UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended April 30, 2001
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: 1-11331
333-06693
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware 43-1698480
Delaware 43-1742520
---------------------------- -------------------------------
(States or other jurisdictions of (I.R.S. Employer Identification Nos.)
incorporation or organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (816) 792-1600
Indicate by check mark whether the registrant (1) has 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
At June 14, 2001, the registrants had units or shares outstanding as follows:
Ferrellgas Partners, L.P. 35,864,616 Common Units
2,839,537 Senior Units
Ferrellgas Partners Finance
Corp. 1,000 Common Stock
FERRELLGAS PARTNERS, L.P. and SUBSIDIARIES
FERRELLGAS PARTNERS FINANCE CORP.
Table of Contents
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ferrellgas Partners, L.P. and Subsidiaries
Consolidated Balance Sheets-April 30, 2001 (unaudited)
and July 31, 2000 1
Consolidated Statements of Earnings -
Three and nine months ended April 30, 2001 and
2000 (unaudited) 2
Consolidated Statement of Partners' Capital and Accumulated Other
Comprehensive Income - Nine months ended April 30, 2001
(unaudited) 3
Consolidated Statements of Cash Flows -
Nine months ended April 30, 2001 and 2000 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Ferrellgas Partners Finance Corp.
Balance Sheets - April 30, 2001 (unaudited) and July 31, 2000 12
Statements of Earnings - Three and nine months ended April 30,
2001 and 2000 (unaudited) 12
Statements of Cash Flows - Nine months ended April 30, 2001
and 2000 (unaudited) 13
Notes to Financial Statements (unaudited) 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 26
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 27
ITEM 5. OTHER INFORMATION 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 27
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of unit data)
April 30, July 31,
ASSETS 2001 2000
- ------------------------------------------------------------------- -------------- ------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 21,264 $14,838
Accounts and notes receivable, net 109,980 89,801
Inventories 60,170 71,979
Prepaid expenses and other current assets 12,801 8,275
-------------- ------------
Total Current Assets 204,215 184,893
Property, plant and equipment, net 493,838 516,183
Intangible assets, net 237,634 256,476
Other assets, net 18,687 10,355
-------------- ------------
Total Assets $954,374 $967,907
============== ============
LIABILITIES AND PARTNERS' CAPITAL
- -------------------------------------------------------------------
Current Liabilities:
Accounts payable $60,679 $95,264
Other current liabilities 67,754 77,631
Short-term borrowings - 18,342
-------------- ------------
Total Current Liabilities 128,433 191,237
Long-term debt 707,844 718,118
Other liabilities 16,196 16,176
Contingencies and commitments - -
Minority interest 2,671 2,032
Partners' Capital:
Senior unitholder (4,888,234 and 4,652,691
units outstanding at April 2001 and July 2000, redeemable
liquidation value - $195,529 and $186,108, respectively) 195,529 179,786
Common unitholders (31,307,116 units outstanding
at both April 2001 and July 2000) (38,221) (80,931)
General partner unitholder (316,233 units outstanding
at both April 2001 and July 2000) (58,078) (58,511)
Accumulated other comprehensive income - -
-------------- ------------
Total Partners' Capital 99,230 40,344
-------------- ------------
Total Liabilities and Partners' Capital $954,374 $967,907
============== ============
See notes to consolidated financial statements.
1
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per-unit data)
(unaudited)
Three months ended April 30, Nine months ended April 30,
----------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------- ----------- ------------
Revenues:
Gas liquids and related product sales $364,723 $279,043 $1,237,572 $736,575
Other 28,112 21,197 74,845 67,399
------------ ------------- ----------- ------------
Total revenues 392,835 300,240 1,312,417 803,974
Cost of product sold (exclusive of
depreciation, shown separately below) 240,034 176,274 833,325 439,627
------------ ------------- ----------- ------------
Gross profit 152,801 123,966 479,092 364,347
Operating expense 73,358 70,556 228,846 197,074
Depreciation and amortization expense 14,484 17,382 42,462 43,381
General and administrative expense 6,619 7,070 18,246 18,213
Equipment lease expense 7,618 8,173 24,386 17,612
Employee stock ownership plan compensation charge 1,316 840 3,510 2,893
Loss (gain) on disposal of assets and other 1,607 (99) 4,761 30
------------ ------------- ----------- ------------
Operating income 47,799 20,044 156,881 85,144
Interest expense (14,884) (15,531) (47,158) (42,809)
Interest income 981 959 2,420 1,568
Other charges (3,118) - (3,118) -
------------ ------------- ----------- ------------
Earnings before minority interest 30,778 5,472 109,025 43,903
Minority interest 376 94 1,240 561
------------ ------------- ----------- ------------
Net earnings 30,402 5,378 107,785 43,342
Distribution to senior unitholder 4,888 4,428 14,310 6,568
Net earnings available to general partner 255 10 935 368
------------ ------------- ----------- ------------
Net earnings available to common unitholders $25,259 $940 $92,540 $36,406
============ ============= =========== ============
Basic and diluted earnings per common unit:
Net earnings after senior unit distribution $ 0.81 $ 0.03 $ 2.96 $ 1.16
============ ============= =========== ============
See notes to consolidated financial statements.
2
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL AND OTHER COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Accumulated
other
General General compre- Total
Senior Common partner Senior Common partner hensive partners'
units units units unitholder unitholders unitholder income capital
---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------
August 1, 2000 4,652.7 31,307.1 316.2 $ 179,786 $ (80,931) $ (58,511) $ - $ 40,344
Contribution from general partner
in connection with ESOP
compensation charge - - - - 3,439 35 - 3,474
Quarterly common unit distributions - - - - (46,962) (474) - (47,436)
Quarterly senior unit distribution - - - - (4,888) (49) - (4,937)
Accrued paid-in-kind
distributions 235.5 - - 9,422 (9,328) (94) - -
Accretion of discount on
senior units - - - 6,321 (6,258) (63) - -
Comprehensive income:
Net earnings - - - - 106,707 1,078 - 107,785
Other comprehensive income-
Cumulative effect of accounting change 709
Net loss on derivative instruments (607)
Reclassification adjustments (102)
----------
Total other comprehensive income -
----------
Comprehensive income 107,785
--------- ---------- -------- ------------ --------- ---------- ---------- ----------
April 30, 2001 4,888.2 31,307.1 316.2 $ 195,529 (38,221) $ (58,078) $ - $ 99,230
========= ========== ======== ============ ========= ========== ========== ==========
See notes to consolidated financial statements.
3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine months ended April 30,
-----------------------------
2001 2000
-------------- -------------
Cash Flows From Operating Activities:
Net earnings $107,785 $43,342
Reconciliation of net earnings to net cash provided by
operating activities:
Depreciation and amortization 42,462 43,381
Employee stock ownership plan compensation charge 3,510 2,893
Other 14,927 4,622
Changes in operating assets and liabilities, net of effects from
business acquisitions and accounts receivable securitization:
Accounts and notes receivable (81,088) (39,926)
Inventories 16,447 (14,088)
Prepaid expenses and other current assets (3,843) (4,778)
Accounts payable (39,473) (1,923)
Accrued interest expense (9,437) (206)
Other current liabilities 3,256 1,121
Other liabilities 194 (763)
-------------- -------------
Net cash provided by operating activities 54,740 33,675
-------------- -------------
Cash Flows From Investing Activities:
Net proceeds form accounts receivable securitization 48,000 -
Business acquisitions, net of cash acquired (4,343) 55,548
Capital expenditures (9,210) (18,631)
Proceeds from sale leaseback transaction - 25,000
Cash paid for acquisition transaction fees - (15,589)
Other 1,051 3,942
-------------- -------------
Net cash provided by investing activities 35,498 50,270
-------------- -------------
Cash Flows From Financing Activities:
Distributions to common unitholders (47,436) (47,435)
Net reductions to short-term borrowings (18,342) (2,627)
Additions to long-term debt 7,648 218,573
Reductions of long-term debt (21,372) (274,743)
Cash paid for debt and lease financing costs - (3,093)
Cash paid for senior unit modification costs (3,764) -
Cash contribution from general partner - 3,571
Other (546) (559)
-------------- -------------
Net cash used in financing activities (83,812) (106,313)
-------------- -------------
Increase (decrease) in cash and cash equivalents 6,426 (22,368)
Cash and cash equivalents - beginning of period 14,838 35,134
-------------- -------------
Cash and cash equivalents - end of period $21,264 $12,766
============== =============
Cash paid for interest $54,367 $41,058
============== =============
See notes to consolidated financial statements.
