UGI (UGI) - 2021 Q1 - Quarterly Report

Glossary of Terms and Abbreviations This section defines key company entities and explains industry-specific and regulatory abbreviations used in the report - Defines key UGI Corporation entities and their roles, including AmeriGas OLP, AmeriGas Partners, UGI International, Energy Services, and UGI Utilities[10] - Explains various industry-specific and regulatory abbreviations such as GAAP, FERC, PAPUC, and COVID-19[12][13][15][16] Part I Financial Information Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements and detailed supporting notes Condensed Consolidated Balance Sheets Shows the company's unaudited condensed consolidated financial position as of December 31, 2020, and comparative periods Condensed Consolidated Balance Sheets | Metric | Dec 31, 2020 (Millions $) | Sep 30, 2020 (Millions $) | Dec 31, 2019 (Millions $) | | :--- | :--- | :--- | :--- | | Assets | | | | | Total current assets | 2,180 | 1,543 | 1,947 | | Property, plant and equipment, net | 7,054 | 6,960 | 6,784 | | Goodwill | 3,564 | 3,518 | 3,483 | | Total assets | 14,725 | 13,985 | 14,286 | | Liabilities & Equity | | | | | Total current liabilities | 2,097 | 1,755 | 2,391 | | Long-term debt | 6,012 | 5,981 | 5,828 | | Total liabilities | 10,279 | 9,848 | 10,281 | | Total equity | 4,446 | 4,137 | 4,005 | Condensed Consolidated Statements of Income Details the unaudited condensed consolidated income statement for the three months ended December 31, 2020, and 2019 Condensed Consolidated Statements of Income | Metric | Three Months Ended Dec 31, 2020 (Millions $) | Three Months Ended Dec 31, 2019 (Millions $) | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | 1,932 | 2,007 | (75) | | Cost of sales | 833 | 1,008 | (175) | | Operating income | 502 | 377 | 125 | | Income before income taxes | 412 | 288 | 124 | | Net income attributable to UGI Corporation | 303 | 212 | 91 | | Basic EPS | 1.45 | 1.01 | 0.44 | | Diluted EPS | 1.44 | 1.00 | 0.44 | Condensed Consolidated Statements of Comprehensive Income Presents the unaudited condensed consolidated statements of comprehensive income for the three months ended December 31, 2020, and 2019 Condensed Consolidated Statements of Comprehensive Income | Metric | Three Months Ended Dec 31, 2020 (Millions $) | Three Months Ended Dec 31, 2019 (Millions $) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net income attributable to UGI Corporation | 303 | 212 | 91 | | Other comprehensive income | 68 | 54 | 14 | | Comprehensive income attributable to UGI Corporation | 371 | 266 | 105 | Condensed Consolidated Statements of Cash Flows Details cash flows from operating, investing, and financing activities for the three months ended December 31, 2020, and 2019 Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended Dec 31, 2020 (Millions $) | Three Months Ended Dec 31, 2019 (Millions $) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 151 | 118 | 33 | | Net cash used by investing activities | (189) | (176) | (13) | | Net cash provided (used) by financing activities | 120 | (33) | 153 | | Cash, cash equivalents and restricted cash increase (decrease) | 89 | (82) | 171 | | Cash, cash equivalents and restricted cash at end of period | 446 | 429 | 17 | Condensed Consolidated Statements of Changes in Equity Outlines movements in common stock, retained earnings, AOCI, and treasury stock for the three months ended December 31, 2020, and 2019 Condensed Consolidated Statements of Changes in Equity | Metric | Three Months Ended Dec 31, 2020 (Millions $) | Three Months Ended Dec 31, 2019 (Millions $) | | :--- | :--- | :--- | | Common stock, without par value (end of period) | 1,419 | 1,398 | | Retained earnings (end of period) | 3,139 | 2,798 | | Accumulated other comprehensive income (loss) (end of period) | (79) | (163) | | Treasury stock (end of period) | (42) | (37) | | Total UGI stockholders' equity (end of period) | 4,437 | 3,996 | | Total equity (end of period) | 4,446 | 4,005 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1 — Nature of Operations Describes UGI's business as a holding company involved in distributing, storing, transporting, and marketing energy products - UGI operates a diverse energy business including retail propane marketing, natural gas and electric distribution, and energy marketing[31][32][34][35] - European operations focus on LPG distribution and energy marketing across much of Europe[31][33] - UGI signed a definitive agreement to acquire