UGI Corp (UGI 1.57%)
Q1Â 2019 Earnings Conference Call
Feb. 06, 2019, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good morning. My name is Denise and I will be your conference operator today. At this time, I would like to welcome everyone to the UGI Corporation AmeriGas Fiscal 2019 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)
Thank you. Brendan Heck, Director of Investor Relations, you may begin your conference.
Brendan Heck -- Director of Investor Relations
Thanks, Denise. Good morning, everyone, and thank you for joining us. With me today are Ted Jastrzebski, CFO of UGI Corporation; Hugh Gallagher, President and CEO of AmeriGas Propane; and John Walsh, President and CEO of UGI.
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 on Form 10-K 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'll also describe our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available in the appendix of our presentation.
Now, let me turn the call over to John.
John L. Walsh -- President and Chief Executive Officer
Thanks, Brendan. Good morning, and welcome to our call. I hope that you've all had a chance to review our press releases reporting first quarter results for UGI and AmeriGas. UGI and AmeriGas delivered a solid Q1 performance while facing some challenging operating conditions. Weather was somewhat colder than prior year for each of our domestic businesses, but significantly warmer than prior year for UGI International.
In addition to the weather challenges in Europe, we did see a recurrence of the severe cold weather in the Mid-Atlantic that closed out Q1 fiscal 18. That severe cold last year resulted in volatility that enabled us to deliver incremental capacity margins that didn't reoccur in the first quarter this year.
I'll review our key activities in Q1 then turn it over to Ted, who will provide you with a detailed overview of UGI's financial performance in the quarter. Hugh will follow -- will review Q1 for AmeriGas and I'll wrap up with an update on our strategic initiatives. Our Q1 GAAP EPS was $0.36, while our adjusted EPS was $0.81. Our adjusted EPS fell short of the record adjusted Q1 fiscal '18 EPS of $1.01.
Both quarters have been adjusted for the mark-to-market valuation of unsettled hedges and other items which Ted will to cover later. The shortfall in adjusted EPS versus our record performance last year is attributed to one-time favorable tax impacts in Q1 fiscal '18. The challenging weather conditions in Europe and the lack of incremental capacity margin opportunities in our Midstream business.
Before I turn the call over to Ted, I would like to comment on the noteworthy progress we made on a number of projects and activities. Our teams maintained their focus on meeting critical commitments to our customers and the communities we serve. While also ensuring that our new capital projects and acquisitions meet or exceed their performance targets. There are major developments in a number of fronts in Q1 that provide a strong foundation for future growth.
Our new Steelton LNG storage and vaporization facility is fully online for the fiscal '19 season. We're continuing to see strong LNG demand in the Mid-Atlantic and New England driven by increased peak day demand for most gas LDCs. These LDCs face significant challenges due to capacity constraints in the East and Northeast. Our growing LNG network positions us well for future growth. And I'll come back to that network investment later in the call.
Our Energy Services team closed on the acquisition of South Jersey Energy gas marketing business. This business was a great fit with our existing gas marketing activities in the Mid-Atlantic and expanded our commercial and small industrial customer base in this very attractive market.
We're really pleased with the team from South Jersey that has joined UGI and they work closely with our UGI team to ensure and very smooth transition for the South Jersey Energy customers. Our utility had a productive quarter adding about 4,500 new heating customers while executing a broad range of infrastructure replacement and reinforcement projects across our service territories.
Our infrastructure replacement program for cast iron and bare steel remains on schedule with roughly 62-miles of pipeline in place during calendar year 2018. The combined focus on infrastructure replacement and customer growth has resulted in record levels of capital spend. We expect CapEx for the utilities to be close to $400 million in fiscal '19.
AmeriGas had a strong quarter with adjusted EBITDA up 8.5% year-on-year. We benefited from colder weather than Q1 fiscal '18 improved unit margins and continued strong volume growth in ACE and National Accounts.
Hugh will comment in much more detail on AmeriGas' Q1 performance in a few minutes. Our international business was basically weather that was substantially warmer than last year. Weather in Europe has been warmer than normal for the past nine months and the summer was unusually dry.
