UGI (US:UGI)2022-02-03 21:11Financial Performance - UGI Corporation reported a net loss of $97 million for the three-month period ended December 31, 2021, compared to a net income of $303 million for the same period in 2020, resulting in a loss per diluted share of $0.46 versus earnings of $1.44[141]. - Adjusted net income attributable to UGI Corporation for the 2021 three-month period was $201 million, or $0.93 per diluted share, down from $247 million, or $1.18 per diluted share, in the prior year[142]. - The decrease in adjusted net income was primarily due to lower earnings from LPG businesses impacted by warmer weather and commodity price volatility, partially offset by improved earnings from Utilities and higher renewable energy margins[142]. - AmeriGas Propane's adjusted net income decreased by $40 million, mainly due to lower retail propane margins from reduced volumes sold and increased operating expenses driven by inflation[143]. - UGI International's adjusted net income attributable to UGI Corporation decreased by $35 million in the 2021 three-month period due to lower total margin from energy marketing and higher costs[144]. - Midstream & Marketing's adjusted net income increased by $16 million in the 2021 three-month period, primarily due to higher margins from renewable energy marketing activities[145]. - Utilities' adjusted net income increased by $14 million in the 2021 three-month period, largely due to earnings from the acquisition of Mountaineer and increased base rates[146]. Revenue and Margin Analysis - AmeriGas Propane revenues increased by $112 million (17%) in the 2021 three-month period, while total margin decreased by $34 million (9%) due to lower retail gallons sold[147]. - UGI International revenues increased by $349 million (50%) in the 2021 three-month period, while total margin decreased by $61 million (19%) due to higher costs and lower margins from energy marketing[154]. - Utilities revenues increased by $119 million (40%) in the 2021 three-month period, driven by a $70 million increase from the Mountaineer acquisition and higher base rates[170]. - Midstream & Marketing revenues increased by $194 million (57%) in the 2021 three-month period, largely due to increased revenues from natural gas marketing activities[163]. - Utilities total margin increased by $46 million during the 2021 three-month period, primarily due to Mountaineer contributing $33 million[172]. Cost and Expense Factors - The company experienced significant inflationary pressures in global commodity and labor markets, affecting inventory costs and distribution expenses across all businesses[136]. - Utilities cost of sales increased by $73 million in the 2021 three-month period, primarily due to incremental costs from the Mountaineer acquisition and higher PGC rates[171]. - Operating income and earnings before interest and taxes rose by $19 million and $20 million, respectively, in the 2021 three-month period, despite higher operating expenses of $20 million and depreciation expenses of $6 million[173]. - Consolidated interest expense increased to $81 million in the 2021 three-month period from $78 million in the prior year, driven by higher long-term debt related to the Mountaineer acquisition[175]. Cash Flow and Liquidity - Cash flow used by operating activities was $594 million in the 2021 three-month period, a significant decrease from cash provided of $151 million in the prior year[193]. - Cash flow used by investing activities was $154 million in the 2021 three-month period, compared to $189 million in the prior year[196]. - Cash flow from financing activities increased to $234 million in the 2021 three-month period, compared to a cash outflow of $120 million in the same period of 2020[198]. - Total available liquidity was approximately $1.5 billion as of December 31, 2021, down from $2.2 billion at September 30, 2021[179]. - Cash and cash equivalents decreased significantly to $334 million at December 31, 2021, from $855 million at September 30, 2021, primarily due to commodity price volatility[181]. - Total debt increased to $7.118 billion as of December 31, 2021, compared to $6.816 billion at September 30, 2021[183]. Business Transformation and Future Outlook - Business transformation initiatives at AmeriGas Propane and UGI International were substantially completed by the end of Fiscal 2021, with anticipated benefits expected to be fully recognized in Fiscal 2022[139]. - UGI Corporation expects to incur approximately $40 million in non-recurring costs related to ongoing business transformation initiatives, resulting in over $15 million in annualized savings by the end of Fiscal 2023[140]. Market and Operational Risks - The ongoing COVID-19 pandemic continues to impact the company's operations, with potential effects on customer financial conditions and supply chain constraints[137]. - UGI Corporation's results are significantly influenced by weather conditions, particularly during the heating season from October through March[128]. - A 10% decline in foreign currencies against the U.S. dollar would reduce the net book value of UGI International operations by approximately $120 million[212]. - The maximum potential loss from derivative instrument counterparties was $1,156 million as of December 31, 2021[215]. - Cash collateral received from derivative instrument counterparties totaled $205 million as of December 31, 2021[215]. - The fair value of commodity price risk derivatives was $941 million, with a change of $(255) million due to market risks[218]. - The company uses derivative financial instruments to manage commodity price risk, interest rate risk, and foreign currency exchange rate risk[203]. Dividends and Regulatory Approvals - UGI's Board of Directors declared a cash dividend of $0.345 per common share, payable on January 1, 2022[190]. - PA Gas Utility filed a request to increase its base operating revenues by $83 million annually, effective March 29, 2022, to fund system improvements and operations[199]. - Electric Utility received approval to increase its annual base distribution revenues by $6 million effective November 9, 2021[200]. - PA Gas Utility was authorized to implement a Distribution System Improvement Charge (DSIC) effective April 1, 2021, after reaching a property threshold of $2,875 million[201]. Debt and Interest Rates - UGI Corporation's variable-rate debt totaled $1,089 million as of December 31, 2021, with interest rates indexed to short-term market rates[209].