UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended |
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission file numbers: 001-11331, 333-06693, 000-50182001‑11331, 333‑06693, 000‑50182 and 000-50183
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
Ferrellgas, L.P.
Ferrellgas Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware | 43‑1698480 | |
Delaware | 43‑1742520 | |
Delaware | 43‑1698481 | |
Delaware | 14‑1866671 | |
(States or other jurisdictions of incorporation or organization) | (I.R.S. Employer Identification Nos.) | |
7500 College Boulevard, Suite 1000, Overland Park, Kansas | 66210 | |
(Address of principal executive office) | (Zip Code) |
Registrants’ telephone number, including area code: (913) 661-1500
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,“Large Accelerated Filer,” “accelerated filer,“Accelerated Filer,” “smaller reporting company,“Smaller Reporting Company,” and “emerging growth company”“Emerging Growth Company” in Rule 12b-212b‑2 of the Exchange Act.
Ferrellgas Partners, L.P.: | |||||||||
Large | Accelerated | Non-accelerated Filer ☐ | Smaller | ||||||
Emerging | |||||||||
Ferrellgas Partners Finance Corp, Ferrellgas, L.P. and Ferrellgas Finance Corp.: | |||||||
Large | Accelerated Filer ☐ | Non-accelerated | Smaller | ||||
Emerging | |||||||
If an emerging growth company,Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Ferrellgas Partners, L.P. and Ferrellgas, L.P.
Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp.
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-212b‑2 of the Exchange Act).
Ferrellgas Partners, L.P. and Ferrellgas, L.P. Yes ¨☐ No x☒
Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. Yes x☒ No ☐¨
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: | Trading Symbol | Name of each exchange on which registered: | ||
Common Units | FGP | New York Stock Exchange |
At February 28, 2018,May 31, 2019, the registrants had common units or shares of common stock outstanding as follows:
Ferrellgas Partners, L.P. | 97,152,665 | Common Units | ||
Ferrellgas Partners Finance Corp. | 1,000 | Common Stock | ||
Ferrellgas, L.P. | n/a | n/a | ||
Ferrellgas Finance Corp. | 1,000 | Common Stock |
Documents Incorporated by Reference: None
EACH OF FERRELLGAS PARTNERS FINANCE CORP. AND FERRELLGAS FINANCE CORP. MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
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2
PART I - FINANCIAL INFORMATION
| FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands, except unit data) | ||||||||
| (unaudited) | ||||||||
| January 31, 2018 | July 31, 2017 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 14,173 | $ | 5,760 | ||||
| Accounts and notes receivable, net (including $235,150 and $109,407 of accounts receivable pledged as collateral at January 31, 2018 and July 31, 2017, respectively) | 255,978 | 165,084 | ||||||
| Inventories | 110,092 | 92,552 | ||||||
| Assets held for sale | 52,200 | — | ||||||
| Prepaid expenses and other current assets | 41,400 | 33,388 | ||||||
| Total current assets | 473,843 | 296,784 | ||||||
| Property, plant and equipment, net | 646,327 | 731,923 | ||||||
| Goodwill, net | 246,098 | 256,103 | ||||||
| Intangible assets (net of accumulated amortization of $452,283 and $436,428 at January 31, 2018 and July 31, 2017, respectively) | 243,079 | 251,102 | ||||||
| Other assets, net | 77,712 | 74,057 | ||||||
| Total assets | $ | 1,687,059 | $ | 1,609,969 | ||||
| LIABILITIES AND PARTNERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 82,072 | $ | 85,561 | ||||
| Short-term borrowings | 261,200 | 59,781 | ||||||
| Collateralized note payable | 166,000 | 69,000 | ||||||
| Other current liabilities | 140,510 | 126,224 | ||||||
| Total current liabilities | 649,782 | 340,566 | ||||||
| Long-term debt | 1,811,617 | 1,995,795 | ||||||
| Other liabilities | 35,422 | 31,118 | ||||||
| Contingencies and commitments (Note J) | ||||||||
| Partners' deficit: | ||||||||
| Common unitholders (97,152,665 units outstanding at January 31, 2018 and July 31, 2017) | (762,046 | ) | (701,188 | ) | ||||
| General partner unitholder (989,926 units outstanding at January 31, 2018 and July 31, 2017) | (67,604 | ) | (66,991 | ) | ||||
| Accumulated other comprehensive income | 24,332 | 14,601 | ||||||
| Total Ferrellgas Partners, L.P. partners' deficit | (805,318 | ) | (753,578 | ) | ||||
| Noncontrolling interest | (4,444 | ) | (3,932 | ) | ||||
| Total partners' deficit | (809,762 | ) | (757,510 | ) | ||||
| Total liabilities and partners' deficit | $ | 1,687,059 | $ | 1,609,969 | ||||
| See notes to condensed consolidated financial statements. | ||||||||
| FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except unit data) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: | ||||||||||||||||
| Propane and other gas liquids sales | $ | 592,239 | $ | 437,375 | $ | 894,997 | $ | 679,774 | ||||||||
| Midstream operations | 117,276 | 96,787 | 238,036 | 204,831 | ||||||||||||
| Other | 45,641 | 45,088 | 76,778 | 74,187 | ||||||||||||
| Total revenues | 755,156 | 579,250 | 1,209,811 | 958,792 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of sales - propane and other gas liquids sales | 362,918 | 235,029 | 542,433 | 354,241 | ||||||||||||
| Cost of sales - midstream operations | 107,067 | 87,024 | 215,192 | 181,666 | ||||||||||||
| Cost of sales - other | 20,787 | 20,657 | 34,489 | 32,403 | ||||||||||||
| Operating expense | 123,716 | 113,076 | 234,178 | 218,162 | ||||||||||||
| Depreciation and amortization expense | 25,485 | 25,607 | 51,217 | 51,809 | ||||||||||||
| General and administrative expense | 14,891 | 12,279 | 28,055 | 26,548 | ||||||||||||
| Equipment lease expense | 6,954 | 7,416 | 13,695 | 14,765 | ||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 7,993 | 6,699 | ||||||||||||
| Asset impairments | 10,005 | — | 10,005 | — | ||||||||||||
| Loss on asset sales and disposals | 39,249 | 45 | 40,144 | 6,468 | ||||||||||||
| Operating income | 40,053 | 75,172 | 32,410 | 66,031 | ||||||||||||
| Interest expense | (42,673 | ) | (36,819 | ) | (83,480 | ) | (72,247 | ) | ||||||||
| Other income, net | 684 | 763 | 1,195 | 1,271 | ||||||||||||
| Earnings (loss) before income taxes | (1,936 | ) | 39,116 | (49,875 | ) | (4,945 | ) | |||||||||
| Income tax expense (benefit) | (162 | ) | 588 | 215 | (2 | ) | ||||||||||
| Net earnings (loss) | (1,774 | ) | 38,528 | (50,090 | ) | (4,943 | ) | |||||||||
| Net earnings (loss) attributable to noncontrolling interest | 69 | 430 | (332 | ) | 32 | |||||||||||
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | (1,843 | ) | 38,098 | (49,758 | ) | (4,975 | ) | |||||||||
| Less: General partner's interest in net earnings (loss) | (19 | ) | 381 | (498 | ) | (50 | ) | |||||||||
| Common unitholders' interest in net earnings (loss) | $ | (1,824 | ) | $ | 37,717 | $ | (49,260 | ) | $ | (4,925 | ) | |||||
| Basic and diluted net earnings (loss) per common unit | $ | (0.02 | ) | $ | 0.39 | $ | (0.51 | ) | $ | (0.05 | ) | |||||
| Cash distributions declared per common unit | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.20 | ||||||||
| See notes to condensed consolidated financial statements. | ||||||||||||||||
| FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| For the three months ended January 31, | For the six months ended January 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net earnings (loss) | $ | (1,774 | ) | $ | 38,528 | $ | (50,090 | ) | $ | (4,943 | ) | ||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Change in value of risk management derivatives | 1,072 | 15,262 | 23,521 | 20,400 | |||||||||||||
| Reclassification of (gains) losses on derivatives to earnings, net | (9,743 | ) | 514 | (13,692 | ) | 4,752 | |||||||||||
| Other comprehensive income (loss) | (8,671 | ) | 15,776 | 9,829 | 25,152 | ||||||||||||
| Comprehensive income (loss) | (10,445 | ) | 54,304 | (40,261 | ) | 20,209 | |||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interest | (19 | ) | 590 | (234 | ) | 286 | |||||||||||
| Comprehensive income (loss) attributable to Ferrellgas Partners, L.P. | $ | (10,426 | ) | $ | 53,714 | $ | (40,027 | ) | $ | 19,923 | |||||||
| See notes to condensed consolidated financial statements. | |||||||||||||||||
| FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT | |||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||
| Number of units | Accumulated other comprehensive income | Total Ferrellgas Partners, L.P. partners' deficit | Total partners' deficit | ||||||||||||||||||||||||||
Common unitholders | General partner unitholder | Common unitholders | General partner unitholder | Non-controlling interest | |||||||||||||||||||||||||
| Balance at July 31, 2017 | 97,152.7 | 989.9 | $ | (701,188 | ) | $ | (66,991 | ) | $ | 14,601 | $ | (753,578 | ) | $ | (3,932 | ) | $ | (757,510 | ) | ||||||||||
| Contributions in connection with non-cash ESOP and stock-based compensation charges | — | — | 7,833 | 81 | — | 7,914 | 79 | 7,993 | |||||||||||||||||||||
| Distributions | — | — | (19,431 | ) | (196 | ) | — | (19,627 | ) | (357 | ) | (19,984 | ) | ||||||||||||||||
| Net loss | — | — | (49,260 | ) | (498 | ) | — | (49,758 | ) | (332 | ) | (50,090 | ) | ||||||||||||||||
| Other comprehensive income | — | — | — | — | 9,731 | 9,731 | 98 | 9,829 | |||||||||||||||||||||
| Balance at January 31, 2018 | 97,152.7 | 989.9 | $ | (762,046 | ) | $ | (67,604 | ) | $ | 24,332 | $ | (805,318 | ) | $ | (4,444 | ) | $ | (809,762 | ) | ||||||||||
| See notes to condensed consolidated financial statements. | |||||||||||||||||||||||||||||
| FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| For the six months ended January 31, | |||||||
| 2018 | 2017 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (50,090 | ) | $ | (4,943 | ) | |
| Reconciliation of net loss to net cash provided by (used in) operating activities: | |||||||
| Depreciation and amortization expense | 51,217 | 51,809 | |||||
| Non-cash employee stock ownership plan compensation charge | 7,993 | 6,699 | |||||
| Non-cash stock-based compensation charge | — | 3,298 | |||||
| Asset impairments | 10,005 | — | |||||
| Loss on asset sales and disposals | 40,144 | 6,468 | |||||
| Unrealized gain on derivative instruments | (91 | ) | (1,862 | ) | |||
| Provision for doubtful accounts | 1,688 | (283 | ) | ||||
| Deferred income tax expense | 364 | 35 | |||||
| Other | 4,482 | 2,659 | |||||
| Changes in operating assets and liabilities, net of effects from business acquisitions: | |||||||
| Accounts and notes receivable, net of securitization | (102,315 | ) | (74,403 | ) | |||
| Inventories | (17,275 | ) | (24,268 | ) | |||
| Prepaid expenses and other current assets | (4,682 | ) | 7,060 | ||||
| Accounts payable | 11,510 | 40,444 | |||||
| Accrued interest expense | 304 | 1,916 | |||||
| Other current liabilities | 13,372 | 19,951 | |||||
| Other assets and liabilities | (2,920 | ) | 4,757 | ||||
| Net cash provided by (used in) operating activities | (36,294 | ) | 39,337 | ||||
| Cash flows from investing activities: | |||||||
| Business acquisitions, net of cash acquired | (14,862 | ) | — | ||||
| Capital expenditures | (35,693 | ) | (19,768 | ) | |||
| Proceeds from sale of assets | 4,207 | 4,591 | |||||
| Other | — | (37 | ) | ||||
| Net cash used in investing activities | (46,348 | ) | (15,214 | ) | |||
| Cash flows from financing activities: | |||||||
| Distributions | (19,627 | ) | (60,107 | ) | |||
| Proceeds from issuance of long-term debt | 23,580 | 204,444 | |||||
| Payments on long-term debt | (1,267 | ) | (172,790 | ) | |||
| Net reductions in short-term borrowings | (7,879 | ) | (35,692 | ) | |||
| Net additions to collateralized short-term borrowings | 97,000 | 69,000 | |||||
| Cash paid for financing costs | (395 | ) | (4,382 | ) | |||
| Noncontrolling interest activity | (357 | ) | 1,000 | ||||
| Repurchase of common units | — | (15,851 | ) | ||||
| Net cash provided by (used in) financing activities | 91,055 | (14,378 | ) | ||||
| Net change in cash and cash equivalents | 8,413 | 9,745 | |||||
| Cash and cash equivalents - beginning of period | 5,760 | 4,965 | |||||
| Cash and cash equivalents - end of period | $ | 14,173 | $ | 14,710 | |||
| See notes to condensed consolidated financial statements. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 45,434 |
| $ | 119,311 |
Accounts and notes receivable, net (including $160,959 and $120,079 of accounts receivable pledged as collateral at April 30, 2019 and July 31, 2018, respectively) |
|
| 157,229 |
|
| 126,054 |
Inventories |
|
| 78,449 |
|
| 83,694 |
Prepaid expenses and other current assets |
|
| 25,489 |
|
| 34,862 |
Total current assets |
|
| 306,601 |
|
| 363,921 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 603,923 |
|
| 557,723 |
Goodwill, net |
|
| 247,508 |
|
| 246,098 |
Intangible assets (net of accumulated amortization of $411,766 and $399,629 at April 30, 2019 and July 31, 2018, respectively) |
|
| 109,634 |
|
| 120,951 |
Other assets, net |
|
| 62,326 |
|
| 74,588 |
Total assets |
| $ | 1,329,992 |
| $ | 1,363,281 |
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 41,408 |
| $ | 46,820 |
Short-term borrowings |
|
| — |
|
| 32,800 |
Collateralized note payable |
|
| 62,000 |
|
| 58,000 |
Other current liabilities |
|
| 160,507 |
|
| 142,025 |
Total current liabilities |
|
| 263,915 |
|
| 279,645 |
|
|
|
|
|
|
|
Long-term debt |
|
| 2,084,506 |
|
| 2,078,637 |
Other liabilities |
|
| 35,879 |
|
| 39,476 |
Contingencies and commitments (Note K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' deficit: |
|
|
|
|
|
|
Common unitholders (97,152,665 units outstanding at April 30, 2019 and July 31, 2018) |
|
| (976,902) |
|
| (978,503) |
General partner unitholder (989,926 units outstanding at April 30, 2019 and July 31, 2018) |
|
| (69,776) |
|
| (69,792) |
Accumulated other comprehensive income (loss) |
|
| (846) |
|
| 20,510 |
Total Ferrellgas Partners, L.P. partners' deficit |
|
| (1,047,524) |
|
| (1,027,785) |
Noncontrolling interest |
|
| (6,784) |
|
| (6,692) |
Total partners' deficit |
|
| (1,054,308) |
|
| (1,034,477) |
Total liabilities and partners' deficit |
| $ | 1,329,992 |
| $ | 1,363,281 |
See notes to condensed consolidated financial statements.
3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
(unaudited)
|
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|
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|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 459,556 |
| $ | 451,302 |
| $ | 1,344,634 |
| $ | 1,346,299 |
|
Midstream operations |
|
| — |
|
| 22,595 |
|
| — |
|
| 260,631 |
|
Other |
|
| 20,069 |
|
| 41,913 |
|
| 60,677 |
|
| 118,691 |
|
Total revenues |
|
| 479,625 |
|
| 515,810 |
|
| 1,405,311 |
|
| 1,725,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 250,389 |
|
| 260,419 |
|
| 766,056 |
|
| 802,852 |
|
Cost of sales - midstream operations |
|
| — |
|
| 14,518 |
|
| — |
|
| 229,710 |
|
Cost of sales - other |
|
| 2,320 |
|
| 19,850 |
|
| 8,789 |
|
| 54,339 |
|
Operating expense |
|
| 119,991 |
|
| 116,579 |
|
| 351,541 |
|
| 350,757 |
|
Depreciation and amortization expense |
|
| 20,617 |
|
| 25,348 |
|
| 59,214 |
|
| 76,565 |
|
General and administrative expense |
|
| 11,516 |
|
| 11,678 |
|
| 42,037 |
|
| 39,733 |
|
Equipment lease expense |
|
| 8,319 |
|
| 7,133 |
|
| 24,597 |
|
| 20,828 |
|
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| 4,688 |
|
| 10,731 |
|
Asset impairments |
|
| — |
|
| — |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 1,683 |
|
| 6,270 |
|
| 8,403 |
|
| 46,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 64,794 |
|
| 51,277 |
|
| 139,986 |
|
| 83,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (44,162) |
|
| (40,375) |
|
| (132,931) |
|
| (123,855) |
|
Other income, net |
|
| 251 |
|
| 227 |
|
| 356 |
|
| 1,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 20,883 |
|
| 11,129 |
|
| 7,411 |
|
| (38,746) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 123 |
|
| 67 |
|
| 284 |
|
| 282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 20,760 |
|
| 11,062 |
|
| 7,127 |
|
| (39,028) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 299 |
|
| 201 |
|
| 337 |
|
| (131) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
|
| 20,461 |
|
| 10,861 |
|
| 6,790 |
|
| (38,897) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: General partner's interest in net earnings (loss) |
|
| 205 |
|
| 109 |
|
| 68 |
|
| (389) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unitholders' interest in net earnings (loss) |
| $ | 20,256 |
| $ | 10,752 |
| $ | 6,722 |
| $ | (38,508) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per common unit |
| $ | 0.21 |
| $ | 0.11 |
| $ | 0.07 |
| $ | (0.40) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash distributions declared per common unit |
| $ | — |
| $ | 0.10 |
| $ | — |
| $ | 0.30 |
|
See notes to condensed consolidated financial statements.
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Net earnings (loss) |
| $ | 20,760 |
| $ | 11,062 |
| $ | 7,127 |
| $ | (39,028) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of risk management derivatives |
|
| 1,870 |
|
| (159) |
|
| (27,364) |
|
| 23,362 |
|
Reclassification of (gains) losses on derivatives to earnings, net |
|
| 6,416 |
|
| (6,568) |
|
| 5,790 |
|
| (20,260) |
|
Other comprehensive income (loss) |
|
| 8,286 |
|
| (6,727) |
|
| (21,574) |
|
| 3,102 |
|
Comprehensive income (loss) |
|
| 29,046 |
|
| 4,335 |
|
| (14,447) |
|
| (35,926) |
|
Less: Comprehensive income (loss) attributable to noncontrolling interest |
|
| 382 |
|
| 134 |
|
| 119 |
|
| (100) |
|
Comprehensive income (loss) attributable to Ferrellgas Partners, L.P. |
| $ | 28,664 |
| $ | 4,201 |
| $ | (14,566) |
| $ | (35,826) |
|
See notes to condensed consolidated financial statements.
5
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ DEFICIT
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of units |
|
|
|
|
|
|
| Accumulated |
| Total Ferrellgas |
|
|
|
|
|
| ||||
|
|
|
| General |
|
|
|
| General |
| other |
| Partner, L.P. |
|
|
|
|
|
| |||
|
| Common |
| Partner |
| Common |
| Partner |
| comprehensive |
| partners’ |
| Non-controlling |
| Total partners’ | ||||||
|
| unitholders |
| unitholder |
| unitholders |
| unitholder |
| income (loss) |
| deficit |
| interest |
| deficit | ||||||
Balance at July 31, 2018 |
| 97,152.7 |
| 989.9 |
| $ | (978,503) |
| $ | (69,792) |
| $ | 20,510 |
| $ | (1,027,785) |
| $ | (6,692) |
| $ | (1,034,477) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
| — |
| — |
|
| 2,693 |
|
| 27 |
|
| — |
|
| 2,720 |
|
| 28 |
|
| 2,748 |
Distributions |
| — |
| — |
|
| (9,716) |
|
| (98) |
|
| — |
|
| (9,814) |
|
| (101) |
|
| (9,915) |
Net loss |
| — |
| — |
|
| (56,445) |
|
| (570) |
|
| — |
|
| (57,015) |
|
| (493) |
|
| (57,508) |
Other comprehensive loss |
| — |
| — |
|
| — |
|
| — |
|
| (12,460) |
|
| (12,460) |
|
| (127) |
|
| (12,587) |
Balance at October 31, 2018 |
| 97,152.7 |
| 989.9 |
|
| (1,041,971) |
|
| (70,433) |
|
| 8,050 |
|
| (1,104,354) |
|
| (7,385) |
|
| (1,111,739) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
| — |
| — |
|
| 1,906 |
|
| 19 |
|
| — |
|
| 1,925 |
|
| 19 |
|
| 1,944 |
Distributions |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (157) |
|
| (157) |
Net earnings |
| — |
| — |
|
| 42,911 |
|
| 433 |
|
| — |
|
| 43,344 |
|
| 531 |
|
| 43,875 |
Other comprehensive loss |
| — |
| — |
|
| — |
|
| — |
|
| (17,099) |
|
| (17,099) |
|
| (174) |
|
| (17,273) |
Balance at January 31, 2019 |
| 97,152.7 |
| 989.9 |
|
| (997,154) |
|
| (69,981) |
|
| (9,049) |
|
| (1,076,184) |
|
| (7,166) |
|
| (1,083,350) |
Contributions in connection with non-cash ESOP compensation charges |
| — |
| — |
|
| (4) |
|
| — |
|
| — |
|
| (4) |
|
| — |
|
| (4) |
Net earnings (loss) |
| — |
| — |
|
| 20,256 |
|
| 205 |
|
| — |
|
| 20,461 |
|
| 299 |
|
| 20,760 |
Other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| 8,203 |
|
| 8,203 |
|
| 83 |
|
| 8,286 |
Balance at April 30, 2019 |
| 97,152.7 |
| 989.9 |
| $ | (976,902) |
| $ | (69,776) |
| $ | (846) |
| $ | (1,047,524) |
| $ | (6,784) |
| $ | (1,054,308) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of units |
|
|
|
|
|
|
| Accumulated |
| Total Ferrellgas |
|
|
|
|
|
| ||||
|
|
|
| General |
|
|
|
| General |
| other |
| Partner, L.P. |
|
|
|
|
|
| |||
|
| Common |
| Partner |
| Common |
| Partner |
| comprehensive |
| partners’ |
| Non-controlling |
| Total partners’ | ||||||
|
| unitholders |
| unitholder |
| unitholders |
| unitholder |
| income (loss) |
| deficit |
| interest |
| deficit | ||||||
Balance at July 31, 2017 |
| 97,152.7 |
| 989.9 |
| $ | (701,188) |
| $ | (66,991) |
| $ | 14,601 |
| $ | (753,578) |
| $ | (3,932) |
| $ | (757,510) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
| — |
| — |
|
| 3,883 |
|
| 40 |
|
| — |
|
| 3,923 |
|
| 39 |
|
| 3,962 |
Distributions |
| — |
| — |
|
| (9,715) |
|
| (98) |
|
| — |
|
| (9,813) |
|
| (100) |
|
| (9,913) |
Net loss |
| — |
| — |
|
| (47,436) |
|
| (479) |
|
| — |
|
| (47,915) |
|
| (401) |
|
| (48,316) |
Other comprehensive income |
| — |
| — |
|
| — |
|
| — |
|
| 18,314 |
|
| 18,314 |
|
| 186 |
|
| 18,500 |
Balance at October 31, 2017 |
| 97,152.7 |
| 989.9 |
|
| (754,456) |
|
| (67,528) |
|
| 32,915 |
|
| (789,069) |
|
| (4,208) |
|
| (793,277) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
| — |
| — |
|
| 3,950 |
|
| 41 |
|
| — |
|
| 3,991 |
|
| 40 |
|
| 4,031 |
Distributions |
| — |
| — |
|
| (9,716) |
|
| (98) |
|
| — |
|
| (9,814) |
|
| (257) |
|
| (10,071) |
Net earnings (loss) |
| — |
| — |
|
| (1,824) |
|
| (19) |
|
| — |
|
| (1,843) |
|
| 69 |
|
| (1,774) |
Other comprehensive loss |
| — |
| — |
|
| — |
|
| — |
|
| (8,583) |
|
| (8,583) |
|
| (88) |
|
| (8,671) |
Balance at January 31, 2018 |
| 97,152.7 |
| 989.9 |
|
| (762,046) |
|
| (67,604) |
|
| 24,332 |
|
| (805,318) |
|
| (4,444) |
|
| (809,762) |
Contributions in connection with non-cash ESOP compensation charges |
| — |
| — |
|
| 2,684 |
|
| 25 |
|
| — |
|
| 2,709 |
|
| 29 |
|
| 2,738 |
Distributions |
| — |
| — |
|
| (9,715) |
|
| (98) |
|
| — |
|
| (9,813) |
|
| (102) |
|
| (9,915) |
Net earnings |
| — |
| — |
|
| 10,752 |
|
| 109 |
|
| — |
|
| 10,861 |
|
| 201 |
|
| 11,062 |
Other comprehensive loss |
| — |
| — |
|
| — |
|
| — |
|
| (6,660) |
|
| (6,660) |
|
| (67) |
|
| (6,727) |
Balance at April 30, 2018 |
| 97,152.7 |
| 989.9 |
| $ | (758,325) |
| $ | (67,568) |
| $ | 17,672 |
| $ | (808,221) |
| $ | (4,383) |
| $ | (812,604) |
See notes to condensed consolidated financial statements.
6
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net earnings (loss) |
| $ | 7,127 |
| $ | (39,028) |
Reconciliation of net earnings (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 59,214 |
|
| 76,565 |
Non-cash employee stock ownership plan compensation charge |
|
| 4,688 |
|
| 10,731 |
Asset impairments |
|
| — |
|
| 10,005 |
Loss on asset sales and disposals |
|
| 8,403 |
|
| 46,414 |
Unrealized gain on derivative instruments |
|
| — |
|
| (91) |
Provision for doubtful accounts |
|
| 1,938 |
|
| 1,906 |
Deferred income tax expense |
|
| 143 |
|
| 423 |
Other |
|
| 9,266 |
|
| 6,712 |
Changes in operating assets and liabilities, net of effects from business acquisitions: |
|
|
|
|
|
|
Accounts and notes receivable, net of securitization |
|
| (33,113) |
|
| (46,771) |
Inventories |
|
| 5,245 |
|
| 7,755 |
Prepaid expenses and other current assets |
|
| (5,584) |
|
| (4,070) |
Accounts payable |
|
| (5,713) |
|
| (18,429) |
Accrued interest expense |
|
| 30,216 |
|
| 31,915 |
Other current liabilities |
|
| (13,506) |
|
| (1,084) |
Other assets and liabilities |
|
| 2,453 |
|
| (4,642) |
Net cash provided by operating activities |
|
| 70,777 |
|
| 78,311 |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (11,351) |
|
| (14,862) |
Capital expenditures |
|
| (94,660) |
|
| (58,961) |
Proceeds from sale of assets |
|
| 2,416 |
|
| 57,802 |
Net cash used in investing activities |
|
| (103,595) |
|
| (16,021) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Distributions |
|
| (9,814) |
|
| (29,440) |
Proceeds from issuance of long-term debt |
|
| — |
|
| 23,580 |
Payments on long-term debt |
|
| (1,656) |
|
| (1,892) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| (84,179) |
Net additions to collateralized short-term borrowings |
|
| 4,000 |
|
| 35,000 |
Cash paid for financing costs |
|
| (531) |
|
| (1,161) |
Noncontrolling interest activity |
|
| (258) |
|
| (459) |
Net cash used in financing activities |
|
| (41,059) |
|
| (58,551) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (73,877) |
|
| 3,739 |
Cash and cash equivalents - beginning of period |
|
| 119,311 |
|
| 5,760 |
Cash and cash equivalents - end of period |
| $ | 45,434 |
| $ | 9,499 |
See notes to condensed consolidated financial statements.
7
(Dollars in thousands, except per unit data, unless otherwise designated)
(unaudited)
A. Partnership organization and formation
Ferrellgas Partners, L.P. (“Ferrellgas Partners”) was formed April 19, 1994, and is a publicly traded limited partnership, owning an approximate 99% limited partner interest in Ferrellgas, L.P. (the "operating partnership"). Ferrellgas Partners and the operating partnership, collectively referred to as “Ferrellgas,” are both Delaware limited partnerships and are governed by their respective partnership agreements. Ferrellgas Partners was formed to acquire and hold a limited partner interest in the operating partnership. As of January 31, 2018,April 30, 2019, Ferrell Companies, Inc. ("Ferrell Companies") beneficially owns 22.8 million Ferrellgas Partners common units. Ferrellgas, Inc. (the "general partner"), a wholly-owned subsidiary of Ferrell Companies, has retained an approximate 1% general partner interest in Ferrellgas Partners and also holds an approximate 1% general partner interest in the operating partnership, representing an effective 2% general partner interest in Ferrellgas on a combined basis. As general partner, it performs all management functions required by Ferrellgas. Unless contractually provided for, creditors of the operating partnership have no recourse with regards to Ferrellgas Partners.
Ferrellgas Partners is a holding entity that conducts no operations and has two subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners owns a 100% equity interest in Ferrellgas Partners Finance Corp., whose only business activity is to act as the co-issuer and co-obligor of debt issued by Ferrellgas Partners. The operating partnership is the only operating subsidiary of Ferrellgas Partners.
Ferrellgas is primarily engaged in the following primary businesses:
Due to seasonality, the results of operations for the sixnine months ended January 31, 2018April 30, 2019 are not necessarily indicative of the results to be expected for the full fiscal year ending July 31, 2018.
The condensed consolidated financial statements of Ferrellgas reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed consolidated financial statements were of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The information included in this Quarterly Report on Form 10-Q10‑Q should be read in conjunction with (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) the consolidated financial statements and accompanying notes included in Ferrellgas'Ferrellgas’ Annual Report on Form 10-K10‑K for fiscal 20172018.
B. Summary of significant accounting policies
(1)Accounting estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances,
8
allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) Assets held for sale:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board ("FASB")(FASB) issued Accounting Standard Update ("ASU") 2014-09,
Ferrellgas adopted ASU 2014‑09 beginning on August 1, 2018 including interimusing the modified retrospective method. This method requires that the cumulative effect of initially applying ASU 2014‑09 be recognized in partner’s deficit at the date of adoption, August 1, 2018. ASU 2014‑09 has not materially impacted Ferrellgas’ consolidated financial statements, and as a result there was no cumulative effect to record as of the date of adoption. Results for reporting periods within that reporting period. Entitiesbeginning after August 1, 2018 are allowed to transition to the new standard by either recastingpresented under ASU 2014‑09, while amounts reported for prior periods or recognizing the cumulative effect. Ferrellgas ishave not been adjusted and continue to be reported under accounting standards in the final stages of analyzing the impact of the new guidance using an integrated approach which includes evaluating differences in the amount and timing of revenue recognitioneffect for those periods. See Note G - Revenue from applying the requirements of the new guidance, reviewing its accounting policies and practices, and assessing the need for changes to its processes, accounting systems and design of internal controls. Ferrellgas has completed the assessment of a significant number of its contracts with customers for additional information related to revenues and contract costs, including qualitative and quantitative disclosures required under the new guidance to determine the effect of the adoption of the new guidance. Although Ferrellgas has not completed its assessment of the impact of the new guidance, it does not expect its adoption will have a material impact on its consolidated financial statements.
FASB Accounting Standard Update No. 2015-11
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new standard requires lessees to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. An entity may elect the transition relief option in ASU 2018-11, “Leases: Targeted Improvements” which, among other things, provides entities with an option to recognize the cumulative-effect adjustment from the modified retrospective application to the opening balance of retained earnings in the period of adoption and consequently, continue to report comparative periods in compliance with the prior guidance (ASC 840). Ferrellgas expects to elect this additional transition method.
Ferrellgas is currently evaluatingcontinuing to evaluate the impact of its pending adoption of ASU 2016-02 on the consolidated financial statements. Ferrellgas has formed anmade significant progress in assessing the impact of the standard and planning for the adoption and implementation. The implementation team has completed trainingscoping and the data gathering process of our current lease portfolio. Ferrellgas continues to perform a completeness assessment over the lease population, analyze the financial statement impact of adopting the standards, and evaluate the impact of adoption on our existing accounting policies and disclosures. Further, our implementation team is in the process of determining appropriate changes to our business processes, systems, and controls to support recognition and disclosure under the new standard. Ferrellgas believes that the adoption of this standard, which will be effective for Ferrellgas August 1, 2019, will result in material increases to right of use assets and is workinglease liabilities on an initial assessment.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,2016‑13, Financial Instruments - Credit Losses (Topic 326) which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard'sstandard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
9
FASB Accounting Standard Update No. 2017-12
In August 2017, the FASB issued ASU 2017-12,2017‑12, Financial Instruments - Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities which is intended to improve the financial reporting for hedging relationships to better portray the economic results of an entity'sentity’s risk management activities in its financial statements. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2018‑15
In August 2018, the FASB issued ASU 2018‑15, Intangibles - Goodwill and Other - Internal-use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract which is intended to clarify the accounting for implementation costs related to a cloud computing arrangement that is a service contract. Costs for implementation activities in the application development stage are deferred, depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed. Any deferred costs are amortized over the term of the service contract. The new guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Ferrellgas adopted ASU 2018-15 on a prospective basis to all implementation costs incurred after January 31, 2019 with an immaterial impact on our consolidated results of operations for the three months ended April 30, 2019.
C. Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Propane gas and related products |
| $ | 63,481 |
| $ | 71,180 |
Appliances, parts and supplies, and other |
|
| 14,968 |
|
| 12,514 |
Inventories |
| $ | 78,449 |
| $ | 83,694 |
| January 31, 2018 | July 31, 2017 | |||||||
| Propane gas and related products | $ | 81,644 | $ | 67,049 | ||||
| Appliances, parts and supplies, and other | 28,448 | 25,503 | ||||||
| Inventories | $ | 110,092 | $ | 92,552 | ||||
In addition to inventories on hand, Ferrellgas enters into contracts to take delivery of propane for supply procurement purposes with terms that generally do not exceed 36 months. Most of these contracts call for payment based on market prices at the date of delivery. As of
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Notes receivable, less current portion |
| $ | 18,745 |
| $ | 27,491 |
Other |
|
| 43,581 |
|
| 47,097 |
Other assets, net |
| $ | 62,326 |
| $ | 74,588 |
| January 31, 2018 | July 31, 2017 | |||||||
| Notes receivable, less current portion | $ | 36,371 | $ | 32,500 | ||||
| Other | 41,341 | 41,557 | ||||||
| Other assets, net | $ | 77,712 | $ | 74,057 | ||||
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Accrued interest |
| $ | 52,438 |
| $ | 22,222 |
Customer deposits and advances |
|
| 20,681 |
|
| 22,829 |
Other |
|
| 87,388 |
|
| 96,974 |
Other current liabilities |
| $ | 160,507 |
| $ | 142,025 |
10
| January 31, 2018 | July 31, 2017 | |||||||
| Accrued interest | $ | 18,975 | $ | 18,671 | ||||
| Customer deposits and advances | 24,676 | 25,541 | ||||||
| Other | 96,859 | 82,012 | ||||||
| Other current liabilities | $ | 140,510 | $ | 126,224 | ||||
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 54,753 |
| $ | 48,351 |
| $ | 162,474 |
| $ | 146,279 |
|
Depreciation and amortization expense |
|
| 1,934 |
|
| 1,340 |
|
| 4,396 |
|
| 3,575 |
|
Equipment lease expense |
|
| 7,784 |
|
| 6,507 |
|
| 23,172 |
|
| 18,872 |
|
|
| $ | 64,471 |
| $ | 56,198 |
| $ | 190,042 |
| $ | 168,726 |
|
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating expense | $ | 54,613 | $ | 47,157 | $ | 97,928 | $ | 88,883 | ||||||||
| Depreciation and amortization expense | 1,123 | 996 | 2,235 | 2,022 | ||||||||||||
| Equipment lease expense | 6,296 | 6,652 | 12,364 | 13,318 | ||||||||||||
| Total shipping and handling expenses | $ | 62,032 | $ | 54,805 | $ | 112,527 | $ | 104,223 | ||||||||
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Loss on assets held for sale | $ | 35,515 | $ | — | $ | 35,515 | $ | — | ||||||||
| Loss on sale of assets and other | 3,734 | 45 | 4,629 | 6,468 | ||||||||||||
| Loss on asset sales and disposals | $ | 39,249 | $ | 45 | $ | 40,144 | $ | 6,468 | ||||||||
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
|
| 2019 |
| 2018 | ||
Cash paid (refunded) for: |
|
|
|
|
|
|
Interest |
| $ | 93,465 |
| $ | 85,171 |
Income taxes |
| $ | 21 |
| $ | (458) |
Non-cash investing and financing activities: |
|
|
|
|
|
|
Liabilities incurred in connection with acquisitions |
| $ | 1,174 |
| $ | 1,508 |
Change in accruals for property, plant and equipment additions |
| $ | 1,202 |
| $ | 386 |
| For the six months ended January 31, | ||||||||
| 2018 | 2017 | |||||||
| Cash paid for: | ||||||||
| Interest | $ | 78,682 | $ | 69,572 | ||||
| Income taxes | $ | 12 | $ | 26 | ||||
| Non-cash investing and financing activities: | ||||||||
| Liabilities incurred in connection with acquisitions | $ | 1,508 | $ | — | ||||
| Change in accruals for property, plant and equipment additions | $ | 47 | $ | (100 | ) | |||
D. Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Accounts receivable pledged as collateral |
| $ | 160,959 |
| $ | 120,079 |
Accounts receivable not pledged as collateral (including other reserves) |
|
| (468) |
|
| 8,272 |
Note receivable - current portion |
|
| 121 |
|
| 132 |
Other |
|
| 37 |
|
| 26 |
Less: Allowance for doubtful accounts |
|
| (3,420) |
|
| (2,455) |
Accounts and notes receivable, net |
| $ | 157,229 |
| $ | 126,054 |
| January 31, 2018 | July 31, 2017 | |||||||
| Accounts receivable pledged as collateral | $ | 235,150 | $ | 109,407 | ||||
| Accounts receivable | 13,596 | 47,346 | ||||||
| Note receivable - current portion | 10,000 | 10,000 | ||||||
| Other | 284 | 307 | ||||||
| Less: Allowance for doubtful accounts | (3,052 | ) | (1,976 | ) | ||||
| Accounts and notes receivable, net | $ | 255,978 | $ | 165,084 | ||||
At April 30, | |||
As of
E.Debt
Short-term borrowings
Ferrellgas classified allclassifies borrowings on the Revolving Facility portion of its secured credit facility borrowingsSenior Secured Credit Facility (each, as defined below) as short-term because the facility matures in October 2018. Prior to October 31, 2017, Ferrellgas classified as short-term the portion of its secured credit facility borrowings that werethey are primarily used to fund working capital needs that management intendedintends to pay down within the 12twelve month period following the balance sheet date. As of JanuaryApril 30, 2019, there were no amounts
11
classified as short-term borrowings. As of July 31, 2018, and July 31, 2017, $261.2$32.8 million and $59.8 million, respectively, werewas classified as short-term borrowings. For further discussion see the secured credit facilityfacilities section below.
