UGI Reports Record Second Quarter Results and Increases Fiscal 2021 Guidance

UGI Corporation (NYSE: UGI) today reported financial results for the fiscal quarter ended March 31, 2021.

HEADLINES

• Q2 GAAP diluted earnings per share ("EPS") of $2.33 and adjusted diluted EPS of $1.99 compared to GAAP diluted EPS of $1.07 and adjusted diluted EPS of $1.56 in the prior-year period.
• Year-to-date GAAP diluted EPS of $3.77 and adjusted diluted EPS of $3.17 compared to GAAP diluted EPS of $2.08 and adjusted diluted EPS of $2.73 in the prior-year period.
• Q2 reportable segments earnings before interest expense and income taxes¹ ("EBIT") of $630 million compared to $527 million in the prior-year period.
• Strong results across the entire business, with each business unit delivering increased EBIT vs. prior year. These improvements were driven by colder than prior-year weather in all of UGI's service territories, higher average LPG unit margin due to strong margin management, effective operating expense management and the increase in base rates at UGI Utilities that went into effect on January 1, 2021.
• Year-to-date cash flow from operating activities grew by 15% compared to the prior-year period, demonstrating continued cash flow stability and growth.
• On April 12, 2021, UGI announced that John L. Walsh, President and CEO, will retire on June 25, 2021, to be succeeded by Roger Perreault, current EVP, Global LPG.
• On May 5, 2021, UGI's Board of Directors approved an increase to its quarterly dividend to $0.345 per share marking the 34th consecutive year of annual dividend increases.
• Increased Fiscal 2021 adjusted EPS guidance to a range of $2.90 - $3.00² per share due to strong year-to-date performance, inclusive of the anticipated negative impact of the COVID-19 pandemic and positive tax benefits.

ESG HIGHLIGHTS

• On January 29, 2021, UGI created a new employee resource group, Black Organization & Leadership Development (BOLD), as a part of its continued commitment to fostering a diverse and inclusive company.
• On April 6, 2021, UGI announced that UGI Utilities and Energy Services had joined the Natural Gas Supply Collaborative (NGSC) to further enhance and expand UGI's ESG initiatives aimed at lowering methane and greenhouse gas emissions, enhancing system integrity and improving safety.
• On April 19, 2021, UGI hired a VP, Talent Management and Diversity & Inclusion to support the advancement of Belonging, Inclusion, Diversity & Equity (BIDE).
• On May 4, 2021, UGI announced that Energy Services entered into definitive agreements to develop dairy farm digester projects to produce renewable natural gas in upstate New York, through its investment in Cayuga RNG.

"UGI delivered record second quarter results with GAAP diluted EPS of $2.33 and adjusted diluted EPS of $1.99," said John L. Walsh, President and Chief Executive Officer of UGI Corporation. "The strong performance clearly demonstrates the depth of our diversified set of businesses. While we benefited from weather that was colder than the prior year, weather was still warmer than normal, which only further highlights the strength of our performance. This strong operating performance was fueled by higher margins across our businesses, new base rates in our Gas Utility that went into effect on January 1st, and continued contributions from our growth drivers and recent investments. These factors more than offset the headwinds from the COVID-19 pandemic. We benefited greatly from the strength of our strategic assets and diversified portfolio, disciplined capital allocation strategy and robust execution capabilities. As a result of the strong performance in the first half of the fiscal year, we have increased our fiscal 2021 guidance to a range of $2.90 - $3.00² per share.

“During the quarter, our businesses continued to make progress on crucial initiatives. AmeriGas and UGI International remain on pace to deliver total ongoing annual benefits of more than $140 million and €30 million, respectively, by the end of fiscal year 2022. The Midstream and Marketing team, through a joint venture, completed the acquisition of Pine Run Midstream, which operates 43-miles of dry gas gathering pipeline and compression assets. This transaction was immediately accretive to earnings and further strengthened our foundation, which enables us to provide low-cost, environmentally responsible energy to customers. We also made significant progress in developing an exciting range of renewable solutions opportunities, with particular emphasis on renewable natural gas, bioLPG and renewable DME. These projects have strong return profiles, with attractive unlevered IRRs. Earlier this week, we announced that UGI Energy Services entered into definitive agreements to produce renewable natural gas in upstate New York, further leveraging our GHI platform.

"We remain on track to close on the Mountaineer transaction in the second half of the calendar year. As previously announced, this transaction will be financed through a combination of equity-linked securities, existing liquidity and debt. This week, we received firm commitments associated with the debt financing portion of the transaction.

"At UGI, we continue to focus on disciplined execution of our strategy and delivering our long-term commitments of 6-10% EPS growth and 4% dividend growth. We are excited about the opportunities for growth that exist and are committed to creating value for our customer, shareholders and employees."

