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,November 30, 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)
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 29,805 |
| $ | 11,054 |
Accounts and notes receivable, net (including $118,164 and $106,145 of accounts receivable pledged as collateral at October 31, 2019 and July 31, 2019, respectively) |
|
| 123,841 |
|
| 107,596 |
Inventories |
|
| 84,995 |
|
| 80,454 |
Prepaid expenses and other current assets |
|
| 50,582 |
|
| 42,275 |
Total current assets |
|
| 289,223 |
|
| 241,379 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 598,887 |
|
| 596,723 |
Goodwill, net |
|
| 247,195 |
|
| 247,195 |
Intangible assets (net of accumulated amortization of $416,512 and $414,210 at October 31, 2019 and July 31, 2019, respectively) |
|
| 108,493 |
|
| 108,557 |
Operating lease right-of-use assets |
|
| 124,047 |
|
| — |
Other assets, net |
|
| 75,443 |
|
| 69,105 |
Total assets |
| $ | 1,443,288 |
| $ | 1,262,959 |
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 44,421 |
| $ | 33,364 |
Short-term borrowings |
|
| 80,000 |
|
| 43,000 |
Collateralized note payable |
|
| 73,000 |
|
| 62,000 |
Current portion of long-term debt |
|
| 358,080 |
|
| 631,756 |
Current operating lease liabilities |
|
| 33,832 |
|
| — |
Other current liabilities |
|
| 187,731 |
|
| 138,237 |
Total current liabilities |
|
| 777,064 |
|
| 908,357 |
|
|
|
|
|
|
|
Long-term debt |
|
| 1,731,920 |
|
| 1,457,004 |
Operating lease liabilities |
|
| 88,773 |
|
| — |
Other liabilities |
|
| 36,915 |
|
| 36,536 |
Contingencies and commitments (Note L) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' deficit: |
|
|
|
|
|
|
Common unitholders (97,152,665 units outstanding at October 31, 2019 and July 31, 2019) |
|
| (1,091,704) |
|
| (1,046,245) |
General partner unitholder (989,926 units outstanding at October 31, 2019 and July 31, 2019) |
|
| (70,935) |
|
| (70,476) |
Accumulated other comprehensive loss |
|
| (20,598) |
|
| (14,512) |
Total Ferrellgas Partners, L.P. partners' deficit |
|
| (1,183,237) |
|
| (1,131,233) |
Noncontrolling interest |
|
| (8,147) |
|
| (7,705) |
Total partners' deficit |
|
| (1,191,384) |
|
| (1,138,938) |
Total liabilities and partners' deficit |
| $ | 1,443,288 |
| $ | 1,262,959 |
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)
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Revenues: |
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 273,385 |
| $ | 334,966 |
|
Other |
|
| 19,829 |
|
| 17,343 |
|
Total revenues |
|
| 293,214 |
|
| 352,309 |
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 134,028 |
|
| 204,136 |
|
Cost of sales - other |
|
| 3,681 |
|
| 3,047 |
|
Operating expense - personnel, vehicle, plant and other |
|
| 114,543 |
|
| 110,331 |
|
Operating expense - equipment lease expense |
|
| 8,388 |
|
| 7,863 |
|
Depreciation and amortization expense |
|
| 19,219 |
|
| 18,992 |
|
General and administrative expense |
|
| 9,695 |
|
| 14,179 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| 2,748 |
|
Loss on asset sales and disposals |
|
| 2,235 |
|
| 4,504 |
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 630 |
|
| (13,491) |
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (45,697) |
|
| (43,878) |
|
Other income (expense), net |
|
| (132) |
|
| 19 |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (45,199) |
|
| (57,350) |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 518 |
|
| 158 |
|
|
|
|
|
|
|
|
|
Net loss |
|
| (45,717) |
|
| (57,508) |
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interest |
|
| (373) |
|
| (493) |
|
|
|
|
|
|
|
|
|
Net loss attributable to Ferrellgas Partners, L.P. |
|
| (45,344) |
|
| (57,015) |
|
|
|
|
|
|
|
|
|
Less: General partner's interest in net loss |
|
| (453) |
|
| (570) |
|
|
|
|
|
|
|
|
|
Common unitholders' interest in net loss |
| $ | (44,891) |
| $ | (56,445) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common unit |
| $ | (0.46) |
| $ | (0.58) |
|
|
|
|
|
|
|
|
|
Cash distributions declared per common unit |
| $ | — |
| $ | — |
|
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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
|
|
|
|
|
|
|
|
Net loss |
| $ | (45,717) |
| $ | (57,508) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
Change in value of risk management derivatives |
|
| (13,627) |
|
| (8,154) |
|
Reclassification of (gains) losses on derivatives to earnings, net |
|
| 7,479 |
|
| (4,433) |
|
Other comprehensive loss |
|
| (6,148) |
|
| (12,587) |
|
Comprehensive loss |
|
| (51,865) |
|
| (70,095) |
|
Less: Comprehensive loss attributable to noncontrolling interest |
|
| (435) |
|
| (620) |
|
Comprehensive loss attributable to Ferrellgas Partners, L.P. |
| $ | (51,430) |
| $ | (69,475) |
|
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, 2019 |
| 97,152.7 |
| 989.9 |
| $ | (1,046,245) |
| $ | (70,476) |
| $ | (14,512) |
| $ | (1,131,233) |
| $ | (7,705) |
| $ | (1,138,938) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions in connection with non-cash ESOP compensation charges |
| — |
| — |
|
| 779 |
|
| 8 |
|
| — |
|
| 787 |
|
| 8 |
|
| 795 |
Distributions |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1) |
|
| (1) |
Cumulative adjustment for lease accounting standard |
| — |
| — |
|
| (1,347) |
|
| (14) |
|
| — |
|
| (1,361) |
|
| (14) |
|
| (1,375) |
Net loss |
| — |
| — |
|
| (44,891) |
|
| (453) |
|
| — |
|
| (45,344) |
|
| (373) |
|
| (45,717) |
Other comprehensive loss |
| — |
| — |
|
| — |
|
| — |
|
| (6,086) |
|
| (6,086) |
|
| (62) |
|
| (6,148) |
Balance at October 31, 2019 |
| 97,152.7 |
| 989.9 |
| $ | (1,091,704) |
| $ | (70,935) |
| $ | (20,598) |
| $ | (1,183,237) |
| $ | (8,147) |
| $ | (1,191,384) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 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) |
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 three months ended October 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (45,717) |
| $ | (57,508) |
Reconciliation of net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 19,219 |
|
| 18,992 |
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| 2,748 |
Loss on asset sales and disposals |
|
| 2,235 |
|
| 4,504 |
Provision for doubtful accounts |
|
| 665 |
|
| 519 |
Deferred income tax expense |
|
| 554 |
|
| 150 |
Other |
|
| 3,450 |
|
| 3,193 |
Changes in operating assets and liabilities, net of effects from business acquisitions: |
|
|
|
|
|
|
Accounts and notes receivable, net of securitization |
|
| (14,410) |
|
| (10,654) |
Inventories |
|
| (4,541) |
|
| (22,866) |
Prepaid expenses and other current assets |
|
| (8,008) |
|
| (6,391) |
Accounts payable |
|
| 11,360 |
|
| 13,159 |
Accrued interest expense |
|
| 34,167 |
|
| 31,987 |
Other current liabilities |
|
| 8,214 |
|
| 6,677 |
Other assets and liabilities |
|
| (872) |
|
| (2,124) |
Net cash provided by (used in) operating activities |
|
| 7,111 |
|
| (17,614) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (6,400) |
|
| (4,625) |
Capital expenditures |
|
| (18,126) |
|
| (23,433) |
Proceeds from sale of assets |
|
| 835 |
|
| 1,061 |
Cash payments to construct assets in connection with future lease transactions |
|
| (16,879) |
|
| — |
Cash receipts in connection with leased vehicles |
|
| 5,863 |
|
| — |
Other |
|
| — |
|
| (292) |
Net cash used in investing activities |
|
| (34,707) |
|
| (27,289) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Distributions |
|
| — |
|
| (9,814) |
Payments on long-term debt |
|
| (512) |
|
| (281) |
Net additions to (reductions in) short-term borrowings |
|
| 37,000 |
|
| (32,800) |
Net additions to collateralized short-term borrowings |
|
| 11,000 |
|
| 32,000 |
Cash paid for financing costs and other |
|
| (1,140) |
|
| (224) |
Noncontrolling interest activity |
|
| (1) |
|
| (101) |
Net cash provided by (used in) financing activities |
|
| 46,347 |
|
| (11,220) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 18,751 |
|
| (56,123) |
Cash and cash equivalents - beginning of period |
|
| 11,054 |
|
| 119,311 |
Cash and cash equivalents - end of period |
| $ | 29,805 |
| $ | 63,188 |
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 JanuaryOctober 31, 2018,2019, 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 sixthree months ended JanuaryOctober 31, 20182019 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 20172019..
Going Concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. Ferrellgas Partners has $357.0 million in unsecured notes due June 15, 2020 that are classified as current in the condensed consolidated financial statements. The ability of Ferrellgas Partners to restructure, refinance or otherwise satisfy these notes is uncertain considering the level of other outstanding indebtedness. Given these concerns, Ferrellgas Partners believes there is substantial doubt about the entity’s ability to continue as a going concern. Ferrellgas has engaged Moelis & Company LLC as its financial advisor and the law firm of Squire Patton Boggs LLP to assist in our ongoing process to address our upcoming debt maturities. The successful outcome of Ferrellgas’ debt reduction strategy continues to remain uncertain. Additionally, see Note F – Debt below for further discussion of the outstanding debt.
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 condensed consolidated financial statements include
8
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 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 isbecame effective for fiscal yearsFerrellgas for its annual reporting period beginning after December 15, 2018,August 1, 2019, including interim periods within that reporting period. Ferrellgas adopted the standard using 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, to continue to report comparative periods in compliance with the prior guidance (ASC 840).
Ferrellgas elected the short-term lease recognition exemption for all leases that qualify, meaning it does not recognize right-of-use assets or lease liabilities for those fiscal years.leases. Ferrellgas is currently evaluatingalso elected the impactpractical expedient to not separate lease and non-lease components for its most significant leasing activity, which includes vehicle and real estate leases.
Additionally, Ferrellgas elected the package of its pending adoptionthree practical expedients which allows entities to not reassess initial direct costs, lease classification for existing or expired leases, and lease definition for existing or expired contracts as of ASU 2016-02 on the consolidated financial statements.effective date of August 1, 2019. Ferrellgas has formed an implementation team, completed training ondid not, however, elect the new standard,hindsight method practical expedient which would have allowed it to reassess lease terms and is working 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.
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 isbecame effective for fiscal yearsFerrellgas for its annual reporting period beginning after December 15, 2018,August 1, 2019, including interim periods within those fiscal years. that reporting period. Ferrellgas is currently evaluatingapplied ASU No. 2017-12 using a modified retrospective approach for cash flow hedges existing at the impactdate of its pendingadoption and prospectively for the presentation and disclosure guidance. The adoption of this standard did not have a material impact on our consolidated financial statements.
C. Leases
Ferrellgas determines if an arrangement is a lease or contains a lease at inception. Ferrellgas leases certain transportation and computer equipment and real estate, predominantly through operating leases. Ferrellgas has an immaterial amount of leases in which it is the lessor. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the lease commencement date. Ferrellgas determines the lease term by assuming the exercise of renewal options that are reasonably certain. The lease term is used to determine whether a lease is finance or operating and is
9
used to calculate rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term. Operating lease balances are classified as operating lease right-of-use (“ROU”) assets, and current and long-term operating lease liabilities on Ferrellgas’ condensed consolidated financial statements.balance sheet. Ferrellgas has an immaterial amount of finance leases that are included in “Other assets, net”, “Other current liabilities”, and “Other liabilities” on its condensed consolidated balance sheet.
ROU assets represent Ferrellgas’ right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of Ferrellgas’ leases do not provide an implicit discount rate, Ferrellgas uses its incremental borrowing rate adjusted for the lease term to represent the rate it would have to pay to borrow on a collateralized basis based on the information available at the commencement date in determining the present value of lease payments. Ferrellgas’ lease terms may include options to extend or terminate the lease and it will adjust the life of the lease when it is reasonably certain that it will exercise these options.
Ferrellgas has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. Ferrellgas has variable lease components, including lease payments with payment escalation based on the Consumer Price Index, and other variable items, such as common area maintenance and taxes.
Key assumptions include the discount rate, the impact of purchase options and renewal options on Ferrellgas’ lease term, as well as the assessment of residual value guarantees.
Ferrellgas’ transportation equipment leases generally have purchase options. However, in most circumstances Ferrellgas is not certain if it will exercise the purchase option. As circumstances dictate, it may instead return the existing equipment to the lessor and sign a new lease. Ferrellgas’ transportation equipment leases often contain residual value guarantees, but they are not reflected in Ferrellgas’ lease liabilities as its lease rates are such that residual value guarantees are not expected to be owed at the end of its leases.
Ferrellgas’ real estate leases will often have an option to extend the lease, but it is typically not reasonably certain of exercising options to extend. As customer demand changes over time, Ferrellgas typically maintains the ability to move to more advantageous locations, relocate to other leased and owned locations, or discontinue service from particular locations.
The following table provides the operating and financing ROU assets and lease liabilities as of October 31, 2019:
|
|
|
|
|
|
Leases |
| Classification |
|
| October 31, 2019 |
Assets |
|
|
|
|
|
Operating lease assets |
| Operating lease right-of-use assets |
| $ | 124,047 |
Financing lease assets |
| Other assets, net |
|
| 5,719 |
Total leased assets |
|
|
| $ | 129,766 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
|
|
|
|
|
Operating |
| Current operating lease liabilities |
| $ | 33,832 |
Financing |
| Other current liabilities |
|
| 1,817 |
Noncurrent |
|
|
|
|
|
Operating |
| Operating lease liabilities |
|
| 88,773 |
Financing |
| Other liabilities |
|
| 3,949 |
Total leased liabilities |
|
|
| $ | 128,371 |
10
The following table provides the lease expenses for the three months ended October 31, 2019:
|
|
|
|
|
|
Leases Expense |
| Classification |
| For the three months ended October 31, | |
|
|
|
| 2019 | |
|
|
|
|
|
|
Operating lease expense |
| Operating expenses - personnel, vehicle, plant and other |
| $ | 1,741 |
|
| Operating expense - equipment lease expense |
|
| 7,607 |
|
| Cost of sales - propane and other gas liquids sales |
|
| 389 |
|
| General and administrative expense |
|
| 266 |
Total operating lease expense |
|
|
| $ | 10,003 |
|
|
|
|
|
|
Short-term expense |
| Operating expenses - personnel, vehicle, plant and other |
| $ | 1,954 |
|
| General and administrative expense |
|
| 110 |
Total short-term expense |
|
|
| $ | 2,064 |
|
|
|
|
|
|
Variable lease expense |
| Operating expenses - personnel, vehicle, plant and other |
| $ | 675 |
|
| Operating expense - equipment lease expense |
|
| 733 |
Total variable lease expense |
|
|
| $ | 1,408 |
|
|
|
|
|
|
Finance lease expense |
|
|
|
|
|
Amortization of leased assets |
| Depreciation and amortization expense |
| $ | 40 |
Interest on lease liabilities |
| Interest expense |
|
| 42 |
Total finance lease expense |
|
|
| $ | 82 |
|
|
|
|
|
|
Total lease expense |
|
|
| $ | 13,557 |
Minimum annual payments under existing operating and finance lease liabilities as of October 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
Maturities of lease liabilities |
|
| Operating leases |
|
| Finance leases |
|
| Total |
| 2020 |
| $ | 31,711 |
| $ | 1,233 |
| $ | 32,944 |
| 2021 |
|
| 35,187 |
|
| 1,568 |
|
| 36,755 |
| 2022 |
|
| 25,864 |
|
| 1,177 |
|
| 27,041 |
| 2023 |
|
| 19,938 |
|
| 893 |
|
| 20,831 |
| 2024 |
|
| 17,092 |
|
| 812 |
|
| 17,904 |
Thereafter |
|
| 34,326 |
|
| 1,735 |
|
| 36,061 |
Total lease payments |
| $ | 164,118 |
| $ | 7,418 |
| $ | 171,536 |
Less: Imputed interest |
|
| 41,513 |
|
| 1,652 |
|
| 43,165 |
Present value of lease liabilities |
| $ | 122,605 |
| $ | 5,766 |
| $ | 128,371 |
The following table represents the weighted-average remaining lease term and discount rate as of October 31, 2019:
|
|
|
|
|
|
| As of October 31, 2019 | ||
Lease type |
| Weighted-average remaining lease term (years) |
| Weighted-average discount rate |
Operating leases |
| 5.7 |
| 8.2% |
Finance leases |
| 5.8 |
| 8.0% |
Cash flow information is presented below:
|
|
|
|
|
| For the three months ended October 31, | |
|
| 2019 | |
Cash paid for amounts included in the measurement of lease liabilities for operating leases: |
|
|
|
Operating cash flows |
| $ | 11,049 |
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities for financing leases: |
|
|
|
Operating cash flows |
| $ | 42 |
Financing cash flows |
| $ | 28 |
11
C.D. Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Propane gas and related products |
| $ | 70,067 |
| $ | 66,001 |
Appliances, parts and supplies, and other |
|
| 14,928 |
|
| 14,453 |
Inventories |
| $ | 84,995 |
| $ | 80,454 |
| 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
Prepaid expenses and other current assets consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Broker margin deposit assets |
| $ | 33,519 |
| $ | 25,028 |
Other |
|
| 17,063 |
|
| 17,247 |
Prepaid expenses and other current assets |
| $ | 50,582 |
| $ | 42,275 |
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Notes receivable, less current portion |
| $ | 13,809 |
| $ | 16,216 |
Other |
|
| 61,634 |
|
| 52,889 |
Other assets, net |
| $ | 75,443 |
| $ | 69,105 |
| 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:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Accrued interest |
| $ | 54,651 |
| $ | 20,484 |
Customer deposits and advances |
|
| 35,625 |
|
| 24,686 |
Accrued payroll |
|
| 23,918 |
|
| 17,356 |
Accrued insurance |
|
| 13,980 |
|
| 18,524 |
Price risk management liabilities |
|
| 19,745 |
|
| 14,198 |
Other |
|
| 39,812 |
|
| 42,989 |
Other current liabilities |
| $ | 187,731 |
| $ | 138,237 |
| 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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Operating expense - personnel, vehicle, plant and other |
| $ | 48,015 |
| $ | 47,443 |
|
Depreciation and amortization expense |
|
| 1,840 |
|
| 1,072 |
|
Operating expense - equipment lease expense |
|
| 7,642 |
|
| 7,519 |
|
|
| $ | 57,497 |
| $ | 56,034 |
|
12
| 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 three months ended October 31, | ||||
|
| 2019 |
| 2018 | ||
Cash paid (refunded) for: |
|
|
|
|
|
|
Interest |
| $ | 8,284 |
| $ | 8,930 |
Income taxes |
| $ | — |
| $ | 2 |
Non-cash investing and financing activities: |
|
|
|
|
|
|
Liabilities incurred in connection with acquisitions |
| $ | 520 |
| $ | 1,096 |
Change in accruals for property, plant and equipment additions |
| $ | (43) |
| $ | (315) |
Right-of-use assets arising from operating and finance lease liabilities |
| $ | 17,177 |
| $ | — |
| 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.E. Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Accounts receivable pledged as collateral |
| $ | 118,164 |
| $ | 106,145 |
Accounts receivable not pledged as collateral (including other reserves) |
|
| 2,817 |
|
| 1,218 |
Note receivable |
|
| 5,292 |
|
| 2,660 |
Other |
|
| 36 |
|
| 36 |
Less: Allowance for doubtful accounts |
|
| (2,468) |
|
| (2,463) |
Accounts and notes receivable, net |
| $ | 123,841 |
| $ | 107,596 |
| 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 October 31, 2018. See additional disclosure about Ferrellgas' financial covenants in Note E - Debt.
