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.

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.

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…

Thanks John. This table lays out our GAAP and adjusted earnings per share for this quarter compared to the same for Q2 of last year. As you can see, adjusted results exclude the impact of mark-to-market changes in commodity hedging instruments gains of $0.12 and $0.17 and acquisition and transition costs associated with the integration of Finagaz $0.03 in each quarter. Our adjusted earnings of $1.24 per share for the quarter are down only $0.02 from last year in spite of nearly record warm temperatures in all of our service territories. As you can see from this slide, we experienced warmer than normal weather in all of our businesses this quarter. Weather in our utility and midstream and marketing service territory with above 25% warmer than last year. Weather for AmeriGas was 13% warmer than last year and weather in France up was above 7% warmer. The warmer weather resulted in negative variances to earnings in the U.S. businesses, but was measurably offset by strong results in Europe, largely due to the accretive acquisition of Finagaz in France. As mentioned, AmeriGas experienced much warmer weather this quarter. Volume was down 14% on weather that was 13% warmer than last year, resulting in operating income of $250 million for the quarter. This represent the decrease of $47 million versus the second quarter of last year where we experienced weather that was 2% colder than normal. Operating and administrative expenses decreased by $19 million down 7.4% versus last year, primarily due to lower compensation and benefit expenses, lower vehicle fuel cost and lower uncollectible account expense. UGI International contributed $105 million in income before taxes $46 million increase over last year driven largely by the acquisition of the Finagaz LPG business in France. Weather in France was 7% warmer than last year,…

Okay. Thanks, Kirk. Very similar story for AmeriGas, extremely warm weather had a significant impact on our financial performance, not only over the quarter or the year-to-date period, but actually over the last 12-months. Before I go into details for the quarter, I would to share just a few weather statistics. The 12-months ended March 31, 2016 were the warmest on record according to NOVA and that’s a 121-years of history. The six months ended March 31, our fiscal year-to-date period was also the warmest October through March period on record. Q2 weather was the second warmest on record with nationwide degree days coming in at 12% warmer than normal and 13% warmer than last year. And the month of March alone was 21% warmer than normal. This extremely warm weather created a significant volume headwind starting in December and continuing through the second quarter. As a result, our retail volumes sold during the quarter were $62 million gallons or about 14% below last year’s quarter on weather that was 13% warmer than last year. Propane cost at Mont Belvieu averaged $0.39 for the quarter which was $0.14 below the second quarter last year. Unit margins for the quarter averaged about $0.03 above last year, as we were able to keep a portion of the low cost in an effort to offset the impact of the volume shortfall. In warm years, operating expenses discipline in this business is an absolute necessity as we seek to offset the impact of lower volumes and we were pleased with our expense performance during the quarter given the extreme weather challenges. Operating expenses for Q2 were down about $19 million of 7% from last year due to solid management of payroll cost and lower vehicle and collection expenses. Expenses in margin management have enabled…

Thanks Jerry. I would like to briefly review progress on the strategic investments in programs that are so critical for our future growth. Our midstream team is making good progress on their three major projects. We received our FERC certificate for the Sunbury pipeline project on April 29 just last week and we’re preparing for the field execution phase of that $160 million project. We expect Sunbury to be online early in 2017. PennEast also cleared a critical FERC milestone with the issuance that of its schedule for environmental review. The FERC set December 16, 2016 as a completion date for that process. Based on this newly confirmed milestone date, we know anticipate an in-service date for PennEast in the second half 2018. Our third major active project in midstream is our new LNG liquefaction unit in Manning, Pennsylvania. The project is now in the say construction phase and is on-track to meet its targeted in-service date of January 2017. Our gas utility is to deploying capital at record levels to support the continued growth of our residential, commercial and industrial customer base and our intensive infrastructure replacement and upgrade program. We expect to invest upwards of $1 billion in capital in our utility business over the next four-years. Our teams are focused on meeting the challenge, we’re confident that we have the resources and capabilities to execute these far reaching capital programs. As Jerry just described to you, our team at AmeriGas did a great job of handling our warm weather challenges in addition to taking the actions necessary to control expenses and generate cash, we remain focused on developing the growth opportunities that will drive future performance. One area of note that I would like to reinforce is our ACE business where we won a series of major…

[Operator Instructions] And your first question comes from the line of Ben Brownlow from Raymond James. Your line is now open.

