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,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-212b‑2 of the Exchange Act.
Ferrellgas Partners, L.P.: | |||||||||
Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | ||||||
Emerging growth company ☐ |
Ferrellgas Partners Finance Corp, Ferrellgas, L.P. and Ferrellgas Finance Corp.: | |||||||
Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | ||||
Emerging growth company ☐ |
If an 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 ☐¨
At May 31, 2018,February 28, 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
H(1)(A) AND (B) OF FORM 10-Q10‑Q AND ARE THEREFORE, WITH RESPECT TO EACH SUCH REGISTRANT, FILING THIS FORM 10-Q10‑Q WITH THE REDUCED DISCLOSURE FORMAT.
FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
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1
PART I - FINANCIAL INFORMATION
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands, except unit data) | ||||||||
(unaudited) | ||||||||
April 30, 2018 | July 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 9,499 | $ | 5,760 | ||||
Accounts and notes receivable, net (including $182,486 and $109,407 of accounts receivable pledged as collateral at April 30, 2018 and July 31, 2017, respectively) | 202,727 | 165,084 | ||||||
Inventories | 85,062 | 92,552 | ||||||
Prepaid expenses and other current assets | 44,090 | 33,388 | ||||||
Total current assets | 341,378 | 296,784 | ||||||
Property, plant and equipment, net | 637,688 | 731,923 | ||||||
Goodwill, net | 246,098 | 256,103 | ||||||
Intangible assets (net of accumulated amortization of $460,011 and $436,428 at April 30, 2018 and July 31, 2017, respectively) | 235,318 | 251,102 | ||||||
Other assets, net | 72,094 | 74,057 | ||||||
Total assets | $ | 1,532,576 | $ | 1,609,969 | ||||
LIABILITIES AND PARTNERS' DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 52,472 | $ | 85,561 | ||||
Short-term borrowings | — | 59,781 | ||||||
Collateralized note payable | 104,000 | 69,000 | ||||||
Other current liabilities | 158,875 | 126,224 | ||||||
Total current liabilities | 315,347 | 340,566 | ||||||
Long-term debt | 1,995,608 | 1,995,795 | ||||||
Other liabilities | 34,225 | 31,118 | ||||||
Contingencies and commitments (Note J) | ||||||||
Partners' deficit: | ||||||||
Common unitholders (97,152,665 units outstanding at April 30, 2018 and July 31, 2017) | (758,325 | ) | (701,188 | ) | ||||
General partner unitholder (989,926 units outstanding at April 30, 2018 and July 31, 2017) | (67,568 | ) | (66,991 | ) | ||||
Accumulated other comprehensive income | 17,672 | 14,601 | ||||||
Total Ferrellgas Partners, L.P. partners' deficit | (808,221 | ) | (753,578 | ) | ||||
Noncontrolling interest | (4,383 | ) | (3,932 | ) | ||||
Total partners' deficit | (812,604 | ) | (757,510 | ) | ||||
Total liabilities and partners' deficit | $ | 1,532,576 | $ | 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 April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Propane and other gas liquids sales | $ | 451,302 | $ | 369,437 | $ | 1,346,299 | $ | 1,049,211 | ||||||||
Midstream operations | 22,595 | 126,676 | 260,631 | 331,507 | ||||||||||||
Other | 41,913 | 41,996 | 118,691 | 116,183 | ||||||||||||
Total revenues | 515,810 | 538,109 | 1,725,621 | 1,496,901 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales - propane and other gas liquids sales | 260,419 | 197,487 | 802,852 | 551,728 | ||||||||||||
Cost of sales - midstream operations | 14,518 | 118,767 | 229,710 | 300,433 | ||||||||||||
Cost of sales - other | 19,850 | 20,810 | 54,339 | 53,213 | ||||||||||||
Operating expense | 116,579 | 104,773 | 350,757 | 322,935 | ||||||||||||
Depreciation and amortization expense | 25,348 | 25,737 | 76,565 | 77,546 | ||||||||||||
General and administrative expense | 11,678 | 9,978 | 39,733 | 36,526 | ||||||||||||
Equipment lease expense | 7,133 | 7,270 | 20,828 | 22,035 | ||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | 10,731 | 11,396 | ||||||||||||
Asset impairments | — | — | 10,005 | — | ||||||||||||
Loss on asset sales and disposals | 6,270 | 2,393 | 46,414 | 8,861 | ||||||||||||
Operating income | 51,277 | 46,197 | 83,687 | 112,228 | ||||||||||||
Interest expense | (40,375 | ) | (39,860 | ) | (123,855 | ) | (112,107 | ) | ||||||||
Other income, net | 227 | 162 | 1,422 | 1,433 | ||||||||||||
Earnings (loss) before income taxes | 11,129 | 6,499 | (38,746 | ) | 1,554 | |||||||||||
Income tax expense (benefit) | 67 | (192 | ) | 282 | (194 | ) | ||||||||||
Net earnings (loss) | 11,062 | 6,691 | (39,028 | ) | 1,748 | |||||||||||
Net earnings (loss) attributable to noncontrolling interest | 201 | 155 | (131 | ) | 187 | |||||||||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. | 10,861 | 6,536 | (38,897 | ) | 1,561 | |||||||||||
Less: General partner's interest in net earnings (loss) | 109 | 66 | (389 | ) | 16 | |||||||||||
Common unitholders' interest in net earnings (loss) | $ | 10,752 | $ | 6,470 | $ | (38,508 | ) | $ | 1,545 | |||||||
Basic and diluted net earnings (loss) per common unit | $ | 0.11 | $ | 0.07 | $ | (0.40 | ) | $ | 0.02 | |||||||
Cash distributions declared per common unit | $ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||||
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 April 30, | For the nine months ended April 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Net earnings (loss) | $ | 11,062 | $ | 6,691 | $ | (39,028 | ) | $ | 1,748 | ||||||||
Other comprehensive income (loss): | |||||||||||||||||
Change in value of risk management derivatives | (159 | ) | (6,496 | ) | 23,362 | 13,904 | |||||||||||
Reclassification of (gains) losses on derivatives to earnings, net | (6,568 | ) | (1,933 | ) | (20,260 | ) | 2,819 | ||||||||||
Other comprehensive income (loss) | (6,727 | ) | (8,429 | ) | 3,102 | 16,723 | |||||||||||
Comprehensive income (loss) | 4,335 | (1,738 | ) | (35,926 | ) | 18,471 | |||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interest | 134 | 70 | (100 | ) | 356 | ||||||||||||
Comprehensive income (loss) attributable to Ferrellgas Partners, L.P. | $ | 4,201 | $ | (1,808 | ) | $ | (35,826 | ) | $ | 18,115 | |||||||
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 | — | — | 10,517 | 106 | — | 10,623 | 108 | 10,731 | |||||||||||||||||||||
Distributions | — | — | (29,146 | ) | (294 | ) | — | (29,440 | ) | (459 | ) | (29,899 | ) | ||||||||||||||||
Net loss | — | — | (38,508 | ) | (389 | ) | — | (38,897 | ) | (131 | ) | (39,028 | ) | ||||||||||||||||
Other comprehensive income | — | — | — | — | 3,071 | 3,071 | 31 | 3,102 | |||||||||||||||||||||
Balance at April 30, 2018 | 97,152.7 | 989.9 | $ | (758,325 | ) | $ | (67,568 | ) | $ | 17,672 | $ | (808,221 | ) | $ | (4,383 | ) | $ | (812,604 | ) | ||||||||||
See notes to condensed consolidated financial statements. |
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
For the nine months ended April 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net earnings (loss) | $ | (39,028 | ) | $ | 1,748 | ||
Reconciliation of net earnings (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 76,565 | 77,546 | |||||
Non-cash employee stock ownership plan compensation charge | 10,731 | 11,396 | |||||
Non-cash stock-based compensation charge | — | 3,298 | |||||
Asset impairments | 10,005 | — | |||||
Loss on asset sales and disposals | 46,414 | 8,861 | |||||
Unrealized gain on derivative instruments | (91 | ) | (3,888 | ) | |||
Provision for doubtful accounts | 1,906 | 39 | |||||
Deferred income tax expense | 423 | 45 | |||||
Other | 6,712 | 5,250 | |||||
Changes in operating assets and liabilities, net of effects from business acquisitions: | |||||||
Accounts and notes receivable, net of securitization | (46,771 | ) | (58,923 | ) | |||
Inventories | 7,755 | (2,163 | ) | ||||
Prepaid expenses and other current assets | (4,070 | ) | 12,115 | ||||
Accounts payable | (18,429 | ) | 18,830 | ||||
Accrued interest expense | 31,915 | 34,054 | |||||
Other current liabilities | (1,084 | ) | 5,053 | ||||
Other assets and liabilities | (4,642 | ) | 5,070 | ||||
Net cash provided by operating activities | 78,311 | 118,331 | |||||
Cash flows from investing activities: | |||||||
Business acquisitions, net of cash acquired | (14,862 | ) | (3,539 | ) | |||
Capital expenditures | (58,961 | ) | (35,412 | ) | |||
Proceeds from sale of assets | 57,802 | 4,721 | |||||
Other | — | (37 | ) | ||||
Net cash used in investing activities | (16,021 | ) | (34,267 | ) | |||
Cash flows from financing activities: | |||||||
Distributions | (29,440 | ) | (69,920 | ) | |||
Proceeds from issuance of long-term debt | 23,580 | 220,354 | |||||
Payments on long-term debt | (1,892 | ) | (173,471 | ) | |||
Net reductions in short-term borrowings | (84,179 | ) | (62,902 | ) | |||
Net additions to collateralized short-term borrowings | 35,000 | 27,000 | |||||
Cash paid for financing costs | (1,161 | ) | (5,633 | ) | |||
Noncontrolling interest activity | (459 | ) | 900 | ||||
Repurchase of common units | — | (15,851 | ) | ||||
Net cash used in financing activities | (58,551 | ) | (79,523 | ) | |||
Net change in cash and cash equivalents | 3,739 | 4,541 | |||||
Cash and cash equivalents - beginning of period | 5,760 | 4,965 | |||||
Cash and cash equivalents - end of period | $ | 9,499 | $ | 9,506 | |||
See notes to condensed consolidated financial statements. |
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 40,647 |
| $ | 119,311 |
Accounts and notes receivable, net (including $201,717 and $120,079 of accounts receivable pledged as collateral at January 31, 2019 and July 31, 2018, respectively) |
|
| 203,164 |
|
| 126,054 |
Inventories |
|
| 89,784 |
|
| 83,694 |
Prepaid expenses and other current assets |
|
| 36,616 |
|
| 34,862 |
Total current assets |
|
| 370,211 |
|
| 363,921 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 584,334 |
|
| 557,723 |
Goodwill, net |
|
| 247,478 |
|
| 246,098 |
Intangible assets (net of accumulated amortization of $407,795 and $399,629 at January 31, 2019 and July 31, 2018, respectively) |
|
| 113,558 |
|
| 120,951 |
Other assets, net |
|
| 72,539 |
|
| 74,588 |
Total assets |
| $ | 1,388,120 |
| $ | 1,363,281 |
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 63,639 |
| $ | 46,820 |
Short-term borrowings |
|
| — |
|
| 32,800 |
Collateralized note payable |
|
| 140,000 |
|
| 58,000 |
Other current liabilities |
|
| 147,253 |
|
| 142,025 |
Total current liabilities |
|
| 350,892 |
|
| 279,645 |
|
|
|
|
|
|
|
Long-term debt |
|
| 2,083,031 |
|
| 2,078,637 |
Other liabilities |
|
| 37,547 |
|
| 39,476 |
Contingencies and commitments (Note K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' deficit: |
|
|
|
|
|
|
Common unitholders (97,152,665 units outstanding at January 31, 2019 and July 31, 2018) |
|
| (997,154) |
|
| (978,503) |
General partner unitholder (989,926 units outstanding at January 31, 2019 and July 31, 2018) |
|
| (69,981) |
|
| (69,792) |
Accumulated other comprehensive income (loss) |
|
| (9,049) |
|
| 20,510 |
Total Ferrellgas Partners, L.P. partners' deficit |
|
| (1,076,184) |
|
| (1,027,785) |
Noncontrolling interest |
|
| (7,166) |
|
| (6,692) |
Total partners' deficit |
|
| (1,083,350) |
|
| (1,034,477) |
Total liabilities and partners' deficit |
| $ | 1,388,120 |
| $ | 1,363,281 |
See notes to condensed consolidated financial statements.
2
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, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 550,112 |
| $ | 592,239 |
| $ | 885,078 |
| $ | 894,997 |
|
Midstream operations |
|
| — |
|
| 117,276 |
|
| — |
|
| 238,036 |
|
Other |
|
| 23,265 |
|
| 45,641 |
|
| 40,608 |
|
| 76,778 |
|
Total revenues |
|
| 573,377 |
|
| 755,156 |
|
| 925,686 |
|
| 1,209,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 311,531 |
|
| 362,918 |
|
| 515,667 |
|
| 542,433 |
|
Cost of sales - midstream operations |
|
| — |
|
| 107,067 |
|
| — |
|
| 215,192 |
|
Cost of sales - other |
|
| 3,422 |
|
| 20,787 |
|
| 6,469 |
|
| 34,489 |
|
Operating expense |
|
| 121,219 |
|
| 123,716 |
|
| 231,550 |
|
| 234,178 |
|
Depreciation and amortization expense |
|
| 19,605 |
|
| 25,485 |
|
| 38,597 |
|
| 51,217 |
|
General and administrative expense |
|
| 16,342 |
|
| 14,891 |
|
| 30,521 |
|
| 28,055 |
|
Equipment lease expense |
|
| 8,415 |
|
| 6,954 |
|
| 16,278 |
|
| 13,695 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| 4,692 |
|
| 7,993 |
|
Asset impairments |
|
| — |
|
| 10,005 |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 2,216 |
|
| 39,249 |
|
| 6,720 |
|
| 40,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 88,683 |
|
| 40,053 |
|
| 75,192 |
|
| 32,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (44,891) |
|
| (42,673) |
|
| (88,769) |
|
| (83,480) |
|
Other income, net |
|
| 86 |
|
| 684 |
|
| 105 |
|
| 1,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 43,878 |
|
| (1,936) |
|
| (13,472) |
|
| (49,875) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
| 3 |
|
| (162) |
|
| 161 |
|
| 215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 43,875 |
|
| (1,774) |
|
| (13,633) |
|
| (50,090) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 531 |
|
| 69 |
|
| 38 |
|
| (332) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
|
| 43,344 |
|
| (1,843) |
|
| (13,671) |
|
| (49,758) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: General partner's interest in net earnings (loss) |
|
| 433 |
|
| (19) |
|
| (137) |
|
| (498) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unitholders' interest in net earnings (loss) |
| $ | 42,911 |
| $ | (1,824) |
| $ | (13,534) |
| $ | (49,260) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per common unit |
| $ | 0.44 |
| $ | (0.02) |
| $ | (0.14) |
| $ | (0.51) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash distributions declared per common unit |
| $ | — |
| $ | 0.10 |
| $ | — |
| $ | 0.20 |
|
See notes to condensed consolidated financial statements.
3
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, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
| $ | 43,875 |
| $ | (1,774) |
| $ | (13,633) |
| $ | (50,090) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of risk management derivatives |
|
| (21,080) |
|
| 1,072 |
|
| (29,234) |
|
| 23,521 |
|
Reclassification of (gains) losses on derivatives to earnings, net |
|
| 3,807 |
|
| (9,743) |
|
| (626) |
|
| (13,692) |
|
Other comprehensive income (loss) |
|
| (17,273) |
|
| (8,671) |
|
| (29,860) |
|
| 9,829 |
|
Comprehensive income (loss) |
|
| 26,602 |
|
| (10,445) |
|
| (43,493) |
|
| (40,261) |
|
Less: Comprehensive income (loss) attributable to noncontrolling interest |
|
| 357 |
|
| (19) |
|
| (263) |
|
| (234) |
|
Comprehensive income (loss) attributable to Ferrellgas Partners, L.P. |
| $ | 26,245 |
| $ | (10,426) |
| $ | (43,230) |
| $ | (40,027) |
|
See notes to condensed consolidated financial statements.
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ DEFICIT
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of units |
|
|
|
|
|
|
| Accumulated |
| Total Ferrellgas |
|
|
|
|
|
| ||||
|
|
|
| General |
|
|
|
| General |
| other |
| Partner, L.P. |
|
|
|
|
|
| |||
|
| Common |
| Partner |
| Common |
| Partner |
| comprehensive |
| partners’ |
| Non-controlling |
| Total partners’ | ||||||
|
| unitholders |
| unitholder |
| unitholders |
| unitholder |
| income (loss) |
| deficit |
| interest |
| deficit | ||||||
Balance at July 31, 2018 |
| 97,152.7 |
| 989.9 |
| $ | (978,503) |
| $ | (69,792) |
| $ | 20,510 |
| $ | (1,027,785) |
| $ | (6,692) |
| $ | (1,034,477) |
Contributions in connection with non-cash ESOP compensation charges |
| — |
| — |
|
| 4,599 |
|
| 46 |
|
| — |
|
| 4,645 |
|
| 47 |
|
| 4,692 |
Distributions |
| — |
| — |
|
| (9,716) |
|
| (98) |
|
| — |
|
| (9,814) |
|
| (258) |
|
| (10,072) |
Net earnings (loss) |
| — |
| — |
|
| (13,534) |
|
| (137) |
|
| — |
|
| (13,671) |
|
| 38 |
|
| (13,633) |
Other comprehensive loss |
| — |
| — |
|
| — |
|
| — |
|
| (29,559) |
|
| (29,559) |
|
| (301) |
|
| (29,860) |
Balance at January 31, 2019 |
| 97,152.7 |
| 989.9 |
| $ | (997,154) |
| $ | (69,981) |
| $ | (9,049) |
| $ | (1,076,184) |
| $ | (7,166) |
| $ | (1,083,350) |
See notes to condensed consolidated financial statements.
5
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (13,633) |
| $ | (50,090) |
Reconciliation of net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 38,597 |
|
| 51,217 |
Non-cash employee stock ownership plan compensation charge |
|
| 4,692 |
|
| 7,993 |
Asset impairments |
|
| — |
|
| 10,005 |
Loss on asset sales and disposals |
|
| 6,720 |
|
| 40,144 |
Unrealized gain on derivative instruments |
|
| — |
|
| (91) |
Provision for doubtful accounts |
|
| 1,576 |
|
| 1,688 |
Deferred income tax expense |
|
| 141 |
|
| 364 |
Other |
|
| 6,843 |
|
| 4,482 |
Changes in operating assets and liabilities, net of effects from business acquisitions: |
|
|
|
|
|
|
Accounts and notes receivable, net of securitization |
|
| (78,686) |
|
| (102,315) |
Inventories |
|
| (6,090) |
|
| (17,275) |
Prepaid expenses and other current assets |
|
| (16,351) |
|
| (4,682) |
Accounts payable |
|
| 16,441 |
|
| 11,510 |
Accrued interest expense |
|
| (260) |
|
| 304 |
Other current liabilities |
|
| (8,944) |
|
| 13,372 |
Other assets and liabilities |
|
| (6,164) |
|
| (2,920) |
Net cash used in operating activities |
|
| (55,118) |
|
| (36,294) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (5,069) |
|
| (14,862) |
Capital expenditures |
|
| (58,330) |
|
| (35,693) |
Proceeds from sale of assets |
|
| 1,960 |
|
| 4,207 |
Net cash used in investing activities |
|
| (61,439) |
|
| (46,348) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Distributions |
|
| (9,814) |
|
| (19,627) |
Proceeds from issuance of long-term debt |
|
| — |
|
| 23,580 |
Payments on long-term debt |
|
| (1,014) |
|
| (1,267) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| (7,879) |
Net additions to collateralized short-term borrowings |
|
| 82,000 |
|
| 97,000 |
Cash paid for financing costs |
|
| (221) |
|
| (395) |
Noncontrolling interest activity |
|
| (258) |
|
| (357) |
Net cash provided by financing activities |
|
| 37,893 |
|
| 91,055 |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (78,664) |
|
| 8,413 |
Cash and cash equivalents - beginning of period |
|
| 119,311 |
|
| 5,760 |
Cash and cash equivalents - end of period |
| $ | 40,647 |
| $ | 14,173 |
See notes to condensed consolidated financial statements.
6
(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 April 30, 2018,January 31, 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 ninesix months ended April 30, 2018January 31, 2019 are not necessarily indicative of the results to be expected for the full fiscal year ending July 31, 2018.
The condensed consolidated financial statements of Ferrellgas reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed consolidated financial statements were of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The information included in this Quarterly Report on Form 10-Q10‑Q should be read in conjunction with (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) the consolidated financial statements and accompanying notes included in Ferrellgas'Ferrellgas’ Annual Report on Form 10-K10‑K for fiscal 20172018.
7
B. Summary of significant accounting policies
(1)Accounting estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) New accounting standards:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board ("FASB")(FASB) issued Accounting Standard Update ("ASU") 2014-09,
Ferrellgas adopted ASU 2014‑09 beginning on August 1, 2018 including interimusing the modified retrospective method. This method requires that the cumulative effect of initially applying ASU 2014‑09 be recognized in partner’s deficit at the date of adoption, August 1, 2018. ASU 2014‑09 has not materially impacted Ferrellgas’ consolidated financial statements, and as a result there was no cumulative effect to record as of the date of adoption. Results for reporting periods within that reporting period. Entitiesbeginning after August 1, 2018 are allowed to transition to the new standard by either recastingpresented under ASU 2014‑09, while amounts reported for prior periods or recognizing the cumulative effect. Ferrellgas ishave not been adjusted and continue to be reported under accounting standards in the final stages of analyzing the impact of the new guidance using an integrated approach which includes evaluating differences in the amount and timing of revenue recognitioneffect for those periods. See Note G - Revenue from applying the requirements of the new guidance, reviewing its accounting policies and practices, and assessing the need for changes to its processes, accounting systems and design of internal controls. Ferrellgas has completed the assessment of a significant number of its contracts with customers for additional information related to revenues and contract costs, including qualitative and quantitative disclosures required under the new guidance. Although Ferrellgas has not completed its assessment of the impact of the new guidance, it does not expect its adoption will have a material impact on its consolidated financial statements. Ferrellgas expects to utilize the modified retrospective transition method, which recognizes the cumulative effect upon adoption, when it adopts the new standard, effective August 1, 2018.
FASB Accounting Standard Update No. 2015-11
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new standard requires lessees to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. An entity may elect the transition relief option in ASU 2018-11, “Leases: Targeted Improvements” which, among other things, provides entities with an option to recognize the cumulative-effect adjustment from the modified retrospective application to the opening balance of retained earnings in the period of adoption and consequently, continue to report comparative periods in compliance with the prior guidance (ASC 840). Ferrellgas expects to elect this additional transition method.
Ferrellgas is currently evaluatingcontinuing to evaluate the impact of its pending adoption of ASU 2016-02 on the consolidated financial statements. Ferrellgas has formed anmade significant progress in assessing the impact of the standard and planning for the adoption and implementation. The implementation team has completed training on the new standard,initial scoping and is workingsubstantially complete in the data gathering process of our current lease portfolio. Ferrellgas is currently performing a completeness assessment over the lease population, analyzing the financial statement impact of adopting the standards, and evaluating the impact of adoption on an initial assessment.our existing accounting policies and disclosures. Ferrellgas believes that the adoption of this standard,
8
which will be effective for Ferrellgas August 1, 2019, will result in material increases to right of use assets and lease liabilities on our consolidated balance sheet.
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 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2018‑15
In August 2018, the FASB issued ASU 2018‑15, Intangibles - Goodwill and Other - Internal-use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract which is intended to clarify the accounting for implementation costs related to a cloud computing arrangement that is a service contract. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
C. Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Propane gas and related products |
| $ | 74,964 |
| $ | 71,180 |
Appliances, parts and supplies, and other |
|
| 14,820 |
|
| 12,514 |
Inventories |
| $ | 89,784 |
| $ | 83,694 |
April 30, 2018 | July 31, 2017 | |||||||
Propane gas and related products | $ | 58,142 | $ | 67,049 | ||||
Appliances, parts and supplies, and other | 26,920 | 25,503 | ||||||
Inventories | $ | 85,062 | $ | 92,552 |
In addition to inventories on hand, Ferrellgas enters into contracts to take delivery of propane for supply procurement purposes with terms that generally do not exceed 36 months. Most of these contracts call for payment based on market prices at the date of delivery. As of
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Notes receivable, less current portion |
| $ | 27,646 |
| $ | 27,491 |
Other |
|
| 44,893 |
|
| 47,097 |
Other assets, net |
| $ | 72,539 |
| $ | 74,588 |
9
April 30, 2018 | July 31, 2017 | |||||||
Notes receivable, less current portion | $ | 33,962 | $ | 32,500 | ||||
Other | 38,132 | 41,557 | ||||||
Other assets, net | $ | 72,094 | $ | 74,057 |
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Accrued interest |
| $ | 21,963 |
| $ | 22,222 |
Customer deposits and advances |
|
| 26,323 |
|
| 22,829 |
Other |
|
| 98,967 |
|
| 96,974 |
Other current liabilities |
| $ | 147,253 |
| $ | 142,025 |
April 30, 2018 | July 31, 2017 | |||||||
Accrued interest | $ | 50,586 | $ | 18,671 | ||||
Customer deposits and advances | 18,956 | 25,541 | ||||||
Other | 89,333 | 82,012 | ||||||
Other current liabilities | $ | 158,875 | $ | 126,224 |
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 60,279 |
| $ | 54,613 |
| $ | 107,721 |
| $ | 97,928 |
|
Depreciation and amortization expense |
|
| 1,389 |
|
| 1,123 |
|
| 2,462 |
|
| 2,235 |
|
Equipment lease expense |
|
| 7,869 |
|
| 6,296 |
|
| 15,388 |
|
| 12,364 |
|
|
| $ | 69,537 |
| $ | 62,032 |
| $ | 125,571 |
| $ | 112,527 |
|
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating expense | $ | 48,351 | $ | 44,309 | $ | 146,279 | $ | 134,090 | ||||||||
Depreciation and amortization expense | 1,340 | 957 | 3,575 | 2,979 | ||||||||||||
Equipment lease expense | 6,507 | 6,564 | 18,872 | 19,882 | ||||||||||||
Total shipping and handling expenses | $ | 56,198 | $ | 51,830 | $ | 168,726 | $ | 156,951 |
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Loss on sale of assets classified as held for sale | $ | 1,237 | $ | — | $ | 36,752 | $ | — | ||||||||
Loss on sale of assets and other | 5,033 | 2,393 | 9,662 | 8,861 | ||||||||||||
Loss on asset sales and disposals | $ | 6,270 | $ | 2,393 | $ | 46,414 | $ | 8,861 |
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
|
| 2019 |
| 2018 | ||
Cash paid for: |
|
|
|
|
|
|
Interest |
| $ | 82,941 |
| $ | 78,682 |
Income taxes |
| $ | 2 |
| $ | 12 |
Non-cash investing and financing activities: |
|
|
|
|
|
|
Liabilities incurred in connection with acquisitions |
| $ | 1,174 |
| $ | 1,508 |
Change in accruals for property, plant and equipment additions |
| $ | 2,815 |
| $ | 47 |
A. |
For the nine months ended April 30, | ||||||||
2018 | 2017 | |||||||
Cash paid (refunded) for: | ||||||||
Interest | $ | 85,171 | $ | 73,276 | ||||
Income taxes | $ | (458 | ) | $ | 28 | |||
Non-cash investing and financing activities: | ||||||||
Liabilities incurred in connection with acquisitions | $ | 1,508 | $ | 856 | ||||
Change in accruals for property, plant and equipment additions | $ | 386 | $ | (111 | ) |
D. Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Accounts receivable pledged as collateral |
| $ | 201,717 |
| $ | 120,079 |
Accounts receivable |
|
| 4,651 |
|
| 8,272 |
Note receivable - current portion |
|
| 126 |
|
| 132 |
Other |
|
| 27 |
|
| 26 |
Less: Allowance for doubtful accounts |
|
| (3,357) |
|
| (2,455) |
Accounts and notes receivable, net |
| $ | 203,164 |
| $ | 126,054 |
April 30, 2018 | July 31, 2017 | |||||||
Accounts receivable pledged as collateral | $ | 182,486 | $ | 109,407 | ||||
Accounts receivable | 13,131 | 47,346 | ||||||
Note receivable - current portion | 10,000 | 10,000 | ||||||
Other | 232 | 307 | ||||||
Less: Allowance for doubtful accounts | (3,122 | ) | (1,976 | ) | ||||
Accounts and notes receivable, net | $ | 202,727 | $ | 165,084 |
At April 30, 2018, $182.5January 31, 2019, $201.7 million of trade accounts receivable were pledged as collateral against $104.0$140.0 million of collateralized notes payable due to thea commercial paper conduit. At
As of
10
Ferrellgas had received cash proceeds of $69.0$58.0 million from trade accounts receivables securitized, with no remaining capacity to receive additional proceeds. Borrowings under the accounts receivable securitization facility had a weighted average interest rate of 4.2%5.3% and 4.0%5.2% as of April 30, 2018January 31, 2019 and July 31, 2017,2018, respectively.
E.Debt
Short-term borrowings
Ferrellgas classifies as short-termborrowings on the revolving line of credit portion of its secured credit facility borrowings that wereSenior Secured Credit Facility as short-term because they are used to fund working capital needs and that management intends to pay down within the 12twelve month period following the balance sheet date. As of April 30, 2018,January 31, 2019, there were no amounts classified as short-term borrowings because all amounts outstanding were refinanced on May 4, 2018 under the five-year term loan discussed in Note M - Subsequent events.borrowings. As of July 31, 2017, $59.82018, $32.8 million was classified as short-term borrowings. For further discussion see the senior secured credit facility section below.
Secured credit facilities
As of January 31, 2019, the operating partnership had borrowings of $275.0 million under the Term Loan at a rate of 8.27%, which was classified as long-term debt, and no borrowings under the Revolving Facility. As of January 31, 2019, the operating partnership had available borrowing capacity under its Revolving Facility of $196.2 million. As of July 31, 2018, the operating partnership had borrowings of $275.0 million under the Term Loan at a rate of 7.86%, which was classified as long-term debt, and $32.8 million under the Revolving Facility at a rate of 9.75%, which was classified as short-term borrowings. As of July 31, 2018, the operating partnership had available borrowing capacity under its Revolving Facility of $159.3 million.
Letters of credit outstanding at January 31, 2019 and July 31, 2018 totaled $103.8 million and $107.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At January 31, 2019, Ferrellgas had available letter of credit remaining capacity of $21.2 million. At July 31, 2018, Ferrellgas had available letter of credit remaining capacity of $17.1 million.
Debt and interest expense reduction and refinancing strategy
Ferrellgas continues to execute on a strategy to further reduce its debt and interest expense. This strategy included entering into the new Senior Secured Credit Facility and amending its accounts receivable securitization facility in May 2018 and certain asset sales during fiscal 2018. Ferrellgas continues to evaluate its options to address its leverage.
Financial covenants
The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit Ferrellgas Partners'Partners’ ability and itsthe 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 isare those related to the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of Ferrellgas Partners.
Consolidated fixed charge coverage ratio
Under the Ferrellgas Partners indenture, before a restricted payment (as defined in the Ferrellgas Partners indenture) can be made by Ferrellgas Partners, Ferrellgas Partners must be in compliance with thesatisfy a consolidated fixed charge coverage ratio covenantrequirement or have unused capacity under a limited exception to the Ferrellgas Partners indenture.ratio requirement. If Ferrellgas Partners is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders.
The restricted payments covenant requires that, for Ferrellgas Partners to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of Ferrellgas Partners be at least 1.75x beforeon a pro forma basis giving effect to the restricted payment (as defined inand, if applicable, certain other specified events,
11
subject to its ability to make restricted payments under the indenture) can be made by Ferrellgas Partners.limited exception described below. If this pro forma 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.period. As of April 30, 2018,January 31, 2019, the ratio was 1.56x.1.38x. As a result the $9.8 million distribution to beof distributions paid to common unitholders on June 14, 2018 will be taken from 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, December 2017, and March 2018, leaves $10.8 million forJune 2018, and September 2018, while this ratio was less than 1.75x, Ferrellgas Partners has used substantially all of its capacity under the limited exception and therefore is currently restricted by this covenant from making future restricted payments.payments, including distributions to common unitholders. Accordingly, no distributions were paid to common unitholders in December 2018 for the three months ended October 31, 2018 and no distributions will be paid for the three months ended January 31, 2019. Unless thethis indenture governing the outstanding notes is amended or refinanced, ifreplaced, or our consolidated fixed charge coverage ratio does not improveimproves to at least 1.75x and we continue our current quarterly distribution rate of $0.10 per common unit, this covenant will not allowcontinue to restrict us to makefrom making common unit distributions for our quarter ending October 31, 2018 and beyond.distributions.