Q1 volumes for international were approximately 9% below prior year due to the warmer weather and much lower seasonal demand for grain drying. We are encouraged by the improving more seasonal weather pattern that has now moved across Europe and by the drop in LPG costs over the past 60 days.
The timing of that drop in commodity costs should support our unit margin performance in the future. We continued to be pleased with the contributions from Preem, UniverGas and DVEP. The LPG and marketing acquisitions that we've added over the past 18 months.
I'll return later in the call to comment on our strategic initiatives, but I'd like to turn the call over to Ted at this point for the financials. Ted?
Ted Jastrzebski -- Chief Financial Officer
Thanks, John. As John mentioned the results this quarter were solid, but fell short of our record earnings last year. Adjusted earnings per share were $0.81 versus $1.01 in Q1 of 2018. This table lays out our GAAP and adjusted earnings per share for the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018.
As you can see our adjusted earnings exclude a number of items such as the impact of mark-to-market changes and commodity hedging instruments, a loss of $0.46 this year versus a gain of $0.03 last year. This quarter, we had $0.03 of unrealized gains on our foreign currency derivative instruments versus a loss of less than a $0.01 in 2018. You can also see that we no longer have Finagaz integration expenses as this acquisition has been fully integrated.
Lastly, there is a $0.02 loss on the extinguishment of debt. Our international team refinanced approximately EUR1 billion of its existing capital structure in the quarter, which includes EUR350 million of 3.25% senior notes due in 2025, a EUR300 million term loans and a EUR300 million revolving credit facility.
Turning to the bridge. Adjusted earnings per share decreased $0.20 versus Q1 of 2018. For our LPG businesses, AmeriGas benefited from colder weather, while our international business continue to face warmer weather conditions and was the largest contributor to the year-over-year decline at $0.11.
For our natural gas businesses both Midstream and Marketing and Utility saw declines in adjusted EPS of $0.04 and $0.06 respectively. Less volatile weather in the Midstream and Marketing business limited capacity management margin and then Utilities, a prior non-recurring benefit from tax reform decreased comparative results.
On the individual businesses, AmeriGas reported adjusted EBITDA of $210.7 million, a 9% increase over the first quarter of fiscal 2018 on weather that was 6% colder for the same period. Total margin was up $20.5 million due to a combination of higher retail unit margins and 2% higher retail volume. Operating and administrative expenses increased $4.8 million primarily due to higher labor and overtime to deliver increased volume and higher vehicle expenses.
Hugh will discuss AmeriGas' results in more detail in a few minutes. UGI International recorded adjusted income before taxes of $53.6 million. Weather for the quarter was 8% warmer than normal and 7% warmer than the first quarter last year. Furthermore, December marked ninth consecutive months of warmer than normal weather.
Total retail gallons sold decreased by 9% driven by a combination of the warm heating season and a dry summer that significantly reduced crop drying volume. Margin was down $37.3 million, primarily reflecting lower retail volumes sold, the translation effects of the weaker Euro and British pound sterling and to a lesser extent slightly lower LPG unit margins.
Operating and administrative expenses were essentially flat with compliance costs associated with energy conservation and costs related to strategic projects offset by the translation effects of the weaker euro and British pound sterling and lower cylinder repair costs.
Although both margin and operating expenses were impacted by the slightly weaker euro and British pound sterling currencies, the impact on net income was substantially offset by net gains on foreign currency exchange contracts. Midstream and Marketing reported income before taxes of $42.1 million. Total margin decreased $7.1 million compared to Q1 of last year on weather that was 5% colder.
Although the weather for the quarter was colder, warmer or less volatile and extreme December limited capacity management opportunities driving the margin decrease. To a lesser extent, lower electric generation from lower off-peak volumes also reduced margin, partially offsetting these were higher peaking and natural gas gathering margin.
Operating expenses increased $3.6 million from higher compensation and expenses associated with new investments placed into service and increased activities with peaking LNG and natural gas gathering. Planned maintenance at the Conemaugh electric generating station also contributed.
Depreciation was $1.4 million greater than last year due to the continued expansion of our LNG and peaking assets. UGI Utilities reported income before taxes of $65.7 million. Core market throughput increased 4% as a result of weather that was 1.5% colder than last year and we saw continued customer growth in excess of 2%.
