UGI Corp (UGI) 2014 Q3 法說會逐字稿

Good morning, my name is Steve and I will be your conference operator today. At this time, I would like to welcome everyone to the UGI AmeriGas third quarter earnings conference call. (Operator Instructions)

Before turning the call over the to the speakers today, I would like to apologize in advance, as we are experiencing technical difficulties and you may hear clicking on the line. Please do not disconnect to reestablish the connection.

I would now like to turn the call over to Daniel Platt, Treasurer. Please go ahead.

Thanks Steve. Good morning and thank you for joining us. As we begin, let me remind you that our comments today will include certain forward-looking statements which management of UGI and AmeriGas believe to be reasonable as of today's date only.

Actual results may differ significantly because of risks and uncertainties that are difficult to predict and many of which are beyond management's control.

You should read our annual reports on Form 10-K for a more extensive list of factors that could affect results, but among them are adverse weather conditions; cost volatility and availability of all energy products; increased customer conservation measures; the impact of pending and future legal proceedings; domestic and international political, regulatory and economic conditions; currency exchange rate fluctuations; the timing of development of Marcellus Shale gas production; the timing and success of our commercial initiatives and investments to grow our business; and our ability to successfully integrate acquired businesses and achieve anticipated synergies.

UGI and AmeriGas undertake no obligation to release revisions to their forward-looking statements to reflect events or circumstances occurring after today.

In addition, our remarks will reference certain non-GAAP financial measures that management believes provide useful information to investors, to more effectively evaluate the year-over-year results of operations of the Companies. These non-GAAP financial measures are not comparable to measures used by other companies and should not be considered in conjunction with performance measures such as cash flow from operating activities.

With me today are Hugh Gallagher, CFO of AmeriGas Propane; Kirk Oliver, CFO of UGI Corporation; Jerry Sheridan, President and CEO of AmeriGas Propane; and your host, President and CEO of UGI Corporation, John Walsh. John?

Thanks Dan. Good morning and welcome to our call. I hope that you've all had a chance to review our press releases reporting third quarter results for UGI and AmeriGas.

While operational activity ramps down somewhat in the third quarter, the last three months have been noteworthy for us as we move forward on an attractive range of new investment opportunities.

I'll comment briefly on the key drivers for our solid performance in the third quarter. I'll turn it over to Kirk to provide you with a more detailed review of UGI's financial performance. Jerry will follow with an overview on AmeriGas and I'll wrap up with an update on our strategic initiatives.

We delivered a strong performance in Q3, despite warmer than normal weather across our service territories. Our Q3 GAAP EPS was $0.18, while our adjusted EPS, which reflects a $0.03 mark-to-market adjustment was $0.15. This compares favorably with our adjusted EPS of $0.11 in the third quarter of FY13.

Our Midstream and Marketing business showed particular strength as we utilized our Marcellus asset network to serve the strong natural gas demand across the region.

As I noted on our last call, while extreme winter weather was the most significant factor impacting our financial performance over the winter, the market factors impacting pipeline capacity values and delivered gas costs are fundamental and far-reaching. Demand for natural gas across UGI service territories is exceptionally strong. It spans all of our traditional customer segments as well as the power generation sector.

Our integrated assets portfolio in the Marcellus, which includes pipelines, gathering systems, natural gas storage, LNG and a large base of customer demand, provides us with a significant opportunity to deliver value during periods of volatility. There is a clear need for additional pipeline and storage capacity to serve the Mid-Atlantic and Northeast regions.

We believe there is recognition of an infrastructure gap on the part of producers and consumers, which will enhance and accelerate our efforts to develop new infrastructure projects. We're pleased with the progress we've achieved in the Marcellus and remain very focused on continuing to build out our asset network.

There were several other noteworthy activities in the quarter across our businesses. Our gas utility continues to deliver exceptional growth as demand for natural gas remains strong across both the residential and commercial segments. We expect to add over 18,000 new customers this fiscal year, with conversions accounting for the majority of the additions.

