Ferrellgas Partners Reports Record Third-Quarter Earnings Net Income Climbs 41%; Adjusted EBITDA Up 18%
OVERLAND PARK, Kan., June 7, 2007 – Ferrellgas Partners, L.P. (NYSE: FGP), one of the nation’s largest propane distributors, today reported record earnings for its fiscal third quarter ended April 30, 2007.
Net earnings for the quarter rose 41% to a record $43.7 million from $30.9 million in the prior fiscal year’s quarter, while Adjusted EBITDA increased 18% to a record $95.1 million from $80.8 million in that same prior year period. This earnings performance reflects the positive impact of higher propane sales volumes and continued strong margin performance during the quarter.
Propane sales volumes rose 6% for the quarter to 244 million gallons from 231 million gallons sold a year ago. This increase in demand correlated to nationwide temperatures that were 6% cooler than in the same period last year, yet remained 1% warmer than normal.
“We are pleased to be able to share these record third quarter results with our investors,” said Steve Wambold, President and Chief Operating Officer. “As we continue to improve both operationally and financially, we anticipate that this strong performance will continue into our fourth-quarter and positively impact our full year results. We remain confident in our full-year Adjusted EBITDA guidance of $235 million to $245 million.” As of April 30, 2007, the partnership’s trailing 12-month Adjusted EBITDA was a record $235.2 million, a nearly 9% improvement over its record fiscal 2006 Adjusted EBITDA of $215.9 million.
Third-quarter revenues rose 19% in the quarter to $624.2 million from $526.0 million and gross profit grew to a record $210.5 million from $194.3 million achieved in the prior-year quarter. Operating and general and administrative expenses were $97.4 million and $11.8 million, respectively, compared to $95.1 million and $12.3 million a year ago. Equipment lease expense increased slightly to $6.7 million in the quarter from $6.5 million in the prior fiscal year’s quarter.
“We believe that we have built a solid foundation for continued earnings growth, both through our investments in technology and people,” commented James Ferrell, Chairman and Chief Executive Officer. “We will continue to look for ways to improve our financial results with our objective to improve our distributable cash flow in the near future.”
For the first nine-months of fiscal 2007, both Adjusted EBITDA and gross profit were a record $226.3 million and $565.0 million, respectively. Revenues grew to $1.7 billion from $1.6 billion in the prior nine-month period, while propane sales volumes remained unchanged at 682 million gallons. Operating and general and administrative expenses were $287.2 million and $32.9 million, respectively, compared to $281.9 million and $34.8 million a year ago. Interest and depreciation and amortization expenses for the nine-month period were $66.2 million and $65.9 million, respectively, and equipment lease expense for the same period was $19.8 million. Net earnings for the period totaled $73.4 million, a 16% increase compared to $63.2 million achieved in the same period last year.
Ferrellgas Partners, L.P., through its operating partnership. Ferrellgas, L.P., serves more than one million customers in all 50 states, the District of Columbia and Puerto Rico. Ferrellgas employees indirectly own more than 20 million common units of the partnership through an employee stock ownership plan. More information about the company can be found online atwww.ferrellgas.com.
Statements in this release concerning expectations for the future are forward-looking statements. A variety of known and unknown risks, uncertainties and other factors could cause results, performance and expectations to differ materially from anticipated results, performance and expectations. These risks, uncertainties and other factors are discussed in the Form 10-K of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas Finance Corp. for the fiscal year end July 31, 2006, and other documents filed from time to time by these entities with the Securities and Exchange Commission.
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FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) (unaudited)
ASSETS
April 30, 2007
July 31, 2006
Current Assets:
Cash and cash equivalents
$
23,830
$
16,525
Accounts and notes receivable, net
146,171
116,369
Inventories
98,684
154,613
Prepaid expenses and other current assets
18,828
15,334
Total Current Assets
287,513
302,841
Property, plant and equipment, net
729,490
740,101
Goodwill
249,325
246,050
Intangible assets, net
251,216
248,546
Other assets, net
18,443
11,962
Total Assets
$
1,535,987
$
1,549,500
LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities:
Accounts payable
$
64,250
$
82,212
Short term borrowings
33,006
52,647
Other current liabilities(a)
102,326
140,738
Total Current Liabilities
199,582
275,597
Long-term debt(a)
1,003,811
983,545
Other liabilities
20,585
19,178
Contingencies and commitments
—
—
Minority interest
5,870
5,435
Partners’ Capital:
Common unitholders (62,952,174 and 60,885,784 units
outstanding at April 2007 and July 2006, respectively)
356,077
321,194
General partner unitholder (635,881 and 615,008 units
outstanding at April 2007 and July 2006, respectively)
(56,477
)
(56,829
)
Accumulated other comprehensive income
6,539
1,380
Total Partners’ Capital
306,139
265,745
Total Liabilities and Partners’ Capital
$
1,535,987
$
1,549,500
(a) The principal difference between the Ferrellgas Partners, L.P. balance sheet and that of Ferrellgas, L.P., is $268 million of 8 3/4% notes which are liabilities of Ferrellgas Partners, L.P. and not of Ferrellgas, L.P.