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2001
(unaudited)
A. The consolidated financial statements of Ferrellgas Partners, L.P.
("Ferrellgas Partners") and Subsidiaries (collectively, the "Partnership")
reflect all adjustments which are, in the opinion of management, necessary
for a fair statement of the interim periods presented. All adjustments to
the consolidated financial statements were of a normal, recurring nature,
as well as the accounting change to adopt Statement of Accounting Standards
(SFAS) 133, Accounting for Derivative Instruments and Hedging Activities.
The information included in this Form 10-Q should be read in conjunction
with Management's Discussion and Analysis and the consolidated financial
statements with related notes included in the Partnership's annual report
on Form 10-K for the year ended July 31, 2000.
B. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States ("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.
C. Certain amounts included in the three and nine months ended April 30 of
fiscal 2000 consolidated financial statements have been reclassified to
conform to the three and nine months ended of fiscal 2001 presentation.
D. The propane industry is seasonal in nature with peak activity during the
winter months. Therefore, the results of operations for the periods ended
April 30 2001 and 2000, are not necessarily indicative of the results to be
expected for a full year.
E. Accounts Receivable Securitization
The operating partnership ("Ferrellgas, L.P.") sells and contributes an
interest in a pool of its trade accounts receivable to its wholly-owned,
special purpose subsidiary, Ferrellgas Receivables, LLC. Ferrellgas
Receivables then sells its interest to a commercial paper conduit of Banc
One, NA according to the terms of a 364-day agreement. Ferrellgas, L.P.
remits to Ferrellgas Receivables funds collected on the pool of trade
receivables held by Ferrellgas Receivables. At April 30, 2001, Ferrellgas,
L.P. had collected and remitted to Ferrellgas Receivables all but
$48,000,000 of the receivables sold to it.
At April 30, 2001, the level of funding available from this facility was
limited to $60,000,000. In accordance with SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," this transaction is reflected on the Partnership's financial
statements as a sale of accounts receivable and an investment in an
unconsolidated subsidiary. The proceeds of these sales are less than the
face amount of the pool of accounts receivable sold. The difference is
classified on the statement of earnings as "Loss (gain) on disposal of
assets and other" and approximates the financing cost of issuing commercial
paper backed by these accounts receivable as well as the associated bad
debt expense. See Note F for the accounting policy implemented to account
for "Investment in an unconsolidated subsidiary."
5
F. Supplemental Balance Sheet Information:
Inventories consist of:
April 30, July 31,
(in thousands) 2001 2000
----------- ----------
Liquefied propane gas and related products $40,656 $50,868
Appliances, parts and suppl 19,514 21,111
----------- ----------
$60,170 $71,979
=========== ==========
In addition to inventories on hand, the Partnership enters into contracts
to buy product for supply purposes. Nearly all of these contracts have
terms of less than one year and most call for payment based on market
prices at the date of delivery. All fixed price contracts have terms of
less than one year. As of April 30, 2001, in addition to the inventory on
hand, the Partnership had committed to take delivery of approximately 11
million gallons at a fixed price for its future retail propane sales.
Property, plant and equipment, net consist of:
April 30, July 31,
(in thousands) 2001 2000
----------- ----------
Property, plant and equipme $772,792 $781,548
Less: accumulated depreciation 278,954 265,365
----------- ----------
$493,838 $516,183
=========== ==========
In the first quarter of fiscal 2001, the Partnership increased the estimate
of the residual values of its existing customer and storage tanks. This
increase in the residual values resulted from a review by management of
tank values established in an independent valuation obtained in connection
with tank lease financings completed in December 1999. Due to this change
in the tank residual values, depreciation expense decreased by
approximately $2,888,000 and $8,848,000 during the three and nine months
ended April 30, 2001, respectively, compared to the depreciation expense
that would have been recorded using the previously estimated residual
values. The change in estimated residual values will continue to affect
future depreciation expense as compared to the depreciation that would have
been recorded using the previously estimated residual values.
Intangible assets, net consist of:
April 30, July 31,
(in thousands) 2001 2000
---------- ----------
Intangible assets $420,360 $418,700
Less: accumulated amor 182,726 162,224
---------- ----------
$237,634 $256,476
========== ==========
6
Other assets, net consist of:
April 30, July 31,
(in thousands) 2001 2000
---------- ----------
Other assets, net $11,710 $10,355
Investment in unconsolidated subsidiary 6,977 -
---------- ----------
$18,687 $10,355
========== ==========
The investment in an unconsolidated subsidiary represents the Partnership's
investment in Ferrellgas Receivables and is accounted for on the equity
basis. The earnings in the equity of the unconsolidated subsidiary, service
income and the loss on the sale of the receivables are classified as "Loss
(gain) on disposal of assets and other" on the statement of earnings. These
amounts primarily reflect the financing cost of issuing commercial paper
backed by the pool of accounts receivable as well as the associated bad
debt expense. See additional discussion of the transactions between the
Partnership and Ferrellgas Receivables in "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." See Note E for additional information about the
accounts receivable securitization.
G. Quarterly Distributions of Available Cash
The Partnership makes quarterly cash distributions of all of its "Available
Cash", generally defined as consolidated cash receipts less consolidated
cash disbursements and net changes in reserves established by the General
Partner for future requirements. Reserves are retained in order to provide
for the proper conduct of the Partnership business, or to provide funds for
distributions with respect to any one or more of the next four fiscal
quarters. Distributions are made within 45 days after the end of each
fiscal quarter ending January, April, July and October to holders of record
on the applicable record date.
Distributions by the Partnership in an amount equal to 100% of its
Available Cash, as defined in its Third Amended and Restated Agreement of
Limited Partnership of Ferrellgas Partners, L.P. (the "Partnership
Agreement"), will be made to the senior, common and the general partner
unitholders. Additionally, the payment of incentive distributions to the
holders of incentive distribution rights will be made to the extent that
certain target levels of cash distributions are achieved. The senior units
have certain preference rights over the common units. The publicly held
common units have certain preference rights over the common units held by
Ferrell Companies.
On April 6, 2001, the Partnership modified the structure of its outstanding
senior units and increased the cash distribution coverage to its publicly
held common unitholders. Among other changes, the senior unitholder is now
entitled to quarterly cash distributions instead of in-kind distributions.
See Note H for additional information about the modifications to the senior
units. Also Ferrell Companies, Inc., the owner of 17,817,600 common units,
granted the Partnership the ability to defer future distributions on the
common units held by it up to an aggregate outstanding amount of
$36,000,000. The ability to defer distributions to Ferrell Companies
provides the Partnership's public common unitholders additional
distribution support until December 31, 2005. This new distribution support
is available if the Partnership's available cash for any fiscal quarter is
insufficient to pay all of the common unitholders the quarterly
distribution to be declared by the general partner for that fiscal quarter.
If an insufficiency would exist, the distribution declared may not be more
than the highest quarterly distribution paid on the common units for any of
the immediately preceding four fiscal quarters. In that case, after payment
of distributions on the senior units, the Partnership would pay a
distribution out of available cash on the publicly-held common units first
and then pay a distribution on the common units held by Ferrell Companies
to the extent of any remaining available cash. If the outstanding amount of
deferred distributions were to reach $36 million, the common units held by
Ferrell Companies would then be paid in the same manner as the
publicly-held common units. After payment of all required distributions for
any subsequent period, the Partnership will use remaining available cash to
reduce any amount previously deferred on the common units held by Ferrell
Companies. Reductions in amounts previously deferred will then again be
available for future deferrals.
7
H. Partners' Capital
On April 30, 2001, the Partnership's capital consisted of 4,888,234 senior
units, 31,307,116 common units, 316,233 general partner units representing
a 1% General Partner interest related to the common units, and a 1% general
partner interest related to the senior units. The Partnership Agreement
contains specific provisions for the allocation of net earnings and loss to
each of the partners for purposes of maintaining the partner capital
accounts.
In connection with the Thermogas acquisition on December 17, 1999, the
Partnership issued 4,375,000 senior units to Williams Natural Gas Liquids,
Inc., a subsidiary of The Williams Companies, Inc. ("Williams" or
"Seller"). On April 6, 2001, the Chief Executive Officer of the General
Partner, James E. Ferrell purchased all these senior units from Williams
and at the same time modified the structure of its outstanding senior
units. The senior units are now paid quarterly cash distributions from the
MLP equivalent to 10 percent per annum of the liquidating value. The senior
units are redeemable by the Partnership at any time, in whole or in part,
upon payment in cash of the liquidating value of the senior units,
currently $40 per unit, plus the amount of any accrued and unpaid
distributions. The holder of the senior units has the right, subject to
certain events and conditions, to convert any outstanding senior units into
common units at the earlier of December 31, 2005 or upon the occurrence of
a material event as defined by the Partnership Agreement. Such conversion
rights are contingent upon the Partnership not previously redeeming such
securities.
