UGI Corporation Aktie

Good day, and thank you for standing by. Welcome to UGI Corporation Q2 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Tameka Morris.

Good morning, everyone. Thank you for joining our fiscal 2026 second quarter earnings call. With me today are Bob Flexon, President and CEO; and Sean O達rien, CFO. On today's call, we will review our second quarter financial results and key business highlights before concluding with a question-and-answer session. 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 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 within our presentation.

And with that, I'll turn the call over to Bob.

Thanks, Tameka, and good morning. Fiscal 2026 is shaping up to be a year of meaningful progress against the strategic priorities we laid out at the start of the year. Our natural gas businesses continue to anchor the portfolio, supported by strong customer demand and operational execution. We continue to have a robust pipeline of data center opportunities, much like the announcement of our partnership with Prime Data Centers. UGI International continues to demonstrate the strength of its business, generating strong free cash flow and effectively managing margins through a dynamic operating environment. Of note, we do not anticipate any full year impact to margins or supply availability issues from the ongoing conflict in the Middle East due to the nature of our sales contracts and our risk management hedging program.

The operational transformation at AmeriGas is delivering substantial measurable results and on target to set the business up for a successful heating season at the start of fiscal year 2027. Our balance sheet ended the quarter with consolidated leverage below the targeted range of at or below 3.75x. Sean will cover in more detail the leverage milestones we expect to achieve this fiscal year. Our year-to-date reportable segment's EBIT is up $17 million over prior year, largely from higher gas base rates at our utilities and effective margin management at UGI International, which offset the impact of warmer weather in our global LPG service territories. At our utilities, we deployed approximately $280 million of capital year-to-date, advancing our commitment to pipeline safety, reliability and modernization while adding more than 6,000 new heating customers across our service territories.

Through our weather normalization riders in Pennsylvania and West Virginia, customers were able to save $26 million on heating bills this past winter. At AmeriGas, we are excited that in select cities, our barbecue cylinders are now available online through Amazon. We are rolling this out in a phased approach across the markets where we currently operate AmeriGas' cylinder home delivery service called Cynch, leveraging our established direct-to-consumer delivery infrastructure. Turning to the next slide. I want to spend a few minutes on several strategic actions that together reflect the deliberate execution of our long-term value creation strategy, sharpening our focus on natural gas and deploying capital into the most attractive growth opportunities we see in our service territories.

First, subsequent to the quarter, we entered into a definitive agreement to sell our electric division at UGI Utilities. The transaction valued at approximately $470 million with further potential earn-outs prior to working capital adjustments is expected to close in the first quarter of calendar 2027, subject to customary closing conditions and applicable regulatory approvals. The strategic rationale here is clear. The transaction sharpens UGI's focus in our area of greatest competitive advantage and the after-tax proceeds will be used to reduce UGI debt and for general corporate purposes, further strengthening the balance sheet and providing greater financial flexibility for natural gas capital investment.

We're excited to announce the strategic partnership between UGI Energy Services and Prime Data Centers to develop major natural gas supply infrastructure in Pennsylvania's Northern tier. Under a purchase and sale agreement, UGI Energy Services will sell Prime property to build a proposed on-site gas fuel electric generation facility. UGI will retain the storage capacity and oil and gas rights associated with the property and is expected to supply the data center with reliable, large-scale gas supply. Prime's natural gas demand is expected to exceed 100,000 dekatherms per day within 3 to 5 years, a scale that underscores the importance of the project for the region's energy infrastructure.

This partnership is a powerful example of how UGI's integrated natural gas platform is uniquely positioned to support the next wave of energy demand. The northern tier of Pennsylvania offers direct access to locally produced natural gas and multiple redundant interstate pipeline pathways, a combination of supply, security and infrastructure depth. And importantly, Prime is one of many opportunities we are actively pursuing. Our team is in active conversations with numerous parties across the data center and large load industrial space with over 75 nondisclosure agreements directly related to potential future projects signed to date. While we don't expect that every one of those will translate into contracted opportunity, the breadth of inbound interest continues to be a strong signal of the demand environment in our service territories and UGI's position to be a strategic partner for large-scale natural gas infrastructure.

Lastly, during the quarter, we ran a successful oversubscribed open season for the projected Auburn pipeline expansion, which is pending FERC approval. The level of customer demand validates our expansion strategy. Taken together, these announcements provide additional avenues to creating long-term value, sharpening focus, strengthening the balance sheet and deploying capital where the demand exists. Now let me spend a few minutes on UGI International because this segment really embodies what disciplined execution looks like over the long term. When you look at the financial and operational profile of this business, there are several metrics worth highlighting. First, the return on capital employed of approximately 15% indicates that we're earning attractive returns on the capital invested in this business, reflecting the quality of our market positions, a thoughtful approach to capital allocation and an operating model that has been refined over many years to drive efficiency at every level.

We've also continued to expand operating margin, drive cost productivity and improve on already strong safety and customer metrics, areas where this team has long set a high bar and continues to raise it. Free cash flow generation is equally important. And over the past 3 years, UGI International has generated more than $800 million in free cash flow. Free cash flow that has been used to fund dividends to shareholders, invest in growth initiatives in our natural gas line of business and maintain a strong balance sheet with net leverage consistently below 2x. This reflects disciplined CapEx, working capital rigor and the structural cost improvements this team has driven consistently over time. Together, these metrics describe a business that is efficient, generates strong returns on the capital it deploys and built to perform through changing economic cycles.

Turning to Slide 7. The operational transformation is fully underway at AmeriGas and making a significant difference. We continue to advance many active improvement work streams across 6 focus areas with measurable improvements compared to fiscal 2024. Over the past 2 years, we have reduced the recordable incident and lost time injury rates by roughly 50%. In operations, the percentage of 0 fill stops and out-of-gas events are down considerably while we've become more efficient in the number of miles driven to serve customers. And when I think of customer satisfaction, our customer service call volumes are down 32%, while our Net Promoter Score is up 67%, significant progress when compared to fiscal year '24.

A major milestone on our turnaround for AmeriGas is the full reshoring of our call center to the U.S. at the end of the second quarter. We now have over 250 agents dedicated to serving customers and regional teams that are closer to our customers and can better understand and respond to our customers' needs.

This was a multi-quarter effort, and we executed on schedule, on budget and well ahead of the upcoming heating season. Our route optimization program is fully implemented and the productivity benefits are showing up in miles driven and on-time delivery metrics. Although we've seen strong improvements, our established PMO team remains focused on efforts to improve our cylinder exchange business, customer segmentation, pricing and billing, service operations improvement, supply chain optimization and inventory modernization. Taken together, the operational transformation at AmeriGas is delivering tangible results with volumes stabilized and a 9% improvement in EBIT over the 2-year period.

And with that, I'll hand the call over to Sean to walk through our financial results for the quarter and year-to-date in more detail.

Thanks, Bob, and good morning. For the fiscal 2026 second quarter, UGI delivered total reported segment EBIT of $688 million in comparison to $692 million in the prior year period. This performance was largely driven by higher base rates at our Pennsylvania gas utility and effective margin management across our global LPG businesses in a quarter that was warmer than the prior year across their respective service territories. I want to highlight the strong operational execution by our natural gas teams who faced periods of colder weather in their service territories and delivered safe, reliable service for our customers. Turning to EPS. Adjusted diluted EPS was $2.09 compared to $2.21 in the prior year period.

As we previously anticipated, the year-over-year decline in adjusted EPS was driven primarily by the absence of investment tax credits realized last year and higher interest expense. Turning to the drivers of each segment's results. First, the utilities delivered EBIT of $250 million, up $9 million over the prior year. Total margin increased $23 million, primarily due to the effect of higher gas base rates that went into effect in Pennsylvania at the end of October 2025. As designed, our weather normalization adjustment mechanism mitigated approximately $19 million of the weather impact this quarter, providing bill stability for our customers.

Operating and administrative expenses increased $8 million, reflecting higher personnel costs and uncollectible account expenses. Depreciation and amortization rose $4 million on our continued distribution system capital investment. At Midstream & Marketing, EBIT was $150 million for the quarter in comparison to $154 million in the prior year. While heating degree days were 3% colder than the prior year, this winter, we saw longer durations of cold weather where the team was focused on reliably serving its peaking customers who pay a fixed demand charge regardless of usage, driving greater earnings stability in this business.

Next, operating and administrative expenses were higher year-over-year, primarily due to new assets placed in service in the prior year. In the global LPG businesses, starting with UGI International, EBIT was $132 million in comparison to $143 million in the prior year. Retail volumes were 8% lower, largely due to divestitures of the LPG businesses in Italy and Austria and the impact of warmer weather. Total margin was down $4 million as the lower retail volumes were substantially offset by the translation effects of stronger foreign currencies, which contributed approximately $30 million.

Operating and administrative expenses were comparable with the prior year period as the impact of the aforementioned divestitures as well as lower distribution expenses were largely offset by the translation effects of the stronger foreign currencies of approximately $15 million. Other income declined $11 million, and this included approximately $8 million of lower realized gains on foreign currency exchange contracts. Lastly, while we are closely monitoring the current geopolitical situation involving Iran, the structure of our LPG contracts with customers, combined with proactive actions taken by our team, gives us confidence that we do not anticipate any impact to margin or supply availability constraints. Importantly, the underlying business continues to perform well from a margin management and cash generation standpoint.

Moving to AmeriGas. EBIT was $156 million, up $2 million versus the prior year. Retail gallons decreased 5%, primarily due to temperatures in the West that were warmer than prior year period as well as continuing customer attrition. For the quarter, while weather in the Eastern region of the U.S. was comparable on a year-over-year basis, temperatures in the West were 12% warmer than the prior year period, impacting total volumes sold. On aggregate, on a weather-adjusted basis and excluding the effect of the Hawaii divestiture, retail gallons were comparable to the prior year period. Total margin increased $2 million as higher average LPG unit margins and increased fee income were largely offset by the lower retail gallons. OpEx increased $2 million from the continued investment in customer-facing initiatives, which resulted in higher compensation and advertising expenses.

Turning to our year-to-date results. Adjusted diluted EPS for the first half of fiscal 2026 was $3.35 in comparison to $3.58 in the prior year period. UGI delivered core EBIT growth, largely driven by higher gas base rates at our utilities, which more than offset the impact of warmer weather in our global LPG service territories and the previously announced LPG divestitures. This EBIT growth was offset by higher income tax expense, reflecting the absence of investment tax credits realized last year and higher interest expense. As we turn to the full year outlook, we are revising our fiscal 2026 adjusted diluted EPS guidance range to $2.75 to $2.90.