Mountaineer Gas Company for a preliminary purchase price of $540 million[36] Note 2 — Summary of Significant Accounting Policies Outlines significant accounting policies for preparing the unaudited condensed consolidated financial statements - Financial statements are unaudited and prepared in accordance with SEC rules, including all necessary normal recurring adjustments[37] - Equity method investments, primarily PennEast and Pennant, face ongoing legal challenges which could result in delays or additional costs[39][40] - Derivative instruments are reported on the balance sheets at fair value, with accounting treatment depending on their designation[44][45][46] Weighted-Average Common Shares Outstanding | Denominator (thousands of shares) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Weighted-average common shares outstanding — basic | 208,774 | 209,439 | | Incremental shares issuable for stock options and awards | 866 | 1,819 | | Weighted-average common shares outstanding — diluted | 209,640 | 211,258 | Note 3 — Accounting Changes Discusses the adoption of new accounting standards, specifically ASU 2016-13 on Credit Losses and ASU 2019-12 on Income Taxes - Adopted ASU 2016-13, 'Measurement of Credit Losses on Financial Instruments,' which did not have a material impact on consolidated financial statements[51] - Assessing the impact of ASU 2019-12, 'Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,' effective Fiscal 2022[52] Note 4 — Revenue from Contracts with Customers Explains the company's revenue recognition policy and provides disaggregated revenue data by segment and type - Revenue is recognized when control of promised goods or services is transferred to customers[53] - Contract liabilities were $108 million at December 31, 2020, and $93 million at December 31, 2019[59] - Midstream & Marketing and UGI Utilities expect to record approximately $2.1 billion and $0.2 billion of revenues, respectively, from future performance obligations[60] Disaggregated Revenue | Revenue Type (Millions $) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Utility Revenues | 284 | 314 | | Total Non-Utility Revenues | 1,619 | 1,661 | | Total revenues from contracts with customers | 1,903 | 1,975 | | Other revenues | 29 | 32 | | Total revenues | 1,932 | 2,007 | Note 5 — Inventories Details the composition of inventories, including non-utility LPG, natural gas, and other materials and supplies - UGI Utilities is party to Storage Contract Administrative Agreements (SCAAs) with Energy Services, with effects eliminated in consolidation[61] Inventory Composition | Inventory Type (Millions $) | Dec 31, 2020 | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Non-utility LPG and natural gas | 181 | 164 | 164 | | Gas Utility natural gas | 19 | 20 | 24 | | Materials, supplies and other | 79 | 57 | 60 | | Total inventories | 279 | 241 | 248 | Note 6 — Utility Regulatory Assets and Liabilities and Regulatory Matters Provides a breakdown of UGI Utilities' regulatory assets and liabilities and discusses key regulatory matters - Gas Utility's and Electric Utility's tariffs permit recovery of prudently incurred purchased gas and power costs[64] - The PAPUC approved a settlement for Gas Utility to increase annual base distribution rates by $20 million and establish a regulatory asset for certain COVID-19 expenses[66] Regulatory Assets and Liabilities | Regulatory Item (Millions $) | Dec 31, 2020 | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Total regulatory assets | 395 | 397 | 391 | | Total regulatory liabilities | 346 | 353 | 351 | Note 7 — Commitments and Contingencies Details environmental matters related to former manufactured gas plant sites and ongoing class action lawsuits - UGI Utilities' aggregate estimated accrued liabilities for environmental remediation totaled $49 million at December 31, 2020[69][70] - AmeriGas OLP has an undiscounted environmental remediation liability of $8 million as of December 31, 2020[73] - Purported class action lawsuits against AmeriGas Propane/UGI regarding propane cylinder fill levels were settled or have an agreement in principle[74][76] - Management believes the final outcome of pending claims will not have a material effect on the financial statements[77][78] Note 8 — Defined Benefit Pension and Other Postretirement Plans Provides information on the components of net periodic pension cost for the three months ended December 31, 2020, and 2019 Net Periodic Pension Cost | Net Periodic