Issues Fiscal 2023 Guidance
UGI Corporation (NYSE: UGI) reported financial results for the
fiscal year ended September 30, 2022 and provided guidance for
fiscal year 2023.
HEADLINES
- GAAP net income of $1,073 million and adjusted net income of
$626 million compared to GAAP net income of $1,467 million and
adjusted net income of $629 million in the prior year.
- GAAP diluted earnings per share (“EPS”) of $4.97 and adjusted
diluted EPS of $2.90 compared to GAAP diluted EPS of $6.92 and
adjusted diluted EPS of $2.96 in the prior year.
- Reportable segments earnings before interest expense and income
tax1 ("EBIT") of $1,166 million compared to $1,134 million in the
prior year.
- Strong balance sheet with available liquidity of approximately
$1.7 billion, inclusive of $398 million in cash collateral received
from derivative counterparties.
- Divested of the UK energy marketing business effective October
21, 2022.
- Announced the intent to sell the French energy marketing
business, with a targeted closing2 in the first quarter of fiscal
2023, and to wind down energy marketing operations in Belgium and
the Netherlands3.
- Issued fiscal 2023 adjusted diluted EPS guidance range of $2.85
- $3.154 while reiterating our long-term 6% - 10% EPS growth rate
target.
STRATEGIC ACCOMPLISHMENTS
Reliable Earnings Growth:
- Invested a record level of capital ($562 million) and added
over 14,000 residential and commercial heating customers at the
Utilities
- Successfully concluded a gas base rate case at UGI Utilities
comprised of a phased rate increase totaling $49.45 million as well
as approval for a weather normalization adjustment mechanism
- Expanded our interest in the Appalachian basin natural gas
gathering systems with the Stonehenge and Pennant acquisitions and
continued to generate significant fee-based income
- Sustained LPG volumes and margins at UGI International despite
5% warmer weather and a 53% increase in average propane cost in
northwest Europe
- Solid national account volumes at AmeriGas
Renewables:
- Made additional strides in our renewables strategy with
investments in new RNG projects in South Dakota and New York
- Committed over $300 million to renewable energy projects to
date
Rebalance:
- Rebalanced our portfolio with the record performance from our
natural gas businesses and continued investments in replacement and
betterment, renewables and our midstream capabilities
Roger Perreault, President and Chief Executive Officer of UGI
Corporation said, “In fiscal 2022, our reportable segments
delivered record EBIT, in aggregate, and the business reported the
second highest GAAP and adjusted diluted EPS in its history. This
solid financial performance is reflective of our resiliency and the
strategic advantages of our diversified business portfolio, amidst
a challenging macro-economic environment. We had record earnings in
our Utilities and Midstream & Marketing segments, as well as
continued strong performance from our LPG business at UGI
International, and this helped to mitigate the impact of headwinds
faced at AmeriGas and in the European energy marketing business. In
fact, without the extreme market conditions that negatively
impacted the European energy marketing business, we would have
delivered well within our original fiscal 2022 guidance range.
"I am extremely proud of the dedication, flexibility and
resiliency of our employees who worked tirelessly to execute
against our 3-R strategy this year. Their commitment as we deployed
record levels of capital and focused on margin management, expense
control and safely serving our customers and communities, each and
every day, culminated in these strong fiscal 2022 results. In
addition, together our teams made tremendous progress on our ESG
commitments and we were pleased to receive a rating upgrade to "AA"
in the MSCI ESG rating assessment.
“As we embark on another fiscal year, we are progressing on
several strategic priorities to drive growth and manage the current
economic conditions in the US and Europe. We view fiscal 2023 as a
year where we will be strengthening our platform, with focus on
enhancing the performance of AmeriGas to drive long-term EPS and
market share growth, as we navigate sustained inflationary
pressures. UGI is committed to creating value for its shareholders
and we will continue to execute our strategy to achieve the
long-term financial commitments of 6 to 10% EPS growth and 4%
dividend growth.”
2023 OUTLOOK UGI provides an adjusted EPS guidance range of
$2.85 - $3.154 per diluted share for the fiscal year ending
September 30, 2023. This guidance range assumes normal weather, the
current tax regime and divestiture of the energy marketing business
located in France in the first quarter of fiscal 2023.
