Market Overview

UGI Reports Fiscal 2017 Third Quarter Earnings

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  • GAAP net loss attributable to UGI of $19.0 million, or $0.11 per
    diluted share, compared to net income of $60.7 million, or $0.34 per
    diluted share in the prior year
  • Adjusted net income attributable to UGI of $16.6 million, or $0.09 per
    diluted share, compared to $40.0 million, or $0.23 per diluted share
    in the prior year
  • Joint settlement petition for UGI PNG base rate case filed on June 30th

UGI Corporation (NYSE:UGI) today reported a GAAP net loss attributable
to UGI of $19.0 million, or $0.11 per diluted share, for the fiscal
quarter ended June 30, 2017, compared to GAAP net income of $60.7
million, or $0.34 per diluted share, for the fiscal quarter ended June
30, 2016. Adjusted net income attributable to UGI was $16.6 million, or
$0.09 per diluted share, compared to $40.0 million, or $0.23 per diluted
share, for the quarters ended June 30, 2017 and 2016, respectively.
Adjusted net income excludes the impact of unrealized gains and losses
on commodity and certain foreign currency derivative instruments,
integration expenses associated with the Finagaz acquisition, and losses
on early extinguishments of debt.

Adjusted earnings were in line with historical third quarter levels
although lower than the prior year due to two factors. Weather was
warmer than the prior year for all UGI businesses, especially in the
critical shoulder month of April which accounts for most of the heating
degree days in the quarter. Additionally, the company experienced
declining LPG costs in Europe in the prior year that provided a
temporary margin increase, a trend which reversed in this quarter as
propane and butane costs in Europe were 22% and 28% higher,
respectively, than the prior-year levels. Partially offsetting the
impact of weather and LPG costs were the impacts of customer growth
across our utilities, new base rates at UGI Gas, higher peaking margin,
growth in AmeriGas ACE and national accounts programs, and the
realization of synergies from the Finagaz acquisition.

John L. Walsh, president and chief executive officer of UGI, commented,
"Our teams did an outstanding job this quarter. By managing costs and
maintaining our focus on operational efficiency we were able to meet the
challenges of warm weather and higher commodity costs. In addition, we
were pleased to mark progress on several growth projects. Our Midstream
& Marketing business placed its Manning LNG facility into service on
July 1st. Our Utility reached agreement on its PNG base rate case and
filed a Joint Petition for Approval with the Pennsylvania PUC on June
30th. Under the terms of the settlement agreement, UGI PNG would be
permitted to increase base rates by $11.25 million and we anticipate new
rates going into effect in mid-October. Our UGI International business
closed a small acquisition in Sweden and the pipeline of opportunities
remains strong. Finally, AmeriGas marked strong growth in its cylinder
exchange and national accounts programs and closed three acquisitions in
the quarter."

Based on year-to-date results, UGI expects full year adjusted EPS to be
at, or slightly below, its guidance range of $2.30 to $2.45.

     

Segment Performance (millions, except where otherwise indicated)

 

AmeriGas Propane1:

 
For the fiscal quarter ended June 30, 2017 2016 Increase (Decrease)
Revenues $ 467.5 $ 446.7 $ 20.8   4.7 %
Total margin (a) $ 270.0 $ 275.9 $ (5.9 ) (2.1 )%
Partnership operating and administrative expenses $ 227.4 $ 217.2 $ 10.2 4.7 %
Operating income $ 4.6 $ 18.3 $ (13.7 ) (74.9 )%
Partnership Adjusted EBITDA $ 58.4 $ 64.6 $ (6.2 ) (9.6 )%
Retail gallons sold 195.0 202.8 (7.8 ) (3.8 )%
Heating degree days - % (warmer) than normal (11.7 )% (7.5 )%
Capital expenditures $ 20.9 $ 18.7 $ 2.2 11.8 %
 
  • Retail gallons sold decreased due to temperatures that were 11.7%
    warmer than normal and 4.6% warmer than the prior year. Temperatures
    in the critical month of April were 17.1% warmer than normal and 10.6%
    warmer than the prior year.
  • Total margin decreased primarily reflecting the decrease in retail
    volumes sold, partially offset by slightly higher retail unit margin.
  • Partnership operating and administrative expenses were higher than the
    prior year reflecting a $7.5 million environmental accrual associated
    with the site of a former manufactured gas plant, a settlement with
    one of AmeriGas' insurance carriers ($5.5 million), partially offset
    by lower group insurance expenses ($2.2 million).
  • Partnership Adjusted EBITDA decreased principally reflecting the lower
    total margin.
 