Pension Cost (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Service cost | 3 | 3 | | Interest cost | 5 | 6 | | Expected return on assets | (10) | (10) | | Amortization of actuarial loss | 4 | 4 | | Net cost | 2 | 3 | Note 9 — Fair Value Measurements Presents financial assets and liabilities measured at fair value on a recurring basis, categorized by fair value hierarchy levels - Fair values of Level 1 instruments are based on actively quoted market prices, while Level 2 derivatives use indicative price quotations[82] Fair Value of Financial Instruments | Financial Instrument (Millions $) | Level 1 (Dec 31, 2020) | Level 2 (Dec 31, 2020) | Level 3 (Dec 31, 2020) | Total (Dec 31, 2020) | | :--- | :--- | :--- | :--- | :--- | | Derivative instruments (Assets) | | | | | | Commodity contracts | 60 | 111 | — | 171 | | Foreign currency contracts | — | 14 | — | 14 | | Derivative instruments (Liabilities) | | | | | | Commodity contracts | (58) | (14) | — | (72) | | Foreign currency contracts | — | (25) | — | (25) | | Interest rate contracts | — | (50) | — | (50) | | Non-qualified supplemental postretirement grantor trust investments | 46 | — | — | 46 | Fair Value of Long-term Debt | Long-term Debt (Millions $) | Dec 31, 2020 | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Carrying amount | 6,078 | 6,081 | 5,906 | | Estimated fair value | 6,581 | 6,504 | 6,249 | Note 10 — Derivative Instruments and Hedging Activities Details UGI's use of derivative instruments to manage commodity price, interest rate, and foreign currency exchange rate risks - UGI uses derivative instruments to manage commodity price, interest rate, and foreign currency exchange rate risk, not for speculative purposes[85][86][87][88][89][90][91][92][93][95][96] - The maximum loss UGI would incur if derivative counterparties failed to perform was not material at December 31, 2020[99] Derivative Notional Amounts | Derivative Type (Notional Amounts in Millions) | Dec 31, 2020 | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Regulated Utility Operations (Dekatherms) | 16 | 22 | 15 | | LPG swaps (Gallons) | 719 | 846 | 772 | | Natural gas futures, forward, basis swap, options and pipeline contracts (Dekatherms) | 342 | 339 | 358 | | Electricity long forward and futures contracts (Kilowatt hours) | 4,719 | 4,517 | 4,145 | | Electricity short forward and futures contracts (Kilowatt hours) | 97 | 188 | 556 | | Interest rate swaps (Euro) | €300 | €300 | €300 | | Interest rate swaps (USD) | $1,306 | $1,344 | $1,354 | | Forward foreign currency exchange contracts (USD) | $457 | $511 | $431 | | Net investment hedge forward foreign exchange contracts (Euro) | €173 | €173 | €173 | Net Derivative Assets and Liabilities | Derivative Assets/Liabilities (Millions $) | Dec 31, 2020 | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | :--- | | Total derivative assets — net | 131 | 82 | 60 | | Total derivative liabilities — net | (99) | (123) | (160) | Derivative Impact on Income | Derivative Impact on Income (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Gain (Loss) Recognized in AOCI (Cash Flow Hedges) | $0 | $8 | | Gain (Loss) Recognized in AOCI (Net Investment Hedges) | $(8) | $(4) | | Gain (Loss) Recognized in Income (Derivatives Not Designated as Hedging Instruments) | $93 | $(42) | Note 11 — Accumulated Other Comprehensive Income (Loss) Presents changes in Accumulated Other Comprehensive Income (Loss), net of tax, for the three months ended December 31, 2020, and 2019 Changes in AOCI (2020) | AOCI Component (Millions $) | Sep 30, 2020 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Postretirement Benefit Plans | (26) | (26) | 0 | | Derivative Instruments | (54) | (49) | 5 | | Foreign Currency | (67) | (4) | 63 | | Total AOCI | (147) | (79) | 68 | Changes in AOCI (2019) | AOCI Component (Millions $) | Sep 30, 2019 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Postretirement Benefit Plans | (26) | (26) | 0 | | Derivative Instruments | (25) | (18) | 7 | | Foreign Currency | (166) | (119) | 47 | | Total AOCI | (217) | (163) | 54 | Note 12 — Segment Information Provides disaggregated financial information for UGI's four reportable segments and Corporate & Other - UGI's operations comprise four reportable segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities[106] - Corporate & Other includes items excluded from segment performance assessment, such as unallocated corporate and interest expenses[107] Segment Performance | Segment Performance (Millions $) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Revenues from external customers | | | | AmeriGas Propane | 666 | 730 | | UGI International | 700 | 651 | | Midstream & Marketing | 279 | 309 | | UGI Utilities | 285 | 314 | | Corporate & Other | 2 | 3 | | Total | 1,932 | 2,007 | | Operating income | | | | AmeriGas Propane | 141 | 165 | | UGI International | 135 | 96 | | Midstream & Marketing | 52 | 55 | | UGI Utilities | 77 | 92 | | Corporate & Other | 97 | (31) | | Total | 502 | 377 | Note 13 — Business Transformation Initiatives Describes ongoing multi-year business transformation initiatives aimed at improving operational performance and reducing costs - AmeriGas Propane and UGI International are executing multi-year business transformation initiatives to improve long-term performance[112] - AmeriGas Propane expects over $140 million in ongoing annualized benefits by the end of Fiscal 2022 from its initiatives[112][129] - UGI International's 'Project Alliance' aims to generate over €30 million of annual benefits[113][131] - A Corporate Services transformation project is expected to result in more than $15 million of ongoing annualized savings by Fiscal 2023[113][128] Note 14 — Impact of Global Pandemic Discusses the ongoing impact of the COVID-19 pandemic on UGI's operations, financial condition, and liquidity - The COVID-19 pandemic has significantly impacted the global economy and UGI's operations[114] - UGI continues to provide essential products and services while evaluating potential effects on demand, receivables, and project delays[114][125][126] - The total magnitude of the pandemic and its effects on UGI's business cannot be predicted at this time[114][127] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides a detailed discussion and analysis of UGI's financial condition and results of operations for the three months ended December 31, 2020 Forward-Looking Statements Provides a cautionary statement regarding forward-looking statements and outlines factors that could cause actual results to differ - The Quarterly Report contains forward-looking statements, and actual results can materially vary from expectations[116][117] - Important factors affecting future results include weather, commodity prices, regulations, and the impact of the COVID-19 pandemic[117] Analysis of Results of Operations Compares UGI's results of operations for the three months ended December 31, 2020, with the same period in 2019 - The analysis compares UGI's results of operations for the three months ended December 31, 2020, with the prior-year period[120] - Operating results are significantly influenced by temperatures in service territories, particularly during the heating season[121] Recent Developments Highlights key recent developments including a pending acquisition, the COVID-19 pandemic, and business transformation initiatives Pending Acquisition of Mountaineer Gas Company Details the definitive agreement to acquire Mountaineer Gas Company for $540 million, expected to close in the second half of 2021 - UGI signed a definitive agreement to acquire Mountaineer Gas Company for a preliminary purchase price of $540 million[124] - Mountaineer serves nearly 215,000 customers across 50 of West Virginia's 55 counties[124] - The acquisition is subject to regulatory approvals and is expected to close in the second half of calendar year 2021[124] COVID-19 Pandemic Discusses the ongoing impact of the COVID-19 pandemic on UGI's operations and the benefits from the CARES Act - The COVID-19 pandemic continues to significantly impact the global economy and UGI's results[125] - UGI continues to provide essential services and is evaluating potential effects on customer demand and accounts receivable[125] - The CARES Act includes provisions modifying NOL limitation and carryback rules, which UGI is evaluating[126] Business Transformation Initiatives Outlines multi-year business transformation initiatives across Corporate Services, AmeriGas Propane, and UGI International - Corporate Services initiated a transformation project expecting over $15 million in ongoing annualized savings by Fiscal 2023[128] - AmeriGas Propane's initiatives are expected to provide over $140 million in annual benefits by the end of Fiscal 2022[129] - UGI International's 'Project Alliance' is expected to generate over €30 million of annual benefits[131] Non-GAAP Financial Measures Explains the use of non-GAAP financial measures to provide meaningful