17	(32,898	)	$	26.17	—		$	—
September 30, 2012	885,338		$	24.09	580,122		$	21.72	305,216		$	28.59


(a)	Generally, shares granted under UGI Stock Unit awards are paid approximately 70% in shares. UGI Stock Unit awards granted in Fiscal 2011 and Fiscal 2010 were 61,945 and 27,060, respectively.

During Fiscal 2012, Fiscal 2011 and Fiscal 2010, the Company paid UGI Performance Unit and UGI Stock Unit awards in shares and cash as follows:



	2012		2011		2010
UGI Performance Unit awards:
Number of original awards granted	210,750		197,917		193,983
Fiscal year granted	2009		2008		2007
Payment of awards:
Shares of UGI Common Stock issued	—		142,494		123,169
Cash paid	$	—	$	7.5	$	2.6

UGI Stock Unit awards:
Number of original awards granted	32,898		22,400		—
Payment of awards:
Shares of UGI Common Stock issued	21,757		17,545		—
Cash paid	$	0.2	$	0.2	$	—

During Fiscal 2012, Fiscal 2011 and Fiscal 2010, we granted UGI Unit awards representing 239,845, 285,470 and 231,710 shares, respectively, having weighted-average grant date fair values per Unit of $27.68, $34.78 and $22.69, respectively.

As of September 30, 2012, there was a total of approximately $5.2 of unrecognized compensation cost associated with 885,338 UGI Unit awards outstanding that is expected to be recognized over a weighted-average period of 1.9 years. The total fair values of UGI Units that vested during Fiscal 2012, Fiscal 2011 and Fiscal 2010 were $3.6, $6.8 and $5.0, respectively. As of September 30, 2012 and 2011, total liabilities of $5.0 and $6.0, respectively, associated with UGI Unit awards are reflected in employee compensation and benefits accrued and other noncurrent liabilities in the Consolidated Balance Sheets.

At September 30, 2012, 1,436,672 shares of Common Stock were available for future grants under the OECP, of which up to 1,436,672 may be issued pursuant to future grants other than stock options or SARs.

AmeriGas Partners Equity-Based Compensation Plans and Awards. Under the AmeriGas Propane, Inc. 2010 Long-Term Incentive Plan on Behalf of AmeriGas Partners, L.P. (“2010 Propane Plan”), the General Partner may award to employees and non-employee directors grants of AmeriGas Partners Units (comprising “AmeriGas Stock Units” and “AmeriGas Performance Units”), options, unit appreciation rights and other Common Unit-based awards. The 2010 Propane Plan succeeded the AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan (“2000 Propane Plan”) which expired on December 31, 2009, and replaced the AmeriGas Propane, Inc. Discretionary Long-Term Incentive Plan for Non-Executive Key Employees (“Nonexecutive Propane Plan”). The total aggregate number of Common Units that may be issued under the 2010 Propane Plan is 2,800,000. The exercise price for options may not be less than the fair market value on the date of grant. Awards granted under the 2010 Propane Plan may vest immediately or ratably over a period of years, and options can be exercised no later than ten years from the grant date. In addition, the 2010 Propane Plan provides that Common Unit-based awards may also provide for the crediting of Common Unit distribution equivalents to participants’ accounts.

Recipients of AmeriGas Performance Unit awards are awarded a target number of AmeriGas Performance Units. The number of AmeriGas Performance Units ultimately paid at the end of the performance period (generally three years ) may be higher or lower than the target number based upon AmeriGas Partners’ Total Unitholder Return (“TUR”) percentile rank relative to entities in a peer group. Percentile rankings and payout percentages are generally the same as those used for the UGI Performance Unit awards. Any Common Unit distribution equivalents earned are paid in cash. Generally, except in the event of retirement, death or disability, each grant, unless paid, will terminate when the participant ceases to be employed by the General Partner. There are certain change of control and retirement eligibility conditions that, if met, generally result in accelerated vesting or elimination of further service requirements.

As a result of the Heritage Acquisition, certain Heritage Propane employees were awarded AmeriGas Performance Units, AmeriGas Stock Units (in the form of phantom units), or a combination of AmeriGas Performance Units and AmeriGas Stock Units. The terms of the Performance Unit awards granted to Heritage Propane employees are generally the same as those described above. The AmeriGas Stock Units awards granted to Heritage employees vest in tranches with certain awards beginning to vest in January 2013 through January 2016. Certain of the AmeriGas Stock Unit awards provide for accelerated vesting under certain conditions. Under certain conditions all or a portion of these awards could be forfeited. The AmeriGas Stock Unit awards granted to Heritage Propane employees provide for the crediting of distribution equivalents to participants' accounts.