The Partnership maintains shelf registration statements for common units
representing limited partner interests in the Partnership. One of the shelf
registration statements allows for common units to be issued from time to
time by the Partnership in connection with the Partnership's acquisition of
other businesses, properties or securities in business combination
transactions. The Partnership also maintains another shelf registration
statement for the issuance of common units, deferred participation units,
warrants and debt securities.
On June 8, 2001, the Partnership received $85,365,000 pursuant to the
issuance of 4,500,000 common units to the public. The Partnership then used
all of these proceeds to redeem 2,048,697 senior units and the related
accrued senior unit distribution. After the completion of these
transactions, the Partnership had outstanding 35,864,616 common units and
2,839,537 senior units. The common units issued to the public on June 8,
2001, are entitled to a distribution equivalent to that distribution that
is expected to be paid to the already outstanding publicly held common
units for the quarter ending July 31, 2001.
I. Contingencies
The Partnership is threatened with or named as a defendant in various
lawsuits, which among other items, claim damages for product liability. 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 likely to have a material adverse effect on the
financial condition, results of operations or cash flows of the
Partnership.
J. Common and Senior Unit Distributions
On September 14, 2000, December 14, 2000, and March 14, 2001, the
Partnership paid a cash distribution of $0.50 per common unit for the
quarters ended July 31, 2000, October 31, 2000, and January 31, 2001,
respectively.
On June 14, 2001, the Partnership paid cash distributions of $0.50 per
common unit and $1.00 per senior unit, for the quarter ended April 30,
2001.
8
K. Other Charges
Three months ended Nine months ended
------------------ -----------------
April 30, April 30, April 30, April 30,
(in thousands) 2001 2000 2001 2000
--------------- ---------------- --------------- ---------------
Fees paid related to senior
unit modifications, change in cash $3,101 $ - $3,101 $ -
distribution coverage and sale of
senior units
Amortization of fees paid to holders
of debt held by parent company 17 - 17 -
--------------- ---------------- --------------- ---------------
Total Other Charges $3,118 $ - $3,118 $ -
=============== ================ =============== ===============
On April 6, 2001, Ferrellgas Partners announced a series of transactions
that increased the cash distribution coverage to its public unitholders and
modified the structure of its outstanding senior units. See Notes G and H
for more information on these items. In connection with these transactions,
Ferrellgas Partners also accrued $405,000 of fees related to these
transactions and capitalized $1,068,000. These fees are being amortized
over approximately 60 months using a method that approximates the effective
interest method. The capitalized fees are classified as other assets on the
consolidated balance sheet.
L. Earnings Per Unit
Below is a calculation of the basic and diluted common units used to
calculate basic and diluted earnings per unit on the statements of
earnings.
(in thousands, except per unit data)
Three months ended Nine months ended
------------------ -----------------
April 30, April 30, April 30, April 30,
2001 2000 2001 2000
--------------- ---------------- --------------- ---------------
Common unitholders' interest in net
earnings $25,259 $940 $92,540 $36,406
Weighted average common units
outstanding 31,307.1 31,307.1 31,307.1 31,306.6
---------------- ----------------- ---------------- --------------
Basic and diluted earnings per
common unit $ 0.81 $0.03 $ 2.96 $ 1.16
================ ================= ================ ==============
The senior units are considered contingently issuable common units for
which all necessary conditions for their issuance have not been satisfied
as of the end of the reporting period and have been excluded from common
units outstanding. In order to compute the basic and diluted earnings per
common unit, the distributions on senior units are subtracted from net
earnings to arrive at the common unitholders' interest in net earnings.
There was no difference between basic and diluted earnings per common unit
for either the three or nine months ended April 30, 2001 or 2000.
9
M. Adoption of New Accounting Standards
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133, as amended by SFAS 137 and
SFAS 138, establishes accounting and reporting standards for derivative
instruments and for hedging activities. All derivatives, whether designated
in hedging relationships or not, are required to be recorded on the balance
sheet at fair value. The Partnership's overall objective for entering into
derivative contracts for the purchase of product is related to hedging,
risk reduction and to anticipate market movements. Other derivatives are
entered into to reduce interest rate risk associated with long term debt
and lease obligations. Fair value hedges are derivative financial
instruments that hedge the exposure to changes in the fair value of an
asset, a liability or an identified portion thereof attributable to a
particular risk. Cash flow hedges are derivative financial instruments that
hedge the exposure to variability in expected future cash flows
attributable to a particular risk.
The Partnership uses cash flow hedges to manage exposure to product
purchase price risk and uses both fair value and cash flow hedges to manage
exposure to interest rate risks.
Product purchase price risk
Fluctuations in the wholesale cost of propane subject the Partnership to
purchase price risk. The Partnership purchases propane at various prices
that are eventually sold to its customers, exposing the Partnership to
future product price fluctuations. Also, certain forecasted transactions
expose the Partnership to purchase price risk. The Partnership continually
monitors and assesses its purchase price exposures and consequently
utilizes product hedges to mitigate the risk of future price fluctuations.
Propane is the only product hedged with the use of product hedge positions.
The Partnership uses derivative products to hedge a portion of its
forecasted purchases for up to one year in the future. These derivatives
are designated as cash flow hedging instruments. Because these derivatives
are designated as cash flow hedges, the effective portions of changes in
the fair value of the derivative are recorded in other comprehensive income
(OCI) and are recognized in the statement of earnings when the forecasted
transaction impacts earnings. Changes in the fair value of cash flow hedges
due to hedge ineffectiveness are recognized in other revenues on the
consolidated statement of earnings. The fair value of the derivatives
related to purchase price risk is classified on the consolidated balance
sheet as inventories. The Partnership also purchases and sells derivatives
that are not classified as hedges to manage other risks associated with
commodity prices. The changes in fair value of these derivatives are
recognized as they occur in other revenue on the consolidated statement of
earnings.
The Partnership also uses forward contracts, not designated as hedging
instruments under SFAS 133, to help reduce the price risk related to sales
made to its propane customers. These forward contracts meet the requirement
to qualify as normal purchases and normal sales as defined in SFAS 133, as
amended by SFAS 137 and SFAS 138, and thus are not adjusted to fair market
value.
Interest rate risk
The Partnership also holds $707,844,000 in primarily fixed rate long-term
debt and $158,000,000 in variable rate operating leases. Fluctuations in
interest rates subject the Partnership to interest rate risk. Decreases in
interest rates increase the fair value of the Partnership's fixed rate
debt, while increases in interest rates subject the Partnership to the risk
of increased interest expense related to its variable rate debt and
operating leases.
10
The Partnership enters into fair value and cash flow hedges to help reduce
its overall interest rate risk. Interest rate swaps are used to hedge the
exposure to changes in the fair value of fixed rate debt due to changes in
interest rates. The fair value of interest rate derivatives that are
considered fair value or cash flow hedges are classified either as other
current or long-term assets or as other current or long-term liabilities on
the consolidated balance sheet. Changes in the fair value of the fixed rate
debt and any related fair value hedges are recognized as they occur in
interest expense on the consolidated statement of earnings. Interest rate
caps are used to hedge the risk associated with rising interest rates and
their affect on forecasted transactions related to variable rate debt and
lease obligations. These interest rate caps are designated as cash flow
hedges. Thus, the effective portions of changes in the fair value of the
hedges are recorded in OCI at interim periods and are recognized as
interest expense in the consolidated statement of earnings when the
forecasted transaction impacts earnings. Changes in the fair value of any
cash flow hedges that are considered ineffective are recognized as interest
expense on the consolidated statement of earnings as they occur.
Effect of adoption of SFAS 133
The adoption of SFAS 133 resulted in an increase in other revenues of
$299,000, an increase in OCI of $709,000 and an increase of $1,008,000 to
inventories as of August 1, 2000. The increase in other revenue is
primarily attributable to increases in the fair value of derivatives not
designated as hedging instruments under SFAS 133. The increase in OCI is
mostly attributable to increases in the value of cash flow hedges for the
fair value of options designated as hedging instruments. The $709,000
related to these derivatives included in OCI as of August 1, 2000, were
reclassified into earnings during the nine months ended April 30, 2001, at
the time that the hedged item affected earnings.
Three and nine months ended April 30, 2001
Gains and losses related to derivatives held for product price risk
included in OCI are reclassified into earnings at the expiration or
settlement date of the hedged item. There are currently no derivatives held
for product price risk outstanding at April 30, 2001.
Hedge ineffectiveness, determined in accordance with SFAS 133, increased
interest expense $329,853 during the nine months ended April 30, 2001, due
to the change in the time value of the interest rate cap. No fair value
hedges or cash flow hedges were derecognized or discontinued for the nine
months ended April 30, 2001.