EARNINGS CALL and WEBCAST UGI Corporation will hold a live
Internet Audio Webcast of its conference call to discuss fiscal
2022 earnings and other current activities at 9:00 AM ET on Friday,
November 18, 2022. Interested parties may listen to the audio
webcast both live and in replay on the Internet at https://www.ugicorp.com/investors/financial-reports/presentations
or by visiting the company website https://www.ugicorp.com and clicking on Investors
and then Presentations. A replay of the webcast will be available
after the event through to 11:59 PM ET November 17, 2023.
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, natural gas
utilities in West Virginia, 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 the
Mid-Atlantic region of the United States and California and
internationally in France, Belgium, and the Netherlands.
Comprehensive information about UGI Corporation is available on
the Internet at https://www.ugicorp.com.
USE OF NON-GAAP MEASURES Management uses “adjusted net income
attributable to UGI Corporation” and "adjusted diluted earnings per
share," both of which are non-GAAP financial measures, when
evaluating UGI's overall performance. Management believes that
these non-GAAP measures provide meaningful information to investors
about UGI’s performance because they eliminate the impacts 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.
1Reportable segments' earnings before interest expense and
income taxes represents an aggregate of our reportable operating
segment level EBIT as determined in accordance with GAAP. 2Closing
for any sale transaction would require satisfaction of customary
regulatory approvals and closing conditions, including completion
of works council consultations. 3Wind down in the Netherlands
subject to completion of works council consultation. 4Because we
are unable to predict certain potentially material items affecting
diluted earnings per share on a GAAP basis, principally
mark-to-market gains and losses on commodity and certain foreign
currency derivative instruments we cannot reconcile the fiscal year
2023 adjusted diluted earnings per share guidance, a non-GAAP
measure, to diluted earnings per share guidance, the most directly
comparable GAAP measure, in reliance on the “unreasonable efforts”
exception set forth in SEC rules.
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, and Section 27A of the Securities Act of
1933, as amended). Such statements use forward-looking words such
as “believe,” “plan,” “anticipate,” “continue,” “estimate,”
“expect,” “may,” or other similar words and terms of similar
meaning, although not all forward-looking statements contain such
words. These statements discuss plans, strategies, events or
developments that we expect or anticipate will or may occur in the
future. 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; accordingly, there is no assurance
that results will be realized. You should read UGI’s Annual Report
on Form 10-K and Quarterly Reports on Form 10-Q for a more
extensive list of factors that could affect results. We undertake
no obligation to update publicly any forward-looking statement
whether as a result of new information or future events except as
required by the federal securities laws. Among them are adverse
weather conditions (including increasingly uncertain weather
patterns due to climate change) resulting in reduced demand, the
seasonal nature of our business, and disruptions in our operations
and supply chain; cost volatility and availability of energy
products, including propane and other LPG, natural gas, and
electricity, as well as the availability of LPG cylinders, and the
capacity to transport product to our customers; changes in domestic
and foreign laws and regulations, including safety, health, tax,
transportation, consumer protection, data privacy, accounting, and
environmental matters, such as regulatory responses to climate
change; the inability to timely recover costs through utility rate
proceedings; increased customer conservation measures due to high
energy prices and improvements in energy efficiency and technology
resulting in reduced demand; adverse labor relations and our
ability to address existing or potential workforce shortages; the
impact of pending and future legal or regulatory proceedings,
inquiries or investigations; competitive pressures from the same
and alternative energy sources; failure to acquire new customers or
retain current customers, thereby reducing or limiting any increase
in revenues; liability for environmental claims; customer,
counterparty, supplier, or vendor defaults; liability for uninsured
claims and for claims in excess of insurance coverage, including
those for personal injury and property damage arising from
explosions, acts of war, terrorism, natural disasters, pandemics
and other catastrophic events that may result from operating
hazards and risks incidental to generating and distributing
electricity and transporting, storing and distributing natural gas
and LPG in all forms; transmission or distribution system service
interruptions; political, regulatory and economic conditions in the
United States, Europe and other foreign countries, including
uncertainties related to the war between Russia and Ukraine, the
European energy crisis, and foreign currency exchange rate
fluctuations (particularly the euro); credit and capital market
conditions, including reduced access to capital markets and
interest rate fluctuations; changes in commodity market prices
resulting in significantly higher cash collateral requirements;
impacts of our indebtedness and the restrictive covenants in our
debt agreements; reduced distributions from subsidiaries impacting
the ability to pay dividends or service debt; changes in Marcellus
and Utica Shale gas production; the availability, timing and
success of our acquisitions, commercial initiatives and investments
to grow our businesses; our ability to successfully integrate
acquired businesses and achieve anticipated synergies; the
interruption, disruption, failure, malfunction, or breach of our
information technology systems, and those of our third-party
vendors or service providers, 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
business transformation initiatives, including the impact of
customer service disruptions resulting in potential customer loss
due to the transformation activities; our ability to attract,
develop, retain and engage key employees; uncertainties related to
a global pandemic, including the duration and/or impact of the
COVID-19 pandemic; the impact of proposed or future tax
legislation; the impact of declines in the stock market or bond
market, and a low interest rate environment, on our pension
liability; our ability to protect our intellectual property; and
our ability to overcome supply chain issues that may result in
delays or shortages in, as well as increased costs of, equipment,
materials or other resources that are critical to our business
operations.
