Issues Fiscal 2022 Guidance
UGI Corporation (NYSE: UGI) reported financial results for the
fiscal year ended September 30, 2021 and provided guidance for
fiscal year 2022.
HEADLINES
- Record GAAP net income of $1,467 million and adjusted net
income of $629 million compared to GAAP net income of $532 million
and adjusted net income of $561 million in the prior year.
- Record GAAP diluted earnings per share (“EPS”) of $6.92 and
adjusted diluted EPS of $2.96 compared to GAAP diluted EPS of $2.54
and adjusted diluted EPS of $2.67 in the prior year.
- Reportable segments earnings before interest expense and income
tax1 ("EBIT") of $1,134 million compared to $1,029 million in the
prior year.
- Fiscal year performance at the top end of our revised guidance
range issued on May 5, 2021, prior to $0.03 non-cash adjustment on
equity units issued in May 2021 now reflecting the required
if-converted method2.
- Completed the strategic acquisition of Mountaineer Gas Company,
the largest gas local distribution company in West Virginia, adding
approximately 6,200 miles of pipelines and nearly 214,000
customers.
- Committed investment of over $100 million to renewable natural
gas ("RNG") projects in the U.S.
- Issued Fiscal 2022 adjusted diluted EPS guidance range of $3.05
- $3.253 while reiterating our long-term 6% - 10% EPS growth rate
target.
"Our solid Fiscal 2021 results reflect the strength of our
diversified business and the commitment and resiliency of our
employees," said Roger Perreault, President and Chief Executive
Officer of UGI Corporation. "We are proud to have delivered record
adjusted diluted EPS of $2.96 and strong value creation for the
year, while also making progress on environmental, social and
governance (“ESG”) initiatives. During Fiscal 2021, we completed
the acquisition of Mountaineer Gas Company and deployed a record
level of capital at UGI Utilities. Midstream & Marketing
entered into several partnerships to produce RNG, with over $100
million committed during the year. We also made great progress to
improve the weather resiliency of our business and enhance customer
experience through our LPG business transformation initiatives.
"Further demonstrating our commitment to sustainability, we
established a dedicated ESG team and committed to reducing Scope I
greenhouse gas emissions by 55% by 2025 using 2020 as the base
year. We made great strides in advancing Belonging, Inclusion,
Diversity and Equity ("BIDE") and were pleased to increase our
domestic spend and commitment with diverse suppliers by over
20%.
"As we turn to Fiscal 2022, we are well positioned to drive
growth and create value for our investors, customers and employees.
Our strategy of delivering reliable earnings growth, investing in
renewable energy solutions and rebalancing our portfolio is
delivering results. We will continue to execute our strategy to
deliver on our long-term commitment of 6 to 10% EPS growth and 4%
dividend growth. We look forward to discussing our long-term
outlook at our Virtual Investor Day in December."
STRATEGIC ACCOMPLISHMENTS
- Reliable Earnings Growth
- UGI Utilities invested a record level of capital ($394 million)
and added over 12,000 residential and commercial heating customers
in Pennsylvania
- Completed the acquisition of Mountaineer Gas Company which
increased rate base to approximately $3 billion
- Midstream & Marketing expanded its interest in the
Appalachian basin natural gas gathering systems with the Pine Run
investment and continued to generate significant fee-based
income
- UGI International generated record financial results,
increasing EBIT by 22% over the prior year, and realized €14
million in annual benefits from the business transformation
initiatives
- AmeriGas achieved over 9% growth in national account volumes
and $78 million in incremental annual benefits from the business
transformation initiatives
- Renewables:
- Committed over $100 million to renewable natural gas projects
in Idaho, New York, Ohio, Kentucky and South Dakota
- Announced an intended joint venture to advance the production
and use of Renewable Dimethyl Ether (“rDME”), a low-carbon
sustainable liquid gas, in the LPG industry in the US and Europe.
The aggregate investment of both joint venture participants is
estimated to be up to $1 billion and is expected to involve third
party investment
- Rebalance: Progressed on our objective to rebalance our
portfolio through the aforementioned Mountaineer Gas acquisition
and investments in replacement and betterment, Pine Run Midstream
asset and renewables
2022 OUTLOOK UGI provides an adjusted EPS guidance range of
$3.05 - $3.253 per diluted share for the fiscal year ending
September 30, 2022. This guidance range assumes normal weather, the
current tax regime and includes the negative impact of
approximately $0.06 per diluted share related to the accounting for
the equity units2 issued in May 2021.