Under GAAP, AmeriGas Performance Units are equity awards with a market-based condition which, if settled in Common Units, results in the recognition of compensation cost over the requisite employee service period regardless of whether the market-based condition is satisfied. The fair values of AmeriGas Performance Units are estimated using a Monte Carlo valuation model. The fair value associated with the target award and the award above the target, if any, which will be paid in Common Units, is accounted for as equity and the fair value of all Common Unit distribution equivalents, which will be paid in cash, is accounted for as a liability. The expected term of the AmeriGas Performance Unit awards is three years based on the performance period. Expected volatility is based on the historical volatility of Common Units over a three-year period. The risk-free interest rate is based on the rates on U.S. Treasury bonds at the time of grant. Volatility for all limited partnerships in the peer group is based on historical volatility.

The following table summarizes the weighted-average assumptions used to determine the fair value of AmeriGas Performance Unit awards and related compensation costs:



	Grants Awarded in Fiscal
	2012		2011		2010
Risk-free rate	0.4	%	1.0	%	1.7	%
Expected life	3 years		3 years		3 years
Expected volatility	23.0	%	34.6	%	35.0	%
Dividend yield	6.4	%	5.8	%	6.8	%

The General Partner granted awards under the 2010 Propane Plan representing 248,818, 49,287 and 57,750 Common Units in Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively, having weighted-average grant date fair values per Common Unit subject to award of $43.22, $53.19 and $41.39, respectively. At September 30, 2012, 2,517,419 Common Units were available for future award grants under the 2010 Propane Plan.

The following table summarizes AmeriGas Common Unit-based award activity for Fiscal 2012:



	Total				Vested				Non-Vested
	Number of AmeriGas Partners Common Units Subject to Award		Weighted Average Grant Date Fair Value (per Unit)		Number of AmeriGas Partners Common Units Subject to Award		Weighted Average Grant Date Fair Value (per Unit)		Number of AmeriGas Partners Common Units Subject to Award		Weighted Average Grant Date Fair Value (per Unit)
September 30, 2011	155,356		$	41.79	62,638		$	38.20	92,718		$	44.22
AmeriGas Performance Units:
Granted	55,150		$	48.28	8,665		$	48.28	46,485		$	48.28
Forfeited	(15,068	)	$	50.37	—		$	—	(15,068	)	$	50.37
Vested	—		$	—	36,833		$	39.28	(36,833	)	$	39.28
Performance criteria not met	(48,633	)	$	32.17	(48,633	)	$	32.17	—		$	—
AmeriGas Stock Units:
Granted	193,668		$	41.77	66,244		$	41.81	127,424		$	41.76
Forfeited	(10,360	)	$	41.42	—		$	—	(10,360	)	$	41.42
Vested	—		$	—	6,050		$	35.05	(6,050	)	$	35.05
Awards paid	(66,146	)	$	40.72	(66,146	)	$	40.72	—		$	—
September 30, 2012	263,967		$	44.70	65,651		$	45.42	198,316		$	44.47

During Fiscal 2012, Fiscal 2011 and Fiscal 2010, the Partnership paid AmeriGas Common Unit-based awards in Common Units and cash as follows:



	2012 (a)		2011		2010
Number of Common Units subject to original awards granted	60,200		41,064		49,650
Fiscal year granted	2009		2008		2007
Payment of awards:
AmeriGas Partners Common Units issued	3,500		35,787		42,121
Cash paid	$	0.1	$	1.2	$	1.2

(a) In addition, 40,516 AmeriGas Stock Units, and $0.9 in cash, were paid to Heritage Propane employees associated with awards granted in Fiscal 2012.

As of September 30, 2012, there was a total of approximately $3.0 of unrecognized compensation cost associated with 263,967 Common Units subject to award that is expected to be recognized over a weighted-average period of 2.0 years. The total fair value of Common Unit-based awards that vested during Fiscal 2012, Fiscal 2011 and Fiscal 2010 was $5.1, $2.0 and $2.0, respectively. As of September 30, 2012 and 2011, total liabilities of $1.1 and $1.2 associated with Common Unit-based awards are reflected in employee compensation and benefits accrued and other noncurrent liabilities in the Consolidated Balance Sheets.