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 October 31, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________ to __________
Commission file numbers: 001-11331
333-06693
000-50182 and
000-50183
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
Ferrellgas, L.P.
Ferrellgas Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware 43-1698480
Delaware 43-1742520
Delaware 43-1698481
Delaware 14-1866671
-------------- ----------------
(States or other (I.R.S. Employer
jurisdictions of 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 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
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act).
Ferrellgas Partners, L.P. Yes [ X ] No [ ]
Ferrellgas Partners Finance Corp., Ferrellgas, L.P.
and Ferrellgas Finance Corp. Yes [ ] No [ X ]
At December 8, 2003, the registrants had common units or shares outstanding as
follows:
Ferrellgas Partners, L.P. 39,722,234 Common Units
Ferrellgas Partners Finance Corp. 1,000 Common Stock
Ferrellgas, L.P. n/a n/a
Ferrellgas Finance Corp. 1,000 Common Stock
EACH OF FERRELLGAS PARTNERS FINANCE CORP. AND FERRELLGAS FINANCE CORP. MEET THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H)(1) OF FORM 10-Q AND ARE
THEREFORE, WITH RESPECT TO EACH SUCH REGISTRANT, FILING THIS FORM 10-Q WITH THE
REDUCED DISCLOSURE FORMAT.
FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
Table of Contents
Page
PART I - FINANCIAL INFORMATION --------
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Ferrellgas Partners, L.P. and Subsidiaries
------------------------------------------
Condensed Consolidated Balance Sheets -
October 31, 2003 and July 31, 2003 1
Condensed Consolidated Statements of Earnings -
Three months ended October 31, 2003 and 2002 2
Condensed Consolidated Statement of Partners' Capital
(Deficit)- Three months ended October 31, 2003 3
Condensed Consolidated Statements of Cash Flows -
Three months ended October 31, 2003 and 2002 (as restated) 4
Notes to Condensed Consolidated Financial Statements 5
Ferrellgas Partners Finance Corp.
---------------------------------
Condensed Balance Sheets - October 31, 2003 and
July 31, 2003 13
Condensed Statements of Earnings -
Three months ended October 31, 2003 and 2002 13
Condensed Statements of Cash Flows -
Three months ended October 31, 2003 and 2002 14
Note to Condensed Financial Statements 14
Ferrellgas, L.P. and Subsidiaries
---------------------------------
Condensed Consolidated Balance Sheets -
October 31, 2003 and July 31, 2003 15
Condensed Consolidated Statements of Earnings -
Three months ended October 31, 2003 and 2002 16
Condensed Consolidated Statement of Partners' Capital -
Three months ended October 31, 2003 17
Condensed Consolidated Statements of Cash Flows -
Three months ended October 31, 2003 and 2002 18
Notes to Condensed Consolidated Financial Statements 19
Ferrellgas Finance Corp.
------------------------
Condensed Balance Sheets - October 31, 2003 and
July 31, 2003 24
Condensed Statement of Earnings -
Three months ended October 31, 2003 24
Condensed Statement of Cash Flows -
Three months ended October 31, 2003 25
Note to Condensed Financial Statements 25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 35
ITEM 4. CONTROLS AND PROCEDURES 36
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 36
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 36
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 36
ITEM 5. OTHER INFORMATION 36
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 37
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
October 31, July 31,
ASSETS 2003 2003
- -------------------------------------------------------------------------------- ------------- -------------
Current assets:
Cash and cash equivalents $ 12,351 $ 11,154
Accounts and notes receivable, net 63,495 56,742
Inventories 103,232 69,077
Prepaid expenses and other current assets 10,893 8,306
------------- -------------
Total current assets 189,971 145,279
Property, plant and equipment, net 683,581 684,917
Goodwill 124,190 124,190
Intangible assets, net 96,743 98,157
Other assets 9,420 8,853
------------- -------------
Total assets $ 1,103,905 $ 1,061,396
============= =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
- --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 119,389 $ 59,454
Other current liabilities 74,838 89,687
Short-term borrowings 21,800 -
------------- -------------
Total current liabilities 216,027 149,141
Long-term debt 900,807 888,226
Other liabilities 19,607 18,747
Contingencies and commitments (Note I) - -
Minority interest 2,036 2,363
Partners' capital (deficit):
Senior unitholder (1,994,146 units outstanding at
both October 31, 2003 and July 31, 2003 - liquidation preference
$79,766 at both October 31, 2003 and July 31, 2003) 79,766 79,766
Common unitholders (37,707,434 and 37,673,455 units outstanding
at October 31, 2003 and July 31, 2003, respectively) (52,381) (15,602)
General partner unitholder (401,026 and 400,683 units outstanding
at October 31, 2003 and July 31, 2003, respectively) (59,670) (59,277)
Accumulated other comprehensive loss (2,287) (1,968)
------------- -------------
Total partners' capital (deficit) (34,572) 2,919
------------- -------------
Total liabilities and partners' capital (deficit) $ 1,103,905 $ 1,061,396
============= =============
See notes to these condensed consolidated financial statements.