As of
F, respectively..
Short-term borrowings
Since October 31, 2017, 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 JanuaryOctober 31, 20182019 and July 31, 2017, $261.22019, $80.0 million and $59.8$43.0 million,, respectively, were classified as short-term borrowings. For further discussion see the “Senior secured credit facilities” section below.
13
Long-term debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Senior notes |
|
|
|
|
|
|
Fixed rate, 6.50%, due 2021 (1) |
| $ | 500,000 |
| $ | 500,000 |
Fixed rate, 6.75%, due 2023 (2) |
|
| 500,000 |
|
| 500,000 |
Fixed rate, 6.75%, due 2022, net of unamortized premium of $1,455 and $1,633 at October 31, 2019 and July 31, 2019, respectively (3) |
|
| 476,455 |
|
| 476,633 |
Fixed rate, 8.625%, due 2020, net of unamortized discount of $668 and $1,319 at October 31, 2019 and July 31, 2019, respectively (4) |
|
| 356,332 |
|
| 355,681 |
|
|
|
|
|
|
|
Senior secured term loan |
|
|
|
|
|
|
Variable interest rate, Term Loan, expected to mature May 2023 (5) |
|
| 275,000 |
|
| 275,000 |
|
|
|
|
|
|
|
Notes payable |
|
|
|
|
|
|
10.4% and 10.7% weighted average interest rate at October 31, 2019 and July 31, 2019, respectively, due 2020 to 2029, net of unamortized discount of $683 and $711 at October 31, 2019 and July 31, 2019, respectively |
|
| 6,080 |
|
| 5,962 |
Total debt, excluding unamortized debt issuance and other costs |
|
| 2,113,867 |
|
| 2,113,276 |
Unamortized debt issuance and other costs |
|
| (23,867) |
|
| (24,516) |
Less: current portion of long-term debt |
|
| 358,080 |
|
| 631,756 |
Long-term debt |
| $ | 1,731,920 |
| $ | 1,457,004 |
(1) | During November 2010, the operating partnership issued $500.0 million in aggregate principal amount of 6.50% senior notes due 2021. These notes are general unsecured senior obligations of the operating partnership and are effectively junior to all existing and future senior secured indebtedness of the operating partnership, to the extent of the value of the assets securing such debt. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on May 1 and November 1 of each year. The outstanding principal amount is due on May 1, 2021. |
(2) | During June 2015, the operating partnership issued $500.0 million in aggregate principal amount of 6.75% senior notes due 2023. These notes are general unsecured senior obligations of the operating partnership and are effectively junior to all existing and future senior secured indebtedness of the operating partnership, to the extent of the value of the assets securing such debt. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on June 15 and December 15 of each year. The operating partnership would incur prepayment penalties if it were to repay the notes prior to June 2021. |
(3) | During fiscal 2014, the operating partnership issued $475.0 million in aggregate principal amount of 6.75% senior notes due 2022. These notes are general unsecured senior obligations of the operating partnership and are effectively junior to all existing and future senior secured indebtedness of the operating partnership, to the extent of the value of the assets securing such debt. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on January 15 and July 15 of each year. |
(4) | During January 2017, Ferrellgas Partners issued $175.0 million in aggregate principal amount of additional 8.625% unsecured senior notes due 2020, issued at 96% of par. Ferrellgas Partners contributed the net proceeds from the offering of approximately $166.1 million to the operating partnership, which used such amounts to repay borrowings under its previous senior secured credit facility. During April 2010, Ferrellgas Partners issued $280.0 million of its fixed rate senior notes. During March 2011, Ferrellgas Partners redeemed $98.0 million of these fixed rate senior notes. These notes are general unsecured senior obligations of Ferrellgas Partners and are structurally subordinated to all existing and future indebtedness and obligations of the operating partnership. The unsecured senior notes bear interest from the date of issuance, payable semi-annually in arrears on June 15 and December 15 of each year. |
14
(5) | The Senior Secured Credit Facility, including the Term Loan, will mature on the earlier of (i) May 4, 2023 and (ii) the date that is 90 days prior to the earliest maturity date of any series of the operating partnership’s outstanding notes after giving effect to any extensions or refinancings thereof. As of July 31, 2019, the earliest maturity date of any series of the operating partnership’s outstanding notes was May 1, 2021, except for the reclassification of the Term Loan from long-term to current. As of October 31, 2019, the Term Loan was reclassified to long-term. |
Senior secured credit facilities
On May 4, 2018, the operating partnership entered into a new $575.0 million senior secured credit facility section below.(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”), which mature on the earlier of (i) May 4, 2023 and (ii) the date that is 90 days prior to the earliest maturity date of any series of the operating partnership’s outstanding notes after giving effect to any extensions or refinancings thereof. As of this filing, the earliest maturity date of any series of the operating partnership’s outstanding notes is May 1, 2021. Revolving Facility borrowings bear interest at the Prime Rate + 4.75% and Term Loan borrowings bear interest at LIBOR + 5.75%. The Revolving Facility, as amended, includes a $140.0 million sublimit for the issuance of letters of credit.Borrowings under the Senior Secured Credit Facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness and acquisitions, within certain limits.
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 the following: 1) certain asset sales, 2) 50% of any excess cash flow, as defined by the Term Loan, in any fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and 4) certain tax refunds.
On June 6, 2019, the operating partnership entered into a first amendment to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the first amendment updated the calculation of the fixed charge coverage ratio for purposes of the fixed charge coverage ratio in the agreement to exclude certain maintenance capital expenditures related to the purchase during fiscal 2019 of new propane delivery trucks which have historically been leased. The first 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.
On November 7, 2019, the operating partnership entered into a second amendment (the “Second Amendment”) to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the Second Amendment (i) increased from $125.0 million to $140.0 million the sub-limit for issuance of letters of credit that exists within the $300.0 million Revolving Facility; and (ii) modified a component of the fixed charge coverage ratio calculation to exclude payments related to the manufacture of vehicles used for propane delivery or related service up to specified amounts if operating lease commitments sufficient to cover such excluded amounts have been obtained and those payments are in fact reimbursed under such operating leases within nine months thereafter. In addition, the Second Amendment provided waivers for any event of default that has or would otherwise arise with respect to the delivery of an unqualified report of Grant Thornton LLP as to going concern with respect to the audited financial statements of Ferrellgas, L.P. and with respect to the timely delivery of financial information for fiscal 2019, thereby resolving the disagreement with the agent under the Senior Secured Credit Facility regarding alleged events of default described in the Annual Report on Form 10-K for fiscal 2019. As a result of the Second Amendment, the Term Loan was reclassified from current to long-term, consistent with its underlying maturity.
The Senior Secured Credit Facility is secured with substantially all of the assets of Ferrellgas, L.P. and its subsidiaries, and Ferrellgas Partners’ and the general partner’s partnership interests in Ferrellgas, L.P., and contains various affirmative and negative covenants and default provisions, as well as requirements with respect to the maintenance of specified financial ratios and limitations on the making of loans and investments.
As of October 31, 2019, the operating partnership had borrowings of $275.0 million under the Term Loan at an interest rate of 7.89%, which was classified as long-term debt, and $80.0 million of borrowings under the Revolving Facility at a weighted average interest rate of 9.09%, which was classified as short-term borrowings. As of October 31, 2019, the operating partnership had available borrowing capacity under the Revolving Facility of $101.9 million. As of July 31, 2019, the operating partnership had borrowings of $275.0 million under the Term Loan at an interest rate of 8.16%, which was classified as current, and $43.0 million under the Revolving Facility at an interest rate of 9.47%, which was
15
classified as short-term borrowings. As of July 31, 2019, the operating partnership had available borrowing capacity under the Revolving Facility of $155.1 million.
Letters of credit outstanding at October 31, 2019 and July 31, 2019 totaled $118.1 million and $101.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At October 31, 2019, Ferrellgas had remaining available letter of credit capacity of $6.9 million (or $21.9 million, if the Second Amendment had been effective as of October 31, 2019). At July 31, 2019, Ferrellgas had remaining available letter of credit capacity of $23.1 million.
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 the consolidated fixed charge coverage ratio, as definedrestricted payments covenants in the indenture governing the outstanding notes of Ferrellgas Partners and the consolidated leverage ratio and consolidated interest coverage ratio, as defined in the secured credit facility and the accounts receivable securitization facility.
Ferrellgas Partners, L.P., the operatingmaster limited partnership as detailed in Ferrellgas' secured credit facility and accounts receivable securitization facility.
The indenture governing the outstanding notes of Ferrellgas Partners includesdue June 15, 2020 contains a covenant that restricts the ability of Ferrellgas Partners to make certain restricted payments, including distributions on its common units.
Under this covenant, subject to the limited exception described below, Ferrellgas Partners may not make a restricted payment unless its consolidated fixed charge coverage ratio test for(defined in the incurrence of debt and the making of restricted payments. This covenant requires thatindenture generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, (bothboth as adjusted for certain, specified items) of Ferrellgas Partners beis at least 1.75x, beforeon a pro forma basis giving effect to the restricted payment (as defined inand, if applicable, certain other specified events. As of October 31, 2019, Ferrellgas Partners’ consolidated fixed charge coverage ratio was 1.35x.
If the indenture) can be made by Ferrellgas Partners. If thisconsolidated fixed charge coverage ratio were to dropis below 1.75x, the indenture allows Ferrellgas Partners tomay make restricted payments of up to $50.0 million in total over a 16sixteen quarter period while below this ratio. As of January 31, 2018, the ratio was 1.59x.period. As a result of distributions paid to common unitholders in September 2017, December 2017, March 2018, June 2018, and September 2018, while this ratio was less than 1.75x, Ferrellgas Partners has used substantially all of its capacity under the $9.8 million distributionlimited exception and therefore is currently restricted by this covenant from making future restricted payments, including distributions to common unitholders. Accordingly, no distributions have been or will be paid to common unitholders on March 16, 2018for the three months ended October 31, 2019, and, unless this indenture is amended or replaced or Ferrellgas Partners’ consolidated fixed charge coverage ratio improves to at least 1.75x, this covenant will be takencontinue to prohibit Ferrellgas Partners from making common unit distributions.
Ferrellgas, L.P., the $50.0 million restricted payment limitation, which after considering the $9.8 million deductions taken as a result of the distributions paid in September 2017 and December 2017, leaves $20.6 million for future restricted payments. Unlessoperating partnership
Similar to the indenture governing the outstanding notes is amended or refinanced, if ourof Ferrellgas Partners, the indentures governing the outstanding notes of the operating partnership contain covenants that restrict the ability of the operating partnership to make certain restricted payments, including distributions to Ferrellgas Partners. Under these covenants, subject to the limited exception described below, the operating partnership may not make a restricted payment unless its consolidated fixed charge coverage ratio does not improve(defined in the indentures generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, both as adjusted for certain, specified items) is at least 1.75x on a pro forma basis giving effect to the restricted payment and, we continueif applicable, certain other specified events. As of October 31, 2019, the operating partnership’s consolidated fixed charge coverage ratio was 1.68x.
If the consolidated fixed charge coverage ratio is below 1.75x, the operating partnership may make restricted payments in limited amounts determined under the indentures.If the operating partnership’s consolidated fixed charge coverage ratio remains below 1.75x, the distribution to be made by the operating partnership on December 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 would be made from capacity under the limited exception to the ratio requirement.
16
Although the operating partnership believes that its remaining capacity under the limited exception to the ratio requirement under the operating partnership’s indentures, and its ability to comply with the limitations on distributions under our current quarterly distribution rate of $0.10 per common unit, this covenantSenior Secured Credit Facility, will not allow usit to make common unit distributions for our quarter ending October 31, 2018 and beyond.
Debt and interest expense reduction and refinancing strategy
Ferrellgas continues to execute onpursue a strategy to further reduce its debt and interest expense. ThisAchievements under this strategy mayduring fiscal 2018 included entering into the Senior Secured Credit Facility, amending our accounts receivable securitization facility and selling certain assets. Other opportunities include amendingthe generation of additional cash flows organically or through accretive acquisitions, restructuring or refinancing existing indebtedness, selling additional assets, maintaining the suspension of Ferrellgas’ common unit distributions, issuing equity or executing one or more debt agreements, additional asset sales, a reduction inexchanges. Ferrellgas Partners' annual distribution rate or the issuance of equity. Ferrellgas believes anyexpects to maintain its debt and interest expense reduction strategies would remain in effectstrategy until Ferrellgas'its consolidated leverage ratio reaches 4.5x or a level Ferrellgasthat it deems appropriate for its business.
G. Partners’ deficit
As of JanuaryOctober 31, 2018, Ferrellgas had total borrowings outstanding under its secured credit facility of $261.2 million, all of which was classified as short-term. Ferrellgas had $125.8 million of capacity under the secured credit facility as of January 31, 2018. As of July 31, 2017, Ferrellgas had total borrowings outstanding under its secured credit facility of $245.5 million, of which $185.7 million was classified as long-term debt. Ferrellgas had $190.3 million of capacity under the secured credit facility as of July 31, 2017. However, the consolidated leverage ratio covenant under this facility limited additional borrowings to $67.5 million as of July 31, 2017. Borrowings outstanding at January 31, 2018 and July 31, 2017 under the secured credit facility had weighted average interest rates of 6.5% and 6.0%, respectively.