Secured credit facilities
On May 4, 2018, the operating partnership entered into a new $575.0 million senior secured credit facility (the “Senior Secured Credit Facility”), consisting of a $300.0 million revolving line of credit (the “Revolving Facility”) and a $275.0 million term loan (the “Term Loan”).
As of April 30, 2019, the operating partnership had borrowings of $275.0 million under the Term Loan at an interest rate of 8.26%, which was classified as long-term debt, and no borrowings under the Revolving Facility. As of April 30, 2019, the operating partnership had available borrowing capacity under the Revolving Facility of $197.9 million. As of July 31, 2018, the operating partnership had borrowings of $275.0 million under the Term Loan at an interest rate of 7.86%, which was classified as long-term debt, and $32.8 million under the Revolving Facility at an interest rate of 9.75%, which was classified as short-term borrowings. As of July 31, 2018, the operating partnership had available borrowing capacity under the Revolving Facility of $159.3 million.
Letters of credit outstanding at April 30, 2019 and July 31, 2018 totaled $102.1 million and $107.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At April 30, 2019, Ferrellgas had remaining available letter of credit capacity of $22.9 million. At July 31, 2018, Ferrellgas had remaining available letter of credit capacity of $17.1 million.
Subsequent to the quarter ended April 30, 2019, the operating partnership entered into an amendment to the agreement governing its Senior Secured Credit Facility. See Note N – Subsequent events for additional information related to the amendment.
Debt and interest expense reduction and refinancing strategy
Ferrellgas continues to pursue a strategy to further reduce its debt and interest expense. This strategy included entering into the new Senior Secured Credit Facility and amending our accounts receivable securitization facility in May 2018 and certain asset sales during fiscal 2018. Ferrellgas continues to evaluate its options to address its leverage.
Financial covenants
The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit Ferrellgas Partners'Partners’ ability and the ability of specified subsidiaries to, among other things, make restricted payments and incur additional indebtedness. The general partner believes that the most restrictive of these covenants are those related to the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of Ferrellgas Partners and the consolidated leverage ratio and consolidated interestfixed charge coverage ratio, as defined in the secured credit facility andindentures governing the accounts receivable securitization facility.
Consolidated fixed charge coverage ratio - Ferrellgas Partners, L.P., the master limited partnership
Under the Ferrellgas Partners indenture, before a restricted payment (as defined in the secured credit facility and the operating partnership indentures) can be made by the operating partnership, the operating partnership must be in compliance with the consolidated leverage ratio and consolidated interest coverage ratio covenants under the secured credit facility and accounts receivable securitization facility and in compliance with the covenants under the operating partnership's indentures. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make semi-annual interest payments on its $357.0 million 8.625% unsecured senior notes due 2020 or distributions to Ferrellgas Partners common unitholders. If Ferrellgas Partners does not make interest payments on its unsecured notes, that would constitute an event of default which would permit the acceleration of the obligations underlying the Ferrellgas Partners indenture, including all outstanding principal owed. The
The restricted payments covenant or the consolidated interest coverage ratio covenant under the secured credit facility and the accounts receivable securitization facility would result in an event of default under those facilities resulting in the operating partnership’s inability to obtain funds under those facilities and would give the lenders and receivables purchasers the right to accelerate the operating partnership's obligations under those facilities and to exercise remedies to collect the outstanding amounts under those facilities. If the lenders and receivables purchasers accelerated the operating partnership's obligations,requires that, would constitute an event of default which would permit the acceleration of the obligations underlying thefor Ferrellgas Partners indenture, including all outstanding principal owed. The accelerated obligations would become immediately due and payable, which would in turn trigger cross acceleration of other debt. If Ferrellgas' debt obligations are accelerated, Ferrellgas may be unable to borrow sufficient funds to refinance debt in which case unitholders and investors in our debt instruments could experience a partial or total loss of their investment.
12
Accordingly, no distributions were paid to common unitholders in December 2018 and March 2019 for the three months ended October 31, 2018 and the three months ended January 31, 2019, respectively, and no distributions will be paid for the three months ended April 30, 2019. Unless thethis indenture governing the outstanding notes is amended or refinanced, if ourreplaced, or Ferrellgas Partners’ consolidated fixed charge coverage ratio does not improveimproves to at least 1.75x and we continue our current quarterly distribution rate of $0.10 per common unit, this covenant will not allow uscontinue to makerestrict Ferrellgas Partners from making common unit distributions for our quarter ending October 31, 2018 and beyond.
Consolidated fixed charge coverage ratio - Ferrellgas, continuesL.P., the operating partnership
Under the operating partnership indentures, before a restricted payment (as defined in the indentures) can be made by the operating partnership to execute onFerrellgas Partners, the operating partnership must satisfy a strategyconsolidated fixed charge coverage ratio requirement or have unused capacity under a limited exception to further reduce its debt and interest expense. This strategy may include amending or refinancing existing debt agreements, additional asset sales, a reduction in Ferrellgas Partners' annual distribution rate or the issuance of equity. Ferrellgas believes any debt and interest expense reduction strategies would remain in effect until Ferrellgas' consolidated leverage ratio reaches 4.5x or a level Ferrellgas deems appropriate for its business.
The restricted payment covenants require that, for the operating partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the operating partnership be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its operations after that maturity date.
F. Partners'Partners’ deficit
As of January 31, 2018April 30, 2019 and July 31, 2017,2018, Ferrellgas Partners limited partner units, which are listed on the New York Stock Exchange under the symbol “FGP,” were beneficially owned by the following:
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 |
Public common unitholders |
| 69,612,939 |
| 69,612,939 |
Ferrell Companies (1) |
| 22,529,361 |
| 22,529,361 |
FCI Trading Corp. (2) |
| 195,686 |
| 195,686 |
Ferrell Propane, Inc. (3) |
| 51,204 |
| 51,204 |
James E. Ferrell (4) |
| 4,763,475 |
| 4,763,475 |
(1) | Ferrell Companies is the owner of the general partner and is an approximate 23% direct owner of Ferrellgas Partners’ common units and thus a related party. Ferrell Companies also beneficially owns 195,686 and 51,204 common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies’ beneficial ownership to 23.4% at April 30, 2019. |
(2) | FCI Trading is an affiliate of the general partner and thus a related party. |
(3) | Ferrell Propane is controlled by the general partner and thus a related party. |
(4) | James E. Ferrell is the Interim Chief Executive Officer and President of our general partner; and is the Chairman of the Board of Directors of our general partner and a related party. JEF Capital Management owns 4,758,859 of these common units and is owned by the James E. Ferrell Revocable Trust Two and other family trusts, all of which James E. Ferrell and/or his family members are the trustees and beneficiaries. James E. Ferrell holds all voting common stock of JEF Capital Management. The remaining 4,616 common units are held by Ferrell Resources Holdings, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary. |
13
| January 31, 2018 | July 31, 2017 | |||||
| Public common unitholders | 69,612,939 | 69,612,939 | ||||
| Ferrell Companies (1) | 22,529,361 | 22,529,361 | ||||
| FCI Trading Corp. (2) | 195,686 | 195,686 | ||||
| Ferrell Propane, Inc. (3) | 51,204 | 51,204 | ||||
| James E. Ferrell (4) | 4,763,475 | 4,763,475 | ||||
Partnership distributions paid
Ferrellgas Partners has paidrecognized the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Public common unitholders |
| $ | — |
| $ | 6,961 |
| $ | 6,962 |
| $ | 20,884 |
|
Ferrell Companies |
|
| — |
|
| 2,253 |
|
| 2,253 |
|
| 6,759 |
|
FCI Trading Corp. |
|
| — |
|
| 20 |
|
| 20 |
|
| 60 |
|
Ferrell Propane, Inc. |
|
| — |
|
| 5 |
|
| 5 |
|
| 15 |
|
James E. Ferrell |
|
| — |
|
| 476 |
|
| 476 |
|
| 1,428 |
|
General partner |
|
| — |
|
| 98 |
|
| 98 |
|
| 294 |
|
|
| $ | — |
| $ | 9,813 |
| $ | 9,814 |
| $ | 29,440 |
|
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Public common unitholders | $ | 6,962 | $ | 6,961 | $ | 13,923 | $ | 42,639 | ||||||||
| Ferrell Companies | 2,253 | 2,253 | 4,506 | 13,799 | ||||||||||||
| FCI Trading Corp. | 20 | 20 | 40 | 120 | ||||||||||||
| Ferrell Propane, Inc. | 5 | 5 | 10 | 31 | ||||||||||||
| James E. Ferrell | 476 | 476 | 952 | 2,917 | ||||||||||||
| General partner | 98 | 98 | 196 | 601 | ||||||||||||
| $ | 9,814 | $ | 9,813 | $ | 19,627 | $ | 60,107 | |||||||||
Ferrellgas Partners declaredpaid cash distributions as detailed in the table above. Ferrellgas Partners did not declare a cash distribution of $0.10 per common unit forrelated to the three months ended October 31, 2018, the three months ended January 31, 2018, which is expected2019, or the three months ended April 30, 2019. As discussed in Note E – Debt, Ferrellgas Partners was not permitted, pursuant to be paid on March 16, 2018. Included in this cash distribution are the following amountsconsolidated fixed charge coverage ratio under its note indenture, to be paidmake restricted payments, including distributions to related parties:
| Ferrell Companies | $ | 2,253 | ||
| FCI Trading Corp. | 20 | |||
| Ferrell Propane, Inc. | 5 | |||
| James E. Ferrell | 476 | |||
| General partner | 98 | |||
See additional discussions about transactions with related parties in Note IJ – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)See Note HI – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the three and sixnine months ended
General partner’s commitment to maintain its capital account
Ferrellgas’ partnership agreements allow the general partner to have an option to maintain its effective 2% general partner interest concurrent with the issuance of other additional equity.
During the sixnine months ended January 31,April 30, 2019, the general partner made non-cash contributions of $0.1 million to Ferrellgas to maintain its effective 2% general partner interest.
During the nine months ended April 30, 2018, the general partner made non-cash contributions of $0.2 million to Ferrellgas to maintain its effective 2% general partner interest.
G. Revenue from contracts with customers
Ferrellgas adopted ASU 2014‑09 beginning on August 1, 2018 using the modified retrospective method. Ferrellgas earns revenue from contracts with customers primarily through the distribution of propane, as well as through the sale of propane related equipment and supplies. Revenues from propane and other gas liquids sales are comprised of revenue earned from the delivery of propane to tanks on customers’ premises, from the delivery of propane filled cylinders to customers, or from the sale of portable propane tanks to nationwide and local retailers and end use customers. Other revenues primarily include sales of appliances and other materials as well as other fees charged to customers. Upon adoption, Ferrellgas applied ASU 2014‑09 only to contracts that were not completed.
Contracts with customers
Ferrellgas’ contracts with customers are principally for the bulk delivery of propane to tanks, delivery of propane filled cylinders or the delivery of portable propane tanks to retailers. Ferrellgas sells propane to a wide variety of customers, including residential, industrial/commercial, portable tank exchange, agricultural, wholesale and others. Ferrellgas’ performance obligations in these contracts are generally limited to the delivery of propane, and therefore revenues from these contracts are earned at the time product is delivered, or in the case of some of Ferrellgas’ portable tank exchange retailers who have consignment agreements, at the time the tanks are sold to the end use customer. Payment is generally
14
due within 30 days. Revenues from sales of propane are included in Propane and other gas liquids sales on the consolidated statements of operations.
Typically, Ferrellgas bills customers upon delivery and payment is generally due within 30 days. With its residential customers, Ferrellgas offers customers the ability to spread their annual heating costs over a longer period, typically twelve months. Customers who opt to spread their heating costs over a longer period are referred to as “even-pay” customers.
Ferrellgas charges other amounts to customers associated with the delivery of propane including hazardous materials fees and fuel surcharge fees. In some regions, Ferrellgas also sells appliances and related parts and fittings as well as other retail propane related services. Ferrellgas charges on an annual basis tank and equipment rental charges for customers that are using our equipment to store propane. Other revenues associated with deliveries of propane are earned at the time product is delivered. Revenues associated with sales of appliances and other materials or services are earned at the time of delivery or installation. Revenues associated with tank and equipment rentals are generally recognized on a straight-line basis over one year.
Accounting estimates related to recognition of revenue require that Ferrellgas make estimates and assumptions about various factors including credits issued for completed sales, future returns and total consideration payable in instances where we have customer incentives payable to the customer.
Disaggregation of revenue
Ferrellgas disaggregates revenues based upon the type of customer and on the type of revenue. The following table presents retail propane revenues, wholesale propane revenues and other revenues. Retail revenues result from sales to end use customers, wholesale revenues result from sales to or through resellers and all other revenues include sales of appliances and other materials, other fees charged to customers and equipment rental charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Retail - Sales to End Users |
| $ | 350,151 |
| $ | 330,320 |
| $ | 983,742 |
| $ | 931,495 |
|
Wholesale - Sales to Resellers |
|
| 99,311 |
|
| 97,689 |
|
| 308,646 |
|
| 324,863 |
|
Other Gas Sales |
|
| 10,094 |
|
| 23,293 |
|
| 52,246 |
|
| 89,941 |
|
Other |
|
| 20,069 |
|
| 41,913 |
|
| 60,677 |
|
| 118,691 |
|
Propane and related equipment revenues |
| $ | 479,625 |
| $ | 493,215 |
| $ | 1,405,311 |
| $ | 1,464,990 |
|
Contract assets and liabilities
Ferrellgas’ performance obligations are generally limited to the delivery of propane for our retail and wholesale contracts. Ferrellgas’ performance obligations with respect to sales of appliances and other materials and other revenues are limited to the delivery of the agreed upon good or service. Ferrellgas does not have material performance obligations that are delivered over time, thus all of our revenue is recognized at the time the goods, including propane, are delivered or installed. Ferrellgas offers “even pay” billing programs that can create customer deposits or advances, depending on whether Ferrellgas has delivered more propane than the customer has paid for or whether the customer has paid for more propane than what has been delivered. Revenue is recognized from these customer deposits or advances to customers at the time product is delivered. The advance or deposit is considered to be a contract asset or liability. Additionally, from time to time, we have customers that pay in advance for goods or services, and such amounts result in contract liabilities.
Ferrellgas incurs incremental commissions directly related to the acquisition or renewal of customer contracts. The commissions are calculated and paid based upon the number of gallons sold to the acquired or renewed customer. The total amount of commissions that we incur is not material, and the commissions are expensed commensurate with the deliveries to which they relate; therefore, Ferrellgas does not capitalize these costs.
15
The following table presents the opening and closing balances of our receivables, contract assets, and contract liabilities:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Accounts receivable |
| $ | 135,337 |
| $ | 119,818 |
Contract assets |
| $ | 25,312 |
| $ | 8,691 |
Contract liabilities |
|
|
|
|
|
|
Deferred revenue (1) |
| $ | 29,068 |
| $ | 29,933 |
(1) | Of the beginning balance of deferred revenue, $22.7 million was recognized as revenue during the nine months ended April 30, 2019. |
Remaining performance obligations
Ferrellgas’ remaining performance obligations are generally limited to situations where its customers have remitted payment but have not yet received deliveries of propane. This most commonly occurs in Ferrellgas’ even pay billing programs and Ferrellgas expects that these balances will be recognized within a year or less as the customer takes delivery of propane.
H. Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas’ financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset (Liability) | ||||||||||
|
| Quoted Prices in Active |
|
|
|
|
|
|
|
|
| |
|
| Markets for Identical |
| Significant Other |
|
|
|
|
|
| ||
|
| Assets and Liabilities |
| Observable Inputs |
| Unobservable Inputs |
|
|
| |||
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | ||||
April 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 5,489 |
| $ | — |
| $ | 5,489 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (6,502) |
| $ | — |
| $ | (6,502) |
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 22,470 |
| $ | — |
| $ | 22,470 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (1,910) |
| $ | — |
| $ | (1,910) |
| Asset (Liability) | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | Total | |||||||||||||
| January 31, 2018: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Commodity derivatives | $ | — | $ | 25,725 | $ | — | $ | 25,725 | ||||||||
| Liabilities: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Interest rate swap agreements | $ | — | $ | (2,423 | ) | $ | — | $ | (2,423 | ) | ||||||
| Commodity derivatives | $ | — | $ | (1,417 | ) | $ | — | $ | (1,417 | ) | ||||||
| July 31, 2017: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Interest rate swap agreements | $ | — | $ | 583 | $ | — | $ | 583 | ||||||||
| Commodity derivatives | $ | — | $ | 16,212 | $ | — | $ | 16,212 | ||||||||
| Liabilities: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Interest rate swap agreements | $ | — | $ | (707 | ) | $ | — | $ | (707 | ) | ||||||
| Commodity derivatives | $ | — | $ | (1,258 | ) | $ | — | $ | (1,258 | ) | ||||||
Methodology
The fair values of Ferrellgas’ non-exchange traded commodity derivative contracts are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. The fair values of interest rate swap contracts are based upon third-party quotes or indicative values based on recent market transactions.
Other financial instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. The estimated fair value of various notesnote receivable financial instruments classified in "Other assets, net" on the condensed consolidated balance
16
sheets, are approximately $32.1$16.0 million, or $4.3$2.8 million less than their carrying amount as of January 31, 2018.April 30, 2019. The estimated fair values of these notes receivable were calculated using a discounted cash flow method which relied on significant unobservable inputs. At January 31, 2018April 30, 2019 and July 31, 2017,2018, the estimated fair value of Ferrellgas’ long-term debt instruments was $1,728.3$1,851.4 million and $1,966.6$1,935.1 million, respectively. Ferrellgas estimates the fair value of long-term debt based on quoted market prices. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
Ferrellgas has other financial instruments such as trade accounts receivable which could expose it to concentrations of credit risk. The credit risk from trade accounts receivable is limited because of a large customer base which extends across many different U.S. markets.
H.I. Derivative instruments and hedging activities
Ferrellgas is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. Prior to the sale of Bridger Energy, LLC in January 2018, all other commodity derivative instruments were neither qualified nor were designated as cash flow hedges,hedges; therefore, changes in their fair value were recorded currently in earnings. Ferrellgas also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
Derivative instruments and hedging activity
During the sixnine months ended January 31,April 30, 2019 and 2018, and 2017, Ferrellgas did not recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
The following tables provide a summary of the fair value of derivatives in Ferrellgas’ condensed consolidated balance sheets as of
|
|
|
|
|
|
|
|
|
|
|
|
| April 30, 2019 | ||||||||
|
| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 5,049 |
| Other current liabilities |
| $ | 5,726 |
Commodity derivatives-propane |
| Other assets, net |
|
| 440 |
| Other liabilities |
|
| 776 |
|
| Total |
| $ | 5,489 |
| Total |
| $ | 6,502 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2018 | ||||||||
|
| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 17,123 |
| Other current liabilities |
| $ | 1,832 |
Commodity derivatives-propane |
| Other assets, net |
|
| 5,347 |
| Other liabilities |
|
| 78 |
|
| Total |
| $ | 22,470 |
| Total |
| $ | 1,910 |
| January 31, 2018 | ||||||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||
| Derivative Instrument | Location | Fair value | Location | Fair value | ||||||||
| Derivatives designated as hedging instruments | ||||||||||||
| Commodity derivatives-propane | Prepaid expenses and other current assets | $ | 18,188 | Other current liabilities | $ | 1,417 | ||||||
| Commodity derivatives-propane | Other assets, net | 7,537 | Other liabilities | — | ||||||||
| Interest rate swap agreements | Prepaid expenses and other current assets | — | Other current liabilities | 319 | ||||||||
| Interest rate swap agreements | Other assets, net | — | Other liabilities | 2,104 | ||||||||
| Total | $ | 25,725 | Total | $ | 3,840 | |||||||
| July 31, 2017 | ||||||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||
| Derivative Instrument | Location | Fair value | Location | Fair value | ||||||||
| Derivatives designated as hedging instruments | ||||||||||||
| Commodity derivatives-propane | Prepaid expenses and other current assets | $ | 11,061 | Other current liabilities | $ | 415 | ||||||
| Commodity derivatives-propane | Other assets, net | 4,413 | Other liabilities | 15 | ||||||||
| Interest rate swap agreements | Prepaid expenses and other current assets | 583 | Other current liabilities | 595 | ||||||||
| Interest rate swap agreements | Other assets, net | — | Other liabilities | 112 | ||||||||
| Derivatives not designated as hedging instruments | ||||||||||||
| Commodity derivatives-crude oil | Prepaid expenses and other current assets | 738 | Other current liabilities | 828 | ||||||||
| Total | $ | 16,795 | Total | $ | 1,965 | |||||||
Ferrellgas’ exchange traded commodity derivative contracts require cash margin deposit as collateral for contracts that are in a negative mark-to-market position. These cash margin deposits will be returned if mark-to-market conditions improve or will be applied against cash settlement when the contracts are settled. Liabilities represent cash margin
17
deposits received by Ferrellgas for contracts that are in a positive mark-to-market position. The following tables provide a summary of cash margin balances as of January 31, 2018April 30, 2019 and July 31, 2017,2018, respectively:
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|
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|
|
| April 30, 2019 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 6,493 |
| Other current liabilities |
| $ | 1,339 |
|
| Other assets, net |
|
| 1,728 |
| Other liabilities |
|
| — |
|
|
|
| $ | 8,221 |
|
|
| $ | 1,339 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2018 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 2,851 |
| Other current liabilities |
| $ | 12,308 |
|
| Other assets, net |
|
| 927 |
| Other liabilities |
|
| 4,235 |
|
|
|
| $ | 3,778 |
|
|
| $ | 16,543 |
| January 31, 2018 | ||||||||||||
| Assets | Liabilities | |||||||||||
| Description | Location | Amount | Location | Amount | ||||||||
| Margin Balances | Prepaid expenses and other current assets | $ | 3,018 | Other current liabilities | $ | 12,201 | ||||||
| Other assets, net | 1,404 | Other liabilities | 5,216 | |||||||||
| $ | 4,422 | $ | 17,417 | |||||||||
| July 31, 2017 | ||||||||||||
| Assets | Liabilities | |||||||||||
| Description | Location | Amount | Location | Amount | ||||||||
| Margin Balances | Prepaid expenses and other current assets | $ | 1,778 | Other current liabilities | $ | 7,729 | ||||||
| Other assets, net | 1,631 | Other liabilities | 3,073 | |||||||||
| $ | 3,409 | $ | 10,802 | |||||||||
The following tables providetable provides a summary of the effect on Ferrellgas'Ferrellgas’ condensed consolidated statements of operations for the three and sixnine months ended
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|
|
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|
|
|
| Amount of Interest Expense | ||||||||
|
|
|
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Location of Gain |
| Derivative |
| (Related Hedged Item) | ||||||||
|
| Recognized on |
| For the three months ended April 30, |
| For the three months ended April 30, | ||||||||
Derivative Instrument |
| Derivative |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 40 |
| $ | — |
| $ | (2,275) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of Interest Expense | ||||||||
|
|
|
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Location of Amounts |
| Derivative |
| (Related Hedged Item) | ||||||||
|
| Recognized on |
| For the nine months ended April 30, |
| For the nine months ended April 30, | ||||||||
Derivative Instrument |
| Derivative |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 266 |
| $ | — |
| $ | (6,825) |
| Amount of Gain Recognized on Derivative | Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item) | |||||||||||||||||
| Derivative Instrument | Location of Amounts Recognized on Derivative | For the three months ended January 31, | For the three months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Interest rate swap agreements | Interest expense | $ | 88 | $ | 328 | $ | (2,275 | ) | $ | (2,275 | ) | |||||||
| Amount of Gain Recognized on Derivative | Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item) | |||||||||||||||||
| Derivative Instrument | Location of Amounts Recognized on Derivative | For the six months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Interest rate swap agreements | Interest expense | $ | 226 | $ | 748 | $ | (4,550 | ) | $ | (4,550 | ) | |||||||
The following tables provide a summary of the effect on Ferrellgas’ condensed consolidated statements of comprehensive income (loss) for the three and sixnine months ended
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|
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|
|
|
| For the three months ended April 30, 2019 | |||||||||
|
|
|
|
|
|
| Amount of Gain (Loss) | ||||
|
| Amount of Gain |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| (Loss) Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | 1,870 |
| Cost of product sold- propane and other gas liquids sales |
| $ | (6,416) |
| $ | — |
|
| $ | 1,870 |
|
|
| $ | (6,416) |
| $ | — |
18
| For the three months ended January 31, 2018 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 960 | Cost of sales-propane and other gas liquids sales | $ | 9,886 | $ | — | |||||||
| Interest rate swap agreements | 112 | Interest expense | (143 | ) | — | |||||||||
| $ | 1,072 | $ | 9,743 | $ | — | |||||||||
| For the three months ended January 31, 2017 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 14,699 | Cost of sales-propane and other gas liquids sales | $ | 73 | $ | — | |||||||
| Interest rate swap agreements | 563 | Interest expense | (587 | ) | — | |||||||||
| $ | 15,262 | $ | (514 | ) | $ | — | ||||||||
| For the six months ended January 31, 2018 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 23,283 | Cost of sales-propane and other gas liquids sales | $ | 14,018 | $ | — | |||||||
| Interest rate swap agreements | 238 | Interest expense | (326 | ) | — | |||||||||
| $ | 23,521 | $ | 13,692 | $ | — | |||||||||
| For the six months ended January 31, 2017 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 19,572 | Cost of sales-propane and other gas liquids sales | $ | (3,523 | ) | $ | — | ||||||
| Interest rate swap agreements | 828 | Interest expense | (1,229 | ) | — | |||||||||
| $ | 20,400 | $ | (4,752 | ) | $ | — | ||||||||
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|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, 2018 | |||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||
|
| Amount of Gain (Loss) |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | (169) |
| Cost of sales-propane and other gas liquids sales |
| $ | 6,628 |
| $ | — |
Interest rate swap agreements |
|
| 10 |
| Interest expense |
|
| (60) |
|
| — |
|
| $ | (159) |
|
|
| $ | 6,568 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2019 | |||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||
|
| Amount of Gain (Loss) |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | (27,364) |
| Cost of sales-propane and other gas liquids sales |
| $ | (5,790) |
| $ | — |
|
| $ | (27,364) |
|
|
| $ | (5,790) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2018 | |||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||
|
| Amount of Gain (Loss) |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | 23,114 |
| Cost of product sold- propane and other gas liquids sales |
| $ | 20,646 |
| $ | — |
Interest rate swap agreements |
|
| 248 |
| Interest expense |
|
| (386) |
|
| — |
|
| $ | 23,362 |
|
|
| $ | 20,260 |
| $ | — |
The following tables providetable provides a summary of the effect on Ferrellgas'Ferrellgas’ condensed consolidated statements of operations for the three and sixnine months ended January 31,April 30, 2019 and 2018 and 2017 due to the change in fair value of derivatives not designated as hedging instruments:
For the nine months ended April 30, 2018 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
Derivatives Not Designated as Hedging Instruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | (3,470) | Cost of sales - midstream operations | ||
| For the three months ended January 31, 2018 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (2,080 | ) | Cost of sales - midstream operations | ||
| For the three months ended January 31, 2017 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (1,007 | ) | Cost of sales - midstream operations | ||
| Commodity derivatives - vehicle fuel | $ | 489 | Operating expense | |||
| For the six months ended January 31, 2018 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (3,470 | ) | Cost of sales - midstream operations | ||
| For the six months ended January 31, 2017 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (2,248 | ) | Cost of sales - midstream operations | ||
| Commodity derivatives - vehicle fuel | $ | 1,516 | Operating expense | |||
The changes in derivatives included in AOCI for the sixnine months ended January 31,April 30, 2019 and 2018 and 2017 were as follows:
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|
|
|
|
|
|
| For the nine months ended April 30, | ||||
Gains and losses on derivatives included in AOCI |
| 2019 |
| 2018 | ||
Beginning balance |
| $ | 20,560 |
| $ | 14,648 |
Change in value of risk management commodity derivatives |
|
| (27,364) |
|
| 23,114 |
Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net |
|
| 5,790 |
|
| (20,646) |
Change in value of risk management interest rate derivatives |
|
| — |
|
| 248 |
Reclassification of losses on interest rate hedges to interest expense |
|
| — |
|
| 386 |
Ending balance |
| $ | (1,014) |
| $ | 17,750 |
| For the six months ended January 31, | ||||||||
| Gains and losses on derivatives included in AOCI | 2018 | 2017 | ||||||
| Beginning balance | $ | 14,648 | $ | (9,815 | ) | |||
| Change in value of risk management commodity derivatives | 23,283 | 19,572 | ||||||
| Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net | (14,018 | ) | 3,523 | |||||
| Change in value of risk management interest rate derivatives | 238 | 828 | ||||||
| Reclassification of losses on interest rate hedges to interest expense | 326 | 1,229 | ||||||
| Ending balance | $ | 24,477 | $ | 15,337 | ||||
Ferrellgas expects to reclassify net gainslosses related to the risk management commodity derivatives of approximately $16.8$0.7 million to earnings during the next 12 months. These net gainslosses are expected to be offset by decreasedincreased margins on propane sales commitments Ferrellgas has with its customers that qualify for the normal purchase normal sales exception.
19
During the sixnine months ended January 31,April 30, 2019 and 2018, and 2017, Ferrellgas had no reclassifications to operations resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
As of
Derivative financial instruments credit risk
Ferrellgas is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas’ counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas maintains credit policies with regard to its counterparties that it believes reduces its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas in the forms of letters of credit, parent guarantees or cash. Ferrellgas has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at January 31, 2018,April 30, 2019, the maximum amount of loss due to credit risk that Ferrellgas would incur is $0.7 million, which is based upon the gross fair values of the derivative financial instruments, Ferrellgas would incur is $7.5 million.
From time to time Ferrellgas enters into derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas'Ferrellgas’ debt rating. There were no open derivative contracts with credit-risk-related contingent features as of January 31, 2018.
I.J. Transactions with related parties
Ferrellgas has no employees and is managed and controlled by its general partner. Pursuant to Ferrellgas’ partnership agreements, the general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of Ferrellgas and all other necessary or appropriate expenses allocable to Ferrellgas or otherwise reasonably incurred by the general partner in connection with operating Ferrellgas’ business. These costs primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas’ behalf and are reported in the condensed consolidated statements of operations as follows:
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|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 64,030 |
| $ | 58,842 |
| $ | 193,258 |
| $ | 181,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
| $ | 5,872 |
| $ | 5,707 |
| $ | 19,196 |
| $ | 21,637 |
|
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating expense | $ | 65,291 | $ | 61,492 | $ | 122,642 | $ | 117,206 | ||||||||
| General and administrative expense | $ | 8,422 | $ | 8,217 | $ | 15,930 | $ | 16,800 | ||||||||
See additional discussions about transactions with the general partner and related parties in Note F – Partners’ deficit.
J.K. Contingencies and commitments
Litigation
Ferrellgas’ operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane and, prior to the sales of midstream operations in fiscal 2018, crude oil. As a result, at any given time, Ferrellgas can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, Ferrellgas is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are reasonably expected to have a material adverse effect on the consolidated financial condition, results of operations and cash flows of Ferrellgas.
Ferrellgas has been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits, which were consolidated in the Western District of Missouri on October 16, 2014, allege that
20
Ferrellgas and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Federal Court for the Western District of Missouri initially dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending.resulted in the court of appeals affirming the dismissal of the federal claims and remanding the case to the district court to decide whether to exercise supplemental jurisdiction over the remaining state law claims. Ferrellgas believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On April 24, 2019 the United States Court of Appeals for the Second Circuit affirmed the judgment of the Southern District Court dismissing the class action lawsuits with prejudice. At this time the derivative lawsuits remain stayed by agreement. Ferrellgas believes that it has defenses and will vigorously defend these cases. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
Ferrellgas and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed in or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude from rail onto barges. Eddystone alleges that Ferrellgas transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. Ferrellgas believes that Ferrellgas and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas believes that the amount of such damage claims, if ultimately owed to Eddystone, could be material to Ferrellgas. Ferrellgas intends to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, Ferrellgas filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. TheOn June 25, 2018, Ferrellgas entered into an agreement with the Third-Party Defendants have filed motions to dismisswhich, among other things, resulted in a dismissal of the third-party complaint for alleged lack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgasclaims against the Third-Party Defendants from the lawsuit. The lawsuit is vigorously opposing these motions.
K.L. Net earnings (loss) per common unit
Ferrellgas Partners is currently restricted by its debt covenants from making distributions to common unitholders. See Note E – Debt – for details regarding these restrictions. Below is a calculation of the basic and diluted net earnings (loss) per common unit in the condensed consolidated statements of operations for the periods indicated. Ferrellgas calculates net earnings (loss) per common unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings or loss for the period had been distributed according to the incentive distribution rights in the Ferrellgas partnership agreement. Due to the seasonality of the propane business, the dilutive effect of the two-class method typically impacts only the three months ending January 31. In periods with undistributed
21
earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners as follows:
|
|
|
|
|
|
|
| Ratio of total distributions payable to: |
| ||
Quarterly distribution per common unit |
| Common unitholder |
| General partner |
|
$0.56 to $0.63 |
| 86.9 | % | 13.1 | % |
$0.64 to $0.82 |
| 76.8 | % | 23.2 | % |
$0.83 and above |
| 51.5 | % | 48.5 | % |
There was no dilutive effect resulting from this method based on basic and diluted net earnings (loss) per common unit for the three and sixnine months ended January 31, 2018April 30, 2019 or 2017.
In periods with net losses, the allocation of the net losses to the limited partners and the general partner will be determined based on the same allocation basis specified in Ferrellgas Partners’ partnership agreement that would apply to periods in which there were no undistributed earnings. Additionally, there are no dilutive securities in periods with net losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
| (in thousands, except per common unit amounts) |
| ||||||||||
Common unitholders’ interest in net earnings (loss) |
| $ | 20,256 |
| $ | 10,752 |
| $ | 6,722 |
| $ | (38,508) |
|
Weighted average common units outstanding (in thousands) |
|
| 97,152.7 |
|
| 97,152.7 |
|
| 97,152.7 |
|
| 97,152.7 |
|
Basic and diluted net earnings (loss) per common unit |
| $ | 0.21 |
| $ | 0.11 |
| $ | 0.07 |
| $ | (0.40) |
|
A. |
B. |
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (in thousands, except per common unit amounts) | ||||||||||||||||
| Common unitholders’ interest in net earnings (loss) | $ | (1,824 | ) | $ | 37,717 | $ | (49,260 | ) | $ | (4,925 | ) | |||||
| Weighted average common units outstanding - basic and diluted | 97,152.7 | 97,152.7 | 97,152.7 | 97,305.1 | ||||||||||||
| Basic and diluted net earnings (loss) per common unit | $ | (0.02 | ) | $ | 0.39 | $ | (0.51 | ) | $ | (0.05 | ) | |||||
L.M. Segment reporting
As of April 30, 2019, Ferrellgas has two primary operations that result in twoone reportable operating segments:segment: propane operations and related equipment salessales. All remaining activities are included in Corporate and midstream operations. During the quarter ended January 31, 2018, Ferrellgas recorded a goodwill impairment of $10.0 million related to a decline in future expected cash flows of an immaterial reporting unit of our Propane operations and related equipment sales segment.
