UGI CORP /PA/ [UGIC] Filings

10-Q 1 ugi-20221231.htm 10-Q ugi-20221231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 1-11071

UGI CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania						23-2668356
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

460 North Gulph Road, King of Prussia, PA 19406

(Address of Principal Executive Offices) (Zip Code)

(610) 337-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol(s):	Name of each exchange on which registered:
Common Stock, without par value	UGI	New York Stock Exchange
Corporate Units	UGIC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

At January 31, 2023, there were 209,556,984 shares of UGI Corporation Common Stock, without par value, outstanding.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


			Page

Glossary of Terms and Abbreviations			1

Part I Financial Information

Item 1. Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of December 31 , 2022, September 30, 202 2 and December 3 1 , 2021			5

Condensed Consolidated Statements of Income for the three months ended December 31 , 2022 and 2021			6

Condensed Consolidated Statements of Comprehensive Income for the three months ended December 3 1 , 2022 and 2021			7

Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2022 and 2021			8

Condensed Consolidated Statements of Changes in Equity for the three months ended December 31, 2022 and 2021			9

Notes to Condensed Consolidated Financial Statements			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Item 3. Quantitative and Qualitative Disclosures About Market Risk			43

Item 4. Controls and Procedures			45

Part II Other Information

Item 1. Legal Proceedings			46

Item 1A. Risk Factors			46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			46

Item 6. Exhibits			47

Signatures			49

Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

Terms and abbreviations used in this Form 10-Q are defined below:

UGI Corporation and Related Entities

AmeriGas OLP - AmeriGas Propane, L.P., the principal operating subsidiary of AmeriGas Partners

AmeriGas Partners - AmeriGas Partners, L.P., a Delaware limited partnership and an indirect wholly-owned subsidiary of UGI; also referred to, together with its consolidated subsidiaries, as the “Partnership”

AmeriGas Propane - Reportable segment comprising AmeriGas Propane, Inc. and its subsidiaries, including AmeriGas Partners and AmeriGas OLP

AmeriGas Propane, Inc. - A wholly owned second-tier subsidiary of UGI and the general partner of AmeriGas Partners

AvantiGas - AvantiGas Limited, an indirect wholly owned subsidiary of UGI International, LLC

Company - UGI and its consolidated subsidiaries collectively

DVEP - DVEP Investeringen B.V., an indirect wholly owned subsidiary of UGI International, LLC

Electric Utility - UGI Utilities’ regulated electric distribution utility

Energy Services - UGI Energy Services, LLC, a wholly owned subsidiary of Enterprises

Enterprises - UGI Enterprises, LLC, a wholly owned subsidiary of UGI

ESFC - Energy Services Funding Corporation, a wholly owned subsidiary of Energy Services

Flaga - Flaga GmbH, an indirect wholly owned subsidiary of UGI International, LLC

Gas Utility - UGI’s regulated natural gas businesses, inclusive of PA Gas Utility and WV Gas Utility

GHI - GHI Energy, LLC, a Houston-based RNG company and indirect wholly owned subsidiary of Energy Services

Midstream & Marketing - Reportable segment comprising Energy Services and UGID

Mountaineer - Mountaineer Gas Company, a natural gas distribution company in West Virginia and a wholly owned subsidiary of Mountaintop Energy Holdings, LLC

Mountaintop Energy Holdings, LLC - Parent company of Mountaineer and wholly owned subsidiary of UGI, acquired on September 1, 2021

PA Gas Utility - UGI Utilities’ regulated natural gas distribution business, primarily located in Pennsylvania

Partnership - AmeriGas Partners and its consolidated subsidiaries, including AmeriGas OLP; also referred to as “AmeriGas Partners”

Pennant - Pennant Midstream, LLC, an indirect wholly owned subsidiary of Energy Services

Pine Run - Pine Run Gathering, LLC

Stonehenge - Stonehenge Appalachia, LLC, a midstream natural gas gathering business

UGI - UGI Corporation or, collectively, UGI Corporation and its consolidated subsidiaries

UGI France - UGI France SAS (a Société par actions simplifiée), an indirect wholly owned subsidiary of UGI International, LLC