Consolidated fixed charge coverage ratio - Ferrellgas, L.P., the operating partnership
Under the operating partnership indentures, before a restricted payment (as defined in the indentures) can be made by the operating partnership to Ferrellgas Partners, is presently considering potential solutions to cure the limitation on distributions under theoperating partnership must satisfy a consolidated fixed charge covenantcoverage ratio relatedrequirement or have unused capacity under a limited exception to the outstandingratio requirement. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders or make interest payments on Ferrellgas Partners’ unsecured bondssenior notes due in June 2020.
The potential solutions, among others, includerestricted payment covenants require that, for the operating partnership to make a refinancing or a transactionrestricted payment, the ratio of trailing four quarters EBITDA to exchange new bondsinterest expense (both as adjusted for some or allcertain, specified items) of the bonds due June 2020.
F. Partners’ deficit
As of January 31, 2017. Borrowings outstanding at April 30, 20182019 and July 31, 2017 under the secured credit facility had weighted average interest rates of 6.7% and 6.0%, respectively.
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|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 |
Public common unitholders |
| 69,612,939 |
| 69,612,939 |
Ferrell Companies (1) |
| 22,529,361 |
| 22,529,361 |
FCI Trading Corp. (2) |
| 195,686 |
| 195,686 |
Ferrell Propane, Inc. (3) |
| 51,204 |
| 51,204 |
James E. Ferrell (4) |
| 4,763,475 |
| 4,763,475 |
(1) | Ferrell Companies is the owner of the general partner and is an approximate 23% direct owner of Ferrellgas Partners’ common units and thus a related party. Ferrell Companies also beneficially owns 195,686 and 51,204 common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies’ beneficial ownership to 23.4% at January 31, 2019. |
(2) | FCI Trading is an affiliate of the general partner and thus a related party. |
(3) | Ferrell Propane is controlled by the general partner and thus a related party. |
(4) | James E. Ferrell is the Interim Chief Executive Officer and President of our general partner; and is the Chairman of the Board of Directors of our general partner and a related party. JEF Capital Management owns 4,758,859 of these common units and is owned by the James E. Ferrell Revocable Trust Two and other family trusts, all of which James E. Ferrell and/or his family members are the trustees and beneficiaries. James E. Ferrell holds all voting common stock of JEF Capital Management. The remaining 4,616 common units are held by Ferrell Resources |
12
April 30, 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 |
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. |
Partnership distributions paid
Ferrellgas Partners has paidrecognized the following distributions:
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| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Public common unitholders |
| $ | — |
| $ | 6,962 |
| $ | 6,962 |
| $ | 13,923 |
|
Ferrell Companies |
|
| — |
|
| 2,253 |
|
| 2,253 |
|
| 4,506 |
|
FCI Trading Corp. |
|
| — |
|
| 20 |
|
| 20 |
|
| 40 |
|
Ferrell Propane, Inc. |
|
| — |
|
| 5 |
|
| 5 |
|
| 10 |
|
James E. Ferrell |
|
| — |
|
| 476 |
|
| 476 |
|
| 952 |
|
General partner |
|
| — |
|
| 98 |
|
| 98 |
|
| 196 |
|
|
| $ | — |
| $ | 9,814 |
| $ | 9,814 |
| $ | 19,627 |
|
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Public common unitholders | $ | 6,961 | $ | 6,961 | $ | 20,884 | $ | 49,600 | ||||||||
Ferrell Companies | 2,253 | 2,253 | 6,759 | 16,052 | ||||||||||||
FCI Trading Corp. | 20 | 20 | 60 | 140 | ||||||||||||
Ferrell Propane, Inc. | 5 | 5 | 15 | 36 | ||||||||||||
James E. Ferrell | 476 | 476 | 1,428 | 3,393 | ||||||||||||
General partner | 98 | 98 | 294 | 699 | ||||||||||||
$ | 9,813 | $ | 9,813 | $ | 29,440 | $ | 69,920 |
Ferrellgas Partners declaredpaid cash distributions as detailed in the table above. Ferrellgas Partners did not declare a cash distribution of $0.10 per common unit forrelated to the three months ended April 30,October 31, 2018 which is expectedor related to be paid on June 14, 2018. Includedthe three months ended January 31, 2019. As discussed in this cash distribution areNote E – Debt, Ferrellgas Partners was not permitted, pursuant to the following amountsconsolidated fixed charge coverage ratio under its note indenture, to be paidmake restricted payments, including distributions to related parties:
Ferrell Companies | $ | 2,253 | ||
FCI Trading Corp. | 20 | |||
Ferrell Propane, Inc. | 5 | |||
James E. Ferrell | 476 | |||
General partner | 98 |
See additional discussions about transactions with related parties in Note IJ – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)See Note HI – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the three and ninesix 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 ninesix months ended April 30,January 31, 2019, the general partner made non-cash contributions of $0.1 million to Ferrellgas to maintain its effective 2% general partner interest.
During the six months ended January 31, 2018, the general partner made non-cash contributions of $0.2 million to Ferrellgas to maintain its effective 2% general partner interest.
G. Revenue from contracts with customers
Ferrellgas adopted ASU 2014‑09 beginning on August 1, 2018 using the modified retrospective method. Ferrellgas earns revenue from contracts with customers primarily through the distribution of propane, as well as through the sale of propane related equipment and supplies. Revenues from propane and other gas liquids sales are comprised of revenue earned from the delivery of propane to tanks on customers’ premises, delivery of propane filled cylinders to customers, or from the sale of portable propane tanks to nationwide and local retailers and end use customers. Other revenues primarily include sales of appliances and other materials as well as other fees charged to customers. Upon adoption, Ferrellgas applied ASU 2014‑09 only to contracts that were not completed.
13
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 thus 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 due within 30 days. Revenues from sales of propane are included in Propane and other gas liquids sales on the consolidated statements of operations.
Typically, Ferrellgas bills customers upon delivery and payment is generally due within 30 days. With its residential customers, Ferrellgas offers customers the ability to spread their annual heating costs over a longer period, typically twelve months. Customers who opt to spread their heating costs over a longer period are referred to as “even-pay” customers.
Ferrellgas charges other amounts to customers associated with the delivery of propane including hazardous materials fees and fuel surcharge fees. In some regions, Ferrellgas also sells appliances and related parts and fittings as well as other retail propane related services. Ferrellgas charges on an annual basis tank and equipment rental charges for customers that are using our equipment to store propane. Other revenues associated with deliveries of propane are earned at the time product is delivered. Revenues associated with sales of appliances and other materials or services are earned at the time of delivery or installation. Revenues associated with tank and equipment rentals are generally recognized on a straight-line basis over one year.
Accounting estimates related to recognition of revenue require that Ferrellgas make estimates and assumptions about various factors including credits issued for completed sales, future returns and total consideration payable in instances where we have customer incentives payable to the customer.
Disaggregation of revenue
Ferrellgas disaggregates revenues based upon the type of customer and on the type of revenue. The following table presents retail propane revenues, wholesale propane revenues and other revenues. Retail revenues result from sales to end use customers, wholesale revenues result from sales to or through resellers and all other revenues include sales of appliances and other materials, other fees charged to customers and equipment rental charges.
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| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Retail - Sales to End Users |
| $ | 415,827 |
| $ | 417,472 |
| $ | 633,591 |
| $ | 601,266 |
|
Wholesale - Sales to Resellers |
|
| 115,392 |
|
| 128,654 |
|
| 209,336 |
|
| 227,083 |
|
Other Gas Sales |
|
| 18,893 |
|
| 46,113 |
|
| 42,151 |
|
| 66,648 |
|
Other |
|
| 23,265 |
|
| 45,641 |
|
| 40,608 |
|
| 76,778 |
|
Propane and related equipment revenues |
| $ | 573,377 |
| $ | 637,880 |
| $ | 925,686 |
| $ | 971,775 |
|
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
14
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, thus Ferrellgas does not capitalize these costs.
The following table presents the opening and closing balances of our receivables, contract assets, and contract liabilities:
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|
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|
|
| January 31, 2019 |
| July 31, 2018 | ||
Accounts receivable |
| $ | 189,151 |
| $ | 119,818 |
Contract assets |
| $ | 18,519 |
| $ | 8,691 |
Contract liabilities |
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|
|
|
|
|
Deferred revenue (1) |
| $ | 35,609 |
| $ | 29,933 |
(1) | Of the beginning balance of deferred revenue, $17.1 million was recognized as revenue during the six months ended January 31, 2019. |
Remaining performance obligations
Ferrellgas’ remaining performance obligations are generally limited to situations where its customers have remitted payment but have not yet received deliveries of propane. This most commonly occurs in Ferrellgas’ even pay billing programs and Ferrellgas expects that these balances will be recognized within a year or less as the customer takes delivery of propane.
H. Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas’ financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
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| Asset (Liability) | ||||||||||
|
| Quoted Prices in Active |
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| |
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| Markets for Identical |
| Significant Other |
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| ||
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| Assets and Liabilities |
| Observable Inputs |
| Unobservable Inputs |
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| |||
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| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | ||||
January 31, 2019: |
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Assets: |
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Derivative financial instruments: |
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|
Commodity derivatives |
| $ | — |
| $ | 5,848 |
| $ | — |
| $ | 5,848 |
Liabilities: |
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Derivative financial instruments: |
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|
Commodity derivatives |
| $ | — |
| $ | (15,148) |
| $ | — |
| $ | (15,148) |
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|
July 31, 2018: |
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Assets: |
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Derivative financial instruments: |
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Commodity derivatives |
| $ | — |
| $ | 22,470 |
| $ | — |
| $ | 22,470 |
Liabilities: |
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Derivative financial instruments: |
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Commodity derivatives |
| $ | — |
| $ | (1,910) |
| $ | — |
| $ | (1,910) |
15
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 | |||||||||||||
April 30, 2018: | ||||||||||||||||
Assets: | ||||||||||||||||
Derivative financial instruments: | ||||||||||||||||
Interest rate swap agreements | $ | — | $ | 41 | $ | — | $ | 41 | ||||||||
Commodity derivatives | $ | — | $ | 19,750 | $ | — | $ | 19,750 | ||||||||
Liabilities: | ||||||||||||||||
Derivative financial instruments: | ||||||||||||||||
Interest rate swap agreements | $ | — | $ | (3,222 | ) | $ | — | $ | (3,222 | ) | ||||||
Commodity derivatives | $ | — | $ | (2,239 | ) | $ | — | $ | (2,239 | ) | ||||||
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 note receivable financial instruments classified in "Other assets, net" on the condensed consolidated balance sheets, are approximately $29.3$24.2 million, or $4.7$3.4 million less than their carrying amount as of April 30, 2018.January 31, 2019. The estimated fair values of these notes receivable were calculated using a discounted cash flow method which relied on significant unobservable inputs. At April 30, 2018January 31, 2019 and July 31, 2017,2018, the estimated fair value of Ferrellgas’ long-term debt instruments was $1,890.1$1,825.1 million and $1,966.6$1,935.1 million, respectively. Ferrellgas estimates the fair value of long-term debt based on quoted market prices. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
Ferrellgas has other financial instruments such as trade accounts receivable which could expose it to concentrations of credit risk. The credit risk from trade accounts receivable is limited because of a large customer base which extends across many different U.S. markets.
H.I. Derivative instruments and hedging activities
Ferrellgas is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. Prior to the sale of Bridger Energy, LLC in January 2018, all other commodity derivative instruments were neither qualified nor were designated as cash flow hedges, 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 ninesix months ended April 30,January 31, 2019 and 2018, and 2017, Ferrellgas did not recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
The following tables provide a summary of the fair value of derivatives in Ferrellgas’ condensed consolidated balance sheets as of
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| January 31, 2019 | ||||||||
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| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
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|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 5,408 |
| Other current liabilities |
| $ | 13,859 |
Commodity derivatives-propane |
| Other assets, net |
|
| 440 |
| Other liabilities |
|
| 1,289 |
|
| Total |
| $ | 5,848 |
| Total |
| $ | 15,148 |
16
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| |||||||||||||
April 30, 2018 |
| July 31, 2018 | ||||||||||||||||||||
Asset Derivatives | Liability Derivatives |
| Asset Derivatives |
| Liability Derivatives | |||||||||||||||||
Derivative Instrument | Location | Fair value | Location | Fair value |
| Location |
| Fair value |
| Location |
| Fair value | ||||||||||
Derivatives designated as hedging instruments |
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| ||||||||||||
Commodity derivatives-propane | Prepaid expenses and other current assets | $ | 14,449 | Other current liabilities | $ | 2,207 |
| Prepaid expenses and other current assets |
| $ | 17,123 |
| Other current liabilities |
| $ | 1,832 | ||||||
Commodity derivatives-propane | Other assets, net | 5,301 | Other liabilities | 32 |
| Other assets, net |
|
| 5,347 |
| Other liabilities |
|
| 78 | ||||||||
Interest rate swap agreements | Prepaid expenses and other current assets | 41 | Other current liabilities | 738 | ||||||||||||||||||
Interest rate swap agreements | Other assets, net | — | Other liabilities | 2,484 | ||||||||||||||||||
Total | $ | 19,791 | Total | $ | 5,461 |
| Total |
| $ | 22,470 |
| Total |
| $ | 1,910 | |||||||
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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| January 31, 2019 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 10,977 |
| Other current liabilities |
| $ | 1,734 |
|
| Other assets, net |
|
| 2,617 |
| Other liabilities |
|
| 3 |
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|
|
| $ | 13,594 |
|
|
| $ | 1,737 |
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| July 31, 2018 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 2,851 |
| Other current liabilities |
| $ | 12,308 |
|
| Other assets, net |
|
| 927 |
| Other liabilities |
|
| 4,235 |
|
|
|
| $ | 3,778 |
|
|
| $ | 16,543 |
April 30, 2018 | ||||||||||||
Assets | Liabilities | |||||||||||
Description | Location | Amount | Location | Amount | ||||||||
Margin Balances | Prepaid expenses and other current assets | $ | 1,623 | Other current liabilities | $ | 8,434 | ||||||
Other assets, net | 1,405 | Other liabilities | 3,631 | |||||||||
$ | 3,028 | $ | 12,065 |
July 31, 2017 | ||||||||||||
Assets | Liabilities | |||||||||||
Description | Location | Amount | Location | Amount | ||||||||
Margin Balances | Prepaid expenses and other current assets | $ | 1,778 | Other current liabilities | $ | 7,729 | ||||||
Other assets, net | 1,631 | Other liabilities | 3,073 | |||||||||
$ | 3,409 | $ | 10,802 |
The following tables providetable provides a summary of the effect on Ferrellgas'Ferrellgas’ condensed consolidated statements of operations for the three and ninesix months ended
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| Amount of Interest Expense | ||||||||
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| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Location of Gain |
| Derivative |
| (Related Hedged Item) | ||||||||
|
| Recognized on |
| For the three months ended January 31, |
| For the three months ended January 31, | ||||||||
Derivative Instrument |
| Derivative |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 88 |
| $ | — |
| $ | (2,275) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of Interest Expense | ||||||||
|
|
|
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Location of Amounts |
| Derivative |
| (Related Hedged Item) | ||||||||
|
| Recognized on |
| For the six months ended January 31, |
| For the six months ended January 31, | ||||||||
Derivative Instrument |
| Derivative |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 226 |
| $ | — |
| $ | (4,550) |
17
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 April 30, | For the three months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Interest rate swap agreements | Interest expense | $ | 40 | $ | 323 | $ | (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 nine months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Interest rate swap agreements | Interest expense | $ | 266 | $ | 1,071 | $ | (6,825 | ) | $ | (6,825 | ) | |||||||
The following tables provide a summary of the effect on Ferrellgas’ condensed consolidated statements of comprehensive income (loss) for the three and ninesix months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, 2019 | |||||||||
|
|
|
|
|
|
| Amount of Gain (Loss) | ||||
|
| Amount of Gain |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| (Loss) Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | (21,080) |
| Cost of product sold- propane and other gas liquids sales |
| $ | 3,807 |
| $ | — |
|
| $ | (21,080) |
|
|
| $ | 3,807 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, 2018 | |||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||
|
| Amount of Gain (Loss) |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | 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 six months ended January 31, 2019 | |||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||
|
| Amount of Gain (Loss) |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | (29,234) |
| Cost of sales-propane and other gas liquids sales |
| $ | (626) |
| $ | — |
|
| $ | (29,234) |
|
|
| $ | (626) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the six months ended January 31, 2018 | |||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||
|
| Amount of Gain (Loss) |
| Location of Gain (Loss) |
| Reclassified from | |||||
|
| Recognized in |
| Reclassified from |
| AOCI into Income | |||||
Derivative Instrument |
| AOCI |
| AOCI into Income |
| Effective portion |
| Ineffective portion | |||
Commodity derivatives |
| $ | 23,283 |
| Cost of product sold- propane and other gas liquids sales |
| $ | 14,018 |
| $ | — |
Interest rate swap agreements |
|
| 238 |
| Interest expense |
|
| (326) |
|
| — |
|
| $ | 23,521 |
|
|
| $ | 13,692 |
| $ | — |
For the three months ended April 30, 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 | $ | (169 | ) | Cost of sales-propane and other gas liquids sales | $ | 6,628 | $ | — | ||||||
Interest rate swap agreements | 10 | Interest expense | (60 | ) | — | |||||||||
$ | (159 | ) | $ | 6,568 | $ | — | ||||||||
For the three months ended April 30, 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 | $ | (6,642 | ) | Cost of sales-propane and other gas liquids sales | $ | 2,411 | $ | — | ||||||
Interest rate swap agreements | 146 | Interest expense | (478 | ) | — | |||||||||
$ | (6,496 | ) | $ | 1,933 | $ | — | ||||||||
For the nine months ended April 30, 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 | $ | 23,114 | Cost of sales-propane and other gas liquids sales | $ | 20,646 | $ | — | |||||||
Interest rate swap agreements | 248 | Interest expense | (386 | ) | — | |||||||||
$ | 23,362 | $ | 20,260 | $ | — | |||||||||
For the nine months ended April 30, 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 | $ | 12,930 | Cost of sales-propane and other gas liquids sales | $ | (1,112 | ) | $ | — | ||||||
Interest rate swap agreements | 974 | Interest expense | (1,707 | ) | — | |||||||||
$ | 13,904 | $ | (2,819 | ) | $ | — |
The following tables providetable provides a summary of the effect on Ferrellgas'Ferrellgas’ condensed consolidated statements of operations for the three and ninesix months ended April 30,January 31, 2019 and 2018 and 2017 due to the change in fair value of derivatives not designated as hedging instruments:
For the three months ended January 31, 2019 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
Derivatives Not Designated as Hedging Instruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | — | Cost of sales - midstream operations |
18
For the three months ended April 30, 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 | $ | — | Cost of sales - midstream operations | |||
For the three months ended April 30, 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 | $ | 1,464 | Cost of sales - midstream operations | |||
Commodity derivatives - vehicle fuel | $ | (393 | ) | Operating expense | ||
For the nine months ended April 30, 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 nine months ended April 30, 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 | $ | (784 | ) | Cost of sales - midstream operations | ||
Commodity derivatives - vehicle fuel | $ | 1,123 | Operating expense |
For the three months ended January 31, 2018 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
Derivatives Not Designated as Hedging Instruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | (2,080) | Cost of sales - midstream operations |
For the six months ended January 31, 2019 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
Derivatives Not Designated as Hedging Instruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | — | Cost of sales - midstream operations |
For the six months ended January 31, 2018 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
Derivatives Not Designated as Hedging Instruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | (3,470) | Cost of sales - midstream operations |
The changes in derivatives included in AOCI for the ninesix months ended April 30,January 31, 2019 and 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
Gains and losses on derivatives included in AOCI |
| 2019 |
| 2018 | ||
Beginning balance |
| $ | 20,560 |
| $ | 14,648 |
Change in value of risk management commodity derivatives |
|
| (29,234) |
|
| 23,283 |
Reclassification of gains on commodity hedges to cost of sales - propane and other gas liquids sales, net |
|
| (626) |
|
| (14,018) |
Change in value of risk management interest rate derivatives |
|
| — |
|
| 238 |
Reclassification of losses on interest rate hedges to interest expense |
|
| — |
|
| 326 |
Ending balance |
| $ | (9,300) |
| $ | 24,477 |
For the nine months ended April 30, | ||||||||
Gains and losses on derivatives included in AOCI | 2018 | 2017 | ||||||
Beginning balance | $ | 14,648 | $ | (9,815 | ) | |||
Change in value of risk management commodity derivatives | 23,114 | 12,930 | ||||||
Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net | (20,646 | ) | 1,112 | |||||
Change in value of risk management interest rate derivatives | 248 | 974 | ||||||
Reclassification of losses on interest rate hedges to interest expense | 386 | 1,707 | ||||||
Ending balance | $ | 17,750 | $ | 6,908 |
Ferrellgas expects to reclassify net gainslosses related to the risk management commodity derivatives of approximately $12.2$8.5 million to earnings during the next 12 months. These net gainslosses are expected to be offset by decreasedincreased margins on propane sales commitments Ferrellgas has with its customers that qualify for the normal purchase normal sales exception.
During the ninesix months ended April 30,January 31, 2019 and 2018, and 2017, Ferrellgas had no reclassifications to operations resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
As of
Derivative financial instruments credit risk
Ferrellgas is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas’ counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas maintains credit policies with regard to its counterparties that it believes reduces its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas in the forms of letters of credit, parent guarantees or cash. Ferrellgas has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at April 30, 2018,January 31, 2019, the maximum amount of loss due to credit risk that Ferrellgas would incur is $5.7$0.5 million, which is based upon the gross fair values of the derivative financial instruments.
19
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 April 30, 2018.
I.J. Transactions with related parties
Ferrellgas has no employees and is managed and controlled by its general partner. Pursuant to Ferrellgas’ partnership agreements, the general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of Ferrellgas and all other necessary or appropriate expenses allocable to Ferrellgas or otherwise reasonably incurred by the general partner in connection with operating Ferrellgas’ business. These costs primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas’ behalf and are reported in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 69,285 |
| $ | 65,291 |
| $ | 129,243 |
| $ | 122,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
| $ | 7,197 |
| $ | 8,422 |
| $ | 13,309 |
| $ | 15,930 |
|
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating expense | $ | 58,842 | $ | 53,747 | $ | 181,484 | $ | 170,953 | ||||||||
General and administrative expense | $ | 5,707 | $ | 6,913 | $ | 21,637 | $ | 23,713 |
See additional discussions about transactions with the general partner and related parties in Note F – Partners’ deficit.
J.K. Contingencies and commitments
Litigation
Ferrellgas’ operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane and, prior to the sales of midstream operations in fiscal 2018, crude oil. As a result, at any given time, Ferrellgas can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, Ferrellgas is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are reasonably expected to have a material adverse effect on the consolidated financial condition, results of operations and cash flows of Ferrellgas.
Ferrellgas has been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits, which were consolidated in the Western District of Missouri on October 16, 2014, allege that Ferrellgas and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Federal Court for the Western District of Missouri initially dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending.resulted in the court of appeals affirming the dismissal of the federal claims and remanding the case to the district court to decide whether to exercise supplemental jurisdiction over the remaining state law claims. Ferrellgas believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas and several
20
current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit.The parties have completed briefing and are preparing for oral argument. At this time the derivative lawsuits remain stayed by agreement. Ferrellgas believes that it has defenses and will vigorously defend these cases. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
Ferrellgas and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude from rail onto barges. Eddystone alleges that Ferrellgas transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. Ferrellgas believes that Ferrellgas and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas believes that the amount of such damage claims, if ultimately owed to Eddystone, could be material to Ferrellgas. Ferrellgas intends to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, Ferrellgas filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. TheOn June 25, 2018, Ferrellgas entered into an agreement with the Third-Party Defendants havewhich, among other things, resulted in a dismissal of the claims against the Third-Party Defendants from the lawsuit. On January 25, 2019, Ferrellgas, Bridger Logistics, LLC and all other defendants filed motionsa Motion to dismiss the third-party complaintDismiss Plaintiff’s First Amended Complaint for alleged lackLack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgas is vigorously opposing these motions.
K.L. Net earnings (loss) per common unit
Below is a calculation of the basic and diluted net earnings (loss) per common unit in the condensed consolidated statements of operations for the periods indicated. Ferrellgas calculates net earnings (loss) per common unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings or loss for the period had been distributed according to the incentive distribution rights in the Ferrellgas partnership agreement. Due to the seasonality of the propane business, the dilutive effect of the two-class method typically impacts only the three months ending January 31. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners as follows:
|
|
|
|
|
|
|
| Ratio of total distributions payable to: |
| ||
Quarterly distribution per common unit |
| Common unitholder |
| General partner |
|
$0.56 to $0.63 |
| 86.9 | % | 13.1 | % |
$0.64 to $0.82 |
| 76.8 | % | 23.2 | % |
$0.83 and above |
| 51.5 | % | 48.5 | % |
There was no dilutive effect resulting from this method based on basic and diluted net earnings (loss) per common unit for the three and ninesix months ended April 30, 2018January 31, 2019 or 2017.
In periods with net losses, the allocation of the net losses to the limited partners and the general partner will be determined based on the same allocation basis specified in Ferrellgas Partners’ partnership agreement that would apply to periods in which there were no undistributed earnings. Additionally, there are no dilutive securities in periods with net losses.
21
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
For the three months ended April 30, | For the nine months ended April 30, |
| For the three months ended January 31, |
| For the six months ended January 31, |
| |||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| |||||||||||||||||
(in thousands, except per common unit amounts) |
| (in thousands, except per common unit amounts) |
| ||||||||||||||||||||||||||
Common unitholders’ interest in net earnings (loss) | $ | 10,752 | $ | 6,470 | $ | (38,508 | ) | $ | 1,545 |
| $ | 42,911 |
| $ | (1,824) |
| $ | (13,534) |
| $ | (49,260) |
| |||||||
Weighted average common units outstanding - basic and diluted | 97,152.7 | 97,152.7 | 97,152.7 | 97,255.4 | |||||||||||||||||||||||||
Weighted average common units outstanding (in thousands) |
|
| 97,152.7 |
|
| 97,152.7 |
|
| 97,152.7 |
|
| 97,152.7 |
| ||||||||||||||||
Basic and diluted net earnings (loss) per common unit | $ | 0.11 | $ | 0.07 | $ | (0.40 | ) | $ | 0.02 |
| $ | 0.44 |
| $ | (0.02) |
| $ | (0.14) |
| $ | (0.51) |
|
B. |
C. |
L.M. Segment reporting
As of January 31, 2019, Ferrellgas has two primary operations that result in twoone reportable operating segments:segment: propane operations and related equipment salessales. All remaining activities are included in Corporate and midstream operations. During the quarter ended January 31, 2018, Ferrellgas recorded a goodwill impairment of $10.0 million related to a decline in future expected cash flows of an immaterial reporting unit of our Propane operations and related equipment sales segment.
Following is a summary of segment information for the three and ninesix months ended April 30, 2018January 31, 2019 and 2017:2018:
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 573,377 |
| $ | — |
| $ | 573,377 |
Direct costs (1) |
|
| 443,533 |
|
| 10,188 |
|
| 453,721 |
Adjusted EBITDA |
| $ | 129,844 |
| $ | (10,188) |
| $ | 119,656 |
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 637,880 |
| $ | 117,276 |
| $ | 755,156 |
Direct costs (1) |
|
| 507,386 |
|
| 127,143 |
|
| 634,529 |
Adjusted EBITDA |
| $ | 130,494 |
| $ | (9,867) |
| $ | 120,627 |
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 925,686 |
| $ | — |
| $ | 925,686 |
Direct costs (1) |
|
| 767,127 |
|
| 21,062 |
|
| 788,189 |
Adjusted EBITDA |
| $ | 158,559 |
| $ | (21,062) |
| $ | 137,497 |
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 971,775 |
| $ | 238,036 |
| $ | 1,209,811 |
Direct costs (1) |
|
| 810,715 |
|
| 252,253 |
|
| 1,062,968 |
Adjusted EBITDA |
| $ | 161,060 |
| $ | (14,217) |
| $ | 146,843 |
(1) | Direct costs are comprised of "cost of sales-propane and other gas liquids sales", "cost of sales- midstream operations", "cost of sales-other", "operating expense", "general and administrative expense", and "equipment lease expense" less "severance charge", "legal fees and settlements", "unrealized (non-cash) losses on changes in fair value of derivatives not designated as hedging instruments" and "multi-employer pension plan withdrawal settlement". |
22
Three months ended April 30, 2018 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 493,215 | $ | 22,595 | $ | — | $ | 515,810 | ||||||||
Direct costs (1) | 397,568 | 21,593 | 9,727 | 428,888 | ||||||||||||
Adjusted EBITDA | $ | 95,647 | $ | 1,002 | $ | (9,727 | ) | $ | 86,922 | |||||||
Three months ended April 30, 2017 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 411,433 | $ | 126,676 | $ | — | $ | 538,109 | ||||||||
Direct costs (1) | 324,442 | 127,223 | 9,654 | 461,319 | ||||||||||||
Adjusted EBITDA | $ | 86,991 | $ | (547 | ) | $ | (9,654 | ) | $ | 76,790 | ||||||
Nine months ended April 30, 2018 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 1,464,990 | $ | 260,631 | $ | — | $ | 1,725,621 | ||||||||
Direct costs (1) | 1,208,283 | 250,423 | 33,150 | 1,491,856 | ||||||||||||
Adjusted EBITDA | $ | 256,707 | $ | 10,208 | $ | (33,150 | ) | $ | 233,765 | |||||||
Nine months ended April 30, 2017 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 1,165,394 | $ | 331,507 | $ | — | $ | 1,496,901 | ||||||||
Direct costs (1) | 931,631 | 323,714 | 30,717 | 1,286,062 | ||||||||||||
Adjusted EBITDA | $ | 233,763 | $ | 7,793 | $ | (30,717 | ) | $ | 210,839 | |||||||
Following is a reconciliation of Ferrellgas'Ferrellgas’ total segment performance measure to condensed consolidated net earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, |
| Six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
| $ | 43,344 |
| $ | (1,843) |
| $ | (13,671) |
| $ | (49,758) |
|
Income tax expense (benefit) |
|
| 3 |
|
| (162) |
|
| 161 |
|
| 215 |
|
Interest expense |
|
| 44,891 |
|
| 42,673 |
|
| 88,769 |
|
| 83,480 |
|
Depreciation and amortization expense |
|
| 19,605 |
|
| 25,485 |
|
| 38,597 |
|
| 51,217 |
|
EBITDA |
|
| 107,843 |
|
| 66,153 |
|
| 113,856 |
|
| 85,154 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| 4,692 |
|
| 7,993 |
|
Asset impairments |
|
| — |
|
| 10,005 |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 2,216 |
|
| 39,249 |
|
| 6,720 |
|
| 40,144 |
|
Other income, net |
|
| (86) |
|
| (684) |
|
| (105) |
|
| (1,195) |
|
Severance costs |
|
| 1,600 |
|
| — |
|
| 1,600 |
|
| 1,663 |
|
Legal fees and settlements |
|
| 5,608 |
|
| 2,118 |
|
| 9,172 |
|
| 2,118 |
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| (314) |
|
| — |
|
| 1,293 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| — |
|
| 1,524 |
|
| — |
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 531 |
|
| 69 |
|
| 38 |
|
| (332) |
|
Adjusted EBITDA |
| $ | 119,656 |
| $ | 120,627 |
| $ | 137,497 |
| $ | 146,843 |
|
Three months ended April 30, | Nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. | $ | 10,861 | $ | 6,536 | $ | (38,897 | ) | $ | 1,561 | |||||||
Income tax expense (benefit) | 67 | (192 | ) | 282 | (194 | ) | ||||||||||
Interest expense | 40,375 | 39,860 | 123,855 | 112,107 | ||||||||||||
Depreciation and amortization expense | 25,348 | 25,737 | 76,565 | 77,546 | ||||||||||||
EBITDA | 76,651 | 71,941 | 161,805 | 191,020 | ||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | 10,731 | 11,396 | ||||||||||||
Non-cash stock-based compensation charge | — | — | — | 3,298 | ||||||||||||
Asset impairments | — | — | 10,005 | — | ||||||||||||
Loss on asset sales and disposals | 6,270 | 2,393 | 46,414 | 8,861 | ||||||||||||
Other income, net | (227 | ) | (162 | ) | (1,422 | ) | (1,433 | ) | ||||||||
Severance costs | — | — | 1,663 | 1,959 | ||||||||||||
Professional fees | 1,289 | — | 3,407 | — | ||||||||||||
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | — | (2,234 | ) | 1,293 | (4,449 | ) | ||||||||||
Net earnings (loss) attributable to noncontrolling interest | 201 | 155 | (131 | ) | 187 | |||||||||||
Adjusted EBITDA | $ | 86,922 | $ | 76,790 | $ | 233,765 | $ | 210,839 |
Following are total assets by segment:
|
|
|
|
|
|
|
Assets |
| January 31, 2019 |
| July 31, 2018 | ||
Propane operations and related equipment sales |
| $ | 1,315,233 |
| $ | 1,196,084 |
Corporate and other |
|
| 72,887 |
|
| 167,197 |
Total consolidated assets |
| $ | 1,388,120 |
| $ | 1,363,281 |
Assets | April 30, 2018 | July 31, 2017 | ||||||
Propane operations and related equipment sales | $ | 1,274,360 | $ | 1,194,905 | ||||
Midstream operations | 244,523 | 399,356 | ||||||
Corporate | 13,693 | 15,708 | ||||||
Total consolidated assets | $ | 1,532,576 | $ | 1,609,969 |
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2019 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 31,460 |
| $ | 549 |
| $ | 32,009 |
Growth |
|
| 23,316 |
|
| — |
|
| 23,316 |
Total |
| $ | 54,776 |
| $ | 549 |
| $ | 55,325 |
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2018 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 12,016 |
| $ | 1,427 |
| $ | 13,443 |
Growth |
|
| 18,311 |
|
| 1,013 |
|
| 19,324 |
Total |
| $ | 30,327 |
| $ | 2,440 |
| $ | 32,767 |
23
Nine months ended April 30, 2018 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Capital expenditures: | ||||||||||||||||
Maintenance | $ | 17,556 | $ | 210 | $ | 1,492 | $ | 19,258 | ||||||||
Growth | 34,784 | 1,265 | — | 36,049 | ||||||||||||
Total | $ | 52,340 | $ | 1,475 | $ | 1,492 | $ | 55,307 | ||||||||
Nine months ended April 30, 2017 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Capital expenditures: | ||||||||||||||||
Maintenance | $ | 8,533 | $ | 241 | $ | 1,905 | $ | 10,679 | ||||||||
Growth | 21,246 | — | — | 21,246 | ||||||||||||
Total | $ | 29,779 | $ | 241 | $ | 1,905 | $ | 31,925 |
M.N. Subsequent events
Ferrellgas evaluated events and transactions occurring after the balance sheet date through the date Ferrellgas'Ferrellgas’ condensed consolidated financial statements were issued and concluded that other than as discussed below, there were no events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
24
FERRELLGAS PARTNERS FINANCE CORP. | |||||||
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.) | |||||||
CONDENSED BALANCE SHEETS | |||||||
(unaudited) | |||||||
April 30, 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 | 27,170 | 25,055 | |||||
Accumulated deficit | (27,170 | ) | (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 April 30, | For the nine months ended April 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
General and administrative expense | $ | 1,840 | $ | 3,225 | $ | 2,115 | $ | 3,317 | |||||||
Net loss | $ | (1,840 | ) | $ | (3,225 | ) | $ | (2,115 | ) | $ | (3,317 | ) | |||
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 nine months ended April 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (2,115 | ) | $ | (3,317 | ) | |
Cash used in operating activities | (2,115 | ) | (3,317 | ) | |||
Cash flows from financing activities: | |||||||
Capital contribution | 2,115 | 3,317 | |||||
Cash provided by financing activities | 2,115 | 3,317 | |||||
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)
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Cash |
| $ | 1,000 |
| $ | 1,000 |
Prepaid expenses and other current assets |
|
| — |
|
| 1,850 |
Total assets |
| $ | 1,000 |
| $ | 2,850 |
|
|
|
|
|
|
|
Contingencies and commitments (Note B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER’S EQUITY |
|
|
|
|
|
|
Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding |
| $ | 1,000 |
| $ | 1,000 |
Additional paid in capital |
|
| 29,111 |
|
| 29,020 |
Accumulated deficit |
|
| (29,111) |
|
| (27,170) |
Total stockholder’s equity |
| $ | 1,000 |
| $ | 2,850 |
See notes to condensed financial statements.