Following is a summary of segment information for the three and sixnine months ended January 31, 2018April 30, 2019 and 2017:2018:
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 479,625 |
| $ | — |
| $ | 479,625 |
Direct costs (1) |
|
| 380,637 |
|
| 10,427 |
|
| 391,064 |
Adjusted EBITDA |
| $ | 98,988 |
| $ | (10,427) |
| $ | 88,561 |
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 493,215 |
| $ | 22,595 |
| $ | 515,810 |
Direct costs (1) |
|
| 397,568 |
|
| 31,320 |
|
| 428,888 |
Adjusted EBITDA |
| $ | 95,647 |
| $ | (8,725) |
| $ | 86,922 |
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 1,405,311 |
| $ | — |
| $ | 1,405,311 |
Direct costs (1) |
|
| 1,147,764 |
|
| 31,489 |
|
| 1,179,253 |
Adjusted EBITDA |
| $ | 257,547 |
| $ | (31,489) |
| $ | 226,058 |
22
| Three months ended January 31, 2018 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 637,880 | $ | 117,276 | $ | — | $ | 755,156 | ||||||||
| Direct costs (1) | 507,386 | 114,929 | 12,214 | 634,529 | ||||||||||||
| Adjusted EBITDA | $ | 130,494 | $ | 2,347 | $ | (12,214 | ) | $ | 120,627 | |||||||
| Three months ended January 31, 2017 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 482,463 | $ | 96,787 | $ | — | $ | 579,250 | ||||||||
| Direct costs (1) | 370,175 | 93,718 | 10,327 | 474,220 | ||||||||||||
| Adjusted EBITDA | $ | 112,288 | $ | 3,069 | $ | (10,327 | ) | $ | 105,030 | |||||||
| Six months ended January 31, 2018 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 971,775 | $ | 238,036 | $ | — | $ | 1,209,811 | ||||||||
| Direct costs (1) | 810,715 | 228,830 | 23,423 | 1,062,968 | ||||||||||||
| Adjusted EBITDA | $ | 161,060 | $ | 9,206 | $ | (23,423 | ) | $ | 146,843 | |||||||
| Six months ended January 31, 2017 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 753,961 | $ | 204,831 | $ | — | $ | 958,792 | ||||||||
| Direct costs (1) | 607,189 | 196,491 | 21,063 | 824,743 | ||||||||||||
| Adjusted EBITDA | $ | 146,772 | $ | 8,340 | $ | (21,063 | ) | $ | 134,049 | |||||||
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 1,464,990 |
| $ | 260,631 |
| $ | 1,725,621 |
Direct costs (1) |
|
| 1,208,283 |
|
| 283,573 |
|
| 1,491,856 |
Adjusted EBITDA |
| $ | 256,707 |
| $ | (22,942) |
| $ | 233,765 |
(1) | Direct costs are comprised of "cost of sales-propane and other gas liquids sales", "cost of sales- midstream operations", "cost of sales-other", "operating expense", "general and administrative expense", and "equipment lease expense" less "severance costs", "legal fees and settlements", "unrealized (non-cash) losses on changes in fair value of derivatives not designated as hedging instruments" and "multi-employer pension plan withdrawal settlement". |
Following is a reconciliation of Ferrellgas'net earnings (loss) attributable to Ferrellgas Partners L.P. to the total segment performance measure to condensed consolidated net earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, |
| Nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
| $ | 20,461 |
| $ | 10,861 |
| $ | 6,790 |
| $ | (38,897) |
|
Income tax expense |
|
| 123 |
|
| 67 |
|
| 284 |
|
| 282 |
|
Interest expense |
|
| 44,162 |
|
| 40,375 |
|
| 132,931 |
|
| 123,855 |
|
Depreciation and amortization expense |
|
| 20,617 |
|
| 25,348 |
|
| 59,214 |
|
| 76,565 |
|
EBITDA |
|
| 85,363 |
|
| 76,651 |
|
| 199,219 |
|
| 161,805 |
|
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| 4,688 |
|
| 10,731 |
|
Asset impairments |
|
| — |
|
| — |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 1,683 |
|
| 6,270 |
|
| 8,403 |
|
| 46,414 |
|
Other income, net |
|
| (251) |
|
| (227) |
|
| (356) |
|
| (1,422) |
|
Severance costs |
|
| — |
|
| — |
|
| 1,600 |
|
| 1,663 |
|
Legal fees and settlements |
|
| 1,471 |
|
| 1,289 |
|
| 10,643 |
|
| 3,407 |
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| — |
|
| — |
|
| 1,293 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| — |
|
| 1,524 |
|
| — |
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 299 |
|
| 201 |
|
| 337 |
|
| (131) |
|
Adjusted EBITDA |
| $ | 88,561 |
| $ | 86,922 |
| $ | 226,058 |
| $ | 233,765 |
|
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | $ | (1,843 | ) | $ | 38,098 | $ | (49,758 | ) | $ | (4,975 | ) | |||||
| Income tax expense (benefit) | (162 | ) | 588 | 215 | (2 | ) | ||||||||||
| Interest expense | 42,673 | 36,819 | 83,480 | 72,247 | ||||||||||||
| Depreciation and amortization expense | 25,485 | 25,607 | 51,217 | 51,809 | ||||||||||||
| EBITDA | 66,153 | 101,112 | 85,154 | 119,079 | ||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 7,993 | 6,699 | ||||||||||||
| Non-cash stock-based compensation charge | — | 1,417 | — | 3,298 | ||||||||||||
| Asset impairments | 10,005 | — | 10,005 | — | ||||||||||||
| Loss on asset sales and disposals | 39,249 | 45 | 40,144 | 6,468 | ||||||||||||
| Other income, net | (684 | ) | (763 | ) | (1,195 | ) | (1,271 | ) | ||||||||
| Severance costs | — | 490 | 1,663 | 1,959 | ||||||||||||
| Professional fees | 2,118 | — | 2,118 | — | ||||||||||||
| Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | (314 | ) | (646 | ) | 1,293 | (2,215 | ) | |||||||||
| Net earnings (loss) attributable to noncontrolling interest | 69 | 430 | (332 | ) | 32 | |||||||||||
| Adjusted EBITDA | $ | 120,627 | $ | 105,030 | $ | 146,843 | $ | 134,049 | ||||||||
Following are total assets by segment:
|
|
|
|
|
|
|
Assets |
| April 30, 2019 |
| July 31, 2018 | ||
Propane operations and related equipment sales |
| $ | 1,257,214 |
| $ | 1,196,084 |
Corporate and other |
|
| 72,778 |
|
| 167,197 |
Total consolidated assets |
| $ | 1,329,992 |
| $ | 1,363,281 |
| Assets | January 31, 2018 | July 31, 2017 | ||||||
| Propane operations and related equipment sales | $ | 1,361,856 | $ | 1,194,905 | ||||
| Midstream operations | 309,952 | 399,356 | ||||||
| Corporate | 15,251 | 15,708 | ||||||
| Total consolidated assets | $ | 1,687,059 | $ | 1,609,969 | ||||
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2019 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 43,975 |
| $ | 672 |
| $ | 44,647 |
Growth |
|
| 44,654 |
|
| — |
|
| 44,654 |
Total |
| $ | 88,629 |
| $ | 672 |
| $ | 89,301 |
23
| Six months ended January 31, 2018 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Capital expenditures: | ||||||||||||||||
| Maintenance | $ | 12,016 | $ | 182 | $ | 1,245 | $ | 13,443 | ||||||||
| Growth | 18,311 | 1,013 | — | 19,324 | ||||||||||||
| Total | $ | 30,327 | $ | 1,195 | $ | 1,245 | $ | 32,767 | ||||||||
| Six months ended January 31, 2017 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Capital expenditures: | ||||||||||||||||
| Maintenance | $ | 5,551 | $ | 204 | $ | 1,484 | $ | 7,239 | ||||||||
| Growth | 9,857 | — | — | 9,857 | ||||||||||||
| Total | $ | 15,408 | $ | 204 | $ | 1,484 | $ | 17,096 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2018 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 17,556 |
| $ | 1,702 |
| $ | 19,258 |
Growth |
|
| 34,784 |
|
| 1,265 |
|
| 36,049 |
Total |
| $ | 52,340 |
| $ | 2,967 |
| $ | 55,307 |
M.N. Subsequent events
Ferrellgas evaluated events and transactions occurring after the balance sheet date through the date Ferrellgas'Ferrellgas’ condensed consolidated financial statements were issued and concluded that other than as discussed below, there were no events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
On February 20, 2018, Ferrellgas completedJune 6, 2019, the saleoperating partnership entered into an amendment to the agreement governing its Senior Secured Credit Facility. Among other matters, the amendment updated the calculation of 1,072 rail cars utilizedthe fixed charge coverage ratio for purposes of the fixed charge coverage ratio in the Midstream operations segment and received approximately $47.0 millionagreement to exclude certain maintenance capital expenditures related to the purchase of new propane delivery trucks which have historically been leased. The amendment provides that up to a specified amount of such maintenance capital expenditures will not be deducted from consolidated EBITDA for purposes of the calculation. The operating partnership was in cash. Proceeds fromcompliance with the transaction were usedfixed charge coverage ratio covenant, as amended, as of April 30, 2019. A copy of the amendment has been filed as Exhibit 10.31 to reduce outstanding debtthis Quarterly Report on Ferrellgas' secured credit facility. See additional discussions on the completed rail car sale in Note C - Supplemental financial statement information.Form 10-Q.
24
| FERRELLGAS PARTNERS FINANCE CORP. | |||||||
| (a wholly-owned subsidiary of Ferrellgas Partners, L.P.) | |||||||
| CONDENSED BALANCE SHEETS | |||||||
| (unaudited) | |||||||
| January 31, 2018 | July 31, 2017 | ||||||
| ASSETS | |||||||
| Cash | $ | 1,000 | $ | 1,000 | |||
| Total assets | $ | 1,000 | $ | 1,000 | |||
| Contingencies and commitments (Note B) | |||||||
| STOCKHOLDER'S EQUITY | |||||||
| Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding | $ | 1,000 | $ | 1,000 | |||
| Additional paid in capital | 25,330 | 25,055 | |||||
| Accumulated deficit | (25,330 | ) | (25,055 | ) | |||
| Total stockholder's equity | $ | 1,000 | $ | 1,000 | |||
| See notes to condensed financial statements. | |||||||
| FERRELLGAS PARTNERS FINANCE CORP. | |||||||||||||||
| (a wholly-owned subsidiary of Ferrellgas Partners, L.P.) | |||||||||||||||
| CONDENSED STATEMENTS OF OPERATIONS | |||||||||||||||
| (unaudited) | |||||||||||||||
| For the three months ended January 31, | For the six months ended January 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| General and administrative expense | $ | 225 | $ | — | $ | 275 | $ | 92 | |||||||
| Net loss | $ | (225 | ) | $ | — | $ | (275 | ) | $ | (92 | ) | ||||
| See notes to condensed financial statements. | |||||||||||||||
| FERRELLGAS PARTNERS FINANCE CORP. | |||||||
| (a wholly-owned subsidiary of Ferrellgas Partners, L.P.) | |||||||
| CONDENSED STATEMENTS OF CASH FLOWS | |||||||
| (unaudited) | |||||||
| For the six months ended January 31, | |||||||
| 2018 | 2017 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (275 | ) | $ | (92 | ) | |
| Cash used in operating activities | (275 | ) | (92 | ) | |||
| Cash flows from financing activities: | |||||||
| Capital contribution | 275 | 92 | |||||
| Cash provided by financing activities | 275 | 92 | |||||
| Net change in cash | — | — | |||||
| Cash - beginning of period | 1,000 | 1,000 | |||||
| Cash - end of period | $ | 1,000 | $ | 1,000 | |||
| See notes to condensed financial statements. | |||||||
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
(unaudited)
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Cash |
| $ | 1,000 |
| $ | 1,000 |
Prepaid expenses and other current assets |
|
| — |
|
| 1,850 |
Total assets |
| $ | 1,000 |
| $ | 2,850 |
|
|
|
|
|
|
|
Contingencies and commitments (Note B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER’S EQUITY |
|
|
|
|
|
|
Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding |
| $ | 1,000 |
| $ | 1,000 |
Additional paid in capital |
|
| 30,837 |
|
| 29,020 |
Accumulated deficit |
|
| (30,837) |
|
| (27,170) |
Total stockholder’s equity |
| $ | 1,000 |
| $ | 2,850 |
See notes to condensed financial statements.
25
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
General and administrative expense |
| $ | 1,725 |
| $ | 1,840 |
| $ | 3,666 |
| $ | 2,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,725) |
| $ | (1,840) |
| $ | (3,666) |
| $ | (2,115) |
|
See notes to condensed financial statements.
26
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (3,666) |
| $ | (2,115) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 1,850 |
|
| — |
Cash used in operating activities |
|
| (1,816) |
|
| (2,115) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Capital contribution |
|
| 1,816 |
|
| 2,115 |
Cash provided by financing activities |
|
| 1,816 |
|
| 2,115 |
|
|
|
|
|
|
|
Net change in cash |
|
| — |
|
| — |
Cash - beginning of period |
|
| 1,000 |
|
| 1,000 |
Cash - end of period |
| $ | 1,000 |
| $ | 1,000 |
See notes to condensed financial statements.
27
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
(unaudited)
A. Formation
Ferrellgas Partners Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on March 28, 1996 and is a wholly-owned subsidiary of Ferrellgas Partners, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has no employees.
B. Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
28
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| January 31, 2018 | July 31, 2017 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 14,171 | $ | 5,701 | |||
| Accounts and notes receivable, net (including $235,150 and $109,407 of accounts receivable pledged as collateral at January 31, 2018 and July 31, 2017, respectively) | 255,978 | 165,084 | |||||
| Inventories | 110,092 | 92,552 | |||||
| Assets held for sale | 52,200 | — | |||||
| Prepaid expenses and other current assets | 41,393 | 33,426 | |||||
| Total current assets | 473,834 | 296,763 | |||||
| Property, plant and equipment, net | 646,327 | 731,923 | |||||
| Goodwill, net | 246,098 | 256,103 | |||||
| Intangible assets (net of accumulated amortization of $452,283 and $436,428 at January 31, 2018 and July 31, 2017, respectively) | 243,079 | 251,102 | |||||
| Other assets, net | 77,712 | 74,057 | |||||
| Total assets | $ | 1,687,050 | $ | 1,609,948 | |||
| LIABILITIES AND PARTNERS' DEFICIT | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 82,072 | $ | 85,561 | |||
| Short-term borrowings | 261,200 | 59,781 | |||||
| Collateralized note payable | 166,000 | 69,000 | |||||
| Other current liabilities | 136,591 | 122,016 | |||||
| Total current liabilities | 645,863 | 336,358 | |||||
| Long-term debt | 1,462,973 | 1,649,270 | |||||
| Other liabilities | 35,422 | 31,118 | |||||
| Contingencies and commitments (Note J) | |||||||
| Partners' deficit: | |||||||
| Limited partner | (477,096 | ) | (417,467 | ) | |||
| General partner | (4,705 | ) | (4,095 | ) | |||
| Accumulated other comprehensive income | 24,593 | 14,764 | |||||
| Total partners' deficit | (457,208 | ) | (406,798 | ) | |||
| Total liabilities and partners' deficit | $ | 1,687,050 | $ | 1,609,948 | |||
| See notes to condensed consolidated financial statements. | |||||||
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| For the three months ended January 31, | For the six months ended January 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Revenues: | |||||||||||||||||
| Propane and other gas liquids sales | $ | 592,239 | $ | 437,375 | $ | 894,997 | $ | 679,774 | |||||||||
| Midstream operations | 117,276 | 96,787 | 238,036 | 204,831 | |||||||||||||
| Other | 45,641 | 45,088 | 76,778 | 74,187 | |||||||||||||
| Total revenues | 755,156 | 579,250 | 1,209,811 | 958,792 | |||||||||||||
| Costs and expenses: | |||||||||||||||||
| Cost of sales - propane and other gas liquids sales | 362,918 | 235,029 | 542,433 | 354,241 | |||||||||||||
| Cost of sales - midstream operations | 107,067 | 87,024 | 215,192 | 181,666 | |||||||||||||
| Cost of sales - other | 20,787 | 20,657 | 34,489 | 32,403 | |||||||||||||
| Operating expense | 123,716 | 113,076 | 234,178 | 218,162 | |||||||||||||
| Depreciation and amortization expense | 25,485 | 25,607 | 51,217 | 51,809 | |||||||||||||
| General and administrative expense | 14,890 | 12,278 | 28,054 | 26,547 | |||||||||||||
| Equipment lease expense | 6,954 | 7,416 | 13,695 | 14,765 | |||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 7,993 | 6,699 | |||||||||||||
| Asset impairments | 10,005 | — | 10,005 | — | |||||||||||||
| Loss on asset sales and disposals | 39,249 | 45 | 40,144 | 6,468 | |||||||||||||
| Operating income | 40,054 | 75,173 | 32,411 | 66,032 | |||||||||||||
| Interest expense | (34,058 | ) | (32,748 | ) | (66,254 | ) | (64,146 | ) | |||||||||
| Other income, net | 684 | 763 | 1,195 | 1,271 | |||||||||||||
| Earnings (loss) before income taxes | 6,680 | 43,188 | (32,648 | ) | 3,157 | ||||||||||||
| Income tax expense (benefit) | (167 | ) | 588 | 204 | (3 | ) | |||||||||||
| Net earnings (loss) | $ | 6,847 | $ | 42,600 | $ | (32,852 | ) | $ | 3,160 | ||||||||
| See notes to condensed consolidated financial statements. | |||||||||||||||||
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| For the three months ended January 31, | For the six months ended January 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net earnings (loss) | $ | 6,847 | $ | 42,600 | $ | (32,852 | ) | $ | 3,160 | ||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Change in value of risk management derivatives | 1,072 | 15,262 | 23,521 | 20,400 | |||||||||||||
| Reclassification of (gains) losses on derivatives to earnings, net | (9,743 | ) | 514 | (13,692 | ) | 4,752 | |||||||||||
| Other comprehensive income (loss) | (8,671 | ) | 15,776 | 9,829 | 25,152 | ||||||||||||
| Comprehensive income (loss) | $ | (1,824 | ) | $ | 58,376 | $ | (23,023 | ) | $ | 28,312 | |||||||
| See notes to condensed consolidated financial statements. | |||||||||||||||||
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT | |||||||||||||||
| (in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Accumulated | |||||||||||||||
| other | Total | ||||||||||||||
| Limited | General | comprehensive | partners' | ||||||||||||
| partner | partner | income | deficit | ||||||||||||
| Balance at July 31, 2017 | $ | (417,467 | ) | $ | (4,095 | ) | $ | 14,764 | $ | (406,798 | ) | ||||
| Contributions in connection with non-cash ESOP and stock-based compensation charges | 7,914 | 79 | — | 7,993 | |||||||||||
| Distributions | (35,023 | ) | (357 | ) | — | (35,380 | ) | ||||||||
| Net loss | (32,520 | ) | (332 | ) | — | (32,852 | ) | ||||||||
| Other comprehensive income | — | — | 9,829 | 9,829 | |||||||||||
| Balance at January 31, 2018 | $ | (477,096 | ) | $ | (4,705 | ) | $ | 24,593 | $ | (457,208 | ) | ||||
| See notes to condensed consolidated financial statements. | |||||||||||||||
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| For the six months ended January 31, | |||||||
| 2018 | 2017 | ||||||
| Cash flows from operating activities: | |||||||
| Net earnings (loss) | $ | (32,852 | ) | $ | 3,160 | ||
| Reconciliation of net earnings (loss) to net cash provided by operating activities: | |||||||
| Depreciation and amortization expense | 51,217 | 51,809 | |||||
| Non-cash employee stock ownership plan compensation charge | 7,993 | 6,699 | |||||
| Non-cash stock-based compensation charge | — | 3,298 | |||||
| Asset impairments | 10,005 | — | |||||
| Loss on asset sales and disposals | 40,144 | 6,468 | |||||
| Unrealized gain on derivative instruments | (91 | ) | (1,862 | ) | |||
| Provision for doubtful accounts | 1,688 | (283 | ) | ||||
| Deferred income tax expense | 364 | 35 | |||||
| Other | 2,650 | 2,448 | |||||
| Changes in operating assets and liabilities, net of effects from business acquisitions: | |||||||
| Accounts and notes receivable, net of securitization | (102,315 | ) | (74,403 | ) | |||
| Inventories | (17,275 | ) | (24,268 | ) | |||
| Prepaid expenses and other current assets | (4,637 | ) | 6,924 | ||||
| Accounts payable | 11,510 | 40,444 | |||||
| Accrued interest expense | 304 | (12 | ) | ||||
| Other current liabilities | 13,662 | 20,087 | |||||
| Other assets and liabilities | (3,208 | ) | 4,757 | ||||
| Net cash provided by (used in) operating activities | (20,841 | ) | 45,301 | ||||
| Cash flows from investing activities: | |||||||
| Business acquisitions, net of cash acquired | (14,862 | ) | — | ||||
| Capital expenditures | (35,693 | ) | (19,768 | ) | |||
| Proceeds from sale of assets | 4,207 | 4,591 | |||||
| Other | — | (37 | ) | ||||
| Net cash used in investing activities | (46,348 | ) | (15,214 | ) | |||
| Cash flows from financing activities: | |||||||
| Distributions | (35,380 | ) | (84,500 | ) | |||
| Contributions from partners | — | 167,640 | |||||
| Proceeds from issuance of long-term debt | 23,580 | 36,444 | |||||
| Payments on long-term debt | (1,267 | ) | (172,790 | ) | |||
| Net reductions in short-term borrowings | (7,879 | ) | (35,692 | ) | |||
| Net additions to collateralized short-term borrowings | 97,000 | 69,000 | |||||
| Cash paid for financing costs | (395 | ) | (1,422 | ) | |||
| Net cash provided by (used in) financing activities | 75,659 | (21,320 | ) | ||||
| Net change in cash and cash equivalents | 8,470 | 8,767 | |||||
| Cash and cash equivalents - beginning of period | 5,701 | 4,890 | |||||
| Cash and cash equivalents - end of period | $ | 14,171 | $ | 13,657 | |||
| See notes to condensed consolidated financial statements. | |||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 45,365 |
| $ | 119,308 |
Accounts and notes receivable, net (including $160,959 and $120,079 of accounts receivable pledged as collateral at April 30, 2019 and July 31, 2018, respectively) |
|
| 157,229 |
|
| 126,054 |
Inventories |
|
| 78,449 |
|
| 83,694 |
Prepaid expenses and other current assets |
|
| 25,427 |
|
| 34,830 |
Total current assets |
|
| 306,470 |
|
| 363,886 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 603,923 |
|
| 557,723 |
Goodwill |
|
| 247,508 |
|
| 246,098 |
Intangible assets (net of accumulated amortization of $411,766 and $399,629 at April 30, 2019 and July 31, 2018, respectively) |
|
| 109,634 |
|
| 120,951 |
Other assets, net |
|
| 62,326 |
|
| 74,588 |
Total assets |
| $ | 1,329,861 |
| $ | 1,363,246 |
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 41,408 |
| $ | 46,820 |
Short-term borrowings |
|
| — |
|
| 32,800 |
Collateralized note payable |
|
| 62,000 |
|
| 58,000 |
Other current liabilities |
|
| 148,875 |
|
| 138,091 |
Total current liabilities |
|
| 252,283 |
|
| 275,711 |
|
|
|
|
|
|
|
Long-term debt |
|
| 1,730,874 |
|
| 1,728,137 |
Other liabilities |
|
| 35,879 |
|
| 39,476 |
Contingencies and commitments (Note K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ deficit: |
|
|
|
|
|
|
Limited partner |
|
| (681,545) |
|
| (693,896) |
General partner |
|
| (6,789) |
|
| (6,915) |
Accumulated other comprehensive income (loss) |
|
| (841) |
|
| 20,733 |
Total partners’ deficit |
|
| (689,175) |
|
| (680,078) |
Total liabilities and partners’ deficit |
| $ | 1,329,861 |
| $ | 1,363,246 |
See notes to condensed consolidated financial statements.
29
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 459,556 |
| $ | 451,302 |
| $ | 1,344,634 |
| $ | 1,346,299 |
|
Midstream operations |
|
| — |
|
| 22,595 |
|
| — |
|
| 260,631 |
|
Other |
|
| 20,069 |
|
| 41,913 |
|
| 60,677 |
|
| 118,691 |
|
Total revenues |
|
| 479,625 |
|
| 515,810 |
|
| 1,405,311 |
|
| 1,725,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 250,389 |
|
| 260,419 |
|
| 766,056 |
|
| 802,852 |
|
Cost of sales - midstream operations |
|
| — |
|
| 14,518 |
|
| — |
|
| 229,710 |
|
Cost of sales - other |
|
| 2,320 |
|
| 19,850 |
|
| 8,789 |
|
| 54,339 |
|
Operating expense |
|
| 119,991 |
|
| 116,579 |
|
| 351,541 |
|
| 350,757 |
|
Depreciation and amortization expense |
|
| 20,617 |
|
| 25,348 |
|
| 59,214 |
|
| 76,565 |
|
General and administrative expense |
|
| 11,512 |
|
| 11,546 |
|
| 42,028 |
|
| 39,600 |
|
Equipment lease expense |
|
| 8,319 |
|
| 7,133 |
|
| 24,597 |
|
| 20,828 |
|
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| 4,688 |
|
| 10,731 |
|
Asset impairments |
|
| — |
|
| — |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 1,683 |
|
| 6,270 |
|
| 8,403 |
|
| 46,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 64,798 |
|
| 51,409 |
|
| 139,995 |
|
| 83,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (35,395) |
|
| (31,739) |
|
| (106,740) |
|
| (97,993) |
|
Other income, net |
|
| 251 |
|
| 227 |
|
| 356 |
|
| 1,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 29,654 |
|
| 19,897 |
|
| 33,611 |
|
| (12,751) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 100 |
|
| 57 |
|
| 254 |
|
| 261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
| $ | 29,554 |
| $ | 19,840 |
| $ | 33,357 |
| $ | (13,012) |
|
See notes to condensed consolidated financial statements.
30
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Net earnings (loss) |
| $ | 29,554 |
| $ | 19,840 |
| $ | 33,357 |
| $ | (13,012) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of risk management derivatives |
|
| 1,870 |
|
| (159) |
|
| (27,364) |
|
| 23,362 |
|
Reclassification of (gains) losses on derivatives to earnings, net |
|
| 6,416 |
|
| (6,568) |
|
| 5,790 |
|
| (20,260) |
|
Other comprehensive income (loss) |
|
| 8,286 |
|
| (6,727) |
|
| (21,574) |
|
| 3,102 |
|
Comprehensive income (loss) |
| $ | 37,840 |
| $ | 13,113 |
| $ | 11,783 |
| $ | (9,910) |
|
See notes to condensed consolidated financial statements.
31
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ DEFICIT
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
| other |
| Total | ||
|
| Limited |
| General |
| comprehensive |
| partners’ | ||||
|
| partner |
| partner |
| income (loss) |
| deficit | ||||
Balance at July 31, 2018 |
| $ | (693,896) |
| $ | (6,915) |
| $ | 20,733 |
| $ | (680,078) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
|
| 2,720 |
|
| 28 |
|
| — |
|
| 2,748 |
Distributions |
|
| (9,914) |
|
| (101) |
|
| — |
|
| (10,015) |
Net loss |
|
| (48,321) |
|
| (493) |
|
| — |
|
| (48,814) |
Other comprehensive loss |
|
| — |
|
| — |
|
| (12,587) |
|
| (12,587) |
Balance at October 31, 2018 |
|
| (749,411) |
|
| (7,481) |
|
| 8,146 |
|
| (748,746) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
|
| 1,925 |
|
| 19 |
|
| — |
|
| 1,944 |
Distributions |
|
| (15,396) |
|
| (157) |
|
| — |
|
| (15,553) |
Net earnings |
|
| 52,086 |
|
| 531 |
|
| — |
|
| 52,617 |
Other comprehensive loss |
|
| — |
|
| — |
|
| (17,273) |
|
| (17,273) |
Balance at January 31, 2019 |
|
| (710,796) |
|
| (7,088) |
|
| (9,127) |
|
| (727,011) |
Contributions in connection with non-cash ESOP compensation charges |
|
| (4) |
|
| — |
|
| — |
|
| (4) |
Net earnings |
|
| 29,255 |
|
| 299 |
|
| — |
|
| 29,554 |
Other comprehensive income |
|
| — |
|
| — |
|
| 8,286 |
|
| 8,286 |
Balance at April 30, 2019 |
| $ | (681,545) |
| $ | (6,789) |
| $ | (841) |
| $ | (689,175) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
| other |
| Total | ||
|
| Limited |
| General |
| comprehensive |
| partners’ | ||||
|
| partner |
| partner |
| income (loss) |
| deficit | ||||
Balance at July 31, 2017 |
| $ | (417,467) |
| $ | (4,095) |
| $ | 14,764 |
| $ | (406,798) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
|
| 3,923 |
|
| 39 |
|
| — |
|
| 3,962 |
Distributions |
|
| (9,813) |
|
| (100) |
|
| — |
|
| (9,913) |
Net loss |
|
| (39,298) |
|
| (401) |
|
| — |
|
| (39,699) |
Other comprehensive income |
|
| — |
|
| — |
|
| 18,500 |
|
| 18,500 |
Balance at October 31, 2017 |
|
| (462,655) |
|
| (4,557) |
|
| 33,264 |
|
| (433,948) |
Contributions in connection with non-cash ESOP and stock and unit-based compensation charges |
|
| 3,991 |
|
| 40 |
|
| — |
|
| 4,031 |
Distributions |
|
| (25,210) |
|
| (257) |
|
| — |
|
| (25,467) |
Net earnings |
|
| 6,778 |
|
| 69 |
|
| — |
|
| 6,847 |
Other comprehensive loss |
|
| — |
|
| — |
|
| (8,671) |
|
| (8,671) |
Balance at January 31, 2018 |
|
| (477,096) |
|
| (4,705) |
|
| 24,593 |
|
| (457,208) |
Contributions in connection with non-cash ESOP compensation charges |
|
| 2,709 |
|
| 29 |
|
| — |
|
| 2,738 |
Distributions |
|
| (10,013) |
|
| (102) |
|
| — |
|
| (10,115) |
Net earnings |
|
| 19,639 |
|
| 201 |
|
| — |
|
| 19,840 |
Other comprehensive loss |
|
| — |
|
| — |
|
| (6,727) |
|
| (6,727) |
Balance at April 30, 2018 |
| $ | (464,761) |
| $ | (4,577) |
| $ | 17,866 |
| $ | (451,472) |
See notes to condensed consolidated financial statements.
32
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net earnings (loss) |
| $ | 33,357 |
| $ | (13,012) |
Reconciliation of net earnings (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 59,214 |
|
| 76,565 |
Non-cash employee stock ownership plan compensation charge |
|
| 4,688 |
|
| 10,731 |
Asset impairments |
|
| — |
|
| 10,005 |
Loss on asset sales and disposals |
|
| 8,403 |
|
| 46,414 |
Unrealized gain on derivative instruments |
|
| — |
|
| (91) |
Provision for doubtful accounts |
|
| 1,938 |
|
| 1,906 |
Deferred income tax expense |
|
| 143 |
|
| 423 |
Other |
|
| 6,135 |
|
| 3,987 |
Changes in operating assets and liabilities, net of effects from business acquisitions: |
|
|
|
|
|
|
Accounts and notes receivable, net of securitization |
|
| (33,113) |
|
| (46,771) |
Inventories |
|
| 5,245 |
|
| 7,755 |
Prepaid expenses and other current assets |
|
| (5,555) |
|
| (4,001) |
Accounts payable |
|
| (5,713) |
|
| (18,429) |
Accrued interest expense |
|
| 22,518 |
|
| 24,217 |
Other current liabilities |
|
| (13,506) |
|
| (809) |
Other assets and liabilities |
|
| 2,453 |
|
| (4,944) |
Net cash provided by operating activities |
|
| 86,207 |
|
| 93,946 |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (11,351) |
|
| (14,862) |
Capital expenditures |
|
| (94,660) |
|
| (58,961) |
Proceeds from sale of assets |
|
| 2,416 |
|
| 57,802 |
Net cash used in investing activities |
|
| (103,595) |
|
| (16,021) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Distributions |
|
| (25,568) |
|
| (45,495) |
Proceeds from issuance of long-term debt |
|
| — |
|
| 23,580 |
Payments on long-term debt |
|
| (1,656) |
|
| (1,892) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| (84,179) |
Net additions to collateralized short-term borrowings |
|
| 4,000 |
|
| 35,000 |
Cash paid for financing costs |
|
| (531) |
|
| (1,149) |
Net cash used in financing activities |
|
| (56,555) |
|
| (74,135) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (73,943) |
|
| 3,790 |
Cash and cash equivalents - beginning of period |
|
| 119,308 |
|
| 5,701 |
Cash and cash equivalents - end of period |
| $ | 45,365 |
| $ | 9,491 |
See notes to condensed consolidated financial statements.
33
(Dollars in thousands, unless otherwise designated)
(unaudited)
A. Partnership organization and formation
Ferrellgas, L.P. is a limited partnership that owns and operates propane distribution and related assets, crude oil transportation and logistics related assets and salt water disposal wells in south Texas.assets. Ferrellgas Partners, L.P. (“Ferrellgas Partners”), a publicly traded limited partnership, holds an approximate 99% limited partner interest in, and consolidates, Ferrellgas, L.P. Ferrellgas, Inc. (the “general partner”), a wholly-owned subsidiary of Ferrell Companies, Inc. (“Ferrell Companies”), holds an approximate 1% general partner interest in Ferrellgas, L.P. and performs all management functions required by Ferrellgas, L.P.
Ferrellgas, L.P. owns a 100% equity interest in Ferrellgas Finance Corp., whose only business activity is to act as the co-issuer and co-obligor of debt issued by Ferrellgas, L.P.
Ferrellgas, L.P. is primarily engaged in the following primary businesses:
Due to seasonality, the results of operations for the sixnine months ended January 31, 2018April 30, 2019 are not necessarily indicative of the results to be expected for the full fiscal year ending July 31, 2018.
The condensed consolidated financial statements of Ferrellgas, L.P. and subsidiaries reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed consolidated financial statements were of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The information included in this Quarterly Report on Form 10-Q10‑Q should be read in conjunction with (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) the consolidated financial statements and accompanying notes included in Ferrellgas, L.P.’s Annual Report on Form 10-K10‑K for fiscal 20172018.
B. Summary of significant accounting policies
(1)Accounting estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) Assets held for sale:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board ("FASB")(FASB) issued Accounting Standard Update ("ASU") 2014-09,
34
Ferrellgas, L.P. adopted ASU 2014‑09 beginning on August 1, 2018 including interimusing the modified retrospective method. This method requires that the cumulative effect of initially applying ASU 2014‑09 be recognized in partner’s deficit at the date of adoption, August 1, 2018. ASU 2014‑09 has not materially impacted Ferrellgas, L.P.’s consolidated financial statements, and as a result there was no cumulative effect to record as of the date of adoption. Results for reporting periods within that reporting period. Entitiesbeginning after August 1, 2018 are allowed to transition to the new standard by either recastingpresented under ASU 2014‑09, while amounts reported for prior periods or recognizing the cumulative effect. Ferrellgas, L.P. ishave not been adjusted and continue to be reported under accounting standards in the final stages of analyzing the impact of the new guidance using an integrated approach which includes evaluating differences in the amount and timing of revenue recognitioneffect for those periods. See Note G - Revenue from applying the requirements of the new guidance, reviewing its accounting policies and practices, and assessing the need for changes to its processes, accounting systems and design of internal controls. Ferrellgas, L.P. has completed the assessment of a significant number of its contracts with customers for additional information related to revenues and contract costs, including qualitative and quantitative disclosures required under the new guidance to determine the effect of the adoption of the new guidance. Although Ferrellgas, L.P. has not completed its assessment of the impact of the new guidance, it does not expect its adoption will have a material impact on its consolidated financial statements.
FASB Accounting Standard Update No. 2015-11
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new standard requires lessees to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. An entity may elect the transition relief option in ASU 2018-11, “Leases: Targeted Improvements” which, among other things, provides entities with an option to recognize the cumulative-effect adjustment from the modified retrospective application to the opening balance of retained earnings in the period of adoption and consequently, continue to report comparative periods in compliance with the prior guidance (ASC 840). Ferrellgas, L.P. expects to elect this additional transition method.
Ferrellgas, L.P. is currently evaluatingcontinuing to evaluate the impact of ourits pending adoption of ASU 2016-02 on the consolidated financial statements. Ferrellgas, L.P. has formed anmade significant progress in assessing the impact of the standard and planning for the adoption and implementation. The implementation team has completed trainingscoping and the data gathering process of our current lease portfolio. Ferrellgas, L.P. continues to perform a completeness assessment over the lease population, analyze the financial statement impact of adopting the standards, and evaluate the impact of adoption on our existing accounting policies and disclosures. Further, our implementation team is in the process of determining appropriate changes to our business processes, systems, and controls to support recognition and disclosure under the new standard. Ferrellgas, L.P. believes that the adoption of this standard, which will be effective for Ferrellgas, L.P. August 1, 2019, will result in material increases to right of use assets and is workinglease liabilities on an initial assessment.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,2016‑13, Financial Instruments - Credit Losses (Topic 326) which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard'sstandard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas, L.P. is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2017-12
In August 2017, the FASB issued ASU 2017-12,2017‑12, Financial Instruments - Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities which is intended to improve the financial reporting for hedging relationships to better portray the economic results of an entity'sentity’s risk management activities in its financial statements. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Ferrellgas, L.P. is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2018‑15
In August 2018, the FASB issued ASU 2018‑15, Intangibles - Goodwill and Other - Internal-use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract which is intended to clarify the accounting for implementation costs related to a cloud computing
35
arrangement that is a service contract. Costs for implementation activities in the application development stage are deferred, depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed. Any deferred costs are amortized over the term of the service contract. The new guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Ferrellgas, L.P. adopted ASU 2018-15 on a prospective basis to all implementation costs incurred after January 31, 2019 with an immaterial impact on our consolidated results of operations for the three months ended April 30, 2019.
.
C. Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Propane gas and related products |
| $ | 63,481 |
| $ | 71,180 |
Appliances, parts and supplies, and other |
|
| 14,968 |
|
| 12,514 |
Inventories |
| $ | 78,449 |
| $ | 83,694 |
| January 31, 2018 | July 31, 2017 | |||||||
| Propane gas and related products | $ | 81,644 | $ | 67,049 | ||||
| Appliances, parts and supplies, and other | 28,448 | 25,503 | ||||||
| Inventories | $ | 110,092 | $ | 92,552 | ||||
In addition to inventories on hand, Ferrellgas, L.P. enters into contracts to take delivery of propane for supply procurement purposes with terms that generally do not exceed 36 months. Most of these contracts call for payment based on market prices at the date of delivery. As of January 31, 2018,April 30, 2019, Ferrellgas, L.P. had committed, for supply procurement purposes, to take delivery of approximately 81.93.3 million gallons of propane at fixed prices.