Total margin decreased $8.1 million compared to Q1 of last year primarily due to the May Pennsylvania PUC order requiring a reduction of $13.5 million in revenues in the most recent quarter to reflect the give back of tax savings from the Tax Cuts and Jobs Act.
Excluding this reduction, total margin increased $5.4 million due to higher total margin from gas utility core market customers and electric utility margin. Operating and administrative expenses were up $8.3 million primarily due to the absence of the favorable payroll tax adjustment in the prior year period.
Higher uncollectible accounts expense, higher IT maintenance and consulting expense. Depreciation increased $2.1 million from increased distribution system and IT capital investments. That concludes my remarks. And I'll now turn the call over to Hugh for his report on AmeriGas. Hugh?
Hugh J. Gallagher -- President and Chief Executive Officer, AmeriGas Partners
Thanks, Ted. Adjusted EBITDA for the first quarter of fiscal '19 was $211 million compared to $194 million in the first quarter of last year, a 9% increase. This marks our strongest first quarter in five years as the business bounced back on more seasonable weather, strong execution of our growth for us combined with operating discipline and solid expense management.
Weather in the first quarter was 5% colder than the 15-year norm and 6% colder than last year primarily driven by a colder fall. The month of December was 6% warmer than normal and 9% warmer than last year, which had a dampening effect on the strong fall results.
Retail volume for the first quarter was up about 2% year-over-year. Retail unit margins increased about 4% from last year. Although our average cost was relatively comparable last year, we did experience a declining wholesale propane cost environment during Q1, and costs have remained stable into Q2. Operating expenses were up slightly about 2% primarily related to higher payroll in vehicle costs. Operating expense per gallon was essentially flat last year.
On our growth fronts both ACE -- both our National Accounts and our AmeriGas Cylinder Exchange program had a solid quarter. Volumes in both areas were up around 10%. We're also making excellent progress on the integration of the home delivery business we acquired last year, as we continued to develop the home cylinder delivery concept. We expect the rollout of a pilot in several cities later this year.
This is a tangible example that we seek to address the needs of our customers through innovative thinking and the deployment of the technology. AmeriGas is a nationwide company. We have the resources and assets required to ensure safe and efficient transport of propane in all 50 states.
We're also a local company and a key part of communities in which we operate. This combination of deep resources and local focus enabled us to serve our customers day in and day out with the highest levels of execution, when our customers need it most, which is usually in the dead of winter. I want to thank our people, both on the front lines and in support roles for their continued commitment to our customers.
Finally, I wanted to add a brief comment on the operational aspects of the strategic review process under way at AmeriGas. We've conducted several sessions with the AmeriGas leadership team with John, Ted and Roger Perreault and with our Board. We're focused on leveraging technology and our scale to advance our customer-facing capabilities and generate business efficiencies that will lower our costs.
I'm pleased to see the progress we are making to position the business for ongoing success. With that I'll turn the call back to John for his closing remarks.
John L. Walsh -- President and Chief Executive Officer
Thank you. I would now like to spend a few minutes reviewing our progress on the strategic projects and initiatives that are crucial to our long-term success.
From that perspective the first quarter was noteworthy in several respects. The PennEast partnership received approval in Q1 to proceed with the bulk of the remaining property surveys in Pennsylvania and New Jersey. The surveys in Pennsylvania are substantially complete and we have filed our Pennsylvanian DEP application. We expect to complete the majority of our New Jersey survey work in the coming weeks.
Our final piece of survey work relates to the state-owned properties in New Jersey where we're awaiting a federal judge's ruling on access. We'll then be in a position to submit our New Jersey DEP permit application for this much needed pipeline project.
We are excited to move to this critical phase of activities on PennEast, which will involve close collaboration with the state and local agencies of Pennsylvania and New Jersey. We expect construction of PennEast to commence by the end of 2019 with the pipeline in service by the end of 2020.
As I noted earlier, our LNG asset network has been an important growth driver over the past decade. In addition to bringing the new Steelton LNG unit onstream last year, we received approval to build a new LNG storage and vaporization facility in Bethlehem, Pennsylvania. This unit strategically located in an area of significant peak demand will come on stream for the winter of fiscal '21.