1 UGI, through subsidiaries, is the sole General Partner and owns 26%
of AmeriGas Partners, L.P.
 
 

UGI International:

 
For the fiscal quarter ended June 30,   2017   2016   Increase (Decrease)
Revenues $ 351.3 $ 395.5 $ (44.2 )   (11.2 )%
Total margin (a) $ 173.1 $ 215.8 $ (42.7 ) (19.8 )%
Operating and administrative expenses $ 141.1 $ 154.9 $ (13.8 ) (8.9 )%
Operating income $ 0.5 $ 33.5 $ (33.0 ) (98.5 )%
(Loss) income before income taxes $ (5.2 ) $ 27.7 $ (32.9 ) (118.8 )%
Finagaz integration expenses $ 7.0 $ 4.5 $ 2.5 55.6 %
Adjusted income before income taxes $ 1.8 $ 32.2 $ (30.4 ) (94.4 )%
Retail gallons sold 158.6 169.9 (11.3 ) (6.7 )%
Heating degree days - % (warmer) than normal (13.7 )% (6.1 )%
Capital expenditures $ 19.1 $ 25.9 $ (6.8 ) (26.3 )%
 

Base-currency results are translated into U.S. dollars based upon
exchange rates experienced during the reporting periods. During the 2017
period, the euro was approximately 2% weaker versus the U.S. dollar, and
the British pound sterling was approximately 10% weaker, compared with
the prior-year period. The effects of the weaker currencies did not
negatively impact UGI International net income due to gains on foreign
currency contracts.

  • Total retail gallons sold were lower than the prior year, principally
    reflecting the effects of weather that was approximately 13.7% warmer
    than normal and 8.1% warmer than the prior-year period.
  • Total margin was lower than the prior year primarily due to lower
    average retail unit margins and the lower volume.
  • Operating expenses decreased primarily due to lower expenses in France
    reflecting expense synergies associated with the Finagaz acquisition,
    lower maintenance and logistics expenses, and the translation effects
    of weaker currencies, offset in part by higher integration expenses.
  • Operating income and income before taxes decreased reflecting the
    lower total margin partially offset by the lower operating and
    administrative expenses.
 

Midstream & Marketing:

 
For the fiscal quarter ended June 30,   2017   2016   Increase (Decrease)
Revenues $ 222.8 $ 166.0 $ 56.8   34.2 %
Total margin (a) $ 33.4 $ 41.9 $ (8.5 ) (20.3 )%
Operating and administrative expenses $ 23.1 $ 22.7 $ 0.4 1.8 %
Operating income $ 2.8 $ 11.3 $ (8.5 ) (75.2 )%
Income before income taxes $ 3.3 $ 10.9 $ (7.6 ) (69.7 )%
Heating degree days - % (warmer) colder than normal (22.9 )% 4.3 %
Capital expenditures $ 21.7 $ 36.3 $ (14.6 ) (40.2 )%
 
  • Temperatures across Midstream & Marketing's service territory were
    22.9% warmer than normal and 26.1% warmer than the prior year.
  • Revenues increased reflecting higher natural gas revenues partially
    offset by lower capacity management revenues; the increase in natural
    gas revenues principally reflects the effects of higher volumes due to
    customer growth.
  • Total margin decreased principally reflecting lower capacity
    management total margin ($8.4 million) due to higher fixed demand
    charges and lower HVAC total margin, partially offset by higher
    peaking and storage margin.
  • Operating income and income before taxes decreased primarily
    reflecting the decrease in total margin, higher depreciation expenses,
    and slightly higher total operating and administrative expenses,
    partially offset by other income largely attributable to allowance for
    funds used during construction ("AFUDC") associated with pipeline
    expenditures.
 