This primarily reflects lower expected earnings contributions from our Midstream & Marketing segment, where there are delays in planned growth investments and lower production volume in the Appalachian region. Also, to a lesser extent, the pace at which operational improvements at AmeriGas are translating into earnings is slower than originally anticipated. The fundamentals of these businesses remain intact. And as Bob discussed earlier, the recent announcements and progress on the operational transformation underscore our confidence in the long-term growth trajectory of this business. Moving to the balance sheet update. We continue to make strong progress against our balance sheet objectives.

Available liquidity at the end of the quarter was approximately $2.1 billion, an increase of approximately $200 million over the prior year quarter. Net leverage at UGI Corporation was 3.7x at the end of the quarter, which was the lowest in 5 years and below our targeted level of at or below 3.75x. At AmeriGas, we closed the quarter with net leverage of 4.7x, representing a meaningful decrease compared to recent years and the lowest in 5 years. On the credit front, we are pleased that [ Fitch ] revised the AmeriGas outlook from negative to stable during the quarter, further validating the operational and financial improvements that are underway, and this builds on the Moody's outlook that was revised to positive last quarter.

Turning to the next slide. I want to walk through a key strategic action that we are taking to optimize the capital structure across our global LPG platform. We are executing a onetime rebalancing across UGI International and AmeriGas designed to optimize the consolidated cost of capital, improve credit profiles and further strengthen the balance sheet. Specifically, UGI International, which ended the quarter at 1.2x net leverage and with approximately $900 million in liquidity, will pay a special onetime dividend of $300 million to UGI Corporation using available liquidity.

Those funds will be immediately contributed to AmeriGas as a capital contribution, which AmeriGas will use to retire outstanding indebtedness, including approximately $150 million of intercompany loans from UGI International. This rebalancing accomplishes 3 things: First, it leverages the interest rate arbitrage between UGI International and AmeriGas to materially reduce our consolidated borrowing costs. Second, it significantly accelerates deleveraging at AmeriGas, which is consistent with our objective of reducing the company's net leverage to sub-4x while enhancing free cash flow and consolidated credit profile.

Our expectation is that AmeriGas will end fiscal 2026 with leverage below 4.0x. Third, it unlocks investment capacity for growth opportunities within our natural gas businesses while maintaining a conservative credit profile. Taken together, the strategic actions we recently announced reflect a deliberate disciplined approach to capital allocation that strengthens the foundation of the company and supports our long-term EPS compound annual growth rate target of 5% to 7% between fiscal year '24 and fiscal year '29.

Now let me turn the call over to Bob for his closing remarks.

Thanks, Sean. Before we open the line for questions, I want to leave you with several key takeaways. First, our year-to-date results reflect the continued execution of our strategic priorities with reportable segment EBIT ahead of the prior year. Our natural gas businesses are performing well, supported by robust customer demand and our weather normalization mechanisms are working as designed to provide bill stability for our customers. Second, the operational transformation at AmeriGas is delivering measurable, sustainable results in safety, in operations and in customer satisfaction.

The onshoring of our call center, the implementation of route optimization and the launch of our cylinder sales on Amazon, all position the business for the upcoming heating season and for future earnings growth. Third, we are well positioned for attractive natural gas growth opportunities and the Prime Data Centers partnership, combined with the planned expansion of the Auburn pipeline supports the long-term outlook for our midstream business.

In addition, the strategic actions we have announced, the agreement to sell our electric division and the global LPG capital structure rebalancing sharpen our focus on natural gas, strengthen our balance sheet and increase our financial flexibility to invest where the demand is greatest. While we have revised our fiscal 2026 guidance to reflect the timing of certain growth initiatives, the long-term trajectory of this business is, in my view, stronger than it has ever been. We are optimally situated to serve the growing demand for safe, reliable and affordable energy solutions and the foundation we are building positions UGI to deliver sustainable returns for our shareholders over the long term.

And with that, I'll turn the call over to the operator for questions.

[Operator Instructions]

Our first call comes from -- question comes from Julien Dumoulin-Smith of Jefferies.

It's actually Paul Zimbardo on for Julien. It's good musical chairs during earnings. The first question I had was just on the decision to kind of put equity into AmeriGas from International. I fully understand the cost of capital benefits, but I thought the message was more that AmeriGas needs to stand on its own 2 feet without support from corporate. So just curious what changed in the plans? Or was this always the plan? And just any details on the thought process there would be helpful.

Paul, I'll go first and then let Sean tap in because I certainly have the viewpoint AmeriGas stands on its own. I think what's different in this situation, AmeriGas is in a position now where they can stand on their own. This is about optimizing cost of capital. And rather than paying interest rates, AmeriGas will be paying a dividend up to the parent starting next fiscal year. So rather than seeing that money go out as interest expense, we see that money flowing to the parent company as more valuable. This is not a situation where AmeriGas could not refinance its upcoming debt maturities. This is more a decision of Sean and team finding creative ways to lower that cost of capital to allow additional funds to flow to the parent. I mean, Sean, you can comment.

Yes. I think, Paul, what -- I just stick to the facts. let's stick to the facts. AmeriGas, this is very -- I was here when the previous -- the aforementioned infusion happened. That was from Holdco to AmeriGas. AmeriGas was in a much different position. So let me hit some of the facts. We set the best debt-to-EBITDA that AmeriGas has seen in over 5 years in this quarter at 4.7x. So massive progress. AmeriGas was sitting on well over $100 million of cash. The business is generating a lot of cash. So we're sitting on a lot of cash. And then one other fact, we will -- and you can see it in the slide, we're going to pay down back to International, the $150 million of intercompany debt in this transaction. So much, much different place. You've got volumes at AmeriGas, much more stable. You've got earnings stable, different position.

Now let me get to the economics, why the team and myself really wanted to put this on the table. Bob alluded to it. This improves the cost of capital for the company. This benefits the company as a whole in terms of interest expense, in terms of cash flow in a meaningful way, and we'll get a full year of that starting in '27, but we'll get some benefit of that this year. The last thing I'll tell you is we know we have a maturity coming due. AmeriGas has a maturity coming due, and we want to put our best foot forward, not only arbitrage the cost -- the lower cost debt at international, but do the best we can to make sure that as we head out into the markets to take care of this AmeriGas maturity that we put our best foot forward.

And I don't know if you saw it this morning, but Fitch upgraded AmeriGas from B1 positive from B positive to BB- stable. That's a big move. That puts us on par with the best propane companies in terms of the balance sheet that are out there and actually, in some cases, stronger than many of our peers. So there's a lot to this deal. I think it's all good. And we kept it between the LPG family, between international and between AmeriGas. So I'm very proud, and I think it really is going to be beneficial to the company.

Facts. That is useful information. And I did not see that Fitch update. So thank you for that. One other one, if I can, just to shift gears. I want to see if you have any thoughts on the Pennsylvania Governor's letter related to utility affordability. Do you think this impacts the current rate case or anything in front of you?

Well, we don't think it impacts the current rate case. It's going through its normal process and procedures. It's on schedule. We've had some of the intervenor commentary. It goes for into the next stage in June. So we don't see anything. But certainly, we want to be constructive with the governor. We want to be constructive for the state. We want Pennsylvania to continue to be one of the best states to invest in, and we're going to do everything we can to work and drive on affordability and support the governor and the governor's goals for the state. So I mean that's how I see it playing out. I mean we're going to do our part.

Our next question comes from the line of Gabriel Moreen of Mizuho.

Maybe I can just follow up on Paul's question on sort of the AmeriGas International capital transactions here. Sean, can you maybe just talk about how -- what else you need to do to address that upcoming maturity and maybe how you plan to address it? Is it just straight up debt issuance at this point? And then also, I think you had mentioned a comment on this allowing you to maybe invest a bit more on midstream. So I'm curious or in the natural gas businesses. So I'm curious about that. And last but not least, Bob, strategically, I'm curious with, I guess, AmeriGas cap structure kind of rightsized after this, do you think there are larger strategic implications as far as you evaluating AmeriGas' place within the UGI family of companies?

Okay. So I think I can go first, Gabe. I think a couple -- one thing I want to highlight, and I should have highlighted it on Paul's question, the absolute debt at AmeriGas Gabe, and you were kind of alluding to this, has moved from $2.8 billion to [ sub-$1.3 billion ] in this period. That's amazing. And it's in the slide, Gabe, but in terms of the overall leverage, we're going to be sub-4 after this transaction. That is -- that will be industry-leading leverage. In terms of the -- we know we have a maturity going current in the next month or so. This does a really good job of preparing us for that. But our goals in dealing with that maturity and any future maturity is to rightsize the cost of capital at AmeriGas. We believe this transaction does that and also continue to delever.

So we've been very open. I can't speak about timing on when we go after the maturities, but I can tell you that our goal is to as quickly as we can deal with the current maturity and also go after the '28, which had a 9 handle and continue to set AmeriGas up, again, with leverage sub-4 with absolute debt lower than [ 1.3 ] when it was just at [ 2.8 ] and really set it up well as it goes to deal with future maturities to be an industry-leading balance sheet as we go out into these markets. So this helps us accelerate all those things I just mentioned to you.

And Paul, sorry, Gabe, in addition to what Sean is speaking about with the great financial profile improvement of the balance sheet, we've done a lot of work over this past year to drive operating improvements, as you saw on one of the slides showing a lot of the more complex projects that we have underway and the significant improvement. We now feel with the call centers being back in the U.S. that we can be much more aggressive now in seeking new business. And by the time we start the winter for 2027, which really begins, call it, in November of this year, we expect to have a substantially better business than what we had when I joined the company November 1, 2024.

So let's get through the upcoming winter season. I expect significantly improved execution. This year was better than last year, and next year is going to be better than this year, and we have all the operating metrics to back that up. Once we get through the winter of next year and kind of prove where we are, I think we will look at what are the longer-term strategic options for the company on how we are configured and the like. But right now, our focus is to make sure that in addition to this financial improvement, we have a strong operating base to show growth in AmeriGas. And then we'll get through the winter and we'll see what's next.

And Gabe, I want to -- I missed -- you asked about the midstream -- what it does for Midstream. In general, and it's not just the AmeriGas delevering, we talk about the transaction on the electric utility. Obviously, the portfolio optimization we've done in international, the sale of Hawaii. What we're alluding to there is we're setting the company up. All of that, as you know, our priority has been to improve the balance sheet, improve the financial standing. All of that -- those transactions have gone to debt reduction.