UGI will discuss its strategy and longer-term financial outlook
at its Virtual Investor Day on Thursday, December 2, 2021.
EARNINGS CALL and WEBCAST UGI Corporation will hold a live
Internet Audio Webcast of its conference call to discuss fiscal
2021 earnings and other current activities at 9:00 AM ET on Friday,
November 19, 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/9r7ezwun or by visiting the
company website https://www.ugicorp.com and clicking on Investor
Relations. A telephonic replay will be available from 12:00 PM ET
on November 19 through 11:59 PM ET on November 26. The replay may
be accessed at 855-859-2056 and internationally at +1 404-537-3406,
conference ID 8651785.
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, 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 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. 2 The
shares associated with the $220 million equity units issued in May
2021 were previously accounted for using the treasury stock method
(in accordance with market practice at the time) and excluded from
the calculation of weighted average shares outstanding. Fiscal 2021
results and fiscal 2022 guidance include the dilutive impact of
adding underlying shares to our calculation using the if-converted
method. 3 Because 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 2022 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).
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 and
Utica 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 year ended September 30,
2021
2020
Increase (Decrease)
Revenues
$
2,614
$
2,381
$
233
10
%
Total margin (a)
$
1,397
$
1,421
$
(24
)
(2
)%
Operating and administrative expenses
$
869
$
890
$
(21
)
(2
)%
Operating income / earnings before
interest expense and income taxes
$
385
$
373
$
12
3
%
Retail gallons sold (millions)
968
987
(19
)
(2
)%
Heating degree days - % (warmer) than
normal
(2.8
)%
(0.7
)%
Capital expenditures
$
130
$
135
$
(5
)
(4
)%
- Retail gallons sold decreased 2% compared to Fiscal 2020
primarily due to the effects of COVID-19 on commercial volumes,
structural conservation, and other residual volume loss.
- Total margin decreased $24 million primarily reflecting lower
retail volumes sold and lower non-propane margin principally due to
lower fees and services, partially offset by higher average propane
margins including effective margin management efforts.
- Operating and administrative expenses decreased by $21 million
in Fiscal 2021 primarily due to benefits achieved from the LPG
transformation initiatives.
- Operating income and EBIT increased $12 million reflecting
higher other income, lower operating and administrative expenses
and lower depreciation expenses, partially offset by lower total
margin.
UGI International
For the year ended September 30,
2021
2020
Increase
Revenues
$
2,651
$
2,127
$
524
25
%
Total margin (a)
$
1,053
$
908
$
145
16
%
Operating and administrative expenses
$
622
$
545
$
77
14
%
Operating income
$
314
$
241
$
73
30
%
Earnings before interest expense and
income taxes
$
317
$
259
$
58
22
%
LPG retail gallons sold (millions)
792
757
35
5
%
Heating degree days - % colder (warmer)
than normal
0.4
%
(12.7
)%
Capital expenditures
$
107
$
89
$
18
20
%
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 2021 and Fiscal 2020, the
average unweighted euro-to-dollar translation rates were $1.20 and
$1.12, respectively, and the average unweighted British pound
sterling-to-dollar translation rate were $1.37 and $1.28,
respectively.
- Total LPG retail volume increased 5% largely due to weather
that was 14.1% colder than the prior-year. The increased volume
reflects higher bulk volumes including the recovery of certain
volume decreases due to the COVID-19 pandemic.
- Total margin increased $145 million primarily due to higher
retail LPG gallons sold, higher average LPG unit margins including
the effects of margin management efforts, and the translation
effects of the stronger euro.
- Operating and administrative expenses increased $77 million
reflecting higher costs attributable to increased volumes and the
translation effects of the stronger euro.
- Operating income increased $73 million due to higher total
margin partially offset by the increase in operating and
administrative expenses, and reflects the translation effects of
the stronger euro ($38 million).
- EBIT increased $58 million due to the higher operating income,
partially offset by lower realized gains on foreign currency
exchange contracts ($14 million).
