UGI Earnings Call Insights: Margins & Pricing, Operating Synergies
Margins & Pricing
Theresa Chen – Barclays Capital: Can you give us an update on the current profitability trends in the cylinder exchange business? You’re saying the volumes have been growing nicely, but if we could get any color on either margins or pricing that would be great.
Jerry E. Sheridan – President and CEO: We generally don’t get into the profitability of cylinder exchange. It’s part of our larger business. But we do comment on volume. We consider it just another aspect of selling propane.
Theresa Chen – Barclays Capital: Would you mind discussing customer mix in the quarter, please, residential/commercial? Are there any unique competitive dynamics within the customer segments?
Jerry E. Sheridan – President and CEO: No, it was strong across every segment. The volume is up 10%. Certainly April weather was very helpful, but it was just terrific compared to, of course, last year to see every single segment growing relatively the same percentagewise.
Theresa Chen – Barclays Capital: Lastly, in terms of further acquisitions from here, where do you see potential value add to your existing business, either geographically products or otherwise?
Jerry E. Sheridan – President and CEO: That’s really the beauty of the deal. I mean, we got the synergies out, but this will be a deal that just keeps giving over the next several years. For cash flow we’re going to have excess trucks and assets and land, but on the acquisition side we are now in over 830 geographies. So just about any deal we look at, we’re going to have synergies. So this just expands our reach and our ability to get deals done that will be more profitable for us…
John L. Walsh – President and CEO, UGI Corporation: That’s certainly true for AmeriGas. We would say the same things in terms of UGI’s European propane distribution businesses. With the expanded footprint, it opens up new opportunities for us in terms of reach, which makes acquisitions potentially more viable and just broadens the scope in terms of potential acquisition opportunities.
Eric Shiu – Wells Fargo: Just following up on that acquisition question. So given that the, I guess, the Heritage integration is largely complete, are you guys starting to actively look at new acquisition opportunities? I guess, what does that market look like right now?
Jerry E. Sheridan – President and CEO: We are. We really did take a pause on acquisition activity, but our corporate development team has now turned away from acquisition integration and back on the road, meeting with various sellers and the pipeline is developing. I think you’ll see us doing deals over the next 12 months.
Eric Shiu – Wells Fargo: How much of the – would you estimate of this $60 million of operating synergies have been realized so far this year?
Jerry E. Sheridan – President and CEO: All but what we’ll see in the fourth quarter. I’d say maybe in the neighborhood of $8 million or so we’ll see in Q4. It was fairly ratable over the four quarters.
Eric Shiu – Wells Fargo: I guess, what were your wholesale gallons sold for the quarter?
Jerry E. Sheridan – President and CEO: We always get this question; 14 million gallons.
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