UGI Utilities:

 
For the fiscal quarter ended June 30,   2017   2016   Increase (Decrease)
Revenues $ 146.6 $ 140.3 $ 6.3   4.5 %
Total margin (a) $ 93.6 $ 94.8 $ (1.2 ) (1.3 )%
Operating and administrative expenses $ 52.0 $ 46.1 $ 5.9 12.8 %
Operating income $ 27.7 $ 29.8 $ (2.1 ) (7.0 )%
Income before income taxes $ 17.5 $ 20.7 $ (3.2 ) (15.5 )%
Gas Utility system throughput - billions of cubic feet
Core market 8.7 10.3 (1.6 ) (15.5 )%
Total 46.5 43.6 2.9 6.7 %
Gas Utility heating degree days - % (warmer) colder than normal (21.2 )% 11.9 %
Capital expenditures $ 79.1 $ 56.5 $ 22.6 40.0 %
 
  • Gas Utility service territory experienced temperatures that were
    approximately 21.2% warmer than normal and nearly 30% warmer than the
    prior year; weather in the important month of April was 43.6% warmer
    than the prior year.
  • Total Gas Utility distribution system throughput increased reflecting
    higher large firm delivery service, partially offset by lower core
    market volumes reflecting the effects of the warmer weather.
  • Total margin decreased primarily reflecting lower Gas Utility total
    margin from core market customers due to lower core market throughput,
    partially offset by the increase in UGI Gas base rates, and higher
    large firm delivery service margin.
  • Operating and administrative expenses were higher than the prior year
    primarily due to higher customer accounts and slightly higher
    distribution and other operating expenses.
  • Operating income decreased reflecting the lower total margin, higher
    operating expenses and higher depreciation and amortization expenses,
    partially offset by a $5.8 million environmental insurance settlement.
(a)   Total margin represents total revenue less total cost of sales and
excludes pre-tax gains and losses on commodity derivative
instruments not associated with current period transactions. In the
case of UGI Utilities, total margin is reduced by revenue-related
taxes.
 

About UGI

UGI is a distributor and marketer of energy products and services.
Through subsidiaries, UGI operates natural gas and electric utilities in
Pennsylvania, distributes propane both domestically and internationally,
manages midstream energy and electric generation assets in Pennsylvania,
and engages in energy marketing in ten states and the District of
Columbia. UGI, through subsidiaries, is the sole General Partner and
owns 26% of AmeriGas Partners, L.P. (NYSE:APU), the nation's largest
retail propane distributor.

UGI Corporation will hold a live Internet Audio Webcast of its
conference call to discuss fiscal 2017 third quarter earnings and other
current activities at 9:00 AM ET on Thursday, August 3, 2017. Interested
parties may listen to the audio webcast both live and in replay on the
Internet at
http://www.ugicorp.com/investor-relations/events-and-presentations/default.aspx
or at the company website
http://www.ugicorp.com
under Investor Relations. A telephonic replay will be available from
12:00 PM ET on August 3rd through 11:59 PM ET on August 10th. The replay
may be accessed at (855) 859-2056, and internationally at (404)
537-3406, conference ID 5913522.

Comprehensive information about UGI Corporation is available on the
Internet at http://www.ugicorp.com.

This press release contains certain forward-looking statements that
management believes to be 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, cost volatility and availability of all
energy products, including propane, natural gas, electricity and fuel
oil, increased customer conservation measures, the impact of pending and
future legal proceedings, 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
foreign currency exchange rate fluctuations (particularly the euro),
changes in Marcellus Shale gas production, the availability, timing and
success of our acquisitions, commercial initiatives and investments to
grow our business, our ability to successfully integrate acquired
businesses and achieve anticipated synergies, and the interruption,
disruption, failure, malfunction, or breach of our information
technology systems, including due to cyber-attack.
UGI undertakes
no obligation to release revisions to its forward-looking statements to
reflect events or circumstances occurring after today.