Revenue Recognition
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 entitled "Revenue Recognition". The bulletin,
as amended, is to be adopted, no later than the fourth fiscal quarter of
fiscal years commencing after December 15, 1999, with retroactive
adjustment to the first fiscal quarter of that year. Management implemented
this bulletin in the first quarter of fiscal 2001 with no material affect
on the Partnership's financial position, results of operations or cash
flows.
Accounting for Securitization
The FASB also recently issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
140 revises the standards for accounting for securitizations and other
transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of SFAS No. 125's provisions without
reconsideration. The Partnership does not believe that the implementation
of SFAS No. 140 will have a material effect on its financial position,
results of operations and cash flows. See Notes E and F for discussion of
SFAS No. 125's effect on recent accounts receivable transactions. SFAS 140
affects the recognition and reclassification of collateral and disclosures
relating to securitization transactions and collateral and will be
effective for the Partnership's fiscal year ending July 31, 2001.
11
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
BALANCE SHEETS
April 30, July 31,
ASSETS 2001 2000
- -------------------------------- -------------- -------------
(unaudited)
Cash $1,000 $1,000
-------------- -------------
Total Assets $1,000 $1,000
============== =============
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 1,662 1,237
Accumulated deficit (1,662) (1,237)
-------------- -------------
Total Stockholder's Equity $1,000 $1,000
============== =============
See notes to financial statements.
STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended Nine Months Ended
------------------------------------ -------------------------------------
April 30, April 30, April 30, April 30,
2001 2000 2001 2000
----------------- ------------------ ------------------ ------------------
General and administrative expense $ 284 $ 249 $ 425 $ 485
----------------- ------------------ ------------------ ------------------
Net loss $(284) $(249) $(425) $(485)
================= ================== ================== ==================
See notes to financial statements.
12
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
--------------------------------------------
April 30, April 30,
2001 2000
------------------ -------------------
Cash Flows From Operating Activities:
Net loss $(425) $ (485)
------------------ -------------------
Cash used in operating activities (425) (485)
------------------ -------------------
Cash Flows From Financing Activities:
Capital contribution 425 485
------------------- -------------------
Cash provided by financing activities 425 485
------------------ -------------------
Change in cash - -
Cash - beginning of period 1,000 1,000
------------------ -------------------
Cash - end of period $1,000 $1,000
================== ===================
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2001
(unaudited)
A. Ferrellgas Partners Finance Corp., a Delaware corporation, was formed on
March 28, 1996, and is a wholly-owned subsidiary of Ferrellgas Partners,
L.P.
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.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the results of operations and liquidity
and capital resources of the Partnership. Except for the $160,000,000 senior
secured notes issued in April 1996 by Ferrellgas Partners and the related
interest expense, Ferrellgas, L.P. accounts for nearly all of the consolidated
assets, liabilities, sales and earnings of Ferrellgas Partners.
Ferrellgas Partners Finance Corp. has nominal assets and does not conduct
any operations. Accordingly, a discussion of the results of operations and
liquidity and capital resources is not presented.
Forward-looking statements
Statements included in this report that are not historical facts are
forward-looking statements. These statements include the following:
o whether or not Ferrellgas, L.P. will have sufficient funds to meet its
obligations and to enable it to distribute to Ferrellgas Partners
sufficient funds to permit Ferrellgas Partners to meet its obligations with
respect its $160,000,000 senior secured notes,
o whether or not Ferrellgas, L.P. will have sufficient funds to meet its
obligations and to enable it to distribute to Ferrellgas Partners
sufficient funds to permit Ferrellgas Partners to pay the required
distribution on its senior units, and to pay the minimum quarterly
distribution of $0.50 per common unit,
o whether or not the Partnership will continue to meet all of the required
quarterly financial tests,
o the expectation that certain interest rate hedges will terminate,
o the expectation of higher than normal cash provided by operating activities
in the last quarter of fiscal 2001, and
o the expectation that future periods may not have the same percentage
increase in retail volumes, revenues and expenses as was experienced in the
first nine months of fiscal 2001.
The forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed in or
implied by the statements. The risks and uncertainties and their effect on the
Partnership's operations include but are not limited to the following:
o the effect of weather conditions on demand for propane,
o increases in propane prices may cause higher levels of conservation by
the Partnership's customers,
o price and availability of propane supplies,
o price and inventory risk of propane supplies,
o the timing of collections of the Partnership's accounts receivable and
increases in product costs and demand may decrease its working capital
availability,
o the availability of capacity to transport propane to market areas,
o competition from other energy sources and within the propane industry,
o operating risks incidental to transporting, storing, and distributing
propane,
o the Partnership may not be successful in making acquisitions,
o changes in interest rates,
o governmental legislation and regulations,
o energy efficiency and technology trends,
o the condition of the capital markets in the United States,
o the political and economic stability of the oil producing nations, and
o the expectation that the remaining senior units will be redeemed in the
future with proceeds from an offering of equity at a price satisfactory to
the Partnership.
14
Results of Operations
Due to the seasonality of the retail propane business, results of
operations for the nine months ended April 30, 2001 and 2000, 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, timing of acquisitions, variations in the weather and
fluctuations in propane prices. As the Partnership has grown through
acquisitions, fixed costs such as personnel costs, equipment leases,
depreciation and interest expense have increased. Due to the seasonality of the
retail propane business, these fixed cost increases have caused net losses in
the first and fourth fiscal quarters and net earnings in the second and third
fiscal quarters to be more pronounced.
Three Months Ended April 30, 2001 vs. April 30, 2000
Total revenues. Total gas liquids and related product sales increased 30.7%
to $364,723,000, primarily due to an increased average sales price per gallon,
partially offset by the decreased retail sales volumes.
The average sales price per gallon increased due to the effect of a
significant increase in the wholesale cost of propane during fiscal 2001. The
wholesale cost of propane for the third quarter of fiscal 2001 was significantly
higher compared to the same quarter last year. The wholesale market price at one
of the major supply points, Mt. Belvieu, Texas, averaged $0.60 per gallon and
reached a high of $0.68 per gallon during the third quarter of fiscal 2001
compared to an average of $0.46 per gallon in the third quarter of the prior
year. Other major supply points in the United States also experienced
significant increases.
Retail sales volumes decreased 5.0% to 248,785,000 gallons in the third
quarter of fiscal 2001 as compared to 261,994,000 gallons in the prior year,
primarily due to the impact of customer conservation caused by the effect of the
higher product cost environment partially offset by the effect of cooler weather
during February and March 2001 as compared to the same months in the prior year.
For February and March, temperatures as reported by the American Gas
Association, were 1% colder than normal as compared to 18% warmer than normal in
the same months in the prior year.
Other revenues increased by $6,915,000 primarily due to risk management
gains realized in the third quarter of fiscal 2001.
Gross profit. Gross profit increased 23.3% to $152,801,000 in the third
quarter of fiscal 2001. Factors contributing to this increase include increased
retail margins and risk management gains. Partially offsetting these factors was
the impact of reduced volume due to conservation by customers in response to the
higher cost of propane.
Operating expense. Operating expense increased 4.0% to $73,358,000
primarily due to incentive based expenses resulting from the improved financial
performance of the company. Additional factors contributing to increased
operating expenses included increased energy costs affecting utility and fuel
expense. These increases were partially offset by favorable expense management
related to the completed integration of the Thermogas acquisition and expense
savings initiatives established late in fiscal year 2000.
15
Depreciation and amortization expense. Depreciation and amortization
expense decreased 16.7% to $14,484,000 primarily due to a change in the
estimated residual values used to compute the depreciation of customer and
storage tanks. In the first quarter of fiscal 2001, the Partnership increased
the estimate of the residual values of its existing customer and storage tanks.
This increase in the residual values resulted from a review by management of
tank values established in an independent valuation obtained in connection with
tank lease financings completed in December 1999. Due to this change in the tank
residual values, depreciation expense decreased by approximately $2,888,000,
compared to the depreciation that would have been recorded using the previously
estimated residual values. The change in estimated residual values will continue
to affect future depreciation expense as compared to the depreciation that would
have been recorded using the previously estimated residual values.
General and administrative expense. General and administrative expense
decreased 6.4% to $6,619,000 as a result of reduced personnel costs related to
the Thermogas, partially offset by increased incentive based expenses resulting
from the improved financial performance of the company.
Equipment lease expense. Equipment lease expense decreased 6.8% to
$7,618,000 due to reduced interest rates compared to the same period last year.
Loss (gain) on disposal of assets and other. Loss (gain) on disposal of
assets and other increased $1,706,000 primarily due to the loss on the sale of
the pool of accounts receivable related to the accounts receivable
securitization. See Notes E and F in the Consolidated Financial Statements
included elsewhere in this report for additional information regarding these
transactions.
