UGI Corporation (NYSE: UGI) today reported financial results for
the fiscal quarter ended December 31, 2020.
HEADLINES
- GAAP diluted earnings per share ("EPS") of $1.44 and adjusted
diluted EPS of $1.18 compared to GAAP diluted EPS of $1.00 and
adjusted diluted EPS of $1.17 in the prior-year period.
- Reportable segments earnings before interest expense and income
taxes1 ("EBIT") of $414 million compared to $419 million in the
prior-year period.
- Margins stronger than prior year at UGI International,
continued progress on the LPG business transformation initiatives,
and disciplined expense management largely offset warmer than
prior-year weather at our domestic businesses and the impact of the
COVID-19 pandemic.
- Through its subsidiary, UGI Energy Services, LLC ("Energy
Services") entered into definitive agreements to invest in New
Energy One HoldCo LLC, which is part of the team developing a
utility-scale renewable natural gas (“RNG”) project in Idaho.
- On December 30, 2020, UGI announced that it had signed a
definitive agreement to acquire Mountaineer Gas Company.
ESG HIGHLIGHTS
- UGI Utilities, Inc. (“UGI Utilities”) has executed a RNG
interconnect agreement with a landfill gas developer in northeast
Pennsylvania.
- UGI Utilities has also commenced construction on a project to
deliver natural gas to UPS Fuel Services Inc., a subsidiary of
United Parcel Services, Inc. (“UPS”), for a large regional fleet of
compressed natural gas (“CNG”) delivery vehicles.
- On February 2, 2021, UGI International announced a new supply
and development partnership with Ekobenz, a Polish technology
specialist in catalytic conversion of bioethanol to bio-gasoline
and bioLPG, for exclusive rights to its supply of bioLPG.
- On December 14, 2020, UGI Utilities and Energy Services joined
the coalition Our Nation’s Energy Future (ONE Future) to further
progress their commitment toward achieving UGI’s ambitious
greenhouse gas emission reduction targets.
- Created a dedicated ESG function to continue advancing UGI's
commitment to sustainability.
- Through its subsidiary, UGI Utilities, UGI supported programs
promoting Belonging, Inclusion, Diversity & Equity (BIDE) and
STEM advancement through a gift of $300,000 to Penn State
Harrisburg.
"UGI delivered a strong first quarter with GAAP diluted EPS of
$1.44 and adjusted diluted EPS of $1.18, despite weather that was
warmer than normal in all of our service territories and the
ongoing impact of COVID-19 on our operations," said John L. Walsh,
President and Chief Executive Officer of UGI Corporation. "The
solid results highlight the benefits of both geographic and
operational diversification as the strong performance was driven by
higher margins at UGI International, higher volumes from AmeriGas’
cylinder exchange program, favorable capacity management margin at
our Midstream & Marketing business, continued contribution from
our growth drivers and transformation initiatives, and disciplined
expense management. These factors largely offset generally warmer
weather in our domestic businesses and the negative impact of
COVID-19 during the quarter; demonstrating the resiliency of our
business.
“The LPG businesses continue to make good progress on the
business transformation initiatives. Fiscal 2021 is an important
year for both businesses as we begin to execute on critical aspects
of the projects and continue to build a culture of continuous
improvement. AmeriGas and UGI International continue to enhance
operational efficiency, improve the customer experience, and remain
on pace to deliver total ongoing annual benefits of more than $140
million and €30 million, respectively.
“On December 30, 2020 we announced an agreement to acquire
Mountaineer Gas Company. The transaction accelerates the goal of
rebalancing our portfolio and provides us with an opportunity to
support our customers in West Virginia through investments that
will ensure safe, reliable, affordable, and environmentally
responsible natural gas services. We expect to see rate base grow
by a compound annual growth rate of approximately 10% to 12% over
the long term. The transaction is expected to be immediately
accretive to adjusted diluted EPS and is expected to close in the
second half of calendar year 2021.
“Lastly, we continue to make progress on our goal to be a leader
in delivering renewable energy solutions for our customers.
