AmeriGas Partners, L.P. today announced a revision to its full year earnings guidance. For the year ended September 30, 2016, we expect net income attributable to AmeriGas Partners, L.P. to be in the range of $205 million and Adjusted EBITDA to be in the range of $540 million.
The Adjusted EBITDA guidance is below the previous guidance range of $575 million to $600 million. The decrease in the earnings guidance is primarily due to an increase in reserves associated with litigation and general liability matters. In addition, weather was 47% warmer than normal during the month of September, the effects of which were not included in previous guidance. Set forth in the table that follows this news release is a reconciliation of forecasted net income attributable to AmeriGas Partners, L.P. to forecasted Adjusted EBITDA for the fiscal year ended September 30, 2016, as well as information about why management believes Adjusted EBITDA provides useful information to investors about the Partnership’s results of operations.
In late September 2016, the Florida Second District Court of Appeals affirmed an $18 million judgment against AmeriGas in a class action proceeding commenced in November of 2005. Prior to the appellate court’s decision, we believed that the likelihood of the appellate court affirming the lower court’s judgment was remote. As a result of this adverse development, as well as adjustments to general liability reserves identified late in fiscal 2016, AmeriGas increased its reserves for these matters by approximately $30 million.
Jerry E. Sheridan, president and chief executive officer of AmeriGas, commented, “We are announcing reduced earnings guidance for fiscal 2016 primarily due to the timing and magnitude of the litigation and general liability reserve adjustments. With regard to the Florida appeals court ruling, we are disappointed with the decision but continue to believe we have valid arguments and are exploring our options for further appeal.”
Sheridan continued, “We remain pleased with the progress we have made on our key strategic objectives despite the headwinds brought about by the extremely warm year. This progress will ensure that we start fiscal 2017 in a strong position. Assuming normal weather patterns, we expect to report Adjusted EBITDA of $660 million to $700 million for fiscal 2017 for the Partnership and its subsidiaries on a consolidated basis. We look forward to discussing our final results for fiscal 2016, as well as our guidance for fiscal 2017 during our upcoming earnings call on November 10th.”
Because we are unable to predict certain potentially material items affecting net income on a GAAP basis, principally mark-to-market gains and losses on commodity derivative instruments, we cannot reconcile 2017 Adjusted EBITDA, a non-GAAP measure, to net income attribute to AmeriGas Partners, L.P., the most directly comparable GAAP measure, in reliance on the “unreasonable efforts” exception set forth in SEC rules. Adjustments that management can reasonably estimate are provided below.