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Notes receivable, less current portion |
| $ | 18,745 |
| $ | 27,491 |
Other |
|
| 43,581 |
|
| 47,097 |
Other assets, net |
| $ | 62,326 |
| $ | 74,588 |
| January 31, 2018 | July 31, 2017 | |||||||
| Notes receivable, less current portion | $ | 36,371 | $ | 32,500 | ||||
| Other | 41,341 | 41,557 | ||||||
| Other assets, net | $ | 77,712 | $ | 74,057 | ||||
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Accrued interest |
|
| 40,806 |
|
| 18,288 |
Customer deposits and advances |
|
| 20,681 |
|
| 22,829 |
Other |
|
| 87,388 |
|
| 96,974 |
Other current liabilities |
| $ | 148,875 |
| $ | 138,091 |
| January 31, 2018 | July 31, 2017 | |||||||
| Accrued interest | $ | 15,041 | $ | 14,737 | ||||
| Customer deposits and advances | 24,676 | 25,541 | ||||||
| Other | 96,874 | 81,738 | ||||||
| Other current liabilities | $ | 136,591 | $ | 122,016 | ||||
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 54,753 |
| $ | 48,351 |
| $ | 162,474 |
| $ | 146,279 |
|
Depreciation and amortization expense |
|
| 1,934 |
|
| 1,340 |
|
| 4,396 |
|
| 3,575 |
|
Equipment lease expense |
|
| 7,784 |
|
| 6,507 |
|
| 23,172 |
|
| 18,872 |
|
|
| $ | 64,471 |
| $ | 56,198 |
| $ | 190,042 |
| $ | 168,726 |
|
36
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating expense | $ | 54,613 | $ | 47,157 | $ | 97,928 | $ | 88,883 | ||||||||
| Depreciation and amortization expense | 1,123 | 996 | 2,235 | 2,022 | ||||||||||||
| Equipment lease expense | 6,296 | 6,652 | 12,364 | 13,318 | ||||||||||||
| Total shipping and handling expenses | $ | 62,032 | $ | 54,805 | $ | 112,527 | $ | 104,223 | ||||||||
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Loss on assets held for sale | $ | 35,515 | $ | — | 35,515 | — | ||||||||||
| Loss on sale of assets and other | 3,734 | 45 | 4,629 | 6,468 | ||||||||||||
| Loss on asset sales and disposals | $ | 39,249 | $ | 45 | $ | 40,144 | $ | 6,468 | ||||||||
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
|
| 2019 |
| 2018 | ||
Cash paid (refunded) for: |
|
|
|
|
|
|
Interest |
| $ | 78,069 |
| $ | 69,775 |
Income taxes |
| $ | (9) |
| $ | (479) |
Non-cash investing and financing activities: |
|
|
|
|
|
|
Liabilities incurred in connection with acquisitions |
| $ | 1,174 |
| $ | 1,508 |
Change in accruals for property, plant and equipment additions |
| $ | 1,202 |
| $ | 386 |
| For the six months ended January 31, | ||||||||
| 2018 | 2017 | |||||||
| Cash paid for: | ||||||||
| Interest | $ | 63,286 | $ | 61,723 | ||||
| Income taxes | $ | 1 | $ | 25 | ||||
| Non-cash investing and financing activities: | ||||||||
| Liabilities incurred in connection with acquisitions | $ | 1,508 | $ | — | ||||
| Change in accruals for property, plant and equipment additions | $ | 47 | $ | (100 | ) | |||
D. Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Accounts receivable pledged as collateral |
| $ | 160,959 |
| $ | 120,079 |
Accounts receivable not pledged as collateral (including other reserves) |
|
| (468) |
|
| 8,272 |
Note receivable - current portion |
|
| 121 |
|
| 132 |
Other |
|
| 37 |
|
| 26 |
Less: Allowance for doubtful accounts |
|
| (3,420) |
|
| (2,455) |
Accounts and notes receivable, net |
| $ | 157,229 |
| $ | 126,054 |
| January 31, 2018 | July 31, 2017 | |||||||
| Accounts receivable pledged as collateral | $ | 235,150 | $ | 109,407 | ||||
| Accounts receivable | 13,596 | 47,346 | ||||||
| Note receivable - current portion | 10,000 | 10,000 | ||||||
| Other | 284 | 307 | ||||||
| Less: Allowance for doubtful accounts | (3,052 | ) | (1,976 | ) | ||||
| Accounts and notes receivable, net | $ | 255,978 | $ | 165,084 | ||||
At April 30, | |||
As of JanuaryApril 30, 2019, Ferrellgas, L.P. had received cash proceeds of $62.0 million from trade accounts receivables securitized, with capacity of $49.0 million to receive additional proceeds or issue letters of credit. As of July 31, 2018, Ferrellgas, L.P. had received cash proceeds of $166.0 million from trade accounts receivables securitized, with no remaining capacity to receive additional proceeds. As of July 31, 2017, Ferrellgas, L.P. had received cash proceeds of $69.0$58.0 million from trade accounts receivables securitized, with no remaining capacity to receive additional proceeds. Borrowings under the accounts receivable securitization facility had a weighted average interest rate of 4.0%5.9% and
E. Debt
Short-term borrowings
Ferrellgas, L.P. classified allclassifies borrowings on the Revolving Facility portion of its secured credit facility borrowingsSenior Secured Credit Facility (each, as defined below) as short-term because the facility matures in October 2018. Prior to October 31, 2017, Ferrellgas, L.P. classified as short-term the portion of its secured credit facility borrowings that werethey are primarily used to fund working capital needs that management intendedintends to pay down within the 12twelve month period following the balance sheet date. As of JanuaryApril 30, 2019, there were no amounts classified as short-term borrowings. As of July 31, 2018, and July 31, 2017, $261.2$32.8 million and $59.8 million, respectively, werewas classified as short-term borrowings. For further discussion see the secured credit facilityfacilities section below.
Secured credit facilities
On May 4, 2018, Ferrellgas, L.P. entered into a new $575.0 million senior secured credit facility (the “Senior Secured Credit Facility”), consisting of a $300.0 million revolving line of credit (the “Revolving Facility”) and a $275.0 million term loan (the “Term Loan”).
As of April 30, 2019, Ferrellgas, L.P. had borrowings of $275.0 million under the Term Loan at an interest rate of 8.26%, which was classified as long-term debt, and no borrowings under the Revolving Facility. As of April 30, 2019, Ferrellgas, L.P. had available borrowing capacity under the Revolving Facility of $197.9 million. As of July 31, 2018, Ferrellgas, L.P. had borrowings of $275.0 million under the Term Loan at an interest rate of 7.86%, which was classified
37
as long-term debt, and $32.8 million under the Revolving Facility at an interest rate of 9.75%, which was classified as short-term borrowings. As of July 31, 2018, Ferrellgas, L.P. had available borrowing capacity under the Revolving Facility of $159.3 million.
Letters of credit outstanding at April 30, 2019 and July 31, 2018 totaled $102.1 million and $107.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At April 30, 2019, Ferrellgas, L.P. had remaining available letter of credit capacity of $22.9 million. At July 31, 2018, Ferrellgas, L.P. had remaining available letter of credit capacity of $17.1 million.
Subsequent to the quarter ended April 30, 2019, Ferrellgas, L.P. entered into an amendment to the agreement governing its Senior Secured Credit Facility. See Note N – Subsequent events for additional information related to the amendment.
Debt and interest expense reduction and refinancing strategy
Ferrellgas, L.P. continues to pursue a strategy to further reduce its debt and interest expense. This strategy included entering into the new Senior Secured Credit Facility and amending our accounts receivable securitization facility in May 2018 and certain asset sales during fiscal 2018. Ferrellgas, L.P. continues to evaluate its options to address its leverage.
Financial covenants
The agreements governing the operating partnership’sFerrellgas, L.P.’s indebtedness contain various covenants that limit ourFerrellgas, L.P.’s ability and the ability of specified subsidiaries to, among other things, make restricted payments and incur additional indebtedness. OurThe general partner believes that the most restrictive of these covenants are those related to the consolidated leverage ratio and consolidated interestfixed charge coverage ratio, as defined in our secured credit facility and our accounts receivable securitization facility.
Under the indentures governing the outstanding notes of Ferrellgas, L.P., before a restricted payment (as defined in the secured credit facility and the operating partnership indentures) can be made by the operating partnership, the operating partnershipFerrellgas, L.P. to Ferrellgas Partners, Ferrellgas, L.P. must be in compliance with thesatisfy a consolidated leverage ratio and consolidated interestfixed charge coverage ratio covenantsrequirement or have unused capacity under a limited exception to the secured credit facility and accounts receivable securitization facility and in compliance with the covenants under the operating partnerships indentures.ratio requirement. If the operating partnershipFerrellgas, L.P. is unable to make restricted payments, Ferrellgas Partners will not have the ability to make semi-annual interest payments on its $357.0 million 8.625% unsecured senior notes due 2020 or distributions to Ferrellgas Partnersits common unitholders. If Ferrellgas Partners does notunitholders or make interest payments on its unsecured senior notes due 2020.
The restricted payments covenants require that, would constitute an event of default which would permit the acceleration of the obligations underlying the Ferrellgas Partners indenture, including all outstanding principal owed. The accelerated obligations would become immediately due and payable, which would in turn trigger cross acceleration of other debt. Iffor Ferrellgas, L.P.'s debt obligations are accelerated, Ferrellgas, L.P. may be unable to borrow sufficient funds to refinance debt in which case Ferrellgas Partners' unitholders and investors in our debt instruments could experience a partial or total loss of their investment.
F. Partners’ deficit
Partnership distributions paid
Ferrellgas, L.P. has paidrecognized the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Ferrellgas Partners |
| $ | — |
| $ | 10,013 |
| $ | 25,310 |
| $ | 45,036 |
|
General partner |
|
| — |
|
| 102 |
|
| 258 |
|
| 459 |
|
|
| $ | — |
| $ | 10,115 |
| $ | 25,568 |
| $ | 45,495 |
|
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Ferrellgas Partners | $ | 25,210 | $ | 17,662 | $ | 35,023 | $ | 83,807 | ||||||||
| General partner | 257 | 180 | 357 | 693 | ||||||||||||
| $ | 25,467 | $ | 17,842 | $ | 35,380 | $ | 84,500 | |||||||||
See additional discussions about transactions with related parties in Note IJ – Transactions with related parties.
38
Accumulated other comprehensive income (loss)(“AOCI”)
See Note HI – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the three and sixnine months ended
General partner’s commitment to maintain its capital account
Ferrellgas, L.P.’s partnership agreement allows the general partner to have an option to maintain its 1.0101% general partner interest concurrent with the issuance of other additional equity.
During the sixnine months ended January 31,April 30, 2019, the general partner made non-cash contributions of $0.1 million to Ferrellgas, L.P. to maintain its 1.0101% general partner interest.
During the nine months ended April 30, 2018, the general partner made non-cash contributions of $0.1 million to Ferrellgas, L.P. to maintain its 1.0101% general partner interest.
During the six months ended January 31, 2017, the general partner made cash contributions of $1.7 million and non-cash contributions of $0.1 million to G. Revenue from contracts with customers
Ferrellgas, L.P. adopted ASU 2014‑09 beginning on August 1, 2018 using the modified retrospective method. Ferrellgas, L.P. earns revenue from contracts with customers primarily through the distribution of propane, as well as through the sale of propane related equipment and supplies. Revenues from propane and other gas liquids sales are comprised of revenue earned from the delivery of propane to maintaintanks on customers’ premises, from the delivery of propane filled cylinders to customers, or from the sale of portable propane tanks to nationwide and local retailers and end use customers. Other revenues primarily include sales of appliances and other materials as well as other fees charged to customers. Upon adoption, Ferrellgas, L.P. applied ASU 2014‑09 only to contracts that were not completed.
Contracts with customers
Ferrellgas, L.P.’s contracts with customers are principally for the bulk delivery of propane to tanks, delivery of propane filled cylinders or the delivery of portable propane tanks to retailers. Ferrellgas, L.P. sells propane to a wide variety of customers, including residential, industrial/commercial, portable tank exchange, agricultural, wholesale and others. Ferrellgas, L.P.’s performance obligations in these contracts are generally limited to the delivery of propane, and therefore revenues from these contracts are earned at the time product is delivered or in the case of some of Ferrellgas, L.P.’s portable tank exchange retailers who have consignment agreements, at the time the tanks are sold to the end use customer. Payment is generally due within 30 days. Revenues from sales of propane are included in Propane and other gas liquids sales on the consolidated statements of operations.
Typically, Ferrellgas, L.P. bills customers upon delivery and payment is generally due within 30 days. With its 1.0101% general partner interest.residential customers, Ferrellgas, L.P offers customers the ability to spread their annual heating costs over a longer period, typically twelve months. Customers who opt to spread their heating costs over a longer period are referred to as “even-pay” customers.
Ferrellgas, L.P. charges other amounts to customers associated with the delivery of propane including hazardous materials fees and fuel surcharge fees. In some regions, Ferrellgas, L.P. also sells appliances and related parts and fittings as well as other retail propane related services. Ferrellgas, L.P. charges on an annual basis tank and equipment rental charges for customers that are using our equipment to store propane. Other revenues associated with deliveries of propane are earned at the time product is delivered. Revenues associated with sales of appliances and other materials or services are earned at the time of delivery or installation. Revenues associated with tank and equipment rentals are generally recognized on a straight-line basis over one year.
Accounting estimates related to recognition of revenue require that Ferrellgas, L.P. make estimates and assumptions about various factors including credits issued for completed sales, future returns and total consideration payable in instances where we have customer incentives payable to the customer.
39
Disaggregation of revenue
Ferrellgas, L.P. disaggregates revenues based upon the type of customer and on the type of revenue. The following table presents retail propane revenues, wholesale propane revenues and other revenues. Retail revenues result from sales to end use customers, wholesale revenues result from sales to or through resellers and all other revenues include sales of appliances and other materials, other fees charged to customers and equipment rental charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Retail - Sales to End Users |
| $ | 350,151 |
| $ | 330,320 |
| $ | 983,742 |
| $ | 931,495 |
|
Wholesale - Sales to Resellers |
|
| 99,311 |
|
| 97,689 |
|
| 308,646 |
|
| 324,863 |
|
Other Gas Sales |
|
| 10,094 |
|
| 23,293 |
|
| 52,246 |
|
| 89,941 |
|
Other |
|
| 20,069 |
|
| 41,913 |
|
| 60,677 |
|
| 118,691 |
|
Propane and related equipment revenues |
| $ | 479,625 |
| $ | 493,215 |
| $ | 1,405,311 |
| $ | 1,464,990 |
|
Contract assets and liabilities
Ferrellgas, L.P.’s performance obligations are generally limited to the delivery of propane for our retail and wholesale contracts. Ferrellgas, L.P.’s performance obligations with respect to sales of appliances and other materials and other revenues are limited to the delivery of the agreed upon good or service. Ferrellgas, L.P. does not have material performance obligations that are delivered over time, thus all of our revenue is recognized at the time the goods, including propane, are delivered or installed. Ferrellgas, L.P. offers “even pay” billing programs that can create customer deposits or advances, depending on whether Ferrellgas, L.P. has delivered more propane than the customer has paid for or whether the customer has paid for more propane than what has been delivered. Revenue is recognized from these customer deposits or advances to customers at the time product is delivered. The advance or deposit is considered to be a contract asset or liability. Additionally, from time to time, we have customers that pay in advance for goods or services, and such amounts result in contract liabilities.
Ferrellgas, L.P. incurs incremental commissions directly related to the acquisition or renewal of customer contracts. The commissions are calculated and paid based upon the number of gallons sold to the acquired or renewed customer. The total amount of commissions that we incur is not material and the commissions are expensed commensurate with the deliveries to which they relate; therefore, Ferrellgas, L.P. does not capitalize these costs.
The following table presents the opening and closing balances of our receivables, contract assets, and contract liabilities:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Accounts receivable |
| $ | 135,337 |
| $ | 119,818 |
Contract assets |
| $ | 25,312 |
| $ | 8,691 |
Contract liabilities |
|
|
|
|
|
|
Deferred revenue (1) |
| $ | 29,068 |
| $ | 29,933 |
(1) | Of the beginning balance of deferred revenue, $22.7 million was recognized as revenue during the nine months ended April 30, 2019. |
Remaining performance obligations
Ferrellgas, L.P.’s remaining performance obligations are generally limited to situations where its customers have remitted payment but have not yet received deliveries of propane. This most commonly occurs in Ferrellgas, L.P.’s even pay billing programs and Ferrellgas, L.P. expects that these balances will be recognized within a year or less as the customer takes delivery of propane.
40
G.H. Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas, L.P.’s financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
|
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|
| Asset (Liability) | ||||||||||
|
| Quoted Prices in Active |
|
|
|
|
|
|
|
|
| |
|
| Markets for Identical |
| Significant Other |
|
|
|
|
|
| ||
|
| Assets and Liabilities |
| Observable Inputs |
| Unobservable Inputs |
|
|
| |||
|
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | ||||
April 30, 2019: |
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|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
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|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 5,489 |
| $ | — |
| $ | 5,489 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (6,502) |
| $ | — |
| $ | (6,502) |
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 22,470 |
| $ | — |
| $ | 22,470 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (1,910) |
| $ | — |
| $ | (1,910) |
| Asset (Liability) | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | Total | |||||||||||||
| January 31, 2018: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Commodity derivatives | $ | — | $ | 25,725 | $ | — | $ | 25,725 | ||||||||
| Liabilities: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Interest rate swap agreements | $ | — | $ | (2,423 | ) | $ | — | $ | (2,423 | ) | ||||||
| Commodity derivatives | $ | — | $ | (1,417 | ) | $ | — | $ | (1,417 | ) | ||||||
| July 31, 2017: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Interest rate swap agreements | $ | — | $ | 583 | $ | — | $ | 583 | ||||||||
| Commodity derivatives | $ | — | $ | 16,212 | $ | — | $ | 16,212 | ||||||||
| Liabilities: | ||||||||||||||||
| Derivative financial instruments: | ||||||||||||||||
| Interest rate swap agreements | $ | — | $ | (707 | ) | $ | — | $ | (707 | ) | ||||||
| Commodity derivatives | $ | — | $ | (1,258 | ) | $ | — | $ | (1,258 | ) | ||||||
Methodology
The fair values of Ferrellgas, L.P.’s non-exchange traded commodity derivative contracts are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. The fair values of interest rate swap contracts are based upon third-party quotes or indicative values based on recent market transactions.
Other financial instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. The estimated fair value of various notesnote receivable financial instruments classified in "Other assets, net" on the condensed consolidated balance sheets, are approximately $32.1$16.0 million, or $4.3$2.8 million less than their carrying amount as of January 31, 2018.April 30, 2019. The estimated fair values of these notes receivable were calculated using a discounted cash flow method which relied on significant unobservable inputs. At January 31, 2018April 30, 2019 and July 31, 2017,2018, the estimated fair value of Ferrellgas, L.P.’s long-term debt instruments was $1,410.6$1,585.4 million and $1,645.3$1,591.5 million, respectively. Ferrellgas, L.P. estimates the fair value of long-term debt based on quoted market prices. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
Ferrellgas, L.P. has other financial instruments such as trade accounts receivable which could expose it to concentrations of credit risk. The credit risk from trade accounts receivable is limited because of a large customer base which extends across many different U.S. markets.
H.I. Derivative instruments and hedging activities
Ferrellgas, L.P. is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas, L.P. utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. Prior to the sale of Bridger Energy, LLC in January 2018, all other commodity derivative instruments were neither qualified nor were designated as cash flow hedges,hedges; therefore, changes in
41
their fair value were recorded currently in earnings. Ferrellgas, L.P. also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
Derivative instruments and hedging activity
During the
The following tables provide a summary of the fair value of derivatives in Ferrellgas, L.P.’s condensed consolidated balance sheets as of January 31, 2018April 30, 2019 and July 31, 2017: 2018:
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|
|
|
|
|
|
|
|
|
|
| April 30, 2019 | ||||||||
|
| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 5,049 |
| Other current liabilities |
| $ | 5,726 |
Commodity derivatives-propane |
| Other assets, net |
|
| 440 |
| Other liabilities |
|
| 776 |
|
| Total |
| $ | 5,489 |
| Total |
| $ | 6,502 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2018 | ||||||||
|
| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 17,123 |
| Other current liabilities |
| $ | 1,832 |
Commodity derivatives-propane |
| Other assets, net |
|
| 5,347 |
| Other liabilities |
|
| 78 |
|
| Total |
| $ | 22,470 |
| Total |
| $ | 1,910 |
| January 31, 2018 | ||||||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||
| Derivative Instrument | Location | Fair value | Location | Fair value | ||||||||
| Derivatives designated as hedging instruments | ||||||||||||
| Commodity derivatives-propane | Prepaid expenses and other current assets | $ | 18,188 | Other current liabilities | $ | 1,417 | ||||||
| Commodity derivatives-propane | Other assets, net | 7,537 | Other liabilities | — | ||||||||
| Interest rate swap agreements | Prepaid expenses and other current assets | — | Other current liabilities | 319 | ||||||||
| Interest rate swap agreements | Other assets, net | — | Other liabilities | 2,104 | ||||||||
| Total | $ | 25,725 | Total | $ | 3,840 | |||||||
| July 31, 2017 | ||||||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||
| Derivative Instrument | Location | Fair value | Location | Fair value | ||||||||
| Derivatives designated as hedging instruments | ||||||||||||
| Commodity derivatives-propane | Prepaid expenses and other current assets | $ | 11,061 | Other current liabilities | $ | 415 | ||||||
| Commodity derivatives-propane | Other assets, net | 4,413 | Other liabilities | 15 | ||||||||
| Interest rate swap agreements | Prepaid expenses and other current assets | 583 | Other current liabilities | 595 | ||||||||
| Interest rate swap agreements | Other assets, net | — | Other liabilities | 112 | ||||||||
| Derivatives not designated as hedging instruments | ||||||||||||
| Commodity derivatives-crude oil | Prepaid expenses and other current assets | 738 | Other current liabilities | 828 | ||||||||
| Total | $ | 16,795 | Total | $ | 1,965 | |||||||
Ferrellgas, L.P.'s’s exchange traded commodity derivative contracts require cash margin deposit as collateral for contracts that are in a negative mark-to-market position. These cash margin deposits will be returned if mark-to-market conditions improve or will be applied against cash settlement when the contracts are settled. Liabilities represent cash margin deposits received by Ferrellgas, L.P. for contracts that are in a positive mark-to-market position. The following tables provide a summary of cash margin balances as of
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|
|
| April 30, 2019 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 6,493 |
| Other current liabilities |
| $ | 1,339 |
|
| Other assets, net |
|
| 1,728 |
| Other liabilities |
|
| — |
|
|
|
| $ | 8,221 |
|
|
| $ | 1,339 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2018 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 2,851 |
| Other current liabilities |
| $ | 12,308 |
|
| Other assets, net |
|
| 927 |
| Other liabilities |
|
| 4,235 |
|
|
|
| $ | 3,778 |
|
|
| $ | 16,543 |
42
| January 31, 2018 | ||||||||||||
| Assets | Liabilities | |||||||||||
| Description | Location | Amount | Location | Amount | ||||||||
| Margin Balances | Prepaid expenses and other current assets | $ | 3,018 | Other current liabilities | $ | 12,201 | ||||||
| Other assets, net | 1,404 | Other liabilities | 5,216 | |||||||||
| $ | 4,422 | $ | 17,417 | |||||||||
| July 31, 2017 | ||||||||||||
| Assets | Liabilities | |||||||||||
| Description | Location | Amount | Location | Amount | ||||||||
| Margin Balances | Prepaid expenses and other current assets | $ | 1,778 | Other current liabilities | $ | 7,729 | ||||||
| Other assets, net | 1,631 | Other liabilities | 3,073 | |||||||||
| $ | 3,409 | $ | 10,802 | |||||||||
The following tablestable provides a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of operations for the three and sixnine months ended
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
| Amount of Interest Expense | ||||||||
|
| Location of Amounts |
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Recognized on |
| Derivative |
| (Related Hedged Item) | ||||||||
Derivative Instrument |
| Derivative |
| For the three months ended April 30, |
| For the three months ended April 30, | ||||||||
|
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 40 |
| $ | — |
| $ | (2,275) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of Interest Expense | ||||||||
|
| Location of Gain |
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Recognized on |
| Derivative |
| (Related Hedged Item) | ||||||||
Derivative Instrument |
| Derivative |
| For the nine months ended April 30, |
| For the nine months ended April 30, | ||||||||
|
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 266 |
| $ | — |
| $ | (6,825) |
| Amount of Gain Recognized on Derivative | Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item) | |||||||||||||||||
| Derivative Instrument | Location of Amounts Recognized on Derivative | For the three months ended January 31, | For the three months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Interest rate swap agreements | Interest expense | $ | 88 | $ | 328 | $ | (2,275 | ) | $ | (2,275 | ) | |||||||
| Amount of Gain Recognized on Derivative | Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item) | |||||||||||||||||
| Derivative Instrument | Location of Amounts Recognized on Derivative | For the six months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Interest rate swap agreements | Interest expense | $ | 226 | $ | 748 | $ | (4,550 | ) | $ | (4,550 | ) | |||||||
The following tables provide a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of comprehensive income (loss) for the three and sixnine months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, 2019 | |||||||||
|
|
|
|
|
|
| Amount of Gain (Loss) | ||||
|
|
|
|
| Location of Gain (Loss) |
| Reclassified from | ||||
|
| Amount of Gain (Loss) |
| Reclassified from AOCI |
| AOCI into Income | |||||
Derivative Instrument |
| Recognized in AOCI |
| into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | 1,870 |
| Cost of product sold- propane and other gas liquids sales |
| $ | (6,416) |
| $ | — |
|
| $ | 1,870 |
|
|
| $ | (6,416) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, 2018 | |||||||||
|
|
|
|
|
|
| Amount of Gain (Loss) | ||||
|
|
|
|
| Location of Gain (Loss) |
| Reclassified from | ||||
|
| Amount of Gain (Loss) |
| Reclassified from AOCI |
| AOCI into Income | |||||
Derivative Instrument |
| Recognized in AOCI |
| into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | (169) |
| Cost of sales-propane and other gas liquids sales |
| $ | 6,628 |
| $ | — |
Interest rate swap agreements |
|
| 10 |
| Interest expense |
|
| (60) |
|
| — |
|
| $ | (159) |
|
|
| $ | 6,568 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2019 | |||||||||
|
|
|
|
|
|
| Amount of Gain (Loss) | ||||
|
|
|
|
| Location of Gain (Loss) |
| Reclassified from | ||||
|
| Amount of Gain (Loss) |
| Reclassified from AOCI |
| AOCI into Income | |||||
Derivative Instrument |
| Recognized in AOCI |
| into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | (27,364) |
| Cost of sales-propane and other gas liquids sales |
| $ | (5,790) |
| $ | — |
|
| $ | (27,364) |
|
|
| $ | (5,790) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2018 | |||||||||
|
|
|
|
|
|
| Amount of Gain (Loss) | ||||
|
|
|
|
| Location of Gain (Loss) |
| Reclassified from | ||||
|
| Amount of Gain (Loss) |
| Reclassified from AOCI |
| AOCI into Income | |||||
Derivative Instrument |
| Recognized in AOCI |
| into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | 23,114 |
| Cost of product sold- propane and other gas liquids sales |
| $ | 20,646 |
| $ | — |
Interest rate swap agreements |
|
| 248 |
| Interest expense |
|
| (386) |
|
| — |
|
| $ | 23,362 |
|
|
| $ | 20,260 |
| $ | — |
43
| For the three months ended January 31, 2018 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 960 | Cost of sales-propane and other gas liquids sales | $ | 9,886 | $ | — | |||||||
| Interest rate swap agreements | 112 | Interest expense | (143 | ) | — | |||||||||
| $ | 1,072 | $ | 9,743 | $ | — | |||||||||
| For the three months ended January 31, 2017 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 14,699 | Cost of sales-propane and other gas liquids sales | $ | 73 | $ | — | |||||||
| Interest rate swap agreements | 563 | Interest expense | (587 | ) | — | |||||||||
| $ | 15,262 | $ | (514 | ) | $ | — | ||||||||
| For the six months ended January 31, 2018 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 23,283 | Cost of sales-propane and other gas liquids sales | $ | 14,018 | $ | — | |||||||
| Interest rate swap agreements | 238 | Interest expense | (326 | ) | — | |||||||||
| $ | 23,521 | $ | 13,692 | $ | — | |||||||||
| For the six months ended January 31, 2017 | ||||||||||||||
| Derivative Instrument | Amount of Gain (Loss) Recognized in AOCI | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||
| Effective portion | Ineffective portion | |||||||||||||
| Commodity derivatives | $ | 19,572 | Cost of sales-propane and other gas liquids sales | $ | (3,523 | ) | $ | — | ||||||
| Interest rate swap agreements | 828 | Interest expense | (1,229 | ) | — | |||||||||
| $ | 20,400 | $ | (4,752 | ) | $ | — | ||||||||
The following tables providetable provides a summary of the effect on Ferrellgas, L.P.'s’s condensed consolidated statements of operations for the three and sixnine months ended January 31,April 30, 2019 and 2018 and 2017 due to the change in fair value of derivatives not designated as hedging instruments:
For the nine months ended April 30, 2018 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
DerivativesNotDesignatedasHedgingInstruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | (3,470) | Cost of sales - midstream operations | ||
| For the three months ended January 31, 2018 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (2,080 | ) | Cost of sales - midstream operations | ||
| For the three months ended January 31, 2017 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (1,007 | ) | Cost of sales - midstream operations | ||
| Commodity derivatives - vehicle fuel | $ | 489 | Operating expense | |||
| For the six months ended January 31, 2018 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (3,470 | ) | Cost of sales - midstream operations | ||
| For the six months ended January 31, 2017 | ||||||
| Derivatives Not Designated as Hedging Instruments | Amount of Gain (Loss) Recognized in Income | Location of Gain (Loss) Recognized in Income | ||||
| Commodity derivatives - crude oil | $ | (2,248 | ) | Cost of sales - midstream operations | ||
| Commodity derivatives - vehicle fuel | $ | 1,516 | Operating expense | |||
The changes in derivatives included in AOCI for the sixnine months ended January 31,April 30, 2019 and 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
Gains and losses on derivatives included in AOCI |
| 2019 |
| 2018 | ||
Beginning balance |
| $ | 20,560 |
| $ | 14,648 |
Change in value of risk management commodity derivatives |
|
| (27,364) |
|
| 23,114 |
Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net |
|
| 5,790 |
|
| (20,646) |
Change in value of risk management interest rate derivatives |
|
| — |
|
| 248 |
Reclassification of losses on interest rate hedges to interest expense |
|
| — |
|
| 386 |
Ending balance |
| $ | (1,014) |
| $ | 17,750 |
| For the six months ended January 31, | ||||||||
| Gains and losses on derivatives included in AOCI | 2018 | 2017 | ||||||
| Beginning balance | $ | 14,648 | $ | (9,815 | ) | |||
| Change in value of risk management commodity derivatives | 23,283 | 19,572 | ||||||
| Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net | (14,018 | ) | 3,523 | |||||
| Change in value of risk management interest rate derivatives | 238 | 828 | ||||||
| Reclassification of losses on interest rate hedges to interest expense | 326 | 1,229 | ||||||
| Ending balance | $ | 24,477 | $ | 15,337 | ||||
Ferrellgas, L.P. expects to reclassify net gainslosses related to the risk management commodity derivatives of approximately $16.8$0.7 million to earnings during the next 12 months. These net gainslosses are expected to be offset by decreasedincreased margins on propane sales commitments Ferrellgas, L.P. has with its customers that qualify for the normal purchase normal sales exception.
During the sixnine months ended January 31,April 30, 2019 and 2018, and 2017, Ferrellgas, L.P. had no reclassifications to operations resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
As of January 31, 2018,April 30, 2019, Ferrellgas, L.P. had financial derivative contracts covering 2.63.3 million barrelsgallons of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
Derivative financial instruments credit risk
Ferrellgas, L.P. is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas, L.P.’s counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas, L.P. maintains credit policies with regard to its counterparties that it believes reduces its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas, L.P. in the forms of letters of credit, parent guarantees or cash. Ferrellgas, L.P. has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at January 31, 2018,April 30, 2019, the maximum amount of loss due to credit risk that Ferrellgas, L.P. would incur is $0.7 million, which is based upon the gross fair values of the derivative financial instruments, Ferrellgas, L.P. would incur is $7.5 million.
From time to time Ferrellgas, L.P. enters into derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas, L.P.’s debt rating. There were no open derivative contracts with credit-risk-related contingent features as of January 31, 2018.
I.J. Transactions with related parties
Ferrellgas, L.P. has no employees and is managed and controlled by its general partner. Pursuant to Ferrellgas, L.P.’s partnership agreement, the general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of Ferrellgas, L.P. and all other necessary or appropriate expenses allocable to Ferrellgas, L.P. or otherwise reasonably incurred by the general partner in connection with operating Ferrellgas, L.P.’s
44
business. These costs primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas, L.P.’s behalf and are reported in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 64,030 |
| $ | 58,842 |
| $ | 193,258 |
| $ | 181,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
| $ | 5,872 |
| $ | 5,707 |
| $ | 19,196 |
| $ | 21,637 |
|
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating expense | $ | 65,291 | $ | 61,492 | $ | 122,642 | $ | 117,206 | ||||||||
| General and administrative expense | $ | 8,422 | $ | 8,217 | $ | 15,930 | $ | 16,800 | ||||||||
See additional discussions about transactions with the general partner and related parties in Note F – Partners’ deficit.
J.K. Contingencies and commitments
Litigation
Ferrellgas, L.P.’s operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane and, prior to the sales of midstream operations in fiscal 2018, crude oil. As a result, at any given time, Ferrellgas, L.P. can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, Ferrellgas, L.P. is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are reasonably expected to have a material adverse effect on the consolidated financial condition, results of operations and cash flows of Ferrellgas, L.P.
Ferrellgas, L.P. has been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits, which were consolidated in the Western District of Missouri on October 16, 2014, allege that Ferrellgas, L.P. and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Federal Court for the Western District of Missouri initially dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending.resulted in the court of appeals affirming the dismissal of the federal claims and remanding the case to the district court to decide whether to exercise supplemental jurisdiction over the remaining state law claims. Ferrellgas, L.P. believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas, L.P. has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas, L.P. and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On April 24, 2019 the United States Court of Appeals for the Second Circuit affirmed the judgment of the Southern District Court dismissing the class action lawsuits with prejudice. At this time the derivative lawsuits remain stayed by agreement. Ferrellgas, L.P. believes that it has defenses and will vigorously defend these cases. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
Ferrellgas, L.P. and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed in or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone
45
facility used to offload crude from rail onto barges. Eddystone alleges that Ferrellgas, L.P. transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas.Ferrellgas, L.P. Ferrellgas, L.P. believes that Ferrellgas, L.P. and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas, L.P. believes that the amount of such damage claims, if ultimately owed to Eddystone, could be material to Ferrellgas, L.P. Ferrellgas, L.P. intends to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, Ferrellgas, L.P. filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. TheOn June 25, 2018, Ferrellgas, L.P. entered into an agreement with the Third-Party Defendants have filed motions to dismisswhich, among other things, resulted in a dismissal of the third-party complaint for alleged lack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgas, L.P.claims against the Third-Party Defendants from the lawsuit. The lawsuit is vigorously opposing these motions.
K.L. Segment reporting
As of April 30, 2019, Ferrellgas, L.P. has two primary operations that result in twoone reportable operating segments: Propanesegment: propane operations and related equipment salessales. All remaining activities are included in Corporate and Midstream operations. During the quarter ended January 31, 2018, Ferrellgas, L.P. recorded a goodwill impairment of $10.0 million related to a decline in future expected cash flows of an immaterial reporting unit of our Propane operations and related equipment sales segment.