1
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per unit data)
(unaudited)
For the three months ended
----------------------------------
October 31, 2003 October 31, 2002
---------------- ----------------
Revenues:
Propane and other gas liquids sales $ 232,054 $ 194,900
Other 23,360 21,414
---------------- ----------------
Total revenues 255,414 216,314
Cost of product sold (exclusive of
depreciation, shown with amortization below) 159,249 123,672
---------------- ----------------
Gross profit 96,165 92,642
Operating expense 72,479 68,428
Depreciation and amortization expense 11,195 9,895
General and administrative expense 6,891 6,902
Equipment lease expense 4,511 5,992
Employee stock ownership plan compensation charge 1,784 1,395
Loss on disposal of assets and other 1,626 671
---------------- ----------------
Operating loss (2,321) (641)
Interest expense (16,794) (14,696)
Interest income 331 62
Early extinguishment of debt expense - (7,052)
---------------- ----------------
Loss before minority interest and cumulative
effect of change in accounting principle (18,784) (22,327)
Minority interest (138) (115)
---------------- ----------------
Loss before cumulative effect of change in
accounting principle (18,646) (22,212)
Cumulative effect of change in accounting principle,
net of minority interest of $28 - (2,754)
---------------- ----------------
Net loss (18,646) (24,966)
Distribution to senior unitholder 1,994 2,782
Net loss available to general partner unitholder (206) (277)
---------------- ----------------
Net loss available to common unitholders $ (20,434) $ (27,471)
================ ================
Basic loss per common unit:
Loss available to common unitholders before
cumulative effect of change in accounting principle $ (0.54) $ (0.69)
Cumulative effect of change in accounting principle - (0.07)
---------------- ----------------
Net loss available to common unitholders $ (0.54) $ (0.76)
================ ================
See notes to these condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(in thousands)
(unaudited)
Accumulated other
Number of units comprehensive loss
--------------------------------- --------------------
Total
General General partners'
Senior Common partner Senior Common partner Risk Pension capital
unitholder unitholders unitholder unitholder unitholders unitholder management liability (deficit)
---------- ----------- ---------- ---------- ----------- ---------- ---------- --------- ---------
August 1, 2003 1,994.1 37,673.5 400.7 $79,766 $(15,602) $(59,277) $ - $(1,968) $2,919
Contribution in connection
with ESOP compensation charge - - - - 1,749 16 - - 1,765
Common unit cash distribution - - - - (18,854) (190) - - (19,044)
Senior unit accrued distribution - - - - (1,974) (40) - - (2,014)
Common unit options exercised - 3.5 0.0 - 64 1 - - 65
Common units issued in connection
with acquisitions - 30.4 0.3 - 695 7 - - 702
Comprehensive income:
Net loss - - - - (18,459) (187) - - (18,646)
Other comprehensive loss:
Net losses on risk management
derivatives - - - - - - (319) - (319)
----------
Comprehensive loss (18,965)
---------- ----------- ---------- ---------- ----------- ---------- --------- --------- ----------
October 31, 2003 1,994.1 37,707.4 401.0 $79,766 $(52,381) $(59,670) $ (319) $(1,968) $(34,572)
========== =========== ========== ========== =========== ========== ========= ========= ==========
See notes to these condensed consolidated financial statements.
