AmeriGas Reports Third Quarter Results; Updates Guidance

AmeriGas Propane, Inc., the general partner of AmeriGas Partners, L.P. (the "Partnership," NYSE: APU), today reported financial results for the fiscal quarter ended June 30, 2019.

HIGHLIGHTS

GAAP net loss of $49.0 million, compared with GAAP net loss of $74.4 million in the prior-year period; adjusted net loss of $43.8 million, compared with adjusted net loss of $20.2 million in the prior-year period
Adjusted EBITDA of $42.5 million, compared with $67.2 million in the prior-year period
Current year period includes $15 million in expenses related to litigation reserves and correction of a prior-period accounting error
Reduces Adjusted EBITDA guidance range to $580 million to $590 million (including the negative impact of aforementioned expense adjustments) for the fiscal year ending September 30, 2019

Hugh J. Gallagher, president and chief executive officer of AmeriGas, said, "Our third quarter results were negatively impacted by April weather that was 30% warmer than the prior-year period and certain expense adjustments. Our Cylinder Exchange and National Accounts programs continue to provide solid growth performance. During the quarter, we launched our cylinder home delivery concept in the Philadelphia area and early customer response has been encouraging. The activities related to the merger with UGI are progressing well, as the Unitholder meeting is scheduled for August 21st and, subject to unitholder approval, the transaction is expected to close shortly thereafter. Finally, we are advancing activities related to driving significant improvements in operating efficiencies and our customer experience, and we expect various initiatives to get underway during our fourth quarter."

Based on the results through the first nine months of the year, and expectations for the fourth quarter, the company now expects Adjusted EBITDA in the range of $580 million - $590 million for the fiscal year ending September 30, 20191.

KEY DRIVERS OF THIRD QUARTER RESULTS

Retail volumes sold decreased by 6.7% primarily due to April weather that was significantly warmer than the prior-year period
Our Cylinder Exchange and National Accounts volume increased 4.5% and 0.6%, respectively, over prior year

See Note on Guidance and Use of Forward-Looking Statements

EARNINGS CALL and WEBCAST

AmeriGas Partners, L.P. will hold a live Internet Audio Webcast of its conference call to discuss third quarter earnings and other current activities at 9:00 AM ET on Tuesday, August 6, 2019. Interested parties may listen to the audio webcast both live and in replay on the Internet at https://investors.amerigas.com/financial-reports-and-information/events-and-presentations or at the company website https://www.amerigas.com under Investor Relations. A telephonic replay will be available from 2:00 PM ET on August 6th through 11:59 PM on August 13th. The replay may be accessed at (855) 859-2056, and internationally at 1-404-537-3406, conference ID 4089204.

ABOUT AMERIGAS

AmeriGas is the nation’s largest retail propane marketer, serving over 1.7 million customers in all 50 states from approximately 1,900 distribution locations. UGI Corporation, through subsidiaries, is the sole General Partner and owns 26% of the Partnership and the public owns the remaining 74%. Comprehensive information about AmeriGas is available on the Internet at https://www.amerigas.com

USE OF NON-GAAP MEASURES

The Partnership’s management uses certain non-GAAP financial measures, including adjusted total margin, EBITDA, Adjusted EBITDA and adjusted net income (loss) attributable to AmeriGas Partners, L.P., when evaluating the Partnership’s overall performance. These financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures.

Management believes earnings before interest, income taxes, depreciation and amortization (“EBITDA”), as adjusted for the effects of gains and losses on commodity derivative instruments not associated with current-period transactions and other gains and losses that competitors do not necessarily have ("Adjusted EBITDA"), is a meaningful non-GAAP financial measure used by investors to (1) compare the Partnership’s operating performance with that of other companies within the propane industry and (2) assess the Partnership’s ability to meet loan covenants. The Partnership’s definition of Adjusted EBITDA may be different from those used by other companies. Management uses Adjusted EBITDA to compare year-over-year profitability of the business without regard to capital structure as well as to compare the relative performance of the Partnership to that of other master limited partnerships without regard to their financing methods, capital structure, income taxes, the effects of gains and losses on commodity derivative instruments not associated with current-period transactions or historical cost basis. In view of the omission of interest, income taxes, depreciation and amortization, gains and losses on commodity derivative instruments not associated with current-period transactions and other gains and losses that competitors do not necessarily have from Adjusted EBITDA, management also assesses the profitability of the business by comparing net income attributable to AmeriGas Partners, L.P. for the relevant periods. Management also uses Adjusted EBITDA to assess the Partnership’s profitability because its parent, UGI Corporation, uses the Partnership’s Adjusted EBITDA to assess the profitability of the Partnership, which is one of UGI Corporation’s industry segments. UGI Corporation discloses the Partnership’s Adjusted EBITDA as the profitability measure for its domestic propane segment.