Following is a summary of segment information for the three and sixnine months ended January 31,April 30, 2019 and 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 479,625 |
| $ | — |
| $ | 479,625 |
Direct costs (1) |
|
| 380,637 |
|
| 10,423 |
|
| 391,060 |
Adjusted EBITDA |
| $ | 98,988 |
| $ | (10,423) |
| $ | 88,565 |
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 493,215 |
| $ | 22,595 |
| $ | 515,810 |
Direct costs (1) |
|
| 397,568 |
|
| 31,188 |
|
| 428,756 |
Adjusted EBITDA |
| $ | 95,647 |
| $ | (8,593) |
| $ | 87,054 |
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 1,405,311 |
| $ | — |
| $ | 1,405,311 |
Direct costs (1) |
|
| 1,147,764 |
|
| 31,480 |
|
| 1,179,244 |
Adjusted EBITDA |
| $ | 257,547 |
| $ | (31,480) |
| $ | 226,067 |
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 1,464,990 |
| $ | 260,631 |
| $ | 1,725,621 |
Direct costs (1) |
|
| 1,208,283 |
|
| 283,440 |
|
| 1,491,723 |
Adjusted EBITDA |
| $ | 256,707 |
| $ | (22,809) |
| $ | 233,898 |
(1) | Direct costs are comprised of "cost of sales-propane and other gas liquids sales", "cost of sales- midstream operations", "cost of sales-other", "operating expense", "general and administrative expense", and "equipment lease expense" less "severance costs", "legal fees and settlements", "unrealized (non-cash) losses on changes in fair value of derivatives not designated as hedging instruments" and "multi-employer pension plan withdrawal settlement". |
46
| Three months ended January 31, 2018 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 637,880 | $ | 117,276 | $ | — | $ | 755,156 | ||||||||
| Direct costs (1) | 507,386 | 114,929 | 12,213 | 634,528 | ||||||||||||
| Adjusted EBITDA | $ | 130,494 | $ | 2,347 | $ | (12,213 | ) | $ | 120,628 | |||||||
| Three months ended January 31, 2017 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 482,463 | $ | 96,787 | $ | — | $ | 579,250 | ||||||||
| Direct costs (1) | 370,175 | 93,718 | 10,326 | 474,219 | ||||||||||||
| Adjusted EBITDA | $ | 112,288 | $ | 3,069 | $ | (10,326 | ) | $ | 105,031 | |||||||
| Six months ended January 31, 2018 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 971,775 | $ | 238,036 | $ | — | $ | 1,209,811 | ||||||||
| Direct costs (1) | 810,715 | 228,830 | 23,422 | 1,062,967 | ||||||||||||
| Adjusted EBITDA | $ | 161,060 | $ | 9,206 | $ | (23,422 | ) | $ | 146,844 | |||||||
| Six months ended January 31, 2017 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Segment revenues | $ | 753,961 | $ | 204,831 | $ | — | $ | 958,792 | ||||||||
| Direct costs (1) | 607,189 | 196,490 | 21,063 | 824,742 | ||||||||||||
| Adjusted EBITDA | $ | 146,772 | $ | 8,341 | $ | (21,063 | ) | $ | 134,050 | |||||||
Following is a reconciliation of net earnings (loss) attributable to Ferrellgas, L.P.'s to the total segment performance measure to condensed consolidated net earnings (loss):measures of EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, |
| Nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
| $ | 29,554 |
| $ | 19,840 |
| $ | 33,357 |
| $ | (13,012) |
|
Income tax expense |
|
| 100 |
|
| 57 |
|
| 254 |
|
| 261 |
|
Interest expense |
|
| 35,395 |
|
| 31,739 |
|
| 106,740 |
|
| 97,993 |
|
Depreciation and amortization expense |
|
| 20,617 |
|
| 25,348 |
|
| 59,214 |
|
| 76,565 |
|
EBITDA |
|
| 85,666 |
|
| 76,984 |
|
| 199,565 |
|
| 161,807 |
|
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| 4,688 |
|
| 10,731 |
|
Asset impairments |
|
| — |
|
| — |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 1,683 |
|
| 6,270 |
|
| 8,403 |
|
| 46,414 |
|
Other income, net |
|
| (251) |
|
| (227) |
|
| (356) |
|
| (1,422) |
|
Severance costs |
|
| — |
|
| — |
|
| 1,600 |
|
| 1,663 |
|
Legal fees and settlements |
|
| 1,471 |
|
| 1,289 |
|
| 10,643 |
|
| 3,407 |
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| — |
|
| — |
|
| 1,293 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| — |
|
| 1,524 |
|
| — |
|
Adjusted EBITDA |
| $ | 88,565 |
| $ | 87,054 |
| $ | 226,067 |
| $ | 233,898 |
|
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net earnings (loss) | $ | 6,847 | $ | 42,600 | $ | (32,852 | ) | $ | 3,160 | |||||||
| Income tax expense (benefit) | (167 | ) | 588 | 204 | (3 | ) | ||||||||||
| Interest expense | 34,058 | 32,748 | 66,254 | 64,146 | ||||||||||||
| Depreciation and amortization expense | 25,485 | 25,607 | 51,217 | 51,809 | ||||||||||||
| EBITDA | 66,223 | 101,543 | 84,823 | 119,112 | ||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 7,993 | 6,699 | ||||||||||||
| Non-cash stock-based compensation charge | — | 1,417 | — | 3,298 | ||||||||||||
| Asset impairments | 10,005 | — | 10,005 | — | ||||||||||||
| Loss on asset sales and disposals | 39,249 | 45 | 40,144 | 6,468 | ||||||||||||
| Other income, net | (684 | ) | (763 | ) | (1,195 | ) | (1,271 | ) | ||||||||
| Severance costs | — | 490 | 1,663 | 1,959 | ||||||||||||
| Professional fees | 2,118 | — | 2,118 | — | ||||||||||||
| Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | (314 | ) | (646 | ) | 1,293 | (2,215 | ) | |||||||||
| Adjusted EBITDA | $ | 120,628 | $ | 105,031 | $ | 146,844 | $ | 134,050 | ||||||||
Following are total assets by segment:
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
Assets |
|
|
|
|
|
|
Propane operations and related equipment sales |
| $ | 1,257,214 |
| $ | 1,196,084 |
Corporate and other |
|
| 72,647 |
|
| 167,162 |
Total consolidated assets |
| $ | 1,329,861 |
| $ | 1,363,246 |
| Assets | January 31, 2018 | July 31, 2017 | ||||||
| Propane operations and related equipment sales | $ | 1,361,856 | $ | 1,194,905 | ||||
| Midstream operations | 309,952 | 399,356 | ||||||
| Corporate | 15,242 | 15,687 | ||||||
| Total consolidated assets | $ | 1,687,050 | $ | 1,609,948 | ||||
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2019 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 43,975 |
| $ | 672 |
| $ | 44,647 |
Growth |
|
| 44,654 |
|
| — |
|
| 44,654 |
Total |
| $ | 88,629 |
| $ | 672 |
| $ | 89,301 |
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended April 30, 2018 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 17,556 |
| $ | 1,702 |
| $ | 19,258 |
Growth |
|
| 34,784 |
|
| 1,265 |
|
| 36,049 |
Total |
| $ | 52,340 |
| $ | 2,967 |
| $ | 55,307 |
| Six months ended January 31, 2018 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Capital expenditures: | ||||||||||||||||
| Maintenance | $ | 12,016 | $ | 182 | $ | 1,245 | $ | 13,443 | ||||||||
| Growth | 18,311 | 1,013 | — | 19,324 | ||||||||||||
| Total | $ | 30,327 | $ | 1,195 | $ | 1,245 | $ | 32,767 | ||||||||
| Six months ended January 31, 2017 | ||||||||||||||||
| Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
| Capital expenditures: | ||||||||||||||||
| Maintenance | $ | 5,551 | $ | 204 | $ | 1,484 | $ | 7,239 | ||||||||
| Growth | 9,857 | — | — | 9,857 | ||||||||||||
| Total | $ | 15,408 | $ | 204 | $ | 1,484 | $ | 17,096 | ||||||||
L.M. Guarantor financial information
The $500.0 million aggregate principal amount of 6.75% senior notes due 2023 co-issued by Ferrellgas, L.P. and Ferrellgas Finance Corp. are fully and unconditionally and jointly and severally guaranteed by all of Ferrellgas, L.P.’s 100% owned subsidiaries except: (i) Ferrellgas Finance Corp; (ii) certain special purposes subsidiaries formed for use in connection with our accounts receivable securitization; and (iii) foreign subsidiaries. Guarantees of these senior notes will be released under certain circumstances, including (i) in connection with any sale or other disposition of (a) all or substantially all of the assets of a guarantor or (b) all of the capital stock of such guarantor (including by way of merger or consolidation), in each case, to a person that is not Ferrellgas, L.P. or a restricted subsidiary of Ferrellgas, L.P., (ii) if
47
Ferrellgas, L.P. designates any restricted subsidiary that is a guarantor as an unrestricted subsidiary, (iii) upon defeasance or discharge of the notes, (iv) upon the liquidation or dissolution of such guarantor, or (v) at such time as such guarantor ceases to guarantee any other indebtedness of either of the issuers and any other guarantor.
The guarantor financial information discloses in separate columns the financial position, results of operations and the cash flows of Ferrellgas, L.P. (Parent), Ferrellgas Finance Corp. (co-issuer), Ferrellgas, L.P.’s guarantor subsidiaries on a combined basis, and Ferrellgas, L.P.’s non-guarantor subsidiaries on a combined basis. The dates and the periods presented in the guarantor financial information are consistent with the periods presented in Ferrellgas, L.P.’s condensed consolidated financial statements.
48
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| As of January 31, 2018 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Current assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 13,954 | $ | 1 | $ | 216 | $ | — | $ | — | $ | 14,171 | |||||||||||
| Accounts and notes receivable, net | (3,004 | ) | — | 23,832 | 235,150 | — | 255,978 | ||||||||||||||||
| Intercompany receivables | 37,988 | — | — | — | (37,988 | ) | — | ||||||||||||||||
| Inventories | 95,097 | — | 14,995 | — | — | 110,092 | |||||||||||||||||
| Assets held for sale | — | — | 52,200 | — | — | 52,200 | |||||||||||||||||
| Prepaid expenses and other current assets | 33,630 | — | 7,762 | 1 | — | 41,393 | |||||||||||||||||
| Total current assets | 177,665 | 1 | 99,005 | 235,151 | (37,988 | ) | 473,834 | ||||||||||||||||
| Property, plant and equipment, net | 547,441 | — | 98,886 | — | — | 646,327 | |||||||||||||||||
| Goodwill, net | 246,098 | — | — | — | — | 246,098 | |||||||||||||||||
| Intangible assets, net | 127,316 | — | 115,763 | — | — | 243,079 | |||||||||||||||||
| Intercompany receivables | 450,000 | — | — | — | (450,000 | ) | — | ||||||||||||||||
| Investments in consolidated subsidiaries | (80,685 | ) | — | — | — | 80,685 | — | ||||||||||||||||
| Other assets, net | 39,847 | — | 37,432 | 433 | — | 77,712 | |||||||||||||||||
| Total assets | $ | 1,507,682 | $ | 1 | $ | 351,086 | $ | 235,584 | $ | (407,303 | ) | $ | 1,687,050 | ||||||||||
| LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) | |||||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||||
| Accounts payable | $ | 78,054 | $ | — | $ | 3,926 | $ | 92 | $ | — | $ | 82,072 | |||||||||||
| Short-term borrowings | 261,200 | — | — | — | — | 261,200 | |||||||||||||||||
| Collateralized note payable | — | — | — | 166,000 | — | 166,000 | |||||||||||||||||
| Intercompany payables | — | — | 44,259 | (6,271 | ) | (37,988 | ) | — | |||||||||||||||
| Other current liabilities | 132,047 | — | 4,074 | 470 | — | 136,591 | |||||||||||||||||
| Total current liabilities | 471,301 | — | 52,259 | 160,291 | (37,988 | ) | 645,863 | ||||||||||||||||
| Long-term debt | 1,462,936 | — | 450,037 | — | (450,000 | ) | 1,462,973 | ||||||||||||||||
| Other liabilities | 30,653 | — | 4,769 | — | — | 35,422 | |||||||||||||||||
| Contingencies and commitments | |||||||||||||||||||||||
| Partners' capital (deficit): | |||||||||||||||||||||||
| Partners' equity | (481,801 | ) | 1 | (155,979 | ) | 75,293 | 80,685 | (481,801 | ) | ||||||||||||||
| Accumulated other comprehensive income | 24,593 | — | — | — | — | 24,593 | |||||||||||||||||
| Total partners' capital (deficit) | (457,208 | ) | 1 | (155,979 | ) | 75,293 | 80,685 | (457,208 | ) | ||||||||||||||
| Total liabilities and partners' capital (deficit) | $ | 1,507,682 | $ | 1 | $ | 351,086 | $ | 235,584 | $ | (407,303 | ) | $ | 1,687,050 | ||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of April 30, 2019 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 45,364 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 45,365 |
Accounts and notes receivable, net |
|
| (9,208) |
|
| — |
|
| 150 |
|
| 166,287 |
|
| — |
|
| 157,229 |
Intercompany receivables |
|
| 49,313 |
|
| — |
|
| — |
|
| — |
|
| (49,313) |
|
| — |
Inventories |
|
| 78,449 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 78,449 |
Prepaid expenses and other current assets |
|
| 25,427 |
|
| — |
|
| (1) |
|
| 1 |
|
| — |
|
| 25,427 |
Total current assets |
|
| 189,345 |
|
| 1 |
|
| 149 |
|
| 166,288 |
|
| (49,313) |
|
| 306,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 603,924 |
|
| — |
|
| (1) |
|
| — |
|
| — |
|
| 603,923 |
Goodwill, net |
|
| 247,508 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 247,508 |
Intangible assets, net |
|
| 109,634 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 109,634 |
Investments in consolidated subsidiaries |
|
| 52,776 |
|
| — |
|
| — |
|
| — |
|
| (52,776) |
|
| — |
Other assets, net |
|
| 58,557 |
|
| — |
|
| 2,875 |
|
| 894 |
|
| — |
|
| 62,326 |
Total assets |
| $ | 1,261,744 |
| $ | 1 |
| $ | 3,023 |
| $ | 167,182 |
| $ | (102,089) |
| $ | 1,329,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 41,296 |
| $ | — |
| $ | — |
| $ | 112 |
| $ | — |
| $ | 41,408 |
Collateralized note payable |
|
| — |
|
| — |
|
| — |
|
| 62,000 |
|
| — |
|
| 62,000 |
Intercompany payables |
|
| — |
|
| — |
|
| (192) |
|
| 49,505 |
|
| (49,313) |
|
| — |
Other current liabilities |
|
| 142,937 |
|
| — |
|
| 267 |
|
| 5,671 |
|
| — |
|
| 148,875 |
Total current liabilities |
|
| 184,233 |
|
| — |
|
| 75 |
|
| 117,288 |
|
| (49,313) |
|
| 252,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 1,730,874 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,730,874 |
Other liabilities |
|
| 35,812 |
|
| — |
|
| 67 |
|
| — |
|
| — |
|
| 35,879 |
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity |
|
| (688,334) |
|
| 1 |
|
| 2,881 |
|
| 49,894 |
|
| (52,776) |
|
| (688,334) |
Accumulated other comprehensive loss |
|
| (841) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (841) |
Total partners' capital (deficit) |
|
| (689,175) |
|
| 1 |
|
| 2,881 |
|
| 49,894 |
|
| (52,776) |
|
| (689,175) |
Total liabilities and partners' capital (deficit) |
| $ | 1,261,744 |
| $ | 1 |
| $ | 3,023 |
| $ | 167,182 |
| $ | (102,089) |
| $ | 1,329,861 |
49
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| As of July 31, 2017 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Current assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 5,327 | $ | 1 | $ | 373 | $ | — | $ | — | $ | 5,701 | |||||||||||
| Accounts and notes receivable, net | (3,132 | ) | — | 58,618 | 109,598 | — | 165,084 | ||||||||||||||||
| Intercompany receivables | 39,877 | — | — | — | (39,877 | ) | — | ||||||||||||||||
| Inventories | 78,963 | — | 13,589 | — | — | 92,552 | |||||||||||||||||
| Prepaid expenses and other current assets | 26,106 | — | 7,314 | 6 | — | 33,426 | |||||||||||||||||
| Total current assets | 147,141 | 1 | 79,894 | 109,604 | (39,877 | ) | 296,763 | ||||||||||||||||
| Property, plant and equipment, net | 537,582 | — | 194,341 | — | — | 731,923 | |||||||||||||||||
| Goodwill, net | 246,098 | — | 10,005 | — | — | 256,103 | |||||||||||||||||
| Intangible assets, net | 128,209 | — | 122,893 | — | — | 251,102 | |||||||||||||||||
| Intercompany receivables | 450,000 | — | — | — | (450,000 | ) | — | ||||||||||||||||
| Investments in consolidated subsidiaries | (53,915 | ) | — | — | — | 53,915 | — | ||||||||||||||||
| Other assets, net | 35,862 | — | 37,618 | 577 | — | 74,057 | |||||||||||||||||
| Total assets | $ | 1,490,977 | $ | 1 | $ | 444,751 | $ | 110,181 | $ | (435,962 | ) | $ | 1,609,948 | ||||||||||
| LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) | |||||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||||
| Accounts payable | $ | 44,026 | $ | — | $ | 41,345 | $ | 190 | $ | — | $ | 85,561 | |||||||||||
| Short-term borrowings | 59,781 | — | — | — | — | 59,781 | |||||||||||||||||
| Collateralized note payable | — | — | — | 69,000 | — | 69,000 | |||||||||||||||||
| Intercompany payables | — | — | 41,645 | (1,768 | ) | (39,877 | ) | — | |||||||||||||||
| Other current liabilities | 118,039 | — | 3,776 | 201 | — | 122,016 | |||||||||||||||||
| Total current liabilities | 221,846 | — | 86,766 | 67,623 | (39,877 | ) | 336,358 | ||||||||||||||||
| Long-term debt | 1,649,139 | — | 450,131 | — | (450,000 | ) | 1,649,270 | ||||||||||||||||
| Other liabilities | 26,790 | — | 4,300 | 28 | — | 31,118 | |||||||||||||||||
| Contingencies and commitments | |||||||||||||||||||||||
| Partners' capital (deficit): | |||||||||||||||||||||||
| Partners' equity | (421,562 | ) | 1 | (96,446 | ) | 42,530 | 53,915 | (421,562 | ) | ||||||||||||||
| Accumulated other comprehensive income | 14,764 | — | — | — | — | 14,764 | |||||||||||||||||
| Total partners' capital (deficit) | (406,798 | ) | 1 | (96,446 | ) | 42,530 | 53,915 | (406,798 | ) | ||||||||||||||
| Total liabilities and partners' capital (deficit) | $ | 1,490,977 | $ | 1 | $ | 444,751 | $ | 110,181 | $ | (435,962 | ) | $ | 1,609,948 | ||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of July 31, 2018 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 119,133 |
| $ | 1 |
| $ | 174 |
| $ | — |
| $ | — |
| $ | 119,308 |
Accounts and notes receivable, net |
|
| (3,420) |
|
| — |
|
| 9,395 |
|
| 120,079 |
|
| — |
|
| 126,054 |
Intercompany receivables |
|
| 15,660 |
|
| — |
|
| — |
|
| — |
|
| (15,660) |
|
| — |
Inventories |
|
| 83,694 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 83,694 |
Prepaid expenses and other current assets |
|
| 34,050 |
|
| — |
|
| 775 |
|
| 5 |
|
| — |
|
| 34,830 |
Total current assets |
|
| 249,117 |
|
| 1 |
|
| 10,344 |
|
| 120,084 |
|
| (15,660) |
|
| 363,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 557,689 |
|
| — |
|
| 34 |
|
| — |
|
| — |
|
| 557,723 |
Goodwill, net |
|
| 246,098 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 246,098 |
Intangible assets, net |
|
| 120,951 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 120,951 |
Investments in consolidated subsidiaries |
|
| 59,937 |
|
| — |
|
| — |
|
| — |
|
| (59,937) |
|
| — |
Other assets, net |
|
| 63,411 |
|
| — |
|
| 9,961 |
|
| 1,216 |
|
| — |
|
| 74,588 |
Total assets |
| $ | 1,297,203 |
| $ | 1 |
| $ | 20,339 |
| $ | 121,300 |
| $ | (75,597) |
| $ | 1,363,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 45,171 |
| $ | — |
| $ | 1,547 |
| $ | 102 |
| $ | — |
| $ | 46,820 |
Short-term borrowings |
|
| 32,800 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 32,800 |
Collateralized note payable |
|
| — |
|
| — |
|
| — |
|
| 58,000 |
|
| — |
|
| 58,000 |
Intercompany payables |
|
| — |
|
| — |
|
| (143) |
|
| 15,803 |
|
| (15,660) |
|
| — |
Other current liabilities |
|
| 131,702 |
|
| — |
|
| 6,036 |
|
| 353 |
|
| — |
|
| 138,091 |
Total current liabilities |
|
| 209,673 |
|
| — |
|
| 7,440 |
|
| 74,258 |
|
| (15,660) |
|
| 275,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 1,728,137 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,728,137 |
Other liabilities |
|
| 39,471 |
|
| — |
|
| 5 |
|
| — |
|
| — |
|
| 39,476 |
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity |
|
| (700,811) |
|
| 1 |
|
| 12,894 |
|
| 47,042 |
|
| (59,937) |
|
| (700,811) |
Accumulated other comprehensive income |
|
| 20,733 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 20,733 |
Total partners' capital (deficit) |
|
| (680,078) |
|
| 1 |
|
| 12,894 |
|
| 47,042 |
|
| (59,937) |
|
| (680,078) |
Total liabilities and partners' capital (deficit) |
| $ | 1,297,203 |
| $ | 1 |
| $ | 20,339 |
| $ | 121,300 |
| $ | (75,597) |
| $ | 1,363,246 |
50
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| For the three months ended January 31, 2018 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Propane and other gas liquids sales | $ | 592,275 | $ | — | $ | (36 | ) | $ | — | $ | — | $ | 592,239 | ||||||||||
| Midstream operations | — | — | 117,276 | — | — | 117,276 | |||||||||||||||||
| Other | 22,707 | — | 22,934 | — | — | 45,641 | |||||||||||||||||
| Total revenues | 614,982 | — | 140,174 | — | — | 755,156 | |||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales - propane and other gas liquids sales | 362,927 | — | (9 | ) | — | — | 362,918 | ||||||||||||||||
| Cost of sales - midstream operations | — | — | 107,067 | — | — | 107,067 | |||||||||||||||||
| Cost of sales - other | 2,853 | — | 17,934 | — | — | 20,787 | |||||||||||||||||
| Operating expense | 114,096 | — | 9,795 | 1,833 | (2,008 | ) | 123,716 | ||||||||||||||||
| Depreciation and amortization expense | 18,521 | — | 6,893 | 71 | — | 25,485 | |||||||||||||||||
| General and administrative expense | 13,833 | 3 | 1,054 | — | — | 14,890 | |||||||||||||||||
| Equipment lease expense | 6,862 | — | 92 | — | — | 6,954 | |||||||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | — | — | — | — | 4,031 | |||||||||||||||||
| Asset impairments | — | — | 10,005 | — | — | 10,005 | |||||||||||||||||
| Loss on asset sales and disposals | 555 | — | 38,694 | — | — | 39,249 | |||||||||||||||||
| Operating income (loss) | 91,304 | (3 | ) | (51,351 | ) | (1,904 | ) | 2,008 | 40,054 | ||||||||||||||
| Interest expense | (21,212 | ) | — | (11,739 | ) | (1,107 | ) | — | (34,058 | ) | |||||||||||||
| Other income (expense), net | 408 | — | 276 | 2,008 | (2,008 | ) | 684 | ||||||||||||||||
| Earnings (loss) before income taxes | 70,500 | (3 | ) | (62,814 | ) | (1,003 | ) | — | 6,680 | ||||||||||||||
| Income tax expense (benefit) | 82 | — | (249 | ) | — | — | (167 | ) | |||||||||||||||
| Equity in earnings (loss) of subsidiary | (63,571 | ) | — | — | — | 63,571 | — | ||||||||||||||||
| Net earnings (loss) | 6,847 | (3 | ) | (62,565 | ) | (1,003 | ) | 63,571 | 6,847 | ||||||||||||||
| Other comprehensive loss | (8,671 | ) | — | — | — | — | (8,671 | ) | |||||||||||||||
| Comprehensive income (loss) | $ | (1,824 | ) | $ | (3 | ) | $ | (62,565 | ) | $ | (1,003 | ) | $ | 63,571 | $ | (1,824 | ) | ||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, 2019 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 459,556 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 459,556 |
Other |
|
| 20,069 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 20,069 |
Total revenues |
|
| 479,625 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 479,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 250,389 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 250,389 |
Cost of sales - other |
|
| 2,320 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,320 |
Operating expense |
|
| 124,078 |
|
| — |
|
| (3) |
|
| 968 |
|
| (5,052) |
|
| 119,991 |
Depreciation and amortization expense |
|
| 20,506 |
|
| — |
|
| — |
|
| 111 |
|
| — |
|
| 20,617 |
General and administrative expense |
|
| 11,511 |
|
| 1 |
|
| — |
|
| — |
|
| — |
|
| 11,512 |
Equipment lease expense |
|
| 8,319 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,319 |
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| — |
|
| — |
|
| — | �� |
| — |
|
| (4) |
Loss on asset sales and disposals |
|
| 1,683 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 60,823 |
|
| (1) |
|
| 3 |
|
| (1,079) |
|
| 5,052 |
|
| 64,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (34,206) |
|
| — |
|
| — |
|
| (1,189) |
|
| — |
|
| (35,395) |
Other income (expense), net |
|
| 278 |
|
| — |
|
| (27) |
|
| 2,834 |
|
| (2,834) |
|
| 251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 26,895 |
|
| (1) |
|
| (24) |
|
| 566 |
|
| 2,218 |
|
| 29,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
| (49) |
|
| — |
|
| 149 |
|
| — |
|
| — |
|
| 100 |
Equity in earnings (loss) of subsidiaries |
|
| 392 |
|
| — |
|
| — |
|
| — |
|
| (392) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 27,336 |
|
| (1) |
|
| (173) |
|
| 566 |
|
| 1,826 |
|
| 29,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| 8,286 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | 35,622 |
| $ | (1) |
| $ | (173) |
| $ | 566 |
| $ | 1,826 |
| $ | 37,840 |
51
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| For the three months ended January 31, 2017 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Propane and other gas liquids sales | $ | 437,375 | $ | — | $ | — | $ | — | $ | — | $ | 437,375 | |||||||||||
| Midstream operations | — | — | 96,787 | — | — | 96,787 | |||||||||||||||||
| Other | 21,609 | — | 23,479 | — | — | 45,088 | |||||||||||||||||
| Total revenues | 458,984 | — | 120,266 | — | — | 579,250 | |||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales - propane and other gas liquids sales | 235,029 | — | — | — | — | 235,029 | |||||||||||||||||
| Cost of sales - midstream operations | — | — | 87,024 | — | — | 87,024 | |||||||||||||||||
| Cost of sales - other | 2,571 | — | 18,086 | — | — | 20,657 | |||||||||||||||||
| Operating expense | 103,986 | — | 9,642 | 539 | (1,091 | ) | 113,076 | ||||||||||||||||
| Depreciation and amortization expense | 18,014 | — | 7,527 | 66 | — | 25,607 | |||||||||||||||||
| General and administrative expense | 11,093 | 3 | 1,182 | — | — | 12,278 | |||||||||||||||||
| Equipment lease expense | 7,267 | — | 149 | — | — | 7,416 | |||||||||||||||||
| Non-cash employee stock ownership plan compensation charge | 2,945 | — | — | — | — | 2,945 | |||||||||||||||||
| Loss on asset sales and disposals | 73 | — | (28 | ) | — | — | 45 | ||||||||||||||||
| Operating income (loss) | 78,006 | (3 | ) | (3,316 | ) | (605 | ) | 1,091 | 75,173 | ||||||||||||||
| Interest expense | (21,089 | ) | — | (11,002 | ) | (657 | ) | — | (32,748 | ) | |||||||||||||
| Other income (expense), net | 304 | — | 459 | 1,091 | (1,091 | ) | 763 | ||||||||||||||||
| Earnings (loss) before income taxes | 57,221 | (3 | ) | (13,859 | ) | (171 | ) | — | 43,188 | ||||||||||||||
| Income tax expense | 103 | — | 485 | — | — | 588 | |||||||||||||||||
| Equity in earnings (loss) of subsidiary | (14,518 | ) | — | — | — | 14,518 | — | ||||||||||||||||
| Net earnings (loss) | 42,600 | (3 | ) | (14,344 | ) | (171 | ) | 14,518 | 42,600 | ||||||||||||||
| Other comprehensive income | 15,776 | — | — | — | — | 15,776 | |||||||||||||||||
| Comprehensive income (loss) | $ | 58,376 | $ | (3 | ) | $ | (14,344 | ) | $ | (171 | ) | $ | 14,518 | $ | 58,376 | ||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, 2018 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 451,212 |
| $ | — |
| $ | 90 |
| $ | — |
| $ | — |
| $ | 451,302 |
Midstream operations |
|
| — |
|
| — |
|
| 22,595 |
|
| — |
|
| — |
|
| 22,595 |
Other |
|
| 19,701 |
|
| — |
|
| 22,212 |
|
| — |
|
| — |
|
| 41,913 |
Total revenues |
|
| 470,913 |
|
| — |
|
| 44,897 |
|
| — |
|
| — |
|
| 515,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 260,317 |
|
| — |
|
| 102 |
|
| — |
|
| — |
|
| 260,419 |
Cost of sales - midstream operations |
|
| — |
|
| — |
|
| 14,518 |
|
| — |
|
| — |
|
| 14,518 |
Cost of sales - other |
|
| 2,328 |
|
| — |
|
| 17,522 |
|
| — |
|
| — |
|
| 19,850 |
Operating expense |
|
| 108,291 |
|
| — |
|
| 9,262 |
|
| 1,459 |
|
| (2,433) |
|
| 116,579 |
Depreciation and amortization expense |
|
| 19,105 |
|
| — |
|
| 6,171 |
|
| 72 |
|
| — |
|
| 25,348 |
General and administrative expense |
|
| 10,460 |
|
| — |
|
| 1,086 |
|
| — |
|
| — |
|
| 11,546 |
Equipment lease expense |
|
| 7,045 |
|
| — |
|
| 88 |
|
| — |
|
| — |
|
| 7,133 |
Non-cash employee stock ownership plan compensation charge |
|
| 2,738 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,738 |
Loss on asset sales and disposals |
|
| 2,243 |
|
| — |
|
| 4,027 |
|
| — |
|
| — |
|
| 6,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 58,386 |
|
| — |
|
| (7,879) |
|
| (1,531) |
|
| 2,433 |
|
| 51,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (20,297) |
|
| — |
|
| (10,104) |
|
| (1,338) |
|
| — |
|
| (31,739) |
Other income (expense), net |
|
| (133) |
|
| — |
|
| 360 |
|
| 2,433 |
|
| (2,433) |
|
| 227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 37,956 |
|
| — |
|
| (17,623) |
|
| (436) |
|
| — |
|
| 19,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
| 102 |
|
| — |
|
| (45) |
|
| — |
|
| — |
|
| 57 |
Equity in earnings (loss) of subsidiaries |
|
| (18,014) |
|
| — |
|
| — |
|
| — |
|
| 18,014 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 19,840 |
|
| — |
|
| (17,578) |
|
| (436) |
|
| 18,014 |
|
| 19,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| (6,727) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,727) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | 13,113 |
| $ | — |
| $ | (17,578) |
| $ | (436) |
| $ | 18,014 |
| $ | 13,113 |
52
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| For the six months ended January 31, 2018 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Propane and other gas liquids sales | $ | 894,392 | $ | — | $ | 605 | $ | — | $ | — | $ | 894,997 | |||||||||||
| Midstream operations | — | — | 238,036 | — | — | 238,036 | |||||||||||||||||
| Other | 39,384 | — | 37,394 | — | — | 76,778 | |||||||||||||||||
| Total revenues | 933,776 | — | 276,035 | — | — | 1,209,811 | |||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales - propane and other gas liquids sales | 541,746 | — | 687 | — | — | 542,433 | |||||||||||||||||
| Cost of sales - midstream operations | — | — | 215,192 | — | — | 215,192 | |||||||||||||||||
| Cost of sales - other | 5,562 | — | 28,927 | — | — | 34,489 | |||||||||||||||||
| Operating expense | 215,328 | — | 19,058 | 3,015 | (3,223 | ) | 234,178 | ||||||||||||||||
| Depreciation and amortization expense | 36,868 | — | 14,206 | 143 | — | 51,217 | |||||||||||||||||
| General and administrative expense | 24,588 | 5 | 3,461 | — | — | 28,054 | |||||||||||||||||
| Equipment lease expense | 13,510 | — | 185 | — | — | 13,695 | |||||||||||||||||
| Non-cash employee stock ownership plan compensation charge | 7,993 | — | — | — | — | 7,993 | |||||||||||||||||
| Asset impairments | — | — | 10,005 | — | — | 10,005 | |||||||||||||||||
| Loss on asset sales and disposals | 1,463 | — | 38,681 | — | — | 40,144 | |||||||||||||||||
| Operating income (loss) | 86,718 | (5 | ) | (54,367 | ) | (3,158 | ) | 3,223 | 32,411 | ||||||||||||||
| Interest expense | (41,606 | ) | — | (22,924 | ) | (1,724 | ) | — | (66,254 | ) | |||||||||||||
| Other income (expense), net | 623 | — | 572 | 3,223 | (3,223 | ) | 1,195 | ||||||||||||||||
| Earnings (loss) before income taxes | 45,735 | (5 | ) | (76,719 | ) | (1,659 | ) | — | (32,648 | ) | |||||||||||||
| Income tax expense | 72 | — | 132 | — | — | 204 | |||||||||||||||||
| Equity in earnings (loss) of subsidiary | (78,515 | ) | — | — | — | 78,515 | — | ||||||||||||||||
| Net earnings (loss) | (32,852 | ) | (5 | ) | (76,851 | ) | (1,659 | ) | 78,515 | (32,852 | ) | ||||||||||||
| Other comprehensive income | 9,829 | — | — | — | — | 9,829 | |||||||||||||||||
| Comprehensive income (loss) | $ | (23,023 | ) | $ | (5 | ) | $ | (76,851 | ) | $ | (1,659 | ) | $ | 78,515 | $ | (23,023 | ) | ||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2019 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 1,344,634 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 1,344,634 |
Other |
|
| 60,628 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| 60,677 |
Total revenues |
|
| 1,405,262 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| 1,405,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 766,056 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 766,056 |
Cost of sales - other |
|
| 8,675 |
|
| — |
|
| 114 |
|
| — |
|
| — |
|
| 8,789 |
Operating expense |
|
| 355,589 |
|
| — |
|
| 36 |
|
| 3,869 |
|
| (7,953) |
|
| 351,541 |
Depreciation and amortization expense |
|
| 58,880 |
|
| — |
|
| — |
|
| 334 |
|
| — |
|
| 59,214 |
General and administrative expense |
|
| 42,022 |
|
| 6 |
|
| — |
|
| — |
|
| — |
|
| 42,028 |
Equipment lease expense |
|
| 24,597 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 24,597 |
Non-cash employee stock ownership plan compensation charge |
|
| 4,688 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,688 |
Loss on asset sales and disposals |
|
| 5,724 |
|
| — |
|
| 2,679 |
|
| — |
|
| — |
|
| 8,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 139,031 |
|
| (6) |
|
| (2,780) |
|
| (4,203) |
|
| 7,953 |
|
| 139,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (103,209) |
|
| — |
|
| (38) |
|
| (3,493) |
|
| — |
|
| (106,740) |
Other income (expense), net |
|
| 393 |
|
| — |
|
| (37) |
|
| 7,953 |
|
| (7,953) |
|
| 356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 36,215 |
|
| (6) |
|
| (2,855) |
|
| 257 |
|
| — |
|
| 33,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 105 |
|
| — |
|
| 149 |
|
| — |
|
| — |
|
| 254 |
Equity in earnings (loss) of subsidiary |
|
| (2,753) |
|
| — |
|
| — |
|
| — |
|
| 2,753 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 33,357 |
|
| (6) |
|
| (3,004) |
|
| 257 |
|
| 2,753 |
|
| 33,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| (21,574) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (21,574) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | 11,783 |
| $ | (6) |
| $ | (3,004) |
| $ | 257 |
| $ | 2,753 |
| $ | 11,783 |
53
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| For the six months ended January 31, 2017 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Propane and other gas liquids sales | $ | 679,774 | $ | — | $ | — | $ | — | $ | — | $ | 679,774 | |||||||||||
| Midstream operations | — | — | 204,831 | — | — | 204,831 | |||||||||||||||||
| Other | 38,935 | — | 35,252 | — | — | 74,187 | |||||||||||||||||
| Total revenues | 718,709 | — | 240,083 | — | — | 958,792 | |||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales - propane and other gas liquids sales | 354,241 | — | — | — | — | 354,241 | |||||||||||||||||
| Cost of sales - midstream operations | — | — | 181,666 | — | — | 181,666 | |||||||||||||||||
| Cost of sales - other | 5,001 | — | 27,402 | — | — | 32,403 | |||||||||||||||||
| Operating expense | 201,641 | — | 19,888 | (1,566 | ) | (1,801 | ) | 218,162 | |||||||||||||||
| Depreciation and amortization expense | 36,291 | — | 15,399 | 119 | — | 51,809 | |||||||||||||||||
| General and administrative expense | 23,956 | 5 | 2,586 | — | — | 26,547 | |||||||||||||||||
| Equipment lease expense | 14,477 | — | 288 | — | — | 14,765 | |||||||||||||||||
| Non-cash employee stock ownership plan compensation charge | 6,699 | — | — | — | — | 6,699 | |||||||||||||||||
| Loss on asset sales and disposals | 1,520 | — | 4,948 | — | — | 6,468 | |||||||||||||||||
| Operating income (loss) | 74,883 | (5 | ) | (12,094 | ) | 1,447 | 1,801 | 66,032 | |||||||||||||||
| Interest expense | (41,441 | ) | — | (21,675 | ) | (1,027 | ) | (3 | ) | (64,146 | ) | ||||||||||||
| Other income (expense), net | 257 | — | 1,014 | 1,798 | (1,798 | ) | 1,271 | ||||||||||||||||
| Earnings (loss) before income taxes | 33,699 | (5 | ) | (32,755 | ) | 2,218 | — | 3,157 | |||||||||||||||
| Income tax expense (benefit) | 74 | — | (77 | ) | — | — | (3 | ) | |||||||||||||||
| Equity in earnings (loss) of subsidiary | (30,465 | ) | — | — | — | 30,465 | — | ||||||||||||||||
| Net earnings (loss) | 3,160 | (5 | ) | (32,678 | ) | 2,218 | 30,465 | 3,160 | |||||||||||||||
| Other comprehensive income | 25,152 | — | — | — | — | 25,152 | |||||||||||||||||
| Comprehensive income (loss) | $ | 28,312 | $ | (5 | ) | $ | (32,678 | ) | $ | 2,218 | $ | 30,465 | $ | 28,312 | |||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2018 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 1,345,604 |
| $ | — |
| $ | 695 |
| $ | — |
| $ | — |
| $ | 1,346,299 |
Midstream operations |
|
| — |
|
| — |
|
| 260,631 |
|
| — |
|
| — |
|
| 260,631 |
Other |
|
| 59,085 |
|
| — |
|
| 59,606 |
|
| — |
|
| — |
|
| 118,691 |
Total revenues |
|
| 1,404,689 |
|
| — |
|
| 320,932 |
|
| — |
|
| — |
|
| 1,725,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 802,063 |
|
| — |
|
| 789 |
|
| — |
|
| — |
|
| 802,852 |
Cost of sales - midstream operations |
|
| — |
|
| — |
|
| 229,710 |
|
| — |
|
| — |
|
| 229,710 |
Cost of sales - other |
|
| 7,890 |
|
| — |
|
| 46,449 |
|
| — |
|
| — |
|
| 54,339 |
Operating expense |
|
| 323,619 |
|
| — |
|
| 28,320 |
|
| 4,474 |
|
| (5,656) |
|
| 350,757 |
Depreciation and amortization expense |
|
| 55,973 |
|
| — |
|
| 20,377 |
|
| 215 |
|
| — |
|
| 76,565 |
General and administrative expense |
|
| 35,048 |
|
| 5 |
|
| 4,547 |
|
| — |
|
| — |
|
| 39,600 |
Equipment lease expense |
|
| 20,555 |
|
| — |
|
| 273 |
|
| — |
|
| — |
|
| 20,828 |
Non-cash employee stock ownership plan compensation charge |
|
| 10,731 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 10,731 |
Asset impairments |
|
| — |
|
| — |
|
| 10,005 |
|
| — |
|
| — |
|
| 10,005 |
Loss on asset sales and disposals |
|
| 3,706 |
|
| — |
|
| 42,708 |
|
| — |
|
| — |
|
| 46,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 145,104 |
|
| (5) |
|
| (62,246) |
|
| (4,689) |
|
| 5,656 |
|
| 83,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (61,903) |
|
| — |
|
| (33,028) |
|
| (3,062) |
|
| — |
|
| (97,993) |
Other income (expense), net |
|
| 490 |
|
| — |
|
| 932 |
|
| 5,656 |
|
| (5,656) |
|
| 1,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 83,691 |
|
| (5) |
|
| (94,342) |
|
| (2,095) |
|
| — |
|
| (12,751) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 174 |
|
| — |
|
| 87 |
|
| — |
|
| — |
|
| 261 |
Equity in earnings (loss) of subsidiary |
|
| (96,529) |
|
| — |
|
| — |
|
| — |
|
| 96,529 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| (13,012) |
|
| (5) |
|
| (94,429) |
|
| (2,095) |
|
| 96,529 |
|
| (13,012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
| 3,102 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | (9,910) |
| $ | (5) |
| $ | (94,429) |
| $ | (2,095) |
| $ | 96,529 |
| $ | (9,910) |
54
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| For the six months ended January 31, 2018 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (57,734 | ) | $ | (5 | ) | $ | 13,335 | $ | 120,563 | $ | (97,000 | ) | $ | (20,841 | ) | |||||||
| Cash flows from investing activities: | |||||||||||||||||||||||
| Business acquisitions, net of cash acquired | (14,862 | ) | — | — | — | — | (14,862 | ) | |||||||||||||||
| Capital expenditures | (34,391 | ) | — | (1,302 | ) | — | — | (35,693 | ) | ||||||||||||||
| Proceeds from sale of assets | 4,207 | — | — | — | — | 4,207 | |||||||||||||||||
| Cash collected for purchase of interest in accounts receivable | — | — | — | 574,783 | (574,783 | ) | — | ||||||||||||||||
| Cash remitted to Ferrellgas, L.P for accounts receivable | — | — | — | (671,783 | ) | 671,783 | — | ||||||||||||||||
| Net changes in advances with consolidated entities | 132,748 | — | — | — | (132,748 | ) | — | ||||||||||||||||
| Net cash provided by (used in) investing activities | 87,702 | — | (1,302 | ) | (97,000 | ) | (35,748 | ) | (46,348 | ) | |||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||
| Distributions | (35,380 | ) | — | — | — | — | (35,380 | ) | |||||||||||||||
| Proceeds from increase in long-term debt | 23,580 | — | — | — | — | 23,580 | |||||||||||||||||
| Payments on long-term debt | (1,267 | ) | — | — | — | — | (1,267 | ) | |||||||||||||||
| Net reductions in short-term borrowings | (7,879 | ) | — | — | — | — | (7,879 | ) | |||||||||||||||
| Net additions to collateralized short-term borrowings | — | — | — | 97,000 | — | 97,000 | |||||||||||||||||
| Net changes in advances with parent | — | 5 | (12,190 | ) | (120,563 | ) | 132,748 | — | |||||||||||||||
| Cash paid for financing costs | (395 | ) | ��� | — | — | — | (395 | ) | |||||||||||||||
| Net cash provided by (used in) financing activities | (21,341 | ) | 5 | (12,190 | ) | (23,563 | ) | 132,748 | 75,659 | ||||||||||||||
| Increase (decrease) in cash and cash equivalents | 8,627 | — | (157 | ) | — | — | 8,470 | ||||||||||||||||
| Cash and cash equivalents - beginning of year | 5,327 | 1 | 373 | — | — | 5,701 | |||||||||||||||||
| Cash and cash equivalents - end of year | $ | 13,954 | $ | 1 | $ | 216 | $ | — | $ | — | $ | 14,171 | |||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2019 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
| $ | 111,008 |
| $ | (6) |
| $ | 24,589 |
| $ | (45,384) |
| $ | (4,000) |
| $ | 86,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (11,351) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (11,351) |
Capital expenditures |
|
| (94,660) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (94,660) |
Proceeds from sale of assets |
|
| 2,416 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,416 |
Cash collected for purchase of interest in accounts receivable |
|
| — |
|
| — |
|
| — |
|
| 1,052,947 |
|
| (1,052,947) |
|
| — |
Cash remitted to Ferrellgas, L.P. for accounts receivable |
|
| — |
|
| — |
|
| — |
|
| (1,056,947) |
|
| 1,056,947 |
|
| — |
Net changes in advances with consolidated entities |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Intercompany loan to affiliate |
|
| (20,638) |
|
| — |
|
| — |
|
| — |
|
| 20,638 |
|
| — |
Other |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Net cash provided by (used in) investing activities |
|
| (124,233) |
|
| — |
|
| — |
|
| (4,000) |
|
| 24,638 |
|
| (103,595) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