SEGMENT RESULTS ($ in millions, except
where otherwise indicated)
AmeriGas Propane
For the year ended September 30,
2022
2021
Increase (Decrease)
Revenues
$
2,943
$
2,614
$
329
13
%
Total margin (a)
$
1,330
$
1,397
$
(67
)
(5
)%
Operating and administrative expenses
$
889
$
869
$
20
2
%
Operating income / earnings before
interest expense and income taxes
$
307
$
385
$
(78
)
(20
)%
Retail gallons sold (millions)
888
968
(80
)
(8
)%
Heating degree days - % warmer than
normal
(0.8
)%
(2.8
)%
Capital expenditures
$
128
$
130
$
(2
)
(2
)%
- Retail gallons sold decreased 8% largely due to the continued
impact of customer service challenges that occurred in fiscal 2021,
staffing shortages in key delivery-related positions and increased
price sensitivity in the higher commodity cost environment.
- Total margin decreased $67 million reflecting lower retail
volumes sold ($100 million), partially offset by higher average
propane margins including effective margin management efforts ($28
million), and higher non-propane margin principally due to
increased fuel recovery and tank rental fees.
- Operating and administrative expenses increased by $20 million
with the impact of the persistent inflationary cost environment
which, among other things, led to increases in vehicle fuel ($13
million), bad debt reserves ($13 million), insurance claims ($11
million) and telecommunication expenses ($10 million). These
increases were partially offset by lower employee compensation and
benefits ($22 million), advertising and vehicle leases.
- Operating income and EBIT decreased $78 million reflecting
lower total margin, and higher operating and administrative
expenses, partially offset by an increase in other income largely
related to gains on asset sales.
UGI International
For the year ended September 30,
2022
2021
Increase (Decrease)
Revenues
$
3,686
$
2,651
$
1,035
39
%
Total margin (a)
$
935
$
1,053
$
(118
)
(11
)%
Operating and administrative expenses
$
611
$
622
$
(11
)
(2
)%
Operating income
$
237
$
314
$
(77
)
(25
)%
Earnings before interest expense and
income taxes
$
254
$
317
$
(63
)
(20
)%
LPG retail gallons sold (millions)
799
792
7
1
%
Heating degree days - % (warmer) colder
than normal
(2.6
)%
0.4
%
Capital expenditures
$
107
$
107
$
—
—
%
Base-currency results are translated into U.S. dollars based
upon exchange rates experienced during the reporting periods. 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 fiscal 2022 and fiscal 2021, the
average unweighted euro-to-dollar translation rates were $1.08 and
$1.20, respectively, and the average unweighted British pound
sterling-to-dollar translation rate were $1.28 and $1.37,
respectively.
- Total LPG retail volume increased 1%, despite weather that was
5% warmer than the prior-year, largely due to the recovery of
certain bulk and autogas volumes that were negatively impacted by
COVID-19 and favorable crop drying campaigns.
- Total margin decreased $118 million primarily reflecting the
translation effects of weaker foreign currencies and lower total
margin from our energy marketing business ($53 million). These
decreases were partially offset by higher total LPG margins.
- Operating and administrative expenses decreased $11 million as
the translation effects of weaker foreign currencies were largely
offset by the impact of the global inflationary cost environment on
the underlying distribution, personnel and maintenance costs.