 

UGI CORPORATION

REPORT OF EARNINGS

(Millions of dollars, except per share)

(Unaudited)

 
 

Three Months Ended
June 30,

 

Nine Months Ended
June 30,

 

Twelve Months Ended
June 30,

2017   2016 2017   2016 2017   2016
Revenues:
AmeriGas Propane $ 467.5 $ 446.7 $ 2,008.3 $ 1,918.3 $ 2,401.8 $ 2,336.5
UGI International 351.3 395.5 1,511.1 1,552.4 1,827.5 1,931.5
Midstream & Marketing 222.8 166.0 916.3 691.7 1,091.2 885.1
UGI Utilities 146.6 140.3 768.0 660.3 876.2 770.5
Corporate & Other (a)   (34.7 )   (17.7 )   (196.9 )   (113.2 )   (213.7 )   (131.3 )
Total revenues $ 1,153.5   $ 1,130.8   $ 5,006.8   $ 4,709.5   $ 5,983.0   $ 5,792.3  
Operating income (loss):
AmeriGas Propane $ 4.6 $ 18.3 $ 373.8 $ 398.3 $ 331.8 $ 388.5
UGI International 0.5 33.5 210.4 230.1 186.9 225.0
Midstream & Marketing 2.8 11.3 134.6 132.0 149.3 150.4
UGI Utilities 27.7 29.8 226.3 192.6 234.6 195.8
Corporate & Other (a)   (38.4 )   62.8     31.5     123.6     (14.6 )   110.3  
Total operating (loss) income (2.8 ) 155.7 976.6 1,076.6 888.0 1,070.0
Income (loss) from equity investees 0.9 3.0 (0.1 ) 2.9 (0.2 )
Loss on extinguishments of debt (4.4 ) (37.1 ) (59.7 ) (37.1 ) (71.5 ) (37.1 )
Losses on foreign currency contracts, net (16.2 ) (16.1 ) (16.1 )
Interest expense:
AmeriGas Propane (40.6 ) (40.9 ) (120.6 ) (122.7 ) (162.0 ) (163.1 )
UGI International (5.6 ) (5.8 ) (15.2 ) (18.8 ) (20.8 ) (25.0 )
Midstream & Marketing (0.3 ) (0.4 ) (1.6 ) (1.7 ) (2.0 ) (2.2 )
UGI Utilities (10.2 ) (9.1 ) (30.5 ) (27.9 ) (40.2 ) (37.8 )
Corporate & Other, net (a)   (0.1 )   (0.2 )   (0.1 )   (0.5 )   (0.3 )   (0.7 )
Total interest expense (56.8 ) (56.4 ) (168.0 ) (171.6 ) (225.3 ) (228.8 )
(Loss) income before income taxes (79.3 ) 62.2 735.8 867.8 578.0 803.9
Income tax benefit (expense) (b)   17.1     (33.6 )   (195.3 )   (263.3 )   (153.2 )   (251.9 )
Net (loss) income including noncontrolling interests (62.2 ) 28.6 540.5 604.5 424.8 552.0
Add net loss (deduct net income) attributable to noncontrolling
interests, principally in AmeriGas Partners, L.P.
  43.2     32.1     (108.9 )   (196.0 )   (37.0 )   (152.7 )
Net (loss) income attributable to UGI Corporation $ (19.0 ) $ 60.7   $ 431.6   $ 408.5   $ 387.8   $ 399.3  
Earnings (loss) per share attributable to UGI shareholders:
Basic $ (0.11 ) $ 0.35   $ 2.49   $ 2.36   $ 2.23   $ 2.31  
Diluted $ (0.11 ) $ 0.34   $ 2.44   $ 2.33   $ 2.19   $ 2.28  
Weighted Average common shares outstanding (thousands):
Basic   173,742     173,395     173,625     172,954     173,654     173,029  
Diluted   173,742     175,974     177,125     175,260     177,198     175,319  
Supplemental information:
Net income (loss) attributable to UGI Corporation:
AmeriGas Propane $ (1.4 ) $ (4.5 ) $ 47.2 $ 53.4 $ 37.0 $ 52.4
UGI International (2.0 ) 19.2 165.6 132.3 144.9 125.2
Midstream & Marketing 3.0 6.8 83.1 77.2 93.0 88.2
UGI Utilities 10.7 12.6 120.1 99.2 118.3 94.6
Corporate & Other (a)   (29.3 )   26.6     15.6     46.4     (5.4 )   38.9  
Total net (loss) income attributable to UGI Corporation $ (19.0 ) $ 60.7   $ 431.6   $ 408.5   $ 387.8   $ 399.3  
 
(a)   Corporate & Other includes, among other things, net gains and
(losses) on commodity and certain foreign currency derivative
instruments not associated with current-period transactions and the
elimination of certain intercompany transactions.
(b) Income tax expense for the nine and twelve months ended June 30,
2017 includes the beneficial impact of a $27.4 million adjustment to
net deferred income tax liabilities associated with a change in the
French income tax rate and an income tax settlement refund of $6.7
million, plus interest, in France.
 