Midstream & Marketing
For the year ended September 30,
2021
2020
Increase (Decrease)
Revenues
$
1,406
$
1,247
$
159
13
%
Total margin (a)
$
373
$
355
$
18
5
%
Operating and administrative expenses
$
129
$
140
$
(11
)
(8
)%
Operating income
$
160
$
140
$
20
14
%
Earnings before interest expense and
income taxes
$
190
$
168
$
22
13
%
Heating degree days - % (warmer) than
normal
(6.9
)%
(4.5
)%
Capital expenditures
$
43
$
93
$
(50
)
(54
)%
- Total margin increased $18 million in Fiscal 2021 reflecting
increased margins from capacity management ($24 million) largely
driven by the timing of mark to market contract settlements, gas
gathering activities and renewable energy marketing activities ($7
million). These increases were partially offset by the absence of
margins attributable to HVAC and Conemaugh that were divested in
Fiscal 2020 ($29 million).
- Operating and administrative expenses decreased $11 million
largely due to lower expenses attributable to the divested assets,
partially offset by higher employee and benefit-related costs and
expenses for new assets placed into service.
- Operating income increased $20 million compared to the prior
year reflecting higher total margin and lower operating and
administrative expenses, partially offset by an adjustment to the
contingent consideration related to the GHI acquisition ($9
million).
- EBIT increased $22 million primarily due to an increase in
operating income and incremental equity income from the investment
in Pine Run.
UGI Utilities
For the year ended September 30,
2021 (b)
2020
Increase (Decrease)
Revenues
$
1,079
$
1,030
$
49
5
%
Total margin (a)
$
616
$
577
$
39
7
%
Operating and administrative expenses
$
254
$
239
$
15
6
%
Operating income
$
241
$
229
$
12
5
%
Earnings before interest expense and
income taxes
$
242
$
229
$
13
6
%
Natural gas system throughput - billions
of cubic feet
Core market
77
75
2
3
%
Total
311
310
1
—
%
Natural gas heating degree days - %
(warmer) than normal
(7.9
)%
(6.9
)%
Capital expenditures
$
394
$
348
$
46
13
%
- Natural gas core market throughput increased 3% reflecting
continued customer growth, recovery of certain volume decreases
attributable to COVID-19 and incremental volume from the
Mountaineer acquisition.
- Total margin increased $39 million during Fiscal 2021 due to
higher natural gas margin ($34 million) and Electric Utility. The
increase in total natural gas margin reflects higher core market
margin ($18 million) including the effects of the increase in base
rates that became effective in 2021 as part of a phased approach,
margin from the Mountaineer acquisition ($6 million) and large
delivery service customers.
- Operating and administrative expenses increased $15 million
reflecting the impact of the Mountaineer acquisition ($7 million)
and higher contracted labor expenses and employee costs.
- Depreciation expense increased $14 million due to increased
distribution system and IT capital expenditure activity and the
incremental impact of Mountaineer.
- EBIT increased $13 million reflecting higher total margin ($39
million) partially offset by increased operating and administrative
expenses ($15 million) and depreciation expense ($14 million).
(a) Total margin represents total revenue less total cost of
sales. In the case of UGI Utilities, total margin is also reduced
by certain revenue-related taxes. In the case of UGI International,
total margin represents total revenues less total cost of sales and
in Fiscal 2020, LPG cylinder filling costs of $28 million. For
financial statement purposes, LPG cylinder filling costs in Fiscal
2020 are included in "Operating and administrative expenses" on the
Consolidated Statements of Income (but excluded from operating and
administrative expenses presented above). For financial statement
purposes, LPG cylinder filling costs in Fiscal 2021 are included in
"Cost of Sales". (b) Includes Mountaineer Gas Company acquired on
September 1, 2021.