UGI International - Reportable segment principally comprising UGI’s foreign operations

UGI International, LLC - UGI International, LLC, a wholly owned subsidiary of Enterprises

Table of Contents

UGI Moraine East - UGI Moraine East Gathering LLC, a wholly owned subsidiary comprising the assets acquired in the Stonehenge Acquisition

UGI Utilities - UGI Utilities, Inc., a wholly owned subsidiary of UGI comprising PA Gas Utility and Electric Utility

UGID - UGI Development Company, a wholly owned subsidiary of Energy Services

UniverGas - UniverGas Italia S.r.l, an indirect wholly owned subsidiary of UGI International, LLC

Utilities - Reportable segment comprising UGI Utilities and Mountaintop Energy Holdings, LLC

WV Gas Utility - Mountaineer’s regulated natural gas distribution business, located in West Virginia

Other Terms and Abbreviations

2022 Annual Report - UGI Annual Report on Form 10-K for the fiscal year ended September 30, 2022

2021 three-month period - Three months ended December 31, 2021

2022 three-month period - Three months ended December 31, 2022

2024 Purchase Contract - A forward stock purchase contract issued by UGI Corporation as a part of the issuance of Equity Units which obligates holders to purchase a number of shares of UGI Common Stock from the Company on June 1, 2024

AOCI - Accumulated Other Comprehensive Income (Loss)

ASC - Accounting Standards Codification

ASC 606 - ASC 606, “Revenue from Contracts with Customers”

ASU - Accounting Standards Update

Bcf - Billions of cubic feet

COA - Consent Order and Agreement

CODM - Chief Operating Decision Maker as defined in ASC 280, “Segment Reporting”

Common Stock - Shares of UGI common stock

Convertible Preferred Stock - Preferred stock of UGI titled 0.125% series A cumulative perpetual convertible preferred stock without par value and having a liquidation preference of $1,000 per share

COVID-19 - A novel strain of coronavirus disease discovered in 2019

DS - Default service

DSIC - Distribution System Improvement Charge

Equity Unit - A corporate unit consisting of a 2024 Purchase Contract and 1/10th or 10% undivided interest in one share of Convertible Preferred Stock

Exchange Act - Securities Exchange Act of 1934, as amended

FDIC - Federal Deposit Insurance Corporation

FERC - Federal Energy Regulatory Commission

Fiscal 2021 - The fiscal year ended September 30, 2021

Fiscal 2022 - The fiscal year ended September 30, 2022

Fiscal 2023 - The fiscal year ending September 30, 2023

Table of Contents

GAAP - U.S. generally accepted accounting principles

Gwh - Millions of kilowatt hours

ICE - Intercontinental Exchange

IREP - Infrastructure Replacement and Expansion Plan

IRPA - Interest rate protection agreement

LIBOR - London Inter-Bank Offered Rate

LNG - Liquefied natural gas

LPG - Liquefied petroleum gas

MDPSC - Maryland Public Service Commission

MGP - Manufactured gas plant

Mountaineer Acquisition - Acquisition of Mountaintop Energy Holdings LLC, which closed on September 1, 2021

Mountaineer 2023 Credit Agreement - Third amendment to the third amended and restated credit agreement entered into by Mountaineer, as borrower, providing for borrowings up to $150 million, with the option to increase to a maximum principal amount of $250 million assuming certain conditions are met, including a letter or credit subfacility of up to $20 million, scheduled to expire in November 2024, with an option to extend the maturity date

NOAA - National Oceanic and Atmospheric Administration

NPNS - Normal purchase and normal sale

NYDEC - New York State Department of Environmental Conservation

NYMEX - New York Mercantile Exchange

PADEP - Pennsylvania Department of Environmental Protection

PAPUC - Pennsylvania Public Utility Commission

Pennant Acquisition - During Fiscal 2022, Energy Services acquired the remaining 53% equity interest in Pennant

PGA - Purchased gas adjustment

PGC - Purchased gas costs

PRP - Potentially responsible party

Purchase Contracts - Forward stock purchase contracts issued by UGI Corporation in May 2021, which obligate holders to purchase a number of shares of UGI common stock from the Company on June 1, 2024

