FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For quarter ended January 31, 1994
Commission file number 33-38482
Ferrellgas, Inc.
Ferrell Companies, Inc.
One Liberty Oil Company
(Exact name of registrants as specified in their charters)
Delaware 73-1285864
Kansas 48-0587968
Missouri 43-1180681
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Nos.)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices)
Registrants' telephone number, including area code: (816) 792-1600
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 X No ___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of January 31, 1994:
Ferrellgas, Inc. - 990 shares of $1 par value common stock
Ferrell Companies, Inc.- 2,573,100 shares of Class A common stock
19,277 shares of $.01 par value Class M common stock
One Liberty Oil Company - 100 shares of $1 par value common stock
FERRELLGAS, INC.
FERRELL COMPANIES, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ferrellgas, Inc. and Subsidiaries
Consolidated Balance Sheet -
January 31, 1994, and July 31, 1993
Consolidated Statement of Earnings -
Three months ended January 31, 1994 and 1993
Consolidated Statement of Earnings -
Six months ended January 31, 1994 and 1993
Consolidated Statement of Cash Flows -
Six months ended January 31, 1994 and 1993
Notes to Consolidated Financial Statements
Ferrell Companies, Inc. and Subsidiaries
Consolidated Balance Sheet -
January 31, 1994, and July 31, 1993
Consolidated Statement of Earnings -
Three months ended January 31, 1994 and 1993
Consolidated Statement of Earnings -
Six months ended January 31, 1994 and 1993
Consolidated Statement of Cash Flows -
Six months ended January 31, 1994 and 1993
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS, INC.
(a wholly-owned subsidiary of Ferrell Companies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands except for share data)
1/31/94 7/31/93
ASSETS (unaudited) (audited)
Current Assets:
Cash and cash equivalents $30,107 $32,706
Short-term investments 27,532 25,040
Accounts and notes receivable 102,471 52,190
Inventories 40,627 23,652
Prepaid expenses and other current assets 2,835 1,898
Receivable from parent and affiliate - 916
Total Current Assets 203,572 136,402
Property, plant and equipment 297,711 303,816
Intangible assets 67,816 72,537
Investment in Class B redeemable
common stock of parent 36,031 36,031
Other assets 21,866 21,833
Note receivable from parent 4,000 -
Deferred income taxes - 2,757
Total Assets $630,996 $573,376
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $69,571 $32,946
Payable to parent and affiliate 967 -
Current portion of long-term debt 1,604 1,766
Accrued interest expense 10,397 10,374
Other current liabilities 18,015 16,908
Total Current Liabilities 100,554 61,994
Long-term debt 488,841 489,589
Other liabilities 10,154 10,434
Deferred income taxes 6,045 -
Stockholder's Equity:
Common stock, one dollar par value;
10,000 shares authorized; 990 shares
issued and outstanding 1 1
Additional paid-in capital 32,863 32,863
Accumulated deficit (7,462) (21,505)
Total Stockholder's Equity 25,402 11,359
Total Liabilities and Stockholder's Equity $630,996 $573,376
<FN>
See notes to consolidated financial statements.
</FN>
FERRELLGAS, INC.
(a wholly-owned subsidiary of Ferrell Companies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands)
(unaudited)
For the three months ended
January 31, January 31,
1994 1993
(as restated)
Revenues:
Gas liquids and related product sales $185,835 $182,243
Other 8,087 9,256
Total Revenues 193,922 191,499
Costs and expenses:
Cost of product sold 95,464 102,868
Operating 40,649 38,143
Depreciation and amortization 7,255 7,771
General and administrative 3,555 2,313
Vehicle leases 1,039 1,218
Total costs and expenses 147,962 152,313
Operating income 45,960 39,186
Loss on disposal of assets (196) (82)
Interest income 934 685
Interest expense (14,917) (15,068)
Earnings before income taxes 31,781 24,721
Income tax expense 12,201 9,396
Net earnings $19,580 $15,325
<FN>
See notes to consolidated financial statements.