3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the three months ended
-----------------------------------
October 31, 2003 October 31, 2002
---------------- ----------------
(as restated*)
Cash flows from operating activities:
Net loss $ (18,646) $ (24,966)
Reconciliation of net loss to net cash
used in operating activities:
Cumulative effect of change in accounting principle - 2,754
Early extinguishment of debt expense - 1,854
Depreciation and amortization expense 11,195 9,895
Employee stock ownership plan compensation charge 1,784 1,395
Loss on disposal of assets 1,321 240
Minority interest (138) (115)
Other 1,319 1,514
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Accounts and notes receivable, net (23,512) (24,485)
Inventories (34,155) (28,821)
Prepaid expenses and other current assets (2,600) (2,302)
Accounts payable 59,968 44,278
Accrued interest expense (5,487) (10,098)
Other current liabilities (10,197) (11,852)
Other liabilities 810 (465)
Accounts receivable securitization:
Proceeds from new accounts receivable securitizations 20,000 40,000
Proceeds from collections reinvested in revolving
period accounts receivable securitizations 157,108 28,237
Remittances of amounts collected as servicer of
accounts receivable securitizations (161,108) (28,237)
---------------- ----------------
Net cash used in operating activities (2,338) (1,174)
---------------- ----------------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (1,787) (249)
Capital expenditures - technology initiative (2,947) (4,439)
Capital expenditures - other (5,513) (4,942)
Other 785 886
---------------- ----------------
Net cash used in investing activities (9,462) (8,744)
---------------- ----------------
Cash flows from financing activities:
Distributions (21,058) (21,035)
Proceeds from issuance of debt 13,300 170,000
Principal payments on debt (866) (161,042)
Net additions to short-term borrowings 21,800 21,500
Cash paid for financing costs (33) (4,809)
Minority interest activity (215) (257)
Proceeds from exercise of common unit options 69 296
---------------- ----------------
Net cash provided by financing activities 12,997 4,653
---------------- ----------------
Increase (decrease) in cash and cash equivalents $ 1,197 $ (5,265)
Cash and cash equivalents - beginning of period 11,154 19,781
---------------- ----------------
Cash and cash equivalents - end of period $12,351 $14,516
================ ================
Cash paid for interest $21,587 $24,168
================ ================
* See Note O to these condensed consolidated financial statements.
See notes to these condensed consolidated financial statements.
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2003
(Dollars in thousands, except per unit data, unless otherwise designated)
(unaudited)
A. Organization
Ferrellgas Partners, L.P. ("Ferrellgas Partners") is a publicly traded
limited partnership, owning a 99% limited partner interest in Ferrellgas,
L.P. (the "Operating Partnership"). Ferrellgas Partners and the Operating
Partnership are collectively referred to as "Ferrellgas." Ferrellgas, Inc.
(the "General Partner"), a wholly-owned subsidiary of Ferrell Companies,
Inc. ("Ferrell Companies"), has retained a 1% general partner interest in
Ferrellgas Partners and also holds a 1.0101% general partner interest in
the Operating Partnership, representing an effective 2% general partner
interest in Ferrellgas on a combined basis. As General Partner, it performs
all management functions required by Ferrellgas.
The condensed consolidated financial statements of Ferrellgas reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the interim periods presented. All adjustments to the
condensed consolidated financial statements were of a normal, recurring
nature. The information included in this Quarterly Report on Form 10-Q
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations, and the consolidated
financial statements and accompanying notes included in Ferrellgas' Annual
Report on Form 10-K for the fiscal year ended July 31, 2003.
B. Unit and stock-based compensation
Ferrellgas accounts for the Ferrellgas Unit Option Plan (the "Unit Option
Plan") and the Ferrell Companies, Inc. Incentive Compensation Plan (the
"ICP") using the intrinsic value method under the provisions of Accounting
Principles Board ("APB") No. 25, "Accounting for Stock Issued to
Employees," for all periods presented and makes the fair value method pro
forma disclosures required under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." Accordingly, no compensation
cost has been recognized for the Unit Option Plan or for the ICP in the
condensed consolidated statements of earnings. Had compensation cost for
these plans been determined based upon the fair value at the grant date for
awards under these plans, consistent with the methodology recommended under
SFAS No. 123, Ferrellgas' net loss and loss per unit would have been
adjusted as noted in the table following:
5
For the three months ended
October 31,
------------------------------
2003 2002
---------- ----------
Net loss available to common unitholders, as
reported $(20,434) $(27,471)
Add: Total stock-based employee compensation
expense determined under fair value based
method for all awards (240) (211)
---------- ----------
Pro forma net loss available to common
unitholders $(20,674) $(27,682)
========== ==========
Basic loss per common unit:
---------------------------
Loss available to common unitholders before
cumulative effect of change in accounting
principle, as reported $ (0.54) $ (0.69)
Net loss available to common unitholders, as
reported (0.54) (0.76)
Loss available to common unitholders before
cumulative effect of change in accounting
principle, pro forma (0.55) (0.70)
Net loss available to common unitholders,
pro forma (0.55) (0.77)
C. Accounting estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP")
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from these estimates. Significant estimates
impacting the condensed consolidated financial statements include accruals
that have been established for contingent liabilities, pending claims and
legal actions arising in the normal course of business, useful lives of
property, plant and equipment assets, residual values of tanks,
amortization methods of intangible assets and valuation methods of
derivative commodity contracts.