Receivables Facility - A receivables purchase facility of Energy Services with an issuer of receivables-backed commercial paper

Retail core-market - Comprises firm residential, commercial and industrial customers to whom Utilities has a statutory obligation to provide service that purchase their natural gas from Utilities

RNG - Renewable natural gas

ROD - Record of Decision

SEC - U.S. Securities and Exchange Commission

SOFR - Secured Overnight Financing Rate

Table of Contents

Stonehenge Acquisition - Acquisition of Stonehenge Appalachia, LLC, which closed January 27, 2022

U.K. - United Kingdom

U.S. - United States of America

UGI International Credit Facilities Agreement - A five-year unsecured senior facilities agreement entered into in October 2018, by UGI International, LLC comprising a €300 million term loan facility and a €300 million revolving credit facility, scheduled to expire in October 2023

UGI Utilities Credit Agreement - A five-year unsecured revolving credit agreement entered into by UGI Utilities on June 27, 2019 providing for borrowings up to $350 million, including a letter of credit subfacility of up to $100 million, scheduled to expire in June 2024. On December 13, 2022, UGI Utilities entered into an amendment to UGI Utilities Credit Agreement, providing for borrowings up to $425 million and to replace the use of LIBOR with SOFR

USD - U.S. dollar

WVPSC - Public Service Commission of West Virginia

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(Millions of dollars)


	December 31, 2022		September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	317	$	405	$	334
Restricted cash	227		64		24
Accounts receivable (less allowances for doubtful accounts of $69, $64 and $57, respectively)	1,578		1,127		1,461
Accrued utility revenues	147		23		95
Income taxes receivable	51		128		128
Inventories	618		665		548


Derivative instruments	238		865		578
Held for sale assets (Note 5)	—		295		—
Prepaid expenses and other current assets	280		230		263
Total current assets	3,456		3,802		3,431
Property, plant and equipment, (less accumulated depreciation of $4,344, $4,166 and $4,047, respectively)	8,176		8,040		7,597
Goodwill	3,697		3,612		3,748
Intangible assets, net	488		500		565
Utility regulatory assets	314		301		372
Derivative instruments	187		565		257


Other assets	810		755		830
Total assets	$	17,128	$	17,575	$	16,800
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	402	$	149	$	123

Short-term borrowings	991		368		579
Accounts payable	1,014		891		973


Derivative instruments	133		144		53
Held for sale liabilities (Note 5)	—		19		—
Other current liabilities	840		873		853
Total current liabilities	3,380		2,444		2,581
Long-term debt	6,323		6,483		6,416

Deferred income taxes	958		1,305		1,060

Derivative instruments	36		50		33
Other noncurrent liabilities	1,243		1,219		1,351
Total liabilities	11,940		11,501		11,441
Commitments and contingencies (Note 9)
Equity:
UGI Corporation stockholders’ equity:
Preferred stock, without par value (authorized – 5,000,000 shares; issued – 220,000, 220,000 and 220,000 Series A shares, respectively)	167		162		214
UGI Common Stock, without par value (authorized — 450,000,000 shares; issued — 210,621,970, 210,560,494 and 210,045,726 shares, respectively)	1,482		1,483		1,402
Retained earnings	3,808		4,841		3,908
Accumulated other comprehensive loss	(231)		(380)		(156)
Treasury stock, at cost	(46)		(40)		(19)
Total UGI Corporation stockholders’ equity	5,180		6,066		5,349
Noncontrolling interests	8		8		10
Total equity	5,188		6,074		5,359
Total liabilities and equity	$	17,128	$	17,575	$	16,800

See accompanying notes to condensed consolidated financial statements.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(Millions of dollars, except per share amounts)


	Three Months Ended December 31,
		2022		2021
Revenues		$	2,759	$	2,673
Costs and expenses:
Cost of sales (excluding depreciation and amortization shown below)		3,106		2,120
Operating and administrative expenses		529		514


Depreciation and amortization		131		129

Loss on disposal of U.K. energy marketing business		215		—
Other operating income, net		(18)		(22)
		3,963		2,741
Operating loss		(1,204)		(68)
Income from equity investees		1		8
Loss on extinguishment of debt		—		(11)