| (25,568) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (25,568) |
Reductions in long-term debt |
|
| (1,656) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,656) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,800) |
Net additions to collateralized short-term borrowings |
|
| — |
|
| — |
|
| — |
|
| 4,000 |
|
| — |
|
| 4,000 |
Net changes in advances with consolidated entities |
|
| — |
|
| 6 |
|
| (24,763) |
|
| 45,395 |
|
| (20,638) |
|
| — |
Cash paid for financing costs |
|
| (520) |
|
| — |
|
| — |
|
| (11) |
|
| — |
|
| (531) |
Net cash provided by (used in) financing activities |
|
| (60,544) |
|
| 6 |
|
| (24,763) |
|
| 49,384 |
|
| (20,638) |
|
| (56,555) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (73,769) |
|
| — |
|
| (174) |
|
| — |
|
| — |
|
| (73,943) |
Cash and cash equivalents - beginning of year |
|
| 119,133 |
|
| 1 |
|
| 174 |
|
| — |
|
| — |
|
| 119,308 |
Cash and cash equivalents - end of year |
| $ | 45,364 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 45,365 |
55
| FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| For the six months ended January 31, 2017 | |||||||||||||||||||||||
| Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 85,916 | $ | (5 | ) | $ | (47,221 | ) | $ | 75,611 | $ | (69,000 | ) | $ | 45,301 | ||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||
| Capital expenditures | (19,686 | ) | — | (82 | ) | — | — | (19,768 | ) | ||||||||||||||
| Proceeds from sale of assets | 4,591 | — | — | — | — | 4,591 | |||||||||||||||||
| Cash collected for purchase of interest in accounts receivable | — | — | — | 469,600 | (469,600 | ) | — | ||||||||||||||||
| Cash remitted to Ferrellgas, L.P for accounts receivable | — | — | — | (538,600 | ) | 538,600 | — | ||||||||||||||||
| Net changes in advances with consolidated entities | 28,408 | — | — | — | (28,408 | ) | — | ||||||||||||||||
| Other | (37 | ) | — | — | — | — | (37 | ) | |||||||||||||||
| Net cash provided by (used in) investing activities | 13,276 | — | (82 | ) | (69,000 | ) | 40,592 | (15,214 | ) | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||
| Distributions | (84,500 | ) | — | — | — | — | (84,500 | ) | |||||||||||||||
| Contributions from Partners | 167,640 | — | — | — | — | 167,640 | |||||||||||||||||
| Proceeds from increase in long-term debt | 36,444 | — | — | — | — | 36,444 | |||||||||||||||||
| Payments on long-term debt | (172,790 | ) | — | — | — | — | (172,790 | ) | |||||||||||||||
| Net reductions in short-term borrowings | (35,692 | ) | — | — | — | — | (35,692 | ) | |||||||||||||||
| Net additions to collateralized short-term borrowings | — | — | — | 69,000 | — | 69,000 | |||||||||||||||||
| Net changes in advances with parent | — | 5 | 47,198 | (75,611 | ) | 28,408 | — | ||||||||||||||||
| Cash paid for financing costs | (1,422 | ) | — | — | — | — | (1,422 | ) | |||||||||||||||
| Net cash provided by (used in) financing activities | (90,320 | ) | 5 | 47,198 | (6,611 | ) | 28,408 | (21,320 | ) | ||||||||||||||
| Increase (decrease) in cash and cash equivalents | 8,872 | — | (105 | ) | — | — | 8,767 | ||||||||||||||||
| Cash and cash equivalents - beginning of year | 4,472 | 1 | 417 | — | — | 4,890 | |||||||||||||||||
| Cash and cash equivalents - end of year | $ | 13,344 | $ | 1 | $ | 312 | $ | — | $ | — | $ | 13,657 | |||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended April 30, 2018 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
| $ | 65,604 |
| $ | (5) |
| $ | (3,531) |
| $ | 66,878 |
| $ | (35,000) |
| $ | 93,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (14,862) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (14,862) |
Capital expenditures |
|
| (57,158) |
|
| — |
|
| (1,803) |
|
| — |
|
| — |
|
| (58,961) |
Proceeds from sale of assets |
|
| 2,479 |
|
| — |
|
| 55,323 |
|
| — |
|
| — |
|
| 57,802 |
Cash collected for purchase of interest in accounts receivable |
|
| — |
|
| — |
|
| — |
|
| 985,084 |
|
| (985,084) |
|
| — |
Cash remitted to Ferrellgas, L.P. for accounts receivable |
|
| — |
|
| — |
|
| — |
|
| (1,020,084) |
|
| 1,020,084 |
|
| — |
Net changes in advances with consolidated entities |
|
| 116,871 |
|
| — |
|
| — |
|
| — |
|
| (116,871) |
|
| — |
Net cash provided by (used in) investing activities |
|
| 47,330 |
|
| — |
|
| 53,520 |
|
| (35,000) |
|
| (81,871) |
|
| (16,021) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
| (45,495) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (45,495) |
Proceeds from increase in long-term debt |
|
| 23,580 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 23,580 |
Payments on long-term debt |
|
| (1,892) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,892) |
Net reductions in short-term borrowings |
|
| (84,179) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (84,179) |
Net additions to collateralized short-term borrowings |
|
| — |
|
| — |
|
| — |
|
| 35,000 |
|
| — |
|
| 35,000 |
Net changes in advances with parent |
|
| — |
|
| 5 |
|
| (49,998) |
|
| (66,878) |
|
| 116,871 |
|
| — |
Cash paid for financing costs |
|
| (1,149) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,149) |
Net cash provided by (used in) financing activities |
|
| (109,135) |
|
| 5 |
|
| (49,998) |
|
| (31,878) |
|
| 116,871 |
|
| (74,135) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 3,799 |
|
| — |
|
| (9) |
|
| — |
|
| — |
|
| 3,790 |
Cash and cash equivalents - beginning of year |
|
| 5,327 |
|
| 1 |
|
| 373 |
|
| — |
|
| — |
|
| 5,701 |
Cash and cash equivalents - end of year |
| $ | 9,126 |
| $ | 1 |
| $ | 364 |
| $ | — |
| $ | — |
| $ | 9,491 |
M.N. Subsequent events
Ferrellgas, L.P. evaluated events and transactions occurring after the balance sheet date through the date Ferrellgas, L.P.'s’s condensed consolidated financial statements were issued and concluded that other than as discussed below, there were no
56
transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
On February 20, 2018,June 6, 2019, Ferrellgas, L.P. completedentered into an amendment to the saleagreement governing its Senior Secured Credit Facility. Among other matters, the amendment updated the calculation of 1,072 rail cars utilizedthe fixed charge coverage ratio for purposes of the fixed charge coverage ratio in the Midstream operations segment and received approximately $47.0 millionagreement to exclude certain maintenance capital expenditures related to the purchase of new propane delivery trucks which have historically been leased. The amendment provides that up to a specified amount of such maintenance capital expenditures will not be deducted from consolidated EBITDA for purposes of the calculation. The operating partnership was in cash. Proceeds fromcompliance with the transaction were usedfixed charge coverage ratio covenant, as amended, as of April 30, 2019. A copy of the amendment has been filed as Exhibit 10.31 to reduce outstanding debtour Current Report on Ferrellgas L.P.'s secured credit facility. See additional discussions on the completed rail car sale in Note C - Supplemental financial statement information.Form 10-Q.
57
| FERRELLGAS FINANCE CORP. | |||||||
| (a wholly-owned subsidiary of Ferrellgas, L.P.) | |||||||
| CONDENSED BALANCE SHEETS | |||||||
| (unaudited) | |||||||
| January 31, 2018 | July 31, 2017 | ||||||
| ASSETS | |||||||
| Cash | $ | 1,100 | $ | 1,100 | |||
| Other current assets | — | 1,500 | |||||
| Total assets | $ | 1,100 | $ | 2,600 | |||
| Contingencies and commitments (Note B) | |||||||
| STOCKHOLDER'S EQUITY | |||||||
| Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding | $ | 1,000 | $ | 1,000 | |||
| Additional paid in capital | 71,052 | 67,336 | |||||
| Accumulated deficit | (70,952 | ) | (65,736 | ) | |||
| Total stockholder's equity | $ | 1,100 | $ | 2,600 | |||
| See notes to condensed financial statements. | |||||||
| FERRELLGAS FINANCE CORP. | ||||||||||||||||
| (a wholly-owned subsidiary of Ferrellgas, L.P.) | ||||||||||||||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| General and administrative expense | $ | 3,666 | $ | 3,400 | $ | 5,216 | $ | 4,950 | ||||||||
| Net loss | $ | (3,666 | ) | $ | (3,400 | ) | $ | (5,216 | ) | $ | (4,950 | ) | ||||
| See notes to condensed financial statements. | ||||||||||||||||
| FERRELLGAS FINANCE CORP. | |||||||
| (a wholly-owned subsidiary of Ferrellgas, L.P.) | |||||||
| CONDENSED STATEMENTS OF CASH FLOWS | |||||||
| (unaudited) | |||||||
| For the six months ended January 31, | |||||||
| 2018 | 2017 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (5,216 | ) | $ | (4,950 | ) | |
| Changes in operating assets and liabilities: | |||||||
| Other current assets | 1,500 | 1,500 | |||||
| Cash used in operating activities | (3,716 | ) | (3,450 | ) | |||
| Cash flows from financing activities: | |||||||
| Capital contribution | 3,716 | 3,450 | |||||
| Cash provided by financing activities | 3,716 | 3,450 | |||||
| Net change in cash | — | — | |||||
| Cash - beginning of period | 1,100 | 1,100 | |||||
| Cash - end of period | $ | 1,100 | $ | 1,100 | |||
| See notes to condensed financial statements. | |||||||
(a wholly-owned subsidiary of Ferrellgas, L.P.)
(unaudited)
|
|
|
|
|
|
|
|
| April 30, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Cash |
| $ | 1,100 |
| $ | 1,100 |
Prepaid expenses and other current assets |
|
| — |
|
| 1,500 |
Total assets |
| $ | 1,100 |
| $ | 2,600 |
|
|
|
|
|
|
|
Contingencies and commitments (Note B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY |
|
|
|
|
|
|
Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding |
| $ | 1,000 |
| $ | 1,000 |
Additional paid in capital |
|
| 76,677 |
|
| 72,552 |
Accumulated deficit |
|
| (76,577) |
|
| (70,952) |
Total stockholder's equity |
| $ | 1,100 |
| $ | 2,600 |
See notes to condensed financial statements.
58
FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended April 30, |
| For the nine months ended April 30, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
General and administrative expense |
| $ | 225 |
| $ | — |
| $ | 5,625 |
| $ | 5,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (225) |
| $ | — |
| $ | (5,625) |
| $ | (5,216) |
|
See notes to condensed financial statements.
59
FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
| For the nine months ended April 30, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (5,625) |
| $ | (5,216) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 1,500 |
|
| 1,500 |
Cash used in operating activities |
|
| (4,125) |
|
| (3,716) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Capital contribution |
|
| 4,125 |
|
| 3,716 |
Cash provided by financing activities |
|
| 4,125 |
|
| 3,716 |
|
|
|
|
|
|
|
Net change in cash |
|
| — |
|
| — |
Cash - beginning of period |
|
| 1,100 |
|
| 1,100 |
Cash - end of period |
| $ | 1,100 |
| $ | 1,100 |
See notes to condensed financial statements.
60
FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
(unaudited)
A. Formation
Ferrellgas Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on January 16, 2003 and is a wholly-owned subsidiary of Ferrellgas, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has no employees.
B. Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
The indentures governing the Partnership’s unsecured senior notes agreements containscontain various restrictive covenants applicable to the Partnership and its subsidiaries, the most restrictive relating to additional indebtedness and restricted payments. The restricted payments covenants require that, for the Partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the Partnership be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, the Partnership may make restricted payments in limited amounts determined under the indentures.As of January 31, 2018,April 30, 2019, the ratio was 1.72x. As a result, it’s likely the distribution that will be made by the Partnership is in compliance with all requirements, tests, limitations and covenants relatedon June 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 will be made from capacity under the limited exception to these debt agreements.the ratio requirement. the Partnership believes that its remaining capacity under the limited exception to the ratio requirement will allow it to make distributions to Ferrellgas Partners’ to cover interest payments on Ferrellgas Partners’ unsecured senior notes due 2020 through the maturity of those notes.
61
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Our management’s discussion and analysis of financial condition and results of operations relates to Ferrellgas Partners and the operating partnership.
Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. have nominal assets, do not conduct any operations and have no employees other than officers. Ferrellgas Partners Finance Corp. serves as co-issuer and co-obligor for debt securities of Ferrellgas Partners, while Ferrellgas Finance Corp. serves as co-issuer and co-obligor for debt securities of the operating partnership. Accordingly, and due to the reduced disclosure format, a discussion of the results of operations, liquidity and capital resources of Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. is not presented.
In this Item 2 of the Quarterly Report on Form 10-Q,10‑Q, unless the context indicates otherwise:
· | “us,” “we,” “our,” “ours,” “consolidated,” or "Ferrellgas" are references exclusively to Ferrellgas Partners, L.P. together with its consolidated subsidiaries, including Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas Finance Corp., except when used in connection with “common units,” in which case these terms refer to Ferrellgas Partners, L.P. without its consolidated subsidiaries; |
· | “Ferrellgas Partners” refers to Ferrellgas Partners, L.P. itself, without its consolidated subsidiaries; |
· | the “operating partnership” refers to Ferrellgas, L.P., together with its consolidated subsidiaries, including Ferrellgas Finance Corp.; |
· | our “general partner” refers to Ferrellgas, Inc.; |
· | “Ferrell Companies” refers to Ferrell Companies, Inc., the sole shareholder of our general partner; |
· | “unitholders” refers to holders of common units of Ferrellgas Partners; |
· | "GAAP" refers to accounting principles generally accepted in the United States; |
· | “retail sales” refers to Propane and other gas liquid sales: Retail - Sales to End Users or the volume of propane sold primarily to our residential, industrial/commercial and agricultural customers; |
· | “wholesale sales” refers to Propane and other gas liquid sales: Wholesale - Sales to Resellers or the volume of propane sold primarily to our portable tank exchange customers and bulk propane sold to wholesale customers; |
· | “other gas sales” refers to Propane and other gas liquid sales: Other Gas Sales or the volume of bulk propane sold to other third party propane distributors or marketers and the volume of refined fuel sold; |
· | “propane sales volume” refers to the volume of propane sold to our retail sales and wholesale sales customers; |
· | “Notes” refers to the notes of the condensed consolidated financial statements of Ferrellgas Partners or the operating partnership, as applicable; |
Ferrellgas Partners is a holding entity that conducts no operations and has two direct subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners’ only significant assets are its approximate 99% limited partnership interest in the operating partnership and its 100% equity interest in Ferrellgas Partners Finance Corp. The common units of Ferrellgas Partners are listed on the New York Stock Exchange and our activities are primarily conducted through the operating partnership.
62
The operating partnership was formed on April 22, 1994, and accounts for substantially all of our consolidated assets, sales and operating earnings, except for interest expense related to the senior notes co-issued by Ferrellgas Partners and Ferrellgas Partners Finance Corp.
Our general partner performs all management functions for us and our subsidiaries and holds aan approximate 1% general partner interest in Ferrellgas Partners and an approximate 1% general partner interest in the operating partnership. The parent company of our general partner, Ferrell Companies, beneficially owns approximately 23% of our outstanding common units. Ferrell Companies is owned 100% by an employee stock ownership trust.
We file annual, quarterly, and other reports and information with the Securities and Exchange Commission (the "SEC"). You may read and download our SEC filings over the Internet from several commercial document retrieval services as well as at the SEC’s website at www.sec.gov. You may also read and copy ourOur SEC filings at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information concerning the Public Reference Room and any applicable copy charges. Because our common units are traded on the New York Stock Exchange under the ticker symbol “FGP,” we also provide our SEC filings and particular other information to the New York Stock Exchange. You may obtain copies of these filings and such other information at the offices of the New York Stock Exchange located at 11 Wall Street, New York, New York 10005. In addition, our SEC filings are available on our website at www.ferrellgas.com at no cost as soon as reasonably practicable after our electronic filing or furnishing thereof with the SEC. Please note that any Internet addresses provided in this Quarterly Report on Form 10-Q10‑Q are for informational purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such Internet addresses is intended or deemed to be incorporated by reference herein.
The following is a discussion of our historical financial condition and results of operations and should be read in conjunction with our historical consolidated financial statements and accompanying Notes thereto included in our Annual Report on Form 10‑K for fiscal 2018 and in our historical condensed consolidated financial statements and accompanying Notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
The discussions set forth in the “Results of Operations” and “Liquidity and Capital Resources” sections generally refer to Ferrellgas Partners and its consolidated subsidiaries. However, in these discussions there exist twoexists one material differencesdifference between Ferrellgas Partners and the operating partnership. Those material differences are:
Cautionary Note Regarding Forward-looking Statements
Statements included in this report include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. These statements often use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” or the negative of those terms or other variations of them or comparable terminology. These statements often discuss plans, strategies, events or developments that we expect or anticipate will or may occur in the future and are based upon the beliefs and assumptions of our management and on the information currently available to them. In particular, statements, express or implied, concerning our future operating results or our ability to generate sales, income or cash flow are forward-looking statements.
Forward-looking statements are not guarantees of performance. You should not put undue reliance on any forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially from those expressed in or implied by these forward-looking statements. Many of the factors that will affect our future results are beyond our ability to control or predict. Some of the risk factors that may affect our business, financial condition or results of operations include:
· | the effect of weather conditions on the demand for propane; |
· | the prices of wholesale propane, motor fuel and crude oil; |
· | disruptions to the supply of propane; |
· | competition from other industry participants and other energy sources; |
· | energy efficiency and technology advances; |
63
· | adverse changes in our relationships with our national tank exchange customers; |
· | significant delays in the collection of accounts or notes receivable; |
· | customer, counterparty, supplier or vendor defaults; |
· | changes in demand for, and production of, hydrocarbon products; |
· | increased trucking and rail regulations; |
· | inherent operating and litigation risks in gathering, transporting, handling and storing propane; |
· | our inability to complete acquisitions or to successfully integrate acquired operations; |
· | costs of complying with, or liabilities imposed under, environmental, health and safety laws; |
· | the impact of pending and future legal proceedings; |
· | the interruption, disruption, failure or malfunction of our information technology systems including due to cyber attack; |
· | the impact of changes in tax law that could adversely affect the tax treatment of Ferrellgas Partners for federal income tax purposes; |
· | economic and political instability, particularly in areas of the world tied to the energy industry; and |
· | disruptions in the capital and credit markets. |
· | access to available capital to meet the our operating requirements up to and including the refinancing of maturing debt instruments |
When considering any forward-looking statement, you should also keep in mind the risk factors set forth in “Item 1A. Risk Factors” of our Annual Report on Form 10-K10‑K for fiscal 2017 and under Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q.2018. Any of these risks could impair our business, financial condition or results of operations. Any such impairment may affect our ability to make distributions to our unitholders or pay interest on the principal of any of our debt securities. In addition, the trading price of our securities could decline as a result of any such impairment.
Except for our ongoing obligations to disclose material information as required by federal securities laws, we undertake no obligation to update any forward-looking statements or risk factors after the date of this Quarterly Report on Form 10-Q.
Recent developments
Debt and interest expense reduction and refinancing strategy
We continue to pursue a strategy to further reduce our debt and interest expense. This strategy included entering into the quarter ended January 31,new Senior Secured Credit Facility and amending its accounts receivable securitization facility in May 2018 we committed to a plan to dispose of all of our rail cars utilized in the Midstream operations segment and as a result, reclassified 1,292 rail cars from "Property, plant and equipment, net" to "Assets held for sale" on our condensed consolidated balance sheet as of January 31, 2018. For the three and six months ended January 31, 2018, "Loss oncertain asset sales and disposals" includes a loss of $35.5 million relatedduring fiscal 2018. We continue to the write-down of these rail cars classified as "Assets held for sale".
Financial covenants
The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit our ability and the ability of specifiedits subsidiaries to, among other things, make restricted payments and incur additional indebtedness. Our general partner believes that the most restrictive of these covenants are those related to the consolidated fixed charge coverage ratio, as defined in the indenture governing
64
the outstanding notes of Ferrellgas Partners, and the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of the operating partnership.
Consolidated fixed charge coverage ratio - Ferrellgas Partners, andL.P., the consolidated leverage ratio and consolidated interest coverage ratio, as defined in our secured credit facility and our accounts receivable securitization facility.
Under the Ferrellgas Partners indenture, before a restricted payment (as defined in the secured credit facility and the operating partnership indentures) can be made by the operating partnership, the operating partnership must be in compliance with the consolidated leverage ratio and consolidated interest coverage ratio covenants under the secured credit facility and accounts receivable securitization facility and in compliance with the covenants under the operating partnership's indentures. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make semi-annual interest payments on its $357.0 million 8.625% unsecured senior notes due 2020 or distributions to Ferrellgas Partners common unitholders. If Ferrellgas Partners does not make interest payments on its unsecured notes, that would constitute an event of default which would permit the acceleration of the obligations underlying the Ferrellgas Partners indenture, including all outstanding principal owed. The accelerated obligations would become immediately due and payable, which would in turn trigger cross acceleration of other debt. If Ferrellgas' debt obligations are accelerated, Ferrellgas may be unable to borrow sufficient funds to refinance debt in which case unitholders and investors in our debt instruments could experience a partial or total loss of their investment.
The restricted payments covenant or the consolidated interest coverage ratio covenant under the secured credit facility and the accounts receivable securitization facility would result in an event of default under those facilities resulting in the operating partnership’s inability to obtain funds under those facilities and would give the lenders and receivables purchasers the right to accelerate the operating partnership’s obligations under those facilities and to exercise remedies to collect the outstanding amounts under those facilities. If the lenders and receivables purchasers accelerated the operating partnership's obligations,requires that, would constitute an event of default which would permit the acceleration of the obligations underlying thefor Ferrellgas Partners indenture, including all outstanding principal owed. The accelerated obligations would become immediately due and payable, which would in turn trigger cross acceleration of other debt. If our debt obligations are accelerated, we may be unable to borrow sufficient funds to refinance debt in which case unitholders and investors in our debt instruments could experience a partial or total loss of their investment.
Consolidated fixed charge coverage ratio - Ferrellgas, L.P., the operating partnership
Under the operating partnership indentures, before a restricted payment (as defined in the indentures) can be made by the operating partnership to Ferrellgas Partners, the operating partnership must satisfy a consolidated fixed charge coverage ratio requirement or have unused capacity under a limited exception to the ratio requirement. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders or make interest payments on March 16, 2018Ferrellgas Partners’ unsecured senior notes due 2020.
The restricted payments covenants require that, for the operating partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the operating partnership be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, the operating partnership may make restricted payments in limited amounts determined under the indentures. As of April 30, 2019, the ratio was 1.72x. As a result, it’s likely the distribution that will be takenmade by the operating partnership on June 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 will be made from capacity under the $50.0 million restricted payment limitation, which after consideringlimited exception to the $9.8 million deductions taken as a resultratio requirement. The operating partnership believes that its remaining capacity under the limited exception to the ratio requirement will allow it to make distributions to Ferrellgas Partners’ to cover interest payments on Ferrellgas Partners’ unsecured senior notes due 2020 through the maturity of those notes.
Distributions
As discussed above, no distributions will be paid to common unitholders in June 2019 for the distributions paid in September 2017 and December 2017, leaves $20.6 million for future restricted payments.three months ended April 30, 2019. Unless the indenture governing the outstanding Ferrellgas Partners notes is amended or refinanced,replaced, if our consolidated fixed charge coverage ratio under that indenture does not improve to at least 1.75x, and we continue our current quarterly distribution rate of $0.10 per common unit, this covenant will not allow us to make common unit distributions for our quarter ending October 31, 2018April 30, 2019 and beyond.
How We Evaluate Our Operations
We evaluate our overall business performance based primarily on Adjusted EBITDA.a metric we refer to as “Adjusted EBITDA”, which is not defined by GAAP and should not be considered an alternative to earnings measures defined by GAAP. We do not utilize depreciation, depletion and amortization expense in our key measures because we focus our performance management on cash flow generation and our revenue generating assets have long useful lives. For the definition of
65
Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Net earnings (loss) attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, see the subheading “Non-GAAP Financial Measures” below.
Propane operations and related equipment sales
Based on our propane sales volumes in fiscal 2017,2018, we believe that we are the second largest retail marketer of propane in the United States and a leading national provider of propane by portable tank exchange. We serve residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all 50 states, the District of Columbia and Puerto Rico. Our operations primarily include the distribution and sale of propane and related equipment and supplies with concentrations in the Midwest, Southeast, Southwest and Northwest regions of the United States.
We use information on temperatures to understand how our results of operations are affected by temperatures that are warmer or colder than normal. Normal temperatures computed by us are the average of the last 3010 years of information published by the
Weather conditions have a significant impact on demand for propane for heating purposes primarily during the months of November through March (the “winter heating season”). Accordingly, the volume of propane used by our customers for this purpose is directly affected by the severity of the winter weather in the regions we serve and can vary substantially from year to year. In any given region, sustained warmer-than-normal temperatures will tend to result in reduced propane usage, while sustained colder-than-normal temperatures will tend to result in greater usage. Although there is a strong correlation between weather and customer usage, general economic conditions in the United States and the wholesale price of propane can have a significant impact on this correlation. Additionally, there is a natural time lag between the onset of cold weather and increased sales to customers. If the United States were to experience a cooling trend we could expect nationwide demand for propane to increase which could lead to greater sales, income and liquidity availability. Conversely, if the United States were to experience a continued warming trend, we could expect nationwide demand for propane for heating purposes to decrease which could lead to a reduction in our sales, income and liquidity availability as well as impact our ability to maintain compliance with our debt covenants.
We employ risk management activities that attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts. We enter into propane sales commitments with a portion of our customers that provide for a contracted price agreement for a specified period of time. These commitments can expose us to product price risk if not immediately hedged with an offsetting propane purchase commitment.
Our open financial derivative propane purchase commitments are designated as hedges primarily for fiscal 20182019 and 20192020 sales commitments and, as of January 31, 2018,April 30, 2019, have experienced net mark-to-market gainslosses of approximately $24.3$1.0 million. Because these financial derivative purchase commitments qualify for hedge accounting treatment, the resulting asset, liability and related mark-to-market gains or losses are recorded on the condensed consolidated balance sheets as “Prepaid expenses and other current assets,” "Other assets, net," “Other current liabilities,” "Other liabilities" and “Accumulated other comprehensive income,loss,” respectively, until settled. Upon settlement, realized gains or losses on these contracts will be reclassified to “Cost of sales-propane and other gas liquid sales” in the condensed consolidated statements of operations as the underlying inventory is sold. These financial derivative purchase commitment net gainslosses are expected to be offset by decreasedincreased margins on propane sales commitments that qualify for the normal purchase normal sale exception. At January 31, 2018,April 30, 2019, we estimate 72%73% of currently open financial derivative purchase commitments, the related propane sales commitments and the resulting gross margin will be realized into earnings during the next twelve months.
66
Summary Discussion of Results of Operations:
Items Impacting the Comparability of Our Financial Results
Our current and future results of operations will not be comparable to our historical results of operations for the periods presented due to the following transactions:
· | During the fourth quarter of fiscal 2018, we completed the sale of a subsidiary and a group of assets within the Midstream operations segment. The subsidiary sold was Bridger Environmental LLC, which encompassed all saltwater disposal activities previously operated by us. The group of assets sold included all assets, excluding working capital, associated with the crude oil trucking operations previously operated by us. Additionally, the sale included two crude oil injection terminals. |
· | During the third quarter of fiscal 2018, we sold all 1,292 rail tank cars utilized in our Midstream operations segment. |
· | During the second quarter of fiscal 2018, we completed the sale of Bridger Energy, LLC, included in our Midstream operations segment. |
· | During the fourth quarter of fiscal 2018, we completed the sale of a group of assets encompassing an immaterial reporting unit within our Propane operations segment that sold lower margin propane related equipment. |
· | Operating loss and Adjusted EBITDA associated with these divestitures in the three months ended April 30, 2018 was $7.8 million and $2.3 million, respectively. Operating loss and Adjusted EBITDA associated with these divestitures in the nine months ended April 30, 2018 was $62.2 million and $13.4 million, respectively. |
For the three months ended January 31,April 30, 2019 and 2018 and 2017
During the three months ended January 31, 2018,April 30, 2019, we generated net lossearnings attributable to Ferrellgas Partners L.P. of $1.8$20.5 million, compared to net earnings attributable to Ferrellgas Partners L.P. of $38.1$10.9 million during the three months ended January 31, 2017.
Our propane operations and related equipment sales segment generated operating income of $101.8$77.1 million during the three months ended January 31, 2018,April 30, 2019, compared to operating income of $95.3$74.5 million earned during the three months ended April 30, 2018. The increase in operating income is primarily due to an $18.3 million increase in “Gross margin – Propane and other gas liquid sales”, largely offset by a $9.3 million increase in "Operating, general and administrative expense", a $4.3 million decrease in “Gross margin – other”, and a $1.3 million increase in "Equipment lease expense". The increase in "Operating, general and administrative expense" and "Gross margin - Propane and other gas liquid sales" primarily resulted from a 4% increase in retail customer count and the increase in total gallons sold. The impact of the sale of a group of assets that sold lower margin propane related equipment at the end of fiscal 2018 resulted in the decrease in "Gross margin - other". The increase in “Equipment lease expense” is due to continued investment in new propane delivery trucks both to serve our expanding customer base and to reduce the age of our fleet. In addition, we purchased new propane delivery trucks as discussed below.
Our corporate and other operations recognized an operating loss of $12.3 million during the three months ended January 31, 2017. DueApril 30, 2019, compared to the seasonal nature of demand for propane, sales volumes of our propane operations and related equipment sales segment typically are higher during the second and third quarters of the fiscal year than during the first and fourth quarters of the fiscal year. The increase in operating income resulted from a $27.0 million increase in gross margin largely offset by a
“Interest expense” for Ferrellgas increased $5.9$3.8 million primarily due to increased interest rates on theour secured credit facility and accounts receivable securitization facility, as well as increased interest rates associated with the $175.0 million of debt issued by Ferrellgas Partners in January 2017, which replaced a portion of the borrowings under the secured credit facility.
Distributable cash flow attributable to equity investors increaseddecreased to $79.2$34.7 million in the current period from $68.9$43.9 million in the prior period primarily due to a $15.6$7.8 million increase in our Adjusted EBITDA, partially offset bymaintenance capital expenditures and a $5.0$2.9 million increase in net cash interest expense. This increase in maintenance capital expenditures primarily relates to the purchase of new propane delivery trucks which have historically been leased.
67
Distributable cash flow excess increased to $67.9$34.0 million in the current period from $57.8$33.3 million in the prior period, primarily due to a $15.6an $7.8 million increase in our Adjusted EBITDA,maintenance capital expenditures and a $2.9 million increase in cash interest expense, as discussed above, partially offset by a $5.0$9.7 million increasedecrease in net cash interest expense.
For the sixnine months ended January 31,April 30, 2019 and 2018 and 2017
During the sixnine months ended January 31, 2018,April 30, 2019, we generated net earnings attributable to Ferrellgas Partners L.P. of $6.8 million, compared to net loss attributable to Ferrellgas Partners L.P. of $49.8 million, compared to $5.0$38.9 million during the sixnine months ended January 31, 2017.
Our propane operations and related equipment sales segment generated operating income of $113.0$192.1 million during the sixnine months ended January 31, 2018,April 30, 2019, compared to operating income of $111.9$187.5 million earned during the sixnine months ended January 31, 2017. Due to the seasonal nature of demand for propane, sales volumes of our propane operations and related equipment sales segment typically are higher during the second and third quarters of the fiscal year than during the first and fourth quarters of the fiscal year.April 30, 2018. The slight increase in operating income resulted from the $27.5is primarily due to a $35.1 million increase in gross“Gross margin being largely offset by a $17.1 million increase in operating expenses– Propane and other gas liquid sales” and a $10.0 million impairment of goodwill in the nine months ended April 30, 2018 related to an immaterial reporting unit.
Our midstreamcorporate and other operations segment generatedrecognized an operating loss of $45.1$52.1 million during the sixnine months ended January 31, 2018April 30, 2019, compared to an operating loss of $11.9$103.8 million recognized during the sixnine months ended January 31, 2017.April 30, 2018. This increasedecrease in operating loss iswas primarily due to a $35.5$53.6 million operating loss on disposal of rail car assets recognizedrelated to our midstream operations in fiscal 2018.
“Interest expense” for Ferrellgas increased $11.2$9.1 million primarily due to increased interest rates on theour secured credit facility and accounts receivable securitization facility, as well as increased interest rates associated with the $175.0 million of debt issued by Ferrellgas Partners in January 2017, which replaced a portion of the borrowings under the secured credit facility.
Distributable cash flow attributable to equity investors of $59.9decreased to $60.1 million in the current period decreased from $62.7$103.8 million in the prior period primarily due to a $9.5$26.0 million increase in netour maintenance capital expenditures, a $10.2 million decrease in our Adjusted EBITDA related to midstream operations in fiscal 2018 and a $7.7 million increase in cash interest expense, a $6.3 millionexpense. This increase in maintenance capital expenditures partially offset by a $12.8 million increase in our Adjusted EBITDA. The increase in maintenance capital expenditures was primarily forrelates to the purchase of new propane delivery trucks.