Management believes the presentation of other non-GAAP financial measures, comprised of adjusted total margin and adjusted net income (loss) attributable to AmeriGas Partners, L.P., provide useful information to investors to more effectively evaluate the period-over-period results of operations of the Partnership. Management uses these non-GAAP financial measures because they eliminate the impact of (1) gains and losses on commodity derivative instruments that are not associated with current-period transactions and (2) other gains and losses that competitors do not necessarily have to provide insight into the comparison of period-over-period profitability to that of other master limited partnerships.

Reconciliations of adjusted total margin, EBITDA, Adjusted EBITDA and adjusted net income (loss) attributable to AmeriGas Partners, L.P. to the most directly comparable financial measure calculated and presented in accordance with GAAP are presented at the end of this press release.

NOTE ON GUIDANCE

Because we are unable to predict certain potentially material items affecting net income on a GAAP basis, principally mark-to-market gains and losses on commodity derivative instruments, we cannot reconcile 2019 Adjusted EBITDA, a non-GAAP measure, to net income attributable to AmeriGas Partners, L.P., the most directly comparable GAAP measure, in reliance on the “unreasonable efforts” exception set forth in SEC rules. Adjustments that management can reasonably estimate are provided below.

USE OF FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements that 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 and many of which are beyond management’s control. You should read the Partnership’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a more extensive list of factors that could affect results. Among them are adverse weather conditions, cost volatility and availability of propane, increased customer conservation measures, the capacity to transport propane to our market areas, the impact of pending and future legal proceedings, including, but not limited to, pending litigations relating to the AmeriGas Merger, liability for uninsured claims and for claims in excess of insurance coverage, political, economic and regulatory conditions in the U.S. and abroad, the availability, timing and success of our acquisitions, commercial initiatives and investments to grow our business, our ability to successfully integrate acquisitions and achieve anticipated synergies, the interruption, disruption, failure, malfunction or breach of our information technology systems, including due to cyber-attack, the failure to realize the anticipated benefits of the merger transaction, the possible diversion of management time on issues related to the merger transaction, the risk that the requisite approvals to complete the merger transaction are not obtained, and the potential need to address any reviews, investigations or other proceedings by governmental authorities or unitholder actions. The Partnership undertakes no obligation to release revisions to its forward-looking statements to reflect events or circumstances occurring after today.

REPORT OF EARNINGS

AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES

(Thousands, except per unit and where otherwise indicated)

(Unaudited)

Three Months Ended June 30,

Nine Months Ended June 30,

Twelve Months Ended June 30,

2019

2018

2019

2018

2019

2018

Revenues:

Propane

414,602

461,875

2,057,395

2,141,128

2,462,061

2,520,850

Other

64,132

66,528

213,143

214,903

275,424

280,354

478,734

528,403

2,270,538

2,356,031

2,737,485

2,801,204

Costs and expenses:

Cost of sales — propane

192,160

199,652

1,027,432

1,039,647

1,203,401

1,168,377

Cost of sales — other

21,604

24,492

61,419

64,770

83,225

85,105

Operating and administrative expenses

234,429

222,358

719,497

704,146

938,415

925,099

Impairment of tradenames and trademarks

—

75,000

—

75,000

—

75,000

Depreciation and amortization

43,989

46,393

133,967

138,968

180,752

193,709

Other operating income, net

(6,690

)

(5,793

)

(17,767

)

(17,443

)

(24,697

)

(18,529

)

485,492

562,102

1,924,548

2,005,088

2,381,096

2,428,761

Operating (loss) income

(6,758

)

(33,699

)

345,990

350,943

356,389

372,443

Interest expense

(41,640

)

(40,449

)

(126,208

)

(122,021

)

(167,312

)

(161,651

)

(Loss) income before income taxes

(48,398

)

(74,148

)

219,782

228,922

189,077

210,792

Income tax expense

(673

)

(624

)

(1,779

)

(3,658

)

(2,336

)

(3,563

)

Net (loss) income including noncontrolling interest

(49,071

)

(74,772

)

218,003

225,264

186,741

207,229

Add net loss (deduct net income) attributable to noncontrolling interest

114

376

(3,340

)

(3,415

)

(3,405

)

(3,611

)

Net (loss) income attributable to AmeriGas Partners, L.P.

(48,957

)

(74,396

)

214,663

221,849

183,336

203,618

General partner’s interest in net (loss) income attributable to AmeriGas Partners, L.P.

10,959

10,587

36,488

36,208

47,505

47,354

Limited partners’ interest in net (loss) income attributable to AmeriGas Partners, L.P.