25
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
General and administrative expense |
| $ | 1,941 |
| $ | 225 |
| $ | 1,941 |
| $ | 275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,941) |
| $ | (225) |
| $ | (1,941) |
| $ | (275) |
|
See notes to condensed financial statements.
26
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (1,941) |
| $ | (275) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 1,850 |
|
| — |
Cash used in operating activities |
|
| (91) |
|
| (275) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Capital contribution |
|
| 91 |
|
| 275 |
Cash provided by financing activities |
|
| 91 |
|
| 275 |
|
|
|
|
|
|
|
Net change in cash |
|
| — |
|
| — |
Cash - beginning of period |
|
| 1,000 |
|
| 1,000 |
Cash - end of period |
| $ | 1,000 |
| $ | 1,000 |
See notes to condensed financial statements.
27
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
(unaudited)
A. Formation
Ferrellgas Partners Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on March 28, 1996 and is a wholly-owned subsidiary of Ferrellgas Partners, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has no employees.
B. Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
The indenture governing the senior unsecured notes contains various restrictive covenants applicable to the Partnership and its subsidiaries, the most restrictive relating to additional indebtedness and restricted payments. As of April 30, 2018,January 31, 2019, the Partnership is in compliance with all requirements, tests, limitations and covenants related to this debt agreement, except for the consolidated fixed charge coverage ratio.
The indenture governing the outstanding notes of the Partnership includes a consolidated fixed charge coverage ratio test for the incurrence of debt and the making of restricted payments. ThisThe restricted payments covenant requires that, for the Partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the Partnership be at least 1.75x beforeon a pro forma basis giving effect to the restricted payment (as defined inand, if applicable, certain other specified events, subject to its ability to make restricted payments under the indenture) can be made by the Partnership.limited exception described below. If this pro forma ratio were to dropis below 1.75x, the indenture allows the Partnership tomay make restricted payments of up to $50.0 million in total over a 16 quarter period while below this ratio.period. As of April 30, 2018,January 31, 2019, the ratio was 1.56x.1.67x. 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, the $9.8 million distributionPartnership has used substantially all of its capacity under the limited exception and therefore is currently restricted by this covenant from making future restricted payments, including distributions to common unitholders. Accordingly, no distributions will be paid to common unitholders on June 14,in December 2018 will be taken fromfor 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, December 2017three and March 2018, leaves $10.8 million for future restricted payments.six months ended January 31, 2019. Unless thethis indenture governing the outstanding notes is amended or refinanced, ifreplaced, or the Partnership'sPartnership’s consolidated fixed charge coverage ratio does not improveimproves to at least 1.75x, and the Partnership continues its current quarterly distribution rate of $0.10 per common unit, this covenant will not allowcontinue to restrict the Partnership to makefrom making common unit distributions for the quarter ending October 31, 2018 and beyond. The Partnership is presently considering potential solutions to cure the limitation on distributions under the consolidated fixed charge covenant ratio related to the outstanding unsecured bonds due in June 2020. The potential solutions, among others, include a refinancing or a transaction to exchange new bonds for some or alldistributions.
28
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
April 30, 2018 | July 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 9,491 | $ | 5,701 | |||
Accounts and notes receivable, net (including $182,486 and $109,407 of accounts receivable pledged as collateral at April 30, 2018 and July 31, 2017, respectively) | 202,727 | 165,084 | |||||
Inventories | 85,062 | 92,552 | |||||
Prepaid expenses and other current assets | 44,059 | 33,426 | |||||
Total current assets | 341,339 | 296,763 | |||||
Property, plant and equipment, net | 637,688 | 731,923 | |||||
Goodwill, net | 246,098 | 256,103 | |||||
Intangible assets (net of accumulated amortization of $460,011 and $436,428 at April 30, 2018 and July 31, 2017, respectively) | 235,318 | 251,102 | |||||
Other assets, net | 72,094 | 74,057 | |||||
Total assets | $ | 1,532,537 | $ | 1,609,948 | |||
LIABILITIES AND PARTNERS' DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 52,472 | $ | 85,561 | |||
Short-term borrowings | — | 59,781 | |||||
Collateralized note payable | 104,000 | 69,000 | |||||
Other current liabilities | 147,243 | 122,016 | |||||
Total current liabilities | 303,715 | 336,358 | |||||
Long-term debt | 1,646,069 | 1,649,270 | |||||
Other liabilities | 34,225 | 31,118 | |||||
Contingencies and commitments (Note J) | |||||||
Partners' deficit: | |||||||
Limited partner | (464,761 | ) | (417,467 | ) | |||
General partner | (4,577 | ) | (4,095 | ) | |||
Accumulated other comprehensive income | 17,866 | 14,764 | |||||
Total partners' deficit | (451,472 | ) | (406,798 | ) | |||
Total liabilities and partners' deficit | $ | 1,532,537 | $ | 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 April 30, | For the nine months ended April 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Revenues: | |||||||||||||||||
Propane and other gas liquids sales | $ | 451,302 | $ | 369,437 | $ | 1,346,299 | $ | 1,049,211 | |||||||||
Midstream operations | 22,595 | 126,676 | 260,631 | 331,507 | |||||||||||||
Other | 41,913 | 41,996 | 118,691 | 116,183 | |||||||||||||
Total revenues | 515,810 | 538,109 | 1,725,621 | 1,496,901 | |||||||||||||
Costs and expenses: | |||||||||||||||||
Cost of sales - propane and other gas liquids sales | 260,419 | 197,487 | 802,852 | 551,728 | |||||||||||||
Cost of sales - midstream operations | 14,518 | 118,767 | 229,710 | 300,433 | |||||||||||||
Cost of sales - other | 19,850 | 20,810 | 54,339 | 53,213 | |||||||||||||
Operating expense | 116,579 | 104,773 | 350,757 | 322,935 | |||||||||||||
Depreciation and amortization expense | 25,348 | 25,737 | 76,565 | 77,546 | |||||||||||||
General and administrative expense | 11,546 | 9,869 | 39,600 | 36,416 | |||||||||||||
Equipment lease expense | 7,133 | 7,270 | 20,828 | 22,035 | |||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | 10,731 | 11,396 | |||||||||||||
Asset impairments | — | — | 10,005 | — | |||||||||||||
Loss on asset sales and disposals | 6,270 | 2,393 | 46,414 | 8,861 | |||||||||||||
Operating income | 51,409 | 46,306 | 83,820 | 112,338 | |||||||||||||
Interest expense | (31,739 | ) | (31,270 | ) | (97,993 | ) | (95,416 | ) | |||||||||
Other income, net | 227 | 162 | 1,422 | 1,433 | |||||||||||||
Earnings (loss) before income taxes | 19,897 | 15,198 | (12,751 | ) | 18,355 | ||||||||||||
Income tax expense (benefit) | 57 | (197 | ) | 261 | (200 | ) | |||||||||||
Net earnings (loss) | $ | 19,840 | $ | 15,395 | $ | (13,012 | ) | $ | 18,555 | ||||||||
See notes to condensed consolidated financial statements. |
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||
(in thousands) | |||||||||||||||||
(unaudited) | |||||||||||||||||
For the three months ended April 30, | For the nine months ended April 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Net earnings (loss) | $ | 19,840 | $ | 15,395 | $ | (13,012 | ) | $ | 18,555 | ||||||||
Other comprehensive income (loss): | |||||||||||||||||
Change in value of risk management derivatives | (159 | ) | (6,496 | ) | 23,362 | 13,904 | |||||||||||
Reclassification of (gains) losses on derivatives to earnings, net | (6,568 | ) | (1,933 | ) | (20,260 | ) | 2,819 | ||||||||||
Other comprehensive income (loss) | (6,727 | ) | (8,429 | ) | 3,102 | 16,723 | |||||||||||
Comprehensive income (loss) | $ | 13,113 | $ | 6,966 | $ | (9,910 | ) | $ | 35,278 | ||||||||
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 | 10,623 | 108 | — | 10,731 | |||||||||||
Distributions | (45,036 | ) | (459 | ) | — | (45,495 | ) | ||||||||
Net loss | (12,881 | ) | (131 | ) | — | (13,012 | ) | ||||||||
Other comprehensive income | — | — | 3,102 | 3,102 | |||||||||||
Balance at April 30, 2018 | $ | (464,761 | ) | $ | (4,577 | ) | $ | 17,866 | $ | (451,472 | ) | ||||
See notes to condensed consolidated financial statements. |
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
For the nine months ended April 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net earnings (loss) | $ | (13,012 | ) | $ | 18,555 | ||
Reconciliation of net earnings (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 76,565 | 77,546 | |||||
Non-cash employee stock ownership plan compensation charge | 10,731 | 11,396 | |||||
Non-cash stock-based compensation charge | — | 3,298 | |||||
Asset impairments | 10,005 | — | |||||
Loss on asset sales and disposals | 46,414 | 8,861 | |||||
Unrealized gain on derivative instruments | (91 | ) | (3,888 | ) | |||
Provision for doubtful accounts | 1,906 | 39 | |||||
Deferred income tax expense | 423 | 45 | |||||
Other | 3,987 | 4,147 | |||||
Changes in operating assets and liabilities, net of effects from business acquisitions: | |||||||
Accounts and notes receivable, net of securitization | (46,771 | ) | (58,923 | ) | |||
Inventories | 7,755 | (2,163 | ) | ||||
Prepaid expenses and other current assets | (4,001 | ) | 12,111 | ||||
Accounts payable | (18,429 | ) | 18,830 | ||||
Accrued interest expense | 24,217 | 24,428 | |||||
Other current liabilities | (809 | ) | 5,047 | ||||
Other assets and liabilities | (4,944 | ) | 5,070 | ||||
Net cash provided by operating activities | 93,946 | 124,399 | |||||
Cash flows from investing activities: | |||||||
Business acquisitions, net of cash acquired | (14,862 | ) | (3,539 | ) | |||
Capital expenditures | (58,961 | ) | (35,412 | ) | |||
Proceeds from sale of assets | 57,802 | 4,721 | |||||
Other | — | (37 | ) | ||||
Net cash used in investing activities | (16,021 | ) | (34,267 | ) | |||
Cash flows from financing activities: | |||||||
Distributions | (45,495 | ) | (94,413 | ) | |||
Contributions from partners | — | 167,640 | |||||
Proceeds from issuance of long-term debt | 23,580 | 52,354 | |||||
Payments on long-term debt | (1,892 | ) | (173,471 | ) | |||
Net reductions in short-term borrowings | (84,179 | ) | (62,902 | ) | |||
Net additions to collateralized short-term borrowings | 35,000 | 27,000 | |||||
Cash paid for financing costs | (1,149 | ) | (2,064 | ) | |||
Net cash used in financing activities | (74,135 | ) | (85,856 | ) | |||
Net change in cash and cash equivalents | 3,790 | 4,276 | |||||
Cash and cash equivalents - beginning of period | 5,701 | 4,890 | |||||
Cash and cash equivalents - end of period | $ | 9,491 | $ | 9,166 | |||
See notes to condensed consolidated financial statements. |
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 40,552 |
| $ | 119,308 |
Accounts and notes receivable, net (including $201,717 and $120,079 of accounts receivable pledged as collateral at January 31, 2019 and July 31, 2018, respectively) |
|
| 203,164 |
|
| 126,054 |
Inventories |
|
| 89,784 |
|
| 83,694 |
Prepaid expenses and other current assets |
|
| 36,553 |
|
| 34,830 |
Total current assets |
|
| 370,053 |
|
| 363,886 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 584,334 |
|
| 557,723 |
Goodwill |
|
| 247,478 |
|
| 246,098 |
Intangible assets (net of accumulated amortization of $407,795 and $399,629 at January 31, 2019 and July 31, 2018, respectively) |
|
| 113,558 |
|
| 120,951 |
Other assets, net |
|
| 72,539 |
|
| 74,588 |
Total assets |
| $ | 1,387,962 |
| $ | 1,363,246 |
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 63,639 |
| $ | 46,820 |
Short-term borrowings |
|
| — |
|
| 32,800 |
Collateralized note payable |
|
| 140,000 |
|
| 58,000 |
Other current liabilities |
|
| 143,319 |
|
| 138,091 |
Total current liabilities |
|
| 346,958 |
|
| 275,711 |
|
|
|
|
|
|
|
Long-term debt |
|
| 1,730,468 |
|
| 1,728,137 |
Other liabilities |
|
| 37,547 |
|
| 39,476 |
Contingencies and commitments (Note K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ deficit: |
|
|
|
|
|
|
Limited partner |
|
| (710,796) |
|
| (693,896) |
General partner |
|
| (7,088) |
|
| (6,915) |
Accumulated other comprehensive income (loss) |
|
| (9,127) |
|
| 20,733 |
Total partners’ deficit |
|
| (727,011) |
|
| (680,078) |
Total liabilities and partners’ deficit |
| $ | 1,387,962 |
| $ | 1,363,246 |
See notes to condensed consolidated financial statements.
29
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales |
| $ | 550,112 |
| $ | 592,239 |
| $ | 885,078 |
| $ | 894,997 |
|
Midstream operations |
|
| — |
|
| 117,276 |
|
| — |
|
| 238,036 |
|
Other |
|
| 23,265 |
|
| 45,641 |
|
| 40,608 |
|
| 76,778 |
|
Total revenues |
|
| 573,377 |
|
| 755,156 |
|
| 925,686 |
|
| 1,209,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 311,531 |
|
| 362,918 |
|
| 515,667 |
|
| 542,433 |
|
Cost of sales - midstream operations |
|
| — |
|
| 107,067 |
|
| — |
|
| 215,192 |
|
Cost of sales - other |
|
| 3,422 |
|
| 20,787 |
|
| 6,469 |
|
| 34,489 |
|
Operating expense |
|
| 121,219 |
|
| 123,716 |
|
| 231,550 |
|
| 234,178 |
|
Depreciation and amortization expense |
|
| 19,605 |
|
| 25,485 |
|
| 38,597 |
|
| 51,217 |
|
General and administrative expense |
|
| 16,341 |
|
| 14,890 |
|
| 30,516 |
|
| 28,054 |
|
Equipment lease expense |
|
| 8,415 |
|
| 6,954 |
|
| 16,278 |
|
| 13,695 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| 4,692 |
|
| 7,993 |
|
Asset impairments |
|
| — |
|
| 10,005 |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 2,216 |
|
| 39,249 |
|
| 6,720 |
|
| 40,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 88,684 |
|
| 40,054 |
|
| 75,197 |
|
| 32,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (36,150) |
|
| (34,058) |
|
| (71,345) |
|
| (66,254) |
|
Other income, net |
|
| 86 |
|
| 684 |
|
| 105 |
|
| 1,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 52,620 |
|
| 6,680 |
|
| 3,957 |
|
| (32,648) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
| 3 |
|
| (167) |
|
| 154 |
|
| 204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
| $ | 52,617 |
| $ | 6,847 |
| $ | 3,803 |
| $ | (32,852) |
|
See notes to condensed consolidated financial statements.
30
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
| $ | 52,617 |
| $ | 6,847 |
| $ | 3,803 |
| $ | (32,852) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of risk management derivatives |
|
| (21,080) |
|
| 1,072 |
|
| (29,234) |
|
| 23,521 |
|
Reclassification of (gains) losses on derivatives to earnings, net |
|
| 3,807 |
|
| (9,743) |
|
| (626) |
|
| (13,692) |
|
Other comprehensive income (loss) |
|
| (17,273) |
|
| (8,671) |
|
| (29,860) |
|
| 9,829 |
|
Comprehensive income (loss) |
| $ | 35,344 |
| $ | (1,824) |
| $ | (26,057) |
| $ | (23,023) |
|
See notes to condensed consolidated financial statements.
31
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ DEFICIT
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
| other |
| Total | ||
|
| Limited |
| General |
| comprehensive |
| partners’ | ||||
|
| partner |
| partner |
| income (loss) |
| deficit | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2018 |
| $ | (693,896) |
| $ | (6,915) |
| $ | 20,733 |
| $ | (680,078) |
Contributions in connection with non-cash ESOP compensation charges |
|
| 4,645 |
|
| 47 |
|
| — |
|
| 4,692 |
Distributions |
|
| (25,310) |
|
| (258) |
|
| — |
|
| (25,568) |
Net earnings |
|
| 3,765 |
|
| 38 |
|
| — |
|
| 3,803 |
Other comprehensive loss |
|
| — |
|
| — |
|
| (29,860) |
|
| (29,860) |
Balance at January 31, 2019 |
| $ | (710,796) |
| $ | (7,088) |
| $ | (9,127) |
| $ | (727,011) |
See notes to condensed consolidated financial statements.
32
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net earnings (loss) |
| $ | 3,803 |
| $ | (32,852) |
Reconciliation of net earnings (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
Depreciation and amortization expense |
|
| 38,597 |
|
| 51,217 |
Non-cash employee stock ownership plan compensation charge |
|
| 4,692 |
|
| 7,993 |
Asset impairments |
|
| — |
|
| 10,005 |
Loss on asset sales and disposals |
|
| 6,720 |
|
| 40,144 |
Unrealized gain on derivative instruments |
|
| — |
|
| (91) |
Provision for doubtful accounts |
|
| 1,576 |
|
| 1,688 |
Deferred income tax expense |
|
| 141 |
|
| 364 |
Other |
|
| 4,736 |
|
| 2,650 |
Changes in operating assets and liabilities, net of effects from business acquisitions: |
|
|
|
|
|
|
Accounts and notes receivable, net of securitization |
|
| (78,686) |
|
| (102,315) |
Inventories |
|
| (6,090) |
|
| (17,275) |
Prepaid expenses and other current assets |
|
| (16,321) |
|
| (4,637) |
Accounts payable |
|
| 16,441 |
|
| 11,510 |
Accrued interest expense |
|
| (259) |
|
| 304 |
Other current liabilities |
|
| (8,944) |
|
| 13,662 |
Other assets and liabilities |
|
| (6,120) |
|
| (3,208) |
Net cash used in operating activities |
|
| (39,714) |
|
| (20,841) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (5,069) |
|
| (14,862) |
Capital expenditures |
|
| (58,330) |
|
| (35,693) |
Proceeds from sale of assets |
|
| 1,960 |
|
| 4,207 |
Net cash used in investing activities |
|
| (61,439) |
|
| (46,348) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Distributions |
|
| (25,568) |
|
| (35,380) |
Proceeds from issuance of long-term debt |
|
| — |
|
| 23,580 |
Payments on long-term debt |
|
| (1,014) |
|
| (1,267) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| (7,879) |
Net additions to collateralized short-term borrowings |
|
| 82,000 |
|
| 97,000 |
Cash paid for financing costs |
|
| (221) |
|
| (395) |
Net cash provided by financing activities |
|
| 22,397 |
|
| 75,659 |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (78,756) |
|
| 8,470 |
Cash and cash equivalents - beginning of period |
|
| 119,308 |
|
| 5,701 |
Cash and cash equivalents - end of period |
| $ | 40,552 |
| $ | 14,171 |
See notes to condensed consolidated financial statements.
33
(Dollars in thousands, unless otherwise designated)
(unaudited)
A. Partnership organization and formation
Ferrellgas, L.P. is a limited partnership that owns and operates propane distribution and related assets, crude oil transportation and logistics related assets and salt water disposal wells in south Texas. 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 ninesix months ended April 30, 2018January 31, 2019 are not necessarily indicative of the results to be expected for the full fiscal year ending July 31, 2018.
The condensed consolidated financial statements of Ferrellgas, L.P. and subsidiaries reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed consolidated financial statements were of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The information included in this Quarterly Report on Form 10-Q10‑Q should be read in conjunction with (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) the consolidated financial statements and accompanying notes included in Ferrellgas, L.P.’s Annual Report on Form 10-K10‑K for fiscal 20172018.
B. Summary of significant accounting policies
(1)Accounting estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) New accounting standards:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board ("FASB")(FASB) issued Accounting Standard Update ("ASU") 2014-09,
34
the consistency of requirements, comparability of practices and usefulness of disclosures. The new standard will supersede much of the existing authoritative literature for revenue recognition. The standard and related amendments will be effective forUpon adoption, Ferrellgas, L.P. for its annual reporting periodapplied ASU 2014‑09 only to contracts that were not completed, referred to as open contracts.
Ferrellgas, L.P. adopted ASU 2014‑09 beginning on August 1, 2018 including interimusing the modified retrospective method. This method requires that the cumulative effect of initially applying ASU 2014‑09 be recognized in partner’s deficit at the date of adoption, August 1, 2018. ASU 2014‑09 has not materially impacted Ferrellgas, L.P.’s consolidated financial statements, and as a result there was no cumulative effect to record as of the date of adoption. Results for reporting periods within that reporting period. Entitiesbeginning after August 1, 2018 are allowed to transition to the new standard by either recastingpresented under ASU 2014‑09, while amounts reported for prior periods or recognizing the cumulative effect. Ferrellgas, L.P. ishave not been adjusted and continue to be reported under accounting standards in the final stages of analyzing the impact of the new guidance using an integrated approach which includes evaluating differences in
FASB Accounting Standard Update No. 2015-11
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new standard requires lessees to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. An entity may elect the transition relief option in ASU 2018-11, “Leases: Targeted Improvements” which, among other things, provides entities with an option to recognize the cumulative-effect adjustment from the modified retrospective application to the opening balance of retained earnings in the period of adoption and consequently, continue to report comparative periods in compliance with the prior guidance (ASC 840). Ferrellgas, L.P. expects to elect this additional transition method.
Ferrellgas, L.P. is currently evaluatingcontinuing to evaluate the impact of ourits pending adoption of ASU 2016-02 on the consolidated financial statements. Ferrellgas, L.P. has formed anmade significant progress in assessing the impact of the standard and planning for the adoption and implementation. The implementation team has completed training on the new standard,initial scoping and is workingsubstantially complete in the data gathering process of our current lease portfolio. Ferrellgas, L.P. is currently performing a completeness assessment over the lease population, analyzing the financial statement impact of adopting the standards, and evaluating the impact of adoption on an initial assessment.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,2016‑13, Financial Instruments - Credit Losses (Topic 326) which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard'sstandard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas, L.P. is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2017-12
In August 2017, the FASB issued ASU 2017-12,2017‑12, Financial Instruments - Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities which is intended to improve the financial reporting for hedging relationships to better portray the economic results of an entity'sentity’s risk management activities in its financial statements. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Ferrellgas, L.P. is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
35
FASB Accounting Standard Update No. 2018‑15
In August 2018, the FASB issued ASU 2018‑15, Intangibles - Goodwill and Other - Internal-use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract which is intended to clarify the accounting for implementation costs related to a cloud computing arrangement that is a service contract. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Ferrellgas, L.P. is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
.
C. Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Propane gas and related products |
| $ | 74,964 |
| $ | 71,180 |
Appliances, parts and supplies, and other |
|
| 14,820 |
|
| 12,514 |
Inventories |
| $ | 89,784 |
| $ | 83,694 |
April 30, 2018 | July 31, 2017 | |||||||
Propane gas and related products | $ | 58,142 | $ | 67,049 | ||||
Appliances, parts and supplies, and other | 26,920 | 25,503 | ||||||
Inventories | $ | 85,062 | $ | 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 April 30, 2018,January 31, 2019, Ferrellgas, L.P. had committed, for supply procurement purposes, to take delivery of approximately 70.714 million gallons of propane at fixed prices.
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Notes receivable, less current portion |
| $ | 27,646 |
| $ | 27,491 |
Other |
|
| 44,893 |
|
| 47,097 |
Other assets, net |
| $ | 72,539 |
| $ | 74,588 |
April 30, 2018 | July 31, 2017 | |||||||
Notes receivable, less current portion | $ | 33,962 | $ | 32,500 | ||||
Other | 38,132 | 41,557 | ||||||
Other assets, net | $ | 72,094 | $ | 74,057 |
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Accrued interest |
|
| 18,029 |
|
| 18,288 |
Customer deposits and advances |
|
| 26,323 |
|
| 22,829 |
Other |
|
| 98,967 |
|
| 96,974 |
Other current liabilities |
| $ | 143,319 |
| $ | 138,091 |
April 30, 2018 | July 31, 2017 | |||||||
Accrued interest | $ | 38,954 | $ | 14,737 | ||||
Customer deposits and advances | 18,956 | 25,541 | ||||||
Other | 89,333 | 81,738 | ||||||
Other current liabilities | $ | 147,243 | $ | 122,016 |
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 60,279 |
| $ | 54,613 |
| $ | 107,721 |
| $ | 97,928 |
|
Depreciation and amortization expense |
|
| 1,389 |
|
| 1,123 |
|
| 2,462 |
|
| 2,235 |
|
Equipment lease expense |
|
| 7,869 |
|
| 6,296 |
|
| 15,388 |
|
| 12,364 |
|
|
| $ | 69,537 |
| $ | 62,032 |
| $ | 125,571 |
| $ | 112,527 |
|
36
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating expense | $ | 48,351 | $ | 44,309 | $ | 146,279 | $ | 134,090 | ||||||||
Depreciation and amortization expense | 1,340 | 957 | 3,575 | 2,979 | ||||||||||||
Equipment lease expense | 6,507 | 6,564 | 18,872 | 19,882 | ||||||||||||
Total shipping and handling expenses | $ | 56,198 | $ | 51,830 | $ | 168,726 | $ | 156,951 |
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Loss on sale of assets classified as held for sale | $ | 1,237 | $ | — | $ | 36,752 | $ | — | ||||||||
Loss on sale of assets and other | 5,033 | 2,393 | 9,662 | 8,861 | ||||||||||||
Loss on asset sales and disposals | $ | 6,270 | $ | 2,393 | $ | 46,414 | $ | 8,861 |
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
|
| 2019 |
| 2018 | ||
Cash paid for: |
|
|
|
|
|
|
Interest |
| $ | 67,546 |
| $ | 63,286 |
Income taxes |
| $ | 9 |
| $ | 1 |
Non-cash investing and financing activities: |
|
|
|
|
|
|
Liabilities incurred in connection with acquisitions |
| $ | 1,174 |
| $ | 1,508 |
Change in accruals for property, plant and equipment additions |
| $ | 2,815 |
| $ | 47 |
A. |
For the nine months ended April 30, | ||||||||
2018 | 2017 | |||||||
Cash paid (refunded) for: | ||||||||
Interest | $ | 69,775 | $ | 67,314 | ||||
Income taxes | $ | (479 | ) | $ | 23 | |||
Non-cash investing and financing activities: | ||||||||
Liabilities incurred in connection with acquisitions | $ | 1,508 | $ | 856 | ||||
Change in accruals for property, plant and equipment additions | $ | 386 | $ | (111 | ) |
D. Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Accounts receivable pledged as collateral |
| $ | 201,717 |
| $ | 120,079 |
Accounts receivable |
|
| 4,651 |
|
| 8,272 |
Note receivable - current portion |
|
| 126 |
|
| 132 |
Other |
|
| 27 |
|
| 26 |
Less: Allowance for doubtful accounts |
|
| (3,357) |
|
| (2,455) |
Accounts and notes receivable, net |
| $ | 203,164 |
| $ | 126,054 |
April 30, 2018 | July 31, 2017 | |||||||
Accounts receivable pledged as collateral | $ | 182,486 | $ | 109,407 | ||||
Accounts receivable | 13,131 | 47,346 | ||||||
Note receivable - current portion | 10,000 | 10,000 | ||||||
Other | 232 | 307 | ||||||
Less: Allowance for doubtful accounts | (3,122 | ) | (1,976 | ) | ||||
Accounts and notes receivable, net | $ | 202,727 | $ | 165,084 |
At April 30, 2018, $182.5January 31, 2019, $201.7 million of trade accounts receivable were pledged as collateral against $104.0$140.0 million of collateralized notes payable due to a commercial paper conduit. At July 31, 2017, $109.42018, $120.1 million of trade accounts receivable were pledged as collateral against $69.0$58.0 million of collateralized notes payable due to the commercial paper conduit. These accounts receivable pledged as collateral are bankruptcy remote from Ferrellgas, L.P. Ferrellgas, L.P. does not provide any guarantee or similar support to the collectability of these accounts receivable pledged as collateral.