 
UGI CORPORATION
REPORT OF EARNINGS
(Millions of dollars, except per share)
(Unaudited)
 

Non-GAAP Financial Measures - Adjusted
Net Income Attributable to UGI and Adjusted Diluted Earnings Per
Share

 
Management uses "adjusted net income attributable to UGI" and
"adjusted diluted earnings per share," both of which are non-GAAP
financial measures, when evaluating UGI's overall performance. For
the periods presented, adjusted net income attributable to UGI is
net income attributable to UGI Corporation after excluding net
after-tax gains and losses on commodity and certain foreign currency
derivative instruments not associated with current period
transactions (principally comprising changes in unrealized gains and
losses on derivative instruments), Finagaz integration expenses,
losses associated with extinguishments of debt and the impact on net
deferred tax liabilities from a change in French corporate income
tax rate. 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. Management
believes that these non-GAAP measures provide meaningful information
to investors about UGI's performance because they eliminate 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.
 
The following table reconciles net income attributable to UGI
Corporation, the most directly comparable GAAP measure, to adjusted
net income attributable to UGI Corporation, and reconciles diluted
earnings per share, the most comparable GAAP measure, to adjusted
diluted earnings per share, to reflect the adjustments referred to
above:
 
  Three Months Ended
June 30,
  Nine Months Ended
June 30,
  Twelve Months Ended
June 30,
2017   2016 2017   2016 2017   2016
Adjusted net income attributable to UGI Corporation:
Net (loss) income attributable to UGI Corporation $ (19.0 ) $ 60.7 $ 431.6 $ 408.5 $ 387.8 $ 399.3
Net losses (gains) on commodity derivative instruments not
associated with current-period transactions (net of tax of ($12.6),
$18.0, $22.2, $32.4, $3.3 and $29.2, respectively) (1)(2)
19.8 (29.6 ) (29.3 ) (55.6 ) (3.6 ) (48.5 )
Unrealized losses on foreign currency derivative instruments (net of
tax of $(5.5), $0.0, $(5.6), $0.0, $(5.6) and $0.0, respectively) (2)
10.5 10.5 10.5
Loss on extinguishments of debt (net of tax of $(0.4), $(3.9),
$(6.1), $(3.9), $(7.3) and $(3.9), respectively) (2)
0.7 6.1 9.6 6.1 11.4 6.1
Integration expenses associated with Finagaz (net of tax of $(2.4),
$(1.7), $(7.5), $(5.9), $(12.2) and $(8.3), respectively) (2)
4.6 2.8 14.3 9.6 22.0 13.6
Impact from change in French tax rate           (27.4 )       (27.4 )    
Adjusted net income attributable to UGI Corporation $ 16.6   $ 40.0   $ 409.3   $ 368.6   $ 400.7   $ 370.5  
 
Adjusted diluted earnings per share (3):
UGI Corporation (loss) earnings per share - diluted $ (0.11 ) $ 0.34 $ 2.44 $ 2.33 $ 2.19 $ 2.28
Net losses (gains) on commodity derivative instruments not
associated with current-period transactions (1)
0.10 (0.16 ) (0.17 ) (0.31 ) (0.02 ) (0.28 )
Unrealized losses on foreign currency derivative instruments 0.06 0.06 0.06
Loss on extinguishments of debt (1) 0.01 0.03 0.05 0.03 0.06 0.03
Integration expenses associated with Finagaz 0.03 0.02 0.08 0.05 0.12 0.08
Impact from change in French tax rate           (0.15 )       (0.15 )    
Adjusted diluted earnings per share $ 0.09   $ 0.23   $ 2.31   $ 2.10   $ 2.26   $ 2.11  
 
(1)   Includes the impact of rounding.
(2) Income taxes associated with pre-tax adjustments determined using
statutory business unit tax rates.
(3) Adjusted diluted earnings per share for the three months ended June
30, 2017 are based upon fully diluted shares of 177.298 million.
 

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