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AmeriGas Partners, L.P. (APU)

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AmeriGas Partners LP (APU)

Q2 2016 Earnings Conference Call

May 3, 2016, 09:00 AM ET

Executives

William Ruthrauff - Director of Investor Relations

John L. Walsh - President and Chief Executive Officer of UGI

Kirk R. Oliver - Chief Financial Officer of UGI

Jerry E. Sheridan - President and Chief Executive Officer of AmeriGas

Hugh J. Gallagher - Chief Financial Officer of AmeriGas Propane

Analysts

Benjamin Brownlow - Raymond James Financial Inc.

Christopher Sighinolfi - Jefferies & Company

Nathan Judge - Janney Montgomery Scott LLC

Presentation

Operator

Good morning my name is Tracy and I will be your conference operator today. At this time, I would like to welcome everyone to the UGI AmeriGas’ Second Quarter 2016 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions] Thank you Mr. Will Ruthrauff, Director of Investor Relations. You may begin your conference.

William Ruthrauff

Thank you Tracy. Good morning everyone and thank you for joining us. With me today are Hugh Gallagher, CFO of AmeriGas Propane, Kirk Oliver, CFO of UGI Corporation, Jerry Sheridan, President and CEO of AmeriGas and John Walsh, President and CEO of UGI.

Before we begin, let me remind you that our comments today will include certain forward-looking statements which management believe to be reasonable as of today’s date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our annual report on Form 10-K for an extensive list of factors that could affect results. We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations.

We will also describe our business using certain non-GAAP financial measures. Reconcilations to the comparable GAAP measures are available in the appendix of our presentation.

Now, let me turn the call over to John. John.

John L. Walsh

Thanks Will. Good morning and welcome to our call. I hope that you’ve all had a chance to review our press releases reporting s1 results and the updated guidance for UGI and AmeriGas. To say the least, this was a dynamic quarter for us though were challenges particularly the unseasonably warm winter across our service territories, but also noteworthy for the progress made on major investments and emerging new opportunities as the landscape changes across the energy sector.

Our financial performance in the quarter demonstrates the resiliency of our businesses in the phase of extremely warm weather. Over the years we've consistently highlighted the benefits of diversification when discussing UGI’s performance. Those benefits were quite evident in Q2 as very strong contributions from our international business and growth of our midstream marketing fee based businesses which are less weather dependant helped lessen the impact of the warm weather challenges.

On the call today, I'll comment on our financial performance and key activities in the second quarter. I'll then turn it over to Kirk, who will provide you with a more detailed review of UGI’s financial performance. Jerry will follow with an overview on AmeriGas and I'll wrap up with an update on our strategic initiatives.

Our Q2 GAAP EPS was $1.33 while our adjusted EPS, which reflects a $0.12 adjustment for mark-too-market gains on commodity derivatives and $0.03 adjustment for Finagaz transition expenses was $1.24. this is just slightly below our adjusted EPS of $1.26 in the second quarter of fiscal 2015 despite weather that was much warmer in our key service territories.

We are very pleased with the underlying performances of our business in this very challenging environment. Our major new investments such as the Finagaz acquisition in France and our new midstream projects delivered results that exceeded our expectations. With the conclusion of Q2 and the winter heating season, we are now in a position to revise our guidance for fiscal 2016. We've reduced our fiscal 2016 guidance range to $1.95 to $205 from the previously stated range of 215 to 230. This reduction is related to the impact of very warm weather in both Q1 and Q2.

As we have seen over the past three-years, weather patterns come and go, but the underlying strength of our businesses hold the key to long-term performance. As you will see later when Kirk compares our fiscal 2016 performance to fiscal 2012 a similar year from a weather perspective, our net income grew at a compounded annual growth rate in excess of 10% over that four-year period. Our outlook remains very positive for fiscal 2017 and beyond. I'll comment on our outlook later in the call. Kirk will provide more detail on guidance and our second quarter performance in a few minutes.

Turning back to Q2, our solid results with adjusted net income down less than 2% versus fiscal 2015, despite very warm weather and limited pipeline capacity volatility in the Mid-Atlantic region, reflect the major impact of strategic investments made over the past three to four-years. Effective expense management in our utilities and LPG businesses and solid unit margin management in AmeriGas and UGI International.

As I noted earlier, Q2 was a dynamic and challenging quarter. However, unlike fiscal 2014 and 2015, when the challenges were related to colder than normal weather, fiscal 2016 brought the challenges of very warm weather in all of our major service areas. Although volumes in our businesses reflected the decline in heating related demand, our underlying weather adjusted demand continues to be very strong.

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