Recently, UGI Utilities executed a RNG interconnect agreement with
a large landfill gas developer in northeast Pennsylvania and
commenced construction on a project to deliver natural gas to UPS
Fuel Services Inc. We also recently announced that UGI
International entered into a supply and development partnership
with Ekobenz and secured exclusive rights to Ekobenz’ supply of
bioLPG, a renewable form of propane-butane produced from advanced
bioethanol.
“We continued to make progress on key initiatives during the
first quarter and remain on track to deliver on our long-term
financial commitments to shareholders.”
KEY DRIVERS OF FIRST QUARTER RESULTS
- AmeriGas: Retail volume decreased 9% on weather that was 8.2%
warmer than the prior-year period; Cylinder Exchange volumes
increased 25%; 8% lower operating and administrative expenses due
to progress on the LPG business transformation initiatives and
disciplined expense management
- UGI International: Higher EBIT primarily driven by higher
average LPG unit margins due to the effects of margin management
efforts, lower LPG product costs, and lower costs associated with
energy conservation certificates; increase in bulk volumes; and
sound expense management
- Midstream & Marketing: Lower EBIT largely attributable to
weather that was 11.4% warmer than the prior year period
- UGI Utilities: Core market volumes decreased 12% primarily due
to weather that was 10.1% warmer than the prior-year period
EARNINGS CALL AND WEBCAST
UGI Corporation will hold a live Internet Audio Webcast of its
conference call to discuss the quarterly earnings and other current
activities at 9:00 AM ET on Thursday, February 4, 2021. Interested
parties may listen to the audio webcast both live and in replay on
the Internet at https://edge.media-server.com/mmc/p/znb3po4k or by
visiting the company website https://www.ugicorp.com and clicking
on Investors and then Presentations. A telephonic replay will be
available from 12:00 PM ET on February 4 through 11:59 PM ET
February 11. The replay may be accessed toll free at 855-859-2056
and internationally at +1 404-537-3406, conference ID 8949575.
ABOUT UGI
UGI Corporation is a distributor and marketer of energy products
and services. Through subsidiaries, UGI operates natural gas and
electric utilities in Pennsylvania, distributes LPG both
domestically (through AmeriGas) and internationally (through UGI
International), manages midstream energy assets in Pennsylvania,
Ohio, and West Virginia and electric generation assets in
Pennsylvania, and engages in energy marketing, including renewable
natural gas, in twelve states and the District of Columbia and
internationally in France, Belgium, the Netherlands and the UK.
Comprehensive information about UGI Corporation is available on
the Internet at https://www.ugicorp.com.
USE OF NON-GAAP MEASURES
Management uses "adjusted diluted earnings per share," a
non-GAAP financial measure, when evaluating UGI's overall
performance. Management believes that this non-GAAP measure
provides meaningful information to investors about UGI’s
performance because it eliminates the impact of (1) gains and
losses on commodity and certain foreign currency derivative
instruments not associated with current-period transactions and (2)
other significant discrete items that can affect the comparison of
period-over-period results. Volatility in net income at UGI can
occur as a result of gains and losses on commodity and certain
foreign currency derivative instruments not associated with
current-period transactions but included in earnings in accordance
with U.S. generally accepted accounting principles ("GAAP").
Non-GAAP financial measures are not in accordance with, or an
alternative to, GAAP and should be considered in addition to, and
not as a substitute for, the comparable GAAP measures.
Tables on the last page reconcile net income attributable to UGI
Corporation, the most directly comparable GAAP measure, to adjusted
net income attributable to UGI Corporation, and diluted earnings
per share, the most comparable GAAP measure, to adjusted diluted
earnings per share, to reflect the adjustments referred to
above.
1 Reportable segments earnings before interest expense and
income taxes represents an aggregate of our segment level EBIT as
determined in accordance with GAAP.
USE OF FORWARD-LOOKING STATEMENTS
This press release contains statements, estimates and
projections that are forward-looking statements (as defined in
Section 21E of the Securities Exchange Act of 1934, as amended).