D. Reclassifications
Certain reclassifications have been made to the three months ended October
31, 2002 condensed consolidated statement of cash flows to conform to the
three months ended October 31, 2003 condensed consolidated statement of
cash flows presentation. "Loss on disposal of assets" is disclosed
separately in net cash used in operating activities on the condensed
consolidated statements of cash flows. This amount was previously
classified as "Other" in net cash used in operating activities in the three
months ended October 31, 2002. See Note O - Restatement of condensed
consolidated statements of cash flows - for discussion about a restatement
of the condensed consolidated statements of cash flows.
6
E. Nature of operations
Ferrellgas Partners is a holding entity that conducts no operations and has
two subsidiaries, Ferrellgas Partners Finance Corp. and the Operating
Partnership. Ferrellgas Partners owns a 100% equity interest in Ferrellgas
Partners Finance Corp. No operations are conducted by or through Ferrellgas
Partners Finance Corp., whose only purpose is to act as the co-issuer and
co-obligor of any debt issued by Ferrellgas Partners. The Operating
Partnership is the only operating subsidiary of Ferrellgas Partners.
The Operating Partnership is engaged primarily in the retail distribution
of propane and related equipment and supplies in the United States. The
retail market is seasonal because propane is used primarily for heating in
residential and commercial buildings. Therefore, the results of operations
for the three months ended October 31, 2003 and 2002 are not necessarily
indicative of the results to be expected for a full fiscal year. The
Operating Partnership serves more than one million residential,
industrial/commercial, agricultural and other customers.
F. Cash and cash equivalents and non-cash activities
For purposes of the condensed consolidated statements of cash flows,
Ferrellgas considers cash equivalents to include all highly liquid debt
instruments purchased with an original maturity of three months or less.
Significant non-cash investing and financing activities are primarily
related to the accounts receivable securitization and transactions with
related parties and are disclosed in Note G - Accounts receivable
securitization and Note M - Transactions with related parties,
respectively.
G. Accounts receivable securitization
During the three months ended October 31, 2003, $16.0 million had been
funded from the Operating Partnership's accounts receivable securitization
facility. Ferrellgas renewed this facility effective September 23, 2003,
for a 364-day commitment with Banc One, NA. In accordance with SFAS No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," this transaction is reflected in the
condensed consolidated financial statements as a sale of accounts
receivable and a retained interest in transferred accounts receivable. The
retained interest is classified on the condensed consolidated balance
sheets within "Accounts and notes receivable, net."
H. Supplemental financial statement information
Inventories consist of:
October 31, July 31,
2003 2003
----------- -----------
Propane gas and related products $ 84,956 $ 49,772
Appliances, parts and supplies 18,276 19,305
----------- -----------
$103,232 $ 69,077
=========== ===========
In addition to inventories on hand, Ferrellgas enters into contracts to buy
and sell product, primarily propane for supply procurement 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 October 31, 2003,
Ferrellgas had committed, for supply procurement purposes, to take net
delivery of approximately 5.0 million gallons of propane at a fixed price.
7
Property, plant and equipment, net consist of:
October 31, July 31,
2003 2003
----------- -----------
Property, plant and equipment $1,006,440 $1,002,199
Less: accumulated depreciation 322,859 317,282
----------- -----------
$ 683,581 $ 684,917
=========== ===========
During the three months ended October 31, 2003, Ferrellgas placed in
service $45.3 million of computer software, which will be depreciated using
the straight-line method over its estimated useful life of 5 years.
