UGI Corporation — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2022; comparisons are with fiscal 2021 unless noted. UGI is a diversified energy holding company operating through AmeriGas Propane, UGI International, Midstream & Marketing, and Utilities. Results are seasonal, with much of earnings generated during the October–March heating season.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $10.106 billion | $7.447 billion |
| Operating income | $1.666 billion | $2.350 billion |
| Net income attributable to UGI | $1.073 billion | $1.467 billion |
| Diluted EPS (GAAP) | $4.97 | $6.92 |
| Adjusted net income (non-GAAP) | $626 million | $629 million |
| Adjusted diluted EPS (non-GAAP) | $2.90 | $2.96 |
| Operating cash flow | $716 million | $1.481 billion |
| Capital expenditures | $835 million | $674 million |
Revenue rose 36%, driven largely by higher energy commodity prices and the full-year contribution from Mountaineer, acquired in September 2021. GAAP net income declined chiefly because net gains on commodity and certain foreign-currency derivatives not associated with current-period transactions were substantially lower year over year. Management’s adjusted measures exclude those gains and other specified items; adjusted net income was nearly flat.
Operating cash flow fell despite higher cash flow before working-capital changes ($1.269 billion versus $1.200 billion). Working capital used $553 million, compared with providing $281 million in FY2021, reflecting derivative collateral timing, receivables growth amid higher energy prices, and accounts-payable changes.
Segment trends
- AmeriGas Propane: Revenue $2.943 billion; operating income $307 million, down from $385 million. Retail gallons sold fell 8% to 888 million, amid customer-service and staffing challenges, warmer weather, and customer price sensitivity. Higher propane prices lifted revenue but pressured margin.
- UGI International: Revenue $3.686 billion; operating income $237 million, down from $314 million. LPG retail volume was slightly higher, but energy-marketing volatility and weaker foreign currencies weighed on results.
- Midstream & Marketing: Revenue $2.326 billion; operating income $246 million, up from $160 million. Improved natural-gas marketing margins, renewable-energy marketing, and the Moraine East acquisition contributed. Approximately 84% of segment margin was fee-based.
- Utilities: Revenue $1.620 billion; operating income $327 million, up from $241 million. Growth reflected Mountaineer, rate and DSIC increases, and customer growth; warmer-than-normal weather affected gas demand.
Debt, liquidity, and capital allocation
- Total debt was $7.0 billion at September 30, 2022, versus $6.816 billion a year earlier; this included $368 million of short-term borrowings. Interest expense increased to $329 million from $310 million.
- Available liquidity, including cash and available revolving-credit capacity, was approximately $1.7 billion, down from $2.2 billion. UGI reported compliance with all debt covenants and no near-term senior-note or term-loan maturities.
- Cash and cash equivalents were $405 million, versus $855 million. The balance included derivative-related cash collateral; $398 million of collateral had been received and could be returned as commodity prices and derivative values change.
- FY2022 common dividends totaled $1.41 per share, compared with $1.35. UGI repurchased 900,000 shares for $38 million and had authorization to repurchase up to 8 million shares through February 2026.
Outlook, developments, and key risks
- Management estimated FY2023 capital expenditures of $1.04 billion, principally for utility infrastructure replacement and growth, Mountaineer investment, and renewable-energy projects. The filing does not provide a consolidated earnings or EPS forecast.
- PA Gas Utility received approval for a phased annual base-rate increase of approximately $49 million, with $38 million effective October 2022 and a further $11 million in October 2023. A five-year weather-normalization pilot was approved; a new DSIC was expected to begin January 2023.
- UGI International sold its U.K. energy-marketing business in October 2022, receiving a net cash payment of $19 million and recognizing a $220 million pretax loss in FY2023 Q1. In November 2022, it announced plans to sell its French energy-marketing business; the company expected a significant loss. The French business’s September 30 carrying value was about $470 million, primarily related to derivatives.
- UGI is investing in RNG, renewable LPG, and renewable fuels. Projects include U.S. farm-digester initiatives and European rDME plans; timing, investment returns, and production targets remain subject to execution and market risks.
- Management cited elevated commodity-price volatility, inflation, supply-chain and labor constraints, and the European energy crisis following Russia’s invasion of Ukraine. Risks include LPG availability and margins, inability to pass through cost increases, weather-driven demand, customer conservation and fuel substitution, regulation and climate policy, cyber incidents, project execution, foreign-exchange movements, and leverage.
- AmeriGas and UGI International completed major transformation initiatives, expected to provide ongoing annual benefits exceeding $150 million and €30 million, respectively. A corporate-functions transformation was expected to finish by FY2023, with about $40 million of nonrecurring costs and more than $15 million of annualized savings targeted.
Most important facts for investors to verify
- Reconcile the $1.073 billion GAAP net income with $626 million adjusted net income, including derivative and other excluded items; adjusted figures are non-GAAP.
- Track whether working-capital and collateral movements normalize, and how much liquidity depends on collateral that may be returned.
- Assess the realized FY2023 impact of the U.K. sale and the timing, proceeds, and expected loss from the planned French energy-marketing exit.
- Monitor AmeriGas volume recovery and service performance, along with energy-market supply costs and the ability to pass them through to customers.
- Evaluate debt and refinancing needs, including scheduled principal repayments, rising variable-rate exposure, and the funding of the projected $1.04 billion FY2023 capital program.
- Compare utility investment and renewable-project execution with approved rate recovery, stated targets, and expected returns; also review environmental and other contingencies in the financial-statement notes.