Management believes that these are reasonable as of today’s date
only. Actual results may differ significantly because of risks and
uncertainties that are difficult to predict and many of which are
beyond management’s control. You should read UGI’s Annual Report on
Form 10-K for a more extensive list of factors that could affect
results. Among them are adverse weather conditions (including
increasingly uncertain weather patterns due to climate change) and
the seasonal nature of our business; cost volatility and
availability of all energy products, including propane, natural
gas, electricity and fuel oil as well as the availability of LPG
cylinders; increased customer conservation measures; the impact of
pending and future legal or regulatory proceedings, inquiries or
investigations, liability for uninsured claims and for claims in
excess of insurance coverage; domestic and international political,
regulatory and economic conditions in the United States and in
foreign countries, including the current conflicts in the Middle
East and the withdrawal of the United Kingdom from the European
Union, and foreign currency exchange rate fluctuations
(particularly the euro); the timing of development of Marcellus
Shale gas production; the availability, timing and success of our
acquisitions, commercial initiatives and investments to grow our
business; our ability to successfully integrate acquired businesses
and achieve anticipated synergies; the interruption, disruption,
failure, malfunction, or breach of our information technology
systems, including due to cyber-attack; the inability to complete
pending or future energy infrastructure projects; our ability to
achieve the operational benefits and cost efficiencies expected
from the completion of pending and future transformation
initiatives including the impact of customer disruptions resulting
in potential customer loss due to the transformation activities;
uncertainties related to the global pandemics, including the
duration and/or impact of the COVID-19 pandemic; and the extent to
which we are able to utilize certain tax benefits currently
available under the CARES Act and similar tax legislation and
whether such benefits will remain available in the future.
SEGMENT RESULTS ($ in millions, except where otherwise
indicated)
AmeriGas Propane
For the fiscal quarter ended
December 31,
2020
2019
Decrease
Revenues
$
666
$
730
$
(64
)
(9
)%
Total margin (a)
$
394
$
441
$
(47
)
(11
)%
Operating and administrative
expenses
$
221
$
240
$
(19
)
(8
)%
Operating income/earnings before
interest expense and income taxes
$
141
$
165
$
(24
)
(15
)%
Retail gallons sold
(millions)
276
304
(28
)
(9
)%
Heating degree days - % (warmer)
colder than normal (b)
(4.6
)%
4.0
%
Capital expenditures
$
27
$
39
$
(12
)
(31
)%
- Retail gallons sold decreased 9%, principally due to weather
that was 8.2% warmer than the prior-year period, the negative
effects of COVID-19 on commercial and motor fuel volumes,
structural conservation and other residual volume loss, partially
offset by increased cylinder exchange volumes.
- Total margin decreased $47 million primarily attributable to
lower retail propane volumes ($36 million) and lower average retail
unit margins ($7 million) compared to the prior-year period.
- Operating and administrative expenses decreased $19 million
reflecting progress on the LPG business transformation initiatives
and $3 million of lower general insurance costs. LPG transformation
savings primarily reflect lower employee compensation and
benefits-related costs ($11 million) and decreased vehicle and
equipment operating and maintenance expenses ($6 million).
- Operating income and earnings before interest expense and
income taxes each decreased $24 million reflecting the lower total
margin, partially offset by lower operating and administrative
expenses.
UGI International
For the fiscal quarter ended
December 31,
2020
2019
Increase (Decrease)
Revenues
$
700
$
651
$
49
8
%
Total margin (a)
$
317
$
276
$
41
15
%
Operating and administrative
expenses (a)
$
157
$
151
$
6
4
%
Operating income
$
135
$
96
$
39
41
%
Earnings before interest expense
and income taxes
$
136
$
100
$
36
36
%
LPG retail gallons sold
(millions)
236
246
(10
)
(4
)%
Heating degree days - % (warmer)
than normal (b)
(2.0
)%
(6.6
)%
Capital expenditures
$
29
$
20
$
9
45
%
UGI International base-currency results are translated into U.S.
dollars based upon exchange rates experienced during the reporting
periods. Differences in these translation rates affect the
comparison of line item amounts presented in the table above. The
functional currency of a significant portion of our UGI
International results is the euro and, to a much lesser extent, the
British pound sterling. During the 2020 and 2019 three-month
periods, the average unweighted euro-to-dollar translation rates
were approximately $1.19 and $1.11, respectively, and the average
unweighted British pound sterling-to-dollar translation rates were
approximately $1.32 and $1.29, respectively.