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 |
Public common unitholders (1) |
| 69,612,939 |
| 69,612,939 |
Ferrell Companies (2) |
| 22,529,361 |
| 22,529,361 |
FCI Trading Corp. (3) |
| 195,686 |
| 195,686 |
Ferrell Propane, Inc. (4) |
| 51,204 |
| 51,204 |
James E. Ferrell (5) |
| 4,763,475 |
| 4,763,475 |
(1) | These common units are listed on the New York Stock Exchange under the symbol “FGP”. |
(2) | Ferrell Companies is the owner of the general partner and is an approximate 23.2% 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 October 31, 2019. |
(3) | FCI Trading is an affiliate of the general partner and thus a related party. |
(4) | Ferrell Propane is controlled by the general partner and thus a related party. |
(5) | 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 or their related entities 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. |
17
| 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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Public common unitholders |
| $ | — |
| $ | 6,962 |
|
Ferrell Companies |
|
| — |
|
| 2,253 |
|
FCI Trading Corp. |
|
| — |
|
| 20 |
|
Ferrell Propane, Inc. |
|
| — |
|
| 5 |
|
James E. Ferrell |
|
| — |
|
| 476 |
|
General partner |
|
| — |
|
| 98 |
|
|
| $ | — |
| $ | 9,814 |
|
| 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 related to the three months ended October 31, 2019. Ferrellgas has not paid any cash distributions to our unitholders since the distribution paid in the first quarter of $0.10 per common unitfiscal 2019 for the three months ended JanuaryJuly 31, 2018, which is expected2018. As discussed in Note F – 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 IK – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)See Note HJ – 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 six 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 sixthree months ended JanuaryOctober 31, 2019, the general partner made non-cash contributions of $16 thousand to Ferrellgas to maintain its effective 2% general partner interest.
During the three months ended October 31, 2018, the general partner made non-cash contributions of $0.2$0.1 million to Ferrellgas to maintain its effective 2% general partner interest.
H. Revenue from contracts with customers
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.
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
18
due within 30 days. Revenues from sales of propane are included in Propane and other gas liquids sales on the six months endedJanuary 31, 2017,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 general partner made cash contributionsability 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 $1.7 millionpropane including hazardous materials fees and non-cash contributionsfuel 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 $0.2 millionpropane 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 maintainthe 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 October 31, |
| ||||
|
|
| 2019 |
| 2018 |
| ||
Retail - Sales to End Users |
|
| $ | 180,417 |
| $ | 217,764 |
|
Wholesale - Sales to Resellers |
|
|
| 82,704 |
|
| 93,944 |
|
Other Gas Sales |
|
|
| 10,264 |
|
| 23,258 |
|
Other |
|
|
| 19,829 |
|
| 17,343 |
|
Propane and related equipment revenues |
|
| $ | 293,214 |
| $ | 352,309 |
|
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.
19
The following table presents the opening and closing balances of Ferrellgas Partners’ receivables, contract assets, and contract liabilities:
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| October 31, 2019 |
| July 31, 2019 | ||
Accounts receivable |
| $ | 119,609 |
| $ | 96,450 |
Contract assets |
| $ | 6,700 |
| $ | 13,609 |
Contract liabilities |
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Deferred revenue (1) |
| $ | 43,821 |
| $ | 31,974 |
(1) | Of the beginning balance of deferred revenue, $9.2 million was recognized as revenue during the three months ended October 31, 2019. |
Remaining performance obligations
Ferrellgas’ remaining performance obligations are generally limited to situations where its effective 2% general partner interest.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.
I.
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
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| Asset (Liability) | ||||||||||
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| Quoted Prices in Active |
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| |
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| Markets for Identical |
| Significant Other |
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| Assets and Liabilities |
| Observable Inputs |
| Unobservable Inputs |
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| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | ||||
October 31, 2019: |
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Assets: |
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Derivative financial instruments: |
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Commodity derivatives |
| $ | — |
| $ | 453 |
| $ | — |
| $ | 453 |
Liabilities: |
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Derivative financial instruments: |
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Commodity derivatives |
| $ | — |
| $ | (21,358) |
| $ | — |
| $ | (21,358) |
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July 31, 2019: |
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Assets: |
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Derivative financial instruments: |
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Commodity derivatives |
| $ | — |
| $ | 1,259 |
| $ | — |
| $ | 1,259 |
Liabilities: |
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Derivative financial instruments: |
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Commodity derivatives |
| $ | — |
| $ | (16,015) |
| $ | — |
| $ | (16,015) |
| 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 notes
20
the note receivable financial instrumentsinstrument classified in "Other assets, net" on the condensed consolidated balance sheets, areis approximately $32.1$13.3 million, or $4.3$0.5 million less than theirits carrying amount as of JanuaryOctober 31, 2018.2019. The estimated fair valuesvalue of these notesthe note receivable werewas calculated using a discounted cash flow method which relied on significant unobservable inputs. At JanuaryOctober 31, 20182019 and July 31, 2017,2019, the estimated fair value of Ferrellgas’ long-term debt instruments was $1,728.3$1,735.5 million and $1,966.6$1,824.6 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.J. 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 neither qualified nor were designated as cash flow 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 sixthree months ended JanuaryOctober 31, 20182019 and 2017,2018, 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
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| Final | October 31, 2019 | ||||||||
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| Maturity | Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Date | Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
| December 2021 |
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Commodity derivatives-propane |
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| Prepaid expenses and other current assets |
| $ | 444 |
| Other current liabilities |
| $ | 19,745 |
Commodity derivatives-propane |
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| Other assets, net |
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| 9 |
| Other liabilities |
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| 1,613 |
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| Total |
| $ | 453 |
| Total |
| $ | 21,358 |
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| Final | July 31, 2019 | ||||||||
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| Maturity | Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Date | Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
| December 2021 |
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Commodity derivatives-propane |
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| Prepaid expenses and other current assets |
| $ | 910 |
| Other current liabilities |
| $ | 14,198 |
Commodity derivatives-propane |
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| Other assets, net |
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| 349 |
| Other liabilities |
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| 1,817 |
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| Total |
| $ | 1,259 |
| Total |
| $ | 16,015 |
21
| 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 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
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| October 31, 2019 | ||||||||
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| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 33,519 |
| Other current liabilities |
| $ | 2,112 |
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| Other assets, net |
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| 2,674 |
| Other liabilities |
|
| — |
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| $ | 36,193 |
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| $ | 2,112 |
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| July 31, 2019 | ||||||||
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| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 25,028 |
| Other current liabilities |
| $ | 1,217 |
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| Other assets, net |
|
| 2,969 |
| Other liabilities |
|
| — |
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|
| $ | 27,997 |
|
|
| $ | 1,217 |
| 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 | |||||||||
| 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 six months ended
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| For the three months ended October 31, 2019 | |||||||||
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| 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 |
| $ | (13,627) |
| Cost of product sold- propane and other gas liquids sales |
| $ | (7,479) |
| $ | — |
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| $ | (13,627) |
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| $ | (7,479) |
| $ | — |
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| For the three months ended October 31, 2018 | |||||||||
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| 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 |
| $ | (8,154) |
| Cost of sales-propane and other gas liquids sales |
| $ | 4,433 |
| $ | — |
|
| $ | (8,154) |
|
|
| $ | 4,433 |
| $ | — |
| 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 | ) | $ | — | ||||||||
| 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 sixthree months ended JanuaryOctober 31, 20182019 and 20172018 were as follows:
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| For the three months ended October 31, | ||||
Gains and losses on derivatives included in AOCI |
| 2019 |
| 2018 | ||
Beginning balance |
| $ | (14,756) |
| $ | 20,560 |
Change in value of risk management commodity derivatives |
|
| (13,627) |
|
| (8,154) |
Reclassification of (gains) losses on commodity hedges to cost of sales - propane and other gas liquids sales, net |
|
| 7,479 |
|
| (4,433) |
Ending balance |
| $ | (20,904) |
| $ | 7,973 |
| 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$19.3 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 salessale exception.
22
During the sixthree months ended JanuaryOctober 31, 20182019 and 2017,2018, 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 reducesreduce 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 JanuaryOctober 31, 2018,2019, the maximum amount of loss due to credit risk that Ferrellgas would incur is zero, 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 JanuaryOctober 31, 2018.
I.K. 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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Operating expense |
| $ | 63,471 |
| $ | 59,958 |
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|
|
|
|
|
General and administrative expense |
| $ | 6,487 |
| $ | 6,112 |
|
| 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 FG – Partners’ deficit.
23
J.L. 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 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 casecoordinated for pretrial purposes by athe 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. Thereafter, in August 2019, Ferrellgas reached a settlement with the direct customers, pursuant to which it agreed to pay a total of $6.25 million to resolve all claims asserted by the putative direct purchaser class. With respect to the indirect customers, the district court exercised supplemental jurisdiction over the remaining state law claims, but then granted in part Ferrellgas’ pleadings-based motion and dismissed 11 of the 24 remaining state law claims. As a result, there are 13 remaining state law claims brought by a putative class of indirect customers. Ferrellgas believes it has strong defenses to the claims and intends to vigorously defend itself against the consolidated case.these remaining claims. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
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”), thenpreviously 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 underas a result of the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas.Ferrellgas and that Bridger and Ferrellgas breached fiduciary duties owed to Eddystone as a creditor of JTS. Ferrellgas believes that Ferrellgas and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim.for breach of contract. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas believes that the amount of such damage claims,damages, 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.
M. Net earnings (loss) per common unit
Ferrellgas Partners is currently restricted by its debt covenants from making distributions to common unitholders. See Note F – Debt – for details regarding these restrictions. Below is a calculation of the basic and diluted net earnings (loss)
24
per common unit in the condensed consolidated statements of operations for the periods indicated. In accordance with guidance issued by the FASB regarding participating securities and the two-class method, 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 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:
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| 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 six months ended JanuaryOctober 31, 20182019 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.
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| For the three months ended October 31, |
| ||||
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| 2019 |
| 2018 |
| ||
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Common unitholders’ interest in net loss |
| $ | (44,891) |
| $ | (56,445) |
|
Weighted average common units outstanding (in thousands) |
|
| 97,152.7 |
|
| 97,152.7 |
|
Basic and diluted net loss per common unit |
| $ | (0.46) |
| $ | (0.58) |
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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. Segment reporting
| 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 | |||||||
| 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 | ||||||||
| 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 | ||||
| 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 | ||||||||
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.statements except as described below.
On November 7, 2019, the operating partnership entered into a second amendment to the financing agreement governing its Senior Secured Credit Facility. See Note F – Debt for further discussion.
On December 5, 2019, the operating partnership entered into an eighth amendment to its accounts receivable securitization facility in order to align certain deliverables under the accounts receivable securitization facility with similar requirements under the second amendment to the financing agreement governing the Senior Secured Credit Facility, noted above.
25
| 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)
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| October 31, 2019 |
| July 31, 2019 | ||
ASSETS |
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Cash |
| $ | 1,000 |
| $ | 1,000 |
Prepaid expenses and other current assets |
|
| 1,021 |
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| 1,858 |
Total assets |
| $ | 2,021 |
| $ | 2,858 |
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Contingencies and commitments (Note B) |
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STOCKHOLDER’S EQUITY |
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Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding |
| $ | 1,000 |
| $ | 1,000 |
Additional paid in capital |
|
| 33,081 |
|
| 33,027 |
Accumulated deficit |
|
| (32,060) |
|
| (31,169) |
Total stockholder’s equity |
| $ | 2,021 |
| $ | 2,858 |
See notes to condensed financial statements.
26
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
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| For the three months ended October 31, |
| ||||
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| 2019 |
| 2018 |
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General and administrative expense |
| $ | 891 |
| $ | 1,941 |
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Net loss |
| $ | (891) |
| $ | (1,941) |
|
See notes to condensed financial statements.
27
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
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| For the three months ended October 31, | ||||
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| 2019 |
| 2018 | ||
Cash flows from operating activities: |
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Net loss |
| $ | (891) |
| $ | (1,941) |
Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
|
| 838 |
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| 1,850 |
Cash used in operating activities |
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| (53) |
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| (91) |
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Cash flows from financing activities: |
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Capital contribution |
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| 53 |
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| 91 |
Cash provided by financing activities |
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| 53 |
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| 91 |
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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.
28
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.
Going Concern
The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. As discussed in Note B – Contingencies and commitments, the Finance Corp serves as co-issuer and co-obligor for debt securities of the Partnership. The Partnership has $357.0 million aggregate principal amount of unsecured senior notes due June 15, 2020 that are classified as current. This obligation is only reported on the Partnership’s condensed consolidated balance sheet. The ability of the Partnership to restructure, refinance or otherwise satisfy these notes is uncertain considering the level of other outstanding indebtedness. Additionally, the Finance Corp. does not have sufficient cash reserves or the ability to generate sufficient future cash flows to satisfy its obligations as co-obligor of the debt securities of the Partnership. Given these concerns, the Finance Corp. believes there is substantial doubt about the entity’s ability to continue as a going concern. The Partnership has engaged Moelis & Company LLC as its financial advisor and the law firm of Squire Patton Boggs LLP to assist with the Partnership’s ongoing process to address its upcoming debt maturities. The successful outcome of the Partnership’s debt reduction strategy continues to remain uncertain.
B. Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
29
| 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)
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 29,733 |
| $ | 11,046 |
Accounts and notes receivable, net (including $118,164 and $106,145 of accounts receivable pledged as collateral at October 31, 2019 and July 31, 2019, respectively) |
|
| 123,841 |
|
| 107,596 |
Inventories |
|
| 84,995 |
|
| 80,454 |
Prepaid expenses and other current assets |
|
| 50,426 |
|
| 42,157 |
Total current assets |
|
| 288,995 |
|
| 241,253 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 598,887 |
|
| 596,723 |
Goodwill, net |
|
| 247,195 |
|
| 247,195 |
Intangible assets (net of accumulated amortization of $416,512 and $414,210 at October 31, 2019 and July 31, 2019, respectively) |
|
| 108,493 |
|
| 108,557 |
Operating lease right-of-use assets |
|
| 124,047 |
|
| — |
Other assets, net |
|
| 75,443 |
|
| 69,105 |
Total assets |
| $ | 1,443,060 |
| $ | 1,262,833 |
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 44,421 |
| $ | 33,364 |
Short-term borrowings |
|
| 80,000 |
|
| 43,000 |
Collateralized note payable |
|
| 73,000 |
|
| 62,000 |
Current portion of long-term debt |
|
| 2,230 |
|
| 277,029 |
Current operating lease liabilities |
|
| 33,832 |
|
| — |
Other current liabilities |
|
| 176,099 |
|
| 134,303 |
Total current liabilities |
|
| 409,582 |
|
| 549,696 |
|
|
|
|
|
|
|
Long-term debt |
|
| 1,731,920 |
|
| 1,457,004 |
Operating lease liabilities |
|
| 88,773 |
|
| — |
Other liabilities |
|
| 36,915 |
|
| 36,536 |
Contingencies and commitments (Note L) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ deficit: |
|
|
|
|
|
|
Limited partner |
|
| (795,385) |
|
| (758,186) |
General partner |
|
| (7,950) |
|
| (7,570) |
Accumulated other comprehensive loss |
|
| (20,795) |
|
| (14,647) |
Total partners’ deficit |
|
| (824,130) |
|
| (780,403) |
Total liabilities and partners’ deficit |
| $ | 1,443,060 |
| $ | 1,262,833 |
See notes to condensed consolidated financial statements.
30
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 273,385 |
| $ | 334,966 |
|
Other |
|
| 19,829 |
|
| 17,343 |
|
Total revenues |
|
| 293,214 |
|
| 352,309 |
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 134,028 |
|
| 204,136 |
|
Cost of sales - other |
|
| 3,681 |
|
| 3,047 |
|
Operating expense - personnel, vehicle, plant and other |
|
| 114,543 |
|
| 110,331 |
|
Operating expense - equipment lease expense |
|
| 8,388 |
|
| 7,863 |
|
Depreciation and amortization expense |
|
| 19,219 |
|
| 18,992 |
|
General and administrative expense |
|
| 9,696 |
|
| 14,175 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| 2,748 |
|
Loss on asset sales and disposals |
|
| 2,235 |
|
| 4,504 |
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 629 |
|
| (13,487) |
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (36,877) |
|
| (35,195) |
|
Other income (expense), net |
|
| (132) |
|
| 19 |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (36,380) |
|
| (48,663) |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 518 |
|
| 151 |
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (36,898) |
| $ | (48,814) |
|
See notes to condensed consolidated financial statements.
31
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
|
|
|
|
|
|
|
|
Net loss |
| $ | (36,898) |
| $ | (48,814) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
Change in value of risk management derivatives |
|
| (13,627) |
|
| (8,154) |
|
Reclassification of (gains) losses on derivatives to earnings, net |
|
| 7,479 |
|
| (4,433) |
|
Other comprehensive loss |
|
| (6,148) |
|
| (12,587) |
|
Comprehensive loss |
| $ | (43,046) |
| $ | (61,401) |
|
See notes to condensed consolidated financial statements.
32
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ DEFICIT
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
| other |
| Total | ||
|
| Limited |
| General |
| comprehensive |
| partners’ | ||||
|
| partner |
| partner |
| loss |
| deficit | ||||
Balance at July 31, 2019 |
| $ | (758,186) |
| $ | (7,570) |
| $ | (14,647) |
| $ | (780,403) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions in connection with non-cash ESOP compensation charges |
|
| 787 |
|
| 8 |
|
| — |
|
| 795 |
Cumulative adjustment for lease accounting standard |
|
| (1,361) |
|
| (14) |
|
| — |
|
| (1,375) |
Distributions |
|
| (100) |
|
| (1) |
|
| — |
|
| (101) |
Net loss |
|
| (36,525) |
|
| (373) |
|
| — |
|
| (36,898) |
Other comprehensive loss |
|
| — |
|
| — |
|
| (6,148) |
|
| (6,148) |
Balance at October 31, 2019 |
| $ | (795,385) |
| $ | (7,950) |
| $ | (20,795) |
| $ | (824,130) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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) |
See notes to condensed consolidated financial statements.