- Operating income decreased $77 million due to lower total
margin partially offset by the decrease in operating and
administrative expenses, and reflects the translation effects of
the weaker foreign currencies.
- EBIT decreased $63 million due to the lower operating income
primarily from the energy marketing business, partially offset by
higher realized gains on foreign currency exchange contracts ($12
million).
Midstream & Marketing
For the year ended September 30,
2022
2021
Increase (Decrease)
Revenues
$
2,326
$
1,406
$
920
65
%
Total margin (a)
$
450
$
373
$
77
21
%
Operating and administrative expenses
$
129
$
129
$
—
—
%
Operating income
$
246
$
160
$
86
54
%
Earnings before interest expense and
income taxes
$
269
$
190
$
79
42
%
Heating degree days - % (warmer) than
normal
(8.1
)%
(6.9
)%
Capital expenditures
$
38
$
43
$
(5
)
(12
)%
- Total margin increased $77 million in fiscal 2022 reflecting
increased margins from natural gas marketing activities ($38
million), including peaking and capacity management ($16 million),
which was largely driven by the timing of settlement of storage
hedge contracts. The increase is also attributable to incremental
margin from UGI Moraine East, the legal entity holding the
Stonehenge assets ($15 million), and renewable energy marketing
activities ($9 million).
- Operating income increased $86 million compared to the prior
year reflecting higher total margin and the absence of the
adjustment to contingent consideration related to the GHI
acquisition recognized in fiscal 2021 ($9 million).
- EBIT increased $79 million due to an increase in operating
income, partially offset by lower equity income and higher
depreciation and amortization expense largely attributable to UGI
Moraine East.
Utilities
For the year ended September 30,
2022
2021
Increase
Revenues
$
1,620
$
1,079
$
541
50
%
Total margin (a)
$
801
$
616
$
185
30
%
Operating and administrative expenses
$
332
$
254
$
78
31
%
Operating income
$
327
$
241
$
86
36
%
Earnings before interest expense and
income taxes
$
336
$
242
$
94
39
%
Natural gas system throughput - billions
of cubic feet
Core market
100
77
23
30
%
Total
363
311
52
17
%
Natural gas heating degree days - % warmer
than normal
(7.5
)%
(6.5
)%
Capital expenditures
$
562
$
394
$
168
43
%
- Core market and total gas utility throughput increased 30% and
17%, respectively, largely reflecting the incremental volume from
Mountaineer.
- Total margin increased $185 million during fiscal 2022
primarily due to the incremental margin from Mountaineer ($123
million), benefits from the increase in DSIC rates ($26 million),
and growth in residential and large delivery service
customers.
- Operating income increased $86 million compared to the prior
year, largely reflecting the higher total margin ($185 million),
partially offset by higher operating and administrative expenses
($78 million) and higher depreciation expense ($25 million), both
principally due to the incremental expenses attributable to
Mountaineer.
- EBIT increased $94 million reflecting higher operating income
and non-service pension benefit ($8 million) compared to the prior
year.
(a)
Total margin represents total
revenue less total cost of sales. In the case of the Utilities,
total margin is also reduced by certain revenue-related taxes.