Hi good morning. Quick question Jerry on the expense management, congratulations on that. That's a very well managed in a difficult weather environment. That $19 million or $18.9 million reduction year-over-year, how much of that was weather reaction versus sustainable, is it 100% of that just in alignment with lower volume?

To keep it really simple, I would say roughly half of it had to do with management action and the rest had to do with two things primarily, slower vehicle fuel because diesel is just cheaper year-over-year and our collection expenses are down, because revenue comes down on the lower price package or margin based business. But the rest is really managing over time well, if we had postpone certain repairs and maintenance and those sorts of things. So about half management action, the rest was natural.

That's really helpful and then just one more for me. There weren’t any acquisitions in the quarter, but when you look historically and you get these unseasonably warm quarters, how does that affect the M&A opportunity as a pipeline that you see in terms of M&A?

Traditionally, it hasn't had a big impact. You would think that this might cause some individual to sell. This year maybe a little different, we're starting to see a growing pipeline, I don't know how much its connected to the weather or just coincidence, but pipeline looks very good and these are all kind of smaller scale deals, but I think we're going to have a good spring, summer.

Just one additional comment I would make on that is that I think one of the key things in M&A in the propane segment in the U.S. is the work that AmeriGas does in terms of continuity. Jerry's team has an ongoing for decades program to maintain strong relationships with distributors that we believe would be strong additions to our network. And we're consistently in contact, regularly in contact with them and that's really crucial in terms of continuity. Whenever as seller reaches the point where they are considering sale of their business that continuity plays a key role in terms of confidence in working with us.

Great. Thank you for the color and just to reaffirm one more thing, you are reiterating kind of a long-term distribution growth outlook of that 5%.

Well in this case, we really believe and investors have hold us that in this environment a tilt towards distribution coverage would be appropriate. So we're not committing to 2% or any number, I think our commitment is that we're going to continue to increase the distribution as we have for 12 consecutive years. So it's a good track record that I think you can rely on, but in this environment there seems to be a call for coverage and that's what we did this around.

That's fair. Great. Thank you, guys.

Thank you.

[Operator Instructions] Your next question comes from the line of Chris Sighinolfi from Jefferies. Your line is now open.

Hey good morning John.

Good morning.

Just a couple of clarification question, if I could start there with regard to some of the detail of the slides. Thanks for the slides deck that helpful. I guess starting on, if you could go to slide 12, where you talking about midstream and marketing and you were noting that total margin was down about $25 million from last year despite the inclusion of that $14 million and contribution new assets. I guess what you have been talking about this in prior years, but the opportunity that you have to make capacity margins. Can we just assume that that was - your comments sort of indicate there was lack of opportunity given a lack of base spread. But can we assume that that was somewhere near zero or how do we think about that business would have been down $40 million I guess without the contribution of the assets. Is that primarily or almost entirely just a decline in capacity repayments or margin opportunity that you made last year?

Well there is a couple of key pieces Chris. That’s one of them the sort of that margin that created when you have that significant basis differential difference driven by extended cold periods. You also have the margin - the contribution from gas marketing, which is impacted by warmer weather. So both of those are material in terms of contributing to the margin shortfall. I think one of the key points to make is, even though this was an extremely warm winter, we did have just a few days and it was actually over a weekend in the early part of the second quarter where we had some colder than normal weather and in that period we saw market volatility. So we did generate some margins, the fact that it was on a weekend tends to dampen demand a little bit versus a weekday sort of cold peak. But that just to me underpin the fact that demand is there, cold weather will obviously bring a considerable draw, the peaks are actually getting higher, which is what we see in our peaking business and the infrastructure gap filling is moving very slowly. So we believe we’ll continue to see significant basis differentials in the Mid-Atlantic and Northeast with cold weather in next year and beyond. But in terms of coming back to the margins question, it’s both the natural gas and power marketing piece contributed to that shortfall due to the warmer weather and we certainly saw a significantly less and materially less opportunity for that opportunistic margin generation on capacity.

Okay. So, if I were to take what you have told us previously with the additions on LNG and the ability of the utilities to take more locally sourced gas. Do you still think that they will roll into next winter and there are those margin opportunities, do you actually think the UGI business is better able to capture them, just you have to have the opportunity to be able to do so?