Intangible assets, net consist of:
October 31, 2003 July 31, 2003
------------------------------------------ ------------------------------------------
Gross Gross
carrying Accumulated carrying Accumulated
amount amortization Net amount amortization Net
------------ ---------------- ----------- ------------ ---------------- -----------
Customer lists $218,134 $(132,235) $85,899 $220,061 $(133,548) $86,513
Non-compete agreements 64,099 (53,255) 10,844 64,020 (52,376) 11,644
------------ ---------------- ----------- ------------ ---------------- -----------
$282,233 $(185,490) $96,743 $284,081 $(185,924) $98,157
============ ================ =========== ============ ================ ===========
For the three months ended
October 31,
---------------------------
2003 2002
---------- ----------
Aggregate amortization expense $3,167 $3,105
Estimated amortization expense:
For the years ended July 31,
2004 $11,501
2005 10,980
2006 10,461
2007 9,783
2008 8,845
For the three months ended
Loss on disposal of assets and other consist of: October 31,
------------------------------
2003 2002
-------------- --------------
Loss on disposal of assets $1,321 $ 240
Loss on transfer of accounts receivable
related to the accounts receivable
securitization 616 464
Service income related to the accounts
receivable securitization (311) (33)
-------------- --------------
$1,626 $ 671
============== ==============
8
Shipping and handling expenses are classified in the following condensed
consolidated statements of earnings line items:
For the three months ended
October 31,
------------------------------
2003 2002
-------------- --------------
Operating expense $30,500 $29,779
Depreciation and amortization expense 2,036 1,672
Equipment lease expense 2,804 2,892
-------------- --------------
$35,340 $34,343
============== ==============
I. Contingencies
Ferrellgas' operations are subject to all operating hazards and risks
normally incidental to handling, storing, transporting and otherwise
providing for use by consumers of combustible liquids such as propane. As a
result, at any given time, Ferrellgas is threatened with or named as a
defendant in various lawsuits arising in the ordinary course of business.
It is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
contingent claims that will have a material adverse effect on the financial
condition, results of operations and cash flows of Ferrellgas. Currently,
Ferrellgas is not a party to any legal proceedings other than various
claims and lawsuits arising in the ordinary course of business.
J. Distributions
On September 12, 2003, Ferrellgas paid cash distributions of $1.00 and
$0.50 per senior and common unit, respectively, for the three months ended
July 31, 2003. On November 17, 2003, Ferrellgas declared cash distributions
of $1.00 and $0.50 per senior and common unit, respectively, for the three
months ended October 31, 2003, that are expected to be paid on December 15,
2003.
K. Loss per common unit
Below is a calculation of the basic loss per common unit in the condensed
consolidated statements of earnings for the periods indicated. As there are
losses from continuing operations for the three months ended October 31,
2003 and 2002, a calculation for diluted loss per common unit for each
period was not performed, because the effect would be antidilutive.
Distributions to the senior unitholder increase the net loss available to
common unitholders. Common units that could potentially dilute basic
earnings per common unit in the future, that were not included this period
in the calculation of diluted earnings per common unit, were 142,079 and
87,298 common units for the three months ended October 31, 2003 and 2002,
respectively.
Three months ended
October 31,
------------------------------
2003 2002
---------- ----------
Loss available to common unitholders before cumulative
effect of change in accounting principle $(20,434) $(24,745)
Cumulative effect of change in accounting principle, net of minority
interest and general partner interest of $56 - (2,726)
---------- ----------
Net loss available to common unitholders $(20,434) $(27,471)
---------- ----------
Weighted average common units outstanding (in thousands) 37,704.7 36,088.1
Basic loss per common unit:
---------------------------
Loss available to common unitholders before cumulative effect of change
in accounting principle $ (0.54) $ (0.69)
Cumulative effect of change in accounting principle, net of minority interest
and general partner interest of $56 - (0.07)
---------- ----------
Net loss available to common unitholders $ (0.54) $ (0.76)
========== ==========
9
L. Adoption of new accounting standards
The Financial Accounting Standards Board ("FASB") recently issued SFAS No.
150 "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity," FASB Financial Interpretation No. 46
"Consolidation of Variable Interest Entities" and Emerging Issues Task
Force ("EITF") 00-21 "Accounting for Revenue Arrangements with Multiple
Deliverables."
SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as
equity. This statement is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective for the fiscal
year ending July 31, 2004. Ferrellgas has studied SFAS No. 150 and believes
it will not have a material effect on its financial position, results of
operations and cash flows.
FASB Financial Interpretation No. 46 clarifies Accounting Research Bulletin
No. 51, "Consolidated Financial Statements." If certain conditions are met,
this interpretation requires the primary beneficiary to consolidate certain
variable interest entities in which equity investors lack the
characteristics of a controlling financial interest or do not have
sufficient equity investment at risk to permit the variable interest entity
to finance its activities without additional subordinated financial support
from other parties. For variable interest entities created or obtained
before February 1, 2003, the interpretation is effective for the first
fiscal year or interim period ending after December 15, 2003. Ferrellgas
currently believes it does not have any variable interest entities that
would be subject to this interpretation.