</FN>
FERRELLGAS, INC.
(a wholly-owned subsidiary of Ferrell Companies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands)
(unaudited)
For the six months ended
January 31, January 31,
1994 1993
(as restated)
Revenues:
Gas liquids and related product sales $289,795 $292,172
Other 14,341 15,824
Total Revenues 304,136 307,996
Costs and expenses:
Cost of product sold 155,979 169,686
Operating 73,926 72,296
Depreciation and amortization 14,778 15,637
General and administrative 5,872 4,957
Vehicle leases 2,144 2,411
Total costs and expenses 252,699 264,987
Operating income 51,437 43,009
Loss on disposal of assets (410) (519)
Interest income 1,693 1,408
Interest expense (29,824) (30,089)
Earnings before income taxes 22,896 13,809
Income tax expense 8,853 5,431
Net earnings $14,043 $8,378
<FN>
See notes to consolidated financial statements.
</FN>
FERRELLGAS, INC.
(a wholly-owned subsidiary of Ferrell Companies, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
For the six months en
January 31, January 31,
1994 1993
(as restated)
Cash Flows From Operating Activities:
Net earnings $14,043 $8,378
Reconciliation of net earnings to
net cash from operating activities:
Depreciation and amortization 14,778 15,637
Other 2,604 3,010
Increase in assets:
Accounts and notes receivable (50,888) (34,987)
Inventories (16,975) (9,522)
Prepaid expenses and other current assets (937) (685)
Increase (decrease) in liabilities:
Accounts payable 36,625 10,288
Accrued interest expense 23 (80)
Other current liabilities 978 674
Other liabilities 119 334
Deferred income taxes 8,802 5,161
Net cash provided (used) by operating activities 9,172 (1,792)
Cash Flows From Investing Activities:
Net short-term investment activity (2,492) 19,208
Capital expenditures (4,910) (7,875)
Proceeds from asset sales 425 1,526
Additions to intangibles (12) -
Net additions to other assets (10) -
Net cash provided (used) by investing activities (6,999) 12,859
Cash Flows From Financing Activities:
Reductions to long-term debt (1,135) (1,397)
Additions to financing costs (53) (7)
Reacquisition of Class B redeemable common stock - (1,351)
Net advances to related party (1,467) (42)
Net advances to parent and affiliates (2,117) (283)
Net cash used by financing activities (4,772) (3,080)
Increase (Decrease) in Cash & Cash Equivalents (2,599) 7,987
Cash and cash equivalents - beginning of year 32,706 27,959
Cash and Cash Equivalents - End of Period $30,107 $35,946
<FN>
See notes to consolidated financial statements.
FERRELLGAS, INC.
(a wholly-owned subsidiary of
Ferrell Companies, Inc.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1994 AND 1993
(unaudited)
A. Reference should be made to the Notes to Financial
Statements for the fiscal years ending July 31, 1993,
1992 and 1991, included in the Company's annual
financial statements in Form 10-K (Commission File No.
33-38482) filed with the SEC.
B. The financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair
statement of the interim periods presented. All
adjustments to the financial statements were of a
normal, recurring nature.
C. The propane industry is seasonal in nature with peak
activity during the winter months. Therefore, the
results of operations for the periods ended January 31,
1994 and 1993, are not necessarily indicative of the
results to be expected for a full year.
D. The Internal Revenue Service (IRS) has examined the
Company's consolidated income tax returns for the years
ended July 31, 1987 and 1986, and has proposed certain
adjustments which relate principally to the purchase
price allocations for an acquisition made during 1987.
The IRS has proposed to disallow $61 million of
deductions taken or to be taken for depreciation of
customer tanks for which the Company asserts the
methods and principles used during the valuation of the
customer tanks are defensible. Also, the IRS has
proposed to disallow $90 million of deductions for
amortization of customer relationships taken or to be
taken on the Company's consolidated income tax returns.