So we're very focused on increasing the -- what I'll call the dry powder of the company. Corp, by the way, set a 5-year record as well at 3.7x this quarter. We set a goal to be sub [ 3.75 ], and we're at 3.7x this quarter. So it's really setting the company up well for midstream opportunities. We know that, obviously, the LDC side of the equation, we've seen opportunities. That's what we're alluding to there, really getting the balance sheet, delevering, getting AmeriGas' cost of capital down. So the company is well positioned if those opportunities come.

And Gabe, I want to maybe stretch your question a little bit further when you talk about how do we position AmeriGas and maybe talk in general about portfolio management for the entire corporation. And as you can see, we've done a lot on recasting what our international business looks like. We are now in markets where we are the top 3, if not primarily top 1 in markets and really where we have a good competitive advantage. The electric utility sale that's underway, we've been able to execute that at a very strong multiple off a rate base of somewhere between $220 million and $230 million rate base and bringing in $470 million approximately of sale proceeds with the potential for some higher earn-outs on that as well.

And then we can look at the overall configuration once we get through the winter. So portfolio management of the entire complex of the company will always be under review, looking what's going to create the most value and the most focus for our shareholders.

Great. Maybe if I can kind of stay on midstream a little bit. I think you alluded to delay in some midstream investments as one of the factors behind the guidance revised. Can you maybe speak to that a little bit more, whether that was organic, inorganic? What are the factors there? Will they resolve? And then also just talking about the Auburn expansion, can you maybe talk about the capital and timing on that project potentially?

Yes, I can take the first part, Gabe, for sure. Since I've been here, it's been -- we've had consistent opportunities to do inorganic growth at the midstream business. A lot of that's just through buying out through JVs, looking at PE firms that are ready to exit the assets and so forth. And we've had that pretty consistently. So it would not be uncommon for us to assume those types of things as we move forward. I think what happened this year, if you want to be specific to that, we anticipated those inorganic opportunities around those similar to what we've seen in the past.

And then the data center evolution hit. So you can think, Gabe, that the valuation on a lot of those inorganic opportunities were massively reassessed by their owners with potential growth in power, potential growth in gas needs in the region. So the region. So it's just a case where the company is being very disciplined. I mean, as we look at those transactions, they have to be at the right return levels for us. So I do think those transactions will continue to be there for the midstream business. But the ones that we were counting on, and we had specific ones we were looking at this year. But again, the valuations got a little bit beyond where we felt comfortable. So I think that could just be a timing. We do anticipate seeing those opportunities in the future.

Yes. And the other part of your question, Gabe, around Auburn, the investment will be somewhere between $25 million, $30 million of capital investment. And through the open season that we just went through, the interest in subscribing to the Auburn pipeline was significantly higher than what we had in our economics. So it's a very strong return project for us. So we look forward to bringing that one online.

Great. And then if I could just squeeze one more in on the data center announcement. Can you just talk about sort of next steps there as far as kind of when you'll figure out whether that's sort of a go on the gas supply. And then I'm also curious whether there's capital kind of being infused into this project? Or are you actually getting capital out because of the sale of the property here to the data center developer?

Well, overall, there will be a net capital input, but certainly, there's the sale of the land, which provides the capital return to us at the beginning. And then there will be investment on our side to be able to deliver gas to the data center when developed, working with Prime and working with John, who -- John and I worked together at [ NRG ] for a number of years, they're good power developers. And so we look to be there to supply the gas to the demand that, that data center will create. So I think you'll see the benefits of that later in the decade in terms of the development, the investment and the bringing online.

This now concludes the question-and-answer session. I would now like to turn it back to Bob Flexon for closing remarks.

Yes. Thanks, Stephanie, and thank you for your interest, everyone, for participating today and listening in. Just to summarize, I think we've really been focusing on our operational performance. I think one of the things that we're most proud about is the dramatic increase in safety. AmeriGas has had its best safety performance in the history of us owning AmeriGas, which is #1 on our list to make sure everybody is safe. And we're seeing that across all of the business units.

So safety is really paramount, and we're seeing just tremendous progress on doing our business in a very safe way and keeping not only us safe, but our customers and communities safe as well. Our performance over winter was good on all accounts. And we're looking at with customer service back in the U.S. for AmeriGas, we're looking for significantly improved customer service, making the business feel local again. We've executed on strategic transactions, the sale of the electric utility at a very strong multiple for us.

We're now a retailer on Amazon for the AmeriGas business, which is exciting. We'll see how that translates into sales, but we're really optimistic on that. Obviously, the deal with Prime Data on bringing in a data center and being able to serve that as well. And finally, as Sean spoke about a lot, strengthening the balance sheet. So the combination of operational improvement and having a much stronger financial base opens up opportunities for us. And so we look forward to executing on all of that. So with that, I will conclude the call. And again, thanks, everybody, for participating.

And thank you for your participation. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the UGI Corporation Q1 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker to Tameka Morris, Vice President of Investor Relations and ESG. Please go ahead.

Good morning, everyone. Thank you for joining our fiscal 2026 first quarter earnings call. With me today are Bob Flexon, President and CEO; and Sean O'Brien, CFO. On today's call, we will review our first quarter financial results and key business highlights before concluding with a question-and-answer session.

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 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 within our presentation.

And now I'll turn the call over to Bob.

Thanks, Tameka, and good morning. Yesterday, we announced fiscal 2026 first quarter total reportable segments' EBIT of $441 million, up 5% over the prior year period, which is in line with our expectation. Our natural gas businesses produced strong results, driven by robust gas demand and the impact of the 2025 gas base rate case at our Pennsylvania utility. In our Global LPG businesses, we capitalized on favorable weather in certain U.S. regions and more than offset the impact of the previously announced divestitures through effective margin management and disciplined cost control.

Throughout the company, we continue to advance operational excellence, safety and cultural transformation, establishing the framework that will position UGI to further unlock intrinsic value. We are seeing early benefits from these efforts with improved safety metrics, better operational efficiency at AmeriGas and continued strength in our natural gas businesses. In parallel, we are also positioning the company for the future through strong capital discipline with our LPG portfolio optimization substantially complete, and our natural gas infrastructure well situated to capture growing demand in Pennsylvania.

I'll turn to the next slide. Safety remains foundational to everything we do, and I believe this to be a leading indicator of a well-run company. Across the enterprise, we saw year-over-year improvement in our safety metrics and specifically at AmeriGas, a 45% reduction in recordable incidents and 60% less lost time injuries compared to the prior year period. The operational transformation at AmeriGas continues to yield improved metrics. For instance, we've seen a reduction in our 0 fill rates and average miles driven to serve customers, all while delivering slightly higher retail volumes than last year.

We've also experienced a reduction in customer service call volumes and continued improvement in our customer satisfaction metrics. AmeriGas now has an A- ranking from the Better Business Bureau. And this quarter, we achieved the highest Net Promoter Score since we launched the current methodology in 2023, reflecting better processes and the progress being made to create efficient operations and optimal customer service. Taken together, our progress is delivering results, and we are pleased that Moody's upgraded AmeriGas' outlook to positive from negative this quarter, further validating the operational and financial improvements that are underway.

At UGI International, our previously announced portfolio rationalization efforts are now substantially complete. Since fiscal 2025, we'd entered into agreements to divest LPG operations in 7 European countries, which represented approximately 5% of UGI International's EBIT in the prior year. These divestitures, which in total will generate approximately $215 million in cash proceeds, support our objective to strengthen the corporation's balance sheet.

Importantly, this action allows us to sharpen our focus on the markets where we have the strongest competitive positions and growth opportunities to create value for our stakeholders. Within our natural gas business, our teams continue to execute well in the midst of cold weather temperatures, maintaining reliable service while investing in the system. In aggregate, during the quarter, we deployed $225 million of capital with 73% going to our regulated utilities businesses, primarily for infrastructure replacement and system betterment.

At UGI Energy Services, our New Carlisle LNG storage and vaporization facility is now operational, backed by a long-term contract with our Utility segment. This investment strengthens our integrated natural gas platform and allows us to meet growing demand in the region.

Lastly, subsequent to the quarter, we filed a gas base rate case for UGI Utilities and Mountaineer Gas Company, requesting an overall distribution rate increase of approximately $99 million and $27 million, respectively. Both rate cases support UGI's continued investment in over $500 million of system and technology upgrades as we prioritize safe and reliable natural gas service for our customers.

While we continue to invest in our infrastructure, our teams work towards keeping natural gas service affordable. As an example, over the next 3 years, we will contribute $3 million to the UGI Utilities Operations Share Energy Fund, which assists low and moderate income customers with paying their heating bills. This funding for operational share is a donation from UGI and is not included in the company's rates.

And with that, I'll turn the call over to Sean, who will walk you through our financial results for the quarter.

Thanks, Bob, and good morning, everyone. For the fiscal 2026 first quarter, UGI delivered total reportable segment EBIT of $441 million, up $21 million over the prior year. Higher gas base rates in Pennsylvania, colder weather and increased unit margins at UGI International were the primary drivers of this increase, which was partially offset by higher operating and administrative expenses in our domestic segments and the effect of the previously announced LPG divestitures.

Next, adjusted diluted EPS was $1.26 for the quarter in comparison to $1.37 in the prior year. This anticipated decline reflects the absence of investment tax credits realized last year, higher interest expense and lost earnings from the divestitures in Hawaii, Italy and Austria, partially offset by the strong segment level performance.

Turning to the drivers of each segment's results. The Utilities delivered EBIT of $157 million, up $16 million over the prior year. Gas Utility service territories experienced temperatures that were approximately 21% colder than the prior year, and this drove a 16% increase in core market volumes. We also saw sustained customer additions with over 3,500 residential commercial and industrial heating customers added during the quarter. Total margin increased $28 million, primarily due to higher gas base rates that went into effect in Pennsylvania at the end of October 2025.

While the colder weather contributed incremental margin, our weather normalization mechanism worked as designed, mitigating a significant portion of the weather impact and providing bill stability for our customers. Operating and administrative expenses increased $9 million, reflecting higher personnel and maintenance expenses.

Next, Midstream & Marketing reported EBIT of $88 million in comparison to the $95 million in the prior year. While temperatures were 18% colder than the prior year period, which provided some incremental margin benefit, this was largely offset by pipeline rate increases, which we expect to recover over time starting in this fiscal year.