information by excluding certain items - UGI management uses 'adjusted net income' and 'adjusted diluted EPS' as non-GAAP financial measures to evaluate performance[132] - These measures eliminate gains and losses on certain derivative instruments and other discrete items for better period-over-period comparisons[132][133] Reconciliation of Net Income to Adjusted Net Income | Metric (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net income attributable to UGI Corporation | 303 | 212 | | Net (gains) losses on commodity derivative instruments not associated with current-period transactions (net of tax) | (85) | 10 | | Unrealized losses on foreign currency derivative instruments (net of tax) | 15 | 11 | | Acquisition and integration expenses (net of tax) | — | 1 | | Acquisition expenses (net of tax) | 1 | — | | Business transformation expenses (net of tax) | 13 | 12 | | Total adjustments | (56) | 34 | | Adjusted net income attributable to UGI Corporation | 247 | 246 | | Diluted EPS | 1.44 | 1.00 | | Total adjustments (per share) | (0.26) | 0.17 | | Adjusted diluted earnings per share | 1.18 | 1.17 | Executive Overview Provides a high-level comparison of UGI's financial performance for the three months ended December 31, 2020, versus 2019 - Net income in the 2020 period reflects gains from changes in unrealized commodity and foreign currency derivative instruments[139] - Adjusted net income saw a slight increase, reflecting higher earnings from UGI International, offset by lower domestic contributions[140] - Both net income and adjusted net income in the 2020 period reflect an NOL benefit resulting from the CARES Act[141] Financial Performance Summary | Metric | Three Months Ended Dec 31, 2020 (Millions $) | Three Months Ended Dec 31, 2019 (Millions $) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net income attributable to UGI Corporation | 303 | 212 | 91 | | Adjusted net income attributable to UGI Corporation | 247 | 246 | 1 | | Diluted EPS | 1.44 | 1.00 | 0.44 | | Adjusted diluted EPS | 1.18 | 1.17 | 0.01 | Segment Results of Operations Provides a detailed financial performance analysis for each of UGI's four reportable segments AmeriGas Propane Reports a decrease in revenues, total margin, and operating income due to warmer weather and lower volumes - Total retail gallons sold decreased by 9% primarily due to warmer weather and the continued impact of COVID-19[148] - Operating and administrative expenses decreased by $19 million, reflecting benefits from ongoing business transformation initiatives[151] AmeriGas Propane Performance | Metric (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | 666 | 730 | (64) (9%) | | Total margin | 394 | 441 | (47) (11%) | | Operating income | 141 | 165 | (24) (15%) | | Retail gallons sold (millions) | 276 | 304 | (28) (9%) | | Heating degree days—% (warmer) colder than normal | (4.6)% warmer | 4.0% colder | 8.6% warmer | UGI International Shows an increase in revenues, total margin, and operating income driven by colder weather and favorable euro translation effects - Revenues increased by $49 million, principally reflecting the translation effects of a stronger euro[157] - Total margin increased by $41 million, reflecting higher average LPG unit margins and favorable euro translation effects[158] - Operating income increased by $39 million, primarily due to the increase in total margin[159] UGI International Performance | Metric (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | 700 | 651 | 49 (8%) | | Total margin | 317 | 276 | 41 (15%) | | Operating income | 135 | 96 | 39 (41%) | | LPG retail gallons sold (millions) | 236 | 246 | (10) (4%) | | Heating degree days—% warmer than normal | (2.0)% warmer | (6.6)% warmer | 4.6% colder | Midstream & Marketing Reports a slight decrease in revenues, total margin, and operating income due to divested assets and lower peaking margin - Revenues decreased by $32 million, reflecting decreased natural gas revenues and the absence of revenues from divested assets[164] - Total margin decreased by $5 million, reflecting the absence of margins from divested assets and lower peaking margin[165] - Operating income decreased by $3 million, primarily reflecting the lower total margin[166] Midstream & Marketing Performance | Metric (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | 341 | 373 | (32) (9%) | | Total margin | 104 | 109 | (5) (5%) | | Operating income | 52 | 55 | (3) (5%) | UGI Utilities Details a decrease in revenues, total