On April 20, 1993, the United States Supreme Court held
in Newark Morning Ledger v. United States that a
taxpayer may amortize customer based intangibles if
that taxpayer can prove such intangibles are capable of
being valued and the value diminishes over time. The
Company contends it has met this burden of proof and
feels this recent Supreme Court decision supports the
positions taken during the Company's allocation of
purchase price to customer relationships. The Company
intends to vigorously defend against these proposed
adjustments and is in the process of protesting these
adjustments through the appeals process of the IRS. At
this time, it is not possible to determine the ultimate
resolution of this matter.
E. In its previously issued consolidated financial
statements, the Company did not record the compensation
expense related to the Ferrell Companies, Inc. Long-
Term Incentive Plan (the "Plan"). Such charges
(credits) and the resulting liability were previously
recorded by Ferrell Companies, Inc. ("Ferrell"). The
1993 consolidated financial statements have been
restated to reflect compensation charges (credits), net
of income taxes, pursuant to the Plan and any
corresponding capital transaction with Ferrell. The
following is a summary of the principal effects of the
restatement:
Three months ended Six months ended
January 31, 1993 January 31, 1993
As As
Previously As Previously As
Reported Restated Reported Restated
Summary of operations:
Interest income $ 741 $ 685 $ 1,518 $ 1,408
Earnings before income taxes 24,777 24,721 13,919 13,809
Income tax expense 9,417 9,396 5,473 5,431
Net earnings 15,360 15,325 8,446 8,378
</FN>
FERRELL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands except for share data)
1/31/94 7/31/93
ASSETS (unaudited) (audited)
Current Assets:
Cash and cash equivalents $32,586 $32,914
Short-term investments 27,532 25,040
Accounts and notes receivable 103,026 52,864
Inventories 40,627 23,652
Prepaid expenses and other current assets 2,862 1,903
Total Current Assets 206,633 136,373
Property, plant and equipment 297,762 303,867
Intangible assets 67,816 72,537
Other assets 22,901 22,877
Deferred income taxes - 2,421
Total Assets $595,112 $538,075
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $69,571 $32,946
Current portion of long-term debt 1,604 1,951
Accrued interest expense 10,397 10,374
Other current liabilities 18,015 17,533
Total Current Liabilities 99,587 62,804
Long-term debt 488,841 489,589
Other liabilities 12,915 12,180
Deferred income taxes 6,294 -
Stockholders' Deficit:
Class A common stock, no par value;
3,550,000 shares authorized;
2,573,100 shares issued and outstanding 211 211
Class M common stock, $.01 par value;
30,000 shares authorized;
19,277 shares issued and outstanding - -
Additional paid-in capital 899 826
Accumulated deficit (13,635) (27,535)
Total Stockholders' Deficit (12,525) (26,498)
Total Liabilities and Stockholders' Deficit $595,112 $538,075
<FN>
See notes to consolidated financial statements.
</FN>
FERRELL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands except per share data)
(unaudited)
For the three months ended
January 31, January 31,
1994 1993
(as restated)
Revenues:
Gas liquids and related product sales $185,835 $182,243
Other 8,087 9,260
Total Revenues 193,922 191,503
Costs and expenses:
Cost of product sold 95,464 102,868
Operating 40,649 38,143
Depreciation and amortization 7,255 7,771
General and administrative 3,667 2,388
Vehicle leases 1,039 1,218
Total costs and expenses 148,074 152,388
Operating income: 45,848 39,115
Loss on disposal of assets (196) (82)
Interest income 908 732
Interest expense (14,916) (15,033)
Earnings before income taxes 31,644 24,732
Income tax expense 12,150 9,399
Net earnings $19,494 $15,333
Net earnings per common share $7.51 $5.79
<F>
See notes to consolidated financial statements.