This expansion of our LNG capacity is driven by the increasing demand for peaking services of gas LDCs in the Houston, US respond to increasing customer demand due to system growth. Our investments in LNG liquefaction and storage over the past decade have positioned us as a leader in LNG peaking services in the Northeast US.
The Auburn Gathering System expansion is going well. Phase I of the expansion went into service in November, and the Phase II of the project is in construction and on target to go into service in the first quarter of fiscal '20. The expanded system will increase the capacity of the Auburn Gathering System by approximately 150,000 dekatherms per day, bringing the total capacity of the system to 620,000 dekatherm per day.
Just last week, UGI Utilities filed the first combined rate case for our merged gas utility. As you may recall, the Pennsylvania PUC approved our request to combine our three gas utilities in October 2018. This first combined rate case request totaled $71.1 million. We look forward to working with the Pennsylvania PUC and all the rate case constituents in the coming months.
We're assuming that this process will conclude by the fall and new rates will go into effect in October of this year. Our growth in infrastructure programs at UGI Utilities continued to ramp up. As I noted earlier, we're likely to approach $400 million in capital expenditures for Utilities this year.
Looking further out, we expect our total capital spend at Utilities to exceed $1.6 billion over the next four years, a substantial increase over the preceding four years. Our goal is to ensure the long-term safety and integrity of our 12,000 miles of infrastructure provide continued access to low cost natural gas for our core customers and enable access to natural gas service in previously unserved areas of the Commonwealth.
Lastly, we have focused considerable time and attention on the AmeriGas strategic review that we announced at our Investor Day in early December. We've made good progress in a number of operational, structural and financial areas and are advancing our discussions as a result. We will obviously share the outcome of this review as soon as we complete the process .
These long-term strategic investments that I've described are indicative of the quality of the growth investments in our portfolio. We're excited about the opportunities that lie ahead for other company. As I've noted several times in recent years, we're benefiting greatly from the diversity of growth opportunities that our teams are pursuing and our path forward has never been clearer.
We're also excited about the return to more normal weather, winter weather conditions that we've seen in Mid-Atlantic and in Europe over the past few weeks. As we've demonstrated in the past, our teams are well equipped to take advantage of the opportunities provided by favorable market conditions. With that I'll turn the call back over to Denise who will open it up for your questions.
Questions and Answers:
Operator
(Operator Instructions) Your first question comes from Shneur Gershuni with UBS. Your line is open.
Shneur Gershuni -- UBS -- Analyst
Hi. Good morning, everyone.
John L. Walsh -- President and Chief Executive Officer
Good morning.
Shneur Gershuni -- UBS -- Analyst
Just to start off. It was just kind of curious when we think about UGI's CapEx expectations, when we think about it's funding for its dividend and so forth, and we contrast that with cash flows from AmericGas' both on the distribution and on the IDR side how dependent is AmeriGas' cash flows to UGI for funding, if the expected growth projects and dividend for the upcoming years. Is it material or is there a way for you to take on where leverage is. Just wondering, if you can sort of talk about how you think about the cash flows?
John L. Walsh -- President and Chief Executive Officer
Sure. AmeriGas similar to UGI International with the two propane businesses. Both are significant cash generation units for us, and so we certainly utilize the cash flow from those two propane distribution businesses, which are substantial as well as the organic cash flow from our natural gas businesses to fund our overall growth and investment. One of the things at UGI, we've always done is maintain the balance sheet capacity and flexibility we -- as you don't share -- we have no debt at the UGI Corp level. We have a very solid balance sheets across all of our businesses and of the debt located at that level. So, we have a pretty resilient based in terms of our capital structure our balance sheet and our cash flows. So, we're not overly dependent on any one business unit in any given year to generate significant cash, but our plans are based on consistent long-term cash generation by the business units, but underpinned and reinforced by a very sort of solid and consistent approach to balance sheet management as well.