Other non-operating (expense) income, net		(28)		10
Interest expense		(92)		(81)
Loss before income taxes		(1,323)		(142)
Income tax benefit		369		46
Net loss including noncontrolling interests		(954)		(96)
Deduct net income attributable to noncontrolling interests		—		(1)
Net loss attributable to UGI Corporation		$	(954)	$	(97)
Loss per common share attributable to UGI Corporation stockholders:
Basic		$	(4.54)	$	(0.46)
Diluted		$	(4.54)	$	(0.46)
Weighted-average common shares outstanding (thousands):
Basic		209,934		209,673
Diluted		209,934		209,673

See accompanying notes to condensed consolidated financial statements.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(Millions of dollars)


	Three Months Ended December 31,
		2022		2021
Net loss including noncontrolling interests		$	(954)	$	(96)
Other comprehensive income (loss):
Net gains on derivative instruments (net of tax of $(1) and $(2), respectively)		3		10
Reclassifications of net (gains) losses on derivative instruments (net of tax of $2 and $(2), respectively)		(5)		4
Foreign currency adjustments (net of tax of $30 and $(4), respectively)		151		(32)
Benefit plans (net of tax of $0 and $(1), respectively)		—		2
Other comprehensive income (loss)		149		(16)
Comprehensive loss including noncontrolling interests		(805)		(112)
Deduct comprehensive income attributable to noncontrolling interests		—		(1)
Comprehensive loss attributable to UGI Corporation		$	(805)	$	(113)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(Millions of dollars)


	Three Months Ended December 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss including noncontrolling interests	$	(954)	$	(96)
Adjustments to reconcile net loss including noncontrolling interests to net cash used by operating activities:
Depreciation and amortization	131		129
Deferred income tax benefit, net	(356)		(82)
Provision for uncollectible accounts	13		12

Changes in unrealized gains and losses on derivative instruments	1,402		397
Loss on disposal of U.K. energy marketing business	215		—
Impairment of assets	19		—
Loss on extinguishment of debt	—		11
Income from equity investees	(1)		(8)

Other, net	22		(33)
Net change in:
Accounts receivable and accrued utility revenues	(569)		(685)
Income taxes receivable	77		—
Inventories	67		(81)
Utility deferred fuel and power costs, net of changes in unsettled derivatives	(18)		(22)
Accounts payable	123		154
Derivative instruments collateral deposits paid	(343)		(260)
Other current assets	(6)		12
Other current liabilities	(62)		(42)
Net cash used by operating activities	(240)		(594)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(210)		(186)
Acquisitions of businesses and assets, net of cash and restricted cash acquired	(9)		—
Investments in equity method investees	(40)		—

Other, net	(12)		32
Net cash used by investing activities	(271)		(154)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on UGI Common Stock	(76)		(72)

Issuances of long-term debt, net of issuance costs	155		614
Repayments of long-term debt and finance leases, including redemption premiums	(128)		(524)
Increase in short-term borrowings	487		212
Receivables Facility net borrowings	121		—

Payments on Purchase Contracts	(4)		(4)
Issuances of UGI Common Stock	5		8
Repurchases of UGI Common Stock	(12)		—


Net cash provided by financing activities	548		234
Effect of exchange rate changes on cash, cash equivalents and restricted cash	38		(5)
Cash, cash equivalents and restricted cash increase (decrease)	$	75	$	(519)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash, cash equivalents and restricted cash at end of period	$	544	$	358
Cash, cash equivalents and restricted cash at beginning of period	469		877
Cash, cash equivalents and restricted cash increase (decrease)	$	75	$	(519)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

(Millions of dollars, except per share amounts)


	Three Months Ended December 31,
		2022		2021
Preferred stock, without par value
Balance, beginning of period		$	162	$	213

Cumulative effect of change in accounting - ASU 2020-06 (Note 3)		5		—


Other		—		1
Balance, end of period		$	167	$	214
Common stock, without par value
Balance, beginning of period		$	1,483	$	1,394
Common Stock issued in connection with employee and director plans, net of tax withheld		2		5
Equity-based compensation expense		3		3



