UGI Reports Record Fiscal 2017 Results
Issues 2018 Guidance
HIGHLIGHTS
- GAAP EPS of
$2.46 per diluted share and adjusted EPS of$2.29 per diluted share - Record results despite warmer-than-normal weather in all service territories
- Issued adjusted diluted EPS guidance of
$2.45 -$2.65 for the fiscal year endingSeptember 30, 2018
"This year highlighted the strength and resilience of our business as we delivered record earnings despite weather that was warmer than normal in all of our businesses, and significantly warmer in our domestic businesses," said
STRATEGIC ACCOMPLISHMENTS
-
UGI Utilities executed a record$318 million of capital investment, implemented increased base rates atUGI Gas , settled a base rate case forUGI PNG that went into effect last month, added over 14,000 residential heating and commercial customers, and installed a new customer information management system that will unify all four utilities and streamline operations. - Midstream & Marketing completed construction of the
Sunbury pipeline under budget and ahead of schedule, completed construction and placed into service its Manning LNG liquefaction plant, began construction of its Steelton LNG vaporization and storage facility, and received its Final Environmental Impact Statement (FEIS) from theFERC for the PennEast pipeline. -
UGI International launched an energy marketing business in theU.K. , acquired an energy marketing and services business inthe Netherlands , made substantial progress toward the full integration of the Finagaz cylinder and bulk business, and, inOctober 2017 , acquired an LPG distribution business in northern and centralItaly , marking its entrance into the country. -
AmeriGas completed five acquisitions, delivered record operating results in its ACE and National Accounts programs, reduced its average interest rate on long-term debt by more than 100 basis points through refinancings, and increased its distribution for the 13th consecutive year. UGI is excited about the growth opportunities ofAmeriGas and has provided a standby equity commitment to fund up to$225 million so thatAmeriGas can continue to pursue growth should it experience another significantly warmer than normal winter. -
UGI Corporation increased its dividend for the 30th consecutive year.
2018 OUTLOOK
UGI provided an adjusted diluted EPS guidance range of
1 See “Note on Guidance and Use of Forward-Looking Statements”
EARNINGS CALL and WEBCAST
ABOUT UGI
UGI is a distributor and marketer of energy products and services. Through subsidiaries, UGI operates natural gas and electric utilities in
Comprehensive information about
USE OF NON-GAAP MEASURES
Management uses "adjusted net income attributable to
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.
Tables below reconcile net income attributable to
NOTE ON GUIDANCE and USE OF FORWARD-LOOKING STATEMENTS
Because we are unable to predict certain potentially material items affecting diluted earnings per share on a GAAP basis, principally mark-to-market gains and losses on commodity and certain foreign currency derivative instruments and Finagaz integration expenses, we cannot reconcile 2018 adjusted diluted earnings per share, a non-GAAP measure, to diluted earnings per share, the most directly comparable GAAP measure, in reliance on the “unreasonable efforts” exception set forth in
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, domestic and international political, regulatory and economic conditions in
SEGMENT RESULTS — Propane (millions, except where otherwise indicated)
For the year ended |
2017 | 2016 | Increase (Decrease) | ||||||||||||
Revenues | $ | 2,453.5 | $ | 2,311.8 | $ | 141.7 | 6.1 | % | |||||||
Total margin (a) | $ | 1,450.6 | $ | 1,447.0 | $ | 3.6 | 0.2 | % | |||||||
Partnership operating and administrative expenses | $ | 915.1 | $ | 928.8 | $ | (13.7 | ) | (1.5 | )% | ||||||
Operating income | $ | 355.3 | $ | 356.3 | $ | (1.0 | ) | (0.3 | )% | ||||||
Partnership Adjusted EBITDA | $ | 551.3 | $ | 543.0 | $ | 8.3 | 1.5 | % | |||||||
Retail gallons sold | 1,046.9 | 1,065.5 | (18.6 | ) | (1.7 | )% | |||||||||
Heating degree days - % (warmer) than normal | (13.5 | )% | (15.0 | )% | |||||||||||
Capital expenditures | $ | 98.1 | $ | 101.7 | $ | (3.6 | ) | (3.5 | )% | ||||||
- Retail gallons sold decreased slightly, primarily due to warm weather in the critical heating months of January and February, a period that was 9% warmer than the prior year.