As of April 30,January 31, 2019, Ferrellgas, L.P. had received cash proceeds of $140.0 million from trade accounts receivables securitized, with no remaining capacity to receive additional proceeds or issue letters of credit. As of July 31, 2018, Ferrellgas, L.P. had received cash proceeds of $104.0 million from trade accounts receivables securitized, with $19.0 million of remaining capacity to receive additional proceeds. As of July 31, 2017, Ferrellgas, L.P. had received cash proceeds of $69.0$58.0 million from trade accounts receivables securitized, with no remaining capacity to receive additional proceeds. Borrowings under the accounts receivable securitization facility had a weighted average interest rate of 4.2%5.3% and
E. Debt
Short-term borrowings
Ferrellgas, L.P. classifies as short-termborrowings on the revolving line of credit portion of its secured credit facility borrowings that wereSenior Secured Credit Facility as short-term because they are used to fund working capital needs and that management intends to pay down within the 12twelve month period following the balance sheet date. As of April 30, 2018,January 31, 2019, there were no amounts classified as short-term borrowings because all amounts outstanding were refinanced on May 4, 2018 under the five-year term loan discussed in Note M - Subsequent events.borrowings. As of July 31, 2017, $59.82018, $32.8 million was classified as short-term borrowings. For further discussion see the senior secured credit facility section below.
Secured credit facilities
As of January 31, 2019, Ferrellgas, L.P. had borrowings of $275.0 million under the Term Loan at a rate of 8.27%, which was classified as long-term debt, and no borrowings under the Revolving Facility. As of January 31, 2019, Ferrellgas, L.P. had available borrowing capacity under its Revolving Facility of $196.2 million. As of July 31, 2018, Ferrellgas, L.P. had borrowings of $275.0 million under the Term Loan at a rate of 7.86%, which was classified as long-
37
term debt, and $32.8 million under the Revolving Facility at a rate of 9.75%, which was classified as short-term borrowings. As of July 31, 2018, Ferrellgas, L.P. had available borrowing capacity under its Revolving Facility of $159.3 million.
Letters of credit outstanding at January 31, 2019 and July 31, 2018 totaled $103.8 million and $107.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At January 31, 2019, Ferrellgas, L.P. had available letter of credit remaining capacity of $21.2 million. At July 31, 2018, Ferrellgas, L.P. had available letter of credit remaining capacity of $17.1 million.
Debt and interest expense reduction and refinancing strategy
Ferrellgas, L.P. continues to execute on a strategy to further reduce its debt and interest expense. This strategy included entering into the new Senior Secured Credit Facility and amending our secured credit facility andits accounts receivable securitization facility as discussed in Note M - Subsequent events, as well asMay 2018 and certain asset sales executedduring fiscal 2018. Ferrellgas, L.P. continues to date,evaluate its options to address its leverage.
Financial covenants
The agreements governing Ferrellgas, L.P.’s indebtedness contain various covenants that limit Ferrellgas, L.P.’s ability and the ability of specified subsidiaries to, among other things, make restricted payments and incur additional indebtedness. The general partner believes that the most restrictive of these covenants are those related to the consolidated fixed charge coverage ratio, as defined in the indentures governing the outstanding notes of Ferrellgas, L.P.
Under the indentures governing the outstanding notes of Ferrellgas, L.P., before a restricted payment (as defined in the indentures) can be made by Ferrellgas, L.P. to Ferrellgas Partners, Ferrellgas, L.P. must be satisfy a consolidated fixed charge coverage ratio requirement or have unused capacity under a limited exception to the ratio requirement. If Ferrellgas, L.P. is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to its common unitholders or make interest payments on its unsecured senior notes due 2020.
The restricted payments covenants require that, for Ferrellgas, L.P. to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of Ferrellgas, L.P. be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, Ferrellgas, L.P. may include refinancing existing debt agreements, additional asset sales,make restricted payments in limited amounts determined under the indentures. As of January 31, 2019, the ratio was 1.67x. As a reduction inresult, it’s likely the distribution that will be made by Ferrellgas, Partners' annual distribution rate orL.P. on June 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 will be made from capacity under the issuance of equity.limited exception to the ratio requirement. Ferrellgas, L.P. believes any debt and interest expense reduction strategies would remain in effect until Ferrellgas, L.P.'s consolidated leverage ratio reaches 4.5x or a level Ferrellgas, L.P. deems appropriate forthat its business.
F. Partners’ deficit
Partnership distributions paid
Ferrellgas, L.P. has paidrecognized the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Ferrellgas Partners |
| $ | 15,396 |
| $ | 25,210 |
| $ | 25,310 |
| $ | 35,023 |
|
General partner |
|
| 157 |
|
| 257 |
|
| 258 |
|
| 357 |
|
|
| $ | 15,553 |
| $ | 25,467 |
| $ | 25,568 |
| $ | 35,380 |
|
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Ferrellgas Partners | $ | 10,013 | $ | 9,813 | $ | 45,036 | $ | 93,620 | ||||||||
General partner | 102 | 100 | 459 | 793 | ||||||||||||
$ | 10,115 | $ | 9,913 | $ | 45,495 | $ | 94,413 |
See additional discussions about transactions with related parties in Note IJ – Transactions with related parties.
38
Accumulated other comprehensive income (loss)(“AOCI”)
See Note HI – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the three and ninesix 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 ninesix months ended April 30,January 31, 2019, the general partner made non-cash contributions of $0.1 million to Ferrellgas, L.P. to maintain its 1.0101% general partner interest.
During the six months ended January 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.
G. Revenue from contracts with customers
Ferrellgas, L.P. adopted ASU 2014‑09 beginning on August 1, 2018 using the modified retrospective method. Ferrellgas, L.P. earns revenue from contracts with customers primarily through the distribution of propane, as well as through the sale of propane related equipment and supplies. Revenues from propane and other gas liquids sales are comprised of revenue earned from the delivery of propane to maintaintanks on customers’ premises, delivery of propane filled cylinders to customers, or from the sale of portable propane tanks to nationwide and local retailers and end use customers. Other revenues primarily include sales of appliances and other materials as well as other fees charged to customers. Upon adoption, Ferrellgas, L.P. applied ASU 2014‑09 only to contracts that were not completed.
Contracts with customers
Ferrellgas, L.P.’s contracts with customers are principally for the bulk delivery of propane to tanks, delivery of propane filled cylinders or the delivery of portable propane tanks to retailers. Ferrellgas, L.P. sells propane to a wide variety of customers, including residential, industrial/commercial, portable tank exchange, agricultural, wholesale and others. Ferrellgas, L.P.’s performance obligations in these contracts are generally limited to the delivery of propane thus revenues from these contracts are earned at the time product is delivered or in the case of some of Ferrellgas, L.P.’s portable tank exchange retailers who have consignment agreements, at the time the tanks are sold to the end use customer. Payment is generally due within 30 days. Revenues from sales of propane are included in Propane and other gas liquids sales on the consolidated statements of operations.
Typically, Ferrellgas, L.P. bills customers upon delivery and payment is generally due within 30 days. With its 1.0101% general partner interest.residential customers, Ferrellgas, L.P offers customers the ability to spread their annual heating costs over a longer period, typically twelve months. Customers who opt to spread their heating costs over a longer period are referred to as “even-pay” customers.
Ferrellgas, L.P. charges other amounts to customers associated with the delivery of propane including hazardous materials fees and fuel surcharge fees. In some regions, Ferrellgas, L.P. also sells appliances and related parts and fittings as well as other retail propane related services. Ferrellgas, L.P. charges on an annual basis tank and equipment rental charges for customers that are using our equipment to store propane. Other revenues associated with deliveries of propane are earned at the time product is delivered. Revenues associated with sales of appliances and other materials or services are earned at the time of delivery or installation. Revenues associated with tank and equipment rentals are generally recognized on a straight-line basis over one year.
Accounting estimates related to recognition of revenue require that Ferrellgas, L.P. make estimates and assumptions about various factors including credits issued for completed sales, future returns and total consideration payable in instances where we have customer incentives payable to the customer.
39
Disaggregation of revenue
Ferrellgas, L.P. disaggregates revenues based upon the type of customer and on the type of revenue. The following table presents retail propane revenues, wholesale propane revenues and other revenues. Retail revenues result from sales to end use customers, wholesale revenues result from sales to or through resellers and all other revenues include sales of appliances and other materials, other fees charged to customers and equipment rental charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Retail - Sales to End Users |
| $ | 415,827 |
| $ | 417,472 |
| $ | 633,591 |
| $ | 601,266 |
|
Wholesale - Sales to Resellers |
|
| 115,392 |
|
| 128,654 |
|
| 209,336 |
|
| 227,083 |
|
Other Gas Sales |
|
| 18,893 |
|
| 46,113 |
|
| 42,151 |
|
| 66,648 |
|
Other |
|
| 23,265 |
|
| 45,641 |
|
| 40,608 |
|
| 76,778 |
|
Propane and related equipment revenues |
| $ | 573,377 |
| $ | 637,880 |
| $ | 925,686 |
| $ | 971,775 |
|
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, thus Ferrellgas, L.P. does not capitalize these costs.
The following table presents the opening and closing balances of our receivables, contract assets, and contract liabilities:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Accounts receivable |
| $ | 189,151 |
| $ | 119,818 |
Contract assets |
| $ | 18,519 |
| $ | 8,691 |
Contract liabilities |
|
|
|
|
|
|
Deferred revenue (1) |
| $ | 35,609 |
| $ | 29,933 |
(1) | Of the beginning balance of deferred revenue, $17.1 million was recognized as revenue during the six months ended January 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.
40
G.H. Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas, L.P.’s financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 | ||||
January 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 5,848 |
| $ | — |
| $ | 5,848 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (15,148) |
| $ | — |
| $ | (15,148) |
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | 22,470 |
| $ | — |
| $ | 22,470 |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
| $ | — |
| $ | (1,910) |
| $ | — |
| $ | (1,910) |
Asset (Liability) | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | Total | |||||||||||||
April 30, 2018: | ||||||||||||||||
Assets: | ||||||||||||||||
Derivative financial instruments: | ||||||||||||||||
Interest rate swap agreements | $ | — | $ | 41 | $ | — | $ | 41 | ||||||||
Commodity derivatives | $ | — | $ | 19,750 | $ | — | $ | 19,750 | ||||||||
Liabilities: | ||||||||||||||||
Derivative financial instruments: | ||||||||||||||||
Interest rate swap agreements | $ | — | $ | (3,222 | ) | $ | — | $ | (3,222 | ) | ||||||
Commodity derivatives | $ | — | $ | (2,239 | ) | $ | — | $ | (2,239 | ) | ||||||
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 note receivable financial instruments classified in "Other assets, net" on the condensed consolidated balance sheets, are approximately $29.3$24.2 million, or $4.7$3.4 million less than their carrying amount as of April 30, 2018.January 31, 2019. The estimated fair values of these notes receivable were calculated using a discounted cash flow method which relied on significant unobservable inputs. At April 30, 2018January 31, 2019 and July 31, 2017,2018, the estimated fair value of Ferrellgas, L.P.’s long-term debt instruments was $1,560.8$1,560.0 million and $1,645.3$1,591.5 million, respectively. Ferrellgas, L.P. estimates the fair value of long-term debt based on quoted market prices. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
Ferrellgas, L.P. has other financial instruments such as trade accounts receivable which could expose it to concentrations of credit risk. The credit risk from trade accounts receivable is limited because of a large customer base which extends across many different U.S. markets.
H.I. Derivative instruments and hedging activities
Ferrellgas, L.P. is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas, L.P. utilizes derivative
41
instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. Prior to the sale of Bridger Energy, LLC in January 2018, all other commodity derivative instruments were neither qualified nor were designated as cash flow hedges, therefore, changes in their fair value were recorded currently in earnings. Ferrellgas, L.P. also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
Derivative instruments and hedging activity
During the
The following tables provide a summary of the fair value of derivatives in Ferrellgas, L.P.’s condensed consolidated balance sheets as of April 30, 2018January 31, 2019 and July 31, 2017: 2018:
|
|
|
|
|
|
|
|
|
|
|
|
| January 31, 2019 | ||||||||
|
| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 5,408 |
| Other current liabilities |
| $ | 13,859 |
Commodity derivatives-propane |
| Other assets, net |
|
| 440 |
| Other liabilities |
|
| 1,289 |
|
| Total |
| $ | 5,848 |
| Total |
| $ | 15,148 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2018 | ||||||||
|
| Asset Derivatives |
| Liability Derivatives | ||||||
Derivative Instrument |
| Location |
| Fair value |
| Location |
| Fair value | ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane |
| Prepaid expenses and other current assets |
| $ | 17,123 |
| Other current liabilities |
| $ | 1,832 |
Commodity derivatives-propane |
| Other assets, net |
|
| 5,347 |
| Other liabilities |
|
| 78 |
|
| Total |
| $ | 22,470 |
| Total |
| $ | 1,910 |
April 30, 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 | $ | 14,449 | Other current liabilities | $ | 2,207 | ||||||
Commodity derivatives-propane | Other assets, net | 5,301 | Other liabilities | 32 | ||||||||
Interest rate swap agreements | Prepaid expenses and other current assets | 41 | Other current liabilities | 738 | ||||||||
Interest rate swap agreements | Other assets, net | — | Other liabilities | 2,484 | ||||||||
Total | $ | 19,791 | Total | $ | 5,461 | |||||||
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
|
|
|
|
|
|
|
|
|
|
|
|
| January 31, 2019 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 10,977 |
| Other current liabilities |
| $ | 1,734 |
|
| Other assets, net |
|
| 2,617 |
| Other liabilities |
|
| 3 |
|
|
|
| $ | 13,594 |
|
|
| $ | 1,737 |
|
|
|
|
|
|
|
|
|
|
|
|
| July 31, 2018 | ||||||||
|
| Assets |
| Liabilities | ||||||
Description |
| Location |
| Amount |
| Location |
| Amount | ||
Margin Balances |
| Prepaid expense and other current assets |
| $ | 2,851 |
| Other current liabilities |
| $ | 12,308 |
|
| Other assets, net |
|
| 927 |
| Other liabilities |
|
| 4,235 |
|
|
|
| $ | 3,778 |
|
|
| $ | 16,543 |
42
April 30, 2018 | ||||||||||||
Assets | Liabilities | |||||||||||
Description | Location | Amount | Location | Amount | ||||||||
Margin Balances | Prepaid expenses and other current assets | $ | 1,623 | Other current liabilities | $ | 8,434 | ||||||
Other assets, net | 1,405 | Other liabilities | 3,631 | |||||||||
$ | 3,028 | $ | 12,065 |
July 31, 2017 | ||||||||||||
Assets | Liabilities | |||||||||||
Description | Location | Amount | Location | Amount | ||||||||
Margin Balances | Prepaid expenses and other current assets | $ | 1,778 | Other current liabilities | $ | 7,729 | ||||||
Other assets, net | 1,631 | Other liabilities | 3,073 | |||||||||
$ | 3,409 | $ | 10,802 |
The following tablestable provides a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of operations for the three and ninesix months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of Interest Expense | ||||||||
|
| Location of Amounts |
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Recognized on |
| Derivative |
| (Related Hedged Item) | ||||||||
Derivative Instrument |
| Derivative |
| For the three months ended January 31, |
| For the three months ended January 31, | ||||||||
|
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 88 |
| $ | — |
| $ | (2,275) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of Interest Expense | ||||||||
|
| Location of Gain |
| Amount of Gain Recognized on |
| Recognized on Fixed-Rated Debt | ||||||||
|
| Recognized on |
| Derivative |
| (Related Hedged Item) | ||||||||
Derivative Instrument |
| Derivative |
| For the six months ended January 31, |
| For the six months ended January 31, | ||||||||
|
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Interest rate swap agreements |
| Interest expense |
| $ | — |
| $ | 226 |
| $ | — |
| $ | (4,550) |
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 April 30, | For the three months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Interest rate swap agreements | Interest expense | $ | 40 | $ | 323 | $ | (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 nine months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Interest rate swap agreements | Interest expense | $ | 266 | $ | 1,071 | $ | (6,825 | ) | $ | (6,825 | ) |
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 ninesix months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 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 |
| $ | (21,080) |
| Cost of product sold- propane and other gas liquids sales |
| $ | 3,807 |
| $ | — |
|
| $ | (21,080) |
|
|
| $ | 3,807 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 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 |
| $ | 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 six months ended January 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 |
| $ | (29,234) |
| Cost of sales-propane and other gas liquids sales |
| $ | (626) |
| $ | — |
|
| $ | (29,234) |
|
|
| $ | (626) |
| $ | — |
43
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
For the three months ended April 30, 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 | $ | (169 | ) | Cost of sales-propane and other gas liquids sales | $ | 6,628 | $ | — | |||||||||||||||||
Interest rate swap agreements | 10 | Interest expense | (60 | ) | — | ||||||||||||||||||||
$ | (159 | ) | $ | 6,568 | $ | — | |||||||||||||||||||
For the three months ended April 30, 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 | $ | (6,642 | ) | Cost of sales-propane and other gas liquids sales | $ | 2,411 | $ | — | |||||||||||||||||
Interest rate swap agreements | 146 | Interest expense | (478 | ) | — | ||||||||||||||||||||
$ | (6,496 | ) | $ | 1,933 | $ | — |
| For the six months ended January 31, 2018 | |||||||||||||||||
|
|
|
|
|
| Amount of Gain (Loss) | |||||||||||||||||||
|
|
|
| Location of Gain (Loss) |
| Reclassified from | |||||||||||||||||||
For the nine months ended April 30, 2018 |
| Amount of Gain (Loss) |
| Reclassified from AOCI |
| AOCI into Income | |||||||||||||||||||
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 |
| Recognized in AOCI |
| into Income |
| Effective portion |
| Ineffective portion | ||||||||||||||
Effective portion | Ineffective portion | ||||||||||||||||||||||||
Commodity derivatives | $ | 23,114 | Cost of sales-propane and other gas liquids sales | $ | 20,646 | $ | — |
| $ | 23,283 |
| Cost of product sold- propane and other gas liquids sales |
| $ | 14,018 |
| $ | — | |||||||
Interest rate swap agreements | 248 | Interest expense | (386 | ) | — |
|
| 238 |
| Interest expense |
|
| (326) |
|
| — | |||||||||
$ | 23,362 | $ | 20,260 | $ | — |
| $ | 23,521 |
|
|
| $ | 13,692 |
| $ | — | |||||||||
For the nine months ended April 30, 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 | $ | 12,930 | Cost of sales-propane and other gas liquids sales | $ | (1,112 | ) | $ | — | |||||||||||||||||
Interest rate swap agreements | 974 | Interest expense | (1,707 | ) | — | ||||||||||||||||||||
$ | 13,904 | $ | (2,819 | ) | $ | — |
The following tables providetable provides a summary of the effect on Ferrellgas, L.P.'s’s condensed consolidated statements of operations for the three and ninesix months ended April 30,January 31, 2019 and 2018 and 2017 due to the change in fair value of derivatives not designated as hedging instruments:
For the three months ended January 31, 2019 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
DerivativesNotDesignatedasHedgingInstruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | — | Cost of sales - midstream operations |
For the three months ended January 31, 2018 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
Derivatives Not Designated as Hedging Instruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | (2,080) | Cost of sales - midstream operations |
For the six months ended January 31, 2019 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
DerivativesNotDesignatedasHedgingInstruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | — | Cost of sales - midstream operations |
For the six months ended January 31, 2018 | |||||
Amount of Gain (Loss) | Location of Gain (Loss) | ||||
DerivativesNotDesignatedasHedgingInstruments | Recognized in Income | Reclassified in Income | |||
Commodity derivatives - crude oil | $ | (3,470) | Cost of sales - midstream operations |
For the three months ended April 30, 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 | $ | — | Cost of sales - midstream operations | |||
For the three months ended April 30, 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 | $ | 1,464 | Cost of sales - midstream operations | |||
Commodity derivatives - vehicle fuel | $ | (393 | ) | Operating expense | ||
For the nine months ended April 30, 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 nine months ended April 30, 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 | $ | (784 | ) | Cost of sales - midstream operations | ||
Commodity derivatives - vehicle fuel | $ | 1,123 | Operating expense |
The changes in derivatives included in AOCI for the ninesix months ended April 30,January 31, 2019 and 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
Gains and losses on derivatives included in AOCI |
| 2019 |
| 2018 | ||
Beginning balance |
| $ | 20,560 |
| $ | 14,648 |
Change in value of risk management commodity derivatives |
|
| (29,234) |
|
| 23,283 |
Reclassification of gains on commodity hedges to cost of sales - propane and other gas liquids sales, net |
|
| (626) |
|
| (14,018) |
Change in value of risk management interest rate derivatives |
|
| — |
|
| 238 |
Reclassification of losses on interest rate hedges to interest expense |
|
| — |
|
| 326 |
Ending balance |
| $ | (9,300) |
| $ | 24,477 |
For the nine months ended April 30, | ||||||||
Gains and losses on derivatives included in AOCI | 2018 | 2017 | ||||||
Beginning balance | $ | 14,648 | $ | (9,815 | ) | |||
Change in value of risk management commodity derivatives | 23,114 | 12,930 | ||||||
Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net | (20,646 | ) | 1,112 | |||||
Change in value of risk management interest rate derivatives | 248 | 974 | ||||||
Reclassification of losses on interest rate hedges to interest expense | 386 | 1,707 | ||||||
Ending balance | $ | 17,750 | $ | 6,908 |
Ferrellgas, L.P. expects to reclassify net gainslosses related to the risk management commodity derivatives of approximately $12.2$8.5 million to earnings during the next 12 months. These net gainslosses are expected to be offset by decreasedincreased margins on propane sales commitments Ferrellgas, L.P. has with its customers that qualify for the normal purchase normal sales exception.
During the ninesix months ended April 30,January 31, 2019 and 2018, and 2017, Ferrellgas, L.P. had no reclassifications to operations resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
44
As of April 30, 2018,January 31, 2019, Ferrellgas, L.P. had financial derivative contracts covering 2.33.9 million barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
Derivative financial instruments credit risk
Ferrellgas, L.P. is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas, L.P.’s counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas, L.P. maintains credit policies with regard to its counterparties that it believes reduces its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas, L.P. in the forms of letters of credit, parent guarantees or cash. Ferrellgas, L.P. has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at April 30, 2018,January 31, 2019, the maximum amount of loss due to credit risk that Ferrellgas, L.P. would incur is $5.7$0.5 million, which is based upon the gross fair values of the derivative financial instruments.
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 April 30, 2018.
I.J. Transactions with related parties
Ferrellgas, L.P. has no employees and is managed and controlled by its general partner. Pursuant to Ferrellgas, L.P.’s partnership agreement, the general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of Ferrellgas, L.P. and all other necessary or appropriate expenses allocable to Ferrellgas, L.P. or otherwise reasonably incurred by the general partner in connection with operating Ferrellgas, L.P.’s 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 January 31, |
| For the six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating expense |
| $ | 69,285 |
| $ | 65,291 |
| $ | 129,243 |
| $ | 122,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
| $ | 7,197 |
| $ | 8,422 |
| $ | 13,309 |
| $ | 15,930 |
|
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating expense | $ | 58,842 | $ | 53,747 | $ | 181,484 | $ | 170,953 | ||||||||
General and administrative expense | $ | 5,707 | $ | 6,913 | $ | 21,637 | $ | 23,713 |
See additional discussions about transactions with the general partner and related parties in Note F – Partners’ deficit.
J.K. Contingencies and commitments
Litigation
Ferrellgas, L.P.’s operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane and, prior to the sales of midstream operations in fiscal 2018, crude oil. As a result, at any given time, Ferrellgas, L.P. can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, Ferrellgas, L.P. is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are reasonably expected to have a material adverse effect on the consolidated financial condition, results of operations and cash flows of Ferrellgas, L.P.
Ferrellgas, L.P. has been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits, which were consolidated in the Western District of Missouri on October 16, 2014,
45
allege that Ferrellgas, L.P. and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Federal Court for the Western District of Missouri initially dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending.resulted in the court of appeals affirming the dismissal of the federal claims and remanding the case to the district court to decide whether to exercise supplemental jurisdiction over the remaining state law claims. Ferrellgas, L.P. believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas, L.P. has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas, L.P. and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. The parties have completed briefing and are preparing for oral argument. At this time the derivative lawsuits remain stayed by agreement. Ferrellgas, L.P. believes that it has defenses and will vigorously defend these cases. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
Ferrellgas, L.P. and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude from rail onto barges. Eddystone alleges that Ferrellgas, L.P. transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas.Ferrellgas, L.P. Ferrellgas, L.P. believes that Ferrellgas, L.P. and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas, L.P. believes that the amount of such damage claims, if ultimately owed to Eddystone, could be material to Ferrellgas, L.P. Ferrellgas, L.P. intends to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, Ferrellgas, L.P. filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. TheOn June 25, 2018, Ferrellgas, L.P. entered into an agreement with the Third-Party Defendants havewhich, among other things, resulted in a dismissal of the claims against the Third-Party Defendants from the lawsuit. On January 25, 2019, Ferrellgas, L.P., Bridger Logistics, LLC and all other defendants filed motionsa Motion to dismiss the third-party complaintDismiss Plaintiff’s First Amended Complaint for alleged lackLack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgas, L.P. is vigorously opposing these motions.
K.L. Segment reporting
As of January 31, 2019, Ferrellgas, L.P. has two primary operations that result in twoone reportable operating segments: Propanesegment: propane operations and related equipment salessales. All remaining activities are included in Corporate and Midstream operations. During the quarter ended January 31, 2018, Ferrellgas, L.P. recorded a goodwill impairmentother.
46
Following is a summary of segment information for the three and ninesix months ended April 30,January 31, 2019 and 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 573,377 |
| $ | — |
| $ | 573,377 |
Direct costs (1) |
|
| 443,533 |
|
| 10,187 |
|
| 453,720 |
Adjusted EBITDA |
| $ | 129,844 |
| $ | (10,187) |
| $ | 119,657 |
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 637,880 |
| $ | 117,276 |
| $ | 755,156 |
Direct costs (1) |
|
| 507,386 |
|
| 127,142 |
|
| 634,528 |
Adjusted EBITDA |
| $ | 130,494 |
| $ | (9,866) |
| $ | 120,628 |
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2019 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 925,686 |
| $ | — |
| $ | 925,686 |
Direct costs (1) |
|
| 767,127 |
|
| 21,057 |
|
| 788,184 |
Adjusted EBITDA |
| $ | 158,559 |
| $ | (21,057) |
| $ | 137,502 |
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2018 | |||||||
|
| Propane operations |
|
|
|
|
|
| |
|
| and related equipment |
| Corporate and |
|
|
| ||
|
| sales |
| other |
| Total | |||
Segment revenues |
| $ | 971,775 |
| $ | 238,036 |
| $ | 1,209,811 |
Direct costs (1) |
|
| 810,715 |
|
| 252,252 |
|
| 1,062,967 |
Adjusted EBITDA |
| $ | 161,060 |
| $ | (14,216) |
| $ | 146,844 |
(1) | Direct costs are comprised of "cost of sales-propane and other gas liquids sales", "cost of sales- midstream operations", "cost of sales-other", "operating expense", "general and administrative expense", and "equipment lease expense" less "severance charge", "legal fees and settlements", "unrealized (non-cash) losses on changes in fair value of derivatives not designated as hedging instruments" and "multi-employer pension plan withdrawal settlement". |
47
Three months ended April 30, 2018 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 493,215 | $ | 22,595 | $ | — | $ | 515,810 | ||||||||
Direct costs (1) | 397,568 | 21,593 | 9,595 | 428,756 | ||||||||||||
Adjusted EBITDA | $ | 95,647 | $ | 1,002 | $ | (9,595 | ) | $ | 87,054 | |||||||
Three months ended April 30, 2017 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 411,433 | $ | 126,676 | $ | — | $ | 538,109 | ||||||||
Direct costs (1) | 324,442 | 127,223 | 9,545 | 461,210 | ||||||||||||
Adjusted EBITDA | $ | 86,991 | $ | (547 | ) | $ | (9,545 | ) | $ | 76,899 | ||||||
Nine months ended April 30, 2018 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 1,464,990 | $ | 260,631 | $ | — | $ | 1,725,621 | ||||||||
Direct costs (1) | 1,208,283 | 250,423 | 33,017 | 1,491,723 | ||||||||||||
Adjusted EBITDA | $ | 256,707 | $ | 10,208 | $ | (33,017 | ) | $ | 233,898 | |||||||
Nine months ended April 30, 2017 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Segment revenues | $ | 1,165,394 | $ | 331,507 | $ | — | $ | 1,496,901 | ||||||||
Direct costs (1) | 931,631 | 323,714 | 30,607 | 1,285,952 | ||||||||||||
Adjusted EBITDA | $ | 233,763 | $ | 7,793 | $ | (30,607 | ) | $ | 210,949 | |||||||
Following is a reconciliation of Ferrellgas, L.P.'s’s total segment performance measure to condensed consolidated net earnings (loss):loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, |
| Six months ended January 31, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
| $ | 52,617 |
| $ | 6,847 |
| $ | 3,803 |
| $ | (32,852) |
|
Income tax expense (benefit) |
|
| 3 |
|
| (167) |
|
| 154 |
|
| 204 |
|
Interest expense |
|
| 36,150 |
|
| 34,058 |
|
| 71,345 |
|
| 66,254 |
|
Depreciation and amortization expense |
|
| 19,605 |
|
| 25,485 |
|
| 38,597 |
|
| 51,217 |
|
EBITDA |
|
| 108,375 |
|
| 66,223 |
|
| 113,899 |
|
| 84,823 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| 4,692 |
|
| 7,993 |
|
Asset impairments |
|
| — |
|
| 10,005 |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 2,216 |
|
| 39,249 |
|
| 6,720 |
|
| 40,144 |
|
Other income, net |
|
| (86) |
|
| (684) |
|
| (105) |
|
| (1,195) |
|
Severance costs |
|
| 1,600 |
|
| — |
|
| 1,600 |
|
| 1,663 |
|
Legal fees and settlements |
|
| 5,608 |
|
| 2,118 |
|
| 9,172 |
|
| 2,118 |
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| (314) |
|
| — |
|
| 1,293 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| — |
|
| 1,524 |
|
| — |
|
Adjusted EBITDA |
| $ | 119,657 |
| $ | 120,628 |
| $ | 137,502 |
| $ | 146,844 |
|
Three months ended April 30, | Nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net earnings (loss) | $ | 19,840 | $ | 15,395 | $ | (13,012 | ) | $ | 18,555 | |||||||
Income tax expense (benefit) | 57 | (197 | ) | 261 | (200 | ) | ||||||||||
Interest expense | 31,739 | 31,270 | 97,993 | 95,416 | ||||||||||||
Depreciation and amortization expense | 25,348 | 25,737 | 76,565 | 77,546 | ||||||||||||
EBITDA | 76,984 | 72,205 | 161,807 | 191,317 | ||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | 10,731 | 11,396 | ||||||||||||
Non-cash stock-based compensation charge | — | — | — | 3,298 | ||||||||||||
Asset impairments | — | — | 10,005 | — | ||||||||||||
Loss on asset sales and disposals | 6,270 | 2,393 | 46,414 | 8,861 | ||||||||||||
Other income, net | (227 | ) | (162 | ) | (1,422 | ) | (1,433 | ) | ||||||||
Severance costs | — | — | 1,663 | 1,959 | ||||||||||||
Professional fees | 1,289 | — | 3,407 | — | ||||||||||||
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | — | (2,234 | ) | 1,293 | (4,449 | ) | ||||||||||
Adjusted EBITDA | $ | 87,054 | $ | 76,899 | $ | 233,898 | $ | 210,949 |
Following are total assets by segment:
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
Assets |
|
|
|
|
|
|
Propane operations and related equipment sales |
| $ | 1,315,233 |
| $ | 1,196,084 |
Corporate and other |
|
| 72,729 |
|
| 167,162 |
Total consolidated assets |
| $ | 1,387,962 |
| $ | 1,363,246 |
Assets | April 30, 2018 | July 31, 2017 | ||||||
Propane operations and related equipment sales | $ | 1,274,360 | $ | 1,194,905 | ||||
Midstream operations | 244,523 | 399,356 | ||||||
Corporate | 13,654 | 15,687 | ||||||
Total consolidated assets | $ | 1,532,537 | $ | 1,609,948 |
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2019 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 31,460 |
| $ | 549 |
| $ | 32,009 |
Growth |
|
| 23,316 |
|
| — |
|
| 23,316 |
Total |
| $ | 54,776 |
| $ | 549 |
| $ | 55,325 |
|
|
|
|
|
|
|
|
|
|
|
| Six months ended January 31, 2018 | |||||||
|
| Propane operations and |
|
|
|
|
|
| |
|
| related equipment sales |
| Corporate and other |
| Total | |||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
Maintenance |
| $ | 12,016 |
| $ | 1,427 |
| $ | 13,443 |
Growth |
|
| 18,311 |
|
| 1,013 |
|
| 19,324 |
Total |
| $ | 30,327 |
| $ | 2,440 |
| $ | 32,767 |
D. |
48
Nine months ended April 30, 2018 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Capital expenditures: | ||||||||||||||||
Maintenance | $ | 17,556 | $ | 210 | $ | 1,492 | $ | 19,258 | ||||||||
Growth | 34,784 | 1,265 | — | 36,049 | ||||||||||||
Total | $ | 52,340 | $ | 1,475 | $ | 1,492 | $ | 55,307 | ||||||||
Nine months ended April 30, 2017 | ||||||||||||||||
Propane operations and related equipment sales | Midstream operations | Corporate | Total | |||||||||||||
Capital expenditures: | ||||||||||||||||
Maintenance | $ | 8,533 | $ | 241 | $ | 1,905 | $ | 10,679 | ||||||||
Growth | 21,246 | — | — | 21,246 | ||||||||||||
Total | $ | 29,779 | $ | 241 | $ | 1,905 | $ | 31,925 |
L.M. Guarantor financial information
The $500.0 million aggregate principal amount of 6.75% senior notes due 2023 co-issued by Ferrellgas, L.P. and Ferrellgas Finance Corp. are fully and unconditionally and jointly and severally guaranteed by all of Ferrellgas, L.P.’s 100% owned subsidiaries except: (i) Ferrellgas Finance Corp; (ii) certain special purposes subsidiaries formed for use in connection with our accounts receivable securitization; and (iii) foreign subsidiaries. Guarantees of these senior notes will be released under certain circumstances, including (i) in connection with any sale or other disposition of (a) all or substantially all of the assets of a guarantor or (b) all of the capital stock of such guarantor (including by way of merger or consolidation), in each case, to a person that is not Ferrellgas, L.P. or a restricted subsidiary of Ferrellgas, L.P., (ii) if 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.