- Retail volume decreased 4% principally due to termination of a
high-volume low-margin autogas contract in Italy during Fiscal
2020, partially offset by increased crop drying and heating-related
bulk volumes, on weather that was 4.9% colder than the prior-year
period.
- Average propane wholesale prices in northwest Europe were
approximately 8% lower than the prior-year period.
- Total margin increased $41 million compared to the prior-year
period reflecting higher average LPG unit margins attributable to
margin management efforts, lower LPG product costs and lower costs
associated with energy conservation certificates, including
adjustments related to the current compliance period. Total margin
also increased due to higher bulk volumes, the translation effects
of the stronger euro (approximately $21 million), and higher
margins from energy marketing, slightly offset by the termination
of the high-volume low-margin autogas contract and the effects of
COVID-19.
- The increase in operating and administrative expenses largely
reflects the translation effects of the stronger euro
(approximately $10 million), partially offset by lower expenses due
to the LPG business transformation initiatives and expense
management.
- Operating income increased $39 million compared to the
prior-year period primarily due to the increase in total margin,
partially offset by higher operating and administrative
expenses.
- Earnings before interest expense and income taxes increased $36
million compared to the prior-year period due to the higher
operating income, partially offset by lower pre-tax realized gains
on foreign currency exchange contracts used to reduce volatility in
UGI International's net income resulting from changes in foreign
currency exchange rates ($4 million).
Midstream & Marketing
For the fiscal quarter ended
December 31,
2020
2019
Decrease
Revenues
$
341
$
373
$
(32
)
(9
)%
Total margin (a)
$
104
$
109
$
(5
)
(5
)%
Operating and administrative
expenses
$
32
$
35
$
(3
)
(9
)%
Operating income
$
52
$
55
$
(3
)
(5
)%
Earnings before interest expense
and income taxes
$
59
$
62
$
(3
)
(5
)%
Heating degree days - % (warmer)
colder than normal
(9.1
)%
2.6
%
Capital expenditures
$
17
$
23
$
(6
)
(26
)%
- Temperatures were 9.1% warmer than normal and 11.4% warmer than
the prior-year period.
- Total margin decreased $5 million primarily reflecting the
absence of margins attributable to HVAC and Conemaugh that were
divested in Fiscal 2020 ($7 million) and lower peaking margin ($5
million) compared to the prior-year period. The effect of these
decreases was partially offset by higher capacity management margin
($8 million) compared to the prior-year period.
- Operating and administrative expenses decreased $3 million
largely due to lower expenses attributable to the divested assets,
partially offset by higher expenses for new assets placed into
service and acquisitions.
- Operating income decreased due to lower total margin partially
offset by lower operating and administrative expenses.
UGI Utilities
For the fiscal quarter ended December
31,
2020
2019
Increase (Decrease)
Revenues
$
300
$
329
$
(29
)
(9
)%
Total margin (a)
$
167
$
177
$
(10
)
(6
)%
Operating and administrative expenses
$
60
$
58
$
2
3
%
Operating income
$
77
$
92
$
(15
)
(16
)%
Earnings before interest expense and
income taxes
$
78
$
92
$
(14
)
(15
)%
Gas Utility system throughput - billions
of cubic feet
Core market
23
26
(3
)
(12
)%
Total
83
85
(2
)
(2
)%
Gas Utility heating degree days - %
(warmer) colder than normal (b)
(9.8
)%
0.3
%
Capital expenditures
$
79
$
71
$
8
11
%
- Gas Utility service territory experienced temperatures that was
10.1% warmer than the prior-year period.
