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AmeriGas’s 2017 Earnings Rose despite Weather Headwinds

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AmeriGas’s 2017 Earnings Rose despite Weather Headwinds PART 1 OF 2

AmeriGas Partners’ Earnings Rose 2% in a Challenging Fiscal 2017

APU’s earnings

AmeriGas Partners (APU) reported its results for the fiscal year ended September 30, 2017, on November 8 after the markets closed and held a conference call on November 9, 2017. AmeriGas Partners reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $551.3 million for the year, which was in line with the company’s guidance issued in May 2017. The full-year fiscal 2017 EBITDA was 1.5% higher than in fiscal 2016. APU’s fiscal 4Q17 EBITDA was $36.5 million compared to $5.3 million in fiscal 4Q16.

AmeriGas Partners’ Earnings Rose 2% in a Challenging Fiscal 2017

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The above graph shows AmeriGas Partners’ adjusted EBITDA over the last three years. “This year presented a challenge as we faced a second consecutive year of exceedingly warm weather that was 13.5% warmer than normal,” said Jerry Sheridan, president and chief executive officer of AmeriGas. AmeriGas Partners’ focus on controlling costs boosted earnings for the year.

Equity commitment

On November 7, AmeriGas Partners entered a $225 million standby equity commitment agreement with UGI, APU’s general partner, which owns a 26% stake in APU. Under the agreement, AmeriGas can issue Class B common units to UGI in exchange for cash with minimum draws of $50 million and up to $225 million in total. The commitment period is through July 1, 2019.

The distributions on these units are to be paid in cash or additional Class B units. The units are convertible into AmeriGas common units at UGI’s option in five years and at APU’s option in six years. The units are not subject to IDRs (incentive distribution rights) until conversion to common units.

According to the company, it “does not intend to call on this facility at the present time.” The facility provides APU with the flexibility to continue with its strategic initiatives. The company’s cash flows were significantly impacted over the last two years due to warmer winters.

APU’s distributions

On October 26, 2017, AmeriGas Partners declared a distribution of $0.95 per unit. The company increased its annualized distribution to $3.8 per unit from $3.76 per unit in April 2017. This was the 13th consecutive year of distribution increases for the company.

AmeriGas Partners currently trades at a distribution yield of ~8.6%. This is higher compared to Alerian MLP Index’s (^AMZ) yield of ~7.8%. The SPDR S&P 500 ETF (SPY) (SPX-INDEX) currently trades at a yield of ~2%.

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