Cumulative effect of change in accounting - ASU 2020-06 (Note 3)		(6)		—

Balance, end of period		$	1,482	$	1,402
Retained earnings
Balance, beginning of period		$	4,841	$	4,081
Cumulative effect of change in accounting - ASU 2020-06 (Note 3)		1		—
Losses on common stock transactions in connection with employee and director plans		(4)		(4)
Net loss attributable to UGI Corporation		(954)		(97)
Cash dividends on UGI Common Stock ($0.36 and $0.35, respectively)		(76)		(72)

Balance, end of period		$	3,808	$	3,908
Accumulated other comprehensive income (loss)
Balance, beginning of period		$	(380)	$	(140)
Net gains on derivative instruments		3		10
Reclassification of net (gains) losses on derivative instruments		(5)		4
Benefit plans		—		2
Foreign currency adjustments		151		(32)
Balance, end of period		$	(231)	$	(156)
Treasury stock
Balance, beginning of period		$	(40)	$	(26)
Common Stock issued in connection with employee and director plans, net of tax withheld		6		7
Repurchases of UGI Common Stock		(12)		—


Balance, end of period		$	(46)	$	(19)
Total UGI stockholders’ equity		$	5,180	$	5,349
Noncontrolling interests
Balance, beginning of period		$	8	$	9
Net income attributable to noncontrolling interests		—		1


Balance, end of period		$	8	$	10
Total equity		$	5,188	$	5,359

See accompanying notes to condensed consolidated financial statements.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(Currency in millions, except per share amounts and where indicated otherwise)

Note 1 — Nature of Operations

UGI is a holding company that, through subsidiaries and affiliates, distributes, stores, transports and markets energy products and related services. In the U.S., we own and operate (1) a retail propane marketing and distribution business; (2) natural gas and electric distribution utilities; and (3) energy marketing, midstream infrastructure, storage, natural gas gathering and processing, natural gas production, electricity generation and energy services businesses. In Europe, we market and distribute propane and other LPG, and market other energy products and services.

We conduct a domestic propane marketing and distribution business through AmeriGas Partners. AmeriGas Partners conducts a national propane distribution business through its principal operating subsidiary, AmeriGas OLP.

UGI International, through subsidiaries and affiliates, conducts (1) an LPG distribution business throughout much of Europe and (2) an energy marketing business in France, Belgium, and the Netherlands. These businesses are conducted principally through our subsidiaries, UGI France, Flaga, AvantiGas, DVEP and UniverGas. See Note 5 for additional information regarding the energy marketing businesses at UGI International.

Energy Services conducts, directly and through subsidiaries and affiliates, energy marketing, including RNG, midstream transmission, LNG storage, natural gas gathering and processing, natural gas and RNG production, electricity generation and energy services businesses primarily in the eastern region of the U.S., eastern Ohio, the panhandle of West Virginia and California. UGID owns electricity generation facilities principally located in Pennsylvania. Energy Services and its subsidiaries’ storage, LNG and portions of its midstream transmission operations are subject to regulation by the FERC.

Our Utilities segment includes UGI Utilities and Mountaineer. PA Gas Utility serves customers in eastern and central Pennsylvania and in portions of one Maryland county, and Mountaineer serves customers in West Virginia. Electric Utility serves customers in portions of Luzerne and Wyoming counties in northeastern Pennsylvania. PA Gas Utility is subject to regulation by the PAPUC and FERC and, with respect to its customers in Maryland, the MDPSC. Mountaineer is subject to regulation by the WVPSC and FERC. Electric Utility is subject to regulation by the PAPUC and FERC.

Note 2 — Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the SEC. They include all adjustments that we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. The September 30, 2022, Condensed Consolidated Balance Sheet was derived from audited financial statements but does not include all footnote disclosures from the annual financial statements.

These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2022 Annual Report. Due to the seasonal nature of our businesses, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.

Restricted Cash. Restricted cash principally represents those cash balances in our commodity futures brokerage accounts that are restricted from withdrawal. The following table provides a reconciliation of the total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the corresponding amounts reported on the Condensed Consolidated Statements of Cash Flows.