You have to have the opportunity and we are adding assets to the portfolio in the region. So a big part of our strategy is a concentration of the assets that can be network to utilize as market volatility occurs and it doesn’t occur uniformly, it shows itself in different forms and locations depending on what else is happening across the overall natural gas grid. So we’re better placed than ever given the range of assets that we have, we have more LNG than ever, we are managing more pipeline capacity and we own more of our own asset network. So we have more tools or capabilities to deploy when those peak days occur.

Okay. Perfect. If I could switch to a sort of a clean-up on the previous slide, slide 11 when you were referencing the utilities. There is the $14 million improvement in O&M expense and I thought Kirk had mentioned and maybe I just heard it wrong that part of that is a capitalization of previously incurred expenses. So is that a reversal of prior period or is that - can you just better help me understand what exactly that line item is?

Yes, Chris that was expenses that we’re capitalizing in the prior year period, but because we’re going to get rate recovery for that the regulatory accounting calls for capitalizing it and putting it into rate base. That was about $5.8 million.

Okay. That’s helpful. And then Kirk, can we just talk about the corporate and other segment, I mean I read the descriptions again at the end of your release about what is contained within that segment description. When you say commodity derivative, are the interest rate hedges on your euro exposure in there as well?

Those get hedge accounting, so they don’t have any - they are in AOCI. So what is in there is the commodity hedges. So each one of the segments Chris are presented almost on a adjusted basis and then we take the mark-to-market on all the commodities in each segments and put it in corporate and other.

Okay, but even if we normalize for that, if we strip off the mark-to-market that you guys gave us in your adjusted earnings figure. There is still a fairly meaningful contribution from corporate and other and since thinking about HVAC and the electric utility moved out, I mean what is still residing in there? I know it’s a lot of inner-company cancellations, but on a total contribution basis, the last two years it's been rather significant in the second quarter? I'm just trying to better understand how we should think about modeling it.

Yes, I think it's mostly inner-company, it's pretty tough to model. I think it's mostly inner-company eliminations and some of that is tax related and other things. Maybe we could try to go through and if there is a way we can help you with modeling it offline. Just one key point Chris on that. We first started reporting on a mark-to-market basis in fiscal 2015 on a full-year basis. So when you compare 2015 and 2016 to any year prior to it, you are not going to see those mark-to-market adjustments showing up in corporate and others. So that’s a big change when you just look at those headline numbers in the period leading up through 2014 if you compare that to 2015 and 2016. It’s certainly the most significant change in that category is the mark-to-market adjustments flowing through that specific segment.

Okay Kirk maybe I will follow up with you offline on how to think about maybe some of the drivers that might shape on a quarter or year-over-year basis?

Yes. That would be great.

I guess the final question from me and I'll get back in the queue, is just, I can't help, but I would like to see across the peer group of companies. You guys operate weather sensitive businesses, you hit yourself for the actual impacts of weather not every peer company of yours does that, some companies even though they don’t have any regulatory mechanisms to actually protect them from weather, they report non-GAAP financials that strip out the effects of weather. And it seems like investors are just willing to go along with that and give them credit for it. So I guess my question is have you ever thought about doing that yourself?

I mean we've seen that other company do it Chris, we don’t really try our self to accurately quantify the weather impact. So we tend to do it like we did today, where you know we go back and we look at a comparable period and look at how we did versus that period. We have a lot of different business units with different customer basis, so it would be quite an exercise for us to do something that is that involved. I mean we have talked about it, the other thing is that there has been some more pronouncement lately about maybe pushing back against some of these adjustments for reporting purposes.

Yes, I have read that with regard to our MLP coverage.

We try to highlight in a way that is straightforward as we can, which is the comparison to 2012 is handy, because it’s very similar weather year and we certainly referenced weather. It does get fairly complicated, because we do have some offsetting factors, commodity costs typically that on always, but typically dropped when demand lessens therefore you get in some cases a parachute effect on margin. So there is a lot of different factors and so we try to do it in a way that’s straightforward as we can make it without any sort of speculation or making too many assumptions on our own. We find that works best and also, it kind of reflects the attitude we have in the company, which is our business teams need to work hard particularly in the non regulated businesses that they have more flexibility. Work hard to offset as much of the impact of weather is possible. So we certainly don’t want to shield our internal teams from having to deal with whatever the weather brings us. So our external communication kind of reflects that attitude as well.

Yes, okay well thanks for the time. I appreciate it.