49
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
As of April 30, 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 | $ | 9,126 | $ | 1 | $ | 364 | $ | — | $ | — | $ | 9,491 | |||||||||||
Accounts and notes receivable, net | (3,346 | ) | — | 23,493 | 182,580 | — | 202,727 | ||||||||||||||||
Intercompany receivables | 65,801 | — | — | — | (65,801 | ) | — | ||||||||||||||||
Inventories | 70,893 | — | 14,169 | — | — | 85,062 | |||||||||||||||||
Prepaid expenses and other current assets | 31,167 | — | 12,890 | 2 | — | 44,059 | |||||||||||||||||
Total current assets | 173,641 | 1 | 50,916 | 182,582 | (65,801 | ) | 341,339 | ||||||||||||||||
Property, plant and equipment, net | 552,551 | — | 85,137 | — | — | 637,688 | |||||||||||||||||
Goodwill, net | 246,098 | — | — | — | — | 246,098 | |||||||||||||||||
Intangible assets, net | 123,177 | — | 112,141 | — | — | 235,318 | |||||||||||||||||
Intercompany receivables | 450,000 | — | — | — | (450,000 | ) | — | ||||||||||||||||
Investments in consolidated subsidiaries | (164,031 | ) | — | — | — | 164,031 | — | ||||||||||||||||
Other assets, net | 36,744 | — | 34,987 | 363 | — | 72,094 | |||||||||||||||||
Total assets | $ | 1,418,180 | $ | 1 | $ | 283,181 | $ | 182,945 | $ | (351,770 | ) | $ | 1,532,537 | ||||||||||
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) | |||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||
Accounts payable | $ | 50,164 | $ | — | $ | 2,221 | $ | 87 | $ | — | $ | 52,472 | |||||||||||
Short-term borrowings | — | — | — | — | — | — | |||||||||||||||||
Collateralized note payable | — | — | — | 104,000 | — | 104,000 | |||||||||||||||||
Intercompany payables | — | — | 45,554 | 20,247 | (65,801 | ) | — | ||||||||||||||||
Other current liabilities | 143,804 | — | 3,041 | 398 | — | 147,243 | |||||||||||||||||
Total current liabilities | 193,968 | — | 50,816 | 124,732 | (65,801 | ) | 303,715 | ||||||||||||||||
Long-term debt | 1,646,069 | — | 450,000 | — | (450,000 | ) | 1,646,069 | ||||||||||||||||
Other liabilities | 29,615 | — | 4,610 | — | — | 34,225 | |||||||||||||||||
Contingencies and commitments | |||||||||||||||||||||||
Partners' capital (deficit): | |||||||||||||||||||||||
Partners' equity | (469,338 | ) | 1 | (222,245 | ) | 58,213 | 164,031 | (469,338 | ) | ||||||||||||||
Accumulated other comprehensive income | 17,866 | — | — | — | — | 17,866 | |||||||||||||||||
Total partners' capital (deficit) | (451,472 | ) | 1 | (222,245 | ) | 58,213 | 164,031 | (451,472 | ) | ||||||||||||||
Total liabilities and partners' capital (deficit) | $ | 1,418,180 | $ | 1 | $ | 283,181 | $ | 182,945 | $ | (351,770 | ) | $ | 1,532,537 | ||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of January 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 |
| $ | 40,305 |
| $ | 1 |
| $ | 246 |
| $ | — |
| $ | — |
| $ | 40,552 |
Accounts and notes receivable, net |
|
| (3,661) |
|
| — |
|
| 150 |
|
| 206,675 |
|
| — |
|
| 203,164 |
Intercompany receivables |
|
| (9,201) |
|
| — |
|
| — |
|
| — |
|
| 9,201 |
|
| — |
Inventories |
|
| 89,784 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 89,784 |
Prepaid expenses and other current assets |
|
| 36,551 |
|
| — |
|
| (1) |
|
| 3 |
|
| — |
|
| 36,553 |
Total current assets |
|
| 153,778 |
|
| 1 |
|
| 395 |
|
| 206,678 |
|
| 9,201 |
|
| 370,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 584,335 |
|
| — |
|
| (1) |
|
| — |
|
| — |
|
| 584,334 |
Goodwill, net |
|
| 247,478 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 247,478 |
Intangible assets, net |
|
| 113,558 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 113,558 |
Investments in consolidated subsidiaries |
|
| 74,072 |
|
| — |
|
| — |
|
| — |
|
| (74,072) |
|
| — |
Other assets, net |
|
| 68,659 |
|
| — |
|
| 2,875 |
|
| 1,005 |
|
| — |
|
| 72,539 |
Total assets |
| $ | 1,241,880 |
| $ | 1 |
| $ | 3,269 |
| $ | 207,683 |
| $ | (64,871) |
| $ | 1,387,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 63,526 |
| $ | — |
| $ | — |
| $ | 113 |
| $ | — |
| $ | 63,639 |
Collateralized note payable |
|
| — |
|
| — |
|
| — |
|
| 140,000 |
|
| — |
|
| 140,000 |
Intercompany payables |
|
| — |
|
| — |
|
| (192) |
|
| (9,009) |
|
| 9,201 |
|
| — |
Other current liabilities |
|
| 137,417 |
|
| — |
|
| 388 |
|
| 5,514 |
|
| — |
|
| 143,319 |
Total current liabilities |
|
| 200,943 |
|
| — |
|
| 196 |
|
| 136,618 |
|
| 9,201 |
|
| 346,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 1,730,468 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,730,468 |
Other liabilities |
|
| 37,480 |
|
| — |
|
| 67 |
|
| — |
|
| — |
|
| 37,547 |
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity |
|
| (717,884) |
|
| 1 |
|
| 3,006 |
|
| 71,065 |
|
| (74,072) |
|
| (717,884) |
Accumulated other comprehensive loss |
|
| (9,127) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (9,127) |
Total partners' capital (deficit) |
|
| (727,011) |
|
| 1 |
|
| 3,006 |
|
| 71,065 |
|
| (74,072) |
|
| (727,011) |
Total liabilities and partners' capital (deficit) |
| $ | 1,241,880 |
| $ | 1 |
| $ | 3,269 |
| $ | 207,683 |
| $ | (64,871) |
| $ | 1,387,962 |
50
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING BALANCE SHEETS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
As of July 31, 2017 | |||||||||||||||||||||||
Ferrellgas, L.P. (Parent and Co-Issuer) | Ferrellgas Finance Corp. (Co-Issuer) | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||
Cash and cash equivalents | $ | 5,327 | $ | 1 | $ | 373 | $ | — | $ | — | $ | 5,701 | |||||||||||
Accounts and notes receivable, net | (3,132 | ) | — | 58,618 | 109,598 | — | 165,084 | ||||||||||||||||
Intercompany receivables | 39,877 | — | — | — | (39,877 | ) | — | ||||||||||||||||
Inventories | 78,963 | — | 13,589 | — | — | 92,552 | |||||||||||||||||
Prepaid expenses and other current assets | 26,106 | — | 7,314 | 6 | — | 33,426 | |||||||||||||||||
Total current assets | 147,141 | 1 | 79,894 | 109,604 | (39,877 | ) | 296,763 | ||||||||||||||||
Property, plant and equipment, net | 537,582 | — | 194,341 | — | — | 731,923 | |||||||||||||||||
Goodwill, net | 246,098 | — | 10,005 | — | — | 256,103 | |||||||||||||||||
Intangible assets, net | 128,209 | — | 122,893 | — | — | 251,102 | |||||||||||||||||
Intercompany receivables | 450,000 | — | — | — | (450,000 | ) | — | ||||||||||||||||
Investments in consolidated subsidiaries | (53,915 | ) | — | — | — | 53,915 | — | ||||||||||||||||
Other assets, net | 35,862 | — | 37,618 | 577 | — | 74,057 | |||||||||||||||||
Total assets | $ | 1,490,977 | $ | 1 | $ | 444,751 | $ | 110,181 | $ | (435,962 | ) | $ | 1,609,948 | ||||||||||
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) | |||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||
Accounts payable | $ | 44,026 | $ | — | $ | 41,345 | $ | 190 | $ | — | $ | 85,561 | |||||||||||
Short-term borrowings | 59,781 | — | — | — | — | 59,781 | |||||||||||||||||
Collateralized note payable | — | — | — | 69,000 | — | 69,000 | |||||||||||||||||
Intercompany payables | — | — | 41,645 | (1,768 | ) | (39,877 | ) | — | |||||||||||||||
Other current liabilities | 118,039 | — | 3,776 | 201 | — | 122,016 | |||||||||||||||||
Total current liabilities | 221,846 | — | 86,766 | 67,623 | (39,877 | ) | 336,358 | ||||||||||||||||
Long-term debt | 1,649,139 | — | 450,131 | — | (450,000 | ) | 1,649,270 | ||||||||||||||||
Other liabilities | 26,790 | — | 4,300 | 28 | — | 31,118 | |||||||||||||||||
Contingencies and commitments | |||||||||||||||||||||||
Partners' capital (deficit): | |||||||||||||||||||||||
Partners' equity | (421,562 | ) | 1 | (96,446 | ) | 42,530 | 53,915 | (421,562 | ) | ||||||||||||||
Accumulated other comprehensive income | 14,764 | — | — | — | — | 14,764 | |||||||||||||||||
Total partners' capital (deficit) | (406,798 | ) | 1 | (96,446 | ) | 42,530 | 53,915 | (406,798 | ) | ||||||||||||||
Total liabilities and partners' capital (deficit) | $ | 1,490,977 | $ | 1 | $ | 444,751 | $ | 110,181 | $ | (435,962 | ) | $ | 1,609,948 | ||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of July 31, 2018 | ||||||||||||||||
|
| Ferrellgas, L.P. |
| Ferrellgas |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| (Parent and |
| Finance Corp. |
| Guarantor |
| Non-Guarantor |
|
|
|
|
|
| ||||
|
| Co-Issuer) |
| (Co-Issuer) |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated | ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 119,133 |
| $ | 1 |
| $ | 174 |
| $ | — |
| $ | — |
| $ | 119,308 |
Accounts and notes receivable, net |
|
| (3,420) |
|
| — |
|
| 9,395 |
|
| 120,079 |
|
| — |
|
| 126,054 |
Intercompany receivables |
|
| 15,660 |
|
| — |
|
| — |
|
| — |
|
| (15,660) |
|
| — |
Inventories |
|
| 83,694 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 83,694 |
Prepaid expenses and other current assets |
|
| 34,050 |
|
| — |
|
| 775 |
|
| 5 |
|
| — |
|
| 34,830 |
Total current assets |
|
| 249,117 |
|
| 1 |
|
| 10,344 |
|
| 120,084 |
|
| (15,660) |
|
| 363,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 557,689 |
|
| — |
|
| 34 |
|
| — |
|
| — |
|
| 557,723 |
Goodwill, net |
|
| 246,098 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 246,098 |
Intangible assets, net |
|
| 120,951 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 120,951 |
Investments in consolidated subsidiaries |
|
| 59,937 |
|
| — |
|
| — |
|
| — |
|
| (59,937) |
|
| — |
Other assets, net |
|
| 63,411 |
|
| — |
|
| 9,961 |
|
| 1,216 |
|
| — |
|
| 74,588 |
Total assets |
| $ | 1,297,203 |
| $ | 1 |
| $ | 20,339 |
| $ | 121,300 |
| $ | (75,597) |
| $ | 1,363,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 45,171 |
| $ | — |
| $ | 1,547 |
| $ | 102 |
| $ | — |
| $ | 46,820 |
Short-term borrowings |
|
| 32,800 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 32,800 |
Collateralized note payable |
|
| — |
|
| — |
|
| — |
|
| 58,000 |
|
| — |
|
| 58,000 |
Intercompany payables |
|
| — |
|
| — |
|
| (143) |
|
| 15,803 |
|
| (15,660) |
|
| — |
Other current liabilities |
|
| 131,702 |
|
| — |
|
| 6,036 |
|
| 353 |
|
| — |
|
| 138,091 |
Total current liabilities |
|
| 209,673 |
|
| — |
|
| 7,440 |
|
| 74,258 |
|
| (15,660) |
|
| 275,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 1,728,137 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,728,137 |
Other liabilities |
|
| 39,471 |
|
| — |
|
| 5 |
|
| — |
|
| — |
|
| 39,476 |
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity |
|
| (700,811) |
|
| 1 |
|
| 12,894 |
|
| 47,042 |
|
| (59,937) |
|
| (700,811) |
Accumulated other comprehensive income |
|
| 20,733 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 20,733 |
Total partners' capital (deficit) |
|
| (680,078) |
|
| 1 |
|
| 12,894 |
|
| 47,042 |
|
| (59,937) |
|
| (680,078) |
Total liabilities and partners' capital (deficit) |
| $ | 1,297,203 |
| $ | 1 |
| $ | 20,339 |
| $ | 121,300 |
| $ | (75,597) |
| $ | 1,363,246 |
51
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
For the three months ended April 30, 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 | $ | 451,212 | $ | — | $ | 90 | $ | — | $ | — | $ | 451,302 | |||||||||||
Midstream operations | — | — | 22,595 | — | — | 22,595 | |||||||||||||||||
Other | 19,701 | — | 22,212 | — | — | 41,913 | |||||||||||||||||
Total revenues | 470,913 | — | 44,897 | — | — | 515,810 | |||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of sales - propane and other gas liquids sales | 260,317 | — | 102 | — | — | 260,419 | |||||||||||||||||
Cost of sales - midstream operations | — | — | 14,518 | — | — | 14,518 | |||||||||||||||||
Cost of sales - other | 2,328 | — | 17,522 | — | — | 19,850 | |||||||||||||||||
Operating expense | 108,291 | — | 9,262 | 1,459 | (2,433 | ) | 116,579 | ||||||||||||||||
Depreciation and amortization expense | 19,105 | — | 6,171 | 72 | — | 25,348 | |||||||||||||||||
General and administrative expense | 10,460 | — | 1,086 | — | — | 11,546 | |||||||||||||||||
Equipment lease expense | 7,045 | — | 88 | — | — | 7,133 | |||||||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | — | — | — | — | 2,738 | |||||||||||||||||
Loss on asset sales and disposals | 2,243 | — | 4,027 | — | — | 6,270 | |||||||||||||||||
Operating income (loss) | 58,386 | — | (7,879 | ) | (1,531 | ) | 2,433 | 51,409 | |||||||||||||||
Interest expense | (20,297 | ) | — | (10,104 | ) | (1,338 | ) | — | (31,739 | ) | |||||||||||||
Other income (expense), net | (133 | ) | — | 360 | 2,433 | (2,433 | ) | 227 | |||||||||||||||
Earnings (loss) before income taxes | 37,956 | — | (17,623 | ) | (436 | ) | — | 19,897 | |||||||||||||||
Income tax expense (benefit) | 102 | — | (45 | ) | — | — | 57 | ||||||||||||||||
Equity in earnings (loss) of subsidiary | (18,014 | ) | — | — | — | 18,014 | — | ||||||||||||||||
Net earnings (loss) | 19,840 | — | (17,578 | ) | (436 | ) | 18,014 | 19,840 | |||||||||||||||
Other comprehensive loss | (6,727 | ) | — | — | — | — | (6,727 | ) | |||||||||||||||
Comprehensive income (loss) | $ | 13,113 | $ | — | $ | (17,578 | ) | $ | (436 | ) | $ | 18,014 | $ | 13,113 | |||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 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 |
| $ | 550,112 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 550,112 |
Other |
|
| 23,216 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| 23,265 |
Total revenues |
|
| 573,328 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| 573,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 311,531 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 311,531 |
Cost of sales - other |
|
| 3,308 |
|
| — |
|
| 114 |
|
| — |
|
| — |
|
| 3,422 |
Operating expense |
|
| 121,180 |
|
| — |
|
| 39 |
|
| 1,884 |
|
| (1,884) |
|
| 121,219 |
Depreciation and amortization expense |
|
| 19,493 |
|
| — |
|
| — |
|
| 112 |
|
| — |
|
| 19,605 |
General and administrative expense |
|
| 16,338 |
|
| 3 |
|
| — |
|
| — |
|
| — |
|
| 16,341 |
Equipment lease expense |
|
| 8,415 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,415 |
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,944 |
Loss on asset sales and disposals |
|
| 2,045 |
|
| — |
|
| 171 |
|
| — |
|
| — |
|
| 2,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 89,074 |
|
| (3) |
|
| (275) |
|
| (1,996) |
|
| 1,884 |
|
| 88,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (34,655) |
|
| — |
|
| (38) |
|
| (1,457) |
|
| — |
|
| (36,150) |
Other income (expense), net |
|
| 96 |
|
| — |
|
| (10) |
|
| 2,916 |
|
| (2,916) |
|
| 86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 54,515 |
|
| (3) |
|
| (323) |
|
| (537) |
|
| (1,032) |
|
| 52,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 3 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3 |
Equity in earnings (loss) of subsidiaries |
|
| (863) |
|
| — |
|
| — |
|
| — |
|
| 863 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 53,649 |
|
| (3) |
|
| (323) |
|
| (537) |
|
| (169) |
|
| 52,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| (17,273) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (17,273) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | 36,376 |
| $ | (3) |
| $ | (323) |
| $ | (537) |
| $ | (169) |
| $ | 35,344 |
52
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
For the three months ended April 30, 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 | $ | 369,437 | $ | — | $ | — | $ | — | $ | — | $ | 369,437 | |||||||||||
Midstream operations | — | — | 126,676 | — | — | 126,676 | |||||||||||||||||
Other | 17,850 | — | 24,146 | — | — | 41,996 | |||||||||||||||||
Total revenues | 387,287 | — | 150,822 | — | — | 538,109 | |||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of sales - propane and other gas liquids sales | 197,487 | — | — | — | — | 197,487 | |||||||||||||||||
Cost of sales - midstream operations | — | — | 118,767 | — | — | 118,767 | |||||||||||||||||
Cost of sales - other | 1,992 | — | 18,818 | — | — | 20,810 | |||||||||||||||||
Operating expense | 96,264 | — | 8,594 | 1,315 | (1,400 | ) | 104,773 | ||||||||||||||||
Depreciation and amortization expense | 18,261 | — | 7,418 | 58 | — | 25,737 | |||||||||||||||||
General and administrative expense | 8,930 | — | 939 | — | — | 9,869 | |||||||||||||||||
Equipment lease expense | 7,108 | — | 162 | — | — | 7,270 | |||||||||||||||||
Non-cash employee stock ownership plan compensation charge | 4,697 | — | — | — | — | 4,697 | |||||||||||||||||
Loss on asset sales and disposals | 2,146 | — | 247 | — | — | 2,393 | |||||||||||||||||
Operating income (loss) | 50,402 | — | (4,123 | ) | (1,373 | ) | 1,400 | 46,306 | |||||||||||||||
Interest expense | (19,452 | ) | — | (11,019 | ) | (799 | ) | — | (31,270 | ) | |||||||||||||
Other income (expense), net | (157 | ) | — | 319 | 1,400 | (1,400 | ) | 162 | |||||||||||||||
Earnings (loss) before income taxes | 30,793 | — | (14,823 | ) | (772 | ) | — | 15,198 | |||||||||||||||
Income tax expense (benefit) | 97 | — | (294 | ) | — | — | (197 | ) | |||||||||||||||
Equity in earnings (loss) of subsidiary | (15,301 | ) | — | — | — | 15,301 | — | ||||||||||||||||
Net earnings (loss) | 15,395 | — | (14,529 | ) | (772 | ) | 15,301 | 15,395 | |||||||||||||||
Other comprehensive income | (8,429 | ) | — | — | — | — | (8,429 | ) | |||||||||||||||
Comprehensive income (loss) | $ | 6,966 | $ | — | $ | (14,529 | ) | $ | (772 | ) | $ | 15,301 | $ | 6,966 | |||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended January 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 |
| $ | 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 subsidiaries |
|
| (63,571) |
|
| — |
|
| — |
|
| — |
|
| 63,571 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 6,847 |
|
| (3) |
|
| (62,565) |
|
| (1,003) |
|
| 63,571 |
|
| 6,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
| (8,671) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (8,671) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | (1,824) |
| $ | (3) |
| $ | (62,565) |
| $ | (1,003) |
| $ | 63,571 |
| $ | (1,824) |
53
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
For the nine months ended April 30, 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 | $ | 1,345,604 | $ | — | $ | 695 | $ | — | $ | — | $ | 1,346,299 | |||||||||||
Midstream operations | — | — | 260,631 | — | — | 260,631 | |||||||||||||||||
Other | 59,085 | — | 59,606 | — | — | 118,691 | |||||||||||||||||
Total revenues | 1,404,689 | — | 320,932 | — | — | 1,725,621 | |||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of sales - propane and other gas liquids sales | 802,063 | — | 789 | — | — | 802,852 | |||||||||||||||||
Cost of sales - midstream operations | — | — | 229,710 | — | — | 229,710 | |||||||||||||||||
Cost of sales - other | 7,890 | — | 46,449 | — | — | 54,339 | |||||||||||||||||
Operating expense | 323,619 | — | 28,320 | 4,474 | (5,656 | ) | 350,757 | ||||||||||||||||
Depreciation and amortization expense | 55,973 | — | 20,377 | 215 | — | 76,565 | |||||||||||||||||
General and administrative expense | 35,048 | 5 | 4,547 | — | — | 39,600 | |||||||||||||||||
Equipment lease expense | 20,555 | — | 273 | — | — | 20,828 | |||||||||||||||||
Non-cash employee stock ownership plan compensation charge | 10,731 | — | — | — | — | 10,731 | |||||||||||||||||
Asset impairments | — | — | 10,005 | — | — | 10,005 | |||||||||||||||||
Loss on asset sales and disposals | 3,706 | — | 42,708 | — | — | 46,414 | |||||||||||||||||
Operating income (loss) | 145,104 | (5 | ) | (62,246 | ) | (4,689 | ) | 5,656 | 83,820 | ||||||||||||||
Interest expense | (61,903 | ) | — | (33,028 | ) | (3,062 | ) | — | (97,993 | ) | |||||||||||||
Other income (expense), net | 490 | — | 932 | 5,656 | (5,656 | ) | 1,422 | ||||||||||||||||
Earnings (loss) before income taxes | 83,691 | (5 | ) | (94,342 | ) | (2,095 | ) | — | (12,751 | ) | |||||||||||||
Income tax expense | 174 | — | 87 | — | — | 261 | |||||||||||||||||
Equity in earnings (loss) of subsidiary | (96,529 | ) | — | — | — | 96,529 | — | ||||||||||||||||
Net earnings (loss) | (13,012 | ) | (5 | ) | (94,429 | ) | (2,095 | ) | 96,529 | (13,012 | ) | ||||||||||||
Other comprehensive income | 3,102 | — | — | — | — | 3,102 | |||||||||||||||||
Comprehensive income (loss) | $ | (9,910 | ) | $ | (5 | ) | $ | (94,429 | ) | $ | (2,095 | ) | $ | 96,529 | $ | (9,910 | ) | ||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the six months ended January 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 |
| $ | 885,078 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 885,078 |
Other |
|
| 40,559 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| 40,608 |
Total revenues |
|
| 925,637 |
|
| — |
|
| 49 |
|
| — |
|
| — |
|
| 925,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales |
|
| 515,667 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 515,667 |
Cost of sales - other |
|
| 6,355 |
|
| — |
|
| 114 |
|
| — |
|
| — |
|
| 6,469 |
Operating expense |
|
| 231,511 |
|
| — |
|
| 39 |
|
| 2,901 |
|
| (2,901) |
|
| 231,550 |
Depreciation and amortization expense |
|
| 38,374 |
|
| — |
|
| — |
|
| 223 |
|
| — |
|
| 38,597 |
General and administrative expense |
|
| 30,511 |
|
| 5 |
|
| — |
|
| — |
|
| — |
|
| 30,516 |
Equipment lease expense |
|
| 16,278 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 16,278 |
Non-cash employee stock ownership plan compensation charge |
|
| 4,692 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,692 |
Asset impairments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Loss on asset sales and disposals |
|
| 4,041 |
|
| — |
|
| 2,679 |
|
| — |
|
| — |
|
| 6,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
| 78,208 |
|
| (5) |
|
| (2,783) |
|
| (3,124) |
|
| 2,901 |
|
| 75,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (69,003) |
|
| — |
|
| (38) |
|
| (2,304) |
|
| — |
|
| (71,345) |
Other income (expense), net |
|
| 115 |
|
| — |
|
| (10) |
|
| 5,119 |
|
| (5,119) |
|
| 105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
| 9,320 |
|
| (5) |
|
| (2,831) |
|
| (309) |
|
| (2,218) |
|
| 3,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 154 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 154 |
Equity in earnings (loss) of subsidiary |
|
| (3,145) |
|
| — |
|
| — |
|
| — |
|
| 3,145 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
| 6,021 |
|
| (5) |
|
| (2,831) |
|
| (309) |
|
| 927 |
|
| 3,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
| (29,860) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (29,860) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
| $ | (23,839) |
| $ | (5) |
| $ | (2,831) |
| $ | (309) |
| $ | 927 |
| $ | (26,057) |
54
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
For the nine months ended April 30, 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 | $ | 1,049,211 | $ | — | $ | — | $ | — | $ | — | $ | 1,049,211 | |||||||||||
Midstream operations | — | — | 331,507 | — | — | 331,507 | |||||||||||||||||
Other | 56,785 | — | 59,398 | — | — | 116,183 | |||||||||||||||||
Total revenues | 1,105,996 | — | 390,905 | — | — | 1,496,901 | |||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of sales - propane and other gas liquids sales | 551,728 | — | — | — | — | 551,728 | |||||||||||||||||
Cost of sales - midstream operations | — | — | 300,433 | — | — | 300,433 | |||||||||||||||||
Cost of sales - other | 6,993 | — | 46,220 | — | — | 53,213 | |||||||||||||||||
Operating expense | 297,905 | — | 28,482 | (251 | ) | (3,201 | ) | 322,935 | |||||||||||||||
Depreciation and amortization expense | 54,552 | — | 22,817 | 177 | — | 77,546 | |||||||||||||||||
General and administrative expense | 32,886 | 5 | 3,525 | — | — | 36,416 | |||||||||||||||||
Equipment lease expense | 21,585 | — | 450 | — | — | 22,035 | |||||||||||||||||
Non-cash employee stock ownership plan compensation charge | 11,396 | — | — | — | — | 11,396 | |||||||||||||||||
Loss on asset sales and disposals | 3,666 | — | 5,195 | — | — | 8,861 | |||||||||||||||||
Operating income (loss) | 125,285 | (5 | ) | (16,217 | ) | 74 | 3,201 | 112,338 | |||||||||||||||
Interest expense | (60,893 | ) | — | (32,694 | ) | (1,826 | ) | (3 | ) | (95,416 | ) | ||||||||||||
Other income (expense), net | 100 | — | 1,333 | 3,198 | (3,198 | ) | 1,433 | ||||||||||||||||
Earnings (loss) before income taxes | 64,492 | (5 | ) | (47,578 | ) | 1,446 | — | 18,355 | |||||||||||||||
Income tax expense (benefit) | 171 | — | (371 | ) | — | — | (200 | ) | |||||||||||||||
Equity in earnings (loss) of subsidiary | (45,766 | ) | — | — | — | 45,766 | — | ||||||||||||||||
Net earnings (loss) | 18,555 | (5 | ) | (47,207 | ) | 1,446 | 45,766 | 18,555 | |||||||||||||||
Other comprehensive income | 16,723 | — | — | — | — | 16,723 | |||||||||||||||||
Comprehensive income (loss) | $ | 35,278 | $ | (5 | ) | $ | (47,207 | ) | $ | 1,446 | $ | 45,766 | $ | 35,278 | |||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the six months ended January 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 |
| $ | 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) |
55
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
For the nine months ended April 30, 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 | $ | 65,604 | $ | (5 | ) | $ | (3,531 | ) | $ | 66,878 | $ | (35,000 | ) | $ | 93,946 | ||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Business acquisitions, net of cash acquired | (14,862 | ) | — | — | — | — | (14,862 | ) | |||||||||||||||
Capital expenditures | (57,158 | ) | — | (1,803 | ) | — | — | (58,961 | ) | ||||||||||||||
Proceeds from sale of assets | 2,479 | — | 55,323 | — | — | 57,802 | |||||||||||||||||
Cash collected for purchase of interest in accounts receivable | — | — | — | 985,084 | (985,084 | ) | — | ||||||||||||||||
Cash remitted to Ferrellgas, L.P. for accounts receivable | — | — | — | (1,020,084 | ) | 1,020,084 | — | ||||||||||||||||
Net changes in advances with consolidated entities | 116,871 | — | — | — | (116,871 | ) | — | ||||||||||||||||
Net cash provided by (used in) investing activities | 47,330 | — | 53,520 | (35,000 | ) | (81,871 | ) | (16,021 | ) | ||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Distributions | (45,495 | ) | — | — | — | — | (45,495 | ) | |||||||||||||||
Proceeds from increase in long-term debt | 23,580 | — | — | — | — | 23,580 | |||||||||||||||||
Payments on long-term debt | (1,892 | ) | — | — | — | — | (1,892 | ) | |||||||||||||||
Net reductions in short-term borrowings | (84,179 | ) | — | — | — | — | (84,179 | ) | |||||||||||||||
Net additions to collateralized short-term borrowings | — | — | — | 35,000 | — | 35,000 | |||||||||||||||||
Net changes in advances with parent | — | 5 | (49,998 | ) | (66,878 | ) | 116,871 | — | |||||||||||||||
Cash paid for financing costs | (1,149 | ) | — | — | — | — | (1,149 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | (109,135 | ) | 5 | (49,998 | ) | (31,878 | ) | 116,871 | (74,135 | ) | |||||||||||||
Increase (decrease) in cash and cash equivalents | 3,799 | — | (9 | ) | — | — | 3,790 | ||||||||||||||||
Cash and cash equivalents - beginning of year | 5,327 | 1 | 373 | — | — | 5,701 | |||||||||||||||||
Cash and cash equivalents - end of year | $ | 9,126 | $ | 1 | $ | 364 | $ | — | $ | — | $ | 9,491 | |||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the six months ended January 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 |
| $ | 98,494 |
| $ | (5) |
| $ | 24,696 |
| $ | (80,899) |
| $ | (82,000) |
| $ | (39,714) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired |
|
| (5,069) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (5,069) |
Capital expenditures |
|
| (58,330) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (58,330) |
Proceeds from sale of assets |
|
| 1,960 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,960 |
Cash collected for purchase of interest in accounts receivable |
|
| — |
|
| — |
|
| — |
|
| 710,497 |
|
| (710,497) |
|
| — |
Cash remitted to Ferrellgas, L.P. for accounts receivable |
|
| — |
|
| — |
|
| — |
|
| (792,497) |
|
| 792,497 |
|
| — |
Net changes in advances with consolidated entities |
|
| (56,291) |
|
| — |
|
| — |
|
| — |
|
| 56,291 |
|
| — |
Other |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Net cash provided by (used in) investing activities |
|
| (117,730) |
|
| — |
|
| — |
|
| (82,000) |
|
| 138,291 |
|
| (61,439) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
| (25,568) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (25,568) |
Payments on long-term debt |
|
| (1,014) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,014) |
Net reductions in short-term borrowings |
|
| (32,800) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,800) |
Net additions to collateralized short-term borrowings |
|
| — |
|
| — |
|
| — |
|
| 82,000 |
|
| — |
|
| 82,000 |
Net changes in advances with parent |
|
| — |
|
| 5 |
|
| (24,624) |
|
| 80,910 |
|
| (56,291) |
|
| — |
Cash paid for financing costs |
|
| (210) |
|
| — |
|
| — |
|
| (11) |
|
| — |
|
| (221) |
Net cash provided by (used in) financing activities |
|
| (59,592) |
|
| 5 |
|
| (24,624) |
|
| 162,899 |
|
| (56,291) |
|
| 22,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| (78,828) |
|
| — |
|
| 72 |
|
| — |
|
| — |
|
| (78,756) |
Cash and cash equivalents - beginning of year |
|
| 119,133 |
|
| 1 |
|
| 174 |
|
| — |
|
| — |
|
| 119,308 |
Cash and cash equivalents - end of year |
| $ | 40,305 |
| $ | 1 |
| $ | 246 |
| $ | — |
| $ | — |
| $ | 40,552 |
56
FERRELLGAS, L.P. AND SUBSIDIARIES | |||||||||||||||||||||||
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
For the nine months ended April 30, 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 | $ | 186,530 | $ | (5 | ) | $ | (73,168 | ) | $ | 38,042 | $ | (27,000 | ) | $ | 124,399 | ||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Business acquisitions, net of cash acquired | (3,539 | ) | — | — | — | — | (3,539 | ) | |||||||||||||||
Capital expenditures | (35,116 | ) | — | (296 | ) | — | — | (35,412 | ) | ||||||||||||||
Proceeds from sale of assets | 4,721 | — | — | — | — | 4,721 | |||||||||||||||||
Cash collected for purchase of interest in accounts receivable | — | — | — | 803,109 | (803,109 | ) | — | ||||||||||||||||
Cash remitted to Ferrellgas, L.P. for accounts receivable | — | — | — | (830,109 | ) | 830,109 | — | ||||||||||||||||
Net changes in advances with consolidated entities | (35,476 | ) | — | — | 244 | 35,232 | — | ||||||||||||||||
Other | (37 | ) | — | — | — | — | (37 | ) | |||||||||||||||
Net cash provided by (used in) investing activities | (69,447 | ) | — | (296 | ) | (26,756 | ) | 62,232 | (34,267 | ) | |||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Distributions | (94,413 | ) | — | — | — | — | (94,413 | ) | |||||||||||||||
Contributions from Partners | 167,640 | — | — | — | — | 167,640 | |||||||||||||||||
Proceeds from increase in long-term debt | 52,354 | — | — | — | — | 52,354 | |||||||||||||||||
Payments on long-term debt | (173,471 | ) | — | — | — | — | (173,471 | ) | |||||||||||||||
Net reductions in short-term borrowings | (62,902 | ) | — | — | — | — | (62,902 | ) | |||||||||||||||
Net additions to collateralized short-term borrowings | — | — | — | 27,000 | — | 27,000 | |||||||||||||||||
Net changes in advances with parent | — | 5 | 73,269 | (38,042 | ) | (35,232 | ) | — | |||||||||||||||
Cash paid for financing costs | (1,820 | ) | — | — | (244 | ) | — | (2,064 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | (112,612 | ) | 5 | 73,269 | (11,286 | ) | (35,232 | ) | (85,856 | ) | |||||||||||||
Increase (decrease) in cash and cash equivalents | 4,471 | — | (195 | ) | — | — | 4,276 | ||||||||||||||||
Cash and cash equivalents - beginning of year | 4,472 | 1 | 417 | — | — | 4,890 | |||||||||||||||||
Cash and cash equivalents - end of year | $ | 8,943 | $ | 1 | $ | 222 | $ | — | $ | — | $ | 9,166 | |||||||||||
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the six months ended January 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 |
| $ | (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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change 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 |
57
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 events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
58
FERRELLGAS FINANCE CORP. | |||||||
(a wholly-owned subsidiary of Ferrellgas, L.P.) | |||||||
CONDENSED BALANCE SHEETS | |||||||
(unaudited) | |||||||
April 30, 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 April 30, | For the nine months ended April 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
General and administrative expense | $ | — | $ | 225 | $ | 5,216 | $ | 5,175 | ||||||||
Net loss | $ | — | $ | (225 | ) | $ | (5,216 | ) | $ | (5,175 | ) | |||||
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 nine months ended April 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (5,216 | ) | $ | (5,175 | ) | |
Changes in operating assets and liabilities: | |||||||
Other current assets | 1,500 | 1,500 | |||||
Cash used in operating activities | (3,716 | ) | (3,675 | ) | |||
Cash flows from financing activities: | |||||||
Capital contribution | 3,716 | 3,675 | |||||
Cash provided by financing activities | 3,716 | 3,675 | |||||
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)
|
|
|
|
|
|
|
|
| January 31, 2019 |
| July 31, 2018 | ||
ASSETS |
|
|
|
|
|
|
Cash |
| $ | 1,100 |
| $ | 1,100 |
Prepaid expenses and other current assets |
|
| — |
|
| 1,500 |
Total assets |
| $ | 1,100 |
| $ | 2,600 |
|
|
|
|
|
|
|
Contingencies and commitments (Note B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY |
|
|
|
|
|
|
Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding |
| $ | 1,000 |
| $ | 1,000 |
Additional paid in capital |
|
| 76,452 |
|
| 72,552 |
Accumulated deficit | �� |
| (76,352) |
|
| (70,952) |
Total stockholder's equity |
| $ | 1,100 |
| $ | 2,600 |
See notes to condensed financial statements.