Operating and administrative expenses increased $6 million, primarily due to higher personnel-related expenses and additional plants placed in service at the end of the last fiscal year.

Turning to the global LPG businesses. UGI International reported EBIT of $124 million, up $14 million over the prior year period, largely due to continued operating efficiencies within the business, which also offset a decline due to divestitures. Retail LPG volumes were lower than the prior year due to reduced volume from crop drying campaigns, the divestiture of our LPG businesses in Italy and Austria and continued structural conservation.

Total margin increased $20 million, primarily due to effective margin management and favorable foreign currency translation effects, partially offset by the lower retail volumes. Operating and administrative expenses were comparable on a year-over-year basis. as benefits from the divestitures previously mentioned as well as lower distribution and maintenance expenses were fully offset by unfavorable foreign currency translation effects.

At AmeriGas, the business reported EBIT of $72 million, down $2 million versus the prior year period. Total retail LPG volume was up 1 million gallons due to the effects of colder weather in the East, which was partially offset by warmer weather in the West and the divestiture of our Hawaii operations. In addition, there was an improvement in net customer attrition on a year-over-year basis, stemming from the operational transformation taking place in the business.

In aggregate for the business, total margin was up $2 million as higher LPG unit margins were partially offset by lower fee income. Operating and administrative expenses increased $8 million, largely due to continued investment in customer-facing initiatives to drive retention and improve the customers' experience and this led to higher personnel-related and advertising expenses.

Moving to liquidity. At the end of the quarter, UGI had available liquidity of $1.6 billion, up $100 million over the prior year, inclusive of cash and cash equivalents, and available borrowing capacity on our revolving credit facilities. We continue to make progress on our balance sheet objectives.

On the credit front, we were pleased that Moody's upgraded AmeriGas Partners' outlook to positive while affirming the B1 corporate family rating. This reflects the progress we're making in stabilizing and improving the business, and we remain focused on reducing leverage to achieve our long-term target of sub 4.5x through a combination of debt reduction and EBIT growth.

Now I'll turn the call over to Bob for his closing remarks.

Thanks, Sean. UGI delivered a solid first quarter, reflecting the continued execution of our strategic priorities. Total reportable segment EBIT increased by 5% year-over-year, driven by strength in our natural gas businesses and disciplined margin management in our Global LPG operations. At AmeriGas, we're making tangible progress. Safety incidents are down significantly, operational metrics are improving and volume retention levels have largely stabilized.

We remain focused on the crucial work ahead, particularly during these winter months as our businesses work to meet the season's strong demand. We will continue to advance operational excellence and safety across our businesses, maintain disciplined capital allocation and position our natural gas infrastructure to capture growth opportunities.

I want to thank our employees for their dedication to safely serving our customers. And with that, I'll turn the call over to the operator for questions.

[Operator Instructions]

Our first question will be coming from Gabriel Moreen of Mizuho.

Just wanted to -- a couple of questions. I wanted to ask, I guess, first of all, in terms of the recent extreme winter weather we've been having, which certainly seems like it has the potential to benefit some of your segments. So maybe if I can just ask about how you think AmeriGas has been performing through that extreme weather in terms of deliveries and ability, I think, in margins and the like? And then also maybe if I can pivot to marketing and the extent to which some of the volatility in natural gas prices may have benefited that business or not?

Gabe, thanks for the question. On AmeriGas, I've talked about the past years in our preparation for this winter, we want to see certainly a substantially improved performance from AmeriGas. And when I think about our ultimate goals, I want it to be about 60% improved this winter and then 100% by the time we get to next winter. And we've seen a lot of good data points on that.

We've had record safety in AmeriGas. We've had less recordable injuries within AmeriGas than the history of -- really in the history of the company, highest Net Promoter Scores from customers. So we're seeing Promoter Scores in January significantly higher than where they were last January and a lot fewer calls to customer service center.

That said, we're seeing stress in the system in certain geographic locations that have had extreme weather, and it's not so much the cold temperatures, it's conditions of the roads that really impact delivery and getting the propane to the right places.

So the first part of January, we saw warmer weather, nothing too exciting, and suddenly, that really changed by about the third week of January. So now we're seeing significant demand. We've got drivers out there working long hours. We've got propane into the right places. So we're out there doing what we need to be doing. I'm sure that there's going to be areas when we look back that we know where we could perform better, but there's no question that the system is seeing very strong demand.

Given the size of our footprint, we're able to take resources in the West, which have been warmer -- have been experiencing a warm winter and redeploy them to the East. So we've done a lot to make sure we've got the right resources in the area. [Technical Difficulty]

Gabe, maybe to round out the -- a couple of the other divisions, I'll remind you, obviously, our utilities were in areas that saw [Technical Difficulty] but mainly it's the customers that are really benefiting from the weather trackers. And then as you -- I think you mentioned our midstream marketing business. Just a couple of thoughts there. Weather definitely benefits that business typically. But at some point, the capacity that, that business has is there for the utility. So when you see longer periods of extended weather of cold weather, the utility will need some of that capacity.

But Joe and his team, I think, are doing a terrific job of taking advantage, obviously, of the environment, but also making sure that the utility has the gas that it needs.

Great. I appreciate that and Bob as well. Maybe I could pivot to the Utility segment and in light of, I think, the Governor in Pennsylvania's comments earlier this week in his, I think, budget address around affordability and whatnot. You addressed some of that in your comments, Bob, but can you talk about the decision to come back for a rate case in Pennsylvania, I think, relatively quickly relative to your historical cadence? And also, are you asking for anything structurally here in the rate case? I know you've got weather norm and the like, but anything around trackers and the like. So I'll just leave it at that.

Nothing extraordinary or unusual in there, Gabe. I would say that we, as a company and from the very first day that I walked in the door, I've been talking with Hans Bell, our President of the Utility about affordability and really managing our OpEx. And part of what we're doing at AmeriGas, we're also doing throughout the company is driving efficiency as far -- as much as we possibly can. And to the extent that we are more efficient, particularly on OpEx, that's a direct benefit to the customer bill.

So we've been focusing on affordability long before people started talking about affordability. So the CapEx is more of what we've been doing in the past around infrastructure. So it's just keeping it safe in Pennsylvania and where we stand on the affordability ladder, we're below a lot of the other utilities in the state, and we'll continue to focus keenly on that.

If I could just sneak one more in around the commentary on being well positioned for increasing natural gas demand in PA and where things stand on, I think, the NDAs you've mentioned in the last couple of quarters, how those are progressing and potential timing?

Everything is progressing as they should. I mean, we can't move faster than the power providers or the data centers, but we are engaged in a significant number of discussions. We've got a small group that have kind of moved to the next level. I'm hoping that we'll be able to announce something during this fiscal year. But it's -- there's a lot of discussion out there. And then also, I think most recently with the directions from the White House and the 13 state governors around emergency procurement of more power just is even an added benefit on top of that, the data center, what was progressing anyway.

So we're in a discussion with a number of power providers, and we'll continue to engage in all that. And again, like I said, I hope that we'll be able to announce some things during the course of this fiscal year.

[Operator Instructions]

Our next question will be coming from Paul Zimbardo of Jefferies.

I was going to ask, I saw the press release yesterday that you're bringing Sidd on board, creating that Chief Strategic Officer role. Just curious kind of why now? What are the mandates? You talk a lot about growth in there, but just if you could give some color on why create that role at this time?

Sure, Paul. Thanks for the question. And one of the things that I worked up with the management team when I got here was 4 critical stands that we're taking as a company. One of the stands that we've defined is building a sustainable future. And when I think about my first, whatever, 14, 15 months here, focus relentlessly on day-to-day operations, putting the discipline and the skill set within the organization of strong business processes, putting quality into the system, getting rid of rework and things of that nature.

And we are going to continue to do that. And that's because 99.9% of our employees have an impact on that every single day. This is the time, though, as we really have been building that skill set and building that, if you will, the muscle to do that within the company, need to start looking -- I want to start looking more to the medium term and longer term. So when I want to live true to that stand of building a sustainable future that we're looking, what's the right portfolio for the company? Are there opportunities extrinsically for this company? How do we think about products? How do we think about maybe some of the issues from an environmental standpoint that could impact us at some point in the future, regulatory, things of that nature.

So it's kind of lifting my head up a little bit and seeing what's a little bit further down the road for the company. So I think it's kind of the natural growth of what we want to do as part of the company and building for that future. Sidd and I have worked together in the past. He's very skilled, understands the energy industry very well. And I think he's going to bring a lot of value to us when we start looking for long -- what our longer-term objectives for the company, for the portfolio for opportunities.

So it's kind of, to me, just a natural evolution, but I will continue to spend the vast majority of my time on focusing on making sure when we have winters like this that we can be the best we possibly can be to keep all of our customers safe and warm. So that's kind of the background, Paul, just kind of where I feel it's time for a little bit further looks down the road.

Okay. I appreciate that. Glad to have him back. One other smaller one, if I can. Just on the midstream business, you had a comment about margin was comparable year-over-year, and you said there was a lag in recovery of a pipeline transportation cost. Just if you could quantify what that is? And should that create a tailwind in the rest of the fiscal year?

Yes, Paul, that increase is a rate increase on our FERC pipelines that we incurred. I think we anticipated it. So if you were to look at our budget, you would have seen that in there. But there is a timing lag to it. So we will recover that. I think we indicated starting this year. I don't know that we'll get it all back in fiscal '26, but we'll get, I think, a significant portion of it back in fiscal '26.

Okay. Is there any way to kind of frame it roughly in terms of size?

I think it was somewhere in the $5 million range.

And I would now like to turn the conference back to Bob for closing remarks.

Again, I would like to turn the call back to Bob for closing remarks.

Great. Thank you. So when I look at the first quarter, I feel we've got off to a very good start of the year. We've got year-over-year growth even when I consider the divestitures. Our leading indicators around AmeriGas are all in the right direction, safety, Net Promoter Scores. We've seen calls to the call center down 17% in the first quarter versus the same period in the prior year, and our delivery metrics are better. So we're making very good progress on the AmeriGas side.

And finally, I would just say we focused on being prepared for this winter. And again, when I think about where we are in the middle of this right now, January started off warmer for the first half of the month, and then it really picked up week 3, week 4, and it's been sustained cold, particularly on the eastern half of the country. The western half has not been as cold. So we've been able to redeploy resources to the East. And we've got a lot of people working long hours to make sure that we're getting propane to the right places to our customers.