- Total margin increased primarily reflecting higher margin from ancillary sales and services partially offset by lower retail total margin due to lower volumes.
- Partnership operating and administrative expenses decreased largely due to lower uninsured litigation and general insurance expenses and lower group medical insurance expenses, partially offset by higher vehicle and bad debt expenses and a
$7.5 million environmental accrual related to a legacy acquisition. - Partnership Adjusted EBITDA increased principally reflecting lower operating and administrative expenses excluding the environmental accrual and slightly higher total margin, partially offset by lower other operating income.
For the year ended |
2017 | 2016 | Increase (Decrease) | ||||||||||||
Revenues | $ | 1,877.5 | $ | 1,868.8 | $ | 8.7 | 0.5 | % | |||||||
Total margin (a) | $ | 942.2 | $ | 965.0 | $ | (22.8 | ) | (2.4 | )% | ||||||
Operating and administrative expenses | $ | 626.2 | $ | 639.7 | $ | (13.5 | ) | (2.1 | )% | ||||||
Operating income | $ | 195.7 | $ | 206.6 | $ | (10.9 | ) | (5.3 | )% | ||||||
Income before income taxes | $ | 175.0 | $ | 182.0 | $ | (7.0 | ) | (3.8 | )% | ||||||
Finagaz integration expenses | $ | 39.9 | $ | 27.9 | $ | 12.0 | 43.0 | % | |||||||
Adjusted income before income taxes | $ | 214.9 | $ | 209.9 | $ | 5.0 | 2.4 | % | |||||||
Retail gallons sold | 827.9 | 820.5 | 7.4 | 0.9 | % | ||||||||||
Heating degree days - % (warmer) than normal | (4.5 | )% | (12.9 | )% | |||||||||||
Capital expenditures | $ | 90.3 | $ | 99.9 | $ | (9.6 | ) | (9.6 | )% | ||||||
Base-currency results are translated into
- Total retail gallons sold increased slightly as the effects of weather that was colder than the prior year were substantially offset by the absence of volume associated with the lower-margin autogas business in
Poland that the company exited in 2016. - Total margin was lower primarily due to currency translation effects of a weaker British pound sterling and euro and slightly lower bulk and cylinder retail margins due to the absence of a significant margin parachute experienced in the prior year.
- Operating expenses decreased primarily reflecting operating synergies from Finagaz integration activities and, to a much lesser extent, currency translation effects.
- The decrease in operating income primarily reflects the lower total margin and higher depreciation and amortization expenses, partially offset by the lower operating and administrative expenses.
SEGMENT RESULTS — Natural Gas (millions, except where otherwise indicated)
Midstream & Marketing
For the year ended |
2017 | 2016 | Increase (Decrease) | ||||||||||||
Revenues | $ | 1,121.2 | $ | 866.6 | $ | 254.6 | 29.4 | % | |||||||
Total margin (a) | $ | 264.5 | $ | 264.4 | $ | 0.1 | — | % | |||||||
Operating and administrative expenses | $ | 95.6 | $ | 90.9 | $ | 4.7 | 5.2 | % | |||||||
Operating income | $ | 139.2 | $ | 146.7 | $ | (7.5 | ) | (5.1 | )% | ||||||
Income before income taxes | $ | 141.4 | $ | 144.6 | $ | (3.2 | ) | (2.2 | )% | ||||||
Heating degree days - % (warmer) colder than normal | (14.5 | )% | (17.8 | )% | |||||||||||
Capital expenditures | $ | 117.5 | $ | 140.4 | $ | (22.9 | ) | (16.3 | )% | ||||||
- Total margin was approximately equal to the prior year primarily reflecting higher peaking, natural gas gathering and natural gas marketing total margin offset by lower capacity management and electricity generation total margin.