We're also getting great response to our growth extension tariff, or GET gas. This new program enables us to reach unserved or underserved areas of our service territory. While growth has been a key area for us, we're equally focused on our infrastructure replacement program of cast-iron and bare-steel, which is moving forward on pace with our commitments.

Jerry will provide you with details on AmeriGas this quarter, but I wanted to comment on the strong performance of our two target growth areas; AmeriGas Cylinder Exchange, ACE, and National Accounts.

ACE sales growth is approximately 8% year to date, while our National Accounts program continues to grow at an accelerated rate with volumes up 11% in the quarter when compared to the prior year.

Our European team was once again challenged in the quarter by very warm weather, which has been a consistent theme for Europe this fiscal year. We've been pleased with our performance in Europe in a year when the weather brought back bad memories of FY12. Our teams remain focused on unit margin management and expense controls, while also identifying opportunities for new investment. I'll comment on one of those investment opportunities when I discuss our strategic initiatives later in the call.

I'd now like to turn it over to Kirk at this point for the financial review. Kirk?

Thanks John. Good morning, everyone. As John mentioned, we had a strong quarter despite the warm weather, driven primarily by strong results in Midstream and Marketing and to a lesser extent the utility operations. You can see here that we experienced warm weather in all of our businesses this quarter.

It's important to note for AmeriGas that weather in the shoulder months of April and May of this year was significantly warmer than last year.

All of our international businesses were also impacted by the effect of much warmer weather this quarter this last year, particularly Antargaz in France, where temperatures were almost 33% warmer the third quarter of last year.

Moving on now to AmeriGas, we're reporting operating income for the quarter of $7.2 million, an increase of $3.4 million over last year. Total margin decreased by $3.6 million, reflecting a decrease in retail volumes sold, partially offset by modestly higher retail propane unit margins.

Operating expenses decreased by $2.1 million. Operating expenses in the prior period include $9.9 million of Heritage transition expenses. Excluding the Heritage transition expenses from last year, operating expense increased $7.8 million, reflecting higher overtime and vehicle equipment repairs, general insurance costs and spring advertising programs.

Depreciation expense was $47.8 million, down $4.6 million from the prior year, due to a onetime adjustment in last year's quarter relating to change in Heritage asset lives and a run off in some short-life assets this quarter.

Finally, I'd also like to remind everybody that effective April 1 of this quarter, all propane hedges have been reported as mark-to-market hedges and are included in corporate and other results in our GAAP financial statements. The existing hedges which qualifies for hedge accounting [run off over time]. We will continue to highlight any mark-to-market impacts to our financial statements.

Jerry will go into more detail on AmeriGas operations later on the call.

We reported a loss in income before taxes at UGI International of [$1 million]. This is down $15 million from the prior year period. Our European operations continued to experience very warm temperatures this quarter, following the record warm winter heating season. Temperatures at Antargaz were almost 20% warmer than normal this year, which were nearly 20% colder than normal last year.

For the full year to date, the weather has been about 18% warmer than last year for Antargaz and 16% warmer for Flaga. UGI International management team did a good job navigating the warm weather and with assistance from volumes added in the BP Poland acquisition have held volumes year to date to only 2.1% below last year.

Volumes for this quarter were 7.4% lower than the prior period and reflect the warm weather (inaudible) offset by incremental retail gallons associated with the BP Poland acquisition. The decrease in total margin of [11.6] million principally reflects the impact of lower LPG gallons sold, slightly lower average retail unit margins related to the addition of BP Poland and the impact of much warmer weather, (inaudible) customer mix at Antargaz.

The increase in operating expenses and other, reflects a higher operating expenses at Flaga, resulting from the BP Poland acquisition, partially offset by the translation effect of the stronger euro. The average euro to dollar translation rate for the current quarter was approximately $1.37 per euro compared with $1.30 for the prior year period.