Shneur Gershuni -- UBS -- Analyst
Great. And just as a two quick follow-ups. You sort of mentioned the structural review and it's proceeding and so forth. Can you talk about the different options that you're thinking about should we be thinking about a roll-up of APU into UGI should we be thinking about an IDR restructure or distribution because APU just kind of wondering what you're thinking about especially since you've got results that are more normal. And as you have noted is one of your best result in five years. So it's kind of the metrics kind of standards where they are versus where your targets. Just wondering if you can sort of talk to that a little bit.
John L. Walsh -- President and Chief Executive Officer
Sure. I won't comment on specific options other than to say at UGI we always think broadly. So, there's all kind of spectrum of options that exist structural options that exist as we step back and now move to this process. We're looking at those full range of options. So, spectrum is open in terms of that spectrum of options that's part of this process. So, I won't comment on specific options other than to say that we're taking this time to think broadly and think long-term. And in doing so you do look at and consider and review a broad set of potential structural changes and review those full range of options.
Shneur Gershuni -- UBS -- Analyst
Okay. And one final question just specifically on the results. Specifically in the Midstream and Marketing segment. You sort of mentioned in your prepared remarks that weather was less volatile or less extreme and so forth. Should we be thinking about the results in the most recent quarter is kind of the more normalized number or do you believe that it didn't perform as well as expectations. Just wondering if you can sort of give us some color with respect to how you would think about it would operate in the normal operating environment?
John L. Walsh -- President and Chief Executive Officer
Sure, I think, I touched on it. I think Ted mentioned as well. The most difficult aspect of Midstream and Marketing forecast is the margins that come from or marketing of capacity, capacity margin. And this last quarter, we did see what we would consider to be typical volatility. We've had quarters in the past where that same set of events occurred. So, you have sort of dampened volatility. Last year, we had two bear cold at the end of December. This year we had moderating temperatures at the end of December. So I wouldn't say that this is the new norm, the norm for that part of our business is that it's volatile because it's reflecting whether or not this volatility in the market for that capacity whether the values are volatile and we could access margin by marketing that. So I wouldn't say is the new norm, as I said, is the most difficult part of our business forecast it kind of ebbs and flows over time. The great point for us is that over time we'll still look to secure those opportunities when they arise, but we have an increasing margin contribution from fee-based activities such as peaking contracts and some of the gathering system revenues and margins that we referenced in our remarks as well. So not necessarily a new norm it just reflected market conditions in the quarter and will continue to be responsive to any opportunities that arise for that incremental margin, while at the same time looking to invest in projects as I talked about that generate long-term fee-based in many cases fixed-fee margins.
Shneur Gershuni -- UBS -- Analyst
All right. Perfect. Thank you very much, guys. I appreciate the color to that.
John L. Walsh -- President and Chief Executive Officer
Okay. Thanks, Shneur.
Operator
Your next question comes from Sharon Liu with Wells Fargo. Your line is open.
Sharon Liu -- Wells Fargo -- Analyst
Hi. Good Morning.
John L. Walsh -- President and Chief Executive Officer
Good morning.
Sharon Liu -- Wells Fargo -- Analyst
Just if you could provide the debt balance at AmeriGas and maybe just touch on the leverage metrics relative to the covenants?
Hugh J. Gallagher -- President and Chief Executive Officer, AmeriGas Partners
Sure, Sharon. This is Huge. Right now our debt at the end of the quarter was around $2.9 billion, last year we were at $2.8 billion. The difference is higher revolver usage. When you look at leverage it's hard to compare leverage at the end of this effort to leverage at the end of September because the seasonal nature of the business that usage of the revolver, but from a leverage ratio standpoint, last year we were at 5.1 at the end of the first quarter and now we are at 4.7 and interest coverage is better.
Sharon Liu -- Wells Fargo -- Analyst
Okay, great. And I guess with regards to PennEast given the recent update. Is there any change in terms of the cost of the project or expected returns?
John L. Walsh -- President and Chief Executive Officer
No. There is limited change in terms of the cost of the project and in the terms of our expected returns. No, our expected returns on PennEast have not changed materially at all. It's fundamentally the same returns we were looking at when we first developed the project with our partners.
Sharon Liu -- Wells Fargo -- Analyst
Okay, great. Thank you.