	December 31, 2022		December 31, 2021
Cash and cash equivalents	$	317	$	334
Restricted cash	227		24
Cash, cash equivalents and restricted cash	$	544	$	358

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(Currency in millions, except per share amounts and where indicated otherwise)

Earnings Per Common Share. Basic earnings per share attributable to UGI stockholders reflect the weighted-average number of common shares outstanding. Diluted earnings per share attributable to UGI stockholders include the effects of dilutive stock options, common stock awards and Equity Units. Shares used in computing basic and diluted earnings per share are as follows:


	Three Months Ended December 31,
		2022	2021
Denominator (thousands of shares):
Weighted-average common shares outstanding — basic		209,934	209,673
Incremental shares issuable for stock options, common stock awards and Equity Units (a)		—	—
Weighted-average common shares outstanding — diluted		209,934	209,673

(a)For the three months ended December 31, 2022 and 2021, 6,431 and 6,486, respectively, of such shares have been excluded as these incremental shares would be antidilutive due to the net losses for the periods presented. At December 31, 2022 and 2021, these incremental shares exclude the effects of 6,625 and 3,347 shares, respectively, associated with outstanding stock option awards because their effect was antidilutive.

Equity Method Investments. We account for privately held equity securities of entities without readily determinable fair values in which we do not have control, but have significant influence over operating and financial policies, under the equity method. These are included in "Other assets" on the Condensed Consolidated Balance Sheets. Equity method earnings are included in "Income from equity method investees" on the Condensed Consolidated Statements of Income. Our equity method investments primarily comprise Pine Run and other equity method investments in biomass and other renewable energy projects.

Pine Run. The Company has an approximately 49% interest in Pine Run, a company jointly owned by Stonehenge Energy Resources and UGI Pine Run LLC. Pine Run owns Pine Run Midstream which operates dry gas gathering pipelines and compression assets in western Pennsylvania. Pine Run is accounted for as an equity method investment as we have the ability to exercise significant influence, but not control, over the entity. The carrying value of our investment in Pine Run at December 31, 2022 and 2021 was $71 and $62, respectively.

At December 31, 2021, the carrying value of our investment in Pennant was $99. During Fiscal 2022, UGI through its wholly owned indirect subsidiary, Energy Services, completed the Pennant Acquisition in which Energy Services acquired the remaining 53% of the equity interests in Pennant. The acquisition of the remaining interests was accounted for as an acquisition of assets, and the purchase price of approximately $61 was primarily allocated to property, plant and equipment.

Our other equity method investments totaled $104 and $22 at December 31, 2022 and 2021, respectively, and principally comprise of a number of investments in biomass and other renewable energy projects at Midstream & Marketing and a renewable energy joint venture at UGI International. Our maximum exposure to loss related to these investments is limited to the amount invested.

Derivative Instruments. Derivative instruments are reported on the Condensed Consolidated Balance Sheets at their fair values, unless the NPNS exception is elected. The accounting for changes in fair value depends upon the purpose of the derivative instrument, whether it is subject to regulatory ratemaking mechanisms or if it qualifies and is designated as a hedge for accounting purposes.

Certain of our derivative instruments qualify and are designated as cash flow hedges. For cash flow hedges, changes in the fair values of the derivative instruments are recorded in AOCI, to the extent effective at offsetting changes in the hedged item, until earnings are affected by the hedged item. We discontinue cash flow hedge accounting if occurrence of the forecasted transaction is determined to be no longer probable. Hedge accounting is also discontinued for derivatives that cease to be highly effective. We do not designate our commodity and certain foreign currency derivative instruments as hedges under GAAP. Changes in the fair values of these derivative instruments are reflected in net income. Gains and losses on substantially all of the commodity derivative instruments used by Utilities are included in regulatory assets or liabilities because it is probable such gains or losses will be recoverable from, or refundable to, customers. From time to time, we also enter into net investment hedges. Gains and losses on net investment hedges that relate to our foreign operations are included in the cumulative translation adjustment component in AOCI until such foreign net investment is substantially sold or liquidated.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(Currency in millions, except per share amounts and where indicated otherwise)

Cash flows from derivative instruments, other than certain cross-currency swaps and net investment hedges, if any, are included in cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows. Cash flows from the interest portion of our cross-currency hedges, if any, are included in cash flows from operating activities while cash flows from the currency portion of such hedges, if any, are included in cash flows from financing activities. Cash flows from net investment hedges, if any, are included in cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows.