Interest expense. Interest expense decreased 4.2% to $14,884,000 due
primarily to the interest rate savings resulting from the interest rate swap and
the effect of the reduced credit facility borrowings during the third quarter of
fiscal 2001. The interest rate swap hedges the fixed interest rate debt held by
Ferrellgas Partners. The reduced credit facility borrowings resulted primarily
from the funds generated from the accounts receivable securitization. See
discussion of the transactions between the Partnership and Ferrellgas
Receivables in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
Forward looking statement. The Partnership does not expect a similar
magnitude of percentage increase in revenues or cost of product sold in future
periods. The nonrecurring percentage increases experienced in the third quarter
of this year compared to the same period last year were primarily a result of
the significantly higher wholesale propane prices experienced during the third
quarter of fiscal 2001 compared to the same period last year. The Partnership
expects the interest rate swap to be terminated in the fourth quarter of fiscal
2001.
Nine Months Ended April 30, 2001 vs. April 30, 2000
Total revenues. Total gas liquids and related product sales increased 68.0%
to $1,237,572,000, primarily due an increased average sales price per gallon and
increased retail sales volumes.
The average sales price per gallon increased due to the effect of a
significant increase in the wholesale cost of propane during fiscal 2001. The
wholesale cost of propane during the first nine months of fiscal 2001 was
significantly higher as compared to the same period in fiscal 2000. The
wholesale market price at one of the major supply points, Mt. Belvieu, Texas,
averaged $0.67 per gallon this period in fiscal 2001 as compared to an average
of $0.42 per gallon in same period of fiscal 2000. Other major supply points in
the United States also experienced significant increases.
Retail sales volumes increased 16.2% to 847,908,000 gallons in fiscal 2001
as compared to 729,467,000 gallons for the prior period, primarily due to the
acquisition of Thermogas completed in December 1999 and the effect of colder
weather, partially offset by the impact of customer conservation caused by the
higher product cost environment. During the winter heating season of fiscal
2001, temperatures as reported by the American Gas Association were 5% colder
than normal as compared to temperatures 14% warmer than normal during the same
period in fiscal 2000.
Other revenues increased by $7,446,000 primarily due to increased risk
management gains and contributions from the Thermogas acquisition.
Gross profit. Gross profit increased 31.5% to $479,092,000, primarily due
to gross profit generated from increased retail margins, the effect on sales
related to the colder than normal weather and the acquired Thermogas operations.
Partially offsetting these factors was a decrease in volume due to conservation
by customers in response to the higher cost of propane.
16
Operating expense. Operating expense increased 16.1% to $228,846,000
primarily due to personnel, plant and office, vehicle and other operating
expenses related to the acquired Thermogas operations and to a lesser extent the
increased incentives based expenses resulting from the improved financial
performance of the company, partially offset by favorable expense management
related to the completed integration of the Thermogas acquisition and expense
savings initiatives established late in fiscal year 2000.
General and administrative expense. General and administrative expense
remained basically unchanged as compared to the same period last year. Prior to
the acquisition by the Partnership, Thermogas incurred in excess of $20,000,000
in general and administrative expenses on an annualized basis. As a result of
Ferrellgas' acquisition of Thermogas and the complete integration of the general
and administrative services into the Ferrellgas operations, Ferrellgas has been
able to eliminate approximately 90% of such overhead costs, thus realizing the
general and administrative cost reduction from the acquisition.
Depreciation and amortization expense. Depreciation and amortization
expense decreased 2.1% to $42,462,000 primarily due to the change in the
estimated residual values used to compute the depreciation of customer and
storage tanks, partially offset by the addition of property, plant and equipment
and intangible assets from the Thermogas acquisition. In the first quarter of
fiscal 2001, the Partnership increased the estimate of the residual values of
its existing customer and storage tanks. This increase in the residual values
resulted from a review by management of tank values established in an
independent valuation obtained in connection with tank lease financings
completed in December 1999. Due to this change in the tank residual values,
depreciation expense decreased by approximately $8,848,000, compared to the
depreciation that would have been recorded using the previously estimated
residual values. The change in estimated residual values will continue to affect
future depreciation expense as compared to the depreciation that would have been
recorded using the previously estimated residual values.
Equipment lease expense. Equipment lease expense increased 38.5% to
$24,386,000 due to the addition of the $160,000,000 operating tank leases in
December 1999, and to a lesser extent to upgrades to the Partnership's truck
fleet.
Loss (gain) on disposal of assets and other. Loss (gain) on disposal of
assets and other increased $4,731,000 primarily due to the loss on the sale of
the pool of accounts receivable related to the accounts receivable
securitization. See Notes E and F in the Consolidated Financial Statements
included elsewhere in this report for additional information regarding these
transactions.
Interest expense. Interest expense increased 10.2% to $47,158,000. This
increase is primarily the result of increased borrowings related to the
Thermogas acquisition, partially offset by the effect of the reduced credit
facility borrowings during the first nine months of fiscal 2001 and the interest
rate savings resulting from the interest rate swap. The reduced credit facility
borrowings resulted primarily from the funds generated from the accounts
receivable securitization. See discussion of the transactions between the
Partnership and Ferrellgas Receivables in "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Forward looking statement. The Partnership does not expect a similar
magnitude of percentage increase in retail volumes, revenues, cost of product
sold or expenses in future periods. The nonrecurring percentage increases
experienced in the first nine months of this year compared to the same period
last year were primarily a result of the impact of the acquisition of Thermogas
and the significantly higher wholesale propane prices experienced during fiscal
2001 compared to the same period last year, and colder winter temperatures this
year compared to last. The Partnership expects the interest rate swap to be
terminated in the fourth quarter of fiscal 2001.
17
Liquidity and Capital Resources
The ability of the Partnership to satisfy its obligations is dependent upon
future performance, which will be subject to prevailing economic, financial,
business and weather conditions and other factors, many of which are beyond its
control. Due to the seasonality of the Partnership's retail propane business, a
significant portion of the Partnership's cash flow from operations is typically
generated during the winter heating season which occurs during the Partnership's
second and third fiscal quarters. Typically, the Partnership generates
significantly lower cash flows from operations in its first and fourth fiscal
quarters as compared to the second and third quarters, because fixed costs
exceed gross profit during the non-peak season. However, the third quarter of
this fiscal year generated a higher than historical cash flow from operating
activities and the second quarter of fiscal 2001 generated lower than historical
cash flow from operating activities. This variance between the two quarters in
the amount of cash flow from operating activities compared to historical levels
was primarily caused by significant increases in customer receivables related to
the significantly higher than historical retail prices and by increases in
retail volumes, and, to a lesser extent, by increases in the cost of propane
inventory during the first half of the year. As a result of the lower cash flow
from operating activities in the second quarter, the Partnership generated
higher than normal cash flow from operating activities in the third quarter as
customers remitted payment of the receivables invoiced during the second quarter
of fiscal 2001. Subject to meeting certain financial tests discussed below, the
General Partner believes that Ferrellgas, L.P. will have sufficient funds
available to meet its obligations, to distribute to Ferrellgas Partners
sufficient funds to permit Ferrellgas Partners to meet its obligations with
respect to the $160,000,000 senior secured notes. In addition, the General
Partner believes that Ferrellgas, L.P. will have sufficient funds available to
distribute to Ferrellgas Partners amounts to allow it to pay the required
quarterly distribution on the senior units and the minimum quarterly
distribution on all common units for the remainder of the non-peak season, which
covers the fourth and first fiscal quarters when the Partnership typically
experiences lower cash flows from operating activities.
The Partnership's credit facilities, public debt, private debt, accounts
receivable securitization facility and tank leases contain several financial
tests and covenants which restrict the Partnership's ability to pay
distributions, incur debt and engage in certain other business transactions. In
general, these tests are based on the Partnership's debt to cash flow ratio and
cash flow to interest expense ratio. Ferrellgas, Inc. believes that the most
restrictive of these tests currently are debt incurrence limitations within the
credit facility, tank leases and accounts receivable securitization facility and
limitations on the payment of distributions within the Ferrellgas Partners
senior secured notes. The credit facility, tank leases and accounts receivable
securitization facility limit Ferrellgas, L.P.'s ability to incur debt if
Ferrellgas, L.P. exceeds prescribed ratios of either debt to cash flow or cash
flow to interest expense. The Ferrellgas Partners senior secured notes restrict
payments if a minimum ratio of cash flow to interest expense is not met. This
restriction places limitations on the Partnership's ability to make certain
restricted payments such as the payment of cash distributions to unitholders.
The cash flow used to determine these financial tests generally is based upon
the Partnership's most recent cash flow performance giving pro forma effect for
acquisitions and divestitures made during the test period.