Turning to slide 11, the gas utility is reporting income before taxes of $7.3 million compared to $5 million in last year's quarter. Throughput to core customers increased 4.5%, reflecting the effect of customer growth, due primarily to customer conversions from fuel oil to natural gas. Total margin increased by $4.8 million or 6.5%, reflecting higher core market margin and greater firm delivery service margin.

Costs were up $3.5 million this quarter, primarily driven by higher maintenance expenses coming out of the extremely cold winter season.

Midstream and Marketing posted another very strong quarter, reporting income before taxes of $26 million, an increase of $19 million over the prior year quarter, as we continue to benefit from our Marcellus asset portfolio and higher gas price volatility. Total margin increased by $23 million in the quarter, reflecting significantly higher capacity management and storage margin of [$8.3] million. Greater retail gas marketing margin of $10.6 million and higher electric generation margin of $(inaudible).

Natural gas gathering margin also increased by $3.4 million this period, reflecting incremental margin from the Auburn pipeline extension, which is (inaudible) during the first quarter. The increase in expenses principally reflects increased costs associated with the expansion of our Marcellus asset portfolio.

Our Midstream and Marketing business benefited from increased volatility in the Mid-Atlantic region of the United States, which has resulted in very strong results for the quarter and for this fiscal year to date. The business' contribution to earnings year to date is up $62 million or almost 140% over last year. While we do not expect this level of volatility to repeat itself anytime soon, we do expect volatility and capacity values to remain above the recessionary levels of the last several years.

Looking now at liquidity and cash resources, we used a combination of bank facilities and cash on hand to meet our liquidity needs. Total liquidity by business in the form of cash on hand and available credit capacity are laid out in the table on this slide. You can see from this table that the businesses have sufficient capacity to meet their liquidity needs.

Finally, as I am sure, you've seen, yesterday we announced an off-cycle 10% dividend increase and a three-for-two stock split. This brings the annual dividend rate to $0.87 per share (inaudible), which is equal to $1.30 per share pre the split.

In the past, we have guided dividend payout expectations to a range of 35% to 45%. It's important to note that like our stated long-term earnings growth objective, the payout guidelines are long-term and the payout ratio may, for a number of reasons, fall out of this band in any given year.

On the whole, we feel good about the quarter and are affirming our guidance for adjusted earnings of $2.95 to $3.05 per share.

That completes my remarks and I'll now turn the call over to Jerry for his report on AmeriGas.

Thank you Kirk and good morning. Adjusted EBITDA for AmeriGas in the third quarter was $55 million compared to $69 million recorded in the third quarter of last year. As discussed during the second quarter conference call in May, this was not an entirely unexpected result as last year's third quarter was unrepeatable due to cold spring weather following a relatively warm winter.

The weather in the shoulder months of April and May this year, were significantly warmer than last year. April alone was 12% warmer than last year, with weather for the quarter averaging about 10% warmer than last year.

As a result, retail volume in Q3 was 216 million gallons or 4% below the 225 million sold last year. Retail margins during the quarter were about $0.03 per gallon above Q3 last year, in line with our expectations to expand margins with inflation.

Average propane cost for the quarter was $1.06 per gallon at Mont Belvieu, which was 16% above Q3 of 2013, though 19% below Q2 of this year.

We also discussed in May that we expected this quarter to include certain expenses that were essentially an overhang from the very unusual winter that left us with many catch-up repairs to our equipment and assets at our customer sites.

In all, operating expenses were $225 million or $11 million; that is 5% higher than last year, primarily due to increased overtime, [vehicle] and equipment repairs and some discretionary advertising expenses related to spring marketing programs. Lastly the expenses excluded $10 million in Heritage transition expenses.

We are reaffirming our guidance for the year at $660 million to $675 million for fiscal 2014. As always, this guidance assumes normal weather in September, (inaudible) month of the fourth quarter with meaningful weather impact.

The expense items that I mentioned are now behind us and the business is meeting our expectations as we focus on commercial accounts and our cylinder exchange business during the [quarter].