33
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| For the three months ended October 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (36,898) |
| $ | (48,814) |
Reconciliation of net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 19,219 |
|
| 18,992 |
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| 2,748 |
Loss on asset sales and disposals |
|
| 2,235 |
|
| 4,504 |
Provision for doubtful accounts |
|
| 665 |
|
| 519 |
Deferred income tax expense |
|
| 554 |
|
| 150 |
Other |
|
| 2,327 |
|
| 2,174 |
Changes in operating assets and liabilities, net of effects from business acquisitions: |
|
|
|
|
|
|
Accounts and notes receivable, net of securitization |
|
| (14,410) |
|
| (10,654) |
Inventories |
|
| (4,541) |
|
| (22,866) |
Prepaid expenses and other current assets |
|
| (7,970) |
|
| (6,361) |
Accounts payable |
|
| 11,360 |
|
| 13,159 |
Accrued interest expense |
|
| 26,469 |
|
| 24,290 |
Other current liabilities |
|
| 8,214 |
|
| 6,677 |
Other assets and liabilities |
|
| (872) |
|
| (2,124) |
Net cash provided by (used in) operating activities |
|
| 7,147 |
|
| (17,606) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (6,400) |
|
| (4,625) |
Capital expenditures |
|
| (18,126) |
|
| (23,433) |
Proceeds from sale of assets |
|
| 835 |
|
| 1,061 |
Cash payments to construct assets in connection with future lease transactions |
|
| (16,879) |
|
| — |
Cash receipts in connection with leased vehicles |
|
| 5,863 |
|
| — |
Other |
|
| — |
|
| (292) |
Net cash used in investing activities |
|
| (34,707) |
|
| (27,289) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Distributions |
|
| (101) |
|
| (10,015) |
Payments on long-term debt |
|
| (512) |
|
| (281) |
Net additions to (reductions in) short-term borrowings |
|
| 37,000 |
|
| (32,800) |
Net additions to collateralized short-term borrowings |
|
| 11,000 |
|
| 32,000 |
Cash paid for financing costs and other |
|
| (1,140) |
|
| (224) |
Net cash provided by (used in) financing activities |
|
| 46,247 |
|
| (11,320) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 18,687 |
|
| (56,215) |
Cash and cash equivalents - beginning of period |
|
| 11,046 |
|
| 119,308 |
Cash and cash equivalents - end of period |
| $ | 29,733 |
| $ | 63,093 |
See notes to condensed consolidated financial statements.
34
(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 sixthree months ended JanuaryOctober 31, 20182019 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 20172019.
Going Concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. Ferrellgas Partners has $357.0 million in unsecured notes due June 15, 2020 that are classified as current in its condensed consolidated financial statements. Ferrellgas Partners’ ability to restructure, refinance or otherwise satisfy these notes is directly impacted by the cash flows of Ferrellgas, L.P. The ability of Ferrellgas Partners to restructure or refinance these notes is uncertain considering the level of other outstanding indebtedness. In certain circumstances, the failure to repay the $357.0 million in unsecured notes on their contractual maturity date may result in an event of default under the operating partnership’s Senior Secured Credit Facility and the indentures governing the operating partnership’s outstanding notes. Given these concerns, Ferrellgas, L.P., believes there is substantial doubt about the entity’s ability to continue as a going concern. Ferrellgas has engaged Moelis & Company LLC as its financial advisor and the law firm of Squire Patton Boggs LLP to assist with its ongoing process to address its upcoming debt maturities. The successful outcome of Ferrellgas’ debt reduction strategy continues to remain uncertain. Additionally, see Note F – Debt below for further discussion of the outstanding debt.
35
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 condensed 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 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 isbecame effective for fiscal yearsFerrellgas, L.P. for its annual reporting period beginning after December 15, 2018,August 1, 2019, including interim periods within those fiscal years.that reporting period. Ferrellgas, L.P. is currently evaluatingadopted the impactstandard using 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 our pendingretained earnings in the period of adoption of ASU 2016-02 onand consequently, to continue to report comparative periods in compliance with the consolidated financial statements. prior guidance (ASC 840).
Ferrellgas, L.P. has formed an implementation team, completed training onelected the new standard,short-term lease recognition exemption for all leases that qualify, meaning it does not recognize right-of-use assets or lease liabilities for those leases. Ferrellgas, L.P. also elected the practical expedient to not separate lease and is working on annon-lease components for its most significant leasing activity, which includes vehicle and real estate leases.
Additionally, Ferrellgas, L.P. elected the package of three practical expedients which allows entities to not reassess 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 isbecame effective for fiscal yearsFerrellgas, L.P. for its annual reporting period beginning after December 15, 2018,August 1, 2019, including interim periods within those fiscal years. that reporting period. Ferrellgas, L.P. is currently evaluatingapplied ASU No. 2017-12 using a modified retrospective approach for cash flow hedges existing at the impactdate of its pendingadoption and prospectively for the presentation and disclosure guidance. The adoption of this standard did not have a material impact on our consolidated financial statements.
.
36
C. Leases
Ferrellgas, L.P. determines if an arrangement is a lease or contains a lease at inception. Ferrellgas, L.P. leases certain transportation and computer equipment and real estate, predominantly through operating leases. Ferrellgas, L.P. has an immaterial amount of leases in which it is the lessor. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the lease commencement date. Ferrellgas, L.P. determines the lease term by assuming the exercise of renewal options that are reasonably certain. The lease term is used to determine whether a lease is finance or operating and is used to calculate rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term. Operating lease balances are classified as operating lease right-of-use (“ROU”) assets, and current and long-term operating lease liabilities on Ferrellgas, L.P.’s condensed consolidated financial statements.balance sheet. Ferrellgas, L.P. has an immaterial amount of finance leases that are included in “Other assets, net”, “Other current liabilities”, and “Other liabilities” on its condensed consolidated balance sheet.
ROU assets represent Ferrellgas, L.P. right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of Ferrellgas, L.P.’s leases do not provide an implicit discount rate, Ferrellgas, L.P. uses its incremental borrowing rate adjusted for the lease term to represent the rate it would have to pay to borrow on a collateralized basis based on the information available at the commencement date in determining the present value of lease payments. Ferrellgas, L.P.’s lease terms may include options to extend or terminate the lease and it will adjust the life of the lease when it is reasonably certain that it will exercise these options.
Ferrellgas, L.P. has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. Ferrellgas, L.P. has variable lease components, including lease payments with payment escalation based on the Consumer Price Index, and other variable items, such as common area maintenance and taxes.
Key assumptions include the discount rate, the impact of purchase options and renewal options on Ferrellgas, L.P.’s lease term, as well as the assessment of residual value guarantees.
Ferrellgas, L.P.’s transportation equipment leases generally have purchase options. However, in most circumstances Ferrellgas, L.P. is not certain if it will exercise the purchase option. As circumstances dictate, it may instead return the existing equipment to the lessor and sign a new lease. Ferrellgas, L.P.’s transportation equipment leases often contain residual value guarantees, but they are not reflected in Ferrellgas, L.P.’s lease liabilities as its lease rates are such that residual value guarantees are not expected to be owed at the end of its leases.
Ferrellgas, L.P.’s real estate leases will often have an option to extend the lease, but it is typically not reasonably certain of exercising options to extend. As customer demand changes over time, Ferrellgas, L.P. typically maintains the ability to move to more advantageous locations, relocate to other leased and owned locations, or discontinue service from particular locations.
The following table provides the operating and financing ROU assets and lease liabilities as of October 31, 2019:
|
|
|
|
|
|
Leases |
| Classification |
|
| October 31, 2019 |
Assets |
|
|
|
|
|
Operating lease assets |
| Operating lease right-of-use assets |
| $ | 124,047 |
Financing lease assets |
| Other assets, net |
|
| 5,719 |
Total leased assets |
|
|
| $ | 129,766 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
|
|
|
|
|
Operating |
| Current operating lease liabilities |
| $ | 33,832 |
Financing |
| Other current liabilities |
|
| 1,817 |
Noncurrent |
|
|
|
|
|
Operating |
| Operating lease liabilities |
|
| 88,773 |
Financing |
| Other liabilities |
|
| 3,949 |
Total leased liabilities |
|
|
| $ | 128,371 |
37
The following table provides the lease expenses for the three months ended October 31, 2019:
|
|
|
|
|
|
Leases Expense |
| Classification |
| For the three months ended October 31, | |
|
|
|
| 2019 | |
|
|
|
|
|
|
Operating lease expense |
| Operating expenses - personnel, vehicle, plant and other |
| $ | 1,741 |
|
| Operating expense - equipment lease expense |
|
| 7,607 |
|
| Cost of sales - propane and other gas liquids sales |
|
| 389 |
|
| General and administrative expense |
|
| 266 |
Total operating lease expense |
|
|
| $ | 10,003 |
|
|
|
|
|
|
Short-term expense |
| Operating expenses - personnel, vehicle, plant and other |
| $ | 1,954 |
|
| General and administrative expense |
|
| 110 |
Total short-term expense |
|
|
| $ | 2,064 |
|
|
|
|
|
|
Variable lease expense |
| Operating expenses - personnel, vehicle, plant and other |
| $ | 675 |
|
| Operating expense - equipment lease expense |
|
| 733 |
Total variable lease expense |
|
|
| $ | 1,408 |
|
|
|
|
|
|
Finance lease expense |
|
|
|
|
|
Amortization of leased assets |
| Depreciation and amortization expense |
| $ | 40 |
Interest on lease liabilities |
| Interest expense |
|
| 42 |
Total finance lease expense |
|
|
| $ | 82 |
|
|
|
|
|
|
Total lease expense |
|
|
| $ | 13,557 |
Minimum annual payments under existing operating and finance lease liabilities as of October 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
Maturities of lease liabilities |
|
| Operating leases |
|
| Finance leases |
|
| Total |
| 2020 |
| $ | 31,711 |
| $ | 1,233 |
| $ | 32,944 |
| 2021 |
|
| 35,187 |
|
| 1,568 |
|
| 36,755 |
| 2022 |
|
| 25,864 |
|
| 1,177 |
|
| 27,041 |
| 2023 |
|
| 19,938 |
|
| 893 |
|
| 20,831 |
| 2024 |
|
| 17,092 |
|
| 812 |
|
| 17,904 |
Thereafter |
|
| 34,326 |
|
| 1,735 |
|
| 36,061 |
Total lease payments |
| $ | 164,118 |
| $ | 7,418 |
| $ | 171,536 |
Less: Imputed interest |
|
| 41,513 |
|
| 1,652 |
|
| 43,165 |
Present value of lease liabilities |
| $ | 122,605 |
| $ | 5,766 |
| $ | 128,371 |
The following table represents the weighted-average remaining lease term and discount rate as of October 31, 2019:
|
|
|
|
|
|
| As of October 31, 2019 | ||
Lease type |
| Weighted-average remaining lease term (years) |
| Weighted-average discount rate |
Operating leases |
| 5.7 |
| 8.2% |
Finance leases |
| 5.8 |
| 8.0% |
38
Cash flow information is presented below:
|
|
|
|
|
| For the three months ended October 31, | |
|
| 2019 | |
Cash paid for amounts included in the measurement of lease liabilities for operating leases: |
|
|
|
Operating cash flows |
| $ | 11,049 |
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities for financing leases: |
|
|
|
Operating cash flows |
| $ | 42 |
Financing cash flows |
| $ | 28 |
C.D. Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Propane gas and related products |
| $ | 70,067 |
| $ | 66,001 |
Appliances, parts and supplies, and other |
|
| 14,928 |
|
| 14,453 |
Inventories |
| $ | 84,995 |
| $ | 80,454 |
| 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 JanuaryOctober 31, 2018,2019, Ferrellgas, L.P. had committed, for supply procurement purposes, to take delivery ofdeliver approximately 81.91.3 million gallons of propane at fixed prices.prices, net of contracts to take delivery.
Prepaid expenses and other current assets consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Broker margin deposit assets |
| $ | 33,519 |
| $ | 25,028 |
Other |
|
| 16,907 |
|
| 17,129 |
Prepaid expenses and other current assets |
| $ | 50,426 |
| $ | 42,157 |
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Notes receivable, less current portion |
| $ | 13,809 |
| $ | 16,216 |
Other |
|
| 61,634 |
|
| 52,889 |
Other assets, net |
| $ | 75,443 |
| $ | 69,105 |
| 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:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Accrued interest |
| $ | 43,019 |
| $ | 16,550 |
Customer deposits and advances |
|
| 35,625 |
|
| 24,686 |
Accrued payroll |
|
| 23,918 |
|
| 17,356 |
Accrued insurance |
|
| 13,980 |
|
| 18,524 |
Price risk management liabilities |
|
| 19,745 |
|
| 14,198 |
Other |
|
| 39,812 |
|
| 42,989 |
Other current liabilities |
| $ | 176,099 |
| $ | 134,303 |
39
| 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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Operating expense - personnel, vehicle, plant and other |
| $ | 48,015 |
| $ | 47,443 |
|
Depreciation and amortization expense |
|
| 1,840 |
|
| 1,072 |
|
Operating expense - equipment lease expense |
|
| 7,642 |
|
| 7,519 |
|
|
| $ | 57,497 |
| $ | 56,034 |
|
| 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 three months ended October 31, | ||||
|
| 2019 |
| 2018 | ||
Cash paid (refunded) for: |
|
|
|
|
|
|
Interest |
| $ | 8,284 |
| $ | 8,930 |
Income taxes |
| $ | — |
| $ | (5) |
Non-cash investing and financing activities: |
|
|
|
|
|
|
Liabilities incurred in connection with acquisitions |
| $ | 520 |
| $ | 1,096 |
Change in accruals for property, plant and equipment additions |
| $ | (43) |
| $ | (315) |
Right-of-use assets arising from operating and finance lease liabilities |
| $ | 17,177 |
| $ | — |
| 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.E. Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Accounts receivable pledged as collateral |
| $ | 118,164 |
| $ | 106,145 |
Accounts receivable not pledged as collateral (including other reserves) |
|
| 2,817 |
|
| 1,218 |
Note receivable |
|
| 5,292 |
|
| 2,660 |
Other |
|
| 36 |
|
| 36 |
Less: Allowance for doubtful accounts |
|
| (2,468) |
|
| (2,463) |
Accounts and notes receivable, net |
| $ | 123,841 |
| $ | 107,596 |
| 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 October 31, 2018. See additional disclosure about Ferrellgas' financial covenants in Note E - Debt.
As of JanuaryOctober 31, 2018,2019, Ferrellgas, L.P. had received cash proceeds of $166.0$73.0 million from trade accounts receivables securitized, with no remaining capacity to receive additional proceeds.proceeds or issue letters of credit. As of July 31, 2017,2019, Ferrellgas, L.P. had received cash proceeds of $69.0$62.0 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%5.2% and
, respectively.
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 JanuaryOctober 31, 20182019 and July 31, 2017, $261.22019,
40
$80.0 million and $59.8$43.0 million, respectively, were classified as short-term borrowings. For further discussion see the “Senior secured credit facilities” section below.