The Partnership's financial performance during the 2000, 1999 and 1998
fiscal years was adversely impacted by average temperatures that were reported
by the National Oceanic Atmospheric Administration as the warmest in recorded
history. Despite these challenges in prior fiscal years, the Partnership met all
of its financial tests and covenants. Currently, these include the debt
incurrence tests within the credit facility, tank leases and accounts receivable
securitization facility and the Ferrellgas Partners senior secured notes
restricted payment test, as well as other financial tests and covenants in the
Ferrellgas Partners senior secured notes, the $350,000,000 senior notes, the
$184,000,000 senior notes, the credit facility, the tank leases and the accounts
receivable securitization facility.
18
Based upon current estimates of the Partnership's cash flow, Ferrellgas,
Inc. believes that the Partnership will be able to meet all of the required
quarterly financial tests and covenants. However, if the Partnership were to
encounter unexpected downturns in business operations in the future, such as
significantly warmer than normal weather or a volatile cost environment, the
Partnership may not meet certain financial tests in future quarters. These
factors could temporarily restrict the ability of Ferrellgas, L.P. to incur debt
or Ferrellgas Partner's ability to make cash distributions to its unitholders.
Depending on the circumstances, the Partnership may consider alternatives to
permit the incurrence of debt at Ferrellgas, L.P. or the continued payment by
Ferrellgas Partners of the quarterly cash distribution to its unitholders. No
assurances can be given, however, that such alternatives can or will be
implemented with respect to any given quarter.
Future maintenance and working capital needs of the Partnership are
expected to be provided by cash generated from future operations, existing cash
balances, the credit facility and the accounts receivable securitization
facility. To fund expansive capital projects and future acquisitions,
Ferrellgas, L.P. may borrow on the existing credit facility, Ferrellgas Partners
or Ferrellgas, L.P. may issue additional debt to the extent permitted under
existing debt agreements or Ferrellgas Partners may issue additional equity
securities, including, among others, common units.
Toward this purpose, on February 5, 1999, Ferrellgas Partners filed a shelf
registration statement with the Securities and Exchange Commission for the
periodic sale of up to $300,000,000 in equity and/or debt securities. The
registered securities would be available for sale by the Partnership in the
future to fund acquisitions, to reduce indebtedness or to fund general corporate
purposes. On June 8, 2001, Ferrellgas Partners received $85,365,000, after
underwriting discounts and commission, from the issuance of 4,500,000 common
units to the public from this shelf registration statement. See Financing
Activities for additional information about this equity offering.
Ferrellgas Partners also maintains an additional shelf registration
statement with the Securities and Exchange Commission for 2,010,484 common
units. These common units may be issued by Ferrellgas Partners in connection
with the Partnership's acquisition of other businesses, properties or securities
in business combination transactions.
Operating Activities. Cash provided by operating activities was $54,740,000
for the nine months ended April 30, 2001, compared to $33,675,000 for the nine
months ended April 30, 2000. This increased cash provided by operations is
primarily due to the increased earnings partially offset by the increased
working capital required to finance operations during the colder winter and
significantly higher wholesale propane cost environment. Accounts receivable,
net of the sale of a pool of trade accounts receivable (see Investing Activities
below), increased significantly during the fiscal 2001 as compared to the prior
year due to higher sales prices and higher retail volumes.
Investing Activities. The operating partnership ("Ferrellgas, L.P.") sells
and contributes an interest in a pool of its trade accounts receivable to its
wholly-owned, special purpose subsidiary, Ferrellgas Receivables, LLC.
Ferrellgas Receivables then sells its interest to a commercial paper conduit of
Banc One, NA according to the terms of a 364-day agreement. Ferrellgas, L.P.
remits to Ferrellgas Receivables funds collected on the pool of trade
receivables held by Ferrell Receivables. At April 30, 2001, Ferrellgas, L.P. had
collected and remitted to Ferrellgas Receivables all but $48,000,000 of the
receivables previously sold to it.
At April 30, 2001, the level of funding available from this accounts
receivable facility agreement is currently limited $60,000,000. In accordance
with SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" this transaction is reflected on the
Partnership's consolidated statement of earnings as a "Loss (gain) on disposal
of assets and other" and on the consolidated balance sheet as other assets. The
proceeds of these sales are less than the face amount of the pool of accounts
receivable sold by an amount that approximates the financing cost of issuing
commercial paper backed by these accounts receivable. See Notes E and F in the
Consolidated Financial Statements included elsewhere in this report for
additional information regarding these transactions.
19
During the nine months ended April 30, 2001, the Partnership made growth
and maintenance capital expenditures of $9,210,000 consisting primarily of :
o vehicle lease buyouts,
o relocating and upgrading district plant facilities,
o upgrading computer equipment and software, and
o additions to propane storage tanks and cylinders.
The Partnership's capital requirements for repair and maintenance of
property, plant and equipment are relatively low due to limited technological
change and long useful lives of propane tanks and cylinders.
The Partnership leases light and medium duty trucks, tractors and trailers.
The Partnership believes vehicle leasing is a cost-effective method for meeting
its transportation equipment needs. The Partnership purchased $1,935,000 of
vehicles whose lease terms expired in the first nine months of fiscal 2001. The
Partnership plans to purchase additional vehicles at the end of their lease term
totaling $1,077,000 in the last quarter of fiscal 2001, $203,000 in fiscal 2002
and $143,000 in fiscal 2003. The Partnership intends to renew other vehicle and
tank leases that would have had buyouts of $6,473,000 in fiscal 2002,
$162,169,000 in fiscal 2003, $4,981,000 in fiscal 2004 and $4,086,000 in fiscal
2005. Historically, the Partnership has been successful in renewing vehicle
leases subject to buyouts. However, there is no assurance that it will be
successful in the future.
The Partnership continues to consider opportunities to expand its
operations through strategic acquisitions of retail propane operations located
throughout the United States. These acquisitions would be funded through
internal cash flow, external borrowings or the issuance of additional
Partnership interests.
Financing Activities. On June 8, 2001, the Partnership received $85,365,000
pursuant to the issuance of 4,500,000 common units to the public. The
Partnership then used all of these proceeds to redeem 2,048,697 senior units and
the related accrued senior unit distribution. After the completion of these
transactions, the Partnership had outstanding 35,864,616 common units and
2,839,537 senior units. The common units issued to the public on June 8, 2001,
are entitled to a distribution equivalent to that distribution that is expected
to be paid to the already outstanding publicly held common units for the quarter
ending July 31, 2001.
On April 4, 2001, the Partnership announced a series of transactions that
increased the cash distribution coverage to its public unitholders and modified
the structure of its outstanding senior units. In addition, the Partnership
announced that Chief Executive Officer, James E. Ferrell, purchased all its
outstanding senior units from The Williams Companies, Inc.
Ferrellgas, L.P.'s credit facility, which expires June 30, 2003, is
unsecured and consists of a $117,000,000 working capital, general corporate and
acquisition facility, including a letter of credit facility, and a $40,000,000
revolving working capital facility. This $40,000,000 facility is subject to an
annual reduction in outstanding balances to zero for thirty consecutive days.
All borrowings under the credit facility bear interest, at the borrower's
option, at a rate equal to either London Interbank Offered Rate (LIBOR) plus an
applicable margin varying from 1.25 percent to 2.25 percent or the bank's base
rate plus an applicable margin varying from 0.25 percent to 1.25 percent. The
bank's base rate at April 30, 2001 and July 31, 2000 was 8.5% and 9.5%,
respectively. During the nine months ended April 30, 2001, the Partnership
repaid $28,600,000 of its credit facility.
20
At April 30, 2001, $1,400,000 of borrowings and $29,290,000 of letters of
credit were outstanding under the Ferrellgas, L.P. credit facility. These
borrowings currently carry an average interest rate of 8.50%. At April 30, 2001,
Ferrellgas, L.P. had $126,310,000 available for general corporate, acquisition
and working capital purposes under the credit facility and the accounts
receivable facility. Based on the pricing grid contained in the credit facility,
the current borrowing rate for future borrowings under the credit facility is
LIBOR plus 1.50%. The Partnership believes that these facilities will be
sufficient to meet its future working capital needs. However, if the Partnership
were to experience an unexpected significant increase in working capital
requirements, it could exceed its immediately available resources. Events that
could cause increases in working capital requirements include a significant
increase in the cost of propane, a significant delay in the collections of
accounts receivable or increased volatility in commodity prices related to risk
management activities. The Partnership would consider alternatives to provide
increased working capital. No assurances can be given, however, that such
alternatives could be implemented.