Distributable cash flow excess increaseddecreased to $39.3$49.2 million in the current period from $1.9$72.6 million in the prior period, primarily due to a $40.1$26.0 million increase in our maintenance capital expenditures, a $10.2 million decrease in our Adjusted EBITDA related to midstream operations in fiscal 2018 and a $7.7 million increase in cash interest expense, partially offset by a $19.4 million decrease in distributions paid to common unitholders and a $12.8 million increase in our Adjusted EBITDA, partially offset by a $9.5 million increase in net cash interest expense and a $6.3 million increase in maintenance capital expenditures.unitholders.
68
Consolidated Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, |
| Nine months ended April 30, |
| ||||||||
(amounts in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Total revenues |
| $ | 479,625 |
| $ | 515,810 |
| $ | 1,405,311 |
| $ | 1,725,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
|
| 252,709 |
|
| 294,787 |
|
| 774,845 |
|
| 1,086,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense |
|
| 119,991 |
|
| 116,579 |
|
| 351,541 |
|
| 350,757 |
|
Depreciation and amortization expense |
|
| 20,617 |
|
| 25,348 |
|
| 59,214 |
|
| 76,565 |
|
General and administrative expense |
|
| 11,516 |
|
| 11,678 |
|
| 42,037 |
|
| 39,733 |
|
Equipment lease expense |
|
| 8,319 |
|
| 7,133 |
|
| 24,597 |
|
| 20,828 |
|
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| 4,688 |
|
| 10,731 |
|
Asset impairments |
|
| — |
|
| — |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 1,683 |
|
| 6,270 |
|
| 8,403 |
|
| 46,414 |
|
Operating income |
|
| 64,794 |
|
| 51,277 |
|
| 139,986 |
|
| 83,687 |
|
Interest expense |
|
| (44,162) |
|
| (40,375) |
|
| (132,931) |
|
| (123,855) |
|
Other income, net |
|
| 251 |
|
| 227 |
|
| 356 |
|
| 1,422 |
|
Earnings (loss) before income taxes |
|
| 20,883 |
|
| 11,129 |
|
| 7,411 |
|
| (38,746) |
|
Income tax expense |
|
| 123 |
|
| 67 |
|
| 284 |
|
| 282 |
|
Net earnings (loss) |
|
| 20,760 |
|
| 11,062 |
|
| 7,127 |
|
| (39,028) |
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 299 |
|
| 201 |
|
| 337 |
|
| (131) |
|
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
|
| 20,461 |
|
| 10,861 |
|
| 6,790 |
|
| (38,897) |
|
Less: General partner's interest in net earnings (loss) |
|
| 205 |
|
| 109 |
|
| 68 |
|
| (389) |
|
Common unitholders' interest in net earnings (loss) |
| $ | 20,256 |
| $ | 10,752 |
| $ | 6,722 |
| $ | (38,508) |
|
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| (amounts in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Total revenues | $ | 755,156 | $ | 579,250 | $ | 1,209,811 | $ | 958,792 | ||||||||
| Total cost of sales | 490,772 | 342,710 | 792,114 | 568,310 | ||||||||||||
| Operating expense | 123,716 | 113,076 | 234,178 | 218,162 | ||||||||||||
| Depreciation and amortization expense | 25,485 | 25,607 | 51,217 | 51,809 | ||||||||||||
| General and administrative expense | 14,891 | 12,279 | 28,055 | 26,548 | ||||||||||||
| Equipment lease expense | 6,954 | 7,416 | 13,695 | 14,765 | ||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 7,993 | 6,699 | ||||||||||||
| Asset impairments | 10,005 | — | 10,005 | — | ||||||||||||
| Loss on asset sales and disposals | 39,249 | 45 | 40,144 | 6,468 | ||||||||||||
| Operating income | 40,053 | 75,172 | 32,410 | 66,031 | ||||||||||||
| Interest expense | (42,673 | ) | (36,819 | ) | (83,480 | ) | (72,247 | ) | ||||||||
| Other income, net | 684 | 763 | 1,195 | 1,271 | ||||||||||||
| Earnings (loss) before income taxes | (1,936 | ) | 39,116 | (49,875 | ) | (4,945 | ) | |||||||||
| Income tax expense (benefit) | (162 | ) | 588 | 215 | (2 | ) | ||||||||||
| Net earnings (loss) | (1,774 | ) | 38,528 | (50,090 | ) | (4,943 | ) | |||||||||
| Net earnings (loss) attributable to noncontrolling interest | 69 | 430 | (332 | ) | 32 | |||||||||||
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | (1,843 | ) | 38,098 | (49,758 | ) | (4,975 | ) | |||||||||
| Less: General partner's interest in net earnings (loss) | (19 | ) | 381 | (498 | ) | (50 | ) | |||||||||
| Common unitholders' interest in net earnings (loss) | $ | (1,824 | ) | $ | 37,717 | $ | (49,260 | ) | $ | (4,925 | ) | |||||
Non-GAAP Financial Measures
In this Quarterly Report we present three primarythe following non-GAAP financial measures: Adjusted EBITDA, Distributable cash flow attributable to equity investors, and Distributable cash flow attributable to common unitholders.
Adjusted EBITDA. Adjusted EBITDA is calculated as net earnings (loss) attributable to Ferrellgas Partners, L.P., less the sum of the following: income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, asset impairments, loss on asset sales and disposals, other income, net, severance costs, professionallegal fees incurred related to a lawsuit,and settlements, multi-employer pension withdrawal settlement, unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments, and net earnings (loss) attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership'spartnership’s performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
Distributable Cash Flow Attributable to Equity Investors. Distributable cash flow attributable to equity investors is calculated as Adjusted EBITDA minus net cash interest expense, maintenance capital expenditures and cash paid for taxes, plus proceeds from asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to equity investors. Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to distributable cash flow attributable to equity investors or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to equity investors may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
Distributable Cash Flow Attributable to Common Unitholders. Distributable cash flow attributable to common unitholders is calculated as Distributable cash flow attributable to equity investors minus distributable cash flow attributable to general partner and noncontrolling interest. Management considers distributableDistributable cash flow attributable to
69
common unitholders a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to common unitholders. Distributable cash flow attributable to common unitholders, as management defines it, may not be comparable to distributable cash flow attributable to common unitholders or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to common unitholders that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to common unitholders should be viewed in conjunction with measurements that are computed in accordance with GAAP.
Distributable Cash Flow Excess. Distributable cash flow excess is calculated as Distributable cash flow attributable to common unitholders minus Distributions paid to common unitholders. Distributable cash flow excess, if any, is retained to establish reserves to reduce debt, fund capital expenditures and for other partnership purposes and management considers Distributable cash flow excess a meaningful measure of the partnership’s ability to effectuate those purposes. Items added into our calculation of distributable cash flow excess that will not occur on a continuing basis may not be consistent with that of other companies andhave associated cash payments. Distributable cash excess should be viewed in conjunction with measurements that are computed in accordance with GAAP.
The following table summarizesreconciles EBITDA, Adjusted EBITDA, Distributable cash flow attributable to equity investors andinvestors. Distributable cash flow attributable to common unitholders and Distributable cash flow excess to Net earnings (loss) attributable to Ferrellgas Partners, L.P. for the three and sixnine months ended January 31, 2018April 30, 2019 and 2017, respectively:2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended April 30, |
| Nine months ended April 30, |
| ||||||||
(amounts in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
| $ | 20,461 |
| $ | 10,861 |
| $ | 6,790 |
| $ | (38,897) |
|
Income tax expense (benefit) |
|
| 123 |
|
| 67 |
|
| 284 |
|
| 282 |
|
Interest expense |
|
| 44,162 |
|
| 40,375 |
|
| 132,931 |
|
| 123,855 |
|
Depreciation and amortization expense |
|
| 20,617 |
|
| 25,348 |
|
| 59,214 |
|
| 76,565 |
|
EBITDA |
|
| 85,363 |
|
| 76,651 |
|
| 199,219 |
|
| 161,805 |
|
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| 4,688 |
|
| 10,731 |
|
Assets impairments |
|
| — |
|
| — |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 1,683 |
|
| 6,270 |
|
| 8,403 |
|
| 46,414 |
|
Other income (expense), net |
|
| (251) |
|
| (227) |
|
| (356) |
|
| (1,422) |
|
Severance costs |
|
| — |
|
| — |
|
| 1,600 |
|
| 1,663 |
|
Legal fees and settlements |
|
| 1,471 |
|
| 1,289 |
|
| 10,643 |
|
| 3,407 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| — |
|
| 1,524 |
|
| — |
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| — |
|
| — |
|
| 1,293 |
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 299 |
|
| 201 |
|
| 337 |
|
| (131) |
|
Adjusted EBITDA |
|
| 88,561 |
|
| 86,922 |
|
| 226,058 |
|
| 233,765 |
|
Net cash interest expense (a) |
|
| (40,747) |
|
| (37,873) |
|
| (123,325) |
|
| (115,664) |
|
Maintenance capital expenditures (b) |
|
| (13,506) |
|
| (5,741) |
|
| (45,038) |
|
| (19,085) |
|
Cash refund from (paid for) taxes |
|
| (23) |
|
| 470 |
|
| (21) |
|
| 458 |
|
Proceeds from certain asset sales |
|
| 456 |
|
| 148 |
|
| 2,416 |
|
| 4,355 |
|
Distributable cash flow attributable to equity investors |
|
| 34,741 |
|
| 43,926 |
|
| 60,090 |
|
| 103,829 |
|
Distributable cash flow attributable to general partner and non-controlling interest |
|
| (695) |
|
| (879) |
|
| (1,202) |
|
| (2,077) |
|
Distributable cash flow attributable to common unitholders |
|
| 34,046 |
|
| 43,047 |
|
| 58,888 |
|
| 101,752 |
|
Less: Distributions paid to common unitholders |
|
| — |
|
| (9,715) |
|
| (9,715) |
|
| (29,146) |
|
Distributable cash flow excess |
| $ | 34,046 |
| $ | 33,332 |
| $ | 49,173 |
| $ | 72,606 |
|
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| (amounts in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | $ | (1,843 | ) | $ | 38,098 | $ | (49,758 | ) | $ | (4,975 | ) | |||||
| Income tax expense (benefit) | (162 | ) | 588 | 215 | (2 | ) | ||||||||||
| Interest expense | 42,673 | 36,819 | 83,480 | 72,247 | ||||||||||||
| Depreciation and amortization expense | 25,485 | 25,607 | 51,217 | 51,809 | ||||||||||||
| EBITDA | 66,153 | 101,112 | 85,154 | 119,079 | ||||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 7,993 | 6,699 | ||||||||||||
| Non-cash stock-based compensation charge | — | 1,417 | — | 3,298 | ||||||||||||
| Asset impairments | 10,005 | — | 10,005 | — | ||||||||||||
| Loss on asset sales and disposals | 39,249 | 45 | 40,144 | 6,468 | ||||||||||||
| Other income, net | (684 | ) | (763 | ) | (1,195 | ) | (1,271 | ) | ||||||||
| Severance costs | — | 490 | 1,663 | 1,959 | ||||||||||||
| Professional fees (d) | 2,118 | — | 2,118 | — | ||||||||||||
| Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | (314 | ) | (646 | ) | 1,293 | (2,215 | ) | |||||||||
| Net earnings (loss) attributable to noncontrolling interest | 69 | 430 | (332 | ) | 32 | |||||||||||
| Adjusted EBITDA | 120,627 | 105,030 | 146,843 | 134,049 | ||||||||||||
| Net cash interest expense (a) | (39,734 | ) | (34,712 | ) | (77,791 | ) | (68,330 | ) | ||||||||
| Maintenance capital expenditures (b) | (4,640 | ) | (3,754 | ) | (13,344 | ) | (7,076 | ) | ||||||||
| Cash paid for taxes | (6 | ) | (25 | ) | (12 | ) | (26 | ) | ||||||||
| Proceeds from asset sales | 2,999 | 2,313 | 4,207 | 4,033 | ||||||||||||
| Distributable cash flow attributable to equity investors | 79,246 | 68,852 | 59,903 | 62,650 | ||||||||||||
| Distributable cash flow attributable to general partner and non-controlling interest | 1,585 | 1,377 | 1,198 | 1,253 | ||||||||||||
| Distributable cash flow attributable to common unitholders | 77,661 | 67,475 | 58,705 | 61,397 | ||||||||||||
| Less: Distributions paid to common unitholders | 9,716 | 9,715 | 19,431 | 59,506 | ||||||||||||
| Distributable cash flow excess (c) | $ | 67,945 | $ | 57,760 | $ | 39,274 | $ | 1,891 | ||||||||
(a) | Net cash interest expense is the sum of interest expense less non-cash interest expense and other income (expense), net. This amount includes interest expense related to the accounts receivable securitization facility. |
(b) | Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment. |
70
Segment Operating Results for the three months ended January 31,April 30, 2019 and 2018 and 2017
Propane operations and related equipment sales
The following table summarizes propane sales volumes and the Adjusted EBITDA results of our propane operations and related equipment sales segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
As of April 30, |
|
|
|
|
|
|
|
|
|
|
|
|
Retail customers |
|
| 705,605 |
|
| 679,678 |
|
| 25,927 |
| 4 | % |
Tank exchange selling locations |
|
| 54,308 |
|
| 51,165 |
|
| 3,143 |
| 6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, |
|
|
|
|
|
|
|
|
|
|
|
|
Propane sales volumes (gallons): |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
|
| 204,441 |
|
| 189,183 |
|
| 15,258 |
| 8 | % |
Wholesale - Sales to Resellers |
|
| 59,641 |
|
| 57,121 |
|
| 2,520 |
| 4 | % |
|
|
| 264,082 |
|
| 246,304 |
|
| 17,778 |
| 7 | % |
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
| $ | 350,151 |
| $ | 330,320 |
| $ | 19,831 |
| 6 | % |
Wholesale - Sales to Resellers |
|
| 99,311 |
|
| 97,689 |
|
| 1,622 |
| 2 | % |
Other Gas Sales (a) |
|
| 10,094 |
|
| 23,293 |
|
| (13,199) |
| (57) | % |
Other (b) |
|
| 20,069 |
|
| 41,913 |
|
| (21,844) |
| (52) | % |
Propane and related equipment revenues |
| $ | 479,625 |
| $ | 493,215 |
| $ | (13,590) |
| (3) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: (c) |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users (a) |
| $ | 167,179 |
| $ | 151,084 |
| $ | 16,095 |
| 11 | % |
Wholesale - Sales to Resellers (a) |
|
| 41,988 |
|
| 39,799 |
|
| 2,189 |
| 6 | % |
Other (b) |
|
| 17,749 |
|
| 22,063 |
|
| (4,314) |
| (20) | % |
Propane and related equipment gross margin |
| $ | 226,916 |
| $ | 212,946 |
| $ | 13,970 |
| 7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense (d) |
| $ | 119,989 |
| $ | 110,673 |
| $ | 9,316 |
| 8 | % |
Equipment lease expense |
|
| 7,939 |
|
| 6,626 |
|
| 1,313 |
| 20 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
| $ | 77,118 |
| $ | 74,479 |
| $ | 2,639 |
| 4 | % |
Depreciation and amortization expense |
|
| 20,187 |
|
| 18,880 |
|
| 1,307 |
| 7 | % |
Loss on asset sales and disposals |
|
| 1,683 |
|
| 2,288 |
|
| (605) |
| (26) | % |
Adjusted EBITDA |
| $ | 98,988 |
| $ | 95,647 |
| $ | 3,341 |
| 3 | % |
(a) | Gross margin for Other Gas Sales is allocated to Gross margin "Retail - Sales to End Users" and "Wholesale - Sales to Resellers" based on the volumes in each respective category. |
| (amounts in thousands) | |||||||||||||||
| Three months ended January 31, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
| Propane sales volumes (gallons): | |||||||||||||||
| Retail - Sales to End Users | 235,071 | 201,580 | 33,491 | 17 | % | ||||||||||
| Wholesale - Sales to Resellers | 74,942 | 66,152 | 8,790 | 13 | % | ||||||||||
| 310,013 | 267,732 | 42,281 | 16 | % | |||||||||||
| Revenues - | |||||||||||||||
| Propane and other gas liquids sales: | |||||||||||||||
| Retail - Sales to End Users | $ | 417,472 | $ | 313,169 | $ | 104,303 | 33 | % | |||||||
| Wholesale - Sales to Resellers | 128,654 | 103,223 | 25,431 | 25 | % | ||||||||||
| Other Gas Sales (a) | 46,113 | 20,983 | 25,130 | 120 | % | ||||||||||
| Other (b) | 45,641 | 45,088 | 553 | 1 | % | ||||||||||
| Propane and related equipment revenues | $ | 637,880 | $ | 482,463 | $ | 155,417 | 32 | % | |||||||
| Gross Margin - | |||||||||||||||
| Propane and other gas liquids sales: (c) | |||||||||||||||
| Retail - Sales to End Users (a) | $ | 182,129 | $ | 158,369 | $ | 23,760 | 15 | % | |||||||
| Wholesale - Sales to Resellers (a) | 47,192 | 43,977 | 3,215 | 7 | % | ||||||||||
| Other (b) | 24,854 | 24,431 | 423 | 2 | % | ||||||||||
| Propane and related equipment gross margin | $ | 254,175 | $ | 226,777 | $ | 27,398 | 12 | % | |||||||
| Operating, general and administrative expense (d) | $ | 117,306 | $ | 106,651 | $ | 10,655 | 10 | % | |||||||
| Equipment lease expense | 6,375 | 6,704 | (329 | ) | (5 | )% | |||||||||
| Operating income | $ | 101,767 | $ | 95,332 | $ | 6,435 | 7 | % | |||||||
| Depreciation and amortization expense | 18,167 | 18,017 | 150 | 1 | % | ||||||||||
| Loss on asset sales and disposals | 555 | 73 | 482 | 660 | % | ||||||||||
| Asset impairments | 10,005 | — | 10,005 | NM | |||||||||||
| Unrealized (non-cash) gains on changes in fair value of derivatives not designated as hedging instruments | — | (1,134 | ) | 1,134 | 100 | % | |||||||||
| Adjusted EBITDA | $ | 130,494 | $ | 112,288 | $ | 18,206 | 16 | % | |||||||
(b) | Other primarily includes appliance and material sales, and to a lesser extent various customer fee income. |
(c) | Gross margin from "Propane and other gas liquids sales" represents "Revenues - Propane and other gas liquids sales" less "Cost of sales - Propane and other gas liquids sales" and does not include depreciation and amortization. |
(d) | Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment. |
Propane sales volumes during the three months ended January 31, 2018April 30, 2019 increased 16%7% or 42.317.8 million gallons from that of the prior year period due to 33.5 million and 8.8 million of increased gallon sales to retail customers of 15.2 million gallons, and an increase of 2.5 million gallons to wholesale customers. The increase in propane sales volumes to retail customers respectively.was primarily due to the 4% increase in retail customer count.
71
Weather in the more highly concentrated geographic areas we serve for the three months ended January 31, 2018April 30, 2019 was approximately 5% warmer6% colder than normal, but 12%and approximately 1% colder than the prior year period. Retail and wholesale gallons increased due to a combination of efforts to increase market share and to a lesser extent colder weather.
Our wholesale sales price per gallon largely correlates to the change in the wholesale market price of propane. The wholesale market price at major supply points in Mt. Belvieu, Texas and Conway, Kansasmajor supply point during the three months ended January 31, 2018April 30, 2019 averaged 46% and 45% greater20% less than the prior year period, respectively.while at the Conway, Kansas major supply point prices averaged 15% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.95$0.66 and $0.65$0.82 per gallon during the three months ended January 31,April 30, 2019 and 2018, and 2017, respectively, while the wholesale market price at Conway, Kansas averaged $0.90$0.58 and $0.62$0.68 per gallon during the three months ended January 31,April 30, 2019 and 2018, and 2017, respectively.
Revenues
Retail sales increased $104.3$19.8 million compared to the prior period. This increase resulted from a $52.3$26.6 million increase in sales volumes, partially offset by a $6.8 million decrease in sales price per gallon, and $52.0 million from increased sales volumes, both as discussed above.
Wholesale sales increased $25.4$1.6 million compared to the prior period. This increase primarily resulted from a $13.9$7.8 million increase in sales volumes, and an $11.5largely offset by a $6.1 million increasedecrease in sales price per gallon, both as discussed above.
Other revenues increased $0.6gas sales decreased $13.2 million compared to the prior year period primarily due to an increasea decrease in sales volume.
Other revenues decreased $21.8 million compared to the salesprior year period primarily due to the sale of certainour lower margin equipment.
Gross margin - Propane and other gas liquids sales
Gross margin increased $27.0$18.3 million primarily due to the 42.3 million increase in gallon sales, as discussed above, partially offset by a slight decrease in gross margin per gallon.above. The increase in retail gross margin of $23.8$16.1 million resulted from efforts toan increase market sharein retail customer counts and to a lesser extent colder weather.increases in gross margin per gallon, both as discussed above. The increase in retail gross margin of $16.1 million resulted primarily from an increase in retail customer accounts and to a lesser extent an increase in gross margin per gallon. The $2.2 million increase in wholesale gross margin primarily relates to increased volumes, related to colder weather,as discussed above, partially offset by decreased gross margin per gallon.
Gross margin - other
Gross margin decreased $4.3 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.
Operating income
Operating income increased $6.4$2.6 million primarily due to a $27.0an $18.3 million increase in Gross“Gross margin -– Propane and other gas liquid sales, partiallysales”, as discussed above, largely offset by a $10.7$9.3 million increase in "Operating, general and administrative expense" primarily resulting from the increase in retail customer count, as discussed above, a $4.3 million decrease in “Gross margin – other”, as discussed above, and a $10.0$1.3 million "Asset impairments"increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $5.6$7.5 million increase in field personnel costs, a $4.2 million increase in general liability and worker compensation costs, and a $3.8$1.2 million increase in vehicle fuel costs, bothpartially offset by $3.3 million of costs incurred in the prior year period related to a business sold in fiscal 2018. Equipment lease expense increased due to continued investment in new propane delivery trucks both to serve our expanding customer base and to reduce the age of our fleet.
Adjusted EBITDA
Adjusted EBITDA increased $3.3 million primarily due to an $18.3 million increase in gallons sold“Gross margin – Propane and other gas liquid sales”, as discussed above, largely offset by a $9.3 million increase in "Operating, general and
72
administrative expense", a $4.3 million decrease in “Gross margin – other”, as discussed above, and a $1.3 million increase in bad debt expense. The "Asset impairments" relates to an impairment of goodwill of an immaterial reporting unit.
| (amounts in thousands) | |||||||||||||||
| Three months ended January 31, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
| Volumes (barrels): | |||||||||||||||
| Crude oil hauled | 11,065 | 13,005 | (1,940 | ) | (15 | )% | |||||||||
| Crude oil sold | 1,556 | 1,326 | 230 | 17 | % | ||||||||||
| Salt water volume processed | 4,851 | 4,002 | 849 | 21 | % | ||||||||||
| Revenues - | |||||||||||||||
| Crude oil and other logistics | $ | 15,886 | $ | 19,573 | $ | (3,687 | ) | (19 | )% | ||||||
| Crude oil sales | 97,646 | 74,794 | 22,852 | 31 | % | ||||||||||
| Other | 3,744 | 2,510 | 1,234 | 49 | % | ||||||||||
| $ | 117,276 | $ | 96,877 | $ | 20,399 | 21 | % | ||||||||
| Gross margin - (a) | |||||||||||||||
| Crude oil and other logistics | $ | 6,550 | $ | 3,829 | $ | 2,721 | 71 | % | |||||||
| Crude oil sales | 2,365 | 4,888 | (2,523 | ) | (52 | )% | |||||||||
| Other | 1,294 | 1,046 | 248 | 24 | % | ||||||||||
| $ | 10,209 | $ | 9,763 | $ | 446 | 5 | % | ||||||||
| Operating, general, and administrative expenses (b) | $ | 7,464 | $ | 7,041 | $ | 423 | 6 | % | |||||||
| Equipment lease expense | 84 | 141 | (57 | ) | (40 | )% | |||||||||
| Operating loss | $ | (42,299 | ) | $ | (4,400 | ) | $ | (37,899 | ) | NM | |||||
| Depreciation and amortization expense | 6,266 | 7,009 | (743 | ) | (11 | )% | |||||||||
| Loss (gain) on asset sales and disposals | 38,694 | (28 | ) | 38,722 | NM | ||||||||||
| Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | (314 | ) | 488 | (802 | ) | NM | |||||||||
| Adjusted EBITDA | $ | 2,347 | $ | 3,069 | $ | (722 | ) | (24 | )% | ||||||
Corporate
The following table summarizes the financial results of our corporate operations for the periods indicated:indicated. Prior period amounts also include results of our midstream operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, |
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
Volumes (barrels): |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil hauled |
|
| — |
|
| 11,640 |
|
| (11,640) |
| NM |
|
Crude oil sold |
|
| — |
|
| 27 |
|
| (27) |
| NM |
|
Salt water volume processed |
|
| — |
|
| 4,761 |
|
| (4,761) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 17,500 |
| $ | (17,500) |
| NM |
|
Crude oil sales |
|
| — |
|
| 1,619 |
|
| (1,619) |
| NM |
|
Other |
|
| — |
|
| 3,476 |
|
| (3,476) |
| NM |
|
|
| $ | — |
| $ | 22,595 |
| $ | (22,595) |
| NM |
|
Gross margin (a) - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 5,540 |
| $ | (5,540) |
| NM |
|
Crude oil sales |
|
| — |
|
| 1,400 |
|
| (1,400) |
| NM |
|
Other |
|
| — |
|
| 1,137 |
|
| (1,137) |
| NM |
|
|
| $ | — |
| $ | 8,077 |
| $ | (8,077) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense |
| $ | 11,518 |
| $ | 17,584 |
| $ | (6,066) |
| (34) | % |
Equipment lease expense |
|
| 380 |
|
| 507 |
|
| (127) |
| (25) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
| $ | (12,324) |
| $ | (23,202) |
| $ | 10,878 |
| 47 | % |
Depreciation and amortization expense |
|
| 430 |
|
| 6,468 |
|
| (6,038) |
| (93) | % |
Non-cash employee stock ownership plan compensation charge |
|
| (4) |
|
| 2,738 |
|
| (2,742) |
| (100) | % |
Loss on asset sales and disposals |
|
| — |
|
| 3,982 |
|
| (3,982) |
| NM |
|
Legal fees and settlements |
|
| 1,471 |
|
| 1,289 |
|
| 182 |
| 14 | % |
Adjusted EBITDA |
| $ | (10,427) |
| $ | (8,725) |
| $ | (1,702) |
| (20) | % |
NM - Not meaningful
(a) | Gross margin represents "Revenues - Midstream operations" less "Cost of sales - Midstream operations" and does not include depreciation and amortization. |
| (amounts in thousands) | |||||||||||||||
| Three months ended January 31, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
| Operating, general and administrative expense (a) | $ | 13,837 | $ | 11,664 | $ | 2,173 | 19 | % | |||||||
| Equipment lease expense | 495 | 570 | (75 | ) | (13 | )% | |||||||||
| Operating loss | $ | (19,415 | ) | $ | (15,760 | ) | $ | (3,655 | ) | (23 | )% | ||||
| Depreciation and amortization expense | 1,052 | 581 | 471 | 81 | % | ||||||||||
| Non-cash employee stock ownership plan compensation charge | 4,031 | 2,945 | 1,086 | 37 | % | ||||||||||
| Non-cash stock based compensation charge | — | 1,417 | (1,417 | ) | (100 | )% | |||||||||
| Severance costs | — | 490 | (490 | ) | NM | ||||||||||
| Professional fees (b) | 2,118 | — | 2,118 | NM | |||||||||||
| Adjusted EBITDA | $ | (12,214 | ) | $ | (10,327 | ) | $ | (1,887 | ) | (18 | )% | ||||
In various dispositions that occurred during fiscal 2018, we sold our midstream businesses. Accordingly, much of the significant variances reported above result from the cessation of the midstream business by the end of fiscal 2018.
Operating loss
Operating loss of $19.4decreased by $10.9 million during the three months ended January 31, 2018,April 30, 2019 as compared to an operating loss of $15.8 million recognized during the three months ended January 31, 2017.April 30, 2018. This increasedecrease in operating loss iswas primarily due to the $8.5 million operating loss related to our midstream operations in fiscal 2018 and decreased corporate costs of $2.3 million. Corporate costs decreased primarily due to a $4.5$2.7 million decrease in non-cash employee stock ownership plan compensation costs, and $0.4 million decrease in depreciation and amortization, partially offset by a $1.2 million increase in legal costs, partially offset by acosts.
73
Adjusted EBITDA
Adjusted EBITDA decreased $1.7 million primarily due to the $1.0 million decrease in corporate personnel costs.
Segment Operating Results for the sixnine months ended January 31,April 30, 2019 and 2018 and 2017
Propane operations and related equipment sales
The following table summarizes propane sales volumes and the Adjusted EBITDA results of our propane operations and related equipment sales segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
As of April 30, |
|
|
|
|
|
|
|
|
|
|
|
|
Retail customers |
|
| 705,605 |
|
| 679,678 |
|
| 25,927 |
| 4 | % |
Tank exchange selling locations |
|
| 54,308 |
|
| 51,165 |
|
| 3,143 |
| 6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, |
|
|
|
|
|
|
|
|
|
|
|
|
Propane sales volumes (gallons): |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
|
| 573,152 |
|
| 543,548 |
|
| 29,604 |
| 5 | % |
Wholesale - Sales to Resellers |
|
| 179,256 |
|
| 185,492 |
|
| (6,236) |
| (3) | % |
|
|
| 752,408 |
|
| 729,040 |
|
| 23,368 |
| 3 | % |
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
| $ | 983,742 |
| $ | 931,495 |
| $ | 52,247 |
| 6 | % |
Wholesale - Sales to Resellers |
|
| 308,647 |
|
| 324,863 |
|
| (16,216) |
| (5) | % |
Other Gas Sales (a) |
|
| 52,245 |
|
| 89,941 |
|
| (37,696) |
| (42) | % |
Other (b) |
|
| 60,677 |
|
| 118,691 |
|
| (58,014) |
| (49) | % |
Propane and related equipment revenues |
| $ | 1,405,311 |
| $ | 1,464,990 |
| $ | (59,679) |
| (4) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: (c) |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users (a) |
| $ | 450,401 |
| $ | 411,644 |
| $ | 38,757 |
| 9 | % |
Wholesale - Sales to Resellers (a) |
|
| 128,177 |
|
| 131,803 |
|
| (3,626) |
| (3) | % |
Other (b) |
|
| 51,888 |
|
| 64,352 |
|
| (12,464) |
| (19) | % |
Propane and related equipment gross margin |
| $ | 630,466 |
| $ | 607,799 |
| $ | 22,667 |
| 4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense (d) |
| $ | 351,537 |
| $ | 332,244 |
| $ | 19,293 |
| 6 | % |
Equipment lease expense |
|
| 23,596 |
|
| 19,206 |
|
| 4,390 |
| 23 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
| $ | 192,086 |
| $ | 187,458 |
| $ | 4,628 |
| 2 | % |
Depreciation and amortization expense |
|
| 57,523 |
|
| 55,135 |
|
| 2,388 |
| 4 | % |
Loss on asset sales and disposals |
|
| 5,724 |
|
| 3,751 |
|
| 1,973 |
| 53 | % |
Asset impairments |
|
| — |
|
| 10,005 |
|
| (10,005) |
| NM |
|
Severance costs |
|
| 690 |
|
| 358 |
|
| 332 |
| 93 | % |
Multi-employer pension plan withdrawal settlement |
|
| 1,524 |
|
| — |
|
| 1,524 |
| NM |
|
Adjusted EBITDA |
| $ | 257,547 |
| $ | 256,707 |
| $ | 840 |
| 0 | % |
(a) | Gross margin for Other Gas Sales is allocated to Gross margin "Retail - Sales to End Users" and "Wholesale - Sales to Resellers" based on the volumes in each respective category. |
(b) | Other primarily includes appliance and material sales, and to a lesser extent various customer fee income. |
(c) | Gross margin from "Propane and other gas liquids sales" represents "Revenues - Propane and other gas liquids sales" less "Cost of sales - Propane and other gas liquids sales" and does not include depreciation and amortization. |
74
| (amounts in thousands) | |||||||||||||||
| Six months ended January 31, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
| Propane sales volumes (gallons): | |||||||||||||||
| Retail - Sales to End Users | 354,365 | 312,768 | 41,597 | 13 | % | ||||||||||
| Wholesale - Sales to Resellers | 128,371 | 118,142 | 10,229 | 9 | % | ||||||||||
| 482,736 | 430,910 | 51,826 | 12 | % | |||||||||||
| Revenues - | |||||||||||||||
| Propane and other gas liquids sales: | |||||||||||||||
| Retail - Sales to End Users | $ | 601,266 | $ | 461,786 | $ | 139,480 | 30 | % | |||||||
| Wholesale - Sales to Resellers | 227,083 | 187,442 | 39,641 | 21 | % | ||||||||||
| Other Gas Sales (a) | 66,648 | 30,546 | 36,102 | 118 | % | ||||||||||
| Other (b) | 76,778 | 74,187 | 2,591 | 3 | % | ||||||||||
| Propane and related equipment other revenues | $ | 971,775 | $ | 753,961 | $ | 217,814 | 29 | % | |||||||
| Gross Margin - | |||||||||||||||
| Propane and other gas liquids sales: (c) | |||||||||||||||
| Retail - Sales to End Users (a) | $ | 260,560 | $ | 239,754 | $ | 20,806 | 9 | % | |||||||
| Wholesale - Sales to Resellers (a) | 92,004 | 85,779 | 6,225 | 7 | % | ||||||||||
| Other (b) | 42,289 | 41,784 | 505 | 1 | % | ||||||||||
| Propane and related equipment gross margin | $ | 394,853 | $ | 367,317 | $ | 27,536 | 7 | % | |||||||
| Operating, general and administrative expense (d) | $ | 221,571 | $ | 204,510 | $ | 17,061 | 8 | % | |||||||
| Equipment lease expense | 12,580 | 13,277 | (697 | ) | (5 | )% | |||||||||
| Operating income | $ | 112,979 | $ | 111,860 | $ | 1,119 | 1 | % | |||||||
| Depreciation and amortization expense | 36,255 | 36,150 | 105 | — | % | ||||||||||
| Loss on asset sales and disposals | 1,463 | 1,520 | (57 | ) | (4 | )% | |||||||||
| Asset impairments | 10,005 | — | 10,005 | NM | |||||||||||
| Severance costs | 358 | 253 | 105 | 42 | % | ||||||||||
| Unrealized (non-cash) gains on changes in fair value of derivatives not designated as hedging instruments | — | (3,011 | ) | 3,011 | NM | ||||||||||
| Adjusted EBITDA | $ | 161,060 | $ | 146,772 | $ | 14,288 | 10 | % | |||||||
(d) | Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment. |
(d) Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment.
Weather in the more highly concentrated geographic areas we serve for the sixnine months ended January 31, 2018April 30, 2019 was approximately 7% warmer4% colder than normal but 13%and 2% colder than the prior year period. Retail and wholesale gallons increased due to a combination of efforts to increase market share and to a lesser extent colder weather.
Our wholesale sales price per gallon largelypartially correlates to the change in the wholesale market price of propane. The wholesale market price at major supply points in Mt. Belvieu, Texas and Conway, Kansas during the sixnine months ended January 31, 2018April 30, 2019 averaged 58% and 62% greater9% less than the prior year period, respectively.while at the Conway, Kansas major supply point prices averaged 18% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.90$0.79 and $0.57$0.87 per gallon during the sixnine months ended January 31,April 30, 2019 and 2018, and 2017, respectively, while the wholesale market price at Conway, Kansas averaged $0.86$0.66 and $0.53$0.80 per gallon during the sixnine months ended January 31,April 30, 2019 and 2018, and 2017, respectively.
Revenues
Retail sales increased $139.5$52.2 million compared to the prior period. This increase resulted from a $78.1$50.7 million increase in sales price per gallon and $61.4 million from increased sales volumes both as discussed above.
Wholesale sales increased $39.6decreased $16.2 million compared to the prior period. This increasedecrease primarily resulted from a $23.4$20.2 million increasedecrease in sales price per gallon and $16.2partially offset by a $4.0 million from increasedincrease in sales volumes, both as discussed above.
Other gas sales increased $36.1decreased $37.7 million compared to the prior year period primarily due to increaseddecreased sales price per gallon and to a lesser extent an increase in sales volumes, as discussed above.
Other revenues increased $2.6decreased $58.0 million compared to the prior year period primarily due to an increase in the salessale of certainour lower margin equipment.
Gross margin - Propane and other gas liquids sales
Gross margin increased $27.0$35.1 million primarily due to the 51.8 million increase in gallon sales, as discussed above, partially offset byand to a slight decrease inlesser extent increased gross margin per gallon. The increase in retail gross margin of $20.8$38.8 million resulted from efforts toan increase market sharein retail customer counts and to a lesser extent colder weather, partially offset by a decreasean increase in gross margin, per gallon.both as discussed above. The increase$3.7 million decrease in wholesale gross margin primarily relates to increased volumes related to colder weather, partially offset by a slight decreased gross margin per gallon.
Gross margin - other
Gross margin decreased $12.5 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.
Operating income
Operating income increased $1.1$4.6 million primarily due to a $27.0$35.1 million increase in Gross"Gross margin - Propane and other gas liquids salesliquid sales", as discussed above, and a $10.0 million impairment of goodwill related to an immaterial reporting unit that was not repeated in the current period, partially offset by a $17.1$19.3 million increase in "Operating, general and administrative expense" primarily resulting from the increase in retail customer count, as discussed above, and a $10.0$12.5 million "Asset impairment"decrease in "Gross margin - other", as discussed above, and a $4.4 million increase in "Equipment lease
75
expense". "Operating, general and administrative expense" increased primarily due to a $7.4$17.8 million increase in field personnel costs, a $6.7 million increase in general liability and worker compensation costs, a $5.7$2.9 million increase in vehicle fuel costs, bothand a $1.5 million pension settlement charge associated with the withdrawal from a multi-employer pension plan, partially offset by $9.8 million of costs incurred in the prior year period related to a business sold in fiscal 2018. Equipment lease expense increased due to continued investment in new propane delivery trucks to both serve our expanding customer base and to reduce the increase in gallons sold as discussed above and a $1.9 million increase in bad debt expense. The "Asset impairments" relates to an impairmentage of goodwill of an immaterial reporting unit.