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FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2007 AND 2006 (in thousands, except per unit data) (unaudited)
Three months ended
Nine months ended
April 30,
April 30,
2007
2006
2007
2006
Revenues:
Propane and other gas liquids sales
$
531,816
$
466,832
$
1,458,732
$
1,400,631
Other
92,346
��
59,194
204,616
163,561
Total revenues
624,162
526,026
1,663,348
1,564,192
Cost of product sold:
Propane and other gas liquids sales
341,593
288,364
956,288
919,626
Other
72,118
43,319
142,039
101,788
Gross profit
210,451
194,343
565,021
542,778
Operating expense
97,369
95,085
287,224
281,894
Depreciation and amortization expense
22,245
21,138
65,936
63,864
General and administrative expense
11,829
12,326
32,877
34,793
Equipment lease expense
6,675
6,506
19,773
20,723
Employee stock ownership plan compensation charge
2,721
2,597
8,301
7,521
Loss on disposal of assets and other
3,097
2,881
9,592
5,518
Operating income
66,515
53,810
141,318
128,465
Interest expense
(21,534
)
(20,778
)
(66,243
)
(62,893
)
Interest income
981
557
2,871
1,465
Earnings before income taxes and minority interest
45,962
33,589
77,946
67,037
Income tax expense
1,752
2,271
3,634
2,971
Minority interest (a)
507
377
933
829
Net earnings
43,703
30,941
73,379
63,237
Net earnings available to general partner
1,860
309
734
632
Net earnings available to common unitholders
$
41,843
$
30,632
$
72,645
$
62,605
Earnings Per Unit
Basic earnings per common unit available to common unitholders
$
0.66
$
0.51
$
1.16
$
1.04
Dilutive effect of EITF 03-6 (b)
0.03
—
—
—
Adjusted net earnings per unit available to common unitholders
$
0.69
$
0.51
$
1.16
$
1.04
Weighted average common units outstanding
62,950.4
60,483.8
62,688.2
60,346.3
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Supplemental Data and Reconciliation of Non-GAAP Items:
Three months ended
Nine months ended
April 30,
April 30,
2007
2006
2007
2006
Propane gallons
244,407
231,186
681,567
681,885
Net earnings
$
43,703
$
30,941
$
73,379
$
63,237
Income tax expense
1,752
2,271
3,634
2,971
Interest expense
21,534
20,778
66,243
62,893
Depreciation and amortization expense
22,245
21,138
65,936
63,864
Interest income
(981
)
(557
)
(2,871
)
(1,465
)
EBITDA
88,253
74,571
206,321
191,500
Employee stock ownership plan compensation charge
2,721
2,597
8,301
7,521
Unit and stock-based compensation charge (c)
499
346
1,165
1,581
Loss on disposal of assets and other
3,097
2,881
9,592
5,518
Minority interest
507
377
933
829
Adjusted EBITDA (d)
95,077
80,772
226,312
206,949
Net cash interest expense (e)
(22,451
)
(21,536
)
(66,723
)
(64,337
)
Maintenance capital expenditures (f)
(4,026
)
(3,399
)
(13,745
)
(9,458
)
Cash paid for taxes
(1,112
)
(534
)
(2,877
)
(609
)
Distributable cash flow to equity investors (g)
$
67,488
$
55,303
$
142,967
$
132,545
(a) Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P.
(b) Emerging Issues Task Force (“EITF”) 03-6 “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share,” requires the calculation of net earnings per limited partner unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings for the period had to be distributed. 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 earnings to the limited partners. Although the dilutive effect of EITF 03-6 on basic net earnigns per common unit was $0.03 for the three months ended April 30, 2007, due to the seasonality of the propane business, the dilution effect of EITF 03-6 on net earnings per limited partner unit will typically only impact the three months ending January 31. EITF 03-6 did not have a dilutive effect on the three months ended April 30, 2006 or the nine months ended April 30, 3007 and 2006.
(c) Statement of Financial Accounting Standards (“SFAS”) No. 123( R), “Share-Based Payment” requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. Share-based payment transactions resulted in a non-cash compensation charge of $0.2 million and $0.1 million to operating expense, for the three months ended April 30, 2007 and 2006, respectively, and $0.3 million and $0.4 million to operating expense for the nine months ended April 30, 2007 and 2006, respectively. A non-cash compensation charge of $0.3 million and $0.2 million was recorded to general and administrative expense for the three months ended April 30, 2007 and 2006, respectively, and $0.9 million and $1.2 million for the nine months ended April 30, 2007 and 2006, respectively.
(d) Management considers Adjusted EBITDA to be a chief measurement of the partnership’s overall economic performance and return on invested capital. Adjusted EBITDA is calculated as earnings before interest, income taxes, depreciation and amortization, employee stock ownership plan compensation charge, unit and stock-based compensation charge, loss on disposal of assets and other, minority interest, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership’s performance in a manner similar to the method management uses, adjusted for items management believes are unusual or non-recurring, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, management believes this measure is consistent with the manner in which the partnership’s lenders and investors measure its overall performance and liquidity, including its ability to pay quarterly equity distributions, services its long-term debt and other fixed obligations and to fund its capital expenditures and working capital requirements. 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.
(e) Net cash interest expense is the sum of interest expense less non-cash interest expense and interest income. This amount also includes interest expense related to the accounts receivable securitization facility.
(f) Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment.
(g) Management considers Distributable cash flow to equity investors a meaningful non-GAAP measure of the partnership’s ability to declare and pay quarterly distributions to common unitholders. Distributable cash flow, as management defines it, may not be comparable to distributable cash flow or similarly titled measures used by other corporations and partnerships.
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