Effective June 2, 2000, Ferrellgas, L.P. entered into an interest rate cap
agreement with Bank of America, related to variable quarterly rent payments due
pursuant to two tank lease agreements. The variable quarterly rent payments are
determined based upon a floating LIBOR based interest rate. The cap agreement,
which expires June 30, 2003, requires Bank of America to pay Ferrellgas, L.P. at
the end of each March, June, September and December the excess, if any, of the
applicable three month floating LIBOR interest rate over a cap of 9.3%, applied
to the unamortized amount outstanding each quarter under the two operating tank
lease agreements. The total obligation under these two operating tank lease
agreements as of April 30, 2001 was $158,000,000.
Effective April 27, 2000, the Partnership entered into an interest rate
swap agreement with Bank of America, related to the semi-annual interest payment
due on the $160,000,000 fixed rate senior secured notes due 2006. The swap
agreement, which expires June 15, 2006, requires Bank of America to pay the
stated fixed interest rate (annual rate 9.375%) pursuant to the $160,000,000
senior secured notes, equaling $7,500,000 every six months due on each June 15
and December 15. In exchange, the Partnership is required to make quarterly
floating interest rate payments on the 15th of March, June, September and
December based on an annual interest rate equal to the three month LIBOR
interest rate plus 1.655% applied to the same notional amount of $160,000,000.
Bank of America has a one-time opportunity to terminate this agreement without a
cancellation premium in June 2001. Based on its evaluation of the current
interest rate market, the Partnership believes that Bank of America will
terminate this agreement prior to June 15, 2001, although there is no assurance
that it will do so. If Bank of America terminates the swap agreement, the
Partnership will resume paying the stated fixed interest rate (annual rate
9.375%) beginning June 15, 2001.
On February 28, 2000, Ferrellgas, L.P. issued $184,000,000 of privately
placed unsecured senior notes. The proceeds of these senior notes, which include
three series with maturities ranging from year 2006 through 2009 and an average
fixed interest rate of 8.8%, were used to retire $183,000,000 of Ferrellgas,
L.P. bridge loan financing assumed in connection with the Thermogas acquisition.
On December 17, 1999, the Partnership purchased Thermogas from Williams
Natural Gas Liquids, Inc., a subsidiary of The Williams Companies, Inc. Part of
the consideration paid to Williams at closing by the Partnership was
$175,000,000 in newly issued senior units. On April 4, 2001, these units were
acquired by our Chief Executive Officer, James E. Ferrell. Mr. Ferrell has the
right to convert any outstanding senior units into common units on December 31,
2005 or upon the occurrence of a material event as defined by the Partnership
Agreement. On June 8, 2001, the Partnership redeemed 2,048,697 senior units and
intends to redeem the remaining 2,839,537 senior units at the redemption value
prior to the date of conversion. No assurances can be given that the Partnership
will be successful in selling additional equity or securing the financing to
redeem the remaining senior units.
21
On December 6, 1999, Ferrellgas, L.P. entered into a $25,000,000 operating
tank lease involving the sale-leaseback of a portion of its customer tanks with
Banc of America Leasing & Capital, LLC. This operating lease has a term that
expires June 30, 2003 and may be extended for two additional one-year periods at
the option of Ferrellgas, L.P., if such extension is approved by the lessor. On
December 17, 1999, immediately prior to the closing of the Thermogas
acquisition, Thermogas entered into a $135,000,000 operating tank lease
involving a portion of its customer tanks, with Banc of America Leasing &
Capital, LLC. In connection with the acquisition of Thermogas, Ferrellgas, L.P.
assumed all obligations under the $135,000,000 operating tank lease, which have
terms and conditions similar to the December 6, 1999, $25,000,000 operating tank
lease discussed above. The Partnership intends to renew both leases for the two
additional one-year periods, subject to lessor approval. Following the renewal
periods, the Partnership intends to refinance these leases, however, there can
be no assurance that the Partnership will be successful in obtaining this
refinancing or lessor approval for the renewals. See related discussion in the
Investing Activities section of Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources.
On August 4, 1998, Ferrellgas, L.P. issued the privately placed unsecured
$350,000,000 senior notes. The senior notes include five series with maturities
ranging from year 2005 through 2013 at an average fixed interest rate of 7.16%.
On June 14, 2001, the Partnership paid cash distributions of $1.00 per
senior unit and $0.50 per common unit.
Adoption of New Accounting Standards. The Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133, as
amended by SFAS 137 and SFAS 138, establishes accounting and reporting standards
for derivative instruments and for hedging activities. All derivatives, whether
designated in hedging relationships or not, are required to be recorded on the
balance sheet at fair value. The Partnership's overall objective for entering
into derivative contracts for the purchase of product is related to hedging,
risk reduction and to anticipate market movements. Other derivatives are entered
into to reduce interest rate risk associated with long term debt and lease
obligations. Fair value hedges are derivative financial instruments that hedge
the exposure to changes in the fair value of an asset or a liability or an
identified portion thereof attributable to a particular risk. Cash flow hedges
are derivative financial instruments that hedge the exposure to variability in
expected future cash flows attributable to a particular risk.
The Partnership uses cash flow hedges to manage exposures to product
purchase price risk and uses both fair value and cash flow hedges to manage
exposure to interest rate risks.
Product purchase price risk
Fluctuations in the wholesale cost of propane subject the Partnership to
purchase price risk. The Partnership purchases propane at various prices that
are eventually sold to its customers, exposing the Partnership to future product
price fluctuations. Also, certain forecasted transactions expose the Partnership
to purchase price risk. The Partnership continually monitors and assesses its
purchase price exposures and consequently utilizes product hedges to mitigate
the risk of future price fluctuations. Propane is the only product hedged with
the use of product hedge positions. The Partnership uses derivative products to
hedge a portion of its forecasted purchases for up to one year in the future.
These derivatives are designated as cash flow hedging instruments. Because these
derivatives are designated as cash flow hedges, the effective portions of
changes in the fair value of the derivative are recorded in OCI and are
recognized in the consolidated statement of earnings when the forecasted
transaction impacts earnings. Changes in the fair value of cash flow hedges due
to hedge ineffectiveness are recognized in other revenues on the consolidated
statement of earnings. The fair value of the derivatives related to purchase
price risk are classified on the consolidated balance sheet as inventories. The
Partnership also purchases and sells derivatives that are not classified as
hedges to manage other risks associated with commodity prices. The changes in
fair value of these derivatives are recognized as they occur in other revenue on
the consolidated statement of earnings.
22
The Partnership also uses forward contracts, not designated as hedging
instruments under SFAS 133, to help reduce the price risk related to sales made
to its propane customers. These forward contracts meet the requirement to
qualify as normal purchases and normal sales as defined in SFAS 133, as amended
by SFAS 137 and SFAS 138, and thus are not adjusted to fair market value.
Interest rate risk
The Partnership also holds $707,844,000 in primarily fixed rate long-term
debt and $158,000,000 in variable rate operating leases. Fluctuations in
interest rates subject the Partnership to interest rate risk. Decreases in
interest rates increase the fair value of the Partnership's fixed rate debt,
while increases in interest rates subject the Partnership to the risk of
increased interest expense related to its variable rate debt and operating
leases.
The Partnership enters into fair value and cash flow hedges to help reduce
its overall interest rate risk. Interest rate swaps are used to hedge the
exposure to changes in the fair value of fixed rate debt due to changes in
interest rates. The fair value of interest rate derivatives that are considered
fair value or cash flow hedges are classified either as other current or
long-term assets or as other current or long-term liabilities on the
consolidated balance sheet. Changes in the fair value of the fixed rate debt and
any related fair value hedges are recognized as they occur in interest expense
on the consolidated statement of earnings. Interest rate caps are used to hedge
the risk associated with rising interest rates and their affect on forecasted
transactions related to variable rate debt and lease obligations. These interest
rate caps are designated as cash flow hedges. Thus, the effective portions of
changes in the fair value of the hedges are recorded in OCI at interim periods
and are recognized as interest expense in the consolidated statement of earnings
when the forecasted transaction impacts earnings. Changes in the fair value of
any cash flow hedges that are considered ineffective are recognized as interest
expense on the consolidated statement of earnings as they occur.
Effect of adoption of SFAS 133
The adoption of SFAS 133 resulted in an increase in other revenues of
$299,000, an increase in OCI of $709,000 and an increase of $1,008,000 to
inventories as of August 1, 2000. The increase in other revenues is primarily
attributable to increases in the fair value of derivatives not designated as
hedging instruments under SFAS 133. The increase in OCI is mostly attributable
to increases in the value of cash flow hedges for the fair value of options
designated as hedging instruments. The $709,000 related to these derivatives
included in OCI as of August 1, 2000, were reclassified into earnings during the
nine months ended April 30, 2001, at the time that the hedged item affected
earnings.
