UGI Corporation

Ladies and gentlemen, thank you for standing by and welcome to the UGI Corporation third quarter FY20 earnings call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Investor Relations Manager, Alana Zahora. Thank you. Please go ahead. Thank you.

Good morning, everyone, and thank you for joining us. With me today are Ted Yastrzewski, CFO of UGI Corporation, Bob Beard, Executive Vice President, Natural Gas, Roger Perot, 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'll also describe our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available on slide 10 of our presentation. Now, let me turn the call over to John.

Thanks, Alana. Good morning and welcome to our call. I hope that you've all had the opportunity to review our press release reporting our third quarter results. We're very pleased with our strong third quarter performance and increased our full year guidance to a range of $2.45 to $2.55. This was a particularly significant quarter for us as we addressed the challenges of COVID-19, stepped forward with our efforts to help address systemic racism, and maintained our focus on safe and secure operations. While much work remains, we were encouraged with our progress in each of these critical areas in Q3. Turning to our financial performance, we delivered strong results as a combination of colder than normal weather, rigorous expense and margin management, and the positive contributions of our LPG restructuring programs underpinned strong earnings, cash flow, and liquidity. Our teams demonstrated their focus and resiliency as we addressed these major challenges in a quarter that was unlike any quarter in our 138-year history. Our results in Q3 very clearly demonstrate the strength and resiliency of our businesses. Each of our three domestic businesses delivered increased operating income versus Q3 fiscal 19. UGI International performed well despite the challenges of another very warm quarter. In addition to strong earnings performance, our teams did an outstanding job delivering free cash flow while closely managing CapEx and working capital. On today's call, I'll comment on key activities and market developments in the quarter and then turn it over to Ted who will provide you with an overview of UGI's financial performance. Bob Beard will provide an update on key activities across our natural gas business and and Roger will follow with details of progress in our LPG business. I'll wrap up with comments on our ESG program and our outlook. Our Q3 GAAP EPS was 41 cents and our adjusted EPS was 8 cents. That adjusted Q3 EPS was 5 cents below our fiscal 19 Q3 adjusted EPS Due to our 100% ownership of Amerigas during this off-season quarter and the impact of the pandemic, the underlying performance of our business was extremely strong as we benefited from cooler weather in the eastern U.S., the continued strength of UGI Appalachia Midstream, and continued growth in our cylinder exchange program at Amerigas. One indicator of the strength of our Q3 performance is our EBIT of $80.4 million, which was well above our Q3 fiscal 2019 EBIT of $52.6 million. Our year-to-date performance is equally strong. Our year-to-date GAAP EPS is $2.50, and our year-to-date adjusted EPS is $2.81. That adjusted EPS is 18% above fiscal 19 year-to-date adjusted EPS of $2.38. These quarters have been adjusted for the mark-to-mark valuation of unsettled hedges and other items Ted will cover later. That performance comes in a year when weather across all of our businesses has been warmer than normal and warmer than prior year. We're really pleased with the commitment and resilience demonstrated by our teams as we focus on meeting the critical needs of our customers and communities while also delivering very strong performance. Based on the very strong Q3 results and benefits from foreign tax treatment, we now expect our full-year EPS, inclusive of the COVID impact, to be in the range of $2.45 to $2.50. provide more detail on this significant increase in our guidance in his comments. As I noted earlier, one of the drivers for our Q3 performance was the continued strong contribution from UGI Appalachia. We continue to see volume growth in Appalachia year to date versus last year and have benefited from the operational effectiveness of the UGI Appalachia team. Most of the improvement in operating income from midstream marketing in Q3 can be attributed to UGI Appalachia. We're very pleased to have these systems as a core element of our midstream business. Amerigas delivered a solid year-on-year increase in EBIT despite the impact of the pandemic. This strong performance was due to colder weather early in the quarter, focused expense management, and growth in cylinder exchange from our investment in vending and our new home delivery service. In addition, while the pandemic reduced commercial and motor fuel volumes, We received an additional uplift in our cylinder business as customers spent more time cooking at home. Our utilities team had a very busy quarter as well. Our field teams did an outstanding job as we stopped all non-essential customer-facing activities for about two months and then restarted much of that activity late in the quarter. We're executing our field work with new protocols that prioritize the safety of our employees, our customers, and the public. We also move forward with a settlement agreement for our rate case. That agreement with proposed rate increases of $20 million is under review, first by the presiding administrative law judge and then by the PUC, and we expect a decision by early fall. In addition to the rate increase, the settlement includes a recovery mechanism for certain pandemic-related costs, including any increased uncollectible expenses. Bob will speak to the Raitt case in more detail in a few minutes. There was limited activity in the quarter related to our Penn East project. We continue to work closely with our partners to gain the necessary approval to move forward. We expect to gain additional clarity in the early fall when the US Supreme Court decides if they're gonna hear our case. We're encouraged by the firming of natural gas commodity values and believe that our existing network of midstream assets is ideally positioned to benefit from the improving commodity market. We're nearing completion of the Bethlehem LNG storage and vaporization system. This is an important expansion of our LNG network as we see LNG peaking demand increasing as pipeline expansion and greenfield projects are canceled or delayed. We also continue to transport LNG to other regions in the Mid-Atlantic and the Northeast as peak customer demand exceeds existing pipeline supply capacity. I'll return later on the call to comment on our progress on ESG and our outlook for the balance of the year, but I'd like to turn it over to Ted at this point for the financial review. Ted?