UGI (US:UGI)2021-05-06 18:23Acquisition and Growth Strategy - UGI Corporation signed a definitive agreement to acquire Mountaineer Gas Company for a preliminary purchase price of $540 million, including $140 million of long-term debt, serving nearly 215,000 customers[140]. - The company is focused on integrating acquired businesses and achieving anticipated synergies as part of its growth strategy[140]. Financial Performance - Net income attributable to UGI Corporation for the three-month period ended March 31, 2021, was $489 million, or $2.33 per diluted share, compared to $226 million, or $1.07 per diluted share, in the same period of 2020[155]. - Adjusted net income attributable to UGI Corporation for the three-month period was $418 million, or $1.99 per diluted share, compared to $328 million, or $1.56 per diluted share, in the prior year, reflecting higher earnings contributions from all business segments[156]. - For the six-month period ended March 31, 2021, net income attributable to UGI Corporation was $792 million, or $3.77 per diluted share, compared to $438 million, or $2.08 per diluted share, in the same period of 2020[161]. - Adjusted net income for the six-month period was $665 million, or $3.17 per diluted share, compared to $574 million, or $2.73 per diluted share, in the prior year, reflecting effective expense management and contributions from acquisitions[162]. Segment Performance - AmeriGas Propane's adjusted net income increased by $28 million in the three-month period, driven by higher total margin on improved retail volumes due to colder weather[157]. - UGI International's adjusted net income rose by $24 million, benefiting from higher total margin from improved retail LPG volumes and average unit margins, partially offset by higher operating expenses[158]. - Midstream & Marketing's adjusted net income increased by $14 million, attributed to higher earnings from natural gas and renewable energy activities, along with lower operating expenses[159]. - UGI Utilities' adjusted net income grew by $17 million, primarily due to higher Gas Utility margin from colder weather and increased base rates effective January 1, 2021[160]. Revenue and Margin Analysis - UGI International revenues increased by $130 million (18%) to $834 million in the three months ended March 31, 2021, compared to $704 million in the prior year[176]. - Total margin for UGI International rose by $48 million (16%) to $343 million, driven by higher LPG retail volumes and stronger foreign currency translation effects[176][182]. - Revenues for AmeriGas Propane increased by $74 million (5%) to $1,606 million in the six months ended March 31, 2021, compared to $1,532 million in the prior year[199]. - Total margin for AmeriGas Propane decreased by $15 million (2%) to $903 million, primarily due to lower retail propane volumes[203]. - UGI Utilities revenues increased by $20 million (3%) to $742 million, with total margin rising by $21 million (5%) to $405 million[220]. Cost Management and Expenses - The company expects to incur approximately $40 million in non-recurring costs related to corporate transformation initiatives, resulting in over $15 million of ongoing annualized savings by Fiscal 2023[143]. - Consolidated interest expense decreased to $78 million from $83 million in the prior-year period, reflecting lower average short-term borrowings[196]. - Cash flow from operating activities was $646 million in the 2021 six-month period, up from $562 million in the 2020 six-month period[243]. - Cash expenditures for property, plant, and equipment were $304 million in the 2021 six-month period, compared to $342 million in the 2020 six-month period[246]. Risks and Challenges - UGI Corporation is subject to various risks, including weather conditions, regulatory changes, and competitive pressures, which could materially affect future results[134]. - A 10% decline in the value of foreign currencies against the U.S. dollar would reduce the net book value of UGI International operations by approximately $130 million[261]. Currency and Interest Rate Management - The net effect of changes in foreign currency exchange rates on UGI International's earnings resulted in a net benefit of $13 million during the reporting period[179]. - The company has entered into forward foreign currency exchange contracts to hedge approximately 90% of anticipated foreign currency earnings[262]. - Interest rate risk derivatives had a fair value of $(39) million, with a potential adverse change of $(8) million from a 50 basis point increase[266].