- Core market volumes decreased due to the warmer weather and
volume reductions attributable to COVID-19, partially offset by
customer growth.
- Total Gas Utility distribution throughput decreased 2 bcf
reflecting lower core market volumes, partially offset by higher
large firm delivery service volumes.
- Total margin decreased $10 million primarily due to lower total
margin ($8 million) from Gas Utility core market customers.
- Operating and administrative expenses increased $2 million
reflecting increases in employee compensation and benefits-related
expenses and higher allocated corporate expenses compared to the
prior-year period.
- Operating income decreased reflecting the lower total margin,
higher depreciation expense ($3 million) and higher operating and
administrative expenses ($2 million). The increased depreciation
expense is attributable to continued IT and distribution system
capital expenditure activity.
(a)
Total margin represents total
revenue less total cost of sales. In the case of UGI Utilities,
total margin is reduced by revenue-related tax expenses. In the
case of UGI International, total margin represents revenues less
cost of sales and, in the 2019 three-month period, LPG cylinder
filling costs of $7 million. For financial statement purposes, LPG
cylinder filling costs in the 2019 three-month period are included
in "Operating and administrative expenses" on the Condensed
Consolidated Statements of Income (but excluded from operating and
administrative expenses presented above). For financial statement
purposes, LPG cylinder filling costs in the 2020 three-month period
are included in "Cost of Sales".
(b)
Beginning in Fiscal 2021,
deviation from average heating degree days is determined on a
rolling 10-year period utilizing volume-weighted weather data.
Prior-period amounts have been restated to conform to the
current-period presentation.
REPORT OF EARNINGS – UGI
CORPORATION
(Millions of dollars, except per
share)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Revenues:
AmeriGas Propane
$
666
$
730
$
2,317
$
2,592
UGI International
700
651
2,176
2,313
Midstream & Marketing
341
373
1,215
1,429
UGI Utilities
300
329
1,001
1,055
Corporate & Other (a)
(75
)
(76
)
(225
)
(262
)
Total revenues
$
1,932
$
2,007
$
6,484
$
7,127
Earnings (loss) before interest expense
and income taxes:
AmeriGas Propane
$
141
$
165
$
349
$
403
UGI International
136
100
295
276
Midstream & Marketing
59
62
165
133
UGI Utilities
78
92
215
240
Total reportable segments
414
419
1,024
1,052
Corporate & Other (a)
76
(47
)
83
(193
)
Total earnings before interest expense and
income taxes
490
372
1,107
859
Interest expense:
AmeriGas Propane
(40
)
(42
)
(162
)
(168
)
UGI International
(7
)
(7
)
(31
)
(27
)
Midstream & Marketing
(10
)
(12
)
(40
)
(20
)
UGI Utilities
(14
)
(14
)
(54
)
(52
)
Corporate & Other, net (a)
(7
)
(9
)
(29
)
(16
)
Total interest expense
(78
)
(84
)
(316
)
(283
)
Income before income taxes
412
288
791
576
Income tax expense
(109
)
(76
)
(168
)
(145
)
Net income including noncontrolling
interests
303
212
623
431
Deduct net income attributable to
noncontrolling interests, principally in AmeriGas Partners,
L.P.
—
—
—
(27
)
Net income attributable to UGI
Corporation
$
303
$
212
$
623
$
404
Earnings per share attributable to UGI
shareholders:
Basic
$
1.45
$
1.01
$
2.98
$
2.16
Diluted
$
1.44
$
1.00
$
2.97
$
2.13
Weighted Average common shares outstanding
(thousands) (b):
Basic
208,774
209,439
208,896
187,248
Diluted
209,640
211,258
209,599
189,608
Supplemental information:
Net income (loss) attributable to UGI
Corporation:
AmeriGas Propane
$
74
$
91
$
139
$
129
UGI International
92
73
192
181
Midstream & Marketing
35
36
91
83
UGI Utilities
49
61
124
144
Total reportable segments
250
261
546
537
Corporate & Other (a)
53
(49
)
77
(133
)
Total net income attributable to UGI
Corporation
$
303
$
212
$
623
$
404
(a)
Corporate & Other includes
specific items attributable to our reportable segments that are not
included in profit measures used by our chief operating decision
maker in assessing our reportable segments' performance or
allocating resources. These specific items are shown in the section
titled "Non-GAAP Financial Measures - Adjusted Net Income
Attributable to UGI and Adjusted Diluted Earnings Per Share" below.