Long-term debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Senior notes |
|
|
|
|
|
|
Fixed rate, 6.50%, due 2021 (1) |
| $ | 500,000 |
| $ | 500,000 |
Fixed rate, 6.75%, due 2023 (2) |
|
| 500,000 |
|
| 500,000 |
Fixed rate, 6.75%, due 2022, net of unamortized premium of $1,455 and $1,633 at October 31, 2019 and July 31, 2019, respectively (3) |
|
| 476,455 |
|
| 476,633 |
|
|
|
|
|
|
|
Senior secured term loan |
|
|
|
|
|
|
Variable interest rate, Term Loan, expected to mature May 2023 (4) |
|
| 275,000 |
|
| 275,000 |
|
|
|
|
|
|
|
Notes payable |
|
|
|
|
|
|
10.4% and 10.7% weighted average interest rate at October 31, 2019 and July 31, 2019, respectively, due 2020 to 2029, net of unamortized discount of $683 and $711 at October 31, 2019 and July 31, 2019, respectively |
|
| 6,080 |
|
| 5,962 |
Total debt, excluding unamortized debt issuance and other costs |
|
| 1,757,535 |
|
| 1,757,595 |
Unamortized debt issuance and other costs |
|
| (23,385) |
|
| (23,562) |
Less: current portion of long-term debt |
|
| 2,230 |
|
| 277,029 |
Long-term debt |
| $ | 1,731,920 |
| $ | 1,457,004 |
(1) | During November 2010, Ferrellgas, L.P. issued $500.0 million in aggregate principal amount of 6.50% senior notes due 2021.These notes are general unsecured senior obligations of Ferrellgas, L.P. and are effectively junior to all existing and future senior secured indebtedness of Ferrellgas, L.P., to the extent of the value of the assets securing such debt. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on May 1 and November 1 of each year. The outstanding principal amount is due on May 1, 2021. |
(2) | During June 2015, Ferrellgas, L.P. issued $500.0 million in aggregate principal amount of 6.75% senior notes due 2023. These notes are general unsecured senior obligations of Ferrellgas, L.P. and are effectively junior to all existing and future senior secured indebtedness of Ferrellgas, L.P., to the extent of the value of the assets securing such debt. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on June 15 and December 15 of each year. Ferrellgas, L.P. would incur prepayment penalties if it were to repay the notes prior to June 2021. |
(3) | During fiscal 2014, Ferrellgas, L.P. issued $475.0 million in aggregate principal amount of 6.75% senior notes due 2022. These notes are general unsecured senior obligations of Ferrellgas, L.P. and are effectively junior to all existing and future senior secured indebtedness of Ferrellgas, L.P., to the extent of the value of the assets securing such debt. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on January 15 and July 15 of each year. |
(4) | The Senior Secured Credit Facility, including the Term Loan, will mature on the earlier of (i) May 4, 2023 and (ii) the date that is 90 days prior to the earliest maturity date of any series of the operating partnership’s outstanding notes after giving effect to any extensions or refinancings thereof. As of July 31, 2019, the earliest maturity date of any series of the operating partnership’s outstanding notes was May 1, 2021, except for the reclassification of the Term Loan from long-term to current. As of October 31, 2019, the Term Loan was reclassified to long-term. |
Senior secured credit facilities
On May 4, 2018, Ferrellgas, L.P. entered into a new $575.0 million senior secured credit facility section below.(the “Senior Secured Credit Facility”), consisting of a $300.0 million revolving line of credit (the “Revolving Facility”) and a $275.0 million
41
term loan (the “Term Loan”) which mature on the earlier of (i) May 4, 2023 and (ii) the date that is 90 days prior to the earliest maturity date of any series of the operating partnership’s outstanding notes after giving effect to any extensions or refinancings thereof. As of this filing, the earliest maturity date of any series of the operating partnership’s outstanding notes is May 1, 2021. Revolving Facility borrowings bear interest at the Prime Rate + 4.75% and Term Loan borrowings bear interest at LIBOR + 5.75%. The Revolving Facility, as amended, includes a $140.0 million sublimit for the issuance of letters of credit.Borrowings under the Senior Secured Credit Facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness and acquisitions, within certain limits.
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 the following: 1) certain asset sales, 2) 50% of any excess cash flow, as defined by the Term Loan, in any fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and 4) certain tax refunds.
On June 6, 2019, Ferrellgas, L.P. entered into a first amendment to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the first amendment updated the calculation of the fixed charge coverage ratio for purposes of the fixed charge coverage ratio in the agreement to exclude certain maintenance capital expenditures related to the purchase during fiscal 2019 of new propane delivery trucks which have historically been leased. The first 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.
On November 7, 2019, Ferrellgas, L.P. entered into a second amendment (the “Second Amendment”) to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the Second Amendment (i) increased from $125.0 million to $140.0 million the sub-limit for issuance of letters of credit that exists within the $300.0 million Revolving Facility; and (ii) modified a component of the fixed charge coverage ratio calculation to exclude payments related to the manufacture of vehicles used for propane delivery or related service up to specified amounts if operating lease commitments sufficient to cover such excluded amounts have been obtained and those payments are in fact reimbursed under such operating leases within nine months thereafter. In addition, the Second Amendment provided waivers for any event of default that has or would otherwise arise with respect to the delivery of an unqualified report of Grant Thornton LLP as to going concern with respect to the audited financial statements of Ferrellgas, L.P. and with respect to the timely delivery of financial information for fiscal 2019, thereby resolving the disagreement with the agent under the Senior Secured Credit Facility regarding alleged events of default described in the Annual Report on Form 10-K for fiscal 2019. As a result of the Second Amendment, the Term Loan was reclassified from current to long-term, consistent with its underlying maturity.
The Senior Secured Credit Facility is secured with substantially all of the assets of Ferrellgas, L.P. and its subsidiaries, and Ferrellgas Partners’ and the general partner’s partnership interests in Ferrellgas, L.P., and contains various affirmative and negative covenants and default provisions, as well as requirements with respect to the maintenance of specified financial ratios and limitations on the making of loans and investments.
As of October 31, 2019, Ferrellgas, L.P. had borrowings of $275.0 million under the Term Loan at an interest rate of 7.89%, which was classified as long-term debt, and $80.0 million of borrowings under the Revolving Facility, at a weighted average interest rate of 9.09%, which was classified as short-term borrowings. As of October 31, 2019, Ferrellgas, L.P. had available borrowing capacity under the Revolving Facility of $101.9 million. As of July 31, 2019, Ferrellgas, L.P. had borrowings of $275.0 million under the Term Loan at an interest rate of 8.16%, which was classified as current, and $43.0 million under the Revolving Facility at an interest rate of 9.47%, which was classified as short-term borrowings. As of July 31, 2019, Ferrellgas, L.P. had available borrowing capacity under the Revolving Facility of $155.1 million.
Letters of credit outstanding at October 31, 2019 and July 31, 2019 totaled $118.1 million and $101.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At October 31, 2019, Ferrellgas, L.P. had remaining available letter of credit capacity of $6.9 million (or $21.9 million, if the Second Amendment had been effective as of October 31, 2019). At July 31, 2019, Ferrellgas, L.P. had remaining available letter of credit capacity of $23.1 million.
42
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 ourFerrellgas Partners’ 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 the consolidated leverage ratio and consolidated interest coverage ratio, as definedrestricted payments covenants in our secured credit facility and our accounts receivable securitization facility.
Similar to the indenture governing the outstanding notes of Ferrellgas Partners, the indentures governing the outstanding notes of the operating partnership contain covenants that restrict the ability of the operating partnership to make certain restricted payments, including distributions to Ferrellgas Partners. Under these covenants, subject to the limited exception described below, the operating partnership may not make a restricted payment (as definedunless its consolidated fixed charge coverage ratio (defined in the secured credit facilityindentures generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, both as adjusted for certain, specified items) is at least 1.75x , on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events. As of October 31, 2019, the operating partnership’s consolidated fixed charge coverage ratio was 1.68x.
If the consolidated fixed charge coverage ratio is below 1.75x, the operating partnership indentures) canmay make restricted payments in limited amounts determined under the indentures. If the operating partnership’s consolidated fixed charge coverage ratio remains below 1.75x, the distribution to be made by the operating partnership the operating partnership must be in compliance with the consolidated leverage ratio and consolidatedon December 15, 2019 for payment of interest coverage ratio covenants under the secured credit facility and accounts receivable securitization facility and in compliance with the covenants under the operating partnerships indentures. If the operating partnership is unable to make restricted payments,on Ferrellgas Partners will not have the ability to make semi-annual interest payments on its $357.0 million 8.625%Partners’ unsecured senior notes due 2020 orwould be made from capacity under the limited exception to the ratio requirement.
Although the operating partnership believes that its remaining capacity under the limited exception to the ratio requirement under the operating partnership’s indentures, and its ability to comply with the limitations on distributions under our Senior Secured Credit Facility, will allow it to make distributions to Ferrellgas Partners common unitholders. If Ferrellgas Partners does not maketo cover interest payments on itsFerrellgas Partners’ unsecured senior notes that would constitute an eventdue 2020 through the maturity of default which would permitthose notes, 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 wouldrestrictions in turn trigger cross acceleration of other debt. If Ferrellgas, L.P.'sthese debt obligations are accelerated, Ferrellgas, L.P.agreements 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.
Debt and interest expense reduction and refinancing strategy
Ferrellgas, L.P. continues to execute onpursue a strategy to further reduce its debt and interest expense. ThisAchievements under this strategy mayduring fiscal 2018 included entering into the Senior Secured Credit Facility, amending our accounts receivable securitization facility and selling certain assets. Other opportunities include amendingthe generation of additional cash flows organically or through accretive acquisitions, restructuring or refinancing existing debt agreements,indebtedness, selling additional asset sales, a reduction inassets, maintaining the operating partnership's fundingsuspension of Ferrellgas Partners' annual distribution ratePartners’ common unit distributions, issuing equity or the issuance of equity.executing one or more debt exchanges. Ferrellgas, L.P. believes anyexpects to maintain its debt and interest expense reduction strategies would remain in effectstrategy until Ferrellgas, L.P.'sthe consolidated leverage ratio reaches 4.5x or a level Ferrellgas, L.P.that it deems appropriate for its business.
Letters of credit outstanding at January 31, 2018 totaled $188.0 million and were used to secure commodity hedges, product purchases, and insurance arrangements. Letters of credit outstanding at July 31, 2017 totaled $139.2 million and were used to secure commodity hedges, product purchases, and insurance arrangements. At January 31, 2018, Ferrellgas, L.P. had remaining letter of credit capacity of $12.0 million. At July 31, 2017 Ferrellgas, L.P. had remaining letter of credit capacity of $60.8 million.
Partnership distributions paid
Ferrellgas, L.P. has paidrecognized the following distributions:
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Ferrellgas Partners |
| $ | 100 |
| $ | 9,914 |
|
General partner |
|
| 1 |
|
| 101 |
|
|
| $ | 101 |
| $ | 10,015 |
|
| 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 IK – Transactions with related parties.
43
Accumulated other comprehensive income (loss)(“AOCI”)
See Note HJ – 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 six 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 sixthree months ended JanuaryOctober 31, 2019, the general partner made non-cash contributions of $8 thousand to Ferrellgas, L.P. to maintain its 1.0101% general partner interest.
During the three months ended October 31, 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 H. Revenue from contracts with customers
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.
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.
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
44
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 October 31, |
| ||||
|
|
| 2019 |
| 2018 |
| ||
Retail - Sales to End Users |
|
| $ | 180,417 |
| $ | 217,764 |
|
Wholesale - Sales to Resellers |
|
|
| 82,704 |
|
| 93,944 |
|
Other Gas Sales |
|
|
| 10,264 |
|
| 23,258 |
|
Other |
|
|
| 19,829 |
|
| 17,343 |
|
Propane and related equipment revenues |
|
| $ | 293,214 |
| $ | 352,309 |
|
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 its receivables, contract assets, and contract liabilities:
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
Accounts receivable |
| $ | 119,609 |
| $ | 96,450 |
Contract assets |
| $ | 6,700 |
| $ | 13,609 |
Contract liabilities |
|
|
|
|
|
|
Deferred revenue (1) |
| $ | 43,821 |
| $ | 31,974 |
(1) | Of the beginning balance of deferred revenue, $9.2 million was recognized as revenue during the three months ended October 31, 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.
45
G.I. 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 | ||||
October 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 453 |
| $ | — |
| $ | 453 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (21,358) |
| $ | — |
| $ | (21,358) |
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2019: |
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|
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|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 1,259 |
| $ | — |
| $ | 1,259 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (16,015) |
| $ | — |
| $ | (16,015) |
| 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 notesthe note receivable financial instrumentsinstrument classified in "Other assets, net" on the condensed consolidated balance sheets, areis approximately $32.1$13.3 million, or $4.3$0.5 million less than theirits carrying amount as of JanuaryOctober 31, 2018.2019. The estimated fair valuesvalue of these notesthe note receivable werewas calculated using a discounted cash flow method which relied on significant unobservable inputs. At JanuaryOctober 31, 20182019 and July 31, 2017,2019, the estimated fair value of Ferrellgas, L.P.’s long-term debt instruments was $1,410.6$1,514.2 million and $1,645.3$1,562.2 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.J. 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
46
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 JanuaryOctober 31, 20182019 and July 31, 2017: 2019:
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|
|
|
|
|
|
|
|
|
| Final | October 31, 2019 | ||||||||
|
| Maturity | Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Date | Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
| December 2021 |
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
|
| Prepaid expenses and other current assets |
| $ | 444 |
| Other current liabilities |
| $ | 19,745 |
Commodity derivatives-propane |
|
| Other assets, net |
|
| 9 |
| Other liabilities |
|
| 1,613 |
|
|
| Total |
| $ | 453 |
| Total |
| $ | 21,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Final | July 31, 2019 | ||||||||
|
| Maturity | Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Date | Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
| December 2021 |
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
|
| Prepaid expenses and other current assets |
| $ | 910 |
| Other current liabilities |
| $ | 14,198 |
Commodity derivatives-propane |
|
| Other assets, net |
|
| 349 |
| Other liabilities |
|
| 1,817 |
|
|
| Total |
| $ | 1,259 |
| Total |
| $ | 16,015 |
| 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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|
|
| October 31, 2019 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 33,519 |
| Other current liabilities |
| $ | 2,112 |
|
| Other assets, net |
|
| 2,674 |
| Other liabilities |
|
| — |
|
|
|
| $ | 36,193 |
|
|
| $ | 2,112 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2019 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 25,028 |
| Other current liabilities |
| $ | 1,217 |
|
| Other assets, net |
|
| 2,969 |
| Other liabilities |
|
| — |
|
|
|
| $ | 27,997 |
|
|
| $ | 1,217 |
47
| 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 | |||||||||
| 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 six months ended
|
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|
|
|
|
|
|
|
|
| For the three months ended October 31, 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 |
| $ | (13,627) |
| Cost of product sold- propane and other gas liquids sales |
| $ | (7,479) |
| $ | — |
|
| $ | (13,627) |
|
|
| $ | (7,479) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, 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 |
| $ | (8,154) |
| Cost of product sold- propane and other gas liquids sales |
| $ | 4,433 |
| $ | — |
|
| $ | (8,154) |
|
|
| $ | 4,433 |
| $ | — |
| 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 | ) | $ | — | ||||||||
| 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 sixthree months ended JanuaryOctober 31, 20182019 and 20172018 were as follows:
|
|
|
|
|
|
|
|
| For the three months ended October 31, | ||||
Gains and losses on derivatives included in AOCI |
| 2019 |
| 2018 | ||
Beginning balance |
| $ | (14,756) |
| $ | 20,560 |
Change in value of risk management commodity derivatives |
|
| (13,627) |
|
| (8,154) |
Reclassification of (gains) losses on commodity hedges to cost of sales - propane and other gas liquids sales, net |
|
| 7,479 |
|
| (4,433) |
Ending balance |
| $ | (20,904) |
| $ | 7,973 |
| 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$19.3 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 salessale exception.
During the sixthree months ended JanuaryOctober 31, 20182019 and 2017,2018, 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 JanuaryOctober 31, 2018,2019, Ferrellgas, L.P. had financial derivative contracts covering 2.64.5 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 reducesreduce 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 JanuaryOctober 31, 2018,2019, the maximum amount of loss due to credit risk that Ferrellgas, L.P. would incur is zero, which is based upon the gross fair values of the derivative financial instruments, Ferrellgas, L.P. would incur is $7.5 million. instruments.
48
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 JanuaryOctober 31, 2018.
I.K. 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 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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
Operating expense |
| $ | 63,471 |
| $ | 59,958 |
|
|
|
|
|
|
|
|
|
General and administrative expense |
| $ | 6,487 |
| $ | 6,112 |
|
| 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 FG – Partners’ deficit.
J.L. 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 casecoordinated for pretrial purposes by athe 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. Thereafter, in August 2019, Ferrellgas, L.P. reached a settlement with the direct customers, pursuant to which it agreed to pay a total of $6.25 million to resolve all claims asserted by the putative direct purchaser class. With respect to the indirect customers, the district court exercised supplemental jurisdiction over the remaining state law claims, but then granted in part Ferrellgas’ pleadings-based motion and dismissed 11 of the 24 remaining state law claims. As a result, there are 13 remaining state law claims brought by a putative class of indirect customers. Ferrellgas, L.P. believes it has strong defenses to the claims and intends to vigorously defend itself against the consolidated case.these remaining claims. 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. 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
49
Lawsuit"). Eddystone indicated that it has prevailed in or settled an arbitration against Jamex Transfer Services (“JTS”), thenpreviously 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 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 underas a result of the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. Ferrellgas L.P.and that Bridger and Ferrellgas breached fiduciary duties owed to Eddystone as a creditor of JTS. Ferrellgas 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.for breach of contract. 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,damages, if ultimately owed to Eddystone, could be material to Ferrellgas. 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 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.
| 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 | |||||||
| 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 | ||||||||
| 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:
| 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 | ||||||||
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 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.
