UGI Corporation (NYSE: UGI) today reported financial results for
the fiscal quarter ended December 31, 2022.
HEADLINES
- Q1 GAAP diluted earnings per share ("EPS") of $(4.54) and
adjusted diluted EPS of $1.14 compared to GAAP diluted EPS of
$(0.46) and adjusted diluted EPS of $0.93 in the prior-year
period.
- Q1 reportable segments earnings before interest expense and
income taxes1 ("EBIT") of $411 million compared to $348 million in
the prior-year period.
- Strong balance sheet with available liquidity of approximately
$1.2 billion.
- Progressed our renewables strategy with commitments to fully
fund renewable natural gas ("RNG") projects in New York and South
Dakota, bringing our total renewables investment to over $450
million to date.
- Received a rating upgrade to "AAA" in the MSCI ESG rating
assessment in December 2022.
“We had a solid start to fiscal 2023 with robust performance
from our natural gas businesses and from the growth investments
that we have made in recent years, despite the impact of high
inflation,” said Roger Perreault, President and Chief Executive
Officer of UGI Corporation. “In comparison to the prior-year
period, we had colder weather in the U.S. and this helped to offset
the effects of significantly warmer weather in Europe.
“At the Utilities, we continued to experience strong customer
growth, while benefiting from increased earnings at Mountaineer.
UGI Utilities implemented new gas base rates and weather
normalization in October and November, respectively. At our
full-service midstream business, we saw continued growth from our
UGI Appalachia assets, higher throughput across our systems, and
increased margins as we capitalized on colder weather in December
2022. Lastly, the global LPG businesses realized benefits from
their disciplined margin management and expense control efforts, as
well as continued growth in National Accounts volumes at
AmeriGas.
"During the quarter, we made meaningful progress in executing on
our renewables strategy with additional RNG projects announced in
New York and South Dakota. To date, we have committed over $450
million to renewables projects that support our financial
commitments of delivering 6 - 10% EPS growth and 4% dividend growth
over the long-term. We are confident in our strategic priorities
and the resiliency of our diversified business, which we believe
will continue to enable growth and create long-term shareholder
value.”
KEY DRIVERS OF FIRST QUARTER RESULTS
- AmeriGas: EBIT up $24 million, primarily due to higher propane
margins
- UGI International: EBIT down $16 million, largely due to lower
retail LPG volume that was impacted by weather 19% warmer than the
prior-year period and energy conservation efforts driven by the
European geopolitical situation
- Midstream & Marketing: EBIT up $25 million, primarily
reflecting increased commodity marketing, peaking and capacity
management margins as well as incremental earnings from the UGI
Appalachia acquisitions of UGI Moraine East (formerly Stonehenge)
and Pennant
- Utilities: EBIT up $30 million, largely driven by a 17%
increase in core market volume primarily due to weather that was
colder than the prior-year period, higher gas rates and growth in
residential and large delivery service customers
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 2, 2023. 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
February 1, 2024.
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.
1 Reportable segments' earnings before interest expense and
income taxes represents an aggregate of our reportable operating
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, 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 (and expressly
disclaim any 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 fiscal quarter ended December
31,
2022
2021
(Decrease) Increase
Revenues
$
766
$
778
$
(12
)
(2
)%
Total margin (a)
$
380
$
360
$
20
6
%
Operating and administrative expenses
$
235
$
240
$
(5
)
(2
)%
Operating income/earnings before interest
expense and income taxes
$
110
$
86
$
24
28
%
Retail gallons sold (millions)
236
241
(5
)
(2
)%
Heating degree days - % colder (warmer)
than normal (b)
6.2
%
(9.9
)%
Capital expenditures
$
23
$
35
$
(12
)
(34
)%
- Temperatures were 18% colder than the prior-year period.
- Retail gallons sold decreased 2% due to staffing shortages in
key delivery-related positions, which also limited growth, as well
as continuation of customer attrition, along with structural
conservation.
- Total margin increased $20 million primarily due to higher
average retail unit margins ($26 million), partially offset by
lower retail volumes ($6 million).
- Operating and administrative expenses decreased $5 million
reflecting lower employee compensation and benefits, partially
offset by higher overtime and contractor costs associated with
distribution activity given staffing shortages in delivery-related
positions, and increased vehicle expenses.
UGI International
For the fiscal quarter ended December
31,
2022
2021
Decrease
Revenues
$
877
$
1,049
$
(172
)
(16
)%
Total margin (a)
$
215
$
256
$
(41
)
(16
)%
Operating and administrative expenses
(a)
$
143
$
161
$
(18
)
(11
)%
Operating income
$
56
$
78
$
(22
)
(28
)%
Earnings before interest expense and
income taxes
$
66
$
82
$
(16
)
(20
)%
LPG retail gallons sold (millions)
205
249
(44
)
(18
)%
Heating degree days - % (warmer) colder
than normal (b)
(12.3
)%
5.0
%
Capital expenditures
$
27
$
23
$
4
17
%
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 2022 and 2021 three-month
periods, the average unweighted euro-to-dollar translation rates
were approximately $1.02 and $1.14, respectively, and the average
unweighted British pound sterling-to-dollar translation rates were
approximately $1.17 and $1.35, respectively.