REPORT OF EARNINGS - UGI CORPORATION
(Millions of dollars, except per share)
Unaudited
Three Months Ended September
30,
Twelve Months Ended September
30,
2021
2020
2021
2020
Revenues:
AmeriGas Propane
$
482
$
398
$
2,614
$
2,381
UGI International
545
401
2,651
2,127
Midstream & Marketing
320
230
1,406
1,247
UGI Utilities
156
129
1,079
1,030
Corporate & Other (a)
(65
)
(34
)
(303
)
(226
)
Total revenues
$
1,438
$
1,124
$
7,447
$
6,559
Earnings (loss) before interest expense
and income taxes:
AmeriGas Propane
$
(6
)
$
(17
)
$
385
$
373
UGI International
(9
)
12
317
259
Midstream & Marketing
10
7
190
168
UGI Utilities
(3
)
—
242
229
Total reportable segments
(8
)
2
1,134
1,029
Corporate & Other (a)
812
56
1,165
(40
)
Total earnings before interest expense and
income taxes
804
58
2,299
989
Interest expense:
AmeriGas Propane
(39
)
(40
)
(159
)
(164
)
UGI International
(6
)
(8
)
(27
)
(31
)
Midstream & Marketing
(11
)
(8
)
(42
)
(42
)
UGI Utilities
(14
)
(13
)
(56
)
(54
)
Corporate & Other, net (a)
(7
)
(6
)
(26
)
(31
)
Total interest expense
(77
)
(75
)
(310
)
(322
)
Income (loss) before income taxes
727
(17
)
1,989
667
Income tax (expense) benefit (b)
(202
)
27
(522
)
(135
)
Net income including noncontrolling
interests
525
10
1,467
532
Deduct net income attributable to
noncontrolling interests
—
(1
)
—
—
Net income attributable to UGI
Corporation
$
525
$
9
$
1,467
$
532
Earnings per share attributable to UGI
Corporation shareholders:
Basic
$
2.51
$
0.05
$
7.02
$
2.55
Diluted
$
2.43
$
0.05
$
6.92
$
2.54
Weighted Average common shares outstanding
(thousands):
Basic
209,444
208,655
209,063
208,928
Diluted
215,991
209,357
212,126
209,869
Supplemental information:
Net income (loss) attributable to UGI
Corporation:
AmeriGas Propane
$
(36
)
$
(42
)
$
168
$
156
UGI International
(1
)
36
221
173
Midstream & Marketing
—
(1
)
107
92
UGI Utilities
(13
)
(11
)
144
136
Corporate & Other (a)
575
27
827
(25
)
Total net income attributable to UGI
Corporation
$
525
$
9
$
1,467
$
532
(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, 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,
2021
2020
Adjusted net income attributable to UGI
Corporation (millions):
Net income attributable to UGI
Corporation
$
1,467
$
532
Net gains on commodity derivative
instruments not associated with current-period transactions (net of
tax of $389 and $35, respectively)
(1,001
)
(82
)
Unrealized (gains) losses on foreign
currency derivative instruments (net of tax of $2 and $(10),
respectively)
(6
)
26
Acquisition and integration expenses
associated with the CMG Acquisition (net of tax of $0 and $(1),
respectively)
—
1
Business transformation expenses (net of
tax of $(27) and $(17), respectively)
74
45
Loss on disposals of Conemaugh and HVAC
(net of tax of $0 and $(15), respectively)
—
39
Acquisition and integration expenses
associated with the Mountaineer Acquisition (net of tax of $(4) and
$0, respectively)
10
—
Impairment of customer relationship
intangible (net of tax of $(5) and $0, respectively)
15
—
Impairment of investment in PennEast (net
of tax of $0 and $0, respectively)
93
—
Impact of change in Italian tax law
(23
)
—
Total adjustments (1) (2)
(838
)
29
Adjusted net income attributable to UGI
Corporation
$
629
$
561
Adjusted diluted earnings per
share:
UGI Corporation earnings per share -
diluted
$
6.92
$
2.54
Net gains on commodity derivative
instruments not associated with current-period transactions
(4.72
)
(0.39
)
Unrealized (gains) losses on foreign
currency derivative instruments
(0.03
)
0.12
Acquisition and integration expenses
associated with the CMG Acquisition
—
0.01
LPG business transformation expenses
0.35
0.21
Loss on disposals of Conemaugh and
HVAC
—
0.18
Acquisition and integration expenses
associated with the Mountaineer Acquisition
0.04
—
Impairment of customer relationship
intangible
0.07
—
Impairment of investment in PennEast
0.44
—
Impact of change in Italian tax law
(0.11
)
—
Total adjustments (1)
(3.96
)
0.13
Adjusted diluted earnings per share
$
2.96
$
2.67
(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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