</F>
FERRELL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands)
(unaudited)
For the six months ended
January 31, January 31,
1994 1993
(as restated)
Revenues:
Gas liquids and related product sales $289,795 $292,172
Other 14,344 15,830
Total Revenues 304,139 308,002
Costs and expenses:
Cost of product sold 155,979 169,686
Operating 73,926 72,296
Depreciation and amortization 14,778 15,637
General and administrative 6,088 5,139
Vehicle leases 2,144 2,411
Total costs and expenses 252,915 265,169
Operating income: 51,224 42,833
Loss on disposal of assets (410) (519)
Interest income 1,677 1,515
Interest expense (29,825) (30,019)
Earnings before income taxes 22,666 13,810
Income tax expense 8,766 5,431
Net earnings $13,900 $8,379
Net earnings per common share $5.35 $3.17
<F>
See notes to consolidated financial statements.
</F>
FERRELL COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
For the six months ended
January 31, January 31,
1994 1993
(as restated)
Cash Flows From Operating Activities:
Net earnings $13,900 $8,379
Reconciliation of net earnings to net
cash from operating activities:
Depreciation and amortization 14,778 15,637
Other 2,604 3,010
Decrease (increase) in assets:
Accounts and notes receivable (50,769) (34,983)
Inventories (16,975) (9,522)
Prepaid expenses and other current assets (959) 811
Increase (decrease) in liabilities:
Accounts payable 36,625 10,288
Accrued interest expense 23 (157)
Other current liabilities 353 674
Other liabilities 1,134 (1,793)
Deferred income taxes 8,715 5,160
Net cash provided (used) by operating activities 9,429 (2,496)
Cash Flows From Investing Activities:
Net short-term investment activity (2,492) 19,208
Capital expenditures (4,910) (7,875)
Proceeds from asset sales 425 1,526
Additions to intangibles (12) -
Net reductions (additions) to other assets (1) 28
Net cash provided (used) by investing activities (6,990) 12,887
Cash Flows From Financing Activities:
Reductions to long-term debt (1,320) (1,412)
Additions to financing costs (53) (7)
Reacquisition of Class B redeemable common stock - (1,453)
Proceeds from issuance of Class M common stock 76 454
Reacquisition of Class M common stock (3) (29)
Net advances to related party (1,467) (42)
Net cash used by financing activities (2,767) (2,489)
Increase (decrease) in Cash & Cash Equivalents (328) 7,902
Cash and cash equivalents - beginning of year 32,914 28,151
Cash and Cash Equivalents - End of Period $32,586 $36,053
<FN>
See notes to consolidated financial statements.
FERRELL COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1994 AND 1993
(unaudited)
A. Reference should be made to the Notes to Consolidated
Financial Statements for the fiscal years ending July
31, 1993, 1992 and 1991, included in the Company's
annual financial statements in Form 10-K (Commission
File No. 33-38482) filed with the SEC.
B. The financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair
statement of the interim periods presented. All
adjustments to the financial statements were of a
normal, recurring nature.
C. The propane industry is seasonal in nature with peak
activity during the winter months. Therefore, the
results of operations for the periods ended January 31,
1994 and 1993, are not necessarily indicative of the
results to be expected for a full year.
D. The Internal Revenue Service (IRS) has examined the
Company's consolidated income tax returns for the years
ended July 31, 1987 and 1986, and has proposed certain
adjustments which relate principally to the purchase
price allocations for an acquisition made during 1987.
The IRS has proposed to disallow $61 million of
deductions taken or to be taken for depreciation of
customer tanks for which the Company asserts the
methods and principles used during the valuation of the
customer tanks are defensible. Also, the IRS has
proposed to disallow $90 million of deductions for
amortization of customer relationships taken or to be
taken on the Company's consolidated income tax returns.