margin, and operating income mainly due to warmer weather and reduced volumes - Gas Utility core market volumes decreased by 12% due to warmer weather and reduced commercial and industrial volumes[169] - Total margin decreased by $10 million, primarily reflecting lower margin from Gas Utility[172] - Operating income decreased by $15 million, reflecting the decrease in total margin and higher depreciation expense[173] UGI Utilities Performance | Metric (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | 300 | 329 | (29) (9%) | | Total margin | 167 | 177 | (10) (6%) | | Operating income | 77 | 92 | (15) (16%) | | Gas Utility system throughput—Core market (bcf) | 23 | 26 | (3) (12%) | | Electric Utility distribution sales (gwh) | 244 | 246 | (2) (1%) | | Gas Utility heating degree days—% (warmer) colder than normal | (9.8)% warmer | 0.3% colder | 10.1% warmer | Interest Expense and Income Taxes Discusses the decrease in consolidated interest expense and the consistency of the effective income tax rate - The decrease in interest expense principally reflects lower average short-term borrowing outstanding[174] - The effective income tax rate was largely consistent with the prior-year period, with CARES Act benefits offset by other factors[175] - The impacts on income tax provisions related to the CARES Act and GILTI provisions are subject to change[176] Interest Expense | Metric (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Consolidated interest expense | 78 | 84 | (6) (7%) | Financial Condition and Liquidity Provides an overview of UGI's financial condition, liquidity, debt structure, credit facilities, and cash flows Long-term Debt and Credit Facilities Details UGI's liquidity position, long-term debt, and credit facilities, highlighting available borrowing capacity - UGI expects to have sufficient liquidity, totaling approximately $1.5 billion at December 31, 2020[178] - UGI and its subsidiaries were in compliance with all debt covenants as of December 31, 2020[178] - Energy Services has a Receivables Facility, with $75 million of trade receivables sold to the bank at December 31, 2020[187] Total Debt | Debt Type (Millions $) | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | | Short-term borrowings | 568 | 347 | | Long-term debt (including current maturities) | 6,033 | 6,034 | | Total debt | 6,601 | 6,381 | Credit Facility Availability | Credit Facility (Millions $) | Total Capacity (Dec 31, 2020) | Borrowings Outstanding (Dec 31, 2020) | Available Borrowing Capacity (Dec 31, 2020) | | :--- | :--- | :--- | :--- | | AmeriGas OLP | $600 | $222 | $318 | | UGI International, LLC | €300 | €0 | €300 | | Energy Services | $260 | $4 | $256 | | UGI Utilities | $350 | $266 | $84 | | UGI Corporation | $300 | $270 | $30 | Dividends Reports on UGI's Board of Directors' declaration of cash dividends for common stock - UGI's Board of Directors declared a cash dividend of $0.33 per common share paid on January 1, 2021[188] - Another quarterly dividend of $0.33 per common share was declared, payable April 1, 2021[188] Cash Flows Analyzes UGI's cash flows from operating, investing, and financing activities for the three months ended December 31, 2020, and 2019 - Cash flows from operating activities are generally strongest during the second and third fiscal quarters[189] - The increase in cash flow from operating activities was driven by changes in current liabilities and accounts receivable[190] - The change in cash flows from financing activities is primarily attributable to $221 million of net borrowings on revolving facilities[194] Cash Flow Summary | Cash Flow Activity (Millions $) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 151 | 118 | 33 | | Net cash used by investing activities | (189) | (176) | (13) | | Net cash provided (used) by financing activities | 120 | (33) | 153 | Utility Regulatory Matters Provides an update on Gas Utility's base rate filing with the PAPUC, detailing the approved rate increase and other items - The PAPUC approved a settlement allowing Gas Utility to increase its annual base distribution rates by $20 million[195] - Gas Utility is authorized to implement a Distribution System Improvement Charge (DSIC) once certain capital thresholds are met[195] - The PAPUC's final Order permits Gas Utility to establish a regulatory asset for certain incremental expenses attributable to COVID-19[195] Item 3. Quantitative and Qualitative Disclosures About Market Risk Outlines UGI's primary market