REPORT OF EARNINGS - UGI CORPORATION
(Millions of dollars, except per
share)
Unaudited
Three Months Ended
September 30,
Twelve Months Ended
September 30,
2022
2021
2022
2021
Revenues:
AmeriGas Propane
$
520
$
482
$
2,943
$
2,614
UGI International
675
545
3,686
2,651
Midstream & Marketing
595
320
2,326
1,406
Utilities
220
156
1,620
1,079
Corporate & Other (a)
(76
)
(65
)
(469
)
(303
)
Total revenues
$
1,934
$
1,438
$
10,106
$
7,447
Earnings (loss) before interest expense
and income taxes:
AmeriGas Propane
$
4
$
(6
)
$
307
$
385
UGI International
26
(9
)
254
317
Midstream & Marketing
53
10
269
190
Utilities
4
(3
)
336
242
Total reportable segments
87
(8
)
1,166
1,134
Corporate & Other (a)
268
812
550
1,165
Total earnings before interest expense and
income taxes
355
804
1,716
2,299
Interest expense:
AmeriGas Propane
(40
)
(39
)
(160
)
(159
)
UGI International
(6
)
(6
)
(28
)
(27
)
Midstream & Marketing
(10
)
(11
)
(41
)
(42
)
Utilities
(18
)
(14
)
(65
)
(56
)
Corporate & Other, net (a)
(10
)
(7
)
(35
)
(26
)
Total interest expense
(84
)
(77
)
(329
)
(310
)
Income (loss) before income taxes
271
727
1,387
1,989
Income tax expense (b)
(28
)
(202
)
(313
)
(522
)
Net income including noncontrolling
interests
243
525
1,074
1,467
Add net loss (deduct net income)
attributable to noncontrolling interests
1
—
(1
)
—
Net income attributable to UGI
Corporation
$
244
$
525
$
1,073
$
1,467
Earnings per share attributable to UGI
Corporation shareholders:
Basic
$
1.16
$
2.51
$
5.11
$
7.02
Diluted
$
1.13
$
2.43
$
4.97
$
6.92
Weighted Average common shares outstanding
(thousands):
Basic
209,765
209,444
209,940
209,063
Diluted
215,371
215,991
215,821
212,126
Supplemental information:
Net income (loss) attributable to UGI
Corporation:
AmeriGas Propane
$
(23
)
$
(36
)
$
112
$
168
UGI International
14
(1
)
175
221
Midstream & Marketing
31
—
163
107
Utilities
(10
)
(13
)
206
144
Corporate & Other (a)
232
575
417
827
Total net income attributable to UGI
Corporation
$
244
$
525
$
1,073
$
1,467
(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) Income tax expense for the twelve months ended September 30,
2022 includes $20 million income tax benefit from adjustments as a
result of the changes in the Pennsylvania corporate income tax
rates for future years, signed into law in July 2022. Income tax
expense for the twelve months ended September 30, 2021 includes $23
million income tax benefit from adjustments due to a step-up in tax
basis in Italy as a result of tax legislation.
Non-GAAP Financial Measures - Adjusted
Net Income Attributable to UGI and Adjusted Diluted Earnings Per
Share (unaudited)
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:
Fiscal Year Ended September 30,
2022
2021
Adjusted net income attributable to UGI
Corporation (millions):
Net income attributable to UGI
Corporation
$
1,073
$
1,467
Net gains on commodity derivative
instruments not associated with current-period transactions (net of
tax of $140 and $389, respectively)
(458
)
(1,001
)
Unrealized gains on foreign currency
derivative instruments (net of tax of $14 and $2, respectively)
(36
)
(6
)
Business transformation expenses (net of
tax of $(2) and $(27), respectively)
7
74
Acquisition and integration expenses
associated with the Mountaineer Acquisition (net of tax of $(1) and
$(4), respectively)
1
10
Impairment of customer relationship
intangible (net of tax of $0 and $(5), respectively)
—
15
Impairments of certain equity method
investments and assets (net of tax of $(14) and $0,
respectively)
26
93
Impact of change in tax law
(19
)
(23
)
Loss on extinguishment of debt (net of tax
of $(3) and $0, respectively)
8
—
Restructuring costs (net of tax of $(10)
and $0, respectively)
24
—
Total adjustments (1) (2)
(447
)
(838
)
Adjusted net income attributable to UGI
Corporation
$
626
$
629
Adjusted diluted earnings per
share:
UGI Corporation earnings per share -
diluted
$
4.97
$
6.92
Net gains on commodity derivative
instruments not associated with current-period transactions
(2.11
)
(4.72
)
Unrealized gains on foreign currency
derivative instruments
(0.17
)
(0.03
)
Business transformation expenses
0.03
0.35
Acquisition and integration expenses
associated with the Mountaineer Acquisition
—
0.04
Impairment of customer relationship
intangible
—
0.07
Impairments of certain equity method
investments and assets
0.12
0.44
Impact of change in tax law
(0.09
)
(0.11
)
Loss on extinguishment of debt
0.03
—
Restructuring costs
0.12
—
Total adjustments (1)
(2.07
)
(3.96
)
Adjusted diluted earnings per share
$
2.90
$
2.96
(1)
Corporate & Other includes certain adjustments made to our
reporting segments in arriving at net income attributable to UGI
Corporation. 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.
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INVESTOR RELATIONS Tel: +1 610-337-1000 Tameka Morris, ext. 6297
Arnab Mukherjee, ext. 7498 Shelly Oates, ext. 3202
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