Now turning to our growth thrusts. Our national accounts program experienced solid quarter with volume up 11%. Our AmeriGas cylinder exchange program delivered volume growth of 4% in Q3 and a continued focus on marketing activities with key customers as well as an increase in cylinder turns at most retail locations, with year to date volume up approximately [2%].

We've also added over a 1,000 new locations so far this year for ACE and you can find AmeriGas cylinder exchange now at 48,000 locations. Although we're happy to see the unusual 2014 winter fully behind us, through it all 2014 is shaping up to be a tremendous year for AmeriGas.

At our guidance levels, earnings will have literally doubled from the earnings of AmeriGas just three years ago. We've also restored our distribution coverage to 1.3 times and our leverage ratio to approximately 3.6 times, in line with the expectations that we announced in the Heritage acquisition three years ago.

I would also like to mention that on June 17th, we completed a secondary offering by affiliates of Energy Transfer Partners, ETP, of 8.5 million AmeriGas common units. We view the elimination of (inaudible) large unit sales as a very positive event for our unit holders and that it eliminates the uncertainty around the unit price that often accompanies these types of deals.

ETP and affiliates now hold approximately $4.4 million of common [units], most of which are being are held in a captive insurance affiliate and will likely be converted to cash ratably, as ETP's business needs dictate.

Finally, you saw the announcement that Paul Grady, our Chief Operating Officer has decided to retire in January of 2015. Paul's leadership, advice and partnership has been of great value to (inaudible) essential to the successful Heritage integration. I especially thank Paul for giving us enough time to smoothly transition the COO responsibilities.

So that concludes my comments and now I'll turn the call back over to John.

Thanks Jerry. As I noted earlier, this was a noteworthy quarter for us from a strategic perspective, as we moved forward with several exciting new opportunities.

Earlier this month we announced that we had reached Agreement in Principle to acquire Total's LPG distribution business in France for EU400 million to EU450 million. Total's LPG volumes are roughly equivalent to our Antargaz's, but with a somewhat different product mix. We are excited about this opportunity to significantly expand our presence in France. While we are still several months away from closing, the regulatory filing and due process has been initiated and we'll certainly keep you updated on our progress.

One of the platforms of our midstream strategy is the build-out of our infrastructure network in the Marcellus. This includes large projects such as Auburn pipeline network as well as smaller projects that enhance the value of our existing (inaudible).

For example, we recently received FERC approval to expand liquefaction capacity at our Temple LNG facility. This project will increase liquefaction by 50% and is expected to be online by the end of the calendar year. This investment will enhance our ability to serve existing markets such as LDC peak shaving market and develop newly emerging LNG segments.

In addition to the expansion of the existing liquefier at Temple, our Midstream team is actively developing projects that will further expand our LNG asset network in the Marcellus.

On our last call, I outlined two additional phases for Auburn pipeline network project. Work is well underway in the first phase of that project, which will involves additional compression. This phase will come online by the end of 2014 and the additional capacity will enable higher system throughput to serve the robust demand in Northeast Pennsylvania.

There is no doubt that FY14 has been an eventful year for both UGI and AmeriGas. Our strong financial performance over the first nine months has been coupled with significant advances in our strategic programs. While extraordinary weather and its impact on delivered gas costs in the Northeast and Mid-Atlantic regions was a major contributor to our strong year-to-date performance, we believe that the infrastructure gap created by the escalated demand for natural gas will provide positive momentum for new UGI infrastructure projects.

The stock split and dividend increase that Kirk referenced (inaudible) is a good reflection of our confidence in UGI's future prospects. We are excited about the opportunities that lie ahead for us in FY15 and beyond and look forward to keeping you updated on our progress.

With that, I'll turn back over the Steve, who will open it up for questions.

Operator: (Operator Instructions) Gabe Moreen; Bank of America, Merrill Lynch.

On Total Gas, can you talk a little bit about what specific regulatory steps you've got to go through to get this closed and I guess what the timing on those would be? And then also maybe I know you talked about its still early in the process, but have you gotten any initial informal reactions from regulators with the acquisition announcement?