John L. Walsh -- President and Chief Executive Officer
Okay. Thanks, Sharon.
Operator
Your next question comes from Dennis Coleman with Bank of America Merrill Lynch. Your line is open.
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
Yes, good morning. Thanks.
John L. Walsh -- President and Chief Executive Officer
Good morning.
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
I guess, if I can just segue up the PennEast question, I guess, you had some reroutes that you've filed for in Pennsylvania and what your filing there. I wonder if you might just talk a little bit about that. And then with regard to, would you expect the same in New Jersey. And then finally on PennEast to New Jersey any timeline for when you might expect that decision from the judge on the State Line?
John L. Walsh -- President and Chief Executive Officer
Sure. In terms of the filings. The filings that were done. For example, in Pennsylvania, are really just finalizing a submission by a virtue of gaining access to properties where up to this point we haven't had access to do the survey work. If you go way back go back to a substantial period of time, there was some rerouting as we went through the process of finalizing the route and worked with the various agencies. But the recent submissions, both in the one that has occurred in Pennsylvania and the upcoming submission in New Jersey are essentially finalizing the package for submission to the state DEPs in both cases just updating it for the actual surveys of the properties where we haven't had access prior to this recent ruling. So, no changes in the route reflected in these filings. In terms of the timeline for the judge's ruling that's not something that is a finite judge can rule when the judges reached a point to issue a ruling. So we really can't comment on the judge's timeline other than we did receive the majority of the rulings related to these parcels in December, it's a smaller set of parcels that's involved in this upcoming rulings. So we're hopeful that we would get that in the near future, but it's clearly up to the judge in terms of when the judge issues that ruling.
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
Okay, thanks. I guess maybe if we can hit Europe for a second, obviously a pretty significant weather impact and just wondering anything to do there strategically to sort of moderate these kind of swings or is it just the nature of the business and we have to be used to that?
John L. Walsh -- President and Chief Executive Officer
I think a couple of things we have done, as we've diversified in Europe it's still predominantly an LPG distribution business, but we have begun over the last five years to add a marketing business there, which over time will moderate or have a moderating impact in terms of results. I think we're also on both sides of the business, always looking for opportunities to introduce fee-based charges into the business where they make sense and where we can communicate and to customers and attach those fees to specific activities. We do on behalf of our customers. So, that's another step we take in that business with regard to sort of dampening weather impact on margin in that business. So there is a number of steps we're taking and then just good margin management is always part of that equation as well.
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
Okay, thanks. I know it's a -- the weather is the weather, but thank you for that. And then lastly from me on slide 12, if I can you know some pretty big impacts here from a number of different things a little bit of cold weather, but mostly the tax issues, I guess, the simple question is should we think about the 1Q '19 number as a better run rate going forward?
John L. Walsh -- President and Chief Executive Officer
Yeah, I'll let Ted comment on that.
Ted Jastrzebski -- Chief Financial Officer
Yeah, I think, so we had a couple of outsized costs in the quarter that we don't expect to be seeing in the churn. That was in absence of tax adjustments that we had last year was kind of the major piece explained in the operating and admin expense hit, but we also as a result of a new ERP system installation we saw an uptick against our historical uncollectibles as we work through some of the new systems changes that's now reconciled and we're looking in buying some of that money back and expect to go back to historical uncollectible levels. Those are the biggest impacts and so we don't expect to see those kind of cost of charges in the future.
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
Any order of magnitude that you can give us on the uncollectible there, Ted, please?
Ted Jastrzebski -- Chief Financial Officer
It's under $2 million of the amount itself is not that huge, but again it's a systems related issue and so it's something we spend a lot of time working on and as a result of that, we've also increased our spending on IT, maintenance and consulting to make sure we got that problem under control.
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
Okay. That's it from me. Thank you.
John L. Walsh -- President and Chief Executive Officer
Thanks, Ted.
Operator
Your next question comes from Chris Sighinolfi with Jefferies. Your line is open.
Christopher Sighinolfi -- Jefferies -- Analyst
Hey, good morning, John.
John L. Walsh -- President and Chief Executive Officer
Good morning, Chris.