50
| 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 October 31, 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 |
| $ | 29,732 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 29,733 |
Accounts and notes receivable, net |
|
| 7,891 |
|
| — |
|
| 30 |
|
| 115,920 |
|
| — |
|
| 123,841 |
Intercompany receivables |
|
| (7,736) |
|
| — |
|
| — |
|
| — |
|
| 7,736 |
|
| — |
Inventories |
|
| 84,995 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 84,995 |
Prepaid expenses and other current assets |
|
| 50,426 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 50,426 |
Total current assets |
|
| 165,308 |
|
| 1 |
|
| 30 |
|
| 115,920 |
|
| 7,736 |
|
| 288,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 598,887 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 598,887 |
Goodwill, net |
|
| 247,195 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 247,195 |
Intangible assets, net |
|
| 108,493 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 108,493 |
Investments in consolidated subsidiaries |
|
| 55,600 |
|
| — |
|
| — |
|
| — |
|
| (55,600) |
|
| — |
Operating lease right-of-use assets |
|
| 124,047 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 124,047 |
Other assets, net |
|
| 72,517 |
|
| — |
|
| 2,255 |
|
| 671 |
|
| — |
|
| 75,443 |
Total assets |
| $ | 1,372,047 |
| $ | 1 |
| $ | 2,285 |
| $ | 116,591 |
| $ | (47,864) |
| $ | 1,443,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 44,421 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 44,421 |
Short-term borrowings |
|
| 80,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 80,000 |
Collateralized note payable |
|
| — |
|
| — |
|
| — |
|
| 73,000 |
|
| — |
|
| 73,000 |
Intercompany payables |
|
| — |
|
| — |
|
| — |
|
| (7,736) |
|
| 7,736 |
|
| — |
Current portion of long-term debt |
|
| 2,230 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,230 |
Current operating lease liabilities |
|
| 33,832 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 33,832 |
Other current liabilities |
|
| 178,086 |
|
| — |
|
| 13 |
|
| (2,000) |
|
| — |
|
| 176,099 |
Total current liabilities |
|
| 338,569 |
|
| — |
|
| 13 |
|
| 63,264 |
|
| 7,736 |
|
| 409,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 1,731,920 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,731,920 |
Operating lease liabilities |
|
| 88,773 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 88,773 |
Other liabilities |
|
| 36,915 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 36,915 |
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity |
|
| (803,335) |
|
| 1 |
|
| 2,272 |
|
| 53,327 |
|
| (55,600) |
|
| (803,335) |
Accumulated other comprehensive loss |
|
| (20,795) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (20,795) |
Total partners' capital (deficit) |
|
| (824,130) |
|
| 1 |
|
| 2,272 |
|
| 53,327 |
|
| (55,600) |
|
| (824,130) |
Total liabilities and partners' capital (deficit) |
| $ | 1,372,047 |
| $ | 1 |
| $ | 2,285 |
| $ | 116,591 |
| $ | (47,864) |
| $ | 1,443,060 |
51
| 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, 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 |
| $ | 11,045 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 11,046 |
Accounts and notes receivable, net |
|
| (3,912) |
|
| — |
|
| 35 |
|
| 111,473 |
|
| — |
|
| 107,596 |
Intercompany receivables |
|
| (5,650) |
|
| — |
|
| — |
|
| — |
|
| 5,650 |
|
| — |
Inventories |
|
| 80,454 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 80,454 |
Prepaid expenses and other current assets |
|
| 42,158 |
|
| — |
|
| (1) |
|
| — |
|
| — |
|
| 42,157 |
Total current assets |
|
| 124,095 |
|
| 1 |
|
| 34 |
|
| 111,473 |
|
| 5,650 |
|
| 241,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 596,724 |
|
| — |
|
| (1) |
|
| — |
|
| — |
|
| 596,723 |
Goodwill, net |
|
| 247,195 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 247,195 |
Intangible assets, net |
|
| 108,557 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 108,557 |
Investments in consolidated subsidiaries |
|
| 52,999 |
|
| — |
|
| — |
|
| — |
|
| (52,999) |
|
| — |
Other assets, net |
|
| 65,447 |
|
| — |
|
| 2,875 |
|
| 783 |
|
| — |
|
| 69,105 |
Total assets |
| $ | 1,195,017 |
| $ | 1 |
| $ | 2,908 |
| $ | 112,256 |
| $ | (47,349) |
| $ | 1,262,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 33,252 |
| $ | — |
| $ | — |
| $ | 112 |
| $ | — |
| $ | 33,364 |
Short-term borrowings |
|
| 43,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 43,000 |
Collateralized note payable |
|
| — |
|
| — |
|
| — |
|
| 62,000 |
|
| — |
|
| 62,000 |
Intercompany payables |
|
| — |
|
| — |
|
| (192) |
|
| (5,458) |
|
| 5,650 |
|
| — |
Current portion of long-term debt |
|
| 277,029 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 277,029 |
Other current liabilities |
|
| 128,666 |
|
| — |
|
| 20 |
|
| 5,617 |
|
| — |
|
| 134,303 |
Total current liabilities |
|
| 481,947 |
|
| — |
|
| (172) |
|
| 62,271 |
|
| 5,650 |
|
| 549,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 1,457,004 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,457,004 |
Other liabilities |
|
| 36,469 |
|
| — |
|
| 67 |
|
| — |
|
| — |
|
| 36,536 |
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity |
|
| (765,756) |
|
| 1 |
|
| 3,013 |
|
| 49,985 |
|
| (52,999) |
|
| (765,756) |
Accumulated other comprehensive income |
|
| (14,647) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (14,647) |
Total partners' capital (deficit) |
|
| (780,403) |
|
| 1 |
|
| 3,013 |
|
| 49,985 |
|
| (52,999) |
|
| (780,403) |
Total liabilities and partners' capital (deficit) |
| $ | 1,195,017 |
| $ | 1 |
| $ | 2,908 |
| $ | 112,256 |
| $ | (47,349) |
| $ | 1,262,833 |
52
| 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 October 31, 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 |
| $ | 273,385 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 273,385 |
Other |
|
| 19,829 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 19,829 |
Total revenues |
|
| 293,214 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 293,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 134,028 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 134,028 |
Cost of sales - other |
|
| 3,681 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,681 |
Operating expense - personnel, vehicle, plant and other |
|
| 114,543 |
|
| — |
|
| — |
|
| 885 |
|
| (885) |
|
| 114,543 |
Depreciation and amortization expense |
|
| 19,107 |
|
| — |
|
| — |
|
| 112 |
|
| — |
|
| 19,219 |
General and administrative expense |
|
| 9,695 |
|
| 1 |
|
| — |
|
| — |
|
| — |
|
| 9,696 |
Operating expense - equipment lease expense |
|
| 8,388 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,388 |
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 795 |
Loss on asset sales and disposals |
|
| 2,235 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 742 |
|
| (1) |
|
| — |
|
| (997) |
|
| 885 |
|
| 629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (35,691) |
|
| — |
|
| — |
|
| (1,186) |
|
| — |
|
| (36,877) |
Other income (expense), net |
|
| (132) |
|
| — |
|
| — |
|
| 720 |
|
| (720) |
|
| (132) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| (35,081) |
|
| (1) |
|
| — |
|
| (1,463) |
|
| 165 |
|
| (36,380) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 518 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 518 |
Equity in earnings (loss) of subsidiaries |
|
| (1,464) |
|
| — |
|
| — |
|
| — |
|
| 1,464 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| (37,063) |
|
| (1) |
|
| — |
|
| (1,463) |
|
| 1,629 |
|
| (36,898) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| (6,148) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,148) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | (43,211) |
| $ | (1) |
| $ | — |
| $ | (1,463) |
| $ | 1,629 |
| $ | (43,046) |
53
| 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 October 31, 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 |
| $ | 334,966 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 334,966 |
Other |
|
| 17,343 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 17,343 |
Total revenues |
|
| 352,309 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 352,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 204,136 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 204,136 |
Cost of sales - other |
|
| 3,047 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,047 |
Operating expense |
|
| 110,331 |
|
| — |
|
| — |
|
| 1,017 |
|
| (1,017) |
|
| 110,331 |
Depreciation and amortization expense |
|
| 18,881 |
|
| — |
|
| — |
|
| 111 |
|
| — |
|
| 18,992 |
General and administrative expense |
|
| 14,173 |
|
| 2 |
|
| — |
|
| — |
|
| — |
|
| 14,175 |
Equipment lease expense |
|
| 7,863 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,863 |
Non-cash employee stock ownership plan compensation charge |
|
| 2,748 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,748 |
Loss on asset sales and disposals |
|
| 1,996 |
|
| — |
|
| 2,508 |
|
| — |
|
| — |
|
| 4,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| (10,866) |
|
| (2) |
|
| (2,508) |
|
| (1,128) |
|
| 1,017 |
|
| (13,487) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (34,348) |
|
| — |
|
| — |
|
| (847) |
|
| — |
|
| (35,195) |
Other income (expense), net |
|
| 19 |
|
| — |
|
| — |
|
| 2,203 |
|
| (2,203) |
|
| 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| (45,195) |
|
| (2) |
|
| (2,508) |
|
| 228 |
|
| (1,186) |
|
| (48,663) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 151 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 151 |
Equity in earnings (loss) of subsidiary |
|
| (2,282) |
|
| — |
|
| — |
|
| — |
|
| 2,282 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| (47,628) |
|
| (2) |
|
| (2,508) |
|
| 228 |
|
| 1,096 |
|
| (48,814) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| (12,587) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (12,587) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | (60,215) |
| $ | (2) |
| $ | (2,508) |
| $ | 228 |
| $ | 1,096 |
| $ | (61,401) |
54
| 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 CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, 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 |
| $ | 21,350 |
| $ | (1) |
| $ | 506 |
| $ | (3,708) |
| $ | (11,000) |
| $ | 7,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (6,400) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,400) |
Capital expenditures |
|
| (18,126) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (18,126) |
Proceeds from sale of assets |
|
| 835 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 835 |
Cash collected for purchase of interest in accounts receivable |
|
| — |
|
| — |
|
| — |
|
| 161,600 |
|
| (161,600) |
|
| — |
Cash remitted to Ferrellgas, L.P. for accounts receivable |
|
| — |
|
| — |
|
| — |
|
| (172,600) |
|
| 172,600 |
|
| — |
Intercompany loan to affiliate |
|
| (3,203) |
|
| — |
|
| — |
|
| — |
|
| 3,203 |
|
| — |
Cash payments to construct assets in connection with future lease transactions |
|
| (16,879) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (16,879) |
Cash receipts in connection with leased vehicles |
|
| 5,863 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,863 |
Other |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Net cash used in investing activities |
|
| (37,910) |
|
| — |
|
| — |
|
| (11,000) |
|
| 14,203 |
|
| (34,707) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
| (101) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (101) |
Reductions in long-term debt |
|
| (512) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (512) |
Net additions to short-term borrowings |
|
| 37,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 37,000 |
Net additions to collateralized short-term borrowings |
|
| — |
|
| — |
|
| — |
|
| 11,000 |
|
| — |
|
| 11,000 |
Cash payments on lease liabilities |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Net changes in advances with consolidated entities |
|
| — |
|
| 1 |
|
| (506) |
|
| 3,708 |
|
| (3,203) |
|
| — |
Cash paid for financing costs and other |
|
| (1,140) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,140) |
Net cash provided by (used in) financing activities |
|
| 35,247 |
|
| 1 |
|
| (506) |
|
| 14,708 |
|
| (3,203) |
|
| 46,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 18,687 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 18,687 |
Cash and cash equivalents - beginning of year |
|
| 11,045 |
|
| 1 |
|
| — |
|
| — |
|
| — |
|
| 11,046 |
Cash and cash equivalents - end of year |
| $ | 29,732 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 29,733 |
55
| 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 CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended October 31, 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 |
| $ | 11,666 |
| $ | (2) |
| $ | 19,961 |
| $ | (17,231) |
| $ | (32,000) |
| $ | (17,606) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (4,625) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (4,625) |
Capital expenditures |
|
| (23,433) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (23,433) |
Proceeds from sale of assets |
|
| 1,061 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,061 |
Cash collected for purchase of interest in accounts receivable |
|
| — |
|
| — |
|
| — |
|
| 242,912 |
|
| (242,912) |
|
| — |
Cash remitted to Ferrellgas, L.P. for accounts receivable |
|
| — |
|
| — |
|
| — |
|
| (274,912) |
|
| 274,912 |
|
| — |
Net changes in advances with consolidated entities |
|
| 2,585 |
|
| — |
|
| — |
|
| — |
|
| (2,585) |
|
| — |
Other |
|
| (292) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (292) |
Net cash provided by (used in) investing activities |
|
| (24,704) |
|
| — |
|
| — |
|
| (32,000) |
|
| 29,415 |
|
| (27,289) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
| (10,015) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (10,015) |
Proceeds from increase in long-term debt |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Payments on long-term debt |
|
| (281) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (281) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,800) |
Net additions to collateralized short-term borrowings |
|
| — |
|
| — |
|
| — |
|
| 32,000 |
|
| — |
|
| 32,000 |
Net changes in advances with parent |
|
| — |
|
| 2 |
|
| (19,829) |
|
| 17,242 |
|
| 2,585 |
|
| — |
Cash paid for financing costs |
|
| (213) |
|
| — |
|
| — |
|
| (11) |
|
| — |
|
| (224) |
Net cash provided by (used in) financing activities |
|
| (43,309) |
|
| 2 |
|
| (19,829) |
|
| 49,231 |
|
| 2,585 |
|
| (11,320) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (56,347) |
|
| — |
|
| 132 |
|
| — |
|
| — |
|
| (56,215) |
Cash and cash equivalents - beginning of year |
|
| 119,133 |
|
| 1 |
|
| 174 |
|
| — |
|
| — |
|
| 119,308 |
Cash and cash equivalents - end of year |
| $ | 62,786 |
| $ | 1 |
| $ | 306 |
| $ | — |
| $ | — |
| $ | 63,093 |
56
| 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 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 | |||||||||||
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
On February 20, 2018,November 7, 2019, Ferrellgas, L.P. completedentered into a second amendment to the sale of 1,072 rail cars utilizedfinancing agreement governing its Senior Secured Credit Facility. See Note F – Debt for further discussion.
On December 5, 2019, Ferrellgas, L.P. entered into an eighth amendment to its accounts receivable securitization facility in order to align certain deliverables under the Midstream operations segment and received approximately $47.0 million in cash. Proceeds fromaccounts receivable securitization facility with similar requirements under the transaction were usedsecond amendment to reduce outstanding debt on Ferrellgas L.P.'s secured credit facility. See additional discussions on the completed rail car sale in Note C - Supplemental financial statement information.financing agreement governing the Senior Secured Credit Facility, noted above.
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)
|
|
|
|
|
|
|
|
| October 31, 2019 |
| July 31, 2019 | ||
ASSETS |
|
|
|
|
|
|
Cash |
| $ | 1,100 |
| $ | 1,100 |
Prepaid expenses and other current assets |
|
| 875 |
|
| 1,841 |
Total assets |
| $ | 1,975 |
| $ | 2,941 |
|
|
|
|
|
|
|
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 |
|
| 78,571 |
|
| 78,518 |
Accumulated deficit |
|
| (77,596) |
|
| (76,577) |
Total stockholder's equity |
| $ | 1,975 |
| $ | 2,941 |
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 October 31, |
| ||||
|
| 2019 |
| 2018 |
| ||
General and administrative expense |
| $ | 1,019 |
| $ | 1,550 |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,019) |
| $ | (1,550) |
|
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 three months ended October 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (1,019) |
| $ | (1,550) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 966 |
|
| 1,500 |
Cash used in operating activities |
|
| (53) |
|
| (50) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Capital contribution |
|
| 53 |
|
| 50 |
Cash provided by financing activities |
|
| 53 |
|
| 50 |
|
|
|
|
|
|
|
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.
Going Concern
The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. As discussed in Note B – Contingencies and commitments, the Finance Corp serves as co-issuer and co-obligor for debt securities of the Partnership. Ferrellgas Partners has $357.0 million aggregate principal amount of unsecured senior notes due June 15, 2020 that are classified as current in its consolidated financial statements. This obligation is only reported on the consolidated balance sheet of Ferrellgas Partners. The ability of Ferrellgas Partners to restructure, refinance or otherwise satisfy these notes is uncertain considering the level of other outstanding indebtedness. In certain circumstances, the failure to repay the $357 million in unsecured notes on their contractual maturity date may result in an event of default under the Partnership’s Senior Secured Credit Facility and the indentures governing the Partnership’s outstanding notes. Additionally, the Finance Corp. does not have sufficient cash reserves or the ability to generate sufficient future cash flows to satisfy its obligations as co-obligor of the debt securities of the Partnership.Given these concerns, the Finance Corp. believes there is substantial doubt about the entity’s ability to continue as a going concern. The Partnership has engaged Moelis & Company LLC as its financial advisor and the law firm of Squire Patton Boggs LLP to assist with the Partnership’s ongoing process to address its upcoming debt maturities. The successful outcome of the Partnership’s debt reduction strategy continues to remain uncertain.
B. Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
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; and |
· | “fiscal 2021” means the fiscal year ended July 31, 2021, “fiscal 2020” means the fiscal year ended July 31, 2020, “fiscal 2019” means the fiscal year ended July 31, 2019, and “fiscal 2018” means the fiscal year ended July 31, 2018. |
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
62
of Ferrellgas Partners are listed on the New York Stock Exchange and our activities are primarily conducted through the operating partnership.
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%23.4% of our outstanding common units. Ferrell Companies is owned 100% by an employee stock ownership trust.
We file annual, quarterly, and othercurrent reports and other 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 2019 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; |
63
· | energy efficiency and technology advances; |
· | 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; |
· | disruptions to railroad operations on the railroads we use; |
· | 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; |
· | disruptions in the capital and credit markets; |
· | access to available capital to meet our operating requirements up to and including the refinancing of maturing debt instruments; and |
· | the impact of the inclusion in the report of our auditor of an “emphasis of matter” paragraph regarding substantial doubt as to our ability to continue as a going concern. |
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.2019. 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
We have engaged Moelis & Company LLC as our financial advisor and the law firm of Squire Patton Boggs LLP to assist us in our ongoing process to address our upcoming debt maturities.
On November 7, 2019, Ferrellgas, L.P. entered into a second amendment (the “Second Amendment”) to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the second amendment (i) increased from
64
$125.0 million to $140.0 million the quarter ended January 31, 2018, we committedsub-limit for issuance of letters of credit that exists within the $300.0 million Revolving Facility; and (ii) modified a component of the fixed charge coverage ratio calculation 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 on asset sales and disposals" includes a loss of $35.5 millionexclude payments related to the write-downmanufacture of these rail cars classifiedvehicles used for propane delivery or related service up to specified amounts if operating lease commitments sufficient to cover such excluded amounts have been obtained and those payments are in fact reimbursed under such operating leases within nine months thereafter. In addition, the Second Amendment provided waivers for any event of default that has or would otherwise arise with respect to the delivery of an unqualified report of Grant Thornton LLP as "Assets heldto going concern with respect to the audited financial statements of Ferrellgas, L.P. and with respect to the timely delivery of financial information for sale".
Debt and received approximately $47.0 million in cash, which we usedinterest expense reduction and refinancing strategy
We continue to reduce borrowings under our senior secured credit facility. We expect that the sale willpursue a strategy to further reduce our debt and interest expense in future periods, improve our credit metrics, and lessen our reliance onexpense. Achievements under this strategy during fiscal 2018 include refinancing our senior secured credit facility, as we move forward with growth efforts.amending our accounts receivable securitization facility, and selling certain assets. Other opportunities include the generation of additional cash flows organically or through accretive acquisitions, restructuring or refinancing existing indebtedness, selling additional assets, maintaining the suspension of Ferrellgas Partners’ common unit distributions, issuing equity or executing one or more debt exchanges. We expect to maintain our debt and interest expense reduction strategy until our consolidated leverage ratio reaches a level that we deem appropriate for our business. During fiscal 2019, we engaged Moelis & Company LLC as our financial advisor and the liquidity benefits from the salelaw firm of these assets will be achieved without impactingSquire Patton Boggs LLP to assist us with our forecasted Adjusted EBTIDA.
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 specified subsidiaries to, among other things, make restricted payments and incur additional indebtedness. Our general partner believes that the most restrictive of these covenants are the consolidated fixed charge coverage ratio, as definedrestricted payments covenants in the indenture governing the outstanding notes of Ferrellgas Partners and the consolidated leverage ratio and consolidated interest coverage ratio, as defined in our secured credit facility and our accounts receivable securitization facility.
65
Ferrellgas Partners, for purposes of funding quarterly common unit distributions as discussed above.
The indenture governing the outstanding notes of Ferrellgas Partners includesdue June 15, 2020 contains a covenant that restricts the ability of Ferrellgas Partners to make certain restricted payments, including distributions on its common units. Under this covenant, subject to the limited exception described below, Ferrellgas Partners may not make a restricted payment unless its consolidated fixed charge coverage ratio test for(defined in the incurrence of debt and the making of restricted payments. This covenant requires thatindenture generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, (bothboth as adjusted for certain, specified items) of Ferrellgas Partners beis at least 1.75x, beforeon a pro forma basis giving effect to the restricted payment (as defined inand, if applicable, certain other specified events. As of October 31, 2019, Ferrellgas Partners’ consolidated fixed charge coverage ratio was 1.35x.
If the indenture) can be made by Ferrellgas Partners. If thisconsolidated fixed charge coverage ratio were to dropis below 1.75x, the indenture allows us toFerrellgas Partners may make restricted payments of up to $50.0 million in total over a 16sixteen quarter period while below this ratio. As of January 31, 2018, the ratio was 1.59x.period. As a result of distributions paid to common unitholders in September 2017, December 2017, March 2018, June 2018 and September 2018, while this ratio was less than 1.75x, Ferrellgas Partners has used substantially all of its capacity under the $9.8 million distributionlimited exception and therefore is currently restricted by this covenant from making future restricted payments, including distributions to common unitholders. Accordingly, no distributions have been or will be paid to common unitholders for the three months ended October 31, 2019, and, unless this indenture is amended or replaced or Ferrellgas Partners’ consolidated fixed charge coverage ratio improves to at least 1.75x this covenant will continue to prohibit Ferrellgas Partners from making common unit distributions. While there can be no assurance of successfully resolving the distribution limitation under this covenant, we are presently considering potential solutions to address the limitation on March 16, 2018 will be taken from the $50.0 million restricted payment limitation, which after considering the $9.8 million deductions taken asdistributions. The potential solutions include, among others, restructuring, refinancing or a resulttransaction to exchange new notes for some or all of the distributions paid in September 2017 and December 2017, leaves $20.6 million for future restricted payments. Unlessoutstanding notes of Ferrellgas Partners due June 15, 2020.
Ferrellgas, L.P., the operating partnership
Similar to the indenture governing the outstanding notes of Ferrellgas Partners, the indentures governing the outstanding notes of the operating partnership contain covenants that restrict the ability of the operating partnership to make certain restricted payments, including distributions to Ferrellgas Partners. Under these covenants, subject to the limited exception described below, the operating partnership may not make a restricted payment unless its consolidated fixed charge coverage ratio (defined in the indentures generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, both as adjusted for certain, specified items) is at least 1.75x, on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events. As of October 31, 2019, the operating partnership’s consolidated fixed charge coverage ratio was 1.68x.
If the consolidated fixed charge coverage ratio is below 1.75x, the operating partnership may make restricted payments in limited amounts determined under the indentures. If the operating partnership’s consolidated fixed charge coverage ratio remains below 1.75x, the distribution to be made by the operating partnership on December 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 would be made from capacity under the limited exception to the ratio requirement.
Although the operating partnership believes that its remaining capacity under the limited exception to the ratio requirement under the operating partnership’s indentures, and its ability to comply with the limitations on distributions under our Senior Secured Credit Facility, 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, the restrictions in these debt agreements may prevent the operating partnership from making distributions to Ferrellgas Partners to enable it to pay cash distributions to its unitholders.
Distributions
As discussed above, no distributions will be paid to common unitholders in December 2019 for the three months ended October 31, 2019. Unless the indenture governing Ferrellgas Partners’ unsecured senior notes due 2020 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, 20182019 and beyond.
66
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.
Based on our propane sales volumes in fiscal 2017,2019, 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 20182020 and 20192021 sales commitments and, as of JanuaryOctober 31, 2018,2019, have experienced net mark-to-market gainslosses of approximately $24.3$20.9 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 JanuaryOctober 31, 2018,2019, we estimate 72%90% 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.
67
Summary Discussion of Results of Operations:
Executive Overview
For the three months ended JanuaryOctober 31, 2018 and 2017
During the three months ended JanuaryOctober 31, 2018,2019, we generated net loss attributable to Ferrellgas Partners L.P. of $1.8$45.3 million, compared to net earnings attributable to Ferrellgas Partners L.P. of $38.1 million during the three months ended January 31, 2017.
| 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)loss attributable to Ferrellgas Partners, L.P., lessplus 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 (expense), net, severance costs, professionallegal fees incurredand settlements related to a lawsuit, unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments,non-core businesses, multi-employer pension withdrawal settlement, lease accounting standard adjustment, and net earnings (loss)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 makesmake 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 withcomparable to Adjusted EBITDA or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of adjusted EBITDA that will not occur on a continuing basis may have associated cash payments. This method of other companies andcalculating Adjusted EBITDA 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 certain 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 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 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 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
68
to establish reserves to reduce debt, fund capital expenditures and for other partnership purposes and any shortage is funded from previously established reserves, cash on hand or borrowings under our Senior Secured Credit Facility or accounts receivable securitization facility. Management considers Distributable cash flow excess a meaningful measure of the partnership’s ability to effectuate those purposes. Distributable cash flow excess, as management defines it, may not be comparable to distributable cash flow excess or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow excess that will not occur on a continuing basis may have associated cash payments. Distributable cash flow 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, and Distributable cash flow attributable to common unitholders and Distributable cash flow excess to Net loss attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, for the three and six months ended JanuaryOctober 31, 20182019 and 2017, respectively:2018:
|
|
|
|
|
|
|
|
|
| Three months ended October 31, |
| ||||
(amounts in thousands) |
| 2019 |
| 2018 |
| ||
Net loss attributable to Ferrellgas Partners, L.P. |
| $ | (45,344) |
| $ | (57,015) |
|
Income tax expense |
|
| 518 |
|
| 158 |
|
Interest expense |
|
| 45,697 |
|
| 43,878 |
|
Depreciation and amortization expense |
|
| 19,219 |
|
| 18,992 |
|
EBITDA |
|
| 20,090 |
|
| 6,013 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| 2,748 |
|
Loss on asset sales and disposals |
|
| 2,235 |
|
| 4,504 |
|
Other income (expense), net |
|
| 132 |
|
| (19) |
|
Legal fees and settlements related to non-core businesses |
|
| 2,043 |
|
| 3,564 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| 1,524 |
|
Lease accounting standard adjustment |
|
| 170 |
|
| — |
|
Net loss attributable to noncontrolling interest |
|
| (373) |
|
| (493) |
|
Adjusted EBITDA |
|
| 25,092 |
|
| 17,841 |
|
Net cash interest expense (a) |
|
| (42,583) |
|
| (40,899) |
|
Maintenance capital expenditures (b) |
|
| (6,467) |
|
| (5,385) |
|
Cash paid for taxes |
|
| — |
|
| (2) |
|
Proceeds from certain asset sales |
|
| 835 |
|
| 1,061 |
|
Distributable cash flow attributable to equity investors |
|
| (23,123) |
|
| (27,384) |
|
Distributable cash flow attributable to general partner and non-controlling interest |
|
| 462 |
|
| 548 |
|
Distributable cash flow attributable to common unitholders |
|
| (22,661) |
|
| (26,836) |
|
Less: Distributions paid to common unitholders |
|
| — |
|
| 9,715 |
|
Distributable cash flow excess/(shortage) |
| $ | (22,661) |
| $ | (36,551) |
|
| 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 |
69
Operating Results for the three months ended JanuaryOctober 31, 20182019 and 2017
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 October 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Retail customers |
|
| 696,592 |
|
| 678,209 |
|
| 18,383 |
| 3 | % |
Tank exchange selling locations |
|
| 55,952 |
|
| 53,809 |
|
| 2,143 |
| 4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Propane sales volumes (gallons): |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
|
| 129,901 |
|
| 129,667 |
|
| 234 |
| 0 | % |
Wholesale - Sales to Resellers |
|
| 50,039 |
|
| 48,960 |
|
| 1,079 |
| 2 | % |
|
|
| 179,940 |
|
| 178,627 |
|
| 1,313 |
| 1 | % |
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
| $ | 180,417 |
| $ | 217,764 |
| $ | (37,347) |
| (17) | % |
Wholesale - Sales to Resellers |
|
| 82,704 |
|
| 93,944 |
|
| (11,240) |
| (12) | % |
Other Gas Sales (a) |
|
| 10,264 |
|
| 23,258 |
|
| (12,994) |
| (56) | % |
Other (b) |
|
| 19,829 |
|
| 17,343 |
|
| 2,486 |
| 14 | % |
Propane and related equipment revenues |
| $ | 293,214 |
| $ | 352,309 |
| $ | (59,095) |
| (17) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: (c) |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users (a) |
| $ | 97,936 |
| $ | 90,475 |
| $ | 7,461 |
| 8 | % |
Wholesale - Sales to Resellers (a) |
|
| 41,421 |
|
| 40,355 |
|
| 1,066 |
| 3 | % |
Other (b) |
|
| 16,148 |
|
| 14,296 |
|
| 1,852 |
| 13 | % |
Propane and related equipment gross margin |
| $ | 155,505 |
| $ | 145,126 |
| $ | 10,379 |
| 7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense (d) |
| $ | 124,238 |
| $ | 124,510 |
| $ | (272) |
| (0) | % |
Operating expense - equipment lease expense |
|
| 8,388 |
|
| 7,863 |
|
| 525 |
| 7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
| $ | 630 |
| $ | (13,491) |
| $ | 14,121 |
| NM | �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 19,219 |
|
| 18,992 |
|
| 227 |
| 1 | % |
Non-cash employee stock ownership plan compensation charge |
|
| 795 |
|
| 2,748 |
|
| (1,953) |
| (71) | % |
Loss on asset sales and disposals |
|
| 2,235 |
|
| 4,504 |
|
| (2,269) |
| (50) | % |
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| 1,524 |
|
| (1,524) |
| NM |
|
Legal fees and settlements related to non-core businesses |
|
| 2,043 |
|
| 3,564 |
|
| (1,521) |
| (43) | % |
Lease accounting standard adjustment (e) |
|
| 170 |
|
| — |
|
| 170 |
| NM |
|
Adjusted EBITDA |
| $ | 25,092 |
| $ | 17,841 |
| $ | 7,251 |
| 41 | % |
(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 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 expense” above includes both the “Operating expense – personnel, vehicle, plant and other” and the “General and administrative expense” captions in the condensed consolidated statement of operations. |
(e) | Lease accounting standard adjustment reflects the additional expense recognized in excess of cash paid. |
Propane sales volumes during the three months ended JanuaryOctober 31, 20182019 increased 16%1%, or 42.31.3 million gallons, from that of the prior year period due to 33.5 million and 8.8 million of increased gallon sales volumes to both retail and wholesale customers. The increase in propane sales volumes to retail customers respectively.
70
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 three months ended JanuaryOctober 31, 20182019 averaged 46% and 45% greater56% less than the prior year period, respectively.while at the Conway, Kansas major supply point prices averaged 51% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.95$0.44 and $0.65$0.99 per gallon during the three months ended JanuaryOctober 31, 20182019 and 2017,2018, respectively, while the wholesale market price at Conway, Kansas averaged $0.90$0.38 and $0.62$0.78 per gallon during the three months ended JanuaryOctober 31, 2019 and 2018, and 2017, respectively.
Revenues
Retail sales increased $104.3decreased $37.3 million compared to the prior period. This increasedecrease resulted from a $52.3$37.7 million increasedecrease in sales price per gallon and $52.0 million from increased sales volumes, both as discussed above.
Wholesale sales increased $25.4decreased $11.2 million compared to the prior period. This increasedecrease primarily resulted from a $13.9$13.7 million decrease in sales price per gallon partially offset by a $2.4 million increase in sales volumes, and an $11.5 million increase in sales price per gallon, both as discussed above.
Other gas sales increased $25.1 million compared to the prior year period due to both an increase in sales volumes and sales price per gallon, as discussed above.
| (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 | )% | ||||||
| (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 | )% | ||||
| (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 | % | |||||||
Other revenues increased $139.5 million compared to the prior period. This increase resulted from a $78.1 million increase in sales price per gallon and $61.4 million from increased sales volumes, both as discussed above.
Gross margin - Propane and other gas liquids sales price
Gross margin increased $8.5 million primarily due to the increase in gross margin per gallon, as discussed above. The increase in retail gross margin of $7.5 million resulted from an increase in gross margin and to a lesser extent an increase in salesretail customer counts, as discussed above. The $1.1 million increase in wholesale gross margin primarily relates to increased volumes, as discussed above.
Gross margin - other
Gross margin increased $1.9 million compared to the prior year period primarily due to anincreased fees from service labor related to the 3% increase in the sales of certain lower margin equipment.
Operating income
Operating income increased $14.1 million primarily due to an $8.5 million increase in "Gross margin - Propane and other gas liquidsliquid sales", as discussed above, a $2.3 million decrease in “Loss on asset sales
Adjusted EBITDA
Adjusted EBITDA increased $7.3 million primarily due to the 51.8an $8.5 million increase in gallon sales as discussed above, partially offset by a slight decrease in gross margin per gallon. The increase in retail gross margin of $20.8 million resulted from efforts to increase market share and to a lesser extent colder weather, partially offset by a decrease in gross margin per gallon. The increase in wholesale gross margin primarily relates to increased volumes related to colder weather, partially offset by a slight decreased gross margin per gallon.