On April 20, 1993, the United States Supreme Court held
in Newark Morning Ledger v. United States that a
taxpayer may amortize customer based intangibles if
that taxpayer can prove such intangibles are capable of
being valued and the value diminishes over time. The
Company contends it has met this burden of proof and
feels this recent Supreme Court decision supports the
positions taken during the Company's allocation of
purchase price to customer relationships. The Company
intends to vigorously defend against these proposed
adjustments and is in the process of protesting these
adjustments through the appeals process of the IRS. At
this time, it is not possible to determine the ultimate
resolution of this matter.
E. Ferrell has determined that the estimated value of the
Ferrell Companies, Inc. Long-Term Incentive Plan and the
corresponding compensation expense recorded in its
previously issued 1993 consolidated financial statements
were understated. Accordingly, the consolidated financial
statements for 1993 have been restated. The following is a
summary of the principal effects of the restatement:
Three months ended Six months ended
January 31, 1993 January 31, 1993
As As
Previously As Previously As
Reported Restated Reported Restated
Summary of operations:
Costs and expenses $151,464 $152,388 $264,245 $265,169
Operating income 40,039 39,115 43,757 42,833
Income tax expense 9,750 9,399 5,782 5,431
Net earnings 15,906 15,333 8,952 8,371
Net earnings per share $6.00 $5.79 $3.38 $3.17
</FN>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the historical
financial condition and results of operations of Ferrellgas,
Inc. and its subsidiaries (the "Company") and Ferrell
Companies, Inc. and its subsidiaries ("Ferrell"). The
discussion should be read in conjunction with the financial
statements and the notes thereto included elsewhere in this
Form 10-Q.
In its previously issued consolidated financial
statements, the Company did not record the compensation
expense related to the Ferrell Companies, Inc. Long-Term
Incentive Plan (the "Plan"). Such charges (credits) and the
resulting liabilities were previously recorded by Ferrell.
The accompanying consolidated financial statements are
restated to reflect compensation charges (credits), net of
income taxes, pursuant to the Plan and any corresponding
capital transaction with Ferrell. The effects of recording
the adjustments by Ferrellgas are reflected in the following
discussions of the Company's historical financial condition
and results of operations.
Results of Operations - the Company
The propane industry is seasonal in nature with peak
activity during the winter months. Due to the seasonality
of the business, results of operations for the three and six
months ended January 31, 1994, are not necessarily
indicative of the results to be expected for a full year.
Other factors affecting the results of operations include
competitive conditions, demand for product, variations in
weather and fluctuations in propane prices.
Three Months Ended January 31, 1994 vs. January 31, 1993
Total Revenues. Total revenues increased 1.3% to
$193,922,000 as compared with $191,499,000 for the prior
period. The increase is attributable to revenues from retail
operations increasing 4.3% to $172,175,000, offset by other
operations (net trading operations, wholesale propane
marketing and chemical feedstocks marketing) decreasing
17.5% to $21,747,000.
The increase in revenues from retail operations resulted
primarily from an increase in sales volume due to cooler
temperatures in the primary heating months than that which
existed in the prior period. The volume of gallons sold,
excluding acquisitions, increased revenues by $7,874,000.
Fiscal year 1994 and 1993 acquisitions increased revenues by
$1,009,000. These increases are offset by a $2,046,000
decrease in sales price due to lower product costs.
The decrease in other operations revenue is attributable
to i) wholesale propane marketing's reduced grain drying
volumes and decreased product costs and ii) decreased net
trading results due to reduced market volatility relative to
the prior period.
Gross Profit. Gross profit increased 11.1% to $98,458,000
as compared with $88,631,000, for the prior period,
primarily due to an increase in retail operations. Retail
operations gross profit improved due to increased sales
volume as discussed previously and to margin increases as a
result of favorable changes in the competitive pressures of
the industry and normal fluctuations in the Company's
product mix. These increases were offset by a decrease in
net trading results due to reduced market volatility
relative to the prior period.
Operating Expense. Operating expenses increased 6.6% to
$40,649,000 as compared with $38,143,000, for the prior
period, primarily due to i) increased accrued incentive
compensation expense, ii) increased vehicle expenses due to
the increased sales volume and iii) general increases in
the cost of doing business. These increases are primarily
offset by a decrease in general liability expense and a
decrease in bad debt expense.