Corporate & Other also includes the elimination of certain
intercompany transactions.
(b)
Earnings per share for the twelve
months ended December 31, 2019 reflect 34.6 million incremental
shares of UGI Common Stock issued in connection with UGI's buy-in
of the outstanding common units of AmeriGas Partners, L.P.
("AmeriGas Merger").
Non-GAAP Financial Measures - Adjusted
Net Income Attributable to UGI and Adjusted Diluted Earnings Per
Share
The following tables reconcile net income attributable to UGI
Corporation, the most directly comparable GAAP measure, to adjusted
net income attributable to UGI Corporation, and reconcile diluted
earnings per share, the most comparable GAAP measure, to adjusted
diluted earnings per share, to reflect the adjustments referred to
previously:
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Adjusted net income attributable to UGI
Corporation (millions):
Net income attributable to UGI
Corporation
$
303
$
212
$
623
$
404
Net (gains) losses on commodity derivative
instruments not associated with current-period transactions (net of
tax of $31, $(2), $68 and $(25), respectively)
(85
)
10
(177
)
76
Unrealized losses (gains) on foreign
currency derivative instruments (net of tax of $(5), $(4), $(11)
and $3, respectively)
15
11
30
(6
)
Acquisition and integration expenses
associated with the CMG Acquisition (net of tax of $0, $0, $(1) and
$(5), respectively)
—
1
—
12
Acquisition expenses associated with the
pending Mountaineer Acquisition (net of tax of $(1), $0, $(1) and
$0, respectively)
1
—
1
—
Business transformation expenses (net of
tax of $(4), $(5), $(16) and $(10), respectively)
13
12
46
28
AmeriGas Merger expenses (net of tax of
$0, $0, $0 and $0, respectively)
—
—
—
1
Loss on disposals of Conemaugh and HVAC
(net of tax of $0, $0, $(15) and $0, respectively)
—
—
39
—
Total adjustments (1) (2)
(56
)
34
(61
)
111
Adjusted net income attributable to UGI
Corporation
$
247
$
246
$
562
$
515
Adjusted diluted earnings per
share:
UGI Corporation earnings per share —
diluted (3)
$
1.44
$
1.00
$
2.97
$
2.13
Net (gains) losses on commodity derivative
instruments not associated with current-period transactions
(0.40
)
0.05
(0.85
)
0.40
Unrealized losses (gains) on foreign
currency derivative instruments
0.07
0.06
0.14
(0.03
)
Acquisition and integration expenses
associated with the CMG Acquisition
—
—
0.01
0.06
Acquisition expenses associated with the
pending Mountaineer Acquisition
0.01
—
0.01
—
Business transformation expenses
0.06
0.06
0.22
0.15
AmeriGas Merger expenses
—
—
—
0.01
Loss on disposals of Conemaugh and
HVAC
—
—
0.18
—
Total adjustments (1) (3)
(0.26
)
0.17
(0.29
)
0.59
Adjusted diluted earnings per share
(3)
$
1.18
$
1.17
$
2.68
$
2.72
(1)
Corporate & Other includes
certain adjustments made to our reporting segments in arriving at
net income attributable to UGI Corporation, including the impact of
the tax benefits resulting from tax law changes during Fiscal 2020.
These adjustments have been excluded from the segment results to
align with the measure used by our chief operating decision maker
in assessing segment performance and allocating resources.
(2)
Income taxes associated with
pre-tax adjustments determined using statutory business unit tax
rates.
(3)
Earnings per share for the twelve
months ended December 31, 2019 reflect 34.6 million in incremental
shares of UGI Common Stock issued in connection with the AmeriGas
Merger.
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