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AmeriGas Partners, L.P. (APU)

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AmeriGas Partners LP

Q1 2018 Earnings Conference Call

February 1, 2018 9:00 AM ET

Executives

Will Ruthrauff - Investor Relations

Hugh Gallagher - Chief Financial Officer of AmeriGas Propane

Kirk Oliver - Chief Financial Officer of UGI Corporation

Jerry Sheridan - President and Chief Executive Officer of AmeriGas Propane

John Walsh - President and Chief Executive Officer of UGI

Analysts

Marek Kozak - Citigroup

Ben Brownlow - Raymond James & Associates, Inc

Chris Sighinolfi - Jefferies

Stephen Wong - Merrill Capital

Presentation

Operator

Good morning. My name is Christa and I'll be your conference operator today. At this time, I'd like to welcome everyone to the UGI Corporation and AmeriGas Partners First Quarter 2018 Earnings 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.

I would now like to turn the call over to your host, Will Ruthrauff, Director of Investor Relations. You may begin.

Will Ruthrauff

Thanks, Christa. Good morning, everyone and thank you for joining us. On the call today are Hugh Gallagher, CFO of AmeriGas Propane; Kirk Oliver, CFO of UGI Corporation; Jerry Sheridan, President and CEO of AmeriGas Propane; 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 believes 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’ll also describe our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available in the appendix of our presentation.

Now, I'll turn the call over to John.

John Walsh

Thanks Will. Good morning and welcome to our call. I hope that you all had a chance to review our press release's reporting first quarter result for UGI and AmeriGas. We had strong Q1 as each of our domestic businesses contributed higher adjusted net income than in fiscal 2017. Weather was slightly warm than normal in each of our businesses, but Q1 domestic weather was colder than Q1 fiscal 2017. Our strong performance can be attributed to the return of more normal weather in the US, the impact of tax reform and the continuing earnings contributions from our new investments and acquisition. I'll comment on our key activities and market developments in Q1, and then I'll turn it over to Kirk who provides you with a detailed overview of UGI's financial performance including a review of the beneficial impact of Federal tax legislation. Jerry will review Q1 for AmeriGas and I'll wrap up with an update on our strategic initiatives.

I am once again pleased to report record earnings for UGI. Our Q1 GAAP EPS was $2.07, while our adjusted EPS was a $1.01. That adjusted EPS exceeded the prior record adjusted Q1 EPS of $0.91, which we reported last year. Both quarters have been adjusted for the mark-to-market valuation of unsettled hedges and other items, most notably the one-time impact on accrued and deferred tax liabilities resulting from tax changes which Kirk will cover later. The impact of tax legislation was noteworthy in the quarter as the net impact of a significant and permanent positive change in our US tax rate and a smaller temporary negative change in our tax rate in France contributed $0.09 to our EPS growth. These strong results reflect the impact of near normal weather in each of our key service areas, and also demonstrate the underlying strength of our businesses.

In addition to the strong earnings performance in the first quarter, I'd like to comment on the significant progress we made on a number of strategic projects and activities. Our team, as always maintained their focus on meeting our critical commitment to our customers and the communities we serve, while also ensuring our new capital projects and acquisitions meet our exceed their performance targets. I am happy to report that we performed well on both fronts in Q1. We achieved several critical milestones on projects that will lay foundation for our future growth. The PennEast Partnership received its final FERC certificate on January 19 for the much needed pipeline project. PennEast will provide critical new pipeline capacity and enhance access to affordable Marcellus gas to residential customers in Eastern Pennsylvania and across the state of New Jersey. We are excited to start the next phase of our activities which will involve close collaborations with the state and local agencies in Pennsylvania and New Jersey. We expect construction of PennEast to commence by the end of 2018.

Our new Manning LNG liquefaction Unit in Northeast Pennsylvania which came on stream in July has been working at peak capacity for day one. Demand for LNG has never been stronger driven by increased peak day demand for most gas LDCs and the significant challenges faced by capacity constrained areas in east and northeast from LNG has become an essential element of the supply portfolio. Our Manning investment was timely, is important for consumers and is paying off during the strong start to the winter heating season.

Our utility continues to make great progress with its mission to replace and force critical infrastructure across our system, while also investing in growth projects to extend our networks to un-served communities. We continue to grow the customer base at our gas utility with almost 3,800 new residential heating and commercial customers added in Q1. Our infrastructure replacement program for cast iron and bare steel remains on track with over 65 miles of pipeline replaced during calendar year 2017, and a similar target for 2018. In addition, this month we filed our first rate case for UGI Electric in 22 years.

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