UGI Corporation (NYSE: UGI) today reported financial results for the fiscal quarter ended June 30, 2021.

HEADLINES

• Q3 GAAP diluted earnings per share ("EPS") of $0.71 and adjusted diluted EPS of $0.13 compared to GAAP diluted EPS of $0.41 and adjusted diluted EPS of $0.08 in the prior-year period.
• Year-to-date GAAP diluted EPS of $4.48 and adjusted diluted EPS of $3.30 compared to GAAP diluted EPS of $2.49 and adjusted diluted EPS of $2.81 in the prior-year period.
• Q3 reportable segments earnings before interest expense and income taxes¹ ("EBIT") of $98 million compared to $81 million in the prior-year period.
• Strong results from our diversified business led by increased total margins at UGI International in comparison to the prior-year period and new base rates at UGI Utilities that went into effect on January 1, 2021.
• Completed another key milestone in the regulatory approval process related to the pending Mountaineer acquisition. The process is progressing well and we anticipate that the acquisition could potentially close as early as this fiscal year.

ESG HIGHLIGHTS

• On May 14, 2021, UGI released its third ESG report and announced a commitment to reduce Scope I GHG Emissions by 55% by 2025.
• On May 17, 2021, UGI announced that UGI International and SHV Energy intend to launch a joint venture to advance the production and use of Renewable Dimethyl Ether (“rDME”) in the LPG industry.
• On May 19, 2021, UGI announced that its President and CEO signed the CEO Action for Diversity & Inclusion™ pledge, the largest CEO-driven business commitment to advance diversity and inclusion in the workplace.
• On August 4, 2021, UGI announced that Energy Services entered into definitive agreements to develop innovative food waste digester projects to produce RNG in Ohio and Kentucky, through its investment in Hamilton RNG.

"UGI delivered strong third quarter results with GAAP diluted EPS of $0.71 and adjusted diluted EPS of $0.13," said Roger Perreault, President and Chief Executive Officer of UGI Corporation. "This performance was driven by higher total margins at UGI International primarily due to significantly colder than prior-year weather, new base rates in our Gas Utility that went into effect on January 1st, and execution on our key priorities, including our growth investments and business transformation initiatives. As a result of the strong year-to-date performance, we now expect the full year adjusted diluted EPS to be at the upper end of our guidance range of $2.90 - $3.00² for this fiscal year.

“Our businesses progressed well on several growth initiatives during the quarter. UGI Utilities continues to see solid customer growth and is on track to deliver compound annual rate base growth in line with historical trends, through the record capital expenditure plan. In connection with the pending acquisition of Mountaineer Gas, the largest gas distribution company in West Virginia, we filed a unanimous settlement before the Public Service Commission of West Virginia ("the Commission"). We provided testimony in a hearing before the Commission and expect to file a Proposed Order by August 10th. While the precise timing of the Commission's approval is uncertain, we have completed several key steps in the regulatory approval process and now expect to close well before the end of the calendar year, and even potentially within this fiscal year. The transaction remains accretive to earnings in the first full year of operation.

“UGI continues to execute on the renewables strategy that we discussed during the June 2021 Investor Day. Today, we announced that UGI Energy Services entered into definitive agreements to produce renewable natural gas in Ohio and Kentucky, through the Hamilton RNG joint venture. This project aligns with our renewables strategy and our goal of providing affordable, reliable and sustainable energy solutions to our customers. Our teams continue to explore an exciting range of renewables opportunities with strong return profiles in the US and Europe.

“We remain focused on execution and are confident that the company is well positioned to deliver another strong year of financial performance. We are excited about the opportunities ahead and are committed to maintaining the proven track record of delivering on our financial and strategic commitments.”

KEY DRIVERS OF THIRD QUARTER RESULTS

• AmeriGas: National accounts volume increased 18%; lower total margin was primarily due to a decrease in cylinder exchange volumes as sales normalized after the higher pandemic volumes seen in Q3 FY20 resulting in slightly lower average retail unit margins
• UGI International: Retail volume increased 21% on weather that was 54.7% colder than the prior-year period; Q3 FY21 EBIT of $41 million compared to $21 million in the prior-year period
• Midstream & Marketing: Higher EBIT reflecting equity income from the investment in Pine Run; Q3 FY21 EBIT of $21 million compared to $20 million in the prior-year period
• UGI Utilities: Higher EBIT largely driven by the increase in base rates, higher margin from large delivery service customers and customer growth

EARNINGS CALL AND WEBCAST

UGI Corporation will hold a live Internet Audio Webcast of its conference call to discuss the quarterly earnings and other current activities at 9:00 AM ET on Thursday, August 5, 2021. Interested parties may listen to the audio webcast both live and in replay on the Internet at https://www.ugicorp.com/investors/financial-reports/presentations or by visiting the company website https://www.ugicorp.com and clicking on Investors and then Presentations. A telephonic replay will be available from 12:00 PM ET on August 5 through 11:59 PM ET August 12. The replay may be accessed toll free at 855-859-2056 and internationally at +1 404-537-3406, conference ID 7457165.

ABOUT UGI

UGI Corporation is a distributor and marketer of energy products and services. Through subsidiaries, UGI operates natural gas and electric utilities in Pennsylvania, distributes LPG both domestically (through AmeriGas) and internationally (through UGI International), manages midstream energy assets in Pennsylvania, Ohio, and West Virginia and electric generation assets in Pennsylvania, and engages in energy marketing, including renewable natural gas, in twelve states and the District of Columbia and internationally in France, Belgium, the Netherlands and the UK.

