Ladies and gentlemen, thank you for standing by and welcome to the UGI Corporation fiscal year 2019 earnings call and webcast. At this time, all participants are in a listen only mode and after the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to speaker today, Alanna Zahora, Manager of Investor Relations. Please go ahead, ma'am.

Thanks James. Good morning everyone and thank you for joining us. With me today are Ted Jastrzebski, CFO of UGI Corporation, Roger Perreault, Executive Vice President of Global LPG and John Walsh, President and CEO of UGI. Before we begin, let me remind you that our comments today 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 Alanna. Good morning and welcome to our call. I hope you have all had a chance to review our press releases reporting UGI's full year results. I will comment briefly on major achievements over the course of fiscal 2019 and then I will turn it over to Ted who will provide more detail on UGI's financial performance. Roger Perreault, our Executive VP of Global LPG will provide an overview of the significant efficiency initiatives underway at AmeriGas and UGI International. I will then conclude by reviewing our fiscal 2020 guidance and progress on our strategic projects. We reported full year fiscal 2019 GAAP EPS of $1.41, while our adjusted EPS was $2.28. Our adjusted EPS was roughly 17% below our fiscal 2018 record adjusted EPS of $2.74, but includes dilution and a fourth quarter seasonal loss associated with our recent acquisitions. Excluding the acquisition impact, our business delivered $2.36 EPS and this represents the second highest adjusted EPS in UGI's history. Both years have been adjusted for the mark-to-market valuation of unsettled hedges and costs associated with the strategic efficiency programs at AmeriGas and UGI International, Ted and Roger will provide more detail on this later in the call. The results delivered in fiscal 2019 were impacted by a number of factors with the most significant being very warm weather in Europe and the dampening of pipeline capacity values over the course of the winter. Our teams responded well to these significant challenges and we delivered a solid year in the face of those key factors. Our fiscal 2020 guidance range of $2.60 to $2.90 assumes a return to normal weather across our service territories and some incremental improvement in pipeline capacity values. Ted and I will provide further details on our guidance later in the call. We were…

Thanks John. As John mentioned, our fiscal 2019 acquisition adjusted earnings per share of $2.36 was the second highest in UGI's history. The difference between our reported adjusted EPS of $2.28 and the $2.36 figure that you have heard us refer to, the $0.08 delta, can be broken down into two parts, the seasonal loss from the AmeriGas operations related to the timing of the transaction and the dilution impact. First, there was a $0.03 impact related to AmeriGas' operations and incremental interest from financing this deal. This came in below our 40.05 forecast. The remaining $0.05 are attributable to dilution. Our reportable segment EBIT was $978 million this year, compared to $1.08 billion last year, largely as a result of the AmeriGas merger and CMG acquisitions. And for consistency across the businesses, UGI is shifting our profitability reporting metrics to EBIT. You will see this change reflected in our future reporting. This table lays out our GAAP and adjusted earnings per share for fiscal 2019 compared to fiscal 2018. As you can see, our adjusted earnings exclude a number of items such as the impact of mark-to-market changes in commodity hedging instruments, a loss of $0.82 this year versus a gain of $0.39 last year. In fiscal 2019, we had $0.13 of unrealized gains on our foreign currency derivative instruments versus a gain of $0.11 last year. Lastly, you will see transformation costs at our LPG businesses that we will discuss in detail later on the call. Using acquisition adjusted earnings as a base, adjusted earnings per share decreased $0.38 versus last year. Our domestic businesses experienced relatively normal weather, but our international business has faced a warm and dry weather conditions dating back to the summer of 2018. The largest year-over-year decrease occurred at our midstream and marketing…