Our natural gas utility has performed exceptionally well as has Energy Services. So all in all, we've been executing well in the second quarter. We'll see where it all shakes out when it settles down, but we're in the midst of it right now, and it's exciting times for us. But I appreciate the calls and the interest and look forward to providing more updates. Thank you, everyone, for dialing in.

And this concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the UGI Corporation Fourth Quarter 2025 Earnings Conference Call.

After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Tameka Morris, Vice President of Investor Relations and ESG. Please go ahead.

Good morning, everyone. Thank you for joining our fiscal 2025 fourth quarter earnings call. With me today are Bob Flexon, President and CEO; Sean O'Brien, CFO, and Mike Sharp, President of AmeriGas Propane. On today's call, we will review our fiscal '25 financial results and key accomplishments as well as the strategic priorities and financial outlook for fiscal '26 before concluding with a question-and-answer session. 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 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 disclose our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available within our presentation. And with that, I'll turn the call over to Bob.

Thanks, Tameka, and good morning. UGI delivered record adjusted earnings per share of $3.32 through strong execution across multiple fronts, surpassing our revised guidance range of $3 to $3.15. Continued improvements at AmeriGas, which led to its higher EBIT, coupled with solid operational performance from our utility segment and significant tax benefits drove these exceptional results. We strengthened our balance sheet. We generated approximately $530 million of free cash flow, inclusive of cash generated from asset sales of selected LPG territories and return value to shareholders through dividend payments.

Within our natural gas businesses, we successfully upgraded critical pipeline infrastructure and completed several new LNG and renewable natural gas facilities. These investments not only enhance our system integrity, but also expand our revenue-generating capabilities for future growth. At AmeriGas, we continue to make great strides in streamlining and transforming key business processes, better positioning the company for the upcoming winter. At UGI International, we successfully advanced our portfolio optimization strategy. This will allow us to more effectively utilize our resources on core customer segments where we can have competitive advantage and achieve superior returns.

Most importantly, I am proud that we have begun to transform our organizational capabilities by investing in our people and fostering a performance-driven culture focused on driving extraordinary outcomes. This cultural evolution defines the way we work and is a critical driver of continued success. Building on this strong foundation, we are raising our long-term EPS growth expectations with a new EPS compound annual growth rate target of 5% to 7%. This increase underscores the multitude of intrinsic opportunities and our confidence in executing on our strategic vision.

During fiscal 2025, we delivered on the strategic priorities we set at the beginning of the year. We are transforming the culture of UGI and embedding greater accountability and operational discipline across our teams and businesses. This is improving our competitive advantage to accelerate and realize success going forward. Our portfolio optimization initiatives were successful. We achieved approximately $150 million from LPG divestitures, excluding the impact of divesting the Austrian business, which is expected to close before the end of this calendar year. This year, we deployed roughly $900 million of capital, primarily in the natural gas businesses. At the utilities, we invested approximately $560 million largely towards replacing and upgrading our gas distribution infrastructure, including replacing nearly 130 miles of pipeline.

At AmeriGas, while the operational transformation is ongoing, we're seeing meaningful results that Mike will speak to shortly. Notably, this fiscal year, we achieved a 30% reduction in recordable incidents which not only inspires the safety environment but benefits the business. We have deployed stringent project management discipline to drive more efficient business processes through analysis and redesign while increasing technological adoption, including AI throughout the organization, beginning with AmeriGas. Ultimately, these initiatives are strengthening our overall financial profile better positioning the company to deliver long-term shareholder value, which leads me to our strategic vision.

Our vision is to create sustainable shareholder value by driving operational excellence throughout our businesses. There are many opportunities to unlock intrinsic value throughout our portfolio. AmeriGas is at the forefront of this strategic evolution. The team has already made substantial progress in transforming operations that will cement AmeriGas as the premier propane company in the U.S., one that optimizes and takes advantage of our distribution network and establishes a business that is safe, reliable and highly efficient. At UGI International, we will maintain strong operational discipline while positioning LPG as a viable alternative to fuel oil. The strategic and operational transformations underway in our global LPG businesses will generate increased cash flows and provide greater flexibility for future capital allocation.

Our natural gas businesses operate in a dynamic environment, and are well positioned to capitalize on the significant energy expansion happening, particularly in Pennsylvania. With the prolific investment coming into the region, we are capitalizing on the opportunities whether through increased throughput for our utilities business were incremental opportunities for our midstream assets. All of these operational pillars are underpinned by our commitment to strengthen our balance sheet. Now I'll hand the call over to Mike to provide you with an update on the progress and efforts we are making at AmeriGas.

Thanks, Bob, and good morning, everyone. I'm excited to speak with you today about the actions we are taking at AmeriGas. As can be seen on the slide, there are 5 strategic pillars, which guide everything we do. First, our stand is that everyone and everything is always safe. We are committed to maintaining a 0 hot culture across operations because nothing is more important than ensuring everyone goes on safely each day. Our customers are at the heart of our strategy. We are building deeper relationships with our customers through reliable performance and improved customer service quality. We are driving efficiency through business process improvements as well as optimizing existing and employing new technology.

Our success depends on our people and we are investing in now. We are fostering an engaged culture that empowers our employees and encourages transparency, innovation and ownership at every level. Finally, we are exercising financial discipline to enable investment in organic growth while delivering consistent value to our shareholders. These 5 pillars work together to position AmeriGas for sustainable success. Over the past several months, you've heard Bob speak about the fact that we are focused on fundamentally transforming our operations and customer experience. This starts with our customer value and retention work stream where we are working to for satisfaction and retention by looking at who we serve and how we may better serve them.

As part of these efforts, we have segmented our customer base to better understand each group's unique characteristics and needs. This allows us to tailor our service and pricing more effectively while staying true to our stand that every customer matters. As an example, after performing a customer profitability assessment, we decided to exit the wholesale business that represented roughly 11% of our total volumes, but was largely a breakeven business. This decision streamlines our system and removes operational clutter, allowing us to focus squarely on profitable volumes. Ultimately, our goal is to improve customer retention and growth while ensuring that our resources and infrastructure are deployed where they create the most value.

Next is a supply and logistics work stream where our goal is to leverage our size and get the best value in our propane supply, allowing us to offer more competitive prices to our customers while ensuring reliable service. We've made great strides in this area and strengthen the team with individuals who have additional commercial expertise. We have enhanced our forecasting analytics, reassessed the number of our suppliers and strengthen our contracting process. We have optimized our supply points and storage locations. We have also improved our hedging practices to provide greater price stability for our customers. In October, we rolled out a new routing and delivery process to reduce inefficiencies and increase reliability for our customers.

Our initial pilots demonstrated that we can achieve approximately 10% savings in fuel costs through this approach. By optimizing our scheduling and route planning, we will operate more efficiently and achieve a lower cost to serve our customers. Through dynamic routing, adjusting our schedule period and enhancing use of our existing technology, we have realized broader efficiency gains we intend to capture, including fuel savings. Next, we are working to improve both response quality and customer connection in our call center operations. We are in the process of restoring our call centers to the United States. Today, we are 40% to 50% complete with that process, and we'll have a hybrid approach as winner to ensure a smooth transition. We've also invested in training and leveraging new technology, including AI and to provide better service for our customers.

Finally, we are simplifying our billing process to improve clarity and accuracy, which will ultimately reduce cost center volume and free our teams to handle more complex customer needs. All of these operational improvements support our return to growth by strengthening our foundation, we expect to retain existing customers. In addition, we are creating a platform to achieve continued growth through organic customer additions. This strategy is already delivering results with 17% EBIT growth this year, and more importantly, we are expecting sustained year-over-year EBIT growth in the coming years. Each improvement we make builds on the others creating a compounding effect that will drive sustainable, profitable growth. And with that, I'll hand the call over to Sean.

Thanks, Mike, and good morning. First, let me highlight our strong financial performance for the year. UGI delivered impressive results in fiscal 2025 with adjusted diluted EPS of $3.32, $0.26 higher than the prior year. This achievement was largely driven by increased contribution from the AmeriGas and Midstream and marketing segments, partially offset by reduced EPS at UGI International. AmeriGas generated strong results with EPS of $0.27 due to operational momentum and income tax benefits. The segment achieved a $24 million increase in EBIT while also benefiting from the effect of the 1 Big Beautiful Bill Act, which restored interest expense deductibility.

Midstream and Marketing was up $0.12, largely due to a $66 million increase in investment tax credits associated with the RNG facilities placed into service this year, which offset the impact of lower midstream margins. UGI International declined by $0.12 due to higher income tax expense and lower margin contribution from the business. Turning to the key drivers for each reportable segment. Our regulated utilities reported record EBIT of $403 million, up $3 million over the prior year, largely due to higher total margin offset by increased operating and administrative expenses as well as higher depreciation expenses. Total margin increased $39 million, reflecting the 10% increase in core market volumes stemming from the colder than prior year weather, higher gas base rates in West Virginia and continued customer growth.

During the year, the utility segment added over 11,500 residential heating and commercial customers, increasing our customer base to roughly 967,000 customers in Pennsylvania, West Virginia and Maryland. Operating and administrative expenses increased $25 million, reflecting, among other things, higher personnel expenses, general insurance costs and maintenance expenses. In our Midstream & Marketing segment, EBIT was $293 million, down $20 million versus the prior year, largely due to lower margin and reduced income from equity method investments. Total margin decreased $11 million as lower margins from natural gas gathering and processing operations as well as the 2024 divestiture of our power generation asset, Hunlock Creek, were partially offset by increased margins from gas marketing activities.

Turning to the global LPG businesses. UGI International reported $314 million of EBIT, $9 million below the prior year as reduced margin and lower realized gain on foreign currency exchange contracts was partially offset by lower operating and administrative expenses. LPG volumes were down 4% from the effects of continued structural conservation and the absence of certain customers who previously converted from natural gas to LPG. These declines were partially offset by the effects of colder weather and higher crop drying campaigns. The effect of this volume decline was partially offset by higher LPG unit margins and the translation effects of stronger foreign currencies, leading to a $38 million decline in total margin.

Operating and administrative expenses decreased $35 billion, primarily due to lower personnel-related distribution, maintenance and uncollectible account expenses as well as from the exit of the energy marketing business. These decreases were partially offset by the translation effects of the stronger foreign currency. Lastly, at AmeriGas, the business reported EBIT of $166 million, $24 million or 17% above the prior year. LPG volumes were largely consistent year-over-year as the effect of customer attrition was offset by the effect of colder than prior year weather. Total margin increased by $10 million due to higher LPG unit margins, partially offset by lower fee income and slightly lower retail volumes sold. Operating and administrative expenses decreased $9 million, reflecting, among other things, lower uncollectible account and vehicle fuel costs.

