Will Ruthrauff - Director of IR Jerry Sheridan - President and CEO, AmeriGas John Walsh - President and CEO Kirk Oliver - CFO :

:

:

Good morning my name is Scott and I will be your conference operator today. At this time I would like to welcome everyone to the UGI AmeriGas First Quarter 2017 Conference Call. [Operator Instructions] Thank you. Will Ruthrauff, Director of Investor Relations, you may begin your conference.

Thanks Scott. 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 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 will 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 let me turn the call over to John.

Thanks Will. Good morning and welcome to our call. I trust that you've all had a chance to review our press releases reporting first quarter results for UGI and AmeriGas. We had a very strong Q1 at both AmeriGas and UGI. With all of our businesses contributing higher adjusted net income than in 2016, resulting in a record first quarter for UGI. This very strong performance can be attributed to colder weather across our service territories versus FY '16 and the significant positive impact of major investments and acquisitions made over the past few years. We were very pleased with the quality of our earnings in the quarter, as our performance was driven by strong customer demand and very solid operational execution by our teams. I will comment on our key activities and market developments in the first quarter, then I will turn it over to Kirk who will provide you with a detailed overview of UGI's financial performance. Jerry will review Q1 for AmeriGas and I will wrap up with an update on our strategic initiatives. Our Q1 adjusted EPS of $0.91 established a new high water mark for UGI Q1 performance. This was well above last year's adjusted EPS of $0.64. Both quarters have been adjusted for the mark-to-market valuation of unsettled hedges and other items that Kirk will cover later. These exceptionally strong results not only reflect the impact of colder weather in each of our businesses but also reflect the underlying strength of our businesses. In the quarter, we saw the continued major earnings contribution from our Finagaz acquisition. The impact of increased base rates at UGI Gas and the earnings contributions from new LNG contracts and gas marketing growth in midstream and marketing. It's important to note that while weather was colder than in FY…

Thanks John and good morning to everyone on the call. This first table lays out our gap and adjusted earnings per share for this quarter, compared to the same for Q1 of last year. As you can see, adjusted results exclude the impact of mark-to-market changes in commodities and foreign-exchange hedging instruments; transition costs associated with the integration of Finagaz; a loss on extinguishment of debt and a recent change in French tax law which will lower the corporate tax rate in France beginning in FY '21 for UGI. At the end of December, the French Parliament approved a reduction in the corporate tax rate from 34.4% to 28.9% beginning in 2020. Because our French operations have deferred tax liabilities that are expected to be paid after the new rates become effective, we reduced our net-deferred tax liabilities by $24.7 million. Also, beginning with Q1, we centralized our hedging program associated with UGI's international foreign currency exposure. We use foreign currency exchange contracts to reduce the exposure to foreign-exchange rate volatility. These new foreign currency contracts are not accounted for as hedges and the mark-to-market adjustments are recorded in our gas net income, are excluded from adjusted earnings. Our prior year foreign currency contracts continue to be accounted for as hedges and will be recognized in earnings upon their settlement. Our adjusted earnings of $0.91 per share for the quarter, is up $0.27 over last year. Reflecting as John mentioned earlier, contributions from strategic investments in weather that was colder than in the prior-year period. I'll now run through the Q1 results for each of the businesses. Turning first to AmeriGas. Volume was about 4% higher as the effects of very warm October and November were offset by colder weather in December. Adjusted EBITDA of $185 million was up over…

Okay. Thanks Kurt and good morning. Adjusted EBITDA for AmeriGas in the first quarter of FY '17 was $185 million, compared to $178 million first quarter last year. As mentioned in our earnings release, adjusted EBITDA in the current quarter includes the impact of an $8.8 million charge which is recorded to correct an error from prior periods. Therefore, this was a non-operating and non-recurring charge. Although October and November were 26% warmer than last year; December came in essentially normal and first quarter weather over-all was 14% warmer than normal and 7% colder than last year. Retail volumes increased 10.5 million gallons or 4% on this colder weather. Average propane costs at Mt. Belvieu increased 39% when compared to the prior year; however, national inventories remain at strong levels and although propane costs have risen, the supply outlook remains relatively stable historically. We kept up with the rising cost environment and our retail margins were in-line with last year. Expense management was particularly good in the quarter, as we remained in warm weather mode through the first two months of the quarter and then quickly transitioned into winter mode in December. Operating expenses were down $4 million despite the 4% increase in volume. Although our performance this quarter was certainly better than last year on modestly colder weather; we're most encouraged by an additional comparison of this quarter to Q1 in FY15. This analysis reveals that our current quarter's operating results compare nicely to the comparable quarter in FY15 despite 11% warmer weather. Adjusted EBITDA was $185 million this year and again, includes the $8.8 million error correction I mentioned. This compares to the $189 million of adjusted EBITDA in Q1 of 2015. This year's quarter again, was 11% warmer than Q1 in 2015 and as a result, the…

Thanks Jerry. As I noted earlier on the call, we were very pleased with our strong financial performance in Q1. We were equally pleased with the progress on our portfolio strategic investments. We've strengthened our midstream asset network in the Marcellus with the addition of the Sunbury pipeline and the Manning LNG liquefaction unit. Our PennEast pipeline project continues to move through the FERC approval process, although the current phase has been extended. We now expect the environmental impact assessment phase to conclude by mid-April. Our target completion date for PennEast remains the end of calendar 2018. In addition to the Manning project, we're executing a series of smaller LNG projects that will add storage, vaporization and fueling facilities at strategic points in Central and Eastern Pennsylvania. LNG peaking is one of the core activities for our midstream business. We continue to see an increase in requests for peaking services and our LNG network is being enhanced to ensure that we can meet this demand. These projects leverage our existing LNG asset base and provide very attractive returns. We're deploying record levels of capital at UGI Utilities to support our growth and infrastructure replacement programs. These investments ensure that we continue to deliver efficient and reliable service to our expanding customer base. We expect our total capital spend at utilities to exceed $1.1 billion over the next four years. Roughly 40% above the capital spend over the preceding four years. These projects enable access to low-cost natural gas for our core customers; and have contributed to the significant reduction, 40% to 50%, in the average monthly bill our customers have enjoyed versus their peak monthly bills in 2008 and 2009. AmeriGas is positioned well as we enter Q2. Jerry and the team have done a great job of utilizing enhanced…

[Operator Instructions]. Your first question comes from the line of Michael Gaugler with Janney. Your line is open.

Your next question comes from the line of Ben Brownlow with Raymond James. Your line is open.

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

Your next question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.

There are no further questions at this time. I will turn the call back over to the presenters.

Thank you, Scott. Thank you everyone. I appreciate your time this morning and we look forward to talking with you after our quarter two results are issued. Thank you.

This concludes today's conference call. You may now disconnect.