Christopher Sighinolfi -- Jefferies -- Analyst
I wanted to follow up on Dennis questions in Europe. I guess to better understand both the distribution of weather there. I guess from former disclosures would understand that probably the biggest area of volume concentration is in France in the Benelux region, but it's always a difficulty for us to calibrate across so many different countries and maybe different regions within Europe. How weather is tracking and also to understand sort of the margin profile by region. I guess as you think about what transpired last quarter versus maybe the year ago period or what you would consider a normalized environment, whether any help you could offer us in terms of things we should look for weather degree days based on different locations and weighting them in a certain way or thinking about margins in different regions to help us better anticipate I guess outsized weather moves like we saw?
John L. Walsh -- President and Chief Executive Officer
Sure, Chris. Yeah, I think, as you noted, the most significant contributor in terms of margin in UGI International is France, it's business in France. So, if you are looking at margin contribution from regions Western Europe and in specifically France is the most significant weather impact, and this year we had a relatively warm first quarter and as here during the call we had a run up to that, there was warm and dry, and the reason the dry part of that statement is important is that in France in particular elsewhere in Europe and France specifically has a pretty significant grain drying business where if you have a wetter summer is actually significant amounts of LPG used for grain drying. So, that this year was material in terms of the lack of limited amount of grain drying, lack of grain drying that occurred because of being so warm and very dry over the course of the summer. That's true in multiple markets, but once again most critical from a margin standpoint, in France, which is our largest market for that as well. So, the rest of Europe is certainly important and contributes weather in sort of Northern Europe for us which is the Nordics and the UK is relevant. Eastern Europe and particularly Poland are relevant, but if you're going to focus and look at a lead, the best leading indicator to capture weather and act on us, they would be looking at the weather in France.
Christopher Sighinolfi -- Jefferies -- Analyst
Okay. And I know that there were political disruptions in that country in the fall with protests and whatnot in terms of new gasoline taxes that made the news here. I'm just wondering if that provided any uptick and maybe disruptions on an operational front that might be transitory in nature or is that just really immaterial relative to the weather?
John L. Walsh -- President and Chief Executive Officer
Well, the protests throughout the -- the yellow vest protests, the other disruption, other advance and disruptions that occurred, we were very fortunate in terms of our facilities and our class which our people not being impacted by that in terms of our ability to execute our operations. We had one or two instances where access to supply points of third-parties were limited for short periods of time, but it was not a major factor. The one area that did impact that affected our cost base, cost of serving customers is increasing costs associated with what I call white certificates around mandated energy efficiency programs in France where as an energy provider ourselves in every other energy distribution company. There is a mechanism that requires us similar to some of the utility based firms in the US to deliver energy efficiency certificate based on the volume of energy delivered to customers. So that's an increasing cost to serve customers that did impact us in the quarter. We're working hard to make sure we're recovering all those costs through our pricing and other programs that we have. It's not the same thing as the gasoline tax, but it's a another example of the government in France focusing on energy efficiency, carbon reduction, carbon emission reduction et cetera. So that did affect our business in the quarter and there's a lot of work particularly in France under Roger's leadership is focused on .
Christopher Sighinolfi -- Jefferies -- Analyst
Okay, that's very helpful. Thanks for the color on the international side. I guess switching to the domestic front. I appreciate the color on fiscal 1Q performance and the dynamic there. I know a year ago, Jerry had talked about the challenges of a bit of a yo-yoing weather pattern which appears like just based on anecdotally what's happened in New York from last week to this week, might be transpiring here in the fiscal second quarter. And so I'm just wondering sort of on a quarter-to-date basis here in fiscal 2Q. Is that a repeat of conditions from a year ago and are you guys acting differently to try and accommodate that?
Hugh J. Gallagher -- President and Chief Executive Officer, AmeriGas Partners
No, I mean, weather swings are, Chris, weather swings are normal in the business, it has been a little bit different than last year. Last year we had the warm buildup and then intense cold leading into the very end of the year, and you can see the impact of that not only at AmeriGas but even at our Utility and Energy Services result this year, but yeah it got warm, it got warm at the end of December that carried a little bit into January . And then the weather got really cold and then really warm. I'll say this. These fluctuations as long if they're not long term extremes either way or sort of par for the course in the business. And from a standpoint of supply and how the industry is reacting. It's been a reasonably sound operating environment. There is nothing like the polar vortex of five years ago where we had supply shortages everywhere. So you can see a relatively stable price environment, the supply environment is pretty solid and it's been, you deal with the fluctuations, but we know how to operate in these conditions. So we'll just -- we take it as it comes.