In summary, fiscal 2025 was a strong year marked by solid execution across the business. We delivered a 42% total shareholder return and year-over-year growth in adjusted diluted EPS reflecting the strength of our operating strategy. Our cash generation was robust, exceeding $500 million in free cash flow, which enabled us to return approximately $320 million to shareholders through dividends while strengthening our balance sheet. We ended the year with leverage at 3.9x for UGI Corporation and 4.9x at AmeriGas, the result of disciplined debt reduction combined with improved top line performance.

Additionally, we deployed approximately $900 million of capital, primarily in our natural gas business, positioning us for future earnings growth. Our performance through the year underscores the durability of our business model, and we look to build momentum in the coming year. Yesterday, we announced our fiscal 2026 guidance range for adjusted diluted EPS of $2.85 to $3.15, which assumes normal weather based on the 10-year average as well as the current tax environment. This guidance range demonstrates our continued growth trajectory with an expected 5% to 7% increase in reportable segment EBIT on a year-over-year basis.

Our core business fundamentals remain strong, and we are well positioned to deliver solid operational performance. While we anticipate higher interest expense and normalization of our effective tax rate, largely due to the absence of approximately $0.40 of investment tax credits received in fiscal 2025. We expect to deliver strong top line growth, positioning the company for long-term success. Looking at each segment specifically, in our regulated utilities, higher gas base rates went into effect this month and we anticipate similar trends in customer growth as we saw in fiscal 2025.

At the Midstream and Marketing segment, we expect continued earnings growth in the business, which is underpinned by margins that are highly fee-based and with limited commodity exposure. At AmeriGas, we expect to realize year-over-year growth in both retail volume and EBIT due to the operational transformation underway. Lastly, UGI International is expected to be fairly in line with the current year as strong margin management and organic growth initiatives offset the impact of continued structural conservation. Looking ahead to our fiscal 2026 to 2029 plan. We are targeting an EPS compound annual growth rate of 5% to 7%, which is supported by a robust capital investment program of $4.5 billion to $4.9 billion.

These investments support strategic growth opportunities and actions to modernize our infrastructure, enhance system reliability, and position us for long-term success across our portfolio. We continue to project a rate base growth of 9% or higher, which demonstrates the significant regulated utility investments opportunities we see ahead. This strong rate base expansion will provide increasingly predictable earnings and cash flows, further strengthening our business. From a balance sheet perspective, we remain committed to maintaining financial discipline. We are targeting a leverage ratio at or below 3.75x at UGI Corporation, while our AmeriGas business will operate at or below 4.0x leverage. These targets ensure we maintain the appropriate degree of financial flexibility in order to take advantage of attractive investment opportunities.

Taken together, these metrics reflect a clear path forward. One more disciplined capital deployment, operational excellence and prudent financial management are the driving force to consistently create value. We are committed to executing our strategy, and these targets represent our commitment to you, our shareholders, for sustainable long-term growth. And now I'll hand it back to Bob.

Before we open the line for your questions, I want to reinforce 3 critical takeaways that demonstrate the strength of our current position and our trajectory going forward. First, this year, we delivered record adjusted diluted earnings backed by a stronger balance sheet and enhanced liquidity position. This improved earnings profile represents the fundamental strengthening of our financial foundation that positions us for sustained success. Second, the operational and financial improvements underway at AmeriGas and expanding throughout the company are showing meaningful results and will continue to drive year-over-year organic growth well into the future.

Finally, our focused approach to talent management and development along with our structured framework for driving operational change is transforming our culture as to how we operate as a business. These initiatives will work together to unlock the intrinsic value within our portfolio as we strive to deliver positive energy every day. Thank you for your time with us today, and we will open the line for questions.

[Operator Instructions] Our first question comes from Gabriel Moreen with Mizuho.

Just if I could just ask in terms of -- if I can ask maybe on the guidance, you gave some assumptions for what you're looking for next year out of some of your segments. It seems like the utility growth is awfully transparent over the next couple of years given the rate base growth. But can you talk about what you're expecting from midstream in the LPG businesses in the 5-year plan? Should we expect continued growth out of those businesses and just your expectations there a little bit more?

Sure, Gabe. So over that planning horizon, we expect to have growth in all of the business lines overall. So we'll see low double-digit growth over that planning period. So we expect to have a continued growth rate in the businesses and our earnings over that planning horizon.

A couple of things Gabe as well. When you look at EBIT, we gave the 5% to 7% EBIT growth for this year. I want to make sure people understand that guidance is not back-end loaded. We've got consistent fairly linear growth as you go from '26, '27, to '28 to '29. And as Bob said, the nat gas businesses is more of the same. We've got that kind of locked and loaded. But 1 of the more exciting things is we do -- we feel very confident we've got a good outlook on the LPG side. as well. Specifically, AmeriGas, we're seeing some very consistent growth in that plan over the years coming that business line as well.

If I could maybe follow up on the natural gas side of things. Last quarter, Bob, you mentioned all the NDAs that you had signed around some of the activity happening in your backyard base if we can get an update on that. And then anything, I guess, data center adjacent that might be embedded within your midstream growth plan or our utility growth plan over that outlook?

Yes, we still continue to see a lot of activity even more so than when we last spoke about it. We've advanced some of the projects with some interested parties. We have NDA so we can't necessarily go into it. But again, the amount of NDAs that we have with counterparties is north of 50. I mean, we've got significant discussions underway and in various stages with the various counterparties. So these things take time, but we are definitely keenly focused on it and looking to be part of all the growth that we're expecting to see in Pennsylvania.

And then if I could just squeeze 1 last one in. I think there were some media reports about potentially putting your electric utility on the market. Just wondering if you could maybe comment on that and also within the role of just larger expectations around continued portfolio optimization or utility midstream or LPG businesses.

Gabe, we take a look at our portfolio all the time. We did a lot of that this past year on the LPG side of the business to see. Where do we have particular assets or opportunities to see there's greater value in holding or divesting. We will continuously look at our portfolio for those opportunities. I won't comment directly on anything in either the LPG side or the natural gas side. But looking at portfolio optimization continues to be one of the things that we will always consider. What I think really drives the value in this company for the next several years as we have just a lot of opportunities for intrinsic value growth. That's low risk, high return things that I'd love to find and you'll hear from Mike a little bit more this morning on what we're doing at AmeriGas, but I see that across our portfolio, these opportunities to really drive our growth rates that Sean was talking about by driving intrinsic value .

Our next question comes from Julien Dumoulin-Smith with Jefferies.

Can you guys hear me okay? So maybe just a follow-up on a few of these things. First off, look, I just wanted to understand a little bit more about the AmeriGas targets here. I mean how do you think about getting to that sub -- And specifically, is that deleveraging? Or is that principally going to be underlying adjusted EBITDA improvement? And how do you think about the time line to get there at those sub, 4x target?

Well, I'll go first, and I'll let Mike chirp in. But AmeriGas has a lot of opportunities to really drive value. And we're going to grow the AmeriGas business by winning business. We're not going to go out and buy business. But a lot of the things that Mike and team are working on have just outstanding returns. And I think things like routing and delivery, the kind of work that Mike and his team is doing there. When you look at the NPV or something like that, it goes according to my math, in triple digits. You're talking $100-plus million NPV on that type of work because we're driving efficiencies in the business and the work Mike and team are doing in these other work streams is just going to have AmeriGas growing throughout that time period. I'll let Mike maybe comment a little bit more of what's going on in AmeriGas since it's his first call since joining about a year ago when I joined and Mike and I have a history going backwards, and I knew he was the right person to drive the improvements in AmeriGas that we're seeing.

Thank you, Bob. Julien, as Bob said, there's a tremendous amount of intrinsic value here at AmeriGas, right? And to unlock that value, we have the 6 PMO projects that are in progress right now at various stages from supply to around the delivery customer value proposition, billing. So a number of initiatives, again, that we're seeing -- already seeing the results of the fruits from those projects. So really successfully executing those projects. And we have a number of other projects that we don't advertise outside the P&L, which are also creating -- will create creating tremendous intrinsic value. So a lot of effort around there. As Sean mentioned, we had a 70% EBIT growth last year. We foresee this year being in that ballpark, right, the same ballpark.

And then going forward, there's additional value going forward. But this isn't a onetime thing. It's an ongoing thing. There's a lot of improvement at AmeriGas. I think if anyone that's call it not a secret that the last several years here at AmeriGas has been difficult but we have stabilized the business, right? So 17% growth in EBIT. Our volumes are virtually flat this year, which is the first time this has happened in 5 years. It's been a sustained decline. So we flattened volumes and then getting all these things right, as Bob says, is there's just a tremendous amount of intrinsic value growth ahead of us.

Julien, maybe to answer that last question, I'm just going to add on real quick. So this year, we went from a leverage ratio of about 6 when you look back coming into the year to 4.9, which we're incredibly proud of. That happened in 2 ways. Mike and the team grew EBIT $24 million, 17%. Obviously, that has a positive impact. And we delevered another $200 million, came into the year with about $1.9 billion of debt exited the year close to 1.7%. And you were asking in the future, where do we see that going? I'm pretty confident you're going to see us in '26 start to approach or even beat a 4.5% leverage rate in AmeriGas, somewhere in that range, maybe even a little lower, and that's going to come in the same way.

We're continuing to delever a little bit more. And as Bob and Mike said, we're expecting low double-digit growth out of AmeriGas in '26. So more of the same and it'll be a pretty impressive day when that leverage rate is sub-4.5.

Excellent. And then just following up a little bit on the credits and the reset here with 26 here a little bit. Can you speak a little bit more to just the consistency ex credits and just confirm effectively that going forward, you don't have any kind of onetime tax credit items that will roll off or what have you. I just want to make sure that we're abundantly transparent on the same page pumps.

Yes. Yes. I think -- and I think you've got it pretty right. I mean, there's I'll start with OB3, it's the smaller of the 2. We lost interest deductibility at AmeriGas. So there was about $0.10 in the numbers this year that related to '24 and '23. So those are hits we took in 2024 and 2023, they will not be ongoing. So there's no more detriment or benefit, right? We were just recouping some hits we took on our interest deductibility. And then the other big one, and I think you picked up on it, Julien, is the ITCs. The bulk of our RNG projects went into service this year. This was all anticipated. We optimized it a little bit, but the bulk of the projects went into service. That was very large. We talked about $0.40 of positive impact. So that kind of timing is out of the forecast.