For a more detailed description of the derivative instruments we use, our accounting for derivatives, our objectives for using them and other information, see Note 12.

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and costs. These estimates are based on management’s knowledge of current events, historical experience and various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may be different from these estimates and assumptions.

Goodwill. We do not amortize goodwill, but test it at least annually for impairment at the reporting unit level. A reporting unit is an operating segment, or one level below an operating segment (a component) if it constitutes a business for which discrete financial information is available and regularly reviewed by segment management. Components are aggregated into a single reporting unit if they have similar economic characteristics. Each of our reporting units with goodwill is required to perform impairment tests annually or whenever events or circumstances indicate that the value of goodwill may be impaired.

With respect to the AmeriGas Propane reporting unit’s Fiscal 2022 impairment test, we determined that AmeriGas Propane’s fair value exceeded its carrying value by approximately 30%. While the Company believes that its judgments used in the quantitative assessment of AmeriGas Propane’s fair value are reasonable based upon currently available facts and circumstances, if AmeriGas Propane were not able to achieve its anticipated results and/or if its weighted average cost of capital were to increase, its fair value would be adversely affected, which may result in an impairment. There were no changes in facts and circumstances that would indicate that it is more likely than not that the fair value of the AmeriGas Propane reporting unit may not be in excess of its book value at December 31, 2022. There is approximately $2 billion of goodwill in this reporting unit as of December 31, 2022. The Company will continue to monitor its reporting units and related goodwill for any possible future non-cash impairment charges.

Note 3 — Accounting Changes

New Accounting Standard Adopted in Fiscal 2023

Debt and Derivatives and Hedging. Effective October 1, 2022, the Company adopted ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” The amendments in this ASU affect entities that issue convertible instruments and/or contracts indexed to and potentially settled in an entity’s own equity. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, expands disclosure requirements for convertible instruments, and simplifies the related earnings per share guidance. We adopted this ASU using the modified retrospective transition method and applied the new guidance to applicable features of our Equity Units. Periods prior to October 1, 2022 have not been restated.

Upon adoption, we reclassified $6 from Common Stock to Preferred Stock associated with the previously separated equity-classified beneficial conversion feature, which was accounted for as a deemed dividend. The increase to Preferred Stock was partially offset by an increase of $1 to opening retained earnings for the previously recognized non-cash amortization of the beneficial conversion feature. The new guidance also removes the presumption of cash settlement for contracts that may be settled in cash or shares. In accordance with the new guidance, we included the dilutive impact of the quarterly contract adjustment payment liability associated with the 2024 Purchase Contracts, which may be settled in cash or shares, in our computation of weighted average diluted common shares outstanding. The adoption of the new guidance did not, and is not expected to, have a material impact on our consolidated financial statements.

Table of Contents

UGI CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(Currency in millions, except per share amounts and where indicated otherwise)

Note 4 — Revenue from Contracts with Customers

The Company recognizes revenue when control of promised goods or services is transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. See Note 4 in the Company’s 2022 Annual Report for additional information on our revenues from contracts with customers.

Revenue Disaggregation

The following tables present our disaggregated revenues by reportable segment:




























Three Months Ended December 31, 2022	Total		Eliminations (a)		AmeriGas Propane		UGI International		Midstream & Marketing		Utilities		Corporate & Other
Revenues from contracts with customers:
Utility:
Core Market:
Residential	$	336	$	—	$	—	$	—	$	—	$	336	$	—
Commercial & Industrial	132		—		—		—		—		132		—

Large delivery service	47		—		—		—		—		47		—
Off-system sales and capacity releases	32		(33)		—		—		—		65		—
Other	10		—		—		—		—		10		—
Total Utility	557		(33)		—		—		—		590		—
Non-Utility:
LPG:
Retail	1,116		—		634		482		—		—		—
Wholesale	102		—		51		51		—		—		—
Energy Marketing	778		(77)		—		318		537		—		—
Midstream:
Pipeline	65

UGI CORP /PA/ [UGIC] Filings

UGI CORP /PA/ [UGI] Filings