- Retail volume decreased 18% primarily due to weather that was
19% warmer than the prior-year period, the effect of energy
conservation efforts across Europe, and lower volumes associated
with crop drying as a result of a warm and dry summer.
- Total margin decreased $41 million reflecting lower retail
volume and the translation effects of the weaker foreign currencies
($27 million), partially offset by higher LPG unit margins.
- Operating and administrative expenses decreased $18 million due
to the translation effects of the weaker foreign currencies, which
was partially offset by the impact of the global inflationary cost
environment on the underlying distribution, personnel and
maintenance costs.
- Operating income decreased $22 million due to lower total
margin ($41 million) and reduced gains from asset sales ($10
million), partially offset by lower operating and administrative
expenses, higher foreign currency transaction gains ($7 million),
and lower depreciation and amortization expenses.
- Earnings before interest expense and income taxes decreased $16
million due to the lower operating income, partially offset by
higher realized gains on foreign currency exchange contracts ($4
million).
Midstream & Marketing
For the fiscal quarter ended December
31,
2022
2021
Increase
Revenues
$
669
$
535
$
134
25
%
Total margin (a)
$
155
$
122
$
33
27
%
Operating and administrative expenses
$
29
$
29
$
—
—
%
Operating income
$
106
$
74
$
32
43
%
Earnings before interest expense and
income taxes
$
107
$
82
$
25
30
%
Heating degree days - % warmer than normal
(b)
(1.0
)%
(15.8
)%
Capital expenditures
$
11
$
6
$
5
83
%
- Temperatures were 1% warmer than normal and 13% colder than the
prior-year period.
- Total margin increased $33 million primarily reflecting higher
retail commodity margins, coupled with higher peaking and capacity
management activities from the cold weather at the end of December
($18 million), and increased margins from prior-year acquisitions
of UGI Moraine East and Pennant ($14 million).
- Operating income increased $32 million reflecting higher total
margin.
- Earnings before interest expense and income taxes increased $25
million due to the higher operating income ($32 million), partially
offset by lower income from equity method investments following the
acquisition of the remaining interest in Pennant.
Utilities
For the fiscal quarter ended December
31,
2022
2021
Increase
Revenues
$
592
$
419
$
173
41
%
Total margin (a)
$
256
$
213
$
43
20
%
Operating and administrative expenses
$
91
$
80
$
11
14
%
Operating income
$
126
$
96
$
30
31
%
Earnings before interest expense and
income taxes
$
128
$
98
$
30
31
%
Gas Utility system throughput - billions
of cubic feet
Core market
34
29
5
17
%
Total
94
93
1
1
%
Gas Utility heating degree days - % colder
(warmer) than normal (b)
0.2
%
(15.1
)%
Capital expenditures
$
117
$
111
$
6
5
%
- Gas Utility service territory experienced temperatures that
were slightly colder than normal and 17% colder than the prior-year
period.
- Core market and total gas utility volumes increased due to
colder weather and customer growth.
- Total margin increased $43 million primarily due to the
increase in our PA Gas Utility base rates that went into effect at
the end of October 2022 ($11 million), as well as the effects of
colder weather and continued growth in residential and large
delivery service customers.
- Operating and administrative expenses increased $11 million
largely due to higher uncollectible accounts expense, higher taxes
other than income taxes, and higher compensation and benefits
expense.
- Operating income increased $30 million due to the higher total
margin, partially offset by higher operating and administrative
expenses and higher depreciation expense from continued
distribution system capital expenditure activity.
(a)
Total margin represents total revenue less
total cost of sales. In the case of Utilities, total margin is also
reduced by certain revenue-related taxes.
(b)
Deviation from average heating degree days
is determined on a 10-year period utilizing volume-weighted weather
data.
