UGI (US:UGI)2020-02-06 21:11Part I Financial Information Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, with notes on accounting policies and acquisitions Condensed Consolidated Statements of Income (Three Months Ended Dec 31) | (Millions of dollars, except per share) | 2019 | 2018 | | :--- | :--- | :--- | | Revenues | $2,006.6 | $2,200.2 | | Operating income | $377.2 | $167.7 | | Income before income taxes | $288.1 | $111.9 | | Net income attributable to UGI Corporation | $212.0 | $64.2 | | Diluted Earnings per share | $1.00 | $0.36 | Condensed Consolidated Balance Sheet Highlights | (Millions of dollars) | Dec 31, 2019 | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | :--- | | Total current assets | $1,947.0 | $1,566.2 | $2,242.2 | | Total assets | $14,285.7 | $13,346.6 | $12,368.3 | | Total current liabilities | $2,391.5 | $2,026.9 | $2,183.1 | | Total liabilities | $10,281.1 | $9,519.4 | $8,321.7 | | Total equity | $4,004.6 | $3,827.2 | $4,046.6 | - On August 21, 2019, UGI completed the AmeriGas Merger, acquiring all outstanding Common Units of AmeriGas Partners, making it a wholly owned subsidiary33 - Effective October 1, 2019, the Company adopted the new lease accounting standard (ASC 842), recognizing Right-of-Use (ROU) assets and lease liabilities of $451.9 million for operating leases3940 - On August 1, 2019, the company completed the acquisition of Columbia Midstream Group (CMG) for $1.28 billion, with preliminary allocation including $613.2 million in property, plant and equipment, $250.0 million in intangible assets, and $323.9 million in goodwill6870 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes increased GAAP and adjusted net income to lower derivative losses and segment earnings, driven by acquisitions, while discussing liquidity, capital resources, and regulatory filings Reconciliation of GAAP to Adjusted Net Income (Non-GAAP) | (Millions of dollars) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net income attributable to UGI Corporation (GAAP) | $212.0 | $64.2 | | Net losses on commodity derivative instruments | $10.2 | $81.2 | | Unrealized (gains)/losses on foreign currency derivatives | $11.3 | $(5.8) | | Loss on extinguishments of debt | — | $4.2 | | LPG business transformation expenses | $12.2 | — | | Other adjustments | $0.5 | — | | Adjusted net income attributable to UGI Corporation (Non-GAAP) | $246.2 | $143.8 | - Fiscal 2020 results reflect the impact of two major strategic transactions from 2019: the acquisition of the public's interest in AmeriGas Partners and the acquisition of Columbia Midstream Group (CMG)159 - The company is executing multi-year Global LPG Business Transformation Initiatives to improve operational efficiencies and enhance customer experience, with expected annual savings of over $120 million and €30 million, respectively160161162 AmeriGas Propane Segment Results (Q1 FY20 vs Q1 FY19) | (Dollars in millions) | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $730.4 | $820.2 | (10.9)% | | Total margin | $441.2 | $441.7 | (0.1)% | | Operating income | $165.3 | $166.6 | (0.8)% | UGI International Segment Results (Q1 FY20 vs Q1 FY19) | (Dollars in millions) | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $651.4 | $710.7 | (8.3)% | | Total margin | $283.0 | $252.1 | 12.3% | | Operating income | $95.8 | $58.3 | 64.3% | - On January 28, 2020, Gas Utility filed a request with the PAPUC to increase its annual base operating revenues by $74.6 million to fund system improvements and maintain service reliability231 Quantitative and Qualitative Disclosures About Market Risk The company identifies primary market risks as commodity price, interest rate, and foreign currency exchange, which are mitigated using derivative instruments for hedging purposes - The company's primary market risk exposures are identified as (1) commodity price risk, (2) interest rate risk, and (3) foreign currency exchange rate risk237 - To manage risk, the company uses various derivative instruments, including over-the-counter contracts to hedge LPG costs, NYMEX futures to reduce natural gas price volatility for its utility, and forward currency contracts to reduce earnings volatility from foreign operations238239250 Market Risk Sensitivity Analysis (as of Dec 31, 2019) | (Millions of dollars) | Fair Value | Change in Fair Value (from adverse market change) | | :--- | :--- | :--- | | Commodity price risk | $(136.7) | $(107.5) | | Interest rate risk | $(4.2) | $(22.0) | | Foreign currency exchange rate risk | $35.5 | $(41.0) | Controls and Procedures The CEO and CFO concluded that disclosure controls were effective, noting changes to internal controls due to the adoption of the new lease accounting standard - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by the report257 - A change in internal control over financial reporting occurred during the quarter due to the adoption of the new lease accounting standard (ASU 2016-02, Topic 842), which included implementing new software258 Part II Other Information Risk Factors This section states no new risk factors are reported and refers readers to the detailed discussion in the company's latest Annual Report on Form 10-K - The report directs readers to carefully consider the risk factors discussed in Part I, "Item 1A. Risk Factors" in the company's 2019 Annual Report, stating they could materially affect the business262 Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, UGI Corporation repurchased 500,000 shares of common stock as part of an ongoing share repurchase program Issuer Purchases of Equity Securities (Quarter Ended Dec 31, 2019) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Shares Remaining for Purchase (in millions) | | :--- | :--- | :--- | :--- | | Oct 2019 | — | $0.00 | 6.80 | | Nov 2019 | — | $0.00 | 6.80 | | Dec 2019 | 500,000 | $45.15 | 6.30 | | Total | 500,000 | | | Exhibits This section lists all exhibits filed with the Form 10-Q, including credit agreement amendments and CEO/CFO certifications - The exhibits filed with the report include amendments to credit agreements for UGI Corporation and AmeriGas Propane, L.P., and certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002268