Christopher Sighinolfi -- Jefferies -- Analyst
Okay, fantastic. If I could quickly just follow up on two prior question just from my own edification and clarification, when you talk about the leverage at the end of the period, if my understanding is correct, the winter time is a period of elevated borrowing, and then you'll get receivables collected in cash, inventory and we should see some tempering in that just on a natural cadence in the spring? Is that correct, Hugh?
Hugh J. Gallagher -- President and Chief Executive Officer, AmeriGas Partners
Yeah, Chris, especially if you're comparing to where we were at year end at September, right, you will always have the way the balance sheet works at AmeriGas. It builds up in Q1 and Q2 and liquefies down, you end up with a liquidation of receivables and inventory in Q3 and Q4 . So I always try to do the comparison to the same point last year. And our revolver borrowings are a little bit higher than last year, but our earnings are substantially stronger. So, on a trailing 12 basis we are at 4.7 times versus 5.1 that 4.7 is probably higher than we were at year-end. That entire delta from where we were at year-end is the fact that we have higher revolver borrowings than we had at year-end.
Christopher Sighinolfi -- Jefferies -- Analyst
Right. For receivable presumably for things will be received, yeah.
Hugh J. Gallagher -- President and Chief Executive Officer, AmeriGas Partners
Yeah, exactly. As you build up, you build up, the balance sheet builds up and then it liquefies down.
Christopher Sighinolfi -- Jefferies -- Analyst
Yeah, OK. And then the other point of clarification on earlier question. I think John this is for you or for Ted. In terms of just how cash moves within UGI. My understanding was always that the independent subsidiary entities operate in effect as independent entities with their own balance sheets financing their own growth. And then are making dividend decisions backup to the Holdco where because APU is a publicly traded entity and has a quarterly payout on a distribution to the public and to UGI, it rendered arguably the most stable source of cash into the Holdco as a result of that fact. I just want to -- when you're talking to Shneur about the dynamics of cash in the UGI proper and how that is used either from a retention perspective, I think, there was 200 million of entity-level cash at the end of the fiscal year or gets redistributed across the businesses. Is that the correct? Is my understanding the correct understanding of how mechanically cash is moving within the company?
John L. Walsh -- President and Chief Executive Officer
Yeah, you're correct, Chris, on the mechanics. Yeah, my comments were just more broadly about the mechanics are different with the other business units, but the sort of goal and the performance over time are similar, but AmeriGas we are getting distributions and IDR fees which is a structured set of cash flows. The other cash flows are part of the normal operating processes of the company, but aren't fixed the way the AmeriGas cash flows are fixed.
Christopher Sighinolfi -- Jefferies -- Analyst
Right. Okay, all right. Well, hey, I asked a lot of questions. I appreciate you guys making all the time for me and for the others. I appreciate it.
John L. Walsh -- President and Chief Executive Officer
Sure. Thank you, Chris.
Operator
There are no further questions queued up. At this time I'll turn the call back over to Mr. John Walsh .
John L. Walsh -- President and Chief Executive Officer
Okay, thank you very much, and thanks everyone for your time and attention this morning, and we look forward to keeping you up to date in the coming months. We'll talk to you soon.
Operator
This concludes today's conference call. You may now disconnect.
Duration: 48 minutes
Call participants:
Brendan Heck -- Director of Investor Relations
John L. Walsh -- President and Chief Executive Officer
Ted Jastrzebski -- Chief Financial Officer
Hugh J. Gallagher -- President and Chief Executive Officer, AmeriGas Partners
Shneur Gershuni -- UBS -- Analyst
Sharon Liu -- Wells Fargo -- Analyst
Dennis Coleman -- Bank of America Merrill Lynch -- Analyst
Christopher Sighinolfi -- Jefferies -- Analyst
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