We have no expectations going forward on any ITCs, although we do have -- and we've been clear, we have about $0.09 of PTCs in the ongoing forecast so much lower level. So OB3 out of the picture and then the timing of the ITC is essentially out of the picture, you're seeing a very normalized run rate as you think about '26 through '29 coming out of the company.

Awesome. And then lastly, the shift in CapEx relative to the $200 million increase in shareholder return, is that meant to be a reduction in utility CapEx and then an increase in dividends or pivot towards midstream CapEx. I know a lot of different moving things, but just super quick, if you can.

Yes. I mean, Julien, the way I look at it, the utility CapEx, and I know you're comparing to a prior plan, I see it pretty consistent, maybe even slightly up. So we can go off-line with you. But we pulled back a little bit in '23. But when you look at '24 through '27 and including '28 and '29, we're actually growing the utility CapEx a little bit. So we feel really confident there. One thing I'll say on that is we're a few miles away from completing our cast iron program. So that's a pretty big milestone for the team. You do see a little more midstream capital coming into the equation, and I think you've picked up on our commitment to the dividend in the out years as well. So I think you've got a model pretty quickly, but pretty accurately. But we do see the utility capital at or above the levels that we would have had, I think the last time I gave guidance on that.

Our next question comes from Paul Fremont with Ladenburg Thalmann.

I just wanted to sort of follow up on the 45 credits, is the first year that you're going to be collecting that in '26? Or did you collect any in '25?

It will be '26 will be the first time.

And then the other question I have is, were you using sort of a negative credit score to calculate the 45 credits going forward?

Yes. Not sure about that one. We'll need to get back to you on that.

That concludes today's question-and-answer session. I'd like to turn the call back to Bob Flexon for closing remarks.

Well, thank you for dialing in. And just to reiterate, in our year, we had a very strong fiscal year '25 adjusted EPS, 332 record earnings for us. Really love seeing the EBIT growth of 17%. Our leverage getting back in line and, of course, the TSR to our shareholders of 42%. So a great year for us. We continue to be focused very much on our operations across the board. We've got great progress in AmeriGas leading the way on improvement. So that's going to be driving our growth in these future years. Talent management, we've got new people in the right spots and combined with the existing workforce, we've got the right people to bring this forward. So I really look forward to more discussions within the future. We'll see a lot of intrinsic growth, we'll be capitalizing on what's happening in Pennsylvania with the data center investments and the future looks very bright for us. So with that, thank you very much for your time, and we'll be speaking to you more in the future. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the UGI Corporation Q3 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded.

I would now like to hand the conference over to your first speaker today Tameka Morris. Please go ahead.

Good morning, everyone. Thank you for joining our Fiscal 2025 Third Quarter Earnings Call. With me today are Bob Flexon, President and CEO; and Sean O'Brien, CFO.

On today's call, we will review our third quarter and fiscal year-to-date financial results, along with other key business highlights before concluding with a question-and-answer session.

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 or quarterly reports and our annual report 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 within our presentation.

And with that, I'll hand the call over to Bob.

Thanks, Tameka, and good morning. UGI has continued to deliver outstanding year-to-date results, reflecting the strength of our asset portfolio and our team's commitment to safely and reliably deliver positive energy solutions to our customers. Our increasing focus on safety, driving superior business performance, operational excellence, and creating greater financial flexibility is yielding results across each of our businesses.

UGI's year-to-date adjusted diluted earnings per share of $3.55 is a record performance, up $0.33 over the prior year period. This performance reflects meaningful contribution from all segments, specifically from strategic investments in the growth-oriented natural gas infrastructure, operating efficiencies, particularly at UGI International, the customer focus improvement is now underway at AmeriGas and income tax credits.

For the fiscal third quarter, we reported adjusted diluted earnings per share of negative $0.01 compared to positive $0.06 in the prior year period. As a reminder, our third and fourth quarters typically represent the seasonally weaker periods for our business, and this year's results reflect normal seasonal patterns.

Given our strong year-to-date performance and the momentum across our businesses, we expect to be at the top end of our fiscal 2025 adjusted earnings per share guidance range of $3 to $3.15, which Sean will discuss later in the call.

Slide 5 provides several key operational highlights for the third quarter. We deployed over $600 million of capital on a year-to-date basis with more than 80% directed to our highest risk-adjusted return businesses, the regulated Utilities and UGI energy services.

In addition, our Utilities segment continued to demonstrate strong fundamentals with sustained customer growth of approximately 9,000 residential heating and commercial customers added this fiscal year. We also made progress on the Pennsylvania Gas Utility rate case where there was a joint petition for approval of settlement filed on July 9. This petition was for $69.5 million in revenue increase and is subject to review and approval by the Administrative Law Judges and Pennsylvania Public Utility Commission.

We anticipate that new rates will be finalized and implemented in the first quarter of fiscal 2026, which will support continued system investments to promote pipeline safety, reliability, and modernization.

Separately, across both LPG businesses, we are successfully executing on our strategic portfolio, optimization initiatives, entering into definitive agreements for asset sales which are expected to generate approximately $150 million in total proceeds during fiscal 2025.

These targeted divestitures demonstrate our intention to operate in locations where we have a competitive advantage, focusing resources on our highest return opportunities while providing financial flexibility to support deleveraging objectives and fund growth investments.

Turning to AmeriGas. Our customer focus improvement initiatives are progressing as expected, with ongoing execution of key actions, including procurement, routing and delivery, and call-center reshoring as we prepare for the upcoming winter season.

Furthermore, we are focusing on profitable customer segments. Therefore, we will be substantially exiting the wholesale business, while this may reduce the total LPG gallons sold, we expect no meaningful impact on our overall results as these volumes have little to no earnings contributions.

For reference, fiscal 2024, the wholesale business represented approximately 11% of total LPG gallons sold, and was essentially a breakeven business.

And with that, I'll hand the call over to Sean to walk through the financial results in more detail.

Thanks, Bob, and good morning. I'll now provide more details on our financial performance. For the third quarter, UGI reported adjusted diluted EPS of negative $0.01 compared to positive $0.06 in the prior year period. This quarter reflected the impact of typical seasonal patterns within our business. Warmer weather across a few of our service territories and the anticipated reduction in Midstream margins. Specifically, the Utility segment was down $0.04, primarily due to higher operating and administrative expenses.

Midstream & Marketing was down $0.01 as the higher investment tax credits associated with the RNG projects largely offset lower gathering and processing margin. UGI International was also down $0.02, as the lower total margins more than offset the benefits from reduced operating and administrative expenses and lower tax expense.

At AmeriGas, while EBIT was fairly flat year-over-year, the business benefited from lower income tax expense. At Corporate & Other, there is an offset to normalize the corporation's tax rate, and this is reflected in EPS decline shown year-over-year.

Turning to the quarterly results for each reportable segment. At the Utilities, EBIT was $30 million for the quarter versus $39 million in the prior year period. Total margin was up $4 million, largely due to benefits from the infrastructure replacement and betterment program at the West Virginia Gas Utility.

Operating and administrative expenses rose by $10 million, reflecting, among other things, higher personnel-related and maintenance expenses. Depreciation and amortization expenses also increased due to continued investment in our distribution system.

At the Midstream & Marketing segment, EBIT was $27 million for the quarter, down $16 million over the prior year. Total margin decreased $9 million as lower margins from natural gas gathering and processing operations as well as the 2024 divestiture of our power generation asset, Hunlock Creek, were partially offset by increased margins from gas marketing activities.

Year-over-year, the segment also saw lower Other income, particularly due to the absence of income from a storage farm-out contract in the prior year.

Turning to the Global LPG businesses. At UGI International, LPG volumes declined by 9% due to the effects of continued structural conservation, the absence of certain customers who previously converted from natural gas to LPG, and the impact of weather that was 16% warmer than prior year. The effect of this volume decline, along with the lower LPG unit margins, were partially offset by the translation effects of stronger foreign currencies, leading to a $19 million decline in total margin.

UGI International continued to drive operational efficiencies. And this quarter, we saw a $9 million decline in operating and administrative expenses driven by lower personnel and distribution expenses, which was partially offset by the translation effect of the stronger foreign currencies.

Overall, the segment reported EBIT of $43 million, in comparison to $57 million in the prior year period, largely due to a $19 million decline in margin and slightly higher depreciation and amortization expenses partially offset by lower operating and administrative expenses.

At AmeriGas, the operating loss of $28 million for the quarter was fairly consistent with the prior year as the effect of lower retail volumes stemming from continued but reduced customer attrition was more than offset by higher retail unit margins.

Turning to the full year-to-date performance. The EBIT from our reportable segments was comparable year-over-year, demonstrating the resilience of our diversified portfolio amid a mixed operating environment.

At the Utilities, EBIT was up $12 million, primarily driven by a 10% increase in core market volumes from favorable weather conditions. Midstream & Marketing experienced a $22 million EBIT decline, reflecting the anticipated impact of lower minimum volume commitments on one contract renewal completed in Q4 last year, as well as the 2024 power generation asset sale.

UGI International's EBIT decreased $9 million, largely due to the absence of the Swiss business divested in Q3 last year, along with softer retail volumes, and this was largely offset by the successful reduction of $35 million in operating and administrative expenses.

AmeriGas showed some momentum with EBIT up $18 million, reflecting both higher total margins and disciplined expense management. Notably, the segment achieved a slight increase in total retail gallons largely due to colder weather conditions during the critical winter months, which offset customer attrition.

This underlying operational performance, combined with meaningful tax benefits primarily associated with investment tax credits, led to the year-to-date adjusted diluted EPS of $3.55.

Looking to the fiscal fourth quarter, we anticipate that earnings from our underlying businesses, excluding taxes, will be largely consistent with the prior year period. Of note, while we recorded a diluted loss of $0.16 in Q4 of fiscal 2024, this included $0.20 of tax benefit from regulatory changes that allowed us to utilize previously expensed valuation allowance.

With that outlook for the fiscal fourth quarter and our year-to-date results, we expect that UGI will achieve the top end of its fiscal 2025 adjusted EPS guidance range of $3 to $3.15 per share. This guidance excludes potential incremental benefits from the recently enacted One Big Beautiful Bill Act. While our team continues to review the impact of the bill on our business. The bill's changes to the deductibility of interest expense is expected to provide additional tax expense favorability as we move forward.