KEY DRIVERS OF SECOND QUARTER RESULTS

• AmeriGas: Retail volume increased 5% on weather that was 8.4% colder than the prior-year period, National Accounts volume increased 15%; higher average LPG unit margins due to effective margin management
• UGI International: Retail volume increased 5% on weather that was 11.8% colder than the prior-year period; higher average LPG unit margins due to effective margin management
• Midstream & Marketing: Higher EBIT from natural gas, peaking and capacity management primarily attributable to weather that was 11.7% colder than the prior-year period; continued build out of the Texas Creek gathering assets
• UGI Utilities: Core market volumes increased 15% primarily due to weather that was 13.3% colder than the prior-year period; higher total margin largely driven by the increase in base rates and higher margin from large firm customers

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, May 6, 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 May 6 through 11:59 PM ET May 13. The replay may be accessed toll free at 855-859-2056 and internationally at +1 404-537-3406, conference ID 2876774.

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)

• Retail gallons sold increased 5% largely due to weather that was 8.4% colder than the prior-year period, higher Cylinder Exchange and National Account volumes, partially offset by structural conservation and other residual volume loss, and the impact of COVID-19 on commercial and motor fuel volumes.
• Total margin increased $32 million primarily attributable to higher retail propane volumes ($20 million) and higher average retail unit margins ($15 million), partially offset by lower non-propane margin attributable to fees and services ($3 million) compared to the prior-year period.
• Operating and administrative expenses increased $2 million largely due to higher incentive compensation, higher advertising costs and higher telecommunications expenses, partially offset by lower general insurance costs.
• Operating income and earnings before interest expense and income taxes each increased $33 million reflecting the higher total margin, slightly offset by the higher operating and administrative expenses.

UGI International base-currency results are translated into U.S. dollars based upon exchange rates experienced during the reporting periods. Differences in these translation rates affect the comparison of line item amounts presented in the table above. The functional currency of a significant portion of our UGI International results is the euro and, to a much lesser extent, the British pound sterling. During the 2021 and 2020 three-month periods, the average unweighted euro-to-dollar translation rates were approximately $1.21 and $1.10, respectively, and the average unweighted British pound sterling-to-dollar translation rates were approximately $1.38 and $1.28, respectively.

• Retail volume increased 5% largely due to weather that was 11.8% colder than the prior-year period and increased cylinder volume, partially offset by lower wholesale volumes from one-off spot transactions in the prior-year period and the continued impact of the COVID-19 pandemic.
• Total margin increased $48 million compared to the prior-year period reflecting increases in bulk and cylinder volumes, higher average LPG unit margins attributable to margin management efforts, and the translation effects of the stronger euro.
• The increase in operating and administrative expenses largely reflects the translation effects of the stronger euro.
• Operating income increased $30 million compared to the prior-year period reflecting the translation effects of the stronger euro of $13 million.
• Earnings before interest expense and income taxes increased $23 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 ($7 million).

• Temperatures were 5.8% warmer than normal but 11.7% colder than the prior-year period.
• Total margin increased $18 million primarily reflecting increased margins from natural gas marketing activities ($10 million), renewable energy marketing activities ($6 million), capacity management ($6 million), and natural gas gathering activities ($4 million) compared to the prior-year period. The effect of these increases was partially offset by the absence of margins attributable to HVAC and Conemaugh ($7 million) that were divested in Fiscal 2020.
• Operating and administrative expenses decreased $6 million largely due to lower expenses attributable to the divested assets, partially offset by higher expenses for new assets placed into service and acquisitions.
• Operating income increased due to higher total margin and lower operating and administrative expenses, partially offset by an adjustment to the contingent consideration related to the GHI acquisition ($4 million).
• Earnings before interest expense and income taxes increased $21 million compared to the prior-year period due to the higher operating income and equity earnings from the investment in Pine Run Midstream.

• Gas Utility service territory experienced temperatures that was 13.3% colder than the prior-year period.
• Core market volumes increased due to the colder weather, customer growth, and higher average use per customer, partially offset by volume reductions attributable to COVID-19.
• Total Gas Utility distribution throughput increased 2 bcf reflecting higher core market and large firm delivery service volumes, partially offset by lower interruptible delivery service volumes.
• Total margin increased $31 million primarily due to higher total margin from Gas Utility customers ($30 million), largely driven by the increase in volumes and gas base rates which became effective January 1, 2021.
• Operating income increased reflecting the higher total margin, partially offset by higher depreciation expense ($3 million) and slightly higher operating and administrative expenses. The increased depreciation expense is attributable to continued distribution system and IT capital expenditure activity.

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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