REPORT OF EARNINGS – UGI
CORPORATION
(Millions of dollars, except per
share)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Revenues:
AmeriGas Propane
$
766
$
778
$
2,931
$
2,726
UGI International
877
1,049
3,514
3,000
Midstream & Marketing
669
535
2,460
1,600
Utilities
592
419
1,793
1,198
Corporate & Other (a)
(145
)
(108
)
(506
)
(336
)
Total revenues
$
2,759
$
2,673
$
10,192
$
8,188
(Loss) earnings before interest expense
and income taxes:
AmeriGas Propane
$
110
$
86
$
331
$
330
UGI International
66
82
238
263
Midstream & Marketing
107
82
294
213
Utilities
128
98
366
262
Total reportable segments
411
348
1,229
1,068
Corporate & Other (a)
(1,642
)
(409
)
(683
)
680
Total (loss) earnings before interest
expense and income taxes
(1,231
)
(61
)
546
1,748
Interest expense:
AmeriGas Propane
(43
)
(41
)
(162
)
(160
)
UGI International
(7
)
(7
)
(28
)
(27
)
Midstream & Marketing
(11
)
(10
)
(42
)
(42
)
Utilities
(21
)
(16
)
(70
)
(58
)
Corporate & Other, net (a)
(10
)
(7
)
(38
)
(26
)
Total interest expense
(92
)
(81
)
(340
)
(313
)
(Loss) income before income taxes
(1,323
)
(142
)
206
1,435
Income tax expense (benefit) (b)
369
46
10
(367
)
Net (loss) income including noncontrolling
interests
(954
)
(96
)
216
1,068
Deduct net income attributable to
noncontrolling interests
—
(1
)
—
(1
)
Net (loss) income attributable to UGI
Corporation
$
(954
)
$
(97
)
$
216
$
1,067
(Loss) earnings per share attributable to
UGI shareholders:
Basic
$
(4.54
)
$
(0.46
)
$
1.03
$
5.10
Diluted
$
(4.54
)
$
(0.46
)
$
1.00
$
4.99
Weighted Average common shares outstanding
(thousands):
Basic
209,934
209,673
210,012
209,291
Diluted
209,934
209,673
215,880
213,759
Supplemental information:
Net (loss) income attributable to UGI
Corporation:
AmeriGas Propane
$
49
$
34
$
127
$
128
UGI International
45
57
163
186
Midstream & Marketing
77
51
189
123
Utilities
81
63
224
158
Total reportable segments
252
205
703
595
Corporate & Other (a)
(1,206
)
(302
)
(487
)
472
Total net (loss) income attributable to
UGI Corporation
$
(954
)
$
(97
)
$
216
$
1,067
(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 December 31, 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 December
31, 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
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,
2022
2021
2022
2021
Adjusted net (loss) income attributable
to UGI Corporation (millions):
Net (loss) income attributable to UGI
Corporation
$
(954
)
$
(97
)
$
216
$
1,067
Net losses (gains) on commodity derivative
instruments not associated with current-period transactions (net of
tax of $(363), $(111), $(112) and $247, respectively)
999
292
249
(624
)
Unrealized losses (gains) on foreign
currency derivative instruments (net of tax of $(11), $2, $1 and
$9, respectively)
29
(4
)
(3
)
(25
)
Loss on extinguishment of debt (net of tax
of $0, $(3), $0 and $(3), respectively)
—
8
—
8
Acquisition and integration expenses
associated with the Mountaineer Acquisition (net of tax of $0, $0,
$(1) and $(3), respectively)
—
1
—
10
Business transformation expenses (net of
tax of $(1), $(1), $(2), and $(22), respectively)
1
1
7
62
Loss on disposal of U.K. energy marketing
business (net of tax of $(64), $0, $(64) and $0, respectively)
151
—
151
—
Impact of change in tax law
—
—
(19
)
(23
)
Impairment of customer relationship
intangible (net of tax of $0, $0, $0 and $(5), respectively)
—
—
—
15
AmeriGas operations enhancement for growth
project (net of tax of $(2), $0, $(2) and $0, respectively)
5
—
5
—
Impairment of certain equity method
investments and assets (net of tax of $0, $0, $(14) and $0,
respectively)
—
—
26
93
Restructuring costs (net of tax of $0, $0,
$(10) and $0, respectively)
—
—
24
—
Impairment of assets (net of tax of $(4),
$0, $(4) and $0, respectively)
15
—
15
—
Total adjustments (1)
1,200
298
455
(484
)
Adjusted net income attributable to UGI
Corporation
$
246
$
201
$
671
$
583
Adjusted diluted earnings per
share:
UGI Corporation (loss) earnings per share
— diluted (2)
$
(4.54
)
$
(0.46
)
$
1.00
$
4.99
Net losses (gains) on commodity derivative
instruments not associated with current-period transactions
4.73
1.37
1.15
(2.92
)
Unrealized losses (gains) on foreign
currency derivative instruments
0.14
(0.02
)
(0.01
)
(0.12
)
Loss on extinguishment of debt
—
0.03
—
0.04
Acquisition and integration expenses
associated with the Mountaineer Acquisition
—
—
—
0.05
Business transformation expenses
—
0.01
0.03
0.29
Loss on disposal of U.K. energy marketing
business
0.72
—
0.70
—
Impact of change in tax law
—
—
(0.09
)
(0.11
)
Impairment of customer relationship
intangible
—
—
—
0.07
AmeriGas operations enhancement for growth
project
0.02
—
0.02
—
Impairment of certain equity method
investments and assets
—
—
0.12
0.44
Restructuring costs
—
—
0.11
—
Impairment of assets
0.07
—
0.07
—
Total adjustments (2)
5.68
1.39
2.10
(2.26
)
Adjusted diluted earnings per share
(2)
$
1.14
$
0.93
$
3.10
$
2.73
(1)
Income taxes associated with pre-tax
adjustments determined using statutory business unit tax rates.
(2)
The loss per share for the three months
ended December 31, 2022 and 2021, was determined excluding the
effect of 6.43 million dilutive shares and 6.49 million dilutive
shares, respectively, as the impact of such shares would have been
antidilutive to the net loss for the period. Adjusted earnings per
share for the three months ended December 31, 2022 and 2021, was
determined based upon fully diluted shares of 216.37 million and
216.16 million, respectively.
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