71
plant and other” increased primarily due to a $7.3$3.8 million increase in field personnel costs, related to thea $0.7 million increase in gallons sold as discussed above,plant and office costs, and a $2.7$0.5 million increase in vehicle 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 | % | |||||||
| (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 | )% | ||||
Liquidity and Capital Resources
General
Our primary sources of liquidity and capital resources are cash flows from operating activities, borrowings under our secured credit facilitySenior Secured Credit Facility and our accounts receivable securitization facility and funds received from sales of debt and equity securities. As of October 31, 2019, our total liquidity was $131.7 million, which is comprised of $29.8 million in cash and $101.9 million of availability under our Senior Secured Credit Facility and accounts receivable securitization facility. 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 this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 |
· | 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 retentionDecember 2019 for the three months ended October 31, 2019. Unless the indenture governing the outstanding notes due 2020 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;
72
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 this Item 2. Management'sManagement’s Discuss and Analysis of Financial Condition and Results of Operations 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 January 31, 2018 to the twelve months ended October 31, 20172019 to the twelve months ended July 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 (a) | |||
Three months ended October 31, 2019 |
| $ | (23,123) |
| $ | (23,124) |
| $ | 1 |
|
|
Fiscal 2019 |
|
| 22,567 |
|
| 12,338 |
|
| 10,229 |
|
|
Less: Three months ended October 31, 2018 |
|
| (27,384) |
|
| (37,299) |
|
| 9,915 |
|
|
Twelve months ended October 31, 2019 |
| $ | 26,828 |
| $ | 26,513 |
| $ | 315 |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended July 31, 2019 |
|
| 22,567 |
|
| 12,338 |
|
| 10,229 |
| 2.21 |
Change |
| $ | 4,261 |
| $ | 14,175 |
| $ | (9,914) |
| NM |
(a) | DCF ratio is calculated as Distributable cash flow attributable to equity investors divided by Cash distributions paid to equity investors. |
(b) | NM – Not Meaningful. |
| 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 | |||||||
For the twelve months ended JanuaryOctober 31, 2018,2019, distributable cash flow attributable to equity investors increased $10.4$4.3 million compared to the twelve months ended OctoberJuly 31, 2017 primarily due to a $15.6 million increase in Adjusted EBITDA, partially offset by a $5.0 million increase in interest paid. The increase in Adjusted EBITDA is primarily due to an $18.2 million increase in our Propane operations and related equipment sales segment, partially offset by a $1.9 million decrease in Corporate, both as discussed above. The increase in interest paid is primarily due to increased interest rates on the secured credit facility and accounts receivable securitization facility, as well as increased interest expense 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.2019. Cash distributions paid to equity investors were unchangeddecreased by $9.9 million during that twelve month period, because no distributions have been paid since the number of common units outstanding and our annual distribution rate has not changed. Our distribution coverage ratio increased to 1.86 for the twelvethree months ended JanuaryOctober 31, 2018.2018, which were declared in connection with the three month period ended July 31, 2018. Cash reserves, which we utilize to meet future anticipated expenditures, increased by $34.5$26.5 million during the twelve months ended JanuaryOctober 31, 20182019 compared to an increase of $24.2$12.3 million in the twelve months ended OctoberJuly 31, 2017.
We believe that the liquidity available from our cash flows from operating activities, our secured credit facility,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 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.operations.
73
Operating Activities
Ferrellgas Partners
Net cash provided by operating activities was $7.1 million for the three months ended October 31, 2019, compared to net cash used in operating activities was $36.3of $17.6 million for the sixthree months ended JanuaryOctober 31, 2018, compared to net cash provided by operating activities of $39.3 million for the six months ended January 31, 2017.2018. This decreaseincrease in cash provided by operating activities was primarily due to a $69.8$14.9 million increasedecrease in working capital requirements, and a $7.7 million unfavorable impact in 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$8.6 million increase in cash flow from operations.
The decrease in working capital requirements for the three months ended October 31, 2019 compared to the three months ended October 31, 2018 was primarily due to an $18.3 million decrease in requirements for inventory due to declining propane prices in the current quarter compared to the prior quarter, partially offset by a $3.8 million increase in requirements for accounts and notes receivable, partially due to increases in the volume of propane sold.
The increase in cash flow from operations is primarily due to a $12.8$10.4 million increase in Adjusted EBITDA, as discussed above by segment,gross profit, a $2.3 million decrease in “Loss on asset sales and disposals”, partially offset by an $11.2a $1.8 million increase in "Interest expense", as discussed above.
The operating partnership
Net cash provided by operating activities was $7.1 million for the sixthree months ended JanuaryOctober 31, 20182019, compared to the six months ended January 31, 2017 was primarily due to a $27.9 million increase in requirements for accounts receivable due to increases in the the number of gallons sold and the average selling price of propane gas, an $11.7 million increase in requirements for 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 decrease in working capital requirements for the three months ended October 31, 2019 compared to the three months ended October 31, 2018 was primarily due to an $18.3 million decrease in requirements for inventory due to declining propane prices in the current quarter compared to the prior quarter, partially offset by a $3.8 million increase in requirements for accounts and notes receivable, partially due to increases in the volume of propane sold.
The increase in cash flow from operations is primarily due to a $12.8$10.4 million increase in Adjusted EBITDA, as discussed above by segment,gross profit, a $2.3 million decrease in “Loss on asset sales and disposals”, partially offset by a $2.1$1.7 million increase in "Interest expense"expense," due to increased interest ratesborrowings on the secured credit facility.
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, and from time to time may include the purchase of assets that are typically leased, 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. |
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Net cash used in investing activities was $46.3$34.7 million for the sixthree months ended JanuaryOctober 31, 2018,2019, compared to net cash used in investing activities of $15.2$27.3 million for the sixthree months ended JanuaryOctober 31, 2017.2018. This increase in net cash used in investing activities is primarily due to a $15.9 $16.9 million increase in "Capital expenditures""Cash payments to construct assets in connection with future lease transactions" and a $14.9$1.8 million increase in "Business acquisitions, net of cash acquired.acquired", partially offset by a $5.9 million increase in “Cash receipts in connection with leased vehicles” and a $5.3 million decrease in "
The increasedecrease in "Capital expenditures" is primarily due to decreases in growth capital expenditures, partially offset by increases in maintenance andcapital expenditures during the three months ended October 31, 2019. The decrease in growth capital expenditures in our Propane operations and related equipment sales segmentis primarily due to expenditures for the construction of new portable tank exchange production plants that occurred during the sixthree months ended JanuaryOctober 31, 2018. TheThis decrease was partially offset by an increase in maintenance capital expenditures, is primarily relateddue to an increase in lease buyouts on propane delivery trucks and the purchase of new propane delivery trucks. The increase in growth capital expenditures is primarily relatedtrucks, compared to an increase in the number of cylinders purchased to support increases in tank exchange sales and selling locations.
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.
The operating partnership
The investing activities discussed above also apply to the operating partnership.
Financing Activities
Ferrellgas Partners
Net cash provided by financing activities was $91.1$46.3 million for the sixthree months ended JanuaryOctober 31, 2018,2019, compared to net cash used in financing activities of $14.4$11.2 million for the sixthree months ended JanuaryOctober 31, 2017.2018. This increase in cash flow provided by financing activities was primarily due to a $40.5$48.8 million net increase in short-term borrowings and a $9.8 million reduction in distributions, partially offset by a $15.9$0.9 million reduction in common unit repurchases, a $55.8 million net increase in proceeds from short-term borrowings, and a $4.0 million reduction in cash paid for financing costs, partially offset bycosts.
Senior secured credit facility
The Senior Secured Credit Facility consists of a $9.3$300.0 million net reduction in proceeds from long-term debt.
The quarterly distribution of $0.10 on all common unitsTerm 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 the following: 1) certain asset sales, 2) 50% of any excess cash flow, as defined by the Term Loan, in any fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and 4) certain tax refunds.
On June 6, 2019, the operating partnership entered into a first amendment to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the first amendment updated the calculation of the fixed charge coverage ratio for purposes of the fixed charge coverage ratio in the agreement to exclude certain maintenance capital expenditures related general partner distributionto the purchase during fiscal 2019 of new propane delivery trucks which have historically been leased. The first amendment provides that up to a specified amount of such maintenance capital expenditures will not be deducted from consolidated EBITDA for purposes of the three months ended January 31, 2018 totaling $9.8calculation.
On November 7, 2019, the operating partnership entered into a second amendment (the “Second Amendment”) to the financing agreement governing its Senior Secured Credit Facility. Among other matters, the Second Amendment (i)
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increased from $125.0 million are expected to be paid on March 16, 2018 to holders$140.0 million the sub-limit for issuance of record on March 9, 2018.
The Senior Secured Credit Facility is secured credit facilitywith substantially all of the assets of the operating partnership and its subsidiaries, and Ferrellgas Partners’ and the general partner’s partnership interests in the operating partnership, and contains various affirmative and negative covenants and default provisions, as well as requirements with respect to the maintenance of specified financial ratios and limitations on the making of loans and investments.
As of October 31, 2019, the operating partnership had borrowings of $275.0 million under the Term Loan at an interest rate of 7.89%, which was classified as long-term debt, and $80.0 million under the Revolving Facility, at a weighted average interest rate of 6.5%9.09%. All borrowingsAs of October 31, 2019, Ferrellgas had available borrowing capacity under the secured credit facility bear interest, at our option, at a rate equal to either:
Letters of credit outstanding at JanuaryOctober 31, 20182019 totaled $188.0$118.1 million and were used to secure commodity hedges,insurance arrangements, product purchases, and insurance arrangements.commodity hedges. At JanuaryOctober 31, 2018, we2019, Ferrellgas had remaining available letter of credit capacity of $12.0 million. As a result$6.9 million (or $21.9 million, if the Second Amendment had been effective as of the sale of Bridger Energy, LLC on January 16, 2018, we anticipate near-term reductions in outstanding letters of credit of approximately $80.0 million.
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 $21.0 million, as we received net funding of $97.0$11.0 million from this facility during the sixthree months ended JanuaryOctober 31, 20182019 as compared to receiving net funding of $69.0$32.0 million from this facility during the sixthree months ended JanuaryOctober 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 JanuaryOctober 31, 2018,2019, we had received cash proceeds of $166.0$73.0 million related to the securitization of our trade accounts receivable, with no remaining capacity to receive additional proceeds. As of JanuaryOctober 31, 2018,2019, the weighted average interest rate was 4.0%5.2%. 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.
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On September 1, 2016, utilizing borrowingsDecember 5, 2019, we entered into an eighth amendment to the accounts receivable securitization facility in order to align certain deliverables under our secured creditthe accounts receivable securitization facility with similar requirements under the financing agreement governing the Senior Secured Credit Facility.
Distributions
During the three months ended October 31, 2018, Ferrellgas Partners paid approximately $16.9 milliona per unit distribution on all common units of $0.10 in connection with the distributions declared for the three month period ended July 31, 2018. No distribution on common units was made for the three month periods ended October 31, 2018, January 31, 2019, April 30, 2019, July 31, 2019 or October 31, 2019.
Total distributions paid to Jamexcommon unitholders during fiscal 2019, including the related general partner distributions, was $9.8 million. As discussed above, no distribution on common units was made in December 2018, March 2019, June 2019, September 2019 and will not be made in return received 0.9 millionDecember 2019 for the three months ended October 31, 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 Ferrellgas Partners' common units, which were cancelled upon receipt, and approximately 23 thousand barrels of crude oil.
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 paid, as discussed below.
Cash distribution paid
The operating partnership paid cash distributions of $35.4$0.1 million and $84.5$10.0 million during the sixthree months ended JanuaryOctober 31, 20182019 and 2017,2018, respectively. The operating partnership expectsis scheduled to pay cash distributionsmake a distribution of $9.9$15.4 million to Ferrellgas 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,
| 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 | |||||
During the sixthree months ended JanuaryOctober 31, 2018,2019, Ferrellgas Partners and the operating partnership together paid the general partner distributions of $0.6 million.
As discussed previously, Ferrellgas Partners expectscontinues to paybe not in compliance with the consolidated fixed charge coverage ratio under its note indenture, and thus remains unable to make 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 sixthree months ended JanuaryOctober 31, 2018.2019. 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.
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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 futures, 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.Exchange and, to a lesser extent, directly with third parties in the over-the-counter market. We also enter into forward propane purchase and sales contracts with counterparties. These forward contracts qualify for the normal purchase normal salessale 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.
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 JanuaryOctober 31, 20182019 and July 31, 2017,2019, 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$9.3 million and $16.8$8.0 million as of JanuaryOctober 31, 20182019 and July 31, 2017,2019, 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 minimizereduce overall credit risk. These policies include an evaluationevaluating and monitoring of counterparties’ financial condition (including credit ratings), and entering into agreements with counterparties that govern credit guidelines.
Our other counterparties principally consist of major energy companies whothat are suppliers, marketers, wholesalers, retailers and end usersusers; and major U.S. 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.
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Interest rate risk
At JanuaryOctober 31, 2018,2019, we had $427.2a total of $428.0 million in variable rate secured credit facilitySenior 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$4.3 million for the twelve months ending JanuaryOctober 31, 2019.2020. 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 JanuaryOctober 31, 2018,2019, 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.
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 weFerrellgas 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
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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 casecoordinated for pretrial purposes by athe 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. Thereafter, in August 2019, we reached a settlement with the direct customers, pursuant to which it agreed to pay a total of $6.25 million to resolve all claims asserted by the putative direct purchaser class. With respect to the indirect customers, the district court exercised supplemental jurisdiction over the remaining state law claims, but then granted in part our pleadings-based motion and dismissed 11 of the 24 remaining state law claims. As a result, there are 13 remaining state law claims brought by a putative class of indirect customers. We believe we have strong defenses to the claims and intend to vigorously defend against the consolidated case.these remaining claims. We do not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
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”), thenpreviously 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 weFerrellgas 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 underas a result of the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas.Ferrellgas and that Bridger and Ferrellgas breached fiduciary duties owed to Eddystone as a creditor of JTS. We believe that we and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim.for breach of contract. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, we believe that the amount of such damage claims,damages, if ultimately owed to Eddystone, could be material.material to Ferrellgas. 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 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.
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.
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On March 8, 2018, Randy V. Schott, resigned as Senior Vice President16, 2017, plaintiff Justin Pierce ("Plaintiff") filed his Verified Class and Derivative Action Complaint in the U.S. District Court for the District of Retail Operations ofKansas, Pierce v. Ferrell, et al., Case No. 17 Civ. 02160 (JWL) (GEB), against our general partner, Ferrellgas, Inc. Ferrellgas, Inc. is, and certain of the general partnerpartner's current and former officers (the "Derivative Action"). The Derivative Action alleges causes of action for breach of contract and breach of the duty of good faith and fair dealing against the defendants in connection with disclosures and alleged failures to disclose information regarding the Company's acquisition of Bridger Logistics, LLC ("Bridger") and Bridger's operations and performance, which was the subject of an earlier-filed securities class action pending in the U.S. District Court for the Southern District of New York, In re Ferrellgas Partners, L.P. SecuritiesLitigation, No. 1:16-CV-07840 RJS (the "Securities Action").
Because the disclosure claims in the Securities Action were based on the same essential facts and Ferrellgas, L.P.
In light of the agreement,dismissal of the Securities Action, Plaintiff has sought leave to voluntarily dismiss the Derivative Action without prejudice. On August 2, 2019, the parties filed a copyStipulation and Proposed Order for Voluntary Dismissal.
Ferrellgas unitholders are hereby advised:
Ferrellgas unitholders may intervene and continue prosecution of which is attached as an Exhibitthe Derivative Action. Any unitholder who wishes to intervene must file a motion with the U.S. District Court for the District of Kansas, 500 State Avenue, Rm 259, Kansas City, Kansas 66101, not later than 45 days after the date of the filing of this Quarterly Report on Form 10-Q.quarterly report. Any motion to intervene must be filed in writing, and must include: (i) the caption of the Derivative Action; (ii) the name of the unitholder; (iii) proof or certification of the date the intervening unitholder purchased Ferrellgas unit(s), and that the intervening unitholder has held its common unit(s) continuously since the date of purchase; and (iv) a statement of the basis for the intervention.
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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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10.27 | ||||
# 10.28 | ||||
# 10.29 | ||||
# 10.30 | ||||
# 10.31 | ||||
10.32 | ||||
10.33 | ||||
* 10.34 | ||||
* 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.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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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: | December 6, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Chief Financial Officer; Treasurer (Principal Financial and Accounting Officer) | ||||
FERRELLGAS PARTNERS FINANCE CORP. | ||||
Date: | December 6, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Chief Financial Officer and Sole Director | ||||
FERRELLGAS, L.P. | ||||
By Ferrellgas, Inc. (General Partner) | ||||
Date: | December 6, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Chief Financial Officer; Treasurer (Principal Financial and Accounting Officer) | ||||
FERRELLGAS FINANCE CORP. | ||||
Date: | December 6, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Chief Financial Officer and Sole Director | ||||
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