risk exposures and the strategies and derivative instruments used to manage them Commodity Price Risk Discusses UGI's exposure to commodity price fluctuations and the strategies employed to mitigate this risk - UGI is exposed to commodity price risk for LPG, natural gas, and electricity, which is managed through derivative instruments[198][199][200][201] - Gas Utility has limited commodity price risk due to tariff clauses that permit recovery of prudently incurred natural gas costs[200] - Midstream & Marketing diversifies its purchases across multiple suppliers to reduce the risk of supplier nonperformance[201] Interest Rate Risk Explains UGI's exposure to interest rate risk from both fixed-rate and variable-rate debt and its management strategies - UGI has both fixed-rate and variable-rate debt, with variable-rate debt primarily from revolving credit facilities[203][204] - Pay-fixed, receive-variable interest rate swap agreements are used to fix underlying short-term market interest rates[204] - Interest Rate Protection Agreements (IRPAs) are used to reduce market rate risk associated with forecasted debt issuances[206] - Combined borrowings outstanding under variable-rate debt agreements totaled $878 million at December 31, 2020[204] Foreign Currency Exchange Rate Risk Describes UGI's primary foreign currency exchange rate risk and the use of hedges to mitigate volatility - UGI's primary currency exchange rate risk is associated with the U.S. dollar versus the euro and British pound sterling[207] - Forward foreign currency exchange contracts are used to hedge approximately 90% of anticipated UGI International local currency earnings[208] - A 10% decline in associated foreign currencies would reduce UGI International's aggregate net book value by approximately $120 million[207] Derivative Instrument Credit Risk Addresses the credit risk associated with derivative instrument counterparties and outlines UGI's management policies - UGI is exposed to risk of loss from nonperformance by derivative instrument counterparties[209] - Credit policies include evaluating counterparties' financial condition, establishing credit limits, and using netting and collateral arrangements[209][210] - The maximum amount of loss UGI would incur if counterparties failed to perform was not material at December 31, 2020[210] Market Risk Sensitivity Analysis | Market Risk Sensitive Derivative Instruments (Millions $) | Fair Value (Dec 31, 2020) | Change in Fair Value (10% adverse change) | | :--- | :--- | :--- | | Commodity price risk | $100 | $(123) | | Interest rate risk | $(50) | $(7) | | Foreign currency exchange rate risk | $(11) | $(48) | Item 4. Controls and Procedures Details the evaluation of UGI's disclosure controls and procedures and reports on any changes in internal control Evaluation of Disclosure Controls and Procedures States that management evaluated the effectiveness of disclosure controls and procedures and concluded they were effective - UGI's management evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2020[214] - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level[214] Change in Internal Control over Financial Reporting Reports that no material change in internal control over financial reporting occurred during the most recent fiscal quarter - No change in the Company's internal control over financial reporting occurred that has materially affected, or is likely to materially affect, controls[215] Part II Other Information Item 1A. Risk Factors Refers readers to the comprehensive discussion of risk factors in the company's 2020 Annual Report - Readers should carefully consider the factors discussed in Part I, 'Item 1A. Risk Factors' in UGI's 2020 Annual Report[218] - Other unknown or unpredictable factors could also have material adverse effects on future results[218] Item 6. Exhibits Lists the exhibits filed as part of the Form 10-Q report, including certifications and XBRL-related documents - Includes certifications by the CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002[220][222] - Includes a joint certification by the CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002[220][223] - Contains XBRL Instance, Schema, and other interactive data files[220][223] Signatures Contains the signatures of authorized officers certifying the filing of the report - The report is signed by the Chief Financial Officer and the Vice President, Chief Accounting Officer and Corporate Controller on February 4, 2021[226]