59
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, |
| ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
General and administrative expense |
| $ | 3,850 |
| $ | 3,666 |
| $ | 5,400 |
| $ | 5,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (3,850) |
| $ | (3,666) |
| $ | (5,400) |
| $ | (5,216) |
|
See notes to condensed financial statements.
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FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
| For the six months ended January 31, | ||||
|
| 2019 |
| 2018 | ||
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
| $ | (5,400) |
| $ | (5,216) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 1,500 |
|
| 1,500 |
Cash used in operating activities |
|
| (3,900) |
|
| (3,716) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Capital contribution |
|
| 3,900 |
|
| 3,716 |
Cash provided by financing activities |
|
| 3,900 |
|
| 3,716 |
|
|
|
|
|
|
|
Net change in cash |
|
| — |
|
| — |
Cash - beginning of period |
|
| 1,100 |
|
| 1,100 |
Cash - end of period |
| $ | 1,100 |
| $ | 1,100 |
See notes to condensed financial statements.
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FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
(unaudited)
A. Formation
Ferrellgas Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on January 16, 2003 and is a wholly-owned subsidiary of Ferrellgas, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has no employees.
B. Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
The indentures governing the senior notes agreements contains various restrictive covenants applicable to the Partnership and its subsidiaries, the most restrictive relating to additional indebtedness and restricted payments. The restricted payments covenants require that, for the Partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the Partnership be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, the Partnership may make restricted payments in limited amounts determined under the indentures. As of April 30, 2018,January 31, 2019, the ratio was 1.67x. As a result, it’s likely the distribution that will be made by the Partnership is in compliance with all requirements, tests, limitations and covenants relatedon June 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 will be made from capacity under the limited exception to these debt agreements.the ratio requirement. the Partnership believes that its remaining capacity under the limited exception to the ratio requirement will allow it to make distributions to Ferrellgas Partners’ to cover interest payments on Ferrellgas Partners’ unsecured senior notes due 2020 through the maturity of those notes.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Our management’s discussion and analysis of financial condition and results of operations relates to Ferrellgas Partners and the operating partnership.
Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. have nominal assets, do not conduct any operations and have no employees other than officers. Ferrellgas Partners Finance Corp. serves as co-issuer and co-obligor for debt securities of Ferrellgas Partners while Ferrellgas Finance Corp. serves as co-issuer and co-obligor for debt securities of the operating partnership. Accordingly, and due to the reduced disclosure format, a discussion of the results of operations, liquidity and capital resources of Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. is not presented.
In this Item 2 of the Quarterly Report on Form 10-Q,10‑Q, unless the context indicates otherwise:
· | “us,” “we,” “our,” “ours,” “consolidated,” or "Ferrellgas" are references exclusively to Ferrellgas Partners, L.P. together with its consolidated subsidiaries, including Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas Finance Corp., except when used in connection with “common units,” in which case these terms refer to Ferrellgas Partners, L.P. without its consolidated subsidiaries; |
· | “Ferrellgas Partners” refers to Ferrellgas Partners, L.P. itself, without its consolidated subsidiaries; |
· | the “operating partnership” refers to Ferrellgas, L.P., together with its consolidated subsidiaries, including Ferrellgas Finance Corp.; |
· | our “general partner” refers to Ferrellgas, Inc.; |
· | “Ferrell Companies” refers to Ferrell Companies, Inc., the sole shareholder of our general partner; |
· | “unitholders” refers to holders of common units of Ferrellgas Partners; |
· | "GAAP" refers to accounting principles generally accepted in the United States; |
· | “retail sales” refers to Propane and other gas liquid sales: Retail - Sales to End Users or the volume of propane sold primarily to our residential, industrial/commercial and agricultural customers; |
· | “wholesale sales” refers to Propane and other gas liquid sales: Wholesale - Sales to Resellers or the volume of propane sold primarily to our portable tank exchange customers and bulk propane sold to wholesale customers; |
· | “other gas sales” refers to Propane and other gas liquid sales: Other Gas Sales or the volume of bulk propane sold to other third party propane distributors or marketers and the volume of refined fuel sold; |
· | “propane sales volume” refers to the volume of propane sold to our retail sales and wholesale sales customers; |
· | “Notes” refers to the notes of the condensed consolidated financial statements of Ferrellgas Partners or the operating partnership, as applicable; |
Ferrellgas Partners is a holding entity that conducts no operations and has two direct subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners’ only significant assets are its approximate 99% limited partnership interest in the operating partnership and its 100% equity interest in Ferrellgas Partners Finance Corp. The
63
common units 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 a 1% general partner interest in Ferrellgas Partners and an approximate 1% general partner interest in the operating partnership. The parent company of our general partner, Ferrell Companies, beneficially owns approximately 23% of our outstanding common units. Ferrell Companies is owned 100% by an employee stock ownership trust.
We file annual, quarterly, and other reports and information with the Securities and Exchange Commission (the "SEC"). You may read and download our SEC filings over the Internet from several commercial document retrieval services as well as at the SEC’s website at www.sec.gov. You may also read and copy our SEC filings at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information concerning the Public Reference Room and any applicable copy charges. Because our common units are traded on the New York Stock Exchange under the ticker symbol “FGP,” we also provide our SEC filings and particular other information to the New York Stock Exchange. You may obtain copies of these filings and such other information at the offices of the New York Stock Exchange located at 11 Wall Street, New York, New York 10005. In addition, our SEC filings are available on our website at www.ferrellgas.com at no cost as soon as reasonably practicable after our electronic filing or furnishing thereof with the SEC. Please note that any Internet addresses provided in this Quarterly Report on Form 10-Q10‑Q are for informational purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such Internet addresses is intended or deemed to be incorporated by reference herein.
The following is a discussion of our historical financial condition and results of operations and should be read in conjunction with our historical consolidated financial statements and accompanying Notes thereto included in our Annual Report on Form 10‑K for fiscal 2018 and in our historical condensed consolidated financial statements and accompanying Notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
The discussions set forth in the “Results of Operations” and “Liquidity and Capital Resources” sections generally refer to Ferrellgas Partners and its consolidated subsidiaries. However, in these discussions there exist twoexists one material differencesdifference between Ferrellgas Partners and the operating partnership. Those material differences are:
Cautionary Note Regarding Forward-looking Statements
Statements included in this report include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. These statements often use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” or the negative of those terms or other variations of them or comparable terminology. These statements often discuss plans, strategies, events or developments that we expect or anticipate will or may occur in the future and are based upon the beliefs and assumptions of our management and on the information currently available to them. In particular, statements, express or implied, concerning our future operating results or our ability to generate sales, income or cash flow are forward-looking statements.
Forward-looking statements are not guarantees of performance. You should not put undue reliance on any forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially from those expressed in or implied by these forward-looking statements. Many of the factors that will affect our future results are beyond our ability to control or predict. Some of the risk factors that may affect our business, financial condition or results of operations include:
· | the effect of weather conditions on the demand for propane; |
64
· | the prices of wholesale propane, motor fuel and crude oil; |
· | disruptions to the supply of propane; |
· | competition from other industry participants and other energy sources; |
· | energy efficiency and technology advances; |
· | adverse changes in our relationships with our national tank exchange customers; |
· | significant delays in the collection |
· | customer, counterparty, supplier or vendor defaults; |
· | changes in demand for, and production of, hydrocarbon products; |
· | increased trucking and rail regulations; |
· | inherent operating and litigation risks in gathering, transporting, handling and storing propane; |
· | our inability to complete acquisitions or to successfully integrate acquired operations; |
· | costs of complying with, or liabilities imposed under, environmental, health and safety laws; |
· | the impact of pending and future legal proceedings; |
· | the interruption, disruption, failure or malfunction of our information technology systems including due to cyber attack; |
· | the impact of changes in tax law that could adversely affect the tax treatment of Ferrellgas Partners for federal income tax purposes; |
· | economic and political instability, particularly in areas of the world tied to the energy industry; and |
· | disruptions in the capital and credit markets. |
When considering any forward-looking statement, you should also keep in mind the risk factors set forth in “Item 1A. Risk Factors” of our Annual Report on Form 10-K10‑K for fiscal 2017 and under Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q.2018. Any of these risks could impair our business, financial condition or results of operations. Any such impairment may affect our ability to make distributions to our unitholders or pay interest on the principal of any of our debt securities. In addition, the trading price of our securities could decline as a result of any such impairment.
Except for our ongoing obligations to disclose material information as required by federal securities laws, we undertake no obligation to update any forward-looking statements or risk factors after the date of this Quarterly Report on Form 10-Q.
Recent developments
Debt and interest expense reduction and refinancing strategy
We continue to execute on a strategy to further reduce our debt and interest expense. This strategy included entering into the operating partnership entered into a new $575.0 million senior secured credit facility to replace its previous $575.0 million senior secured credit facility that was scheduled to mature in October 2018. This new facility consists of a $300.0 million revolving line of credit as well as a $275.0 million term loan, both priced at LIBOR + 5.75%Senior Secured Credit Facility and maturing May 4, 2023. The revolving line of credit includes a $125.0 million sublimit for the issuance of letters of credit. Borrowings under this facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness and acquisitions. At closing, the following transactions occurred: 1) the proceeds of the term loan were used to repay and terminate the operating partnership’s then existing credit facility, thus, no revolving credit loans were outstanding, 2) approximately $100 million of letters of credit were issued to replace the letters of credit under the operating partnership's then existing credit facility, and 3) the operating partnership held approximately $75 million of surplus cash.
65
certain asset sales during fiscal 2018. We continue to evaluate our options to address our leverage. We are in the maturity date by three years, as well as increases the sizeprocess of the facility fromengaging a maximum borrowing capacity of $225.0 millionfinancial advisor to $250.0 million at a discount rate of LIBOR plus 200 basis points. The amended accounts receivable securitization facility also includes provisions for the issuance of letters of credit with a $50.0 million sublimit. The facility continues to contain provisions where maximum purchase levels are reduced during periods of the year when working capital requirements are lower to efficiently reduce unused capacity fees.
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 its subsidiaries to, among other things, make restricted payments and incur additional indebtedness. Our general partner believes that the most restrictive of these covenants isare those related to the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of Ferrellgas Partners.
Consolidated fixed charge coverage ratio
Under the Ferrellgas Partners indenture, before a restricted payment (as defined in the Ferrellgas Partners indenture) can be made by Ferrellgas Partners, Ferrellgas Partners must be in compliance with thesatisfy a consolidated fixed charge coverage ratio covenantrequirement or have unused capacity under a limited exception to the Ferrellgas Partners
The restricted payments covenant requires that, for Ferrellgas Partners to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of Ferrellgas Partners be at least 1.75x, beforeon a pro forma basis giving effect to the restricted payment (as defined inand, if applicable, certain other specified events, subject to its ability to make restricted payments under the indenture) can be made by Ferrellgas Partners.limited exception described below. If this pro forma 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.period. As of April 30, 2018,January 31, 2019, the ratio was 1.56x.1.38x. 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 will be paid to common unitholders in March 2019 for the three months ended January 31, 2019. Unless this indenture is amended or replaced, or our consolidated fixed charge coverage ratio improves to at least 1.75x, this covenant will continue to restrict us from making common unit distributions.
Consolidated fixed charge coverage ratio - Ferrellgas, L.P., the operating partnership
Under the operating partnership indentures, before a restricted payment (as defined in the indentures) can be made by the operating partnership to Ferrellgas Partners, the operating partnership must satisfy a consolidated fixed charge coverage ratio requirement or have unused capacity under a limited exception to the ratio requirement. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders or make interest payments on Ferrellgas Partners’ unsecured senior notes due 2020.
The restricted payments covenants require that, for the operating partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the operating partnership be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, the operating partnership may make restricted payments in limited amounts determined under the indentures. As of January 31, 2019, the ratio was 1.67x. As a result, it’s likely the distribution that will be made by the operating partnership on June 14, 201815, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 will be takenmade from capacity under the $50.0 million restricted payment limitation, which after consideringlimited exception to the $9.8 million deductions taken as a resultratio requirement. The operating partnership believes that its remaining capacity under the limited exception to the ratio requirement will allow it to make distributions to Ferrellgas Partners’ to cover interest payments on Ferrellgas Partners’ unsecured senior notes due 2020 through the maturity of those notes.
66
Distributions
As discussed above, no distributions will be paid to common unitholders in March 2019 for the distributions paid in September 2017, December 2017 and March 2018, leaves $10.8 million for future restricted payments.three months ended January 31, 2019. Unless the indenture governing the outstanding Ferrellgas Partners notes is amended or refinanced,replaced, if our consolidated fixed charge coverage ratio 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, 2018 and beyond. While there can be no assurance of successfully resolving the distribution limitation, we are presently considering potential solutions to cure the limitation on distributions under the consolidated fixed charge covenant ratio related to the outstanding unsecured bonds due in June 2020. The potential solutions, among others, include a refinancing or a transaction to exchange new bonds for some or all of the bonds due June 2020.
How We Evaluate Our Operations
We evaluate our overall business performance based primarily on Adjusted EBITDA. 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.
Propane operations and related equipment sales
Based on our propane sales volumes in fiscal 2017,2018, we believe that we are the second largest retail marketer of propane in the United States and a leading national provider of propane by portable tank exchange. We serve residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all 50 states, the District of Columbia and Puerto Rico. Our operations primarily include the distribution and sale of propane and related equipment and supplies with concentrations in the Midwest, Southeast, Southwest and Northwest regions of the United States.
We use information on temperatures to understand how our results of operations are affected by temperatures that are warmer or colder than normal. Normal temperatures computed by us are the average of the last 3010 years of information published by the National Oceanic and Atmospheric Administration. Based on this information we calculate a ratio of actual heating degree days to normal heating degree days. Heating degree days are a general indicator of weather impacting propane usage.
Weather conditions have a significant impact on demand for propane for heating purposes primarily during the months of November through March (the “winter heating season”). Accordingly, the volume of propane used by our customers for this purpose is directly affected by the severity of the winter weather in the regions we serve and can vary substantially from year to year. In any given region, sustained warmer-than-normal temperatures will tend to result in reduced propane usage, while sustained colder-than-normal temperatures will tend to result in greater usage. Although there is a strong correlation between weather and customer usage, general economic conditions in the United States and the wholesale price of propane can have a significant impact on this correlation. Additionally, there is a natural time lag between the onset of cold weather and increased sales to customers. If the United States were to experience a cooling trend we could expect nationwide demand for propane to increase which could lead to greater sales, income and liquidity availability. Conversely, if the United States were to experience a continued warming trend, we could expect nationwide demand for propane for heating purposes to decrease which could lead to a reduction in our sales, income and liquidity availability as well as impact our ability to maintain compliance with our debt covenants.
We employ risk management activities that attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts. We enter into propane sales commitments with a portion of our customers that provide for a contracted price agreement for a specified period of time. These commitments can expose us to product price risk if not immediately hedged with an offsetting propane purchase commitment.
Our open financial derivative propane purchase commitments are designated as hedges primarily for fiscal 20182019 and 20192020 sales commitments and, as of April 30, 2018,January 31, 2019, have experienced net mark-to-market gainslosses of approximately $17.5$9.3 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
67
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 April 30, 2018,January 31, 2019, we estimate 64%78% 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.
Summary Discussion of Results of Operations:
Items Impacting the Comparability of Our Financial Results
Our current and future results of operations will not be comparable to our historical results of operations for the periods presented due to the following transactions:
· | During the fourth quarter of fiscal 2018, we completed the sale of a subsidiary and a group of assets within the Midstream operations segment. The subsidiary sold was Bridger Environmental LLC, which encompassed all saltwater disposal activities previously operated by us. The group of assets sold included all assets, excluding working capital, associated with the crude oil trucking operations previously operated by us. Additionally, the sale included two crude oil injection terminals. |
· | During the third quarter of fiscal 2018, we sold all 1,292 rail tank cars utilized in our Midstream operations segment. |
· | During the second quarter of fiscal 2018, we completed the sale of Bridger Energy, LLC, included in our Midstream operations segment. |
· | During the fourth quarter of fiscal 2018, we completed the sale of a group of assets encompassing an immaterial reporting unit within our Propane operations segment that sold lower margin propane related equipment. |
· | Operating loss and adjusted EBITDA associated with these divestitures in the three months ended January 31, 2018 was $51.4 million and $3.9 million, respectively. Operating loss and adjusted EBITDA associated with these divestitures in the six months ended January 31, 2018 was $54.4 million and $11.1 million, respectively. |
For the three months ended April 30,January 31, 2019 and 2018 and 2017
During the three months ended April 30, 2018,January 31, 2019, we generated net earnings attributable to Ferrellgas Partners L.P. of $10.9$43.3 million, compared to net earningsloss attributable to Ferrellgas Partners L.P. of $6.5$1.8 million during the three months ended April 30, 2017.
Our propane operations and related equipment sales segment generated operating income of $74.5$108.1 million during the three months ended April 30, 2018,January 31, 2019, compared to operating income of $67.1$101.8 million earned during the three months ended January 31, 2018. The increase in operating income is primarily due to a $10.0 million impairment of goodwill related to an immaterial reporting unit that was not repeated in the current period and a $9.3 million increase in “Gross margin – Propane and other gas liquid sales”, partially offset by a $5.0 million decrease in “Gross margin – other”, a $3.9 million increase in "Operating, general and administrative expense", and a $1.7 million increase in "Equipment lease expense". The increase in "Operating, general and administrative expense" and "Gross margin - Propane and other gas liquid sales" primarily resulted from a 4% increase in retail customer count and related gallons sold. The impact of the sale of a group of assets that sold lower margin propane related equipment at the end of fiscal 2018 resulted in the decrease in "Gross margin - other". The increase in “Equipment lease expense” is due to both continued investment in new propane delivery trucks to serve our expanding customer base and to reduce the age of our fleet. In addition, we purchased new propane delivery trucks as discussed in “Distributable cash flow attributable to equity investors”.
Our corporate and other operations recognized an operating loss of $19.4 million during the three months ended April 30, 2017. The increase in operating income resulted from a $19.8 million increase in gross margin largely offset by an $11.3 million increase in operating, general and administrative expenses which is primarily the result of increased volumes sold. DueJanuary 31, 2019, compared to the seasonal nature of demand for propane, sales volumes of our propane operations and related equipment sales segment typically are higher during the second and third quarters of the fiscal year than during the first and fourth quarters of the fiscal year.
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decrease in operating loss iswas primarily due to a $3.0$42.3 million loss on the closure of a salt water disposal well during the three months ended April 30, 2018.
“Interest expense” for Ferrellgas increased $0.5$2.2 million primarily due to increased interest rates on theour secured credit facility and accounts receivable securitization facility.
Distributable cash flow attributable to equity investors increaseddecreased to $43.9$52.7 million in the current period from $36.3$79.2 million in the prior period primarily due to a $10.1an $21.5 million increase in our Adjusted EBITDA, partially offset by a $2.3 millionmaintenance capital expenditures. This increase in maintenance capital expenditures.
Distributable cash flow excess increaseddecreased to $33.3$51.7 million in the current period from $25.9$67.9 million in the prior period, primarily due to a $10.1an $21.5 million increase in our Adjusted EBITDA,maintenance capital expenditures, as discussed above, partially offset by a $2.3$9.7 million increasedecrease in maintenance capital expenditures.
For the ninesix months ended April 30,January 31, 2019 and 2018 and 2017
During the ninesix months ended April 30, 2018,January 31, 2019, we generated net loss attributable to Ferrellgas Partners L.P. of $38.9$13.7 million, compared to net earningsloss attributable to Ferrellgas Partners L.P. of $1.6$49.8 million during the ninesix months ended April 30, 2017.
Our propane operations and related equipment sales segment generated operating income of $187.5$115.0 million during the ninesix months ended April 30, 2018,January 31, 2019, compared to operating income of $179.0$113.0 million earned during the ninesix months ended April 30, 2017.January 31, 2018. The increase in operating income resulted from the $47.3is primarily due to a $16.8 million increase in gross“Gross margin partially offset by a $28.3 million increase in operating, general– Propane and administrative expenses both primarily the result of increased volumes soldother gas liquid sales” and a $10.0 million impairment of goodwill related to an immaterial reporting unit recordedthat was not repeated in the current period, partially offset by a $10.6 million increase in "Operating, general and administrative expense", a $8.2 million decrease in "Gross margin - other", and a $3.1 million increase in "Equipment lease expense". The increase in "Operating, general and administrative expense" and "Gross margin - Propane and other gas liquid sales" primarily resulted from a 4% increase in retail customer count. The impact of the sale of a group of assets that sold lower margin propane related equipment at the end of fiscal 2018 resulted in the decrease in "Gross margin - other". The increase in “Equipment lease expense” is due to both continued investment in new propane delivery trucks to serve our expanding customer base and to reduce the age of our fleet. In addition, we purchased new propane delivery trucks as discussed in “Distributable cash flow attributable to equity investors”.
Our corporate and other operations recognized an operating loss of $39.8 million during the threesix months ended January 31, 2018. Due to the seasonal nature of demand for propane, sales volumes of our propane operations and related equipment sales segment typically are higher during the second and third quarters of the fiscal year than during the first and fourth quarters of the fiscal year.
“Interest expense” for Ferrellgas increased $11.7$5.3 million primarily due to increased interest rates associated with the $175.0 million of debt issued by Ferrellgas Partners in January 2017, which replaced a portion of the borrowings under theon our secured credit facility, as well as increased interest rates on the secured credit facility and accounts receivable securitization facility.
Distributable cash flow attributable to equity investors of $103.8decreased to $25.3 million in the current period increased from $99.0$59.9 million in the prior period primarily due to a $22.9$18.2 million increase in our maintenance capital expenditures, a $9.2 million decrease in our Adjusted EBITDA partially offset byrelated to midstream operations in fiscal 2018 and a $10.2$4.8 million increase in net cash interest expense and a $8.6 million increase in maintenance capital expenditures. Theexpense. This increase in maintenance capital expenditures was primarily forrelates to the purchase of new propane delivery trucks.
Distributable cash flow excess increaseddecreased to $72.6$15.1 million in the current period from $27.8$39.3 million in the prior period, primarily due to a $40.1$18.2 million increase in our maintenance capital expenditures, a $9.2 million decrease in our Adjusted EBITDA related to midstream operations in fiscal 2018 and a $4.8 million increase in cash interest expense, partially offset by a $9.7 million decrease in distributions paid to common unitholders and a $22.9 million increase in our Adjusted EBITDA, partially offset by a $10.2 million increase in net cash interest expense and a $8.6 million increase in maintenance capital expenditures.unitholders.
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Consolidated Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, |
| Six months ended January 31, |
| ||||||||
(amounts in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Total revenues |
| $ | 573,377 |
| $ | 755,156 |
| $ | 925,686 |
| $ | 1,209,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
|
| 314,953 |
|
| 490,772 |
|
| 522,136 |
|
| 792,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense |
|
| 121,219 |
|
| 123,716 |
|
| 231,550 |
|
| 234,178 |
|
Depreciation and amortization expense |
|
| 19,605 |
|
| 25,485 |
|
| 38,597 |
|
| 51,217 |
|
General and administrative expense |
|
| 16,342 |
|
| 14,891 |
|
| 30,521 |
|
| 28,055 |
|
Equipment lease expense |
|
| 8,415 |
|
| 6,954 |
|
| 16,278 |
|
| 13,695 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| 4,692 |
|
| 7,993 |
|
Asset impairments |
|
| — |
|
| 10,005 |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 2,216 |
|
| 39,249 |
|
| 6,720 |
|
| 40,144 |
|
Operating income |
|
| 88,683 |
|
| 40,053 |
|
| 75,192 |
|
| 32,410 |
|
Interest expense |
|
| (44,891) |
|
| (42,673) |
|
| (88,769) |
|
| (83,480) |
|
Other income, net |
|
| 86 |
|
| 684 |
|
| 105 |
|
| 1,195 |
|
Earnings (loss) before income taxes |
|
| 43,878 |
|
| (1,936) |
|
| (13,472) |
|
| (49,875) |
|
Income tax expense (benefit) |
|
| 3 |
|
| (162) |
|
| 161 |
|
| 215 |
|
Net earnings (loss) |
|
| 43,875 |
|
| (1,774) |
|
| (13,633) |
|
| (50,090) |
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 531 |
|
| 69 |
|
| 38 |
|
| (332) |
|
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
|
| 43,344 |
|
| (1,843) |
|
| (13,671) |
|
| (49,758) |
|
Less: General partner's interest in net earnings (loss) |
|
| 433 |
|
| (19) |
|
| (137) |
|
| (498) |
|
Common unitholders' interest in net earnings (loss) |
| $ | 42,911 |
| $ | (1,824) |
| $ | (13,534) |
| $ | (49,260) |
|
Three months ended April 30, | Nine months ended April 30, | |||||||||||||||
(amounts in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Total revenues | $ | 515,810 | $ | 538,109 | $ | 1,725,621 | $ | 1,496,901 | ||||||||
Total cost of sales | 294,787 | 337,064 | 1,086,901 | 905,374 | ||||||||||||
Operating expense | 116,579 | 104,773 | 350,757 | 322,935 | ||||||||||||
Depreciation and amortization expense | 25,348 | 25,737 | 76,565 | 77,546 | ||||||||||||
General and administrative expense | 11,678 | 9,978 | 39,733 | 36,526 | ||||||||||||
Equipment lease expense | 7,133 | 7,270 | 20,828 | 22,035 | ||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | 10,731 | 11,396 | ||||||||||||
Asset impairments | — | — | 10,005 | — | ||||||||||||
Loss on asset sales and disposals | 6,270 | 2,393 | 46,414 | 8,861 | ||||||||||||
Operating income | 51,277 | 46,197 | 83,687 | 112,228 | ||||||||||||
Interest expense | (40,375 | ) | (39,860 | ) | (123,855 | ) | (112,107 | ) | ||||||||
Other income, net | 227 | 162 | 1,422 | 1,433 | ||||||||||||
Earnings (loss) before income taxes | 11,129 | 6,499 | (38,746 | ) | 1,554 | |||||||||||
Income tax expense (benefit) | 67 | (192 | ) | 282 | (194 | ) | ||||||||||
Net earnings (loss) | 11,062 | 6,691 | (39,028 | ) | 1,748 | |||||||||||
Net earnings (loss) attributable to noncontrolling interest | 201 | 155 | (131 | ) | 187 | |||||||||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. | 10,861 | 6,536 | (38,897 | ) | 1,561 | |||||||||||
Less: General partner's interest in net earnings (loss) | 109 | 66 | (389 | ) | 16 | |||||||||||
Common unitholders' interest in net earnings (loss) | $ | 10,752 | $ | 6,470 | $ | (38,508 | ) | $ | 1,545 |
Non-GAAP Financial Measures
In this Quarterly Report we present three primary 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., less the sum of the following: income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, asset impairments, loss on asset sales and disposals, other income, net, severance costs, professionallegal fees and settlements, multi-employer pension withdrawal settlement, unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments, and net earnings (loss)loss attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership'spartnership’s performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
Distributable Cash Flow Attributable to Equity Investors. Distributable cash flow attributable to equity investors is calculated as Adjusted EBITDA minus net cash interest expense, maintenance capital expenditures and cash paid for taxes, plus proceeds from asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to equity investors. Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to distributable cash flow attributable to equity investors or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to equity investors may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
70
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 distributable 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.