Sure. Thanks Chris.

Thanks Chris.

Your next question comes from the line of Nathan Judge from Janney. Your line is open.

Yes good morning.

Good morning Nathan.

Just wanted to ask on the international business, there was a pretty nice increase in margin year-on-year and just obviously there has been some lower LPG prices, but how sustainable is that margin especially if we have an environment where oil prices do recover and just thinking about the cultural change and how pricing has happened over there more specifically?

Sure I think unit margins in Europe as you pointed out, we had a healthy increase this year and there is multiple factors, three that I can think of that did contribute to that. One is certainly what you mentioned, we had a drop in the underlying commodity cost, which provides a parachute effect and that was contributing to margin increase, which we see during periods wherein underlying commodity cost drop particularly during the winter season. The other two factors are business base based on activity, we saw the effect of the Finagaz gas acquisition, we significantly increased the scale of our business in France and unit margins in France are higher on average than they are across the rest of Europe. They have that business mix change that contributed to on upward movement in average unit margin. And lastly, we made some decisions in terms of our participation in the auto gas segment in certain markets which is a high volume, low margin segment and we shed some of that business which also - so that's a product effect, product mix effect that also have the impact of increasing our average unit margins. I draw on all three typically two of those are long-lasting, we've increased our position at France, which is a higher unit margin, we've shed some of that low margin business that we felt was less attractive. Typically with the parachute effect that would tend to normalize over time, but our goal is to move margins up with inflations. So it would normalize at a level that's above you know our historical level. So we look to retain some of that parachute in the form of higher ongoing unit margins that would enable us to continue to stay on that path of keeping up with underlying inflation rates.

And the basis spread between Europe and U.S. has narrowed significant but there still is a fair amount of new shifts coming in. Could you just give us a little bit of idea on if in a stable commodity price environment, what that basis differential, what you think it will grow over the next 12-months or so?

It's a good question. We all have a opinions, but we don't act on those so in terms of the way the business will performing in the way our supply strategies. We will continue to assume that we don't know where the underlying costs will go nor that we know what will happen with that differential, because it's pretty complex that of factors that drive it. but absolutely your point is correct, the differential between the lending costs in the Europe and U.S. has narrowed considerably and has also over the last two winters become much more stable. I think it's somewhere around equivalent of $0.20 a gallon between $0.15 and $0.20 which is sort of where it was historically, if you go way back, but that had gotten I think as high as $0.60 to $0.80 a gallon. I think in general terms, because of what's happened to the supply market, the global supply chain has changed considerably based on higher production of NGLs in the U.S. in particular. So I think that over time is going to result in a diminished differential like we've seen. I'm sure we'll see some volatility, but it's a much more global supply market than it was even three-years ago, which from our standpoint as a major European distributor is a really positive development, because as a distribution company the last thing you want to see is significant volatility in your delivered LPG cost. So this dampening effect of enhanced supply around shale gas developments is a real positive for us. So I would think, we'll see far or less volatility in that differential and we would see the differential much lower than it was say in that 2010 to 2014 period, we're kind of [indiscernible] I would think it would to be modified in a significant way and not nearly as volatile.

Thank you and just finally on the PennEast project, just wanted to understand what impact the Delaware River Basin commission can have in the permitting process. Now that its expect to have their own hearing. And is it possible to have that more less that last mile perhaps delayed and the rest of project continued to head on time or is it all one project that needs to be completed?

Nathan the way we think about it is, one project and certainly our partners are the New Jersey based utilities along with Spectra, but speaking of the New Jersey based partners, obviously they are very eager to get access to supply for their customer base. So we look it as one process, so that river crossing is important. That's a process that certainly we'll participate in that process, it's an opportunity for us to communicate and supply information to the DRBC, we work on an ongoing basis with various entities within Pennsylvania and with various sort of river basin commission. So we are very comfortable and familiar, we believe we have good insights into what they would be looking for in terms of information on the projects and also good information and support in terms of what our own experience has been as we've executed major river crossings on our other projects. We had a major river crossing on the Auburn project as a example. So we can point to that and bring that experience to those discussions as that process moves forward.

Thank you very much.

Okay. Thanks Nathan.

There are no further questions at this time. Mr. John Walsh, I turn the call over to you.

Okay, well thank you very much. Thanks for your time and attention this morning and we look forward to speaking with you next quarter. We will talk to you soon.