Adjusted EBITDA
Adjusted EBITDA increased $14.3$0.8 million primarily due to a $27.0$35.1 million increase in Gross"Gross margin - Propane and other gas liquids salesliquid sales", as discussed above, partially offset by a $13.9$17.4 million increase in "Operating, general and administrative expense."expense" and a $12.5 million decrease in "Gross margin - other", as discussed above, and a $4.4 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $7.3$17.5 million increase in field personnel costs, related to thea $6.7 million increase in gallons sold as discussed above,general liability and worker compensation costs, and a $2.7$2.9 million increase in vehicle fuel costs, and a $1.9 million increase in bad debt expense.
| (amounts in thousands) | |||||||||||||||
| Six months ended January 31, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
| Volumes (barrels): | |||||||||||||||
| Crude oil hauled | 23,215 | 24,269 | (1,054 | ) | (4 | )% | |||||||||
| Crude oil sold | 3,385 | 3,118 | 267 | 9 | % | ||||||||||
| Salt water volume processed | 9,791 | 7,705 | 2,086 | 27 | % | ||||||||||
| Revenues - | |||||||||||||||
| Crude oil logistics | $ | 33,227 | $ | 40,614 | $ | (7,387 | ) | (18 | )% | ||||||
| Crude oil sales | 196,665 | 159,481 | 37,184 | 23 | % | ||||||||||
| Other | 8,144 | 4,736 | 3,408 | 72 | % | ||||||||||
| $ | 238,036 | $ | 204,831 | $ | 33,205 | 16 | % | ||||||||
| Gross margin (a) | |||||||||||||||
| Crude oil logistics | $ | 17,506 | $ | 10,994 | $ | 6,512 | 59 | % | |||||||
| Crude oil sales | 3,014 | 10,292 | (7,278 | ) | (71 | )% | |||||||||
| Other | 2,324 | 1,879 | 445 | 24 | % | ||||||||||
| $ | 22,844 | $ | 23,165 | $ | (321 | ) | (1 | )% | |||||||
| Operating, general, and administrative expenses (b) | $ | 16,068 | $ | 15,578 | $ | 490 | 3 | % | |||||||
| Equipment lease expense | 168 | 270 | (102 | ) | (38 | )% | |||||||||
| Operating loss | $ | (45,053 | ) | $ | (11,947 | ) | $ | (33,106 | ) | (277 | )% | ||||
| Depreciation and amortization expense | 12,980 | 14,316 | (1,336 | ) | (9 | )% | |||||||||
| Loss on asset sales and disposals | 38,681 | 4,948 | 33,733 | 682 | % | ||||||||||
| Severance costs | 1,305 | 227 | 1,078 | 475 | % | ||||||||||
| Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments | 1,293 | 796 | 497 | NM | |||||||||||
| Adjusted EBITDA | $ | 9,206 | $ | 8,340 | $ | 866 | 10 | % | |||||||
Corporate and other logistics hauling. Crude oil sales gross margin decreased primarily due to smaller margins on contracted physical crude deals from market conditions in the Niobrara region. Despite decreased volumes and revenues, crude oil and other logistics gross margin increased primarily due to the benefits from the cessation of barge operations related to the Jamex TLA.
The following table summarizes the financial results of our corporate operations for the periods indicated:indicated. Prior period amounts also include results of our midstream operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, |
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
Volumes (barrels): |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil hauled |
|
| — |
|
| 34,855 |
|
| (34,855) |
| NM |
|
Crude oil sold |
|
| — |
|
| 3,412 |
|
| (3,412) |
| NM |
|
Salt water volume processed |
|
| — |
|
| 14,552 |
|
| (14,552) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 50,727 |
| $ | (50,727) |
| NM |
|
Crude oil sales |
|
| — |
|
| 198,283 |
|
| (198,283) |
| NM |
|
Other |
|
| — |
|
| 11,620 |
|
| (11,620) |
| NM |
|
|
| $ | — |
| $ | 260,630 |
| $ | (260,630) |
| NM |
|
Gross margin (a) - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 23,046 |
| $ | (23,046) |
| NM |
|
Crude oil sales |
|
| — |
|
| 4,414 |
|
| (4,414) |
| NM |
|
Other |
|
| — |
|
| 3,461 |
|
| (3,461) |
| NM |
|
|
| $ | — |
| $ | 30,921 |
| $ | (30,921) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general, and administrative expenses |
| $ | 42,041 |
| $ | 58,246 |
| $ | (16,205) |
| (28) | % |
Equipment lease expense |
|
| 1,001 |
|
| 1,622 |
|
| (621) |
| (38) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
| $ | (52,100) |
| $ | (103,771) |
| $ | 51,671 |
| (50) | % |
Depreciation and amortization expense |
|
| 1,691 |
|
| 21,430 |
|
| (19,739) |
| (92) | % |
Non-cash employee stock ownership plan compensation charge |
|
| 4,688 |
|
| 10,731 |
|
| (6,043) |
| (56) | % |
Loss on asset sales and disposals |
|
| 2,679 |
|
| 42,663 |
|
| (39,984) |
| (94) | % |
Legal fees and settlements |
|
| 10,643 |
|
| 3,407 |
|
| 7,236 |
| 212 | % |
Severance costs |
|
| 910 |
|
| 1,305 |
|
| (395) |
| (30) | % |
Unrealized (non-cash) gain on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| 1,293 |
|
| (1,293) |
| NM |
|
Adjusted EBITDA |
| $ | (31,489) |
| $ | (22,942) |
| $ | (8,547) |
| 37 | % |
NM - Not meaningful
(a) | Gross margin represents "Revenues - Midstream operations" less "Cost of sales - Midstream operations" and does not include depreciation and amortization. |
76
| (amounts in thousands) | |||||||||||||||
| Six months ended January 31, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
| Operating, general and administrative expense (a) | $ | 24,594 | $ | 24,623 | $ | (29 | ) | — | % | ||||||
| Equipment lease expense | 947 | 1,217 | (270 | ) | (22 | )% | |||||||||
| Operating loss | $ | (35,516 | ) | $ | (33,882 | ) | $ | (1,634 | ) | (5 | )% | ||||
| Depreciation and amortization expense | 1,982 | 1,343 | 639 | 48 | % | ||||||||||
| Non-cash employee stock ownership plan compensation charge | 7,993 | 6,699 | 1,294 | 19 | % | ||||||||||
| Non-cash stock based compensation charge | — | 3,298 | (3,298 | ) | NM | ||||||||||
| Severance costs | — | 1,479 | (1,479 | ) | NM | ||||||||||
| Professional fees (b) | 2,118 | — | 2,118 | NM | |||||||||||
| Adjusted EBITDA | $ | (23,423 | ) | $ | (21,063 | ) | $ | (2,360 | ) | (11 | )% | ||||
In various dispositions that occurred during fiscal 2018, we sold our midstream businesses. Accordingly, much of the significant variances reported above result from the cessation of the midstream business by the end of fiscal 2018.
Operating loss
Operating loss of $35.5decreased by $51.7 million during the sixnine months ended January 31, 2018,April 30, 2019 as compared to an operating loss of $33.9 million recognized during the sixnine months ended January 31, 2017.April 30, 2018. This increasedecrease in operating loss iswas primarily due to an increasethe $53.6 million operating loss related to our midstream operations in fiscal 2018 and decreased corporate costs of $6.1$0.8 million.
Adjusted EBITDA
Adjusted EBITDA decreased $8.5 million primarily due to the $10.2 million in legal costs,Adjusted EBITDA related to our midstream operations in fiscal 2018, partially offset by $2.0 million of decreased non-cash compensation charges and a $2.7$1.7 million decrease in corporate personnel costs.
Liquidity and Capital Resources
General
Our primary sources of liquidity and capital resources are cash flows from operating activities, borrowings under our secured credit facility and our accounts receivable securitization facility and funds received from sales of debt and equity securities. As of April 30, 2019, our total liquidity was $292.3 million, which is comprised of $45.4 million in cash and $246.9 million of availability under our secured credit and accounts receivable securitization facilities. These sources of liquidity and short term capital resources are intended to fund our working capital requirements, letter of credit requirements, debt service payments,and acquisition and capital expenditures and distributionsexpenditures. Our access to our unitholders. Our liquidity andlong term capital resources, in order to address our leverage, may be affected by our ability to renegotiate our secured credit facility and our accounts receivable securitization facility or secure alternative liquidity sources, access the capital markets, covenants in our debt agreements, unforeseen demands on cash, or other events beyond our control.
Financial Covenants
As more fully described in Item 2. Management’s Discussion and Analysis under the subheading “Financial Covenants”, above, the indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit our ability to, among other things, incur additional indebtedness and make distribution payments to our common unitholders. Given the limitations and the lack of headroom on these covenants, we continue to execute onpursue a strategy to reduce our debt and interest expense. If we are unsuccessful with our strategy to further reduce debt and interest expense, or in renegotiatingwe will continue to be restricted from making distribution payments to our secured credit facility and/or our accounts receivable securitization facility, which both mature in October 2018, or are unable to secure alternative liquidity sources, we may not have the liquidity to fund our operations after that maturity date.
We may not meet the applicable financial tests in future quarters if we were to experience:
· | significantly warmer than normal temperatures during the winter heating season; |
· | significant and sustained increases in the wholesale cost of propane that we are unable to pass along to our customers; |
· | a more volatile energy commodity cost environment; |
· | an unexpected downturn in business operations; |
· | a significant delay in the collection of accounts or notes receivable; |
· | a failure to execute our debt and interest expense reduction and refinancing initiatives; |
· | a change in customer retention or purchasing patterns due to economic or other factors in the United States; |
· | a material downturn in the credit and/or equity markets; or |
77
· | a large uninsured, unfavorable lawsuit judgment or settlement. |
We may seek additional capital as part of our debt and interest expense reduction initiatives;
As discussed above, no distributions will be paid to common unitholders in customer retentionJune 2019 for the three months ended April 30, 2019. Unless the indenture governing the outstanding notes is amended or purchasing patterns duereplaced, or the Ferrellgas Partners’ consolidated fixed charge coverage ratio improves to economic or other factors in the United States;
Distributable Cash Flow
Distributable cash flow attributable to equity investors is reconciled to net lossearnings (loss) attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, in Item 2. Management'sManagement’s Discuss and Analysis under the subheading "Non-GAAP Financial Measures."Measures" above. A comparison of distributable cash flow attributable to equity investors to cash distributions paid to equity investors for the twelve months ended April 30, 2019 to the twelve months ended January 31, 2019 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| Distributable |
| Cash reserves |
| Cash distributions |
|
| |||
|
| cash flow attributable |
| (deficiency) approved |
| paid to |
|
| |||
|
| to equity investors |
| by our General Partner |
| equity investors |
| DCF ratio | |||
Nine months ended April 30, 2019 |
| $ | 60,090 |
| $ | 50,018 |
| $ | 10,072 |
|
|
For the year ended July 31, 2018 |
|
| 62,904 |
|
| 22,934 |
|
| 39,970 |
|
|
Less: Nine months ended April 30, 2018 |
|
| 103,829 |
|
| 73,930 |
|
| 29,899 |
|
|
Twelve months ended April 30, 2019 |
| $ | 19,165 |
| $ | (978) |
| $ | 20,143 |
| 0.95 |
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended January 31, 2019 |
|
| 28,350 |
|
| (1,708) |
|
| 30,058 |
| 0.94 |
Change |
| $ | (9,185) |
| $ | 730 |
| $ | (9,915) |
| 0.01 |
(a) | DCF ratio is calculated as Distributable cash flow attributable to equity investors divided by Cash distributions paid to equity investors. |
For the twelve months ended April 30, 2019, distributable cash flow attributable to equity investors decreased $9.2 million compared to the twelve months ended January 31, 2019, primarily due to the purchase of new propane delivery trucks funded with cash on hand. Cash distributions paid to equity investors decreased by $9.9 million during that twelve month period, because no distributions have been made for the nine months ended April 30, 2019. Our distribution coverage ratio increased to 0.95 for the twelve months ended April 30, 2019, compared with 0.94 for the twelve months ended January 31, 2018 to the twelve months ended October 31, 2017 is as follows (in thousands):
| Distributable Cash Flow to equity investors | Cash reserves (deficiency) approved by our General Partner | Cash distributions paid to equity investors | DCF ratio | |||||||||||
| Six months ended January 31, 2018 | $ | 59,903 | $ | 39,919 | $ | 19,984 | ||||||||
| For the year ended July 31, 2017 | 77,182 | (3,601 | ) | 80,783 | ||||||||||
| Less: Six months ended January 31, 2017 | 62,650 | 1,850 | 60,800 | |||||||||||
| Twelve months ended January 31, 2018 | $ | 74,435 | $ | 34,468 | $ | 39,967 | 1.86 | |||||||
| Twelve months ended October 31, 2017 | 64,041 | 24,152 | 39,889 | 1.61 | ||||||||||
| Change | $ | 10,394 | $ | 10,316 | $ | 78 | 0.25 | |||||||
We believe that the liquidity available from our cash on hand, cash flows from operating activities, our senior secured credit facility, and the accounts receivable securitization facility, combined with our other debt and interest expense reduction initiatives, which may include issuance of equity, restructuring existing debt agreements, asset sales or a further reduction in our annualized distribution, will be sufficient to meet our capital expenditure, working capital and letter of credit requirements. If we are unsuccessful with our strategy to further reduce debt and interest expense, or are unsuccessful in renegotiating our secured credit facility and our accounts receivable securitization facility, which mature in October 2018, or are unable to secure alternative liquidity sources, we may not have the liquidity to meet our capital expenditure, working capital and letter of credit requirements.
During periods of high volatility, our risk management activities may expose us to the risk of counterparty margin calls in amounts greater than we have the capacity to fund. Likewise our counterparties may not be able to fulfill their margin calls from us or may default on the settlement of positions with us.
Our working capital requirements are subject to, among other things, the price of propane, and crude oil, delays in the collection of receivables, volatility in energy commodity prices, liquidity imposed by insurance providers, downgrades in our credit ratings, decreased trade credit, significant acquisitions, the weather, customer retention and purchasing patterns and other changes in the demand for propane. Relatively colder weather or higher propane and crude oil.
Our ability to satisfy our obligations is dependent upon our future performance, which will be subject to prevailing weather, economic, financial and business conditions and other factors, many of which are beyond our control. Due to the seasonality of the retail propane distribution business, a significant portion of our propane operations and related products cash flows from operations is generated during the winter heating season. Our Midstream operations segment is not expected to experience seasonality. Our net cash provided by operating
78
activities primarily reflects earnings from our business activities adjusted for depreciation and amortization and changes in our working capital accounts. Historically, we generate significantly lower net cash from operating activities in our first and fourth fiscal quarters as compared to the second and third fiscal quarters due to the seasonality of our propane operations and related equipment sales segment.
Operating Activities
Ferrellgas Partners
Net cash used inprovided by operating activities was $36.3$70.8 million for the sixnine months ended January 31, 2018,April 30, 2019, compared to net cash provided by operating activities of $39.3$78.3 million for the sixnine months ended January 31, 2017.April 30, 2018. This decrease in cash provided by operating activities was primarily due to a $69.8$22.9 million increasedecrease in cash flow from operations, partially offset by an $8.2 million decrease in working capital requirements and a $7.7$7.1 million unfavorable impact ininflow associated with other assets net, primarily due to an increase in crude oil barrels in linefill during the six months ended January 31, 2018, partially offset by a $1.8 million increase in cash flow from operations.
The increasedecrease in cash flow from operations is primarily due to an $8.3 million decrease in gross profit, as well as a $12.8 millionnet increase in Adjusted EBITDA, as discussed above by segment, partially offset by an $11.2"General and administrative expense" and "Equipment lease expense" of $6.1 million, and a $9.1 million increase in "Interest expense", as discussed above.
The increasedecrease in working capital requirements for the sixnine months ended January 31, 2018April 30, 2019 compared to the sixnine months ended January 31, 2017April 30, 2018 was primarily due to a $27.9$13.7 million decrease in requirements for accounts receivable in our propane operations and related equipment sales segment due to declining propane prices in the current quarter, partially offset by increases in the volume of propane sold, and a $12.7 million decrease in accounts payable. These decreases were partially offset by a $12.4 million increase in requirements for accounts receivableother current liabilities due primarily to increasesan increase in margin deposits paid by us during the nine months ended April 30, 2019 compared to the number of gallons sold and the average selling price of propane gas, an $11.7nine months ended April 30, 2018, a $2.5 million increase in requirements for inventory due to decreases in inventory driven by increases in gallons sold, a $1.7 million increase in accrued interest expense and a $1.5 million increase in prepaid expenses and other assets due primarily to a decrease in margin deposits returned to us by our counterparties during the six months ended January 31, 2018 and a $28.9 million increase in requirements for accounts payable largely due to a decrease in days outstanding for our purchases of propane.
The operating partnership
Net cash used inprovided by operating activities was $20.8$86.2 million for the sixnine months ended January 31, 2018,April 30, 2019, compared to net cash provided by operating activities of $45.3$93.9 million for the sixnine months ended January 31, 2017.April 30, 2018. This decrease in cash provided by operating activities was primarily due to a $67.5$23.1 million increasedecrease in cash flow from operations, partially offset by a $7.9 million decrease in working capital requirements and an $8.0a $7.4 million unfavorable impact ininflow associated with other assets net, primarily due to an increase in crude oil barrels in linefill during the six months ended January 31, 2018, partially offset by a $9.3 million increase in cash flow from operations.
The increasedecrease in cash flow from operations is primarily due to an $8.3 million decrease in gross profit, as well as a $12.8 millionnet increase in Adjusted EBITDA, as discussed above by segment, partially offset by"General and administrative expense" and "Equipment lease expense" of $6.2 million, and a $2.1$8.7 million increase in "Interest expense"expense," due to increased interest rates on theour secured credit facility.
The increasedecrease in working capital requirements for the sixnine months ended January 31, 2018April 30, 2019 compared to the sixnine months ended January 31, 2017April 30, 2018 was primarily due to a $27.9$13.7 million decrease in requirements for accounts receivable in our propane operations and related equipment sales segment due to declining propane prices in the current quarter partially offset by increases in the volume of propane sold, and a $12.7 million decrease in accounts payable. These decreases were partially offset by a $12.7 million increase in requirements for accounts receivableother current liabilities due primarily to increasesa increase in margin deposits paid by us during the nine months ended April 30, 2019 compared to the number of gallons sold and the average selling price of propane gas, an $11.6nine months ended April 30, 2018, a $2.5 million increase in requirements for inventory due to decreases in inventory driven by increases in gallons sold, a $1.7 million increase in accrued interest expense and a $1.6 million increase prepaid expenses and other assets due primarily to a decrease in margin deposits returned to us by our counterparties during the six months ended January 31, 2018 and a $28.9 million increase in requirements for accounts payable largely due to a decrease in days outstanding for our purchasescurrent assets.
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Investing Activities
Ferrellgas Partners
Capital Requirements
Our business requires continual investments to upgrade or enhance existing operations and to ensure compliance with safety and environmental regulations. Capital expenditures for our business consist primarily of:
· | Maintenance capital expenditures. These capital expenditures include expenditures for betterment and replacement of property, plant and equipment rather than to generate incremental distributable cash flow. Examples of maintenance capital expenditures include a routine replacement of a worn-out asset or replacement of major vehicle components; and |
· | Growth capital expenditures. These expenditures are undertaken primarily to generate incremental distributable cash flow. Examples include expenditures for purchases of both bulk and portable propane tanks and other equipment to facilitate expansion of our customer base and operating capacity. |
Net cash used in investing activities was $46.3$103.6 million for the sixnine months ended January 31, 2018,April 30, 2019, compared to net cash used in investing activities of $15.2$16.0 million for the sixnine months ended January 31, 2017.April 30, 2018. This increase in net cash used in investing activities is primarily due to a $15.9decrease of $55.4 million in "Proceeds from sale of assets" which is primarily due to the sale of our midstream rail cars during the three months ended April 30, 2018, as well as a $35.7 million increase in "Capital expenditures" and, partially offset by a $14.9$3.5 million increasedecrease in "Business acquisitions, net of cash acquired."
The increase in "Capital expenditures" is primarily due to increases in both maintenance capital expenditures and in growth capital expenditures, in our Propane operations and related equipment sales segment during the sixnine months ended January 31, 2018.April 30, 2019. The increase in maintenance capital expenditures is primarily related to the purchase of new propane delivery trucks.trucks funded through cash on hand, compared to the nine months ended April 30, 2018. Funding for these trucks has historically been secured through lease financing. The increase in growth capital expenditures is primarily relateddue to an increasethe continued rise in the number of cylinders and cages purchased to support increases in tank exchange sales and selling locations.
The increasedecrease in "Business acquisitions, net of cash acquired" is attributable to fourseven smaller acquisitions by our Propane operations and related equipment sales segment during the sixnine months ended January 31,April 30, 2019 compared to the four acquisitions completed during the nine months ended April 30, 2018.
Due to the mature nature of our Propane operations and related equipment sales operations segment, we do not anticipate significant fluctuations in maintenance capital expenditures.expenditures, with the exception of future decisions regarding lease versus buy financing options. However, future fluctuations in growth capital expenditures could occur due to the opportunistic nature of these projects.
On February 20, 2019, we received full payment for our $8.5 million secured promissory note due in May 2020 from Bridger Energy, LLC.
The operating partnership
The investing activities discussed above also apply to the operating partnership.
Financing Activities
Ferrellgas Partners
Net cash provided byused in financing activities was $91.1$41.1 million for the sixnine months ended January 31, 2018,April 30, 2019, compared to net cash used in financing activities of $14.4$58.6 million for the sixnine months ended January 31, 2017.April 30, 2018. This increasedecrease in cash flow provided byused in financing activities was primarily due to a $40.5 million reduction in distributions, a $15.9 million reduction in common unit repurchases, a $55.8$51.4 million net increasereduction in proceeds from short-term borrowings and a $4.0$19.6 million
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reduction in cash paid for financing costs,distributions, partially offset by a $9.3$23.6 million net reductiondecrease in proceeds from long-term debt.
Distributions
During the sixthree months ended JanuaryOctober 31, 2018, Ferrellgas Partners paid quarterlya per unit distributionsdistribution on all common units of $0.10 in connection with the distributions declared for the three month periodsperiod ended July 31, 2017 and2018. No distribution on common units was made for the three month periods ended October 31, 2017. 2018, January 31, 2019, or for the three month period ended April 30, 2019.
Total distributions paid to common unitholders during the sixnine months ended January 31, 2018,April 30, 2019, including the related general partner distributions, was $19.6$9.8 million. The quarterlyAs discussed above, no distribution of $0.10 on all common units was made in December 2018 or March 2019, and the related general partner distributionwill not be made in June 2019 for the threenine months ended January 31, 2018 totaling $9.8 million are expected to be paid on March 16, 2018 to holdersApril 30, 2019 or for any future quarterly period until Ferrellgas Partners’ fixed charge coverage ratio is at least 1.75x, or the indenture governing the notes of record on March 9, 2018.
Secured credit facility
The Senior Secured Credit Facility consists of covenants in our debt agreements within the "Recent Developments" section and the "Liquidity and Capital Resources" section, both under the heading "Financial Covenants".
The Term Loan does not include any scheduled principal payments and the Revolving Facility does not have any scheduled commitment reductions before maturity; however, the Term Loan requires prepayments pursuant to either:
The Senior Secured Credit Facility is defined as the higher of (i) the federal funds rate plus 0.50%, (ii) Bank of America’s prime rate; or (iii) the Eurodollar Rate plus 1.00%; plus a margin varying from 0.75% to 3.00%; or
As of April 30, 2019, the operating partnership.
Letters of credit outstanding at January 31, 2018April 30, 2019 totaled $188.0$102.1 million and were used to secure commodity hedges,insurance arrangements, product purchases, and insurance arrangements.commodity hedges. At January 31, 2018,April 30, 2019, we had remaining letter of credit capacity of $12.0$22.9 million. As a result
On June 6, 2019, Ferrellgas, L.P. entered into an amendment to the agreement governing its Senior Secured Credit Facility. Among other matters, the amendment updated the calculation of the salefixed charge coverage ratio for purposes of Bridger Energy, LLCthe fixed charge coverage ratio in the agreement to exclude certain maintenance capital expenditures related to the purchase of new propane delivery trucks which have historically been leased. The amendment provides that up to a specified amount of such maintenance capital expenditures will not be deducted from consolidated EBITDA for purposes of the calculation. The operating partnership was in compliance with the fixed charge coverage ratio covenant, as amended, as of April 30, 2019. A copy of the amendment has been filed as Exhibit 10.31 to this Quarterly Report on January 16, 2018, we anticipate near-term reductions in outstanding lettersForm 10-Q.
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Accounts receivable securitization
Ferrellgas Receivables is a consolidated subsidiary. Expenses associated with accounts receivable securitization transactions are recorded in “Interest expense” in the condensed consolidated statements of operations. Additionally, borrowings and repayments associated with these transactions are recorded in “Cash flows from financing activities” in the condensed consolidated statements of cash flows.
Cash flows from our accounts receivable securitization facility increased $28.0 million. Wedecreased $31.0 million, as we received net funding of $97.0$4.0 million from this facility during the sixnine months ended January 31, 2018April 30, 2019 as compared to receiving net funding of $69.0$35.0 million from this facility during the sixnine months ended January 31, 2017.
Our utilization of the accounts receivable securitization facility is limited by the amount of accounts receivable that we are permitted to securitize according to the facility agreement. As of January 31, 2018,April 30, 2019, we had received cash proceeds of $166.0$62.0 million related to the securitization of our trade accounts receivable, with no$49.0 million remaining capacity to receive additional proceeds. As of January 31, 2018,April 30, 2019, the weighted average interest rate was 4.0%5.9%. As our trade accounts receivable increase during the winter heating season, the securitization facility permits us to receive greater proceeds as eligible trade accounts receivable increase, thereby providing additional cash for working capital needs.
The operating partnership
The financing activities discussed above also apply to the operating partnership except for the repurchase of common units discussed above, and cash flows related to distributions, as discussed below.
Distributions
The operating partnership paid cash distributions of $35.4$25.6 million and $84.5$45.5 million during the sixnine months ended January 31,April 30, 2019 and 2018, and 2017, respectively. The operating partnership expectswill make a distribution of $15.4 million to pay cash distributions of $9.9Ferrellgas Partners L.P. and $0.2 million to the general partner on March 16, 2018.
Disclosures about Effects of Transactions with Related Parties
We have no employees and are managed and controlled by our general partner. Pursuant to our partnership agreements, our general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on our behalf,
Related party common unitholder information consisted of the following:
|
|
|
|
|
|
|
|
|
| Distributions | |
|
| Common unit |
| (in thousands) | |
|
| ownership at |
| paid during the nine months ended | |
|
| April 30, 2019 |
| April 30, 2019 | |
Ferrell Companies (1) |
| 22,529,361 |
| $ | 2,253 |
FCI Trading Corp. (2) |
| 195,686 |
|
| 20 |
Ferrell Propane, Inc. (3) |
| 51,204 |
|
| 5 |
James E. Ferrell (4) |
| 4,763,475 |
|
| 476 |
(1) | Ferrell Companies is the owner of the general partner and is an approximate 23% direct owner of Ferrellgas Partners’ common units and thus a related party. Ferrell Companies also beneficially owns 195,686 and 51,204 common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies’ beneficial ownership to 23.4% at April 30, 2019. |
(2) | FCI Trading is an affiliate of the general partner and thus a related party. |
(3) | Ferrell Propane is controlled by the general partner and thus a related party. |
(4) | James E. Ferrell is the Interim Chief Executive Officer and President of the general partner; and is Chairman of the Board of Directors of the general partner and thus a related party. JEF Capital Management owns 4,758,859 of these |
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| Common unit ownership at | Distributions (in thousands) paid during the six months ended | ||||||
| January 31, 2018 | January 31, 2018 | ||||||
| Ferrell Companies (1) | 22,529,361 | $ | 4,506 | ||||
| FCI Trading Corp. (2) | 195,686 | 40 | |||||
| Ferrell Propane, Inc. (3) | 51,204 | 10 | |||||
| James E. Ferrell (4) | 4,763,475 | 952 | |||||
common units and is wholly-owned by the James E. Ferrell Revocable Trust Two and other family trusts, all of which James E. Ferrell and/or his family members are the trustees and beneficiaries. James E. Ferrell holds all voting common stock of JEF Capital Management. The remaining 4,616 common units are held by Ferrell Resources Holding, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary. |
During the sixnine months ended January 31, 2018,April 30, 2019, Ferrellgas Partners and the operating partnership together paid the general partner distributions of $0.6$0.4 million.
As discussed previously, Ferrellgas Partners expectswas not in compliance with the consolidated fixed charge coverage ratio under its note indenture, and thus was unable to paymake restricted payments, including distributions to Ferrell Companies, FCI Trading Corp., Ferrell Propane, Inc., James E. Ferrell (indirectly), and the general partner of $2.3 million, $20 thousand, $5 thousand, $0.5 million, and $0.1 million, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We did not enter into any risk management trading activities during the sixnine months ended January 31, 2018.April 30, 2019. Our remaining market risk sensitive instruments and positions have been determined to be “other than trading.”
Commodity price risk management
Our risk management activities primarily attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts.
Our risk management strategy involves taking positions in the forward or financial markets that are equal and opposite to our positions in the physical products market in order to minimize the risk of financial loss from an adverse price change. This risk management strategy is successful when our gains or losses in the physical product markets are offset by our losses or gains in the forward or financial markets. Propane related financial derivatives are designated as cash flow hedges.
Our risk management activities include the use of financial derivative instruments including, but not limited to, price swaps, options, futures and basis swaps to seek protection from adverse price movements and to minimize potential losses. We enter into these financial derivative instruments directly with third parties in the over-the-counter market and with brokers who are clearing members with the Intercontinental Exchange or the Chicago Mercantile Exchange. We also enter into forward propane purchase and sales contracts with counterparties. These forward contracts qualify for the normal purchase normal sales exception within GAAP guidance and are therefore not recorded on our financial statements until settled.
Transportation Fuel Price Risk
From time to time, our risk management activities also attempt to mitigate price risks related to the purchase of gasoline and diesel fuel for use in the transport of propane from retail fueling stations. When employed, we attempt to mitigate these price risks through the use of financial derivative instruments.
When employed, our risk management strategy involves taking positions in the financial markets that are not more than the forecasted purchases of fuel for our internal use in the retail and supply propane delivery fleet in order to minimize the risk of decreased earnings from an adverse price change. This risk management strategy locks in our purchase price and is successful when our gains or losses in the physical product markets are offset by our losses or gains in the financial markets. Our transport fuel financial derivatives are not designated as cash flow hedges.
Risk Policy and Sensitivity Analysis
Market risks associated with energy commodities are monitored daily by senior management for compliance with our commodity risk management policy. This policy includes an aggregate dollar loss limit and limits on the term of various contracts. We also utilize volume limits for various energy commodities and review our positions daily where we remain exposed to market risk, so as to manage exposures to changing market prices.
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We have prepared a sensitivity analysis to estimate the exposure to market risk of our energy commodity positions. Forward contracts, futures, swaps and options outstanding as of January 31, 2018April 30, 2019 and July 31, 2017,2018, that were used in our risk management activities were analyzed assuming a hypothetical 10% adverse change in prices for the delivery month for all energy commodities. The potential loss in future earnings from these positions due to a 10% adverse movement in market prices of the underlying energy commodities was estimated at $14.8$9.2 million and $16.8$13.7 million as of January 31, 2018April 30, 2019 and July 31, 2017,2018, respectively. The preceding hypothetical analysis is limited because changes in prices may or may not equal 10%, thus actual results may differ. Our sensitivity analysis does not include the anticipated transactions associated with these transactions, which we anticipate will be 100% effective.
Credit risk
We maintain credit policies with regard to our counterparties that we believe significantly minimize overall credit risk. These policies include an evaluation of counterparties’ financial condition (including credit ratings), and entering into agreements with counterparties that govern credit guidelines.
Our other counterparties consist of major energy companies who are suppliers, marketers, wholesalers, retailers, end users and financial institutions. The overall impact due to certain changes in economic, regulatory and other events may impact our overall exposure to credit risk, either positively or negatively in that counterparties may be similarly impacted. Based on our policies, exposures, credit and other reserves, management does not anticipate a material adverse effect on financial position or results of operations as a result of counterparty performance.
Interest rate risk
At January 31, 2018,April 30, 2019, we had $427.2a total of $337.0 million in variable rate secured credit facility and collateralized note payable borrowings. We also have an interest rate swap that hedges a portion of the interest rate risk associated with these variable rate borrowings, as discussed in the table below. Thus, assuming a one percent increase in our variable interest rate, our interest rate risk related to these borrowings would result in a reduction to future earnings of $3.8$3.4 million for the twelve months ending January 31,April 30, 2019. The preceding hypothetical analysis is limited because changes in interest rates may or may not equal one percent, thus actual results may differ. We manage a portion of our interest rate exposure by utilizing interest rate swaps. To the extent that we have debt with variable interest rates that is not hedged, ourOur results of operations, cash flows and financial condition could be materially adversely affected by significant increases in interest rates.
An evaluation was performed by the management of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp., with the participation of the principal executive officer and principal financial officer of our general partner, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e)13a‑15(e) or 15d-15(e)15d‑15(e) under the Exchange Act, were effective.
The management of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. does not expect that our disclosure controls and procedures will prevent all errors and all fraud. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Based on the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the above mentioned partnerships and corporations have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events. Therefore, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
During the most recent fiscal quarter ended January 31, 2018,April 30, 2019, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)13a‑15(f) or Rule 15d-15(f)15d‑15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Our operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane and, prior to the sales of midstream operations in fiscal 2018, crude oil. As a result, at any given time, we can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, we are not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are reasonably expected to have a material adverse effect on our consolidated financial condition, results of operations and cash flows.
We have been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits, which were consolidated in the Western District of Missouri on October 16, 2014, allege that we and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Federal Court for the Western District of Missouri initially dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending.resulted in the court appeals affirming the dismissal of the federal claims and remanding the case to the district court to decide whether to exercise supplemental jurisdiction over the remaining state law claims. We believe we have strong defenses to the claims and intend to vigorously defend against the consolidated case. We do not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
We have been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On April 24, 2019 the United States Court of Appeals for the Second Circuit affirmed the judgment of the Southern District Court dismissing the class action lawsuits with prejudice. At this time the derivative lawsuits remain stayed by agreement. We believe that we have defenses and will vigorously defend these cases. We do not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
We and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed in or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude from rail onto barges. Eddystone alleges that we transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. We believe that we and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, we believe that the amount of such damage claims, if ultimately owed to Eddystone, could be material. We intend to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, we filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. TheOn June 25, 2018, we entered into an agreement with the Third-Party Defendants have filed motions to dismisswhich, among other things, resulted in a dismissal of the third-party complaint for alleged lackclaims against the Third-Party Defendants from the lawsuit. The lawsuit is in the discovery stage; as such, management does not currently believe a loss is probable or reasonably estimable at this time.
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There have been no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K10‑K for fiscal 2017.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 5. OTHER INFORMATION
On March 8, 2018, Randy V. Schott, resigned as Senior Vice President of Retail Operations of Ferrellgas, Inc. Ferrellgas, Inc. is the general partner of Ferrellgas Partners, L.P. andJune 6, 2019, Ferrellgas, L.P.
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ITEM 6. EXHIBITS
The exhibits listed below are furnished as part of this Quarterly Report on Form 10-Q.10‑Q. Exhibits required by Item 601 of Regulation S-K of the Securities Act, which are not listed, are not applicable.
Exhibit | Description | |||
3.1 | ||||
3.2 | ||||
3.3 | ||||
3.4 | ||||
3.5 | ||||
3.6 | ||||
3.7 | ||||
3.8 | ||||
4.1 | ||||
4.2 | ||||
4.3 | ||||
4.4 | ||||
4.5 | ||||
4.6 | ||||
4.7 |
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4.9 | ||||
4.10 | ||||
4.11 | ||||
4.12 | ||||
10.1 | ||||
10.2 | ||||
10.3 | ||||
10.4 | ||||
10.5 | ||||
10.6 | ||||
10.7 | ||||
+10.8 | ||||
10.9 | ||||
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10.10 | ||||
10.11 | ||||
10.12 | ||||
10.13 | ||||
10.14 | ||||
10.15 | ||||
+ 10.16 | ||||
# 10.17 | ||||
# 10.18 | ||||
# 10.19 | ||||
# 10.20 | ||||
# 10.21 | ||||
# 10.22 | ||||
# 10.23 | ||||
# 10.24 | ||||
# 10.25 |
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10.26 | ||||
# 10.27 | ||||
# 10.28 | ||||
# 10.29 | ||||
# 10.30 | ||||
* 10.31 | ||||
* 31.1 | ||||
* 31.2 | ||||
* 31.3 | ||||
* 31.4 | ||||
* 32.1 | ||||
* 32.2 | ||||
* 32.3 | ||||
* 32.4 | ||||
* 101.INS | XBRL Instance Document. | |||
* 101.SCH | XBRL Taxonomy Extension Schema Document. | |||
* 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||
* 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||
* 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||
* 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |||
*Filed herewith
#Management contracts or compensatory plans.
+Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS, L.P. | ||||
By Ferrellgas, Inc. (General Partner) | ||||
Date: | June 10, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer; Treasurer (Principal Financial and Accounting Officer) | ||||
FERRELLGAS PARTNERS FINANCE CORP. | ||||
Date: | June 10, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer and Sole Director | ||||
FERRELLGAS, L.P. | ||||
By Ferrellgas, Inc. (General Partner) | ||||
Date: | June 10, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer; Treasurer (Principal Financial and Accounting Officer) | ||||
FERRELLGAS FINANCE CORP. | ||||
Date: | June 10, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer and Sole Director | ||||
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