Thanks Ted. Driving operational efficiencies across our LPG businesses is an important component of our global LPG strategy for the next few years. As Ted mentioned, we are implementing strategic and sustainable measures that will increase profitability and deliver a better customer experience. Some of these measures are already underway at our international business and the AmeriGas transaction will enable us to redeploy some of the cash generated into several key investment opportunities that will generate substantial savings and efficiencies. Let's start with AmeriGas. We have identified over $120 million of permanent operational efficiencies that will be delivered through accelerated investment in customer digital experience, customer relationship management, operations process redesign and specialization, distribution and routing automation, sales effectiveness, procurement and G&A and lastly, supply and logistics. You have heard us talk about some of these enhancements like distribution efficiencies in the past. These initiatives, which will be fully implemented over the next 24 months significantly accelerate the pace and scale of the technology investments we have been deploying over the past several years. We expect the run rate benefits of these investments to be completely realized by the end of fiscal 2022. We will spend approximately $175 million in capital and transition cost in fiscal year 2020 and fiscal year 2021, of which approximately 55% to 60% will be attributable to CapEx. We expect to see modest P&L benefits in the fiscal year 2020, roughly $30 million and then begin to see more significant benefits build in fiscal year 2021 and onward. We are earmarking a portion of the benefits achieved from these initiatives to be reinvested in the business to take proactive approach to customer retention and growth, including reducing certain base business unit margins as a result of our lower cost structure. We are confident that these…

Thanks Roger. Our guidance for fiscal 2020 of $2.60 to $2.90 assumes normal weather and the return of some pipeline capacity volatility in our service territories. As was the case in fiscal 2019, we are using 15 year normal weather as the basis for our guidance. The midpoint of our fiscal 2020 guidance represents a 17% increase in EPS over our acquisition adjusted fiscal 2019 performance of $2.36. Following the solid fiscal year 2019 performance in a challenging environment and bolstered by the two key transactions in the last quarter, we enter the new fiscal year in a very strong position. The AmeriGas and Columbia transactions provide a strong foundation for accelerated cash generation and earnings growth over the next three to five years. Consistent with when we announced each transaction, we expect AmeriGas to be accretive in fiscal 2020 and CMG to be basically neutral. Together, we expect the transactions to deliver roughly $0.05 of accretion this year, the majority of that coming from the AmeriGas merger, but both acquisitions will be highly cash positive. As we move into fiscal 2021 and beyond, we expect continuing strong cash flows along with positive EPS contributions that become quite meaningful over time. As Roger right just described, we are excited about the opportunity to significantly improve the efficiency of our LPG distribution businesses, both in the U.S. and Europe. We are confident that the work underway will position AmeriGas and UGI International for very strong long term performance. The investment in transition expenses for restructuring and capital for deployment of new technologies will result in a significant reduction in our ongoing operating expenses and enhance customer service and support. We will keep you apprised of our progress over the course of the year. As Roger noted, we will see modest contribution…

[Operator Instructions]. Your first question comes from the line of Chris Sighinolfi from Jefferies. Go ahead, please. Your line is open.

Hi. Good morning John.

Good morning.

I just want to start with your guidance, if I could. I appreciate the information contained in the slides and Roger's explanation of some of the efficiency-focused investments you are making. I see $175 million at APU and €55 million internationally over a couple of years. Roger offered your breakdown as the delta or the breakdown between CapEx and OpEx treatment there. I am just curious, you have noted that you are going to exclude these costs from your adjusted numbers or exclude it from your guidance. I am wondering just if you could quantify how much is excluded from fiscal 2020, just so we can calibrate that?

Yes. Chris, this is Roger talking. So the way I would think about it is, the OpEx numbers are the ones that would be adjusted in fiscal 2020. So we are expecting the rollout of these efficiency plans to be really this year and up to 2022, so over the course of two years. And if you just break that out and look at the OpEx number, that's what I would adjust out.

And would you just break the numbers roughly in half, Roger? Or do you front-end weight those in anyway?

Yes. I would be pretty close to half and half, a little bit front-end loaded, I would say this year.

Okay. And then I guess the logic around excluding them, like I understand when you guys have acquired businesses and we have had some sort of transitional costs, so we have had some labor workouts like we saw with Finagaz. Those are costs that came with a specific action, I guess, the idea around adjusting out investment costs here. Can you just walk me through that?