- Operating and administrative expenses increased reflecting higher wage and benefits expense, partially offset by lower operating and maintenance expenses at our electricity generating facilities.
- Operating income decreased reflecting the higher operating and administrative expenses as well as higher depreciation expense associated with the expansion of our pipeline and peaking assets.
- The decrease in income before income taxes reflects lower operating income partially offset by AFUDC income associated with our equity investment in the PennEast pipeline.
For the year ended |
2017 | 2016 | Increase (Decrease) | ||||||||||||
Revenues | $ | 887.6 | $ | 768.5 | $ | 119.1 | 15.5 | % | |||||||
Total margin (a) | $ | 515.6 | $ | 473.9 | $ | 41.7 | 8.8 | % | |||||||
Operating and administrative expenses | $ | 212.4 | $ | 192.7 | $ | 19.7 | 10.2 | % | |||||||
Operating income | $ | 228.3 | $ | 200.9 | $ | 27.4 | 13.6 | % | |||||||
Income before income taxes | $ | 188.1 | $ | 163.3 | $ | 24.8 | 15.2 | % | |||||||
Gas Utility system throughput - billions of cubic feet | |||||||||||||||
Core market | 70.4 | 66.2 | 4.2 | 6.3 | % | ||||||||||
Total | 243.1 | 212.4 | 30.7 | 14.5 | % | ||||||||||
Gas Utility Heating degree days - % (warmer) than normal | (11.1 | )% | (13.6 | )% | |||||||||||
Capital expenditures | $ | 317.7 | $ | 262.5 | $ | 55.2 | 21.0 | % | |||||||
- Gas Utility core market throughput increased reflecting temperatures that were 2.6% colder than the prior year, but 11.1% warmer than normal and growth in the number of customers.
- Total margin increased primarily reflecting an increase in
UGI Gas base rates that went into effect onOctober 19, 2016 , higher large firm delivery service total margin, and the higher core market throughput. - Operating and administrative expenses increased primarily reflecting higher pension, employee benefits, and customer accounts expenses in addition to the absence of IT system capitalization adjustments that reduced expenses in the prior year.
- Operating income increased primarily due to the increase in total margin, as well as higher other income due to a
$5.8 million environmental insurance settlement, the absence of a charge in the prior year related to environmental matters, and lower interest on purchased gas cost overcollections.
(a) | Total margin represents total revenue less total cost of sales and excludes pre-tax gains and losses on commodity derivative instruments not associated with current period transactions. In the case of |
|
REPORT OF EARNINGS -
($ millions, except per share) | Three Months Ended | Twelve Months Ended | ||||||||||||||
Unaudited | |
|
||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
|
$ | 445.2 | $ | 393.5 | $ | 2,453.5 | $ | 2,311.8 | ||||||||
|
366.4 | 316.4 | 1,877.5 | 1,868.8 | ||||||||||||
Midstream & Marketing | 204.9 | 174.3 | 1,121.2 | 866.6 | ||||||||||||
|
119.6 | 108.2 | 887.6 | 768.5 | ||||||||||||
Corporate & Other (a) | (22.2 | ) | (16.2 | ) | (219.1 | ) | (130.0 | ) | ||||||||
Total revenues | $ | 1,113.9 | $ | 976.2 | $ | 6,120.7 | $ | 5,685.7 | ||||||||
