UGI Reports Strong First Quarter Results
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 inNew Energy One HoldCo LLC , which is part of the team developing a utility-scale renewable natural gas (“RNG”) project inIdaho . - On
December 30, 2020 , UGI announced that it had signed a definitive agreement to acquireMountaineer Gas Company .
ESG HIGHLIGHTS
UGI Utilities, Inc. (“UGI Utilities”) has executed a RNG interconnect agreement with a landfill gas developer in northeastPennsylvania .UGI Utilities has also commenced construction on a project to deliver natural gas toUPS Fuel Services Inc. , a subsidiary ofUnited 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
“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.
“On
“Lastly, we continue to make progress on our goal to be a leader in delivering renewable energy solutions for our customers. Recently,
“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 managementUGI 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
ABOUT UGI
Comprehensive information about
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
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
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
SEGMENT RESULTS ($ in millions, except where otherwise indicated)
|
|||||||||||||||
For the fiscal quarter ended |
|
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.
|
|||||||||||||||
For the fiscal quarter ended |
|
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 |
% |
- 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 inUGI International's net income resulting from changes in foreign currency exchange rates ($4 million ).
Midstream & Marketing |
|||||||||||||||
For the fiscal quarter ended |
|
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 andConemaugh 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.
|
|||||||||||||||
For the fiscal quarter ended |
|
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 |
|
(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 – (Millions of dollars, except per share) (Unaudited) |
||||||||||||||||
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
Revenues: |
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
666 |
|
|
$ |
730 |
|
|
$ |
2,317 |
|
|
$ |
2,592 |
|
|
|
700 |
|
|
651 |
|
|
2,176 |
|
|
2,313 |
|
||||
Midstream & Marketing |
|
341 |
|
|
373 |
|
|
1,215 |
|
|
1,429 |
|
||||
|
|
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: |
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
141 |
|
|
$ |
165 |
|
|
$ |
349 |
|
|
$ |
403 |
|
|
|
136 |
|
|
100 |
|
|
295 |
|
|
276 |
|
||||
Midstream & Marketing |
|
59 |
|
|
62 |
|
|
165 |
|
|
133 |
|
||||
|
|
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: |
|
|
|
|
|
|
|
|
||||||||
|
|
(40 |
) |
|
(42 |
) |
|
(162 |
) |
|
(168 |
) |
||||
|
|
(7 |
) |
|
(7 |
) |
|
(31 |
) |
|
(27 |
) |
||||
Midstream & Marketing |
|
(10 |
) |
|
(12 |
) |
|
(40 |
) |
|
(20 |
) |
||||
|
|
(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 |
|
— |
|
|
— |
|
|
— |
|
|
(27 |
) |
||||
Net income attributable to |
|
$ |
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 |
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
74 |
|
|
$ |
91 |
|
|
$ |
139 |
|
|
$ |
129 |
|
|
|
92 |
|
|
73 |
|
|
192 |
|
|
181 |
|
||||
Midstream & Marketing |
|
35 |
|
|
36 |
|
|
91 |
|
|
83 |
|
||||
|
|
49 |
|
|
61 |
|
|
124 |
|
|
144 |
|
||||
Total reportable segments |
|
250 |
|
|
261 |
|
|
546 |
|
|
537 |
|
||||
Corporate & Other (a) |
|
53 |
|
|
(49 |
) |
|
77 |
|
|
(133 |
) |
||||
Total net income attributable to |
|
$ |
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 |
Non-GAAP Financial Measures - Adjusted Net Income Attributable to UGI and Adjusted Diluted Earnings Per Share
The following tables reconcile net income attributable to
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
Adjusted net income attributable to |
|
|
|
|
|
|
|
|
||||||||
Net income attributable to |
|
$ |
303 |
|
|
$ |
212 |
|
|
$ |
623 |
|
|
$ |
404 |
|
Net (gains) losses on commodity derivative instruments not associated with current-period transactions (net of tax of |
|
(85 |
) |
|
10 |
|
|
(177 |
) |
|
76 |
|
||||
Unrealized losses (gains) on foreign currency derivative instruments (net of tax of |
|
15 |
|
|
11 |
|
|
30 |
|
|
(6 |
) |
||||
Acquisition and integration expenses associated with the CMG Acquisition (net of tax of |
|
— |
|
|
1 |
|
|
— |
|
|
12 |
|
||||
Acquisition expenses associated with the pending Mountaineer Acquisition (net of tax of |
|
1 |
|
|
— |
|
|
1 |
|
|
— |
|
||||
Business transformation expenses (net of tax of |
|
13 |
|
|
12 |
|
|
46 |
|
|
28 |
|
||||
AmeriGas Merger expenses (net of tax of |
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
||||
Loss on disposals of |
|
— |
|
|
— |
|
|
39 |
|
|
— |
|
||||
Total adjustments (1) (2) |
|
(56 |
) |
|
34 |
|
|
(61 |
) |
|
111 |
|
||||
Adjusted net income attributable to |
|
$ |
247 |
|
|
$ |
246 |
|
|
$ |
562 |
|
|
$ |
515 |
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted diluted earnings per share: |
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
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 |
|
— |
|
|
— |
|
|
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 |
|
(2) |
Income taxes associated with pre-tax adjustments determined using statutory business unit tax rates. |
|
(3) |
Earnings per share for the twelve months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005952/en/
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