In terms of the regulatory process, certainly the most significant element of that would be regulatory approval from the appropriate competition authority, so that will get looked at possibly at the (inaudible) level or possibly [in-country]. And that's still to be determined and that's determined through [regulatory] process and that process has been initiated.

And timing of that is sort of in line with my comments. It's basically determined by the regulator. We're assuming and believing that probably within a six-month window or so we close. I think in our release we talked about the first half of 2015. We will get more clarity as the process proceeds.

We feel good about our submission and the rationale, in terms of making this investment, but obviously we have the regulatory process run its course and we will respond to any inquires that come out of that process.

And I guess as a quick follow-up to that is, are going to talk financial matrix and accretion around the deal you think after it closes or just as we get closer to closing?

Certainly after it closes, we definitely will. We may be in a position as we approach closing, to provide more information. We provided the information we could on I think it was July 2nd we announced it. Certainly we get together in the fall at the Analyst Day, we'll provide an update and any available new information we can provide. And then will share that with the investment community as soon as we are in a position to do so.

Great. And then shifting gears, in terms of future projects at midstream, can you talk about to what extent you are weighing what I would term shorter-haul gathering opportunities versus participating either in new or in some of the announced long-haul pipeline opportunities that are getting developed out of the Marcellus?

And then I guess as a quick follow-up to that, can you disclose CapEx around the Temple project and what that's going to be?

First on Temple, the Temple project is about a $10 million project. So that is a great investment for us. It is a modest capital project, but it is a really good example of an add-on investment to enhance the value of an existing critical asset for us, particularly given the demand for both peaking and liquid.

And we are seeing enhanced demand for peaking, based on what occurred this winter. Most utilities in the region established new peaks in terms of output or send-out on record, on cold days. So, we see robust demand for peaking and obviously with transport and another sectors or markets emerging, we see strong liquid demand. So it's a good example.

In terms of the infrastructure projects, we will look at a range of projects, the projects that align best with our strategy or the projects that really link production in Pennsylvania and surrounding regions, particularly in Pennsylvania to demand for us and others in our region, which would be Pennsylvania and surrounding states. Those are the projects and Auburn is a good example of that. Those are the projects that, from a strategic standpoint, really fit well for UGI.

We'll look at other opportunities to participate in some larger projects, but I would say we are most focused on those projects where we can align them with our core strategy, which is really about taking the abundant production and linking it to the demand that we serve and others serve in the Mid-Atlantic and Northeast region.

Got it and then just last one if I could. On the [dividend] and the 10% increase there, but still maintaining the 4% longer-term growth rate around [dividend] going forward, seems reasonably conservative at this point. I realize you don't want to set the bar too high, but I am just wondering in light of your comments about midstream earnings being stronger for longer capacity values being higher; do you think there is a chance you could reevaluate that 4% growth rate in the near to medium term, or do you just think you'll just reevaluate it and there is possibilities in certain years could be stronger?

We look at that each year. We do a (inaudible) plan, which is kind of four-year outlook for our entire business and the Company and we look at our earnings targets, we look at our commitments in terms of dividends. So there is no change in that.

What we historically have done is when we are at a point where cash flow has been particularly strong, we look at that and the outlook for cash flow remains strong, looking forward, we then look at our dividend and have taken it up. The last time we had a significant ratchet of the dividend was in 2010.

So we will certainly continue to do that. We'll look at the policy as well and always looking to maintain the balance of growing our dividend, but also having sufficient cash flow available to fund the investment opportunities that will drive growth in earnings in the mid to long-term.

So we feel good about this increase. We feel good about the cash generation capabilities of our businesses and we'll continually look at that to make sure those critical elements kind of stay in balance for us.

Carl Kirst; BMO Capital.