Operating income (loss): | ||||||||||||||||
|
$ | (18.5 | ) | $ | (42.0 | ) | $ | 355.3 | $ | 356.3 | ||||||
|
(14.7 | ) | (23.5 | ) | 195.7 | 206.6 | ||||||||||
Midstream & Marketing | 4.6 | 14.7 | 139.2 | 146.7 | ||||||||||||
|
2.0 | 8.3 | 228.3 | 200.9 | ||||||||||||
Corporate & Other (a) | 54.2 | (46.1 | ) | 85.7 | 77.5 | |||||||||||
Total operating income (loss) | 27.6 | (88.6 | ) | 1,004.2 | 988.0 | |||||||||||
Income (loss) from equity investees | 1.3 | (0.1 | ) | 4.3 | (0.2 | ) | ||||||||||
Loss on extinguishments of debt | — | (11.8 | ) | (59.7 | ) | (48.9 | ) | |||||||||
Losses on foreign currency contracts, net | (7.8 | ) | — | (23.9 | ) | — | ||||||||||
Interest expense: | ||||||||||||||||
|
(39.6 | ) | (41.4 | ) | (160.2 | ) | (164.1 | ) | ||||||||
|
(5.4 | ) | (5.6 | ) | (20.6 | ) | (24.4 | ) | ||||||||
Midstream & Marketing | (0.5 | ) | (0.4 | ) | (2.1 | ) | (2.1 | ) | ||||||||
|
(9.7 | ) | (9.7 | ) | (40.2 | ) | (37.6 | ) | ||||||||
Corporate & Other, net (a) | (0.3 | ) | (0.2 | ) | (0.4 | ) | (0.7 | ) | ||||||||
Total interest expense | (55.5 | ) | (57.3 | ) | (223.5 | ) | (228.9 | ) | ||||||||
(Loss) income before income taxes | (34.4 | ) | (157.8 | ) | 701.4 | 710.0 | ||||||||||
Income tax benefit (expense) (b) | 17.7 | 42.1 | (177.6 | ) | (221.2 | ) | ||||||||||
Net (loss) income including noncontrolling interests | (16.7 | ) | (115.7 | ) | 523.8 | 488.8 | ||||||||||
Add net loss (deduct net income) attributable to noncontrolling interests, principally in |
21.7 | 71.9 | (87.2 | ) | (124.1 | ) | ||||||||||
Net income (loss) attributable to |
$ | 5.0 | $ | (43.8 | ) | $ | 436.6 | $ | 364.7 | |||||||
Earnings per share attributable to UGI shareholders: | ||||||||||||||||
Basic | $ | 0.03 | $ | (0.25 | ) | $ | 2.51 | $ | 2.11 | |||||||
Diluted | $ | 0.03 | $ | (0.25 | ) | $ | 2.46 | $ | 2.08 | |||||||
Weighted Average common shares outstanding (thousands): | ||||||||||||||||
Basic | 173,769 | 173,737 | 173,662 | 173,154 | ||||||||||||
Diluted | 177,175 | 173,737 | 177,159 | 175,572 | ||||||||||||
Supplemental information: | ||||||||||||||||
Net income (loss) attributable to |
||||||||||||||||
|
$ | (2.6 | ) | $ | (10.2 | ) | $ | 44.6 | $ | 43.2 | ||||||
|
(7.0 | ) | (20.7 | ) | 158.6 | 111.6 | ||||||||||
Midstream & Marketing | 3.8 | 9.9 | 86.9 | 87.1 | ||||||||||||
|
(4.1 | ) | (1.8 | ) | 116.0 | 97.4 | ||||||||||
Corporate & Other (a) | 14.9 | (21.0 | ) | 30.5 | 25.4 | |||||||||||
Total net income (loss) attributable to |
$ | 5.0 | $ | (43.8 | ) | $ | 436.6 | $ | 364.7 |
(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 three months ended |
|
GAAP / NON-GAAP EARNINGS RECONCILIATION | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Fiscal Year Ended |
|
|
Midstream & Marketing | |
Corporate & Other |
Total |
||||||||||||||||||
Adjusted net income attributable to |
||||||||||||||||||||||||
GAAP Net income attributable to |
$ |
44.6 |
$ |
158.6 |
$ |
86.9 |
$ |
116.0 |
$ |
30.5 |
$ |
436.6 |
||||||||||||