Comprehensive information about UGI Corporation is available on the Internet at https://www.ugicorp.com.

USE OF NON-GAAP MEASURES

Management uses "adjusted diluted earnings per share," a non-GAAP financial measure, when evaluating UGI's overall performance. Management believes that this non-GAAP measure provides meaningful information to investors about UGI’s performance because it eliminates 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. Volatility in net income at UGI can occur as a result of gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions but included in earnings in accordance with U.S. generally accepted accounting principles ("GAAP").

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.

Tables on the last page reconcile net income attributable to UGI Corporation, the most directly comparable GAAP measure, to adjusted net income attributable to UGI Corporation, and diluted earnings per share, the most comparable GAAP measure, to adjusted diluted earnings per share, to reflect the adjustments referred to above.

¹ Reportable segments earnings before interest expense and income taxes represents an aggregate of our operating segment level EBIT as determined in accordance with GAAP.

² 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 we cannot reconcile fiscal year 2021 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 SEC rules.

USE OF FORWARD-LOOKING STATEMENTS

This press release contains statements, estimates and projections that are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended). Management believes that these are 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 (including increasingly uncertain weather patterns due to climate change) and the seasonal nature of our business; cost volatility and availability of all energy products, including propane, natural gas, electricity and fuel oil as well as the availability of LPG cylinders; increased customer conservation measures; the impact of pending and future legal or regulatory proceedings, inquiries or investigations, liability for uninsured claims and for claims in excess of insurance coverage; domestic and international political, regulatory and economic conditions in the United States and in foreign countries, including the current conflicts in the Middle East and the withdrawal of the United Kingdom from the European Union, and foreign currency exchange rate fluctuations (particularly the euro); the timing of development of Marcellus and Utica Shale gas production; the availability, timing and success of our acquisitions, commercial initiatives and investments to grow our business; our ability to successfully integrate acquired businesses and achieve anticipated synergies; the interruption, disruption, failure, malfunction, or breach of our information technology systems, including due to cyber-attack; the inability to complete pending or future energy infrastructure projects; our ability to achieve the operational benefits and cost efficiencies expected from the completion of pending and future transformation initiatives including the impact of customer disruptions resulting in potential customer loss due to the transformation activities; uncertainties related to the global pandemics, including the duration and/or impact of the COVID-19 pandemic; and the extent to which we are able to utilize certain tax benefits currently available under the CARES Act and similar tax legislation and whether such benefits will remain available in the future.

SEGMENT RESULTS ($ in millions, except where otherwise indicated)

• Temperatures were 12.3% warmer than the prior-year period.
• Retail gallons sold increased 1% reflecting higher national account volumes, partially offset by lower cylinder exchange volumes compared to the significant increase experienced in the prior-year period, lower residential volumes, structural conservation and other residual volume loss.
• Total margin decreased $14 million primarily due to lower higher-margin residential and cylinder exchange volumes. This was partially offset by an increase in lower-margin national account volumes.
• Operating and administrative expenses increased $3 million largely due to higher vehicle fuel and maintenance expenses, advertising costs and general insurance costs. The effect of these increases were partially offset by LPG transformation savings.
• Operating income and earnings before interest expense and income taxes each decreased $8 million reflecting the lower total margin ($14 million) and higher operating and administrative expenses, slightly offset by higher other income from finance charges and one-time gains on asset sales.

• Retail volume increased 21% largely due to weather that was 54.7% colder than the prior-year period. The increased volume reflects higher bulk and cylinder volumes including the recovery of certain volume decreases due to the COVID-19 pandemic.
• Average propane wholesale selling prices in northwest Europe were approximately 81% higher than the prior-year period.
• Total margin increased $51 million compared to the prior-year period reflecting increases in volumes and the translation effects of the stronger euro, partially offset by a slight decrease in average LPG unit margins.
• The increase in operating and administrative expenses reflects higher costs attributable to increased volumes, increased compensation and employee benefits-related costs and the translation effects of the stronger euro.
• Operating income increased $23 million compared to the prior-year period reflecting the translation effects of the stronger euro of $4 million.
• Earnings before interest expense and income taxes increased $20 million compared to the prior-year period due to the higher operating income, partially offset by lower pre-tax realized gains on foreign currency exchange contracts ($2 million).

• Temperatures were 18.6% warmer than the prior-year period.
• Total margin increased $1 million primarily reflecting increased margins from capacity management, gas gathering and renewable energy marketing activities compared to the prior-year period. The effect of these increases was partially offset by the absence of margins attributable to HVAC and Conemaugh that were divested in Fiscal 2020.
• Earnings before interest expense and income taxes reflects the increase in total margin and equity income from the investment in Pine Run, in comparison to the prior-year period.

• Gas Utility service territory experienced temperatures that were 16.2% warmer than the prior-year period.
• Core market volumes decreased due to the warmer weather compared to the prior-year period, partially offset by customer growth.
• Total Gas Utility distribution throughput increased 1 bcf reflecting higher large delivery service volumes, partially offset by lower core market volumes.
• Total margin increased $3 million primarily due to increase in base rates that went into effect on January 1, 2021 and higher customer fees, partially offset by the decrease in core market volumes.
• Operating income increased largely reflecting the higher total margin.

Non-GAAP Financial Measures - Adjusted Net Income Attributable to UGI and Adjusted Diluted Earnings Per Share

The following tables reconcile net income attributable to UGI Corporation, the most directly comparable GAAP measure, to adjusted net income attributable to UGI Corporation, and reconcile diluted earnings per share, the most comparable GAAP measure, to adjusted diluted earnings per share, to reflect the adjustments referred to previously:

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