Yes. Chris, this is John. I think the logic is this is a major sort of transformation program that we think is fundamental to sort of long term strong performance for AmeriGas and UGI International. And we wanted to make sure for investors and others that it was clear kind of what we were investing and also what the deliverables were. And the fact that these are, particularly the operating expenses associated with this are one-time non-recurring charges. So we wanted to make sure we had clarity around the underlying performance of the business rather than have that mixed with one-time cost associated with reducing our cost base. So that's the logic and just the scale of it is significant and strategically important to the company.

Okay. And John, you had noted, I think, in previous slide presentations, a plan to invest roughly $900 million in total CapEx across the business in fiscal 2020. I didn't see that number featured in today's presentation. You have mentioned some of the long range plans for the utilities and obviously we know these investments at the LPG business. But does that $900 million range still hold as a good expectation for the coming year?

The $900 million is a good estimate, rough estimate for the core business. The investment we make which will highlight in the restructuring or transformation programs would be in addition to that.

Okay. So there are additional capital and then the Texas Creek and Marshlands, just some expansions you noted on slide 18? Was that already embedded in the $900? Or was that?

See, yes, that's embedded as ongoing. Those are just incremental investments in growth opportunities that was captured in that $900 million.

As were of the investments we are going to be making in CMG over the next few years.

Right. Okay. So really the only additional items are some of the investments in the efficiency programs that Roger outlined?

Right. Yes.

Okay. And then a final question from me and then I will hop back in the queue, just to help calibrate with regard to the fourth fiscal quarter. Ted, I am just wondering how much AFUDC did you book on PennEast? And what do you expect for 2020, just given the challenges? And then for CMG, if you could give us sort of a rough breakdown of how much contributed in 4Q and what the profile looks like for fiscal 2020?

Yes. So let me start with the CMG, while we find these numbers on the AFUDC.

Sure.

So CMG was roughly breakeven in Q4. What we saw in increased operational gains, very roughly $11 million, was offset with interest expenses in Q4. We expect it to be a little bit north of neutral in 2020, CMG, in terms of accretion to EPS.

Okay. And is that a somewhat stable profile? I mean you mentioned it provides some stability to counterbalance the seasonality of the AmeriGas business. But is that something you see as a gradually positively sloping line? Or are there periods in the year where based on producer discussions you are expecting some sort of outsized movement?

So it fairly closely mirrors kind of our premium AmeriGas buy-in line over the year. And it slightly levels it out. But I mean slightly, a couple of percentage points in kind of the high end of the year and a couple of percentage points on the low end. So it slightly moderates the impact we see as AmeriGas comes into the picture in terms of how the line changes quarter-to-quarter over the next year.

Good. And just one additional comment on CMG. What we have, we have got a solid underpinning of take-or-pay and minimum volume commitments equivalent to take-or-pay that covers roughly two-thirds or 70% of the margin. So the underlying margin is solid. What we also have, if you look across the five systems, we have a combination of available capacity on certain systems and we have other systems that are at or near capacity. So depending on what happens in the broader market and with commodity values and individual producer plans, we have the upside of potentially adding in incremental volumes during the year because we have some available capacity. And then on other systems where we have got acreage dedicated to us and we are at or near system capacity, we are very hopeful that we will have, as we noted, expansion projects to announce. So we have got a nice sort of foundation underwritten by a pretty broad range of contracts with a long tenure and then some upside as the market evolves.

And Chris on that, AFUDC, we will follow-up with you on that. Just want to make sure we have the exact correct numbers.

Okay. That's great. Thanks for the time this mornings guys. I will hop back in the queue.

Okay. Thank you.

And there are no further questions at this time. I would like to turn the call back over to our presenters for some closing remarks.

Okay. Thanks very much for your time and attention this morning. We will keep you abreast as fiscal year 2020 moves on. Look forward to speaking with you as a group on the next call, but also speaking to many of you in the interim. Take care.

This concludes today's conference call. We thank you for your participation. You may now disconnect.