General and Administrative Expenses. General and
administrative expenses increased 53.7% to $3,555,000 as
compared with $2,313,000 for the prior period due to
increased accrued incentive compensation expense. This
increase was primarily offset by a reduction in facilities
rent due to the purchase of the Liberty, Missouri, corporate
offices in the second and third quarters of fiscal year
1993.
Depreciation and Amortization. Depreciation expense
decreased 6.6% to $7,255,000 as compared with $7,771,000 for
the prior period due primarily to extending the useful life
of the Company's vehicles beyond the depreciable life and to
the reduction in the number of Company owned vehicles.
Net Interest Expense. Net interest expense decreased 2.8%
to $13,983,000 as compared with $14,383,000 for the prior
period due to the repurchase of $10,500,000 of senior notes
in the fourth quarter of fiscal year 1993 offset by
increased non-cash amortization of financing costs.
Net Earnings. Net earnings increased 27.8% to $19,580,000
as compared with $15,325,000 for the prior period primarily
due to the increase in retail operations sales volume and
margins offset by increased operating and general and
administrative expenses.
Six Months Ended January 31, 1994 vs. January 31, 1993
Total Revenues. Total revenues decreased 1.3% to
$304,136,000 as compared with $307,996,000 for the prior
period. The overall decrease is attributable to revenues
from other operations (net trading operations, wholesale
propane marketing and chemical feedstocks marketing)
decreasing 22.6% to $38,612,000 offset by revenues from
retail operations increasing 2.9% to $265,524,000.
The decrease in other operations revenue is primarily due
to increased sales of chemical feedstocks in the prior
period. Due to prior period storage limitations chemical
feedstocks marketing sold product that was designated for
storage. Additional decreases are the result of lower
product costs for chemical feedstocks and wholesale propane
marketing and decreased net trading results due to reduced
market volatility relative to the prior period.
The increase in revenues from retail operations is
primarily due to an increase in sales volume due to cooler
temperatures in the primary heating months than that which
existed in the prior period. The volume of gallons sold,
excluding acquisitions, increased revenues by $5,995,000.
Fiscal year 1994 and 1993 acquisitions increased revenues by
$1,153,000. These increases are offset by a $241,000
decrease in sales price due to lower product costs.
Gross Profit. Gross profit increased 7.1% to $148,157,000
as compared with $138,310,000 for the prior period,
primarily due to an increase in retail operations. Retail
operations results improved due to increased sales volume as
discussed previously and to margin increases as a result of
favorable changes in the competitive pressures of the
industry and to normal fluctuations in the Company's product
mix. These increases are offset by a decrease in net trading
results due to reduced market volatility relative to the
prior period.
Operating Expense. Operating expenses increased 2.3% to
$73,926,000 as compared with $72,296,000, for the prior
period, primarily due to i) increased accrued incentive
compensation expense, ii) increased vehicle expenses due to
the increased sales volume and iii) general increases in
the cost of doing business. These increases are primarily
offset by a decrease in general liability expense and a
decrease in bad debt expense.
General and Administrative Expenses. General and
administrative expenses increased 18.5% to $5,872,000 as
compared with $4,957,000 for the prior period due to
increased accrued incentive compensation expense. This
increase was primarily offset by a reduction in facilities
rent due to the purchase of the Liberty, Missouri, corporate
offices in the second and third quarters of fiscal year
1993.
Depreciation and Amortization. Depreciation expense
decreased 5.5% to $14,778,000 as compared with $15,637,000
for the prior period due primarily to extending the life of
the Company's vehicles beyond the depreciable life and to
the reduction in the number of Company owned vehicles.
Net Interest Expense. Net interest expense decreased 1.9%
to $28,131,000 as compared with $28,681,000 for the prior
period due to the repurchase of $10,500,000 of senior notes
in the fourth quarter of fiscal year 1993 offset by
increased non-cash amortization of financing costs.