(59,916

)

(84,983

)

178,175

185,641

135,831

156,264

(Loss) income per limited partner unit (a)

Basic

(0.64

)

(0.91

)

1.92

2.00

1.46

1.68

Diluted

(0.64

)

(0.91

)

1.92

1.99

1.46

1.68

Weighted average limited partner units outstanding:

Basic

93,098

93,042

93,077

93,031

93,072

93,028

Diluted

93,098

93,042

93,121

93,082

93,119

93,081

SUPPLEMENTAL INFORMATION:

Retail gallons sold (millions)

188.5

202.0

882.4

905.5

1,058.2

1,089.0

Wholesale gallons sold (millions)

12.3

12.1

62.5

49.1

75.7

59.7

Total margin (b)

264,970

304,259

1,181,687

1,251,614

1,450,859

1,547,722

Adjusted total margin (c)

268,452

283,959

1,246,532

1,261,751

1,493,094

1,517,944

EBITDA (c)

37,345

13,070

476,617

486,496

533,736

562,541

Adjusted EBITDA (c)

42,544

67,217

543,480

570,773

578,217

607,307

Adjusted net (loss) income attributable to AmeriGas Partners, L.P. (c)

(43,758

)

(20,249

)

281,526

306,126

227,817

248,384

Expenditures for property, plant and equipment:

Maintenance capital expenditures

12,852

13,775

41,742

35,342

59,336

47,522

Growth capital expenditures

9,110

11,922

36,063

37,551

46,837

49,024

(a)

Income per limited partner unit is computed in accordance with accounting guidance regarding the application of the two-class method for determining earnings per share as it relates to master limited partnerships. Refer to Note 2 to the consolidated financial statements included in the AmeriGas Partners, L.P. Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

(b)

Total margin represents "Total revenues" less "Cost of sales — propane" and "Cost of sales — other."

(c)

The Partnership’s management uses certain non-GAAP financial measures, including adjusted total margin, EBITDA, Adjusted EBITDA, and adjusted net income attributable to AmeriGas Partners, L.P.

GAAP / NON-GAAP RECONCILIATION

(Thousands)

(Unaudited)

Three Months Ended June 30,

Nine Months Ended June 30,

Twelve Months Ended June 30,

2019

2018

2019

2018

2019

2018

Adjusted total margin:

Total revenues

478,734

528,403

2,270,538

2,356,031

2,737,485

2,801,204

Cost of sales — propane

(192,160

)

(199,652

)

(1,027,432

)

(1,039,647

)

(1,203,401

)

(1,168,377

)

Cost of sales — other

(21,604

)

(24,492

)

(61,419

)

(64,770

)

(83,225

)

(85,105

)

Total margin

264,970

304,259

1,181,687

1,251,614

1,450,859

1,547,722

Add net losses (subtract net gains) on commodity derivative instruments not associated with current-period transactions

3,482

(20,300

)

64,845

10,137

42,235

(29,778

)

Adjusted total margin

268,452

283,959

1,246,532

1,261,751

1,493,094

1,517,944

Adjusted net income (loss) attributable to AmeriGas Partners, L.P.:

Net (loss) income attributable to AmeriGas Partners, L.P.

(48,957

)

(74,396

)

214,663

221,849

183,336

203,618

Add net losses (subtract net gains) on commodity derivative instruments not associated with current-period transactions

3,482

(20,300

)

64,845

10,137

42,235

(29,778

)

Impairment of Heritage tradenames and trademarks

—

75,000

—

75,000

—

75,000

Merger expenses

1,770

—

2,700

—

2,700

—

Noncontrolling interest in net (losses) gains on commodity derivative instruments not associated with current-period transactions, impairment of Heritage tradenames and trademarks, and merger expenses

(53

)

(553

)

(682

)

(860

)

(454

)

(456

)

Adjusted net (loss) income attributable to AmeriGas Partners, L.P.

(43,758

)

(20,249

)

281,526

306,126

227,817

248,384

EBITDA and Adjusted EBITDA:

Net (loss) income attributable to AmeriGas Partners, L.P.

(48,957

)

(74,396

)

214,663

221,849

183,336

203,618

Income tax expense

673

624

1,779

3,658

2,336

3,563

Interest expense

41,640

40,449

126,208

122,021

167,312

161,651

Depreciation and amortization

43,989

46,393

133,967

138,968

180,752

193,709

EBITDA

37,345

13,070

476,617

486,496

533,736

562,541

Add net losses (subtract net gains) on commodity derivative instruments not associated with current-period transactions

3,482

(20,300

)

64,845

10,137

42,235

(29,778

)

Impairment of Heritage tradenames and trademarks

—

75,000

—

75,000

—

75,000

Merger expenses

1,770

—

2,700

—

2,700

—

(53

)

(553

)

(682

)

(860

)

(454

)

(456

)

Adjusted EBITDA

42,544

67,217

543,480

570,773

578,217

607,307

The following table includes a quantification of interest expense, income tax expense, depreciation and amortization included in the calculation of forecasted Adjusted EBITDA guidance range for the fiscal year ending September 30, 2019:

Forecast Fiscal Year Ending September 30, 2019

(Low End)

(High End)

Adjusted EBITDA (estimate)

580,000

590,000

Interest expense (estimate)

162,000

Income tax expense (estimate)

3,500

Depreciation (estimate)

149,000