The following table summarizes EBITDA, Adjusted EBITDA, Distributable cash flow attributable to equity investors and Distributable cash flow attributable to common unitholders for the three and ninesix months ended April 30,January 31, 2019 and 2018, and 2017, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended January 31, |
| Six months ended January 31, |
| ||||||||
(amounts in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. |
| $ | 43,344 |
| $ | (1,843) |
| $ | (13,671) |
| $ | (49,758) |
|
Income tax expense (benefit) |
|
| 3 |
|
| (162) |
|
| 161 |
|
| 215 |
|
Interest expense |
|
| 44,891 |
|
| 42,673 |
|
| 88,769 |
|
| 83,480 |
|
Depreciation and amortization expense |
|
| 19,605 |
|
| 25,485 |
|
| 38,597 |
|
| 51,217 |
|
EBITDA |
|
| 107,843 |
|
| 66,153 |
|
| 113,856 |
|
| 85,154 |
|
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| 4,692 |
|
| 7,993 |
|
Assets impairments |
|
| — |
|
| 10,005 |
|
| — |
|
| 10,005 |
|
Loss on asset sales and disposals |
|
| 2,216 |
|
| 39,249 |
|
| 6,720 |
|
| 40,144 |
|
Other income, net |
|
| (86) |
|
| (684) |
|
| (105) |
|
| (1,195) |
|
Severance costs |
|
| 1,600 |
|
| — |
|
| 1,600 |
|
| 1,663 |
|
Legal fees and settlements |
|
| 5,608 |
|
| 2,118 |
|
| 9,172 |
|
| 2,118 |
|
Multi-employer pension plan withdrawal settlement |
|
| — |
|
| — |
|
| 1,524 |
|
| — |
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| (314) |
|
| — |
|
| 1,293 |
|
Net earnings (loss) attributable to noncontrolling interest |
|
| 531 |
|
| 69 |
|
| 38 |
|
| (332) |
|
Adjusted EBITDA |
|
| 119,656 |
|
| 120,627 |
|
| 137,497 |
|
| 146,843 |
|
Net cash interest expense (a) |
|
| (41,679) |
|
| (39,734) |
|
| (82,578) |
|
| (77,791) |
|
Maintenance capital expenditures (b) |
|
| (26,147) |
|
| (4,640) |
|
| (31,532) |
|
| (13,344) |
|
Cash refund from (paid for) taxes |
|
| 4 |
|
| (6) |
|
| 2 |
|
| (12) |
|
Proceeds from certain asset sales |
|
| 899 |
|
| 2,999 |
|
| 1,960 |
|
| 4,207 |
|
Distributable cash flow attributable to equity investors |
|
| 52,733 |
|
| 79,246 |
|
| 25,349 |
|
| 59,903 |
|
Distributable cash flow attributable to general partner and non-controlling interest |
|
| (1,055) |
|
| (1,585) |
|
| (507) |
|
| (1,198) |
|
Distributable cash flow attributable to common unitholders |
|
| 51,678 |
|
| 77,661 |
|
| 24,842 |
|
| 58,705 |
|
Less: Distributions paid to common unitholders |
|
| — |
|
| (9,716) |
|
| (9,715) |
|
| (19,431) |
|
Distributable cash flow excess ( c) |
| $ | 51,678 |
| $ | 67,945 |
| $ | 15,127 |
| $ | 39,274 |
|
Three months ended April 30, | Nine months ended April 30, | |||||||||||||||
(amounts in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net earnings (loss) attributable to Ferrellgas Partners, L.P. | $ | 10,861 | $ | 6,536 | $ | (38,897 | ) | $ | 1,561 | |||||||
Income tax expense (benefit) | 67 | (192 | ) | 282 | (194 | ) | ||||||||||
Interest expense | 40,375 | 39,860 | 123,855 | 112,107 | ||||||||||||
Depreciation and amortization expense | 25,348 | 25,737 | 76,565 | 77,546 | ||||||||||||
EBITDA | 76,651 | 71,941 | 161,805 | 191,020 | ||||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | 10,731 | 11,396 | ||||||||||||
Non-cash stock-based compensation charge | — | — | — | 3,298 | ||||||||||||
Asset impairments | — | — | 10,005 | — | ||||||||||||
Loss on asset sales and disposals | 6,270 | 2,393 | 46,414 | 8,861 | ||||||||||||
Other income, net | (227 | ) | (162 | ) | (1,422 | ) | (1,433 | ) | ||||||||
Severance costs | — | — | 1,663 | 1,959 | ||||||||||||
Professional fees (d) | 1,289 | — | 3,407 | — | ||||||||||||
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments | — | (2,234 | ) | 1,293 | (4,449 | ) | ||||||||||
Net earnings (loss) attributable to noncontrolling interest | 201 | 155 | (131 | ) | 187 | |||||||||||
Adjusted EBITDA | 86,922 | 76,790 | 233,765 | 210,839 | ||||||||||||
Net cash interest expense (a) | (37,873 | ) | (37,140 | ) | (115,664 | ) | (105,470 | ) | ||||||||
Maintenance capital expenditures (b) | (5,741 | ) | (3,442 | ) | (19,085 | ) | (10,518 | ) | ||||||||
Cash paid (refund) for taxes | 470 | (2 | ) | 458 | (28 | ) | ||||||||||
Proceeds from asset sales | 148 | 130 | 4,355 | 4,163 | ||||||||||||
Distributable cash flow attributable to equity investors | 43,926 | 36,336 | 103,829 | 98,986 | ||||||||||||
Distributable cash flow attributable to general partner and non-controlling interest | 879 | 727 | 2,077 | 1,980 | ||||||||||||
Distributable cash flow attributable to common unitholders | 43,047 | 35,609 | 101,752 | 97,006 | ||||||||||||
Less: Distributions paid to common unitholders | 9,715 | 9,715 | 29,146 | 69,221 | ||||||||||||
Distributable cash flow excess (c) | $ | 33,332 | $ | 25,894 | $ | 72,606 | $ | 27,785 |
(a) | Net cash interest expense is the sum of interest expense less non-cash interest expense and other income (expense), net. This amount includes interest expense related to the accounts receivable securitization facility. |
(b) | Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment. |
(c) | Distributable cash flow excess, if any, is retained to establish reserves |
71
Segment Operating Results for the three months ended April 30,January 31, 2019 and 2018 and 2017
Propane operations and related equipment sales
The following table summarizes propane sales volumes and the Adjusted EBITDA results of our propane operations and related equipment sales segment for the periods indicated:
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|
|
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|
|
|
|
|
|
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
As of January 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Retail customers |
|
| 706,741 |
|
| 681,671 |
|
| 25,070 |
| 4 | % |
Tank exchange selling locations |
|
| 53,740 |
|
| 48,791 |
|
| 4,949 |
| 10 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended January 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Propane sales volumes (gallons): |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
|
| 239,044 |
|
| 235,071 |
|
| 3,973 |
| 2 | % |
Wholesale - Sales to Resellers |
|
| 70,655 |
|
| 74,942 |
|
| (4,287) |
| (6) | % |
|
|
| 309,699 |
|
| 310,013 |
|
| (314) |
| (0) | % |
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
| $ | 415,827 |
|
| 417,472 |
| $ | (1,645) |
| (0) | % |
Wholesale - Sales to Resellers |
|
| 115,392 |
|
| 128,654 |
|
| (13,262) |
| (10) | % |
Other Gas Sales (a) |
|
| 18,893 |
|
| 46,113 |
|
| (27,220) |
| (59) | % |
Other (b) |
|
| 23,265 |
|
| 45,641 |
|
| (22,376) |
| (49) | % |
Propane and related equipment revenues |
| $ | 573,377 |
| $ | 637,880 |
| $ | (64,503) |
| (10) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: (c) |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users (a) |
| $ | 192,747 |
| $ | 182,129 |
| $ | 10,618 |
| 6 | % |
Wholesale - Sales to Resellers (a) |
|
| 45,834 |
|
| 47,192 |
|
| (1,358) |
| (3) | % |
Other (b) |
|
| 19,843 |
|
| 24,854 |
|
| (5,011) |
| (20) | % |
Propane and related equipment gross margin |
|
| 258,424 |
|
| 254,175 |
|
| 4,249 |
| 2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense (d) |
|
| 121,217 |
|
| 117,306 |
|
| 3,911 |
| 3 | % |
Equipment lease expense |
|
| 8,053 |
|
| 6,375 |
|
| 1,678 |
| 26 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 108,101 |
|
| 101,767 |
|
| 6,334 |
| 6 | % |
Depreciation and amortization expense |
|
| 18,995 |
|
| 18,167 |
|
| 828 |
| 5 | % |
Loss on asset sales and disposals |
|
| 2,058 |
|
| 555 |
|
| 1,503 |
| NM |
|
Asset impairments |
|
| — |
|
| 10,005 |
|
| (10,005) |
| NM |
|
Severance costs |
|
| 690 |
|
| — |
|
| 690 |
| NM |
|
Adjusted EBITDA |
| $ | 129,844 |
| $ | 130,494 |
| $ | (650) |
| (0) | % |
(a) | Gross margin for Other Gas Sales is allocated to Gross margin "Retail - Sales to End Users" and "Wholesale - Sales to Resellers" based on the volumes in each respective category. |
(b) | Other primarily includes appliance and material sales, and to a lesser extent various customer fee income. |
(c) | Gross margin from "Propane and other gas liquids sales" represents "Revenues - Propane and other gas liquids sales" less "Cost of sales - Propane and other gas liquids sales" and does not include depreciation and amortization. |
(d) | Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment. |
72
(amounts in thousands) | |||||||||||||||
Three months ended April 30, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
Propane sales volumes (gallons): | |||||||||||||||
Retail - Sales to End Users | 189,183 | 160,326 | 28,857 | 18 | % | ||||||||||
Wholesale - Sales to Resellers | 57,121 | 51,891 | 5,230 | 10 | % | ||||||||||
246,304 | 212,217 | 34,087 | 16 | % | |||||||||||
Revenues - | |||||||||||||||
Propane and other gas liquids sales: | |||||||||||||||
Retail - Sales to End Users | $ | 330,320 | $ | 258,292 | $ | 72,028 | 28 | % | |||||||
Wholesale - Sales to Resellers | 97,689 | 90,313 | 7,376 | 8 | % | ||||||||||
Other Gas Sales (a) | 23,293 | 20,832 | 2,461 | 12 | % | ||||||||||
Other (b) | 41,913 | 41,996 | (83 | ) | — | % | |||||||||
Propane and related equipment revenues | $ | 493,215 | $ | 411,433 | $ | 81,782 | 20 | % | |||||||
Gross Margin - | |||||||||||||||
Propane and other gas liquids sales: (c) | |||||||||||||||
Retail - Sales to End Users (a) | $ | 151,084 | $ | 130,057 | $ | 21,027 | 16 | % | |||||||
Wholesale - Sales to Resellers (a) | 39,799 | 41,893 | (2,094 | ) | (5 | )% | |||||||||
Other (b) | 22,063 | 21,186 | 877 | 4 | % | ||||||||||
Propane and related equipment gross margin | $ | 212,946 | $ | 193,136 | $ | 19,810 | 10 | % | |||||||
Operating, general and administrative expense (d) | $ | 110,673 | $ | 99,416 | $ | 11,257 | 11 | % | |||||||
Equipment lease expense | 6,626 | 6,503 | 123 | 2 | % | ||||||||||
Operating income | $ | 74,479 | $ | 67,119 | $ | 7,360 | 11 | % | |||||||
Depreciation and amortization expense | 18,880 | 17,953 | 927 | 5 | % | ||||||||||
Loss on asset sales and disposals | 2,288 | 2,146 | 142 | 7 | % | ||||||||||
Unrealized (non-cash) gains on changes in fair value of derivatives not designated as hedging instruments | — | (227 | ) | 227 | 100 | % | |||||||||
Adjusted EBITDA | $ | 95,647 | $ | 86,991 | $ | 8,656 | 10 | % |
Propane sales volumes during the three months ended April 30, 2018 increased 16% or 34.1 million gallons, fromJanuary 31, 2019 essentially remained even with the prior year period due to increased gallon sales of 28.9 million and 5.2 million to retail andcustomers of 4.0 million gallons, offset by a decrease of 4.3 million gallons to wholesale customers. The increase in propane sales volumes to retail customers respectively.
Weather in the more highly concentrated geographic areas we serve for the three months ended April 30,January 31, 2018 was approximately 1%2% colder than normal, and 24%1% colder than the prior year period; however, not allperiod. Retail gallons increased due to efforts to increase market share and to a lesser extent colder weather.
Our wholesale sales price per gallon largely correlates to the change in the wholesale market price of propane. The Mt. Belvieu, Texas major supply point during the three months ended January 31, 2019 averaged 26% less than the prior year period, while at the Conway, Kansas major supply point prices averaged 32% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.70 and $0.95 per gallon during the three months ended January 31, 2019 and 2018, respectively, while the wholesale market price at Conway, Kansas averaged $0.61 and $0.90 per gallon during the three months ended January 31, 2019 and 2018, respectively. We believe this decrease in the wholesale cost of propane contributed to our gallons are weather sensitive, anddecrease in revenues, but an increase in gross margin.
Revenues
Retail sales decreased $1.6 million compared to the prior period. This decrease resulted from an $8.7 million decrease in sales price per gallon, partially offset by $7.1 million in increased sales volumes, as discussed above.
Wholesale sales decreased $13.3 million compared to the prior period. This decrease primarily resulted from a $12.1 million decrease in sales price per gallon, as discussed above. Additionally, price per gallon decreased due to the impact of increased competitive pressures.
Other gas sales decreased $27.2 million compared to the prior year period primarily due to a decrease in sales volume.
Other revenues decreased $22.4 million compared to the coldest weather occurredprior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.
Gross margin - Propane and other gas liquids sales
Gross margin increased $9.3 million due to both the increase in gross margin per gallon and gallon sales, both as discussed above. The increase in retail gross margin of $10.6 million resulted from an increase in gross margin per gallon and to a lesser extent increases in retail customer counts, both as discussed above. The $1.3 million decrease in wholesale gross margin primarily relates to decreased gross margin per gallon due to the impact of increased competitive pressures on the sales price per gallon, as discussed above.
Gross margin - other
Gross margin decreased $5.0 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.
Operating income
Operating income increased $6.3 million primarily due to a $10.0 million impairment of goodwill related to an immaterial reporting unit that was not repeated in the monthcurrent period and a $9.3 million increase in “Gross margin – Propane and other gas liquid sales”, as discussed above, partially offset by a $5.0 million decrease in “Gross margin – other” and a $3.9 million increase in "Operating, general and administrative expense", as discussed above, and a $1.7 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $5.9 million increase in field personnel costs and a $1.7 million increase in general liability and workers compensation costs, partially offset by $3.4 million of April when there are fewer heating degree days.costs incurred in the prior year period related to a business sold in
73
fiscal 2018. Equipment lease expense increased due to both continued investment in new propane delivery trucks to serve our expanding customer base and to reduce the age of our fleet.
Adjusted EBITDA
Adjusted EBITDA decreased $0.7 million primarily due to a $5.0 million decrease in “Gross margin – other”, a $3.5 million increase in "Operating, general and administrative expense", and a $1.7 million increase in "Equipment lease expense", partially offset by a $9.3 million increase in "Gross margin - Propane and other gas liquid sales", all as discussed above. "Operating, general and administrative expense" increased primarily due to a $5.2 million increase in field personnel costs, and a $1.7 million increase in general liability and worker compensation costs, partially offset by $3.4 million of costs incurred in the prior year period related to a business sold in fiscal 2018.
Corporate and other operations
The following table summarizes the financial results of our corporate operations for the periods indicated. Prior period amounts also include results of our midstream operations.
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|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended January 31, |
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
Volumes (barrels): |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil hauled |
|
| — |
|
| 11,065 |
|
| (11,065) |
| NM |
|
Crude oil sold |
|
| — |
|
| 1,556 |
|
| (1,556) |
| NM |
|
Salt water volume processed |
|
| — |
|
| 4,851 |
|
| (4,851) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 15,886 |
| $ | (15,886) |
| NM |
|
Crude oil sales |
|
| — |
|
| 97,646 |
|
| (97,646) |
| NM |
|
Other |
|
| — |
|
| 3,744 |
|
| (3,744) |
| NM |
|
|
| $ | — |
| $ | 117,276 |
| $ | (117,276) |
| NM |
|
Gross margin (a) - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 6,550 |
| $ | (6,550) |
| NM |
|
Crude oil sales |
|
| — |
|
| 2,365 |
|
| (2,365) |
| NM |
|
Other |
|
| — |
|
| 1,294 |
|
| (1,294) |
| NM |
|
|
|
| — |
|
| 10,209 |
|
| (10,209) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense |
|
| 16,344 |
|
| 21,301 |
|
| (4,957) |
| (23) | % |
Equipment lease expense |
|
| 362 |
|
| 579 |
|
| (217) |
| (37) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (19,418) |
|
| (61,714) |
|
| 42,296 |
| (69) | % |
Depreciation and amortization expense |
|
| 610 |
|
| 7,318 |
|
| (6,708) |
| (92) | % |
Non-cash employee stock ownership plan compensation charge |
|
| 1,944 |
|
| 4,031 |
|
| (2,087) |
| (52) | % |
Loss on asset sales and disposals |
|
| 158 |
|
| 38,694 |
|
| (38,536) |
| NM |
|
Severance costs |
|
| 910 |
|
| — |
|
| 910 |
| NM |
|
Unrealized (non-cash) losses on changes in fair value of derivatives |
|
| — |
|
| (314) |
|
| 314 |
| NM |
|
Legal fees and settlements |
|
| 5,608 |
|
| 2,118 |
|
| 3,490 |
| 165 | % |
Adjusted EBITDA |
| $ | (10,188) |
| $ | (9,867) |
| $ | (321) |
| 3 | % |
NM - Not meaningful
(a) | Gross margin represents "Revenues - Midstream operations" less "Cost of sales - Midstream operations" and does not include depreciation and amortization. |
In various dispositions that occurred during fiscal 2018, we sold our midstream businesses, thus much of the significant variances reported above result from the cessation of the midstream business by the end of fiscal 2018.
74
Operating loss
Operating loss decreased by $42.3 million during the three months ended January 31, 2019 as compared to the three months ended January 31, 2018. This decrease in operating loss was primarily due to the $42.1 million operating loss related to our midstream operations in fiscal 2018 and decreased corporate costs of $0.2 million. Corporate costs decreased primarily due to a $2.1 million decrease in non-cash employee stock ownership plan compensation costs, $0.4 million decrease in depreciation and amortization, and $0.1 million decrease in equipment lease expense, partially offset by a $2.4 million increase in legal costs.
Adjusted EBITDA
Adjusted EBITDA decreased $0.3 million primarily due to the $2.3 million decrease in Adjusted EBITDA related to our midstream operations in fiscal 2018, offset by a $2.0 million increase in Adjusted EBITDA related to corporate costs. Corporate costs decreased primarily due to $1.1 million decrease in legal costs and $0.1 million decrease in equipment lease expense.
75
Segment Operating Results for the six months ended January 31, 2019 and 2018
Propane operations and related equipment sales
The following table summarizes propane sales volumes and the Adjusted EBITDA results of our propane operations and related equipment sales segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
As of January 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Retail customers |
|
| 706,741 |
|
| 681,671 |
|
| 25,070 |
| 4 | % |
Tank exchange selling locations |
|
| 53,740 |
|
| 48,791 |
|
| 4,949 |
| 10 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended January 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Propane sales volumes (gallons): |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
|
| 368,711 |
|
| 354,365 |
|
| 14,346 |
| 4 | % |
Wholesale - Sales to Resellers |
|
| 119,615 |
|
| 128,371 |
|
| (8,756) |
| (7) | % |
|
|
| 488,326 |
|
| 482,736 |
|
| 5,590 |
| 1 | % |
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users |
| $ | 633,591 |
| $ | 601,266 |
| $ | 32,325 |
| 5 | % |
Wholesale - Sales to Resellers |
|
| 209,336 |
|
| 227,083 |
|
| (17,747) |
| (8) | % |
Other Gas Sales (a) |
|
| 42,151 |
|
| 66,648 |
|
| (24,497) |
| (37) | % |
Other (b) |
|
| 40,608 |
|
| 76,778 |
|
| (36,170) |
| (47) | % |
Propane and related equipment revenues |
| $ | 925,686 |
| $ | 971,775 |
| $ | (46,089) |
| (5) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin - |
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales: (c) |
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Sales to End Users (a) |
| $ | 283,222 |
| $ | 260,560 |
| $ | 22,662 |
| 9 | % |
Wholesale - Sales to Resellers (a) |
|
| 86,189 |
|
| 92,004 |
|
| (5,815) |
| (6) | % |
Other (b) |
|
| 34,139 |
|
| 42,289 |
|
| (8,150) |
| (19) | % |
Propane and related equipment gross margin |
| $ | 403,550 |
| $ | 394,853 |
| $ | 8,697 |
| 2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general and administrative expense (d) |
| $ | 231,548 |
| $ | 221,571 |
| $ | 9,977 |
| 5 | % |
Equipment lease expense |
|
| 15,657 |
|
| 12,580 |
|
| 3,077 |
| 24 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
| $ | 114,968 |
| $ | 112,979 |
| $ | 1,989 |
| 2 | % |
Depreciation and amortization expense |
|
| 37,336 |
|
| 36,255 |
|
| 1,081 |
| 3 | % |
Loss on asset sales and disposals |
|
| 4,041 |
|
| 1,463 |
|
| 2,578 |
| 176 | % |
Asset impairments |
|
| — |
|
| 10,005 |
|
| (10,005) |
| NM |
|
Severance costs |
|
| 690 |
|
| 358 |
|
| 332 |
| 93 | % |
Multi-employer pension plan withdrawal settlement |
|
| 1,524 |
|
| — |
|
| 1,524 |
| NM |
|
Adjusted EBITDA |
| $ | 158,559 |
| $ | 161,060 |
| $ | (2,501) |
| (2) | % |
(a) | Gross margin for Other Gas Sales is allocated to Gross margin "Retail - Sales to End Users" and "Wholesale - Sales to Resellers" based on the volumes in each respective category. |
(b) | Other primarily includes appliance and material sales, and to a lesser extent various customer fee income. |
(c) | Gross margin from "Propane and other gas liquids sales" represents "Revenues - Propane and other gas liquids sales" less "Cost of sales - Propane and other gas liquids sales" and does not include depreciation and amortization. |
(d) | Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment. |
76
Propane sales volumes during the six months ended January 31, 2019 increased 1% or 5.6 million gallons, from the prior year period due to increased sales to retail customers of 14.3 million gallons, partially offset by a decrease of 8.7 million gallons to wholesale customers. The increase in propane sales volumes to retail customers was primarily due to the 4% increase in retail customer count. The decrease in propane sales to wholesale customers relates to the impact of increased competitive pressures.
Weather in the more highly concentrated geographic areas we serve for the six months ended January 31, 2018 was approximately 3% colder than normal and 3% colder than the prior year period. Retail and wholesale gallons increased due due to a combination of colder weather and efforts to increase market share.
Our wholesale sales price per gallon largely correlates to the change in the wholesale market price of propane. The wholesale market price at major supply points in Mt. Belvieu, Texas and Conway, Kansas during the threesix months ended April 30, 2018January 31, 2019 averaged 21% and 11% greater6% less than the prior year period, respectively.while at the Conway, Kansas major supply point prices averaged 19% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.82$0.85 and $0.68$0.90 per gallon during the threesix months ended April 30,January 31, 2019 and 2018, and 2017, respectively, while the wholesale market price at Conway, Kansas averaged $0.68$0.70 and $0.61$0.86 per gallon during the threesix months ended April 30,January 31, 2019 and 2018, and 2017, respectively.
Revenues
Retail sales increased $72.0$32.3 million compared to the prior period. This increase resulted from $45.9$24.3 million in increased sales volumes and a $26.1an $8.0 million increase in sales price per gallon, both as discussed above.
Wholesale sales increased $7.4decreased $17.7 million compared to the prior period. This increasedecrease primarily resulted from a $4.3$13.9 million increase in sales volumes and a $3.1 million increasedecrease in sales price per gallon and $3.8 million due to decrease sales volumes, both as discussed above.
Other gas sales increased $2.5decreased $24.5 million compared to the prior year period primarily due to an increase indecreased sales price per gallon, as discussed above, partially offset by a decrease in sales volumes.
Other revenues decreased $36.2 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.
Gross margin - Propane and other gas liquids sales
Gross margin increased $18.9$16.8 million primarily due to the 34.1 million increase in gallon sales, as discussed above, partially offset byand to a decrease inlesser extent increased gross margin per gallon. The increase in retail gross margin of $21.0$22.7 million resulted from an increase in gross margin per gallon and to a combination of colder weather and efforts to increase market share.lesser extent increases in retail customer counts, both as discussed above. The $5.9 million decrease in wholesale gross margin primarily relates to decreased gross margin per gallon partially offset bydue to the impact of increased volumescompetitive pressures on the sales price per gallon, as discussed above.
Gross margin - other
Gross margin decreased $8.2 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.
Operating income
Operating income increased $7.4$2.0 million primarily due to a $18.9$16.8 million increase in Gross"Gross margin - Propane and other gas liquid sales,sales", as discussed above, partially offset by a $11.3$10.6 million increase in "Operating, general and administrative expense", a $10.0 million impairment of goodwill related to an immaterial reporting unit that was not repeated in the current period, an $8.2 million decrease in "Gross margin - other", as discussed above, and a $3.1 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $4.9$10.3 million increase in field personnel costs, and a $1.8$1.9 million increase in vehicle fuel costs, both related toa $1.5 million pension
77
settlement charge associated with the increase in gallons sold as discussed above,withdrawal from a multi-employer pension plan and a $1.4$2.6 million increase in plantgeneral liability and office expenses.
Adjusted EBITDA
Adjusted EBITDA increased $8.7decreased $2.5 million primarily due to a $18.9an $8.1 million increase in Gross"Operating, general and administrative expense", an $8.2 million decrease in "Gross margin - other" and a $3.1 million increase in "Equipment lease expense", partially offset by a $16.8 million increase in "Gross margin - Propane and other gas liquid sales, partially offset by a $11.0 million increase in "Operating, general and administrative expense".sales", all as discussed above. "Operating, general and administrative expense" increased primarily due to a $4.9$10.0 million increase in field personnel costs, and a $1.6$1.9 million increase in vehicle fuel costs both related to the increase in gallons sold as discussed above and a $1.4$2.6 million increase in plantgeneral liability and office expenses.
(amounts in thousands) | |||||||||||||||
Three months ended April 30, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
Volumes (barrels): | |||||||||||||||
Crude oil hauled | 11,640 | 12,280 | (640 | ) | (5 | )% | |||||||||
Crude oil sold | 27 | 2,110 | (2,083 | ) | (99 | )% | |||||||||
Salt water volume processed | 4,761 | 4,635 | 126 | 3 | % | ||||||||||
Revenues - | |||||||||||||||
Crude oil and other logistics | $ | 17,500 | $ | 22,135 | $ | (4,635 | ) | (21 | )% | ||||||
Crude oil sales | 1,619 | 100,957 | (99,338 | ) | (98 | )% | |||||||||
Other | 3,476 | 3,584 | (108 | ) | (3 | )% | |||||||||
$ | 22,595 | $ | 126,676 | $ | (104,081 | ) | (82 | )% | |||||||
Gross margin - (a) | |||||||||||||||
Crude oil and other logistics | $ | 5,540 | $ | 1,676 | $ | 3,864 | 231 | % | |||||||
Crude oil sales | 1,400 | 4,163 | (2,763 | ) | (66 | )% | |||||||||
Other | 1,137 | 2,070 | (933 | ) | (45 | )% | |||||||||
$ | 8,077 | $ | 7,909 | $ | 168 | 2 | % | ||||||||
Operating, general, and administrative expenses (b) | $ | 6,692 | $ | 6,296 | $ | 396 | 6 | % | |||||||
Equipment lease expense | 83 | 153 | (70 | ) | (46 | )% | |||||||||
Operating loss | $ | (8,540 | ) | $ | (5,704 | ) | $ | (2,836 | ) | (50 | )% | ||||
Depreciation and amortization expense | 5,560 | 6,917 | (1,357 | ) | (20 | )% | |||||||||
Loss on asset sales and disposals | 3,982 | 247 | 3,735 | NM | |||||||||||
Unrealized (non-cash) gain on changes in fair value of derivatives not designated as hedging instruments | — | (2,007 | ) | 2,007 | NM | ||||||||||
Adjusted EBITDA | $ | 1,002 | $ | (547 | ) | $ | 1,549 | NM |
Corporate and other logistics hauling, as discussed above, partially offset by a $0.9 million decrease in other gross margin and a $0.8 million decrease in gross margin related to crude oil sales.
The following table summarizes the financial results of our corporate operations for the periods indicated:indicated. Prior period amounts also include results of our midstream operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended January 31, |
| 2019 |
| 2018 |
| Increase (Decrease) |
| |||||
Volumes (barrels): |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil hauled |
|
| — |
|
| 23,215 |
|
| (23,215) |
| NM |
|
Crude oil sold |
|
| — |
|
| 3,385 |
|
| (3,385) |
| NM |
|
Salt water volume processed |
|
| — |
|
| 9,791 |
|
| (9,791) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 33,227 |
| $ | (33,227) |
| NM |
|
Crude oil sales |
|
| — |
|
| 196,665 |
|
| (196,665) |
| NM |
|
Other |
|
| — |
|
| 8,144 |
|
| (8,144) |
| NM |
|
|
| $ | — |
| $ | 238,036 |
| $ | (238,036) |
| NM |
|
Gross margin (a) - |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil logistics |
| $ | — |
| $ | 17,506 |
| $ | (17,506) |
| NM |
|
Crude oil sales |
|
| — |
|
| 3,014 |
|
| (3,014) |
| NM |
|
Other |
|
| — |
|
| 2,324 |
|
| (2,324) |
| NM |
|
|
| $ | — |
| $ | 22,844 |
| $ | (22,844) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, general, and administrative expenses |
| $ | 30,521 |
| $ | 40,662 |
| $ | (10,141) |
| (25) | % |
Equipment lease expense |
|
| 621 |
|
| 1,115 |
|
| (494) |
| (44) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
| $ | (39,776) |
| $ | (80,569) |
| $ | 40,793 |
| (51) | % |
Depreciation and amortization expense |
|
| 1,261 |
|
| 14,962 |
|
| (13,701) |
| (92) | % |
Non-cash employee stock ownership plan compensation charge |
|
| 4,692 |
|
| 7,993 |
|
| (3,301) |
| (41) | % |
Loss on asset sales and disposals |
|
| 2,679 |
|
| 38,681 |
|
| (36,002) |
| (93) | % |
Legal fees and settlements |
|
| 9,172 |
|
| 2,118 |
|
| 7,054 |
| 333 | % |
Severance costs |
|
| 910 |
|
| 1,305 |
|
| (395) |
| (30) | % |
Unrealized (non-cash) gain on changes in fair value of derivatives not designated as hedging instruments |
|
| — |
|
| 1,293 |
|
| (1,293) |
| NM |
|
Adjusted EBITDA |
| $ | (21,062) |
| $ | (14,217) |
| $ | (6,845) |
| 48 | % |
NM - Not meaningful
(a) | Gross margin represents "Revenues - Midstream operations" less "Cost of sales - Midstream operations" and does not include depreciation and amortization. |
78
(amounts in thousands) | |||||||||||||||
Three months ended April 30, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
Operating, general and administrative expense (a) | $ | 10,592 | $ | 9,039 | $ | 1,553 | 17 | % | |||||||
Equipment lease expense | 424 | 614 | (190 | ) | (31 | )% | |||||||||
Operating loss | $ | (14,662 | ) | $ | (15,218 | ) | $ | 556 | 4 | % | |||||
Depreciation and amortization expense | 908 | 867 | 41 | 5 | % | ||||||||||
Non-cash employee stock ownership plan compensation charge | 2,738 | 4,697 | (1,959 | ) | (42 | )% | |||||||||
Professional fees (b) | 1,289 | — | 1,289 | NM | |||||||||||
Adjusted EBITDA | $ | (9,727 | ) | $ | (9,654 | ) | $ | (73 | ) | (1 | )% |
In various dispositions that occurred during fiscal 2018, we sold our midstream businesses, thus much of the significant variances reported above result from the cessation of the midstream business by the end of fiscal 2018.
Operating loss
Operating loss of $14.7decreased by $40.8 million during the three months ended April 30, 2018, compared to an operating loss of $15.2 million recognized during the three months ended April 30, 2017. This decrease in operating loss is primarily due to a $2.0 million decrease in non-cash compensation charges and a $0.9 million decrease in corporate personnel costs, partially offset by a $1.6 million increase in legal costs.