Net Earnings. Net earnings increased 67.6% to $14,043,000
as compared with $8,378,000 for the prior period primarily
due to the increase in retail operations sales volume and
margins offset by increased operating and general and
administrative expenses.
Liquidity and Capital Resources - the Company
The ability of the Company to satisfy its obligations will
be dependent upon future performance, which will be subject
to prevailing economic conditions and too financial,
business, weather conditions and other factors, many of
which are beyond its control.
For the six months ended January 31, 1994, the Company's
cash flow provided by operations (as measured by operating
income before depreciation and amortization) was
$66,215,000, which was sufficient to (i) make interest
payments and required reductions to existing debt and (ii)
make purchases of property, plant and equipment. Over the
next twelve months the Company expects to generate
sufficient cash from operations to meet its obligations.
Cash Flows From Operating Activities. Cash provided by
operating activities increased to $9,172,000 for the six
months ended January 31, 1994, as compared with ($1,792,000)
for the prior period. This increase is primarily
attributable to an increase in net earnings and accounts
payable offset by an increase in accounts and notes
receivable and inventory.
Cash Flows From Investing Activities. During the six
months ended January 31, 1994, the Company made property,
plant and equipment and intangible aggregate expenditures of
$4,992,000. Total capital expenditures are essentially
governed by the cash interest coverage ratio covenants
contained in the various debt agreements. These covenants
limit capital expenditures depending upon the amount of cash
flow and cash interest expense of the Company. The Company
believes that such limitations will not adversely impact the
Company if normal operating results are achieved.
The Company maintains its vehicle and transportation
equipment fleet by leasing light and medium duty trucks and
tractors. The Company believes vehicle leasing is a cost
effective method for financing transportation equipment.
Capital requirements for repair and maintenance of property,
plant and equipment are relatively low since technological
change is limited and the useful lives of propane tanks and
cylinders, the Company's principal physical assets, are
generally long.
The Company invests in United States Treasury Bills and
corporate commercial paper. The maturities as of January 31,
1994 range from one to nine months. These investments are
presented as short-term investments in the Company's
consolidated financial statements. The Company will
maintain this investment strategy in the future by
continuing to invest idle cash in investment grade short-
term investments with maturities of less than one year.
Cash Flows From Financing Activities. Cash provided by
operating activities is expected to continue to provide all
of the funding necessary for the Company's capital
expenditures.
The Company has a $50,000,000 bank credit facility that
provides for a working capital facility and a letter of
credit facility. The facilities terminate July 31, 1995.
At January 31, 1994, there were no borrowings outstanding
under the working capital facility and letters of credit
outstanding under the letter of credit facility, which are
primarily used to secure obligations under certain insurance
and leasing arrangements, totaled $44,009,000, resulting in
an available bank credit facility of $5,991,000.
The Company does not have any significant commitments for
fixed asset acquisitions, unusual working capital
commitments or contingent liabilities that might materially
affect short-term or long-term liquidity. Future short-term
capital needs of the Company are expected to be provided by
future operations and existing cash balances.
The Company is required to make significant debt principal
reductions when the senior notes mature August 1, 1996. The
Company believes that it will be able to refinance or extend
the terms of the senior notes, if necessary.
Results of Operations, Liquidity and Capital Resources -
Ferrell
Virtually all of Ferrell's operating activities occur
through its subsidiaries. Ferrell's principal assets
consist almost entirely of its ownership of the stock of its
subsidiaries. The results of Ferrell's operations are,
therefore, largely determined by the results of operations
of its principal operating subsidiary, the Company . See
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as it relates to the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed on the accompanying Exhibit
Index are filed as part of this report. Exhibits
required by Item 601 of Regulation S-K which are
not listed are not applicable.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the six
months ended January 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrants have duly caused this
report to be signed on their behalf by the undersigned
thereunto duly authorized.
Ferrellgas, Inc.