Maybe John, understanding there is probably not much more to say on or you can say on Total, but just to go ahead and ask and see; is there any additional, outside of the financial metrics as far as trying to give a flavor of either a relative percent synergies or perhaps even better, the sense of timing of how those synergies get realized. Is this something that may take longer, for instance, than say what we saw with Heritage? I am just trying to get a better flavor of that if there's any incremental you can give?

It's a really good question. One of the things that certainly we're focused on and Total is focused on as well is to make sure that we have a clear plan that aligns, in terms of let's call it social issues and (inaudible) fronts and certain agreements that are in place etc., etc.

So, as you sort of pointed out, we're looking at the delivery of certain synergies that will take place over a longer period of time than we would typically see or we would potentially see in other geographies. That was well understood as we looked at the opportunity and developed the plan, so that's not a surprise to us.

And then sort of the valuation of the business was based on that more extended period of bringing the businesses together. There is a lot we can do, assuming we move forward, that delivers value across the two businesses in terms of logistic and operational synergies that can be delivered without [significant structural] changes.

So one of the things we've got a good track record of at the company is having a very detailed view of project execution when it comes to M&A. And certainly we'll bring that discipline to this. But basically, we'll take a little bit longer on certain elements of this, because we need to make sure we are executing in a manner that's consistent and appropriate for a major sort of combination of businesses [in France].

That's helpful, but it's too early to quantify I assume at this point?

Right, right. We'll provide more information as we move forward.

Fair enough. Could I ask you, or maybe it was Kirk, to just repeat some of your comments? Unfortunately, it cut out for me right when you were sort of addressing about the commercial activity as far as the natural gas marketing here in the fiscal third quarter, talking about I think it was volatility or basis specifically in the Mid Atlantic.

And I thought you said something about near-term versus long-term and I just wanted to get a better sense of, I guess, A, what you are seeing here in the fiscal fourth quarter, if there has been any increase or decrease of opportunities relative to the quarter we just came out of?

And if B, from an outside observer standpoint, if something like the TETCo M-3 basis is still perhaps the best thing to monitor to get a sense of that.

I would say that's a good thing to monitor to get some sense. I don't think there is anything you can do that's really precise on that matter. And the point that really I was trying to make is that we've really benefitted a lot this year from where our assets are located and how we optimize those assets around what's going on in the Marcellus, or the Mid-Atlantic region really, and taking advantage of some of the volatility there.

But we don't expect a repeat of this year necessarily next year or any time real soon. But on the other hand, we don't expect things to go back down to the very low volatility levels that you saw going back to 2008, once the recession hit.

Just to expand on that, I think what we're seeing is underlying volatility that is notably higher than it was say in the 2008 to 2012 period, especially, where it was a pretty dormant market. So you can certainly see a difference and we saw some recovery and more volatility in 2013 and certainly last winter was kind of extraordinary.

But I think the point that Kirk made was on an underlying basis, you do have the impact of significantly increased demand with the natural lag that exists in terms of provision of infrastructure to meet peak demand.

So that will continue to provide us opportunities moving forward on two fronts. One, to utilize the assets and the capacity that we have in our network, which is great. We're not assuming next winter looks like this winter, because this is a pretty unique winter, but there will be some solid opportunities to use the assets we have.

And two, to make additional investments to be part of the necessary build-out of infrastructure and the [region[. It's that balance. It was an extraordinary year, but we don't want to lose and certainly we're not losing sight of the fact that the combination of demand and infrastructure-need creates a real opportunity for us that we need to be very focused on.

Chris Sighinolfi; Jefferies.

John, just wanted to follow-up real quickly on Gabe's question about dividend. I know it's your practice and Kirk mentioned it again, to sort of manage the payout ratio to that 35% to 45% band and we've seen the heightened increases in the past, like you referenced in 2010, but I never recalled seeing one that's sort of an off-cycler, where we have two separate increases in the same year.

And so I am just kind of curious what transpired for you and the Board between the April increase and the raise in your EPS guidance at that point and sort of this announcement now, if there was just anything in particular you could point to that maybe shaped the view on boosting the dividend a second time?