Turning to the balance sheet. We continue to build financial strength and flexibility, as evidenced by our leverage ratio of 3.8x for the quarter and robust free cash flow generation, combined with strong available liquidity of approximately $1.9 billion as of June 30, 2025. These metrics underscore our commitment to exercise financial discipline, and maintain a solid foundation for value creation.

Lastly, I am pleased with the progress made in optimizing our LPG portfolio, generating approximately $150 million in cash proceeds, while streamlining our footprint, enhancing our strategic focus and providing meaningful support for our deleveraging objectives.

And with that, I'll turn the call over to Bob for his closing remarks.

Thanks, Sean. [Audio Gap]

[Operator Instructions] Our first question comes from Julien Dumoulin-Smith of Jefferies.

It's actually Paul Zimbardo on for Julien. The first one I want to ask is, if you could unpack a little bit the potential disclosure, you have -- a potential benefit from One Big Beautiful Bill Act. Is that bonus depreciation on regulated activities? Is that 45Zs on the RNG? Just any even just qualitative description you can help with there?

Yes, Paul, this is Sean. I'll hit a couple of things and the biggest impact initially will be -- over time, we have lost some of the interest deductibility, specifically at AmeriGas, almost predominantly at AmeriGas, that started to have impact us, Paul, back in '23. It had impact in '24. And it would have had impact this year. So that's step one is we'll be able to retroactively go back and probably we're still finalizing the numbers. But remove some of the allowance that we had -- the valuation allowance we had to put on the books over the last 2 years and a little bit this year. So that's step one. By the way, that will continue. That's retroactive, but it will also continue as we go forward.

The other two items, I think, that have big impact for us is because of the ITCs this year, we're very, very -- we're closing out our RNG projects that they all come into service. Bonus hasn't been an election that we've really focused on. But this act will give us the ability as we move forward, probably to utilize bonus depreciation a little more. So I think you're spot on there.

R&D credits is another area with the amount of capital we're spending at the Utility and Nat Gas. We see some benefit there. And then on the 45Zs, I think it's just more strengthening the position as we get into next year and beyond, around 45Z.

So we haven't given the exact number, but we definitely know the trend. This is going to be a positive impact to the company.

Okay. It's good to hear across the board. And then, I know, I had asked about AmeriGas, I'll leave that for someone else. I wanted to drill in a little more on the Midstream side of the business. Obviously, you had a lot of activity with the Pennsylvania AI & Innovation Day. Are there any way that you could frame what you think the investment opportunity set is for the Pennsylvania Midstream business, given a lot of the activity in the near your footprint, that would be helpful.

Yes, Paul, I think, the best I can do with that right now is to say that, both Midstream and the Utility, we expect will benefit, we have well into the double digits of NDAs with potential generators and other opportunities to utilize our infrastructure for providing natural gas or providing on-site LPG -- sorry, LNG. So we see pretty robust opportunities there, multiple, like say, multiple counterparties and in-depth discussions that are ongoing.

So we have the right assets in the right place to take advantage of all of this. So it's just to continue to cultivate those opportunities.

Okay. Great. And then if I could squeeze in one last one. Any commentary you provide on the multiple for the strategic divestitures you had as of date?

No. I mean, the way that we looked at all the divestitures is that we looked at, kind of, how we view the value in our hands versus the value that we're receiving from again, the counterparty on it. And we wouldn't sell any asset that would be dilutive. So when you think about the various multiples of our business even when you break them apart, it's got to either be equal or better than in our own hands. So that way on a risk-adjusted basis, you're creating value versus not selling. So, that's the way we look at it.

Again, we look at the NPV in our hands versus the sale price and make sure that it's not going to be dilutive to us.

On leverage, Paul, when you think about it. So it's got to be much better than our leverage ratio as well.

[Operator Instructions] Our next question comes from Gabriel Moreen of Mizuho.

Good morning, everybody. I guess, I'll take the AmeriGas question then just twofold there. One is, there's a lot of moving parts, I think, between the wholesale divestiture, potential high-grading of the customer base. So I'm curious, Bob, as you go into the upcoming winter heating season, what sort of metrics you're most focused on here, whether it's, I guess, profit -- I'm sure profitability is a big one. But anything you can kind of direct us to whether it's absolute or relative metrics?

And then, the second part on the divestiture program, just on LPG, wondering if you think you're kind of done for now if there's more to go at this point?

Thanks, Gabe. I'll go into it, and certainly in the AmeriGas topic, I'll try not to use the rest of the call time for that. First of all, the wholesale business, again, creates -- it's been creating a lot of activity in our business, but not providing any bottom line benefit. So again, working on simplifying that business we're not going to supply largely our competitors basically at our cost using our infrastructure. So it doesn't make any sense to continue doing that.

To the extent we've got customers in there that are lost customers, they'll either become new national accounts on a profitable level or they, again, will not be continuing on with them. So it's really, I think, as you said, high-grading the portfolio, taking the complexity out of the portfolio, so we're focusing on our highest value customers out there providing the commensurate level of service that our customers expect and deserve it. So I think, it's a good step as we go into the winter to better handle our profitable businesses, our profitable customers within AmeriGas.

When you think about some of the indicators we're looking at, safety is one that we don't talk a lot about on these calls. But certainly, the third quarter of this year at AmeriGas had substantial improvements in our safety record. And to me, that's a leading indicator of how well you're focusing on your businesses, your processes, and getting inefficiencies out of your business and maintaining a safe workforce and not creating rework or anything that's just adding cost and more complexity to the business. So -- really happy to see the dramatic improvement that we've experienced in the third quarter on safety. It has been a key focus area for us.

On a lot of the improvement projects that are underway, we've gone from really the analysis of what is the root cause of issues and what's the solution to implementation. And we talked about it in the past that it's -- this is a two-winter effort. Going into this winter, when you think about customer service, we'll have a bit of a hybrid, we'll have some still international support for customer service, but a much more substantial footprint domestically to provide much better customer service. So another metric will be our customer service statistics, our Net Promoter Scores, our time on hold, things of that nature. So we continue to work on some of the KPIs and the things that really affect the customer.

Another one is routing and delivery. It's another work stream that we've been focusing on, and we have that rolled out now to a handful of our locations across the country, and we're experiencing, call it, an 8% to 10% efficiency improvement on miles on efficiency on gallons delivered per mile and the cost of delivery.

So as we get to October 1, we plan to have that launched nationwide. So that will be another statistic that we're looking at, is the efficiency of our delivery routes as well. And then always the kind of bottom line free cash flow, we generating cash flow from this business, as we've talked about need -- to stand on its own.

And one of the things that really excited about as well for AmeriGas is that their leverage ratio has improved by nearly one turn. So we'll continue to watch the balance sheet, the importance of maintaining the right credit metrics, but as we go into the winter, there will be various performance metrics, some of which I just went through. So we're gearing up for the winter.

One of the other things though that came as a little bit of a surprise to me in this quarter when I think about substantial opportunity during the summer months to improve our ACE business as well. And again, through better productivity, better efficiency, better processes that there's meaningful improvement that we can make over the summer months. And I would say that before going into the summer, my focus was relentlessly on the winter, but going out and visiting some of the locations and seeing the opportunity to really hit our production targets I think, can really help us in the summer months as we go forward.

So I'm looking forward not only to a good winter next year, but also a stronger summer than we had this year. So looking at those production metrics will be another one that we look at as we go into next summer at our various ACE facilities. So there's a lot of opportunity procurement of propane, hedging, proactively hedging to help our customers maintain stability of their bills. So we've got a lot going on and a lot of progress. I think we're in really good shape going into the winter.

Okay. Hopefully, that's helpful. I mean, I can talk about for quite a long time, but I'll stop there.

That was very comprehensive. Maybe if I can comment Midstream from a different angle. When you think about your producer activity be signed behind some of the supply push systems that you have, can you maybe talk about what you're seeing, given the uptick in in-basin demand, maybe some egress capacity, too.

And as a second part to that question, are there any notable contract expiries on the Midstream side that you're kind of watching over the next, call it, 12 to 18 months?

Yes, I can hit a few of those, Gabe. No significant notable contract expiries or at least nothing that we anticipate where there's a significant shift, meaning on the re-up, we think it will be generally in line with what we're at. We did have that one last year. Maybe that's what you're referring to. So I think as we look at '26, we're not thinking about any big dip due to big contract expirations.

And again, Gabe, just a follow-up on maybe the earlier question from Paul as well. When we look at the potential developers within the state of Pennsylvania, both on the regulated and unregulated side for power generation and the like. We're seeing substantial inquiries and opportunities there. So will continue to work with all of those counterparties to see what we can do to participate and help make the energy investment that's happening across the state.

Again, we're in a exciting time for the state of Pennsylvania. The Energy Summit really highlighted that. And the great thing of Pennsylvania is how, from a political standpoint, all parties are aligned on bringing investment into the state of Pennsylvania. So it's really an exciting time here in Pennsylvania. And again, our Midstream business and our Utility business should be substantial benefactors of the movement underway.

I'm showing no further questions at this time. I would like to turn it back to Bob Flexon for closing remarks.

Thanks, Dana, and thanks, everyone, for dialing in. And just a few -- maybe a few closing comments. We had a record year. So certainly, that's exciting in its own, right? But work is underway to make the future even more successful than what we had this year. As I just mentioned, talking with Gabe, I'm very excited about our safety performance and the improvements we're seeing in safety, I just view that as a leading indicator to a well-run company. So we feel great about that.

The financial performance this year, we talked about was great. The cash flow of $558 million is an 11% improvement year-on-year. And that really takes me to the kind of the third point of what really focusing on is the balance sheet. And we've got our corporate leverage down to 3.8x, $200 million debt reduction, as I mentioned a moment ago.

The AmeriGas achieving nearly one turn improvement in its leverage ratio. So we're going to continue focusing on the intrinsic value drivers in our business, the State of Pennsylvania and West Virginia.

We've had a constructive rate case proceeding. We're looking to get that through its final stages and have that part of our fiscal '26 results. And we've completed our Midstream projects, and we just continue to look at our emerging opportunities.

And finally, I'll just say that our eyes are completely focused on this upcoming winter and to be ready for winter to have a really successful launch into fiscal '26.

So with that, I'll conclude the call. And again, thanks, everybody, for participating and supporting us through all this and look forward to our discussions in the future.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.