Net gains on commodity derivative instruments not associated with current-period transactions (net of tax of |
— | — | — | — | (51.2 | ) |
(51.2 |
) |
||||||||||||||||
Unrealized losses on foreign currency derivative instruments (net of tax of |
— | — | — | — | 13.9 |
13.9 |
||||||||||||||||||
Loss on extinguishments of debt (net of tax of |
9.6 | — | — | — | — |
9.6 |
||||||||||||||||||
Integration expenses associated with Finagaz (net of tax of |
— | 26.2 | — | — | — |
26.2 |
||||||||||||||||||
Impact from change in French tax rate | — | (29.0 | ) | — | — | — |
(29.0 |
) |
||||||||||||||||
Adjusted net income (loss) attributable to |
$ |
54.2 |
$ |
155.8 |
$ |
86.9 |
$ |
116.0 |
$ |
(6.8 |
) |
$ |
406.1 |
|||||||||||
Adjusted diluted earnings per share: | ||||||||||||||||||||||||
|
$ | 0.25 | $ | 0.89 | $ | 0.49 | $ | 0.66 | $ | 0.17 |
$ |
2.46 |
||||||||||||
Net gains on commodity derivative instruments not associated with current-period transactions | — | — | — | — | (0.29 | ) |
(0.29 |
) |
||||||||||||||||
Unrealized losses on foreign currency derivative instruments | — | — | — | — | 0.08 |
0.08 |
||||||||||||||||||
Loss on extinguishments of debt | 0.05 | — | — | — | — |
0.05 |
||||||||||||||||||
Integration expenses associated with Finagaz | — | 0.15 | — | — | — |
0.15 |
||||||||||||||||||
Impact from change in French tax rate | — | (0.16 | ) | — | — | — |
(0.16 |
) |
||||||||||||||||
Adjusted diluted earnings (loss) per share | $ | 0.30 | $ | 0.88 | $ | 0.49 | $ | 0.66 | $ | (0.04 | ) | $ | 2.29 |
Fiscal Year Ended |
|
|
Midstream & Marketing | |
Corporate & Other | Total | ||||||||||||||||||
Adjusted net income attributable to |
||||||||||||||||||||||||
GAAP Net income attributable to |
$ |
43.2 |
$ |
111.6 |
$ |
87.1 |
$ |
97.4 |
$ |
25.4 |
$ |
364.7 |
||||||||||||
Net gains on commodity derivative instruments not associated with current-period transactions (net of tax of |
— | — | — | — | (29.9 | ) |
(29.9 |
) |
||||||||||||||||
Loss on extinguishments of debt (net of tax of |
7.9 | — | — | — | — |
7.9 |
||||||||||||||||||
Integration expenses associated with Finagaz (net of tax of |
— | 17.3 | — | — | — |
17.3 |
||||||||||||||||||
Adjusted net income (loss) attributable to |
$ |
51.1 |
$ |
128.9 |
$ |
87.1 |
$ |
97.4 |
$ |
(4.5 |
) |
$ |
360.0 |
|||||||||||
Adjusted diluted earnings per share: |
||||||||||||||||||||||||
|
$ | 0.25 | $ | 0.64 | $ | 0.50 | $ | 0.55 | $ | 0.14 | $ | 2.08 | ||||||||||||
Net gains on commodity derivative instruments not associated with current-period transactions (b) | — | — | — | — | (0.17 | ) |
(0.17 |
) |
||||||||||||||||
Loss on extinguishments of debt | 0.04 | — | — | — | — |
0.04 |
||||||||||||||||||
Integration expenses associated with Finagaz | — | 0.10 | — | — | — |
0.10 |
||||||||||||||||||
Adjusted diluted earnings (loss) per share | $ | 0.29 | $ | 0.74 | $ | 0.50 | $ | 0.55 | $ | (0.03 | ) | $ | 2.05 |
(a) | Income taxes associated with pre-tax adjustments determined using statutory business unit tax rates. | |
(b) | Includes the effects of rounding. |
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