(amounts in thousands) | |||||||||||||||
Nine months ended April 30, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
Propane sales volumes (gallons): | |||||||||||||||
Retail - Sales to End Users | 543,548 | 473,094 | 70,454 | 15 | % | ||||||||||
Wholesale - Sales to Resellers | 185,492 | 170,033 | 15,459 | 9 | % | ||||||||||
729,040 | 643,127 | 85,913 | 13 | % | |||||||||||
Revenues - | |||||||||||||||
Propane and other gas liquids sales: | |||||||||||||||
Retail - Sales to End Users | $ | 931,495 | $ | 720,078 | $ | 211,417 | 29 | % | |||||||
Wholesale - Sales to Resellers | 324,863 | 277,755 | 47,108 | 17 | % | ||||||||||
Other Gas Sales (a) | 89,941 | 51,378 | 38,563 | 75 | % | ||||||||||
Other (b) | 118,691 | 116,183 | 2,508 | 2 | % | ||||||||||
Propane and related equipment other revenues | $ | 1,464,990 | $ | 1,165,394 | $ | 299,596 | 26 | % | |||||||
Gross Margin - | |||||||||||||||
Propane and other gas liquids sales: (c) | |||||||||||||||
Retail - Sales to End Users (a) | $ | 411,644 | $ | 369,811 | $ | 41,833 | 11 | % | |||||||
Wholesale - Sales to Resellers (a) | 131,803 | 127,672 | 4,131 | 3 | % | ||||||||||
Other (b) | 64,352 | 62,970 | 1,382 | 2 | % | ||||||||||
Propane and related equipment gross margin | $ | 607,799 | $ | 560,453 | $ | 47,346 | 8 | % | |||||||
Operating, general and administrative expense (d) | $ | 332,244 | $ | 303,926 | $ | 28,318 | 9 | % | |||||||
Equipment lease expense | 19,206 | 19,780 | (574 | ) | (3 | )% | |||||||||
Operating income | $ | 187,458 | $ | 178,979 | $ | 8,479 | 5 | % | |||||||
Depreciation and amortization expense | 55,135 | 54,103 | 1,032 | 2 | % | ||||||||||
Loss on asset sales and disposals | 3,751 | 3,666 | 85 | 2 | % | ||||||||||
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 | — | (3,238 | ) | 3,238 | NM | ||||||||||
Adjusted EBITDA | $ | 256,707 | $ | 233,763 | $ | 22,944 | 10 | % |
(amounts in thousands) | |||||||||||||||
Nine months ended April 30, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
Volumes (barrels): | |||||||||||||||
Crude oil hauled | 34,855 | 36,549 | (1,694 | ) | (5 | )% | |||||||||
Crude oil sold | 3,412 | 5,228 | (1,816 | ) | (35 | )% | |||||||||
Salt water volume processed | 14,552 | 12,340 | 2,212 | 18 | % | ||||||||||
Revenues - | |||||||||||||||
Crude oil logistics | $ | 50,727 | $ | 62,750 | $ | (12,023 | ) | (19 | )% | ||||||
Crude oil sales | 198,283 | 258,724 | (60,441 | ) | (23 | )% | |||||||||
Other | 11,620 | 10,033 | 1,587 | 16 | % | ||||||||||
$ | 260,630 | $ | 331,507 | $ | (70,877 | ) | (21 | )% | |||||||
Gross margin (a) | |||||||||||||||
Crude oil logistics | $ | 23,046 | $ | 12,671 | $ | 10,375 | 82 | % | |||||||
Crude oil sales | 4,414 | 11,835 | (7,421 | ) | (63 | )% | |||||||||
Other | 3,461 | 6,568 | (3,107 | ) | (47 | )% | |||||||||
$ | 30,921 | $ | 31,074 | $ | (153 | ) | — | % | |||||||
Operating, general, and administrative expenses (b) | $ | 23,060 | $ | 21,888 | $ | 1,172 | 5 | % | |||||||
Equipment lease expense | 251 | 423 | (172 | ) | (41 | )% | |||||||||
Operating loss | $ | (53,593 | ) | $ | (17,651 | ) | $ | (35,942 | ) | (204 | )% | ||||
Depreciation and amortization expense | 18,540 | 21,233 | (2,693 | ) | (13 | )% | |||||||||
Loss on asset sales and disposals | 42,663 | 5,195 | 37,468 | 721 | % | ||||||||||
Severance costs | 1,305 | 227 | 1,078 | 475 | % | ||||||||||
Unrealized (non-cash) (gain) loss on changes in fair value of derivatives not designated as hedging instruments | 1,293 | (1,211 | ) | 2,504 | NM | ||||||||||
Adjusted EBITDA | $ | 10,208 | $ | 7,793 | $ | 2,415 | 31 | % |
(amounts in thousands) | |||||||||||||||
Nine months ended April 30, | 2018 | 2017 | Increase (Decrease) | ||||||||||||
Operating, general and administrative expense (a) | $ | 35,186 | $ | 33,660 | $ | 1,526 | 5 | % | |||||||
Equipment lease expense | 1,371 | 1,832 | (461 | ) | (25 | )% | |||||||||
Operating loss | $ | (50,178 | ) | $ | (49,100 | ) | $ | (1,078 | ) | (2 | )% | ||||
Depreciation and amortization expense | 2,890 | 2,210 | 680 | 31 | % | ||||||||||
Non-cash employee stock ownership plan compensation charge | 10,731 | 11,396 | (665 | ) | (6 | )% | |||||||||
Non-cash stock based compensation charge | — | 3,298 | (3,298 | ) | NM | ||||||||||
Severance costs | — | 1,479 | (1,479 | ) | NM | ||||||||||
Professional fees (b) | 3,407 | — | 3,407 | NM | |||||||||||
Adjusted EBITDA | $ | (33,150 | ) | $ | (30,717 | ) | $ | (2,433 | ) | (8 | )% |
Adjusted EBITDA
Adjusted EBITDA decreased $6.8 million primarily due to the $9.2 million in Adjusted EBITDA related to our midstream operations in fiscal 2018, partially offset by a $2.4 million decrease in corporate personnel expenses.
Liquidity and Capital Resources
General
Our primary sources of liquidity and capital resources are cash flows from operating activities, borrowings under our secured credit facility and our accounts receivable securitization facility and funds received from sales of debt and equity securities. As of January 31, 2019, our total liquidity was $236.8 million, which is comprised of $40.6 million in cash and $196.2 million of availability under our secured credit 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 access the capital markets, covenants in our debt agreements, unforeseen demands on cash, or other events beyond our control.
Financial Covenants
As more fully described in Item 2. Management’s Discussion and Analysis under the subheading “Financial Covenants”, 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 of these covenants, we continue to execute on a strategy to reduce our debt and interest expense. If we are unsuccessful with our strategy to further reduce debt and interest expense, we maywill continue to be restricted from making distribution payments to our common unitholders.
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; |
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· | 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 for the three months ended January 31, 2019. Unless the indenture governing the outstanding notes is amended or purchasing patterns duereplaced, or the Ferrellgas Partners’ consolidated fixed charge coverage ratio does improves to economic or other factors in the United States;
Distributable Cash Flow
Distributable cash flow to equity investors is reconciled to net loss attributable to Ferrellgas Partners, L.P. in Item 2. Management'sManagement’s Discuss and Analysis under the subheading "Non-GAAP Financial Measures." A comparison of distributable cash flow to distributions paid for the twelve months ended April 30, 2018January 31, 2019 to the twelve months ended JanuaryOctober 31, 2018 is as follows (in thousands):
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| Distributable |
| Cash reserves |
| Cash distributions |
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| |||
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| Cash Flow to |
| (deficiency) approved |
| paid to |
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| |||
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| equity investors |
| by our General Partner |
| equity investors |
| DCF ratio | |||
Six months ended January 31, 2019 |
| $ | 25,349 |
| $ | 15,277 |
| $ | 10,072 |
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|
For the year ended July 31, 2018 |
|
| 62,904 |
|
| 22,934 |
|
| 39,970 |
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|
Less: Six months ended January 31, 2018 |
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| 59,903 |
|
| 39,919 |
|
| 19,984 |
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|
Twelve months ended January 31, 2019 |
| $ | 28,350 |
| $ | (1,708) |
| $ | 30,058 |
| 0.94 |
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Twelve months ended October 31, 2018 |
|
| 54,863 |
|
| 14,891 |
|
| 39,972 |
| 1.37 |
Change |
| $ | (26,513) |
| $ | (16,599) |
| $ | (9,914) |
| (0.43) |
Distributable Cash Flow to equity investors | Cash reserves (deficiency) approved by our General Partner | Cash distributions paid to equity investors | DCF ratio | |||||||||||
Nine months ended April 30, 2018 | $ | 103,829 | $ | 73,930 | $ | 29,899 | ||||||||
For the year ended July 31, 2017 | 77,182 | (3,601 | ) | 80,783 | ||||||||||
Less: Nine months ended April 30, 2017 | 98,986 | 28,273 | 70,713 | |||||||||||
Twelve months ended April 30, 2018 | $ | 82,025 | $ | 42,056 | $ | 39,969 | 2.05 | |||||||
Twelve months ended January 31, 2018 | 74,435 | 34,468 | 39,967 | 1.86 | ||||||||||
Change | $ | 7,590 | $ | 7,588 | $ | 2 | 0.19 |
For the twelve months ended April 30, 2018,January 31, 2019, distributable cash flow attributable to equity investors increased $7.6decreased $26.5 million compared to the twelve months ended JanuaryOctober 31, 2018, primarily due to a $10.1 million increase in Adjusted EBITDA for the three months ended April 30, 2018 compared to the three months ended April 30, 2017, partially offset by a $2.3 million increase in maintenance capital expenditures during the three months ended April 30, 2018 compared to the three months ended April 30, 2017. The increase in Adjusted EBITDA is primarily due to an $8.7 million increase in our Propane operations and related equipment sales segment and a $1.5 million increase in our Midstream operations segment, both as discussed above. The increase in maintenance capital expenditures is primarily due to increases in our Propane operations and related equipment sales segment.purchase of new propane delivery trucks funded through cash on hand. Cash distributions paid to equity investors were unchangeddecreased by $9.9 million during that twelve month period because no distributions have been made for the number of common units outstanding and our annual distribution rate has not changed.six months ended January 31, 2019. Our distribution coverage ratio increaseddecreased to 2.050.94 for the twelve months ended April 30,January 31, 2019, compared with the twelve months ended October 31, 2018. Cash reserves, which we utilize to meet future anticipated expenditures, increaseddecreased by $42.1$1.7 million during the twelve months ended April 30, 2018January 31, 2019 compared to an increase of $34.5$14.9 million in the twelve months ended JanuaryOctober 31, 2018.
We believe that the liquidity available from our cash on hand, cash flows from operating activities, our new senior secured credit facility, and the amended 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.
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.
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Our working capital requirements are subject to, among other things, the price of propane, 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.
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.
Operating Activities
Ferrellgas Partners
Net cash provided byused in operating activities was $78.3$55.1 million for the ninesix months ended April 30, 2018,January 31, 2019, compared to net cash provided byused in operating activities of $118.3$36.3 million for the ninesix months ended April 30, 2017.January 31, 2018. This decrease in cash provided by operating activities was primarily due to a $39.7$20.8 million increasedecrease in working capital requirementscash flow from operations and a $9.7$3.2 million unfavorable impact inoutflow associated with other assets net, primarily due to an increase in crude oil barrels in linefill prior to the sale of Bridger Energy in January 2018,and other liabilities, partially offset by a $9.3$5.2 million increasedecrease in cash flow from operations.
The increasedecrease in cash flow from operations is primarily due to a $22.9$14.1 million decrease in gross margin, as well as a net increase in Adjusted EBITDA, as discussed above by segment, partially offset by an $11.7"General and administrative expense" and "Equipment lease expense" of $5.0 million, and a $5.3 million increase in "Interest expense", as discussed above.
The increasedecrease in working capital requirements for the ninesix months ended April 30, 2018January 31, 2019 compared to the ninesix months ended April 30, 2017January 31, 2018 was primarily due to a $40.2$23.6 million increasedecrease in requirements for accounts receivable in our propane operations and related equipment sales segment due to declining propane prices in the current quarter partially offset by increases in the the number of gallons sold and the average selling pricevolume of propane gas,sold, a $16.2$11.2 million decrease in requirements for inventory primarily resulting from increases in crude oil inventory in the six months ended January 31, 2018, and a $4.9 million increase in requirements for prepaid expenses and other assets due primarily to a decrease in margin deposits returned to usaccounts payable, partially offset by our counterparties during the nine months ended April 30, 2018, a $6.1$22.3 million increase in requirements for other current liabilities due primarily to a decreasean increase in margin deposits paid toby us during the ninesix months ended April 30, 2018January 31, 2019 compared to the ninesix months ended April 30, 2017, partially offset byJanuary 31, 2018 and a $9.9$11.7 million decreaseincrease in requirements for inventory primarily from our propane operationsprepaid expenses and related equipment sales segment due to decreases in inventory driven by increases in gallons sold, and an approximate $16.0 million decrease in requirements for accounts receivable and accounts payable in our Midstream segment resulting primarily from the sale of Bridger Energy.
The operating partnership
Net cash provided byused in operating activities was $93.9$39.7 million for the ninesix months ended April 30, 2018,January 31, 2019, compared to net cash provided byused in operating activities of $124.4$20.8 million for the ninesix months ended April 30, 2017.January 31, 2018. This decrease in cash provided by operating activities was primarily due to a $37.4$20.9 million increasedecrease in working capital requirementscash flow from operations and an $10.0a $2.9 million unfavorable impact inoutflow associated with other assets net, primarily due to an increase in crude oil barrels in linefill prior to the sale of Bridger Energy in January 2018,and other liabilities, partially offset by a $16.9$4.9 million increasedecrease in cash flow from operations.
The increasedecrease in cash flow from operations is primarily due to a $22.9$14.1 million decrease in gross margin, as well as a net increase in Adjusted EBITDA, as discussed above by segment, partially offset by"General and administrative expense" and "Equipment lease expense" of $5.0 million, and a $2.6$5.1 million increase in "Interest expense"expense," due to increased interest rates on theour secured credit facility.
The increase in working capital requirements for the ninesix months ended April 30, 2018January 31, 2019 compared to the ninesix months ended April 30, 2017January 31, 2018 was primarily due to a $40.2$23.6 million increasedecrease in requirements for accounts receivable in our propane operations and related equipment sales segment due to declining propane prices in the current quarter partially offset by increases in the the number of gallons sold and the average selling pricevolume of propane gas,sold, a $16.1$11.2 million decrease in requirements for inventory primarily
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resulting from increases in crude oil inventory in the six months ended January 31, 2018, and a $4.9 million increase in requirements for prepaid expenses and other assets due primarily to a decrease in margin deposits returned to usaccounts payable, partially offset by our counterparties during the nine months ended April 30, 2018, a $5.9$22.6 million increase in requirements for other current liabilities due primarily to a decreasean increase in margin deposits paid toby us during the ninesix months ended April 30, 2018January 31, 2019 compared to the ninesix months ended April 30, 2017, partially offset byJanuary 31, 2018 and a $9.9$11.7 million decreaseincrease in requirements for inventory primarily from our propane operationsprepaid expenses and related equipment sales segment due to decreases in inventory driven by increases in gallons sold, and an approximate $16.0 million decrease in requirements for accounts receivable and accounts payable in our Midstream segment resulting primarily from the sale of Bridger Energy.
Investing Activities
Ferrellgas Partners
Capital Requirements
Our business requires continual investments to upgrade or enhance existing operations and to ensure compliance with safety and environmental regulations. Capital expenditures for our business consist primarily of:
· | Maintenance capital expenditures. These capital expenditures include expenditures for betterment and replacement of property, plant and equipment rather than to generate incremental distributable cash flow. Examples of maintenance capital expenditures include a routine replacement of a worn-out asset or replacement of major vehicle components; and |
· | Growth capital expenditures. These expenditures are undertaken primarily to generate incremental distributable cash flow. Examples include expenditures for purchases of both bulk and portable propane tanks and other equipment to facilitate expansion of our customer base and operating capacity. |
Net cash used in investing activities was $16.0$61.4 million for the ninesix months ended April 30, 2018,January 31, 2019, compared to net cash used in investing activities of $34.3$46.3 million for the ninesix months ended April 30, 2017.January 31, 2018. This decreaseincrease in net cash used in investing activities is primarily due to a $53.1$22.6 million increase in "Proceeds from sale of assets" which is primarily due to the sale of our midstream rail cars during the three months ended April 30, 2018,"Capital expenditures", partially offset by a $23.5$9.8 million increase in "Capital expenditures" and an $11.3 million increasedecrease in "Business acquisitions, net of cash acquired."
The increase in "Capital expenditures" is primarily due to increasesan increase in maintenance capital expenditures, and to a lesser extent an increase in growth capital expenditures, in our Propane operations and related equipment sales segment during the ninesix months ended April 30, 2018.January 31, 2019. The increase in maintenance capital expenditures is primarily related to the purchase of new propane delivery trucks.trucks funded through cash on hand, compared to the six months ended January 31, 2018. Funding for these trucks has historically been secured through lease financing. The increase in growth capital expenditures is primarily relateddue to anthe construction of new Blue Rhino production plants in the first quarter. The increase is also due to the continued rise in the number of cylinders and cages purchased to support increases in tank exchange sales and selling locations.
The increasedecrease in "Business acquisitions, net of cash acquired" is attributable to fourfive immaterial acquisitions by our Propane operations and related equipment sales segment during the ninesix months ended April 30,January 31, 2019 compared to the acquisitions completed during the six months ended January 31, 2018.
Due to the mature nature of our Propane operations and related equipment sales operations segment, we do not anticipate significant fluctuations in maintenance capital expenditures.expenditures, with the exception of future decisions regarding lease versus buy financing options. However, future fluctuations in growth capital expenditures could occur due to the opportunistic nature of these projects.
On February 20, 2019, we received full payment for our $8.5 million secured promissory note due in May 2020 from Bridger Energy, LLC.
The operating partnership
The investing activities discussed above also apply to the operating partnership.
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Financing Activities
Ferrellgas Partners
Net cash used inprovided by financing activities was $58.6$37.9 million for the ninesix months ended April 30, 2018,January 31, 2019, compared to net cash used inprovided by financing activities of $79.5$91.1 million for the ninesix months ended April 30, 2017.January 31, 2018. This decrease in cash flow used inprovided by financing activities was primarily due to a $40.5$23.6 million reduction in distributions, a $15.9 million reduction in common unit repurchases, partially offset by a $25.2 million net reductiondecrease in proceeds from long-term debt and a $13.3$24.9 million net increasedecrease in proceeds from short-term borrowings.
Distributions
During the ninesix months ended April 30, 2018,January 31, 2019, Ferrellgas Partners paid quarterly a per unit distributionsdistribution on all common units of $0.10 in connection with the distributions declared for the three month periodsperiod ended July 31, 2017,2018. No distribution on common units or the related general partner distribution was made for the three month period ended October 31, 2017, and January 31, 2018.
Total distributions paid to common unitholders during the ninesix months ended April 30, 2018,January 31, 2019, including the related general partner distributions, was $29.4$9.8 million. The quarterlyAs discussed above, no distribution of $0.10 on all common units andor the related general partner distribution was made in December 2018 and will not be made in March 2019 for the threesix months ended April 30, 2018 totaling $9.8 million are expected to be paid on June 14, 2018 to holdersJanuary 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 record on June 7, 2018.
Secured credit facility
The Senior Secured Credit Facility consists of a $300.0 million revolving line of credit (the "Revolving Facility") as well as a $275.0 million term loan (the "Term Loan"), which mature on May 4, 2018,2023. Revolving Facility borrowings bear interest at the operating partnership entered intoPrime Rate + 4.75% and Term Loan borrowings bear interest at LIBOR + 5.75%. The Revolving Facility includes a new $575.0$125.0 million senior secured credit facility, which replacedsublimit for the $575.0 million secured credit facility that was scheduled to mature in October 2018.issuance of letters of credit. Borrowings under the Senior Secured Credit facility disclosures below pertain to the secured credit facility that was in place as of April 30, 2018.
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 pay down within the 12 month period followingfollowing: 1) certain asset sales, 2) 50% of any excess cash flow, as defined by the balance sheet date. As of April 30, 2018, there were no amounts classified as short-term borrowings because all amounts outstanding were refinanced on May 4, 2018 under the five-year term loan discussedTerm Loan, in Item 2. Management's Discussionany fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and Analysis under the subheading "Recent Developments". Additionally, Ferrellgas had $252.3 million of capacity under our4) certain tax refunds.
The Senior Secured Credit Facility is secured credit facility as of April 30, 2018.
As of January 31, 2019, the operating partnership.
Letters of credit outstanding at April 30, 2018January 31, 2019 totaled $111.8$103.8 million and were used to secure commodity hedges,insurance arrangements, product purchases, and insurance arrangements.commodity hedges. At April 30, 2018,January 31, 2019, we had remaining letter of credit capacity of $88.2$21.2 million.
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Accounts receivable securitization
Ferrellgas Receivables is a consolidated subsidiary. Expenses associated with accounts receivable securitization transactions are recorded in “Interest expense” in the condensed consolidated statements of operations. Additionally, borrowings and repayments associated with these transactions are recorded in “Cash flows from financing activities” in the condensed consolidated statements of cash flows.
Cash flows from our accounts receivable securitization facility increased $8.0decreased $15.0 million, as we received net funding of $35.0$82.0 million from this facility during the ninesix months ended April 30, 2018January 31, 2019 as compared to receiving net funding of $27.0$97.0 million from this facility during the ninesix months ended April 30, 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 April 30, 2018,January 31, 2019, we had received cash proceeds of $104.0$140.0 million related to the securitization of our trade accounts receivable, with no remaining capacity of $19.0 million to receive additional proceeds. As of April 30, 2018,January 31, 2019, the weighted average interest rate was 4.2%5.3%. As our trade accounts receivable increase during the winter heating season, the securitization facility permits us to receive greater proceeds as eligible trade accounts receivable increase, thereby providing additional cash for working capital needs.
The operating partnership
The financing activities discussed above also apply to the operating partnership except for the repurchase of common units discussed above, and cash flows related to distributions, as discussed below.
Distributions
The operating partnership paid cash distributions of $45.5$25.6 million and $94.4$35.4 million during the ninesix months ended April 30,January 31, 2019 and 2018, and 2017, respectively. The operating partnership expectswill not make any distributions related to pay cash distributions of $25.6 million on June 14, 2018, which includes distributions to Ferrellgas Partners to allow it to pay its semi-annual interest on its 8.625% senior notes.
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, and all other necessary or appropriate expenses allocable to us or otherwise reasonably incurred by our general partner in connection with operating our business. These reimbursable costs, which totaled $203.1$76.5 million for the ninesix months ended April 30, 2018,January 31, 2019, include operating expenses such as compensation and benefits paid to employees of our general partner who perform services on our behalf as well as related general and administrative expenses.
Related party common unitholder information consisted of the following:
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| Distributions | |
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| Common unit |
| (in thousands) | |
|
| ownership at |
| paid during the six months ended | |
|
| January 31, 2019 |
| January 31, 2019 | |
Ferrell Companies (1) |
| 22,529,361 |
| $ | 2,253 |
FCI Trading Corp. (2) |
| 195,686 |
|
| 20 |
Ferrell Propane, Inc. (3) |
| 51,204 |
|
| 5 |
James E. Ferrell (4) |
| 4,763,475 |
|
| 476 |
(1) | Ferrell Companies is the owner of the general partner and is an approximate 23% direct owner of Ferrellgas Partners’ common units and thus a related party. Ferrell Companies also beneficially owns 195,686 and 51,204 common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies’ beneficial ownership to 23.4% at January 31, 2019. |
(2) | FCI Trading is an affiliate of the general partner and thus a related party. |
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Common unit ownership at | Distributions (in thousands) paid during the nine months ended | ||||||
April 30, 2018 | April 30, 2018 | ||||||
Ferrell Companies (1) | 22,529,361 | $ | 6,759 | ||||
FCI Trading Corp. (2) | 195,686 | 60 | |||||
Ferrell Propane, Inc. (3) | 51,204 | 15 | |||||
James E. Ferrell (4) | 4,763,475 | 1,428 |
(3) | Ferrell Propane is controlled by the general partner and thus a related party. |
(4) | James E. Ferrell is the Interim Chief Executive Officer and President of the general partner; and is Chairman of the Board of Directors of the general partner and thus a related party. JEF Capital Management owns 4,758,859 of these common units and is wholly-owned by the James E. Ferrell Revocable Trust Two and other family trusts, all of which James E. Ferrell and/or his family members are the trustees and beneficiaries. James E. Ferrell holds all voting common stock of JEF Capital Management. The remaining 4,616 common units are held by Ferrell Resources Holding, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary. |
During the ninesix months ended April 30, 2018,January 31, 2019, Ferrellgas Partners and the operating partnership together paid the general partner distributions of $0.8$0.4 million.
As discussed previously, Ferrellgas Partners expectswas not in compliance with the consolidated fixed charge coverage ratio under its note indenture, and thus was unable to paymake restricted payments, including distributions to Ferrell Companies, FCI Trading Corp., Ferrell Propane, Inc., James E. Ferrell (indirectly), and the general partner of $2.3 million, $20 thousand, $5 thousand, $0.5 million, and $0.1 million, respectively.
Payment or settlement due by fiscal year | ||||||||||||||||||||||||||||
(in thousands) | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | |||||||||||||||||||||
Long-term debt, including current portion (1) | $ | 794 | $ | 2,380 | $ | 358,557 | $ | 501,392 | $ | 475,707 | $ | 775,624 | $ | 2,114,454 |
Payment or settlement due by fiscal year | ||||||||||||||||||||||||||||
(in thousands) | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | |||||||||||||||||||||
Long-term debt, including current portion (1) | $ | 794 | $ | 2,380 | $ | 1,557 | $ | 501,392 | $ | 475,707 | $ | 775,624 | $ | 1,757,454 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We did not enter into any risk management trading activities during the ninesix months ended April 30, 2018.January 31, 2019. Our remaining market risk sensitive instruments and positions have been determined to be “other than trading.”
Commodity price risk management
Our risk management activities primarily attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts.
Our risk management strategy involves taking positions in the forward or financial markets that are equal and opposite to our positions in the physical products market in order to minimize the risk of financial loss from an adverse price change. This risk management strategy is successful when our gains or losses in the physical product markets are offset by our losses or gains in the forward or financial markets. Propane related financial derivatives are designated as cash flow hedges.
Our risk management activities include the use of financial derivative instruments including, but not limited to, price swaps, options, futures and basis swaps to seek protection from adverse price movements and to minimize potential losses. We enter into these financial derivative instruments directly with third parties in the over-the-counter market and with brokers who are clearing members with the Intercontinental Exchange or the Chicago Mercantile Exchange. We also enter into forward propane purchase and sales contracts with counterparties. These forward contracts qualify for the normal purchase normal sales exception within GAAP guidance and are therefore not recorded on our financial statements until settled.
Transportation Fuel Price Risk
From time to time, our risk management activities also attempt to mitigate price risks related to the purchase of gasoline and diesel fuel for use in the transport of propane from retail fueling stations. When employed, we attempt to mitigate these price risks through the use of financial derivative instruments.
When employed, our risk management strategy involves taking positions in the financial markets that are not more than the forecasted purchases of fuel for our internal use in the retail and supply propane delivery fleet in order to minimize the risk of decreased earnings from an adverse price change. This risk management strategy locks in our purchase price and is successful when our gains or losses in the physical product markets are offset by our losses or gains in the financial markets. Our transport fuel financial derivatives are not designated as cash flow hedges.
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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 April 30, 2018January 31, 2019 and July 31, 2017,2018, that were used in our risk management activities were analyzed assuming a hypothetical 10% adverse change in prices for the delivery month for all energy commodities. The potential loss in future earnings from these positions due to a 10% adverse movement in market prices of the underlying energy commodities was estimated at $13.0$11.4 million and $16.8$13.7 million as of April 30, 2018January 31, 2019 and July 31, 2017,2018, respectively. The preceding hypothetical analysis is limited because changes in prices may or may not equal 10%, thus actual results may differ. Our sensitivity analysis does not include the anticipated transactions associated with these transactions, which we anticipate will be 100% effective.
Credit risk
We maintain credit policies with regard to our counterparties that we believe significantly minimize overall credit risk. These policies include an evaluation of counterparties’ financial condition (including credit ratings), and entering into agreements with counterparties that govern credit guidelines.
Our other counterparties consist of major energy companies who are suppliers, marketers, wholesalers, retailers, end users and financial institutions. The overall impact due to certain changes in economic, regulatory and other events may impact our overall exposure to credit risk, either positively or negatively in that counterparties may be similarly impacted. Based on our policies, exposures, credit and other reserves, management does not anticipate a material adverse effect on financial position or results of operations as a result of counterparty performance.
Interest rate risk
At April 30, 2018,January 31, 2019, we had a total of $288.9$415.0 million in variable rate secured credit facility and collateralized note payable borrowings. 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 $2.9$4.2 million for the twelve months ending April 30,January 31, 2019. The preceding hypothetical analysis is limited because changes in interest rates may or may not equal one percent, thus actual results may differ. Our results of operations, cash flows and financial condition could be materially adversely affected by significant increases in interest rates. Although we had an interest rate swap that hedged a portion of the interest rate risk associated with our variable rate borrowings as of April 30, 2018, this swap was terminated on May 3, 2018. Thus we did not consider the effect of this swap on our sensitivity analysis.
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
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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. Our disclosure controls and procedures are designed to provide such reasonable assurances of achieving our desired control objectives, and the principal executive officer and principal financial officer of our general partner have concluded, as of April 30, 2018,January 31, 2019, that our disclosure controls and procedures are effective in achieving that level of reasonable assurance.
During the most recent fiscal quarter ended April 30, 2018,January 31, 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 we and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Federal Court for the Western District of Missouri initially dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending.resulted in the court appeals affirming the dismissal of the federal claims and remanding the case to the district court to decide whether to exercise supplemental jurisdiction over the remaining state law claims. We believe we have strong defenses to the claims and intend to vigorously defend against the consolidated case. We do not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
We have been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. The parties have completed briefing and are preparing for oral argument. At this time the derivative lawsuits remain stayed by agreement. We believe that we have defenses and will vigorously defend these cases. We do not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
We and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude
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from rail onto barges. Eddystone alleges that we transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. We believe that we and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, we believe that the amount of such damage claims, if ultimately owed to Eddystone, could be material. We intend to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, we filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. TheOn June 25, 2018, we entered into an agreement with the Third-Party Defendants havewhich, among other things, resulted in a dismissal of the claims against the Third-Party Defendants from the lawsuit. On January 25, 2019, Ferrellgas, Bridger Logistics, LLC and all other defendants filed motionsa Motion to dismiss the third-party complaintDismiss Plaintiff’s First Amended Complaint for alleged lackLack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgas 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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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 |
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4.8 | ||||
4.9 | ||||
4.10 | ||||
4.11 | ||||
4.12 | ||||
10.1 | ||||
10.2 | ||||
10.3 | ||||
10.4 | ||||
10.5 | ||||
10.6 | ||||
10.7 | ||||
+10.8 |
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10.9 | ||
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 |
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# 10.23 | ||||
# 10.24 | ||||
# 10.25 | ||||
10.26 | ||||
# 10.27 | ||||
# 10.28 | ||||
* 10.29 | ||||
* 10.30 | ||||
* 31.1 | ||||
* 31.2 | ||||
* 31.3 | ||||
* 31.4 | ||||
* 32.1 | ||||
* 32.2 | ||||
* 32.3 | ||||
* 32.4 | ||||
* 101.INS | XBRL Instance Document. | |||
* 101.SCH | XBRL Taxonomy Extension Schema Document. | |||
* 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||
* 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||
* 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||
* 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |||
*Filed herewith
#Management contracts or compensatory plans.
+Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS, L.P. | ||||
By Ferrellgas, Inc. (General Partner) | ||||
Date: | March 8, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer; Treasurer (Principal Financial and Accounting Officer) | ||||
FERRELLGAS PARTNERS FINANCE CORP. | ||||
Date: | March 8, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer and Sole Director | ||||
FERRELLGAS, L.P. | ||||
By Ferrellgas, Inc. (General Partner) | ||||
Date: | March 8, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer; Treasurer (Principal Financial and Accounting Officer) | ||||
FERRELLGAS FINANCE CORP. | ||||
Date: | March 8, 2019 | By | /s/ | |
William E. Ruisinger | ||||
Interim Chief Financial Officer and Sole Director |
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