Three and nine months ended April 30, 2001
Gains and losses related to derivatives held for product price risk
included in OCI are reclassified into earnings at the expiration or settlement
date of the hedged item. There are currently no derivatives held for product
price risk outstanding at April 30, 2001.
Hedge ineffectiveness, determined in accordance with SFAS 133, increased
interest expense $329,853 during the nine months ended April 30, 2001, due to
the change in the time value of the interest rate cap. No fair value hedges or
cash flow hedges were derecognized or discontinued for the nine months ended
April 30, 2001.
Revenue Recognition
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 entitled "Revenue Recognition". The bulletin, as
amended, is to be adopted, no later than the fourth fiscal quarter of fiscal
years commencing after December 15, 1999, with retroactive adjustment to the
first fiscal quarter of that year. Management implemented this bulletin in the
first quarter of fiscal 2001 with no material affect on the Partnership's
financial position, results of operations or cash flows.
23
Accounting for Securitization
The FASB also recently issued SFAS No. 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
revises the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries
over most of SFAS No. 125's provisions without reconsideration. The Partnership
does not believe that the implementation of SFAS No. 140 will have a material
effect on its financial position, results of operations and cash flows. See
Notes E and F for discussion of SFAS No. 125's effect on recent accounts
receivable transactions. SFAS 140 affects the recognition and reclassification
of collateral and disclosures relating to securitization transactions and
collateral and will be effective for the Partnership's fiscal year ending July
31, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Partnership's market risk sensitive
instruments and positions is the potential loss arising from adverse changes in
commodity prices. Additionally, the Partnership seeks to mitigate its interest
rate risk exposure on variable rate debt and operating leases by interest rate
cap agreements. At April 30, 2001, the Partnership had $161,400,000 in variable
rate debt, after considering the effect of the swap transaction, which
originated in fiscal 2000. If the swap is terminated, the Partnership's variable
rate debt would immediately decrease by $160,000,000, while the fixed rate debt
would increase by a corresponding amount. Thus, the swap related interest
expense reduction of $1,665,000 recognized to date in fiscal 2001 will not be
repeated in future years. At April 30, 2001, the Partnership had $158,000,000
outstanding in variable rate operating leases and an equal amount of interest
rate cap agreements outstanding to hedge the related variable rate exposure. The
operating leases were entered into during fiscal 2000. Thus, assuming the swap
is terminated in June 2001 and a 100 basis point increase in the variable
interest rate to the Partnership during fiscal 2001, the interest rate risk
related to the swap, variable rate debt, the operating tank leases and the
associated interest rate cap agreements would be an increase in interest expense
of $1,656,000. The Partnership would also begin paying the fixed rate of 9.375%
on its $160,000,000 senior secured notes.
The Partnership's risk management activities utilize certain types of
energy commodity forward contracts and swaps traded on the over-the-counter
financial markets and futures traded on the New York Mercantile Exchange to
anticipate market movements, manage and hedge its exposure to the volatility of
floating commodity prices and to protect its inventory positions. The
Partnership also utilizes certain over-the-counter energy commodity options to
limit overall price risk and to hedge its exposure to inventory price movements.
Market risks associated with energy commodities are monitored daily by
senior management for compliance with the Partnership's risk management trading
policy. This policy includes specific dollar exposure limits, limits on the term
of various contracts and volume limits for various energy commodities. The
Partnership also utilizes loss limits and daily review of open positions to
manage exposures to changing market prices.
Market, Credit and Liquidity Risk. New York Mercantile Exchange traded
futures are guaranteed by the New York Mercantile Exchange and have nominal
credit risk. The Partnership is exposed to credit risk associated with forwards,
swaps and option transactions in the event of nonperformance by counterparties.
For each counterparty, the Partnership analyzes its financial condition prior to
entering into an agreement, establishes credit limits and monitors the
appropriateness of each limit. The change in market value of Exchange-traded
futures contracts requires daily cash settlement in margin accounts with
brokers. Forwards and most other over-the-counter instruments are generally
settled at the expiration of the contract term. The Partnership attempts to
balance favorable and unfavorable positions with counterparties in order to
minimize the risk of collateral requirements for over-the-counter instruments.
24
Sensitivity Analysis. The Partnership has prepared a sensitivity analysis
to estimate the exposure to market risk of its energy commodity positions.
Forward contracts, futures, swaps and options were analyzed assuming a
hypothetical 10% change in forward prices for the delivery month for all energy
commodities. The potential loss in future earnings from these positions from a
10% adverse movement in market prices of the underlying energy commodities is
estimated at $1,300,000 as of April 30, 2001. The preceding hypothetical
analysis is limited because changes in prices may or may not equal 10%, thus,
actual results may differ.
25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 6, 2001, the Partnership completed a series of transactions in which it
modified the structure of its outstanding senior units and increased the cash
distribution coverage to its public common unitholders.
Modification of senior units
The Partnership amended some of the terms of the senior units on April 6, 2001.
Those amendments:
o extended the date after which the senior units may be converted by the
holder into common units from February 1, 2002, to December 31, 2005,
absent the occurrence of a material event as defined in the partnership
agreement;
o changed the senior unit to common unit conversion ratio from 125% to 100%
of the senior unit liquidation preference, plus accrued and unpaid
distributions;
o allow the Partnership to use $20 million of proceeds from sales of its
units to reduce indebtedness after it had first used $40 million of those
proceeds to redeem a portion of its senior units;
o removed the provisions that allowed the holder to require conversion,
transfer or registration of the senior units if the closing price of the
common units was less than $7.50 per common unit or if the Partnership
defaulted on some of its outstanding debt instruments;
o replaced the monetary penalty for not making a required senior unit
distribution with a provision that allows the holder to require conversion,
transfer or registration of the senior units if a required senior unit
distribution is not made; and
o eliminated as of February 1, 2001, the right to make distributions on the
senior units in additional senior units rather than in cash. The right to
pay senior unitholders in kind rather than in cash originally continued
until February 1, 2002.
These amendments eliminated the need to redeem all senior units prior to
February 1, 2002. For the common unitholders, the changes to the terms of the
senior units reduce the potential for significant dilution in the near future
due to a conversion of the senior units. These amendments are reflected in the
Third Amended and Restated Agreement of Limited Partnership.
Cash distribution support
As part of the transactions completed on April 6, 2001, Ferrell Companies
granted the Partnership the ability to defer future distributions on the common
units held by it up to an aggregate outstanding amount of $36 million. This
ability to defer provides the public common unitholders additional distribution
support for approximately five years.
This new distribution support is available if the Partnership's available cash
for any fiscal quarter is insufficient to pay all of the common unitholders the
quarterly distribution to be declared by the general partner for that fiscal
quarter. If an insufficiency would exist, the distribution declared may not be
more than the highest quarterly distribution paid on the common units for any of
the immediately preceding four fiscal quarters. In that case, after payment of
distributions on the senior units, the Partnership would pay a distribution out
of available cash on the publicly-held common units first and then pay a
distribution on the common units held by Ferrell Companies to the extent of any
remaining available cash. If the outstanding amount of deferred distributions
were to reach $36 million, the common units held by Ferrell Companies would then
be paid in the same manner as the publicly-held common units. After payment of
all required distributions for any subsequent period, the Partnership will use
remaining available cash to reduce any amount previously deferred on the common
units held by Ferrell Companies. Reductions in amounts previously deferred will
then again be available for future deferrals. The Partnership's ability to defer
the payment of a distribution on the common units held by Ferrell Companies will
end on the earlier of:
o December 31, 2005;
o a change of control, as defined in the partnership agreement;
o the Partnership's dissolution; or
o when Ferrell Companies no longer owns any common units.
After the end of the period described above, distributions will be made on all
common units equally, including those owned by Ferrell Companies. The period of
deferral described above may not be changed in a manner adverse to the public
common unitholders without the consent of the holders of a majority of the
public common units. This majority consent would not include those common units
held by Ferrell Companies.
26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K
The Partnership filed two Form 8-Ks during the quarter ended
April 30, 2001.
1) On February 19, 2001, a Form 8-K reported that on February 27,
2001, Ferrellgas Partners, L.P. would report earnings for the
three and six months ended January 31, 2001.
2) On April 6, 2001, a Form 8-K reported that Ferrellgas Partners
had announced a series of transactions that increased the cash
distribution coverage to its public unitholders and modified the
structure of its outstanding senior units. In addition, it
announced that Chief Executive Officer, James E. Ferrell,
purchased all its outstanding senior units from The Williams
Companies, Inc.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: June 14, 2001 By /s/ Kevin T. Kelly
------------------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS PARTNERS FINANCE CORP.
Date: June 14, 2001 By /s/ Kevin T. Kelly
-------------------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)