I would just say that probably the other important factor is just the strength of the cash flow this year. Obviously a very strong year reflected in the first nine months. Delivered a lot of that income in the first six months, cash flow has been great, our teams have done a great job working capital management.

So, I think the combination of very very strong operating cash flow coming off the businesses plus bringing some of these capital projects like Auburn on-stream, that I think gave Board the confidence to do this and kind of reward investors. I am not sure if we've done this before, perhaps not, but I think the timing was based on a combination of factors.

Also following up on the others, I know we've been sort of probing and prodding you about the European acquisition on Total. Just curious, you have mentioned that the business mix, the products mix there was somewhat different. And so I am wondering, if we look at the UGI International operations in aggregate and think about sort of the margin and profitability characteristics that exist there today, is there anything you can say broadly about that product mix, John, or any other factor about Total's operations that would, in a broad sense, skew us up or skew us in any way, relative to sort of what we see reported from the business as it exist?

The one thing I would say in terms their product mix, because I don't want to get too specific, is that they serve the same segments, which is great, in that it's the same business, they sort of have a very similar mindset in terms of the way they think about the business. So they're serving the same segments, but their mix across those segments varies.

They tend to skew a little bit larger, higher volume, larger commercial and industrial accounts, which in general on average if you look at our customer base, higher volume tends to be somewhat lower margin. It's not an extreme, but that's the difference. When we talk about difference in product mix, we're really talking about shifts, modest or moderate shift towards larger account versus us, where we have a higher concentration in cylinders and in small bulk.

So lower volume, higher margin entities -- customers, excuse me. So that's sort of directionally the difference when we talk about product mix.

And then with regards to that acquisition, I know international acquisitions you've done a bunch in the last several years and you've noted in the periods after they closed that there is some heightened cost around transition and integration. But I am curious, just given the size of this Total deal, are you just thinking that you will separate -- separately identify let's say those transition and integration costs similar to how you treated Heritage when AmeriGas purchased it? So we can get a better sense of maybe what a normalized recurring run rate might be.

We will do that once we've closed the transaction. When we provide updates etc., we'll break out how much of that is transition expense.

And final question for me, on Marketing and Midstream, another very strong quarter, you mentioned the ongoing infrastructure gap there. I am just wondering John, with investments you've made at Temple, at Auburn, coupled with some environmental factors around basis that get sort of consolidated and are reported as one performance for that segment.

If we think about fiscal 3Q performance, for sake of example, is there any way you can sort of help us couch and bucket how much of that was driven by maybe some of those favorable environmental factors that might be less stable on a go-forward, versus return on base business?

That's not something that we would kind of want to be analyzing or communicating at this point. I think what we will focus on doing is, I said for the Analyst Day, to provide more granularity in terms of the look-back, but also the look-forward. Because it's important that we understand that, but it's also helpful as the business gets larger and our asset base and the network increases, we'll strive to provide more information and the Analyst Day will be a good opportunity for us to do that.

John Edwards; Credit Suisse.

A question on the AmeriGas side; what's the expectation for year-over-year retail volume growth for the fiscal fourth quarter?

Year-over-year volume growth; we're assuming that last year's September was about 20-some percent warmer than normal. So we're expecting [warm weather], but we don't normally talk in terms of our quarterly expectations line item by line item, if that's okay.

Okay. All right, so with a 20% warmer than normal September last year, I guess, would it be fair to say you are pretty optimistic that you should have some pretty good volume growth? Is that fair to say?

I wouldn't say significant volume growth, but it's the beginning of the residential winter season. So, we are just expecting a normal quarter as we've had many, many years.

This concludes the Q&A portion of today's call. I'll turn it back over for any closing comments.

Okay. Thanks everybody for your participation in the call. We look forward to talking with you on the next call. We'll certainly keep you abreast of developments and communicating on any significant issues that come up between now and the next call. And we also look forward to seeing many of you at the Analyst Day, which we'll schedule for November. So take care.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.