Ferrell Companies, Inc.
One Liberty Oil Company
(Registrants)
Date: March 17, 1994 By Danley K. Sheldon
Chief Financial Officer
and Assistant Secretary
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
* 4.1 Purchase Agreement, dated as of
July 1, 1990, among the Company, Ferrell, Liberty Oil
and the purchasers of the Senior Notes, and a list of
the Exhibits thereto.
* 4.2 Indenture, dated as of July 1,
1990, among the Company, Ferrell, Liberty Oil and
State Street Bank and Trust Company of Connecticut,
N.A., as Trustee (which includes the form of Note as
Exhibit A).
* 4.3 First Supplemental Indenture, dated
as of December 20, 1990, among the Company, Ferrell,
Liberty Oil and State Street Bank and Trust Company
of Connecticut, N.A., as Trustee.
* 4.4 Second Supplemental Indenture,
dated as of February 28, 1991, among the Company,
Ferrell, Liberty Oil and State Street Bank and Trust
Company of Connecticut, N.A., as Trustee.
* 4.5 Third Supplemental Indenture, dated
as of March 20, 1991, among the Company, Ferrell,
Liberty Oil and State Street Bank and Trust Company
of Connecticut, N.A., as Trustee.
*** 4.6 Fourth Supplemental Indenture,
dated as of December 12, 1991, among the Company,
Ferrell, Liberty Oil and State Street Bank and Trust
Company of Connecticut, N.A., as Trustee.
*** 4.7 Form of $250,000,000 11 5/8% Senior
Subordinated Debenture Indenture due 2003, dated as
of December 1, 1991, between the Company and Norwest
Bank Minnesota, National Association, as Trustee.
** 4.8 Fifth Supplemental Indenture, dated
as of March 8, 1993, among the Company, Ferrell,
Liberty Oil and State Street Bank and Trust Copany of
Connecticut, N.A., as Trustee. (Series A Floating,
Series B Fixed.)
** 4.9 Sixth Supplemental Indenture, dated
as of October 19, 1993, among the Company, Ferrell,
Liberty Oil and State Street Bank and Trust Company
of Connecticut, N.A., as Trustee. (Series A
Floating, Series B Fixed.)
11 Statement regarding computation of
per share earnings.
** 24.1 Consent of Smith, Gill, Fisher &
Butts, a Professional Corporation.
** 24.2 Consent of Deloitte & Touche.
* 24.3 Consent of Kevin K. Nunnick &
Associates, Inc.
* Previously filed as an exhibit to the Company's
and the Guarantors' Registration Statement on Form S-1
(Commission File No. 33-38482) and incorporated herein
by reference.
** Previously filed as an Exhibit to the Company's
and the Guarantors' Registration Statement on Form S-1
(Commission File No. 33-39932) and incorporated herein
by reference.
*** Previously filed as an Exhibit to the Company's
Registration Statement on Form S-1 (Commission File
No. 33-43727) and incorporated herein by reference.
FERRELL COMPANIES, INC. AND SUBSIDIARIES EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 1994 AND 1993
(in thousands except per share data)
(unaudited)
January 31, 1993
January 31, 1994 (as restated)
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
Net Earnings Per Common Share
Net earnings $19,494 $13,900 $15,333 $8,379
Weighted average common
stock equivalent 2,596 2,596 2,647 2,647
Net earnings per common share $7.51 $5.35 $5.79 $3.17
Common Stock Equivalents
Class A Common Stock 2,573 2,573 2,573 2,573
Class B Common Stock - A) - A) 55 59
Class M Common Stock 19 19 19 15
Unexercised Class M Options 4 4 - B) - B)
Weighted Average Common
Stock Equivalents 2,596 2,596 2,647 2,647
<FN>
A) The final outstanding Class B redeemable common stock shares were
purchased by Ferrellgas in the third quarter of fiscal year 1993.
B) Inclusion of Class M options would be antidilutive.
</FN>