EITF No. 00-21 addresses how to account for arrangements that may involve
multiple revenue-generating activities, such as the delivery or performance
of multiple products, services, and/or rights to use assets. In applying
this guidance, separate contracts with the same party, entered into at or
near the same time, will be presumed to be a bundled transaction, and the
consideration will be measured and allocated to the separate units based on
their relative fair values. This consensus guidance will be applicable to
agreements entered into in quarters beginning after June 15, 2003.
Ferrellgas adopted this new accounting pronouncement beginning August 1,
2003. The implementation of this pronouncement did not have a material
impact on Ferrellgas' financial position, results of operations and cash
flows, because it does not enter into a significant number of arrangements
that may involve multiple revenue-generating activities.
M. Transactions with related parties
Ferrellgas has no employees and is managed and controlled by its General
Partner. Pursuant to Ferrellgas' partnership agreements, the General
Partner is entitled to reimbursement for all direct and indirect expenses
incurred or payments it makes on behalf of Ferrellgas, and all other
necessary or appropriate expenses allocable to Ferrellgas or otherwise
reasonably incurred by its General Partner in connection with operating
Ferrellgas' business. These costs, which totaled $48.8 million and $45.2
million for the three months ended October 31, 2003 and 2002, respectively,
include compensation and benefits paid to employees of the General Partner
who perform services on their behalf, as well as related general and
administrative costs.
JEF Capital Management, Inc. ("JEF Capital Management") is beneficially
owned by James E. Ferrell, the Chairman, President and Chief Executive
Officer of the General Partner, and thus is an affiliate. Ferrellgas paid
senior unit distributions of $2.0 million and $2.8 million to JEF Capital
Management on September 12, 2003 and September 13, 2002, respectively. On
October 31, 2003, Ferrellgas accrued a senior unit distribution of $2.0
million that Ferrellgas expects to pay to JEF Capital Management on
December 15, 2003. See Note N - Subsequent events - for disclosure of
related party transactions with the General Partner and JEF Capital
Management after October 31, 2003, including the waiver given by JEF
Capital Management to Ferrellgas Partners.
10
Ferrell Companies is the sole shareholder of the General Partner and owns
17.8 million common units of Ferrellgas Partners. Ferrell Propane, Inc.
("Ferrell Propane") is wholly-owned by the General Partner. On September
12, 2003 and September 13, 2002, Ferrellgas Partners paid common unit
distributions of $8.9 million, $26 thousand and $0.2 million to Ferrell
Companies, Ferrell Propane and the General Partner, respectively, for each
of the three month periods ended July 31, 2003 and 2002. On November 17,
2003, Ferrellgas declared distributions to Ferrell Companies, Ferrell
Propane and the General Partner of $8.9 million, $26 thousand and $0.2
million, respectively, that are expected to be paid on December 15, 2003.
See Note N - Subsequent events - for disclosure of related party
transactions with the General Partner and JEF Capital Management after
October 31, 2003.
Ferrell International Limited is beneficially owned by James E. Ferrell and
thus is an affiliate. Ferrellgas enters into transactions with Ferrell
International Limited in connection with Ferrellgas' risk management
activities and does so at market prices in accordance with Ferrellgas'
affiliate trading policy approved by the General Partner's Board of
Directors. These transactions include forward, option and swap contracts
and are all reviewed for compliance with the policy. Ferrellgas also
provides limited accounting services for Ferrell International Limited.
Ferrellgas recognized the following net receipts (disbursements) from
purchases, sales and commodity derivative transactions and for providing
accounting services with Ferrell International Limited:
For the three months ended
October 31,
---------------------------
2003 2002
---------- ----------
Net disbursements $ - $(310)
Receipts from providing accounting services 10 10
These net purchases, sales and commodity derivative transactions with
Ferrell International Limited are classified as cost of product sold on the
condensed consolidated statements of earnings. There were no amounts due
from or due to Ferrell International Limited at October 31, 2003.
N. Subsequent events
Ferrellgas Partners' partnership agreement generally provides that it use
the cash proceeds of any offering of common units to redeem a portion of
its outstanding senior units, otherwise a "Material Event" would be deemed
to have occurred and JEF Capital Management, as the holder of the senior
units, would thereafter have specified rights, such as the right to convert
the senior units into common units or the right to register the senior
units. By letter agreement dated November 20, 2003, JEF Capital Management
agreed to waive the occurrence of a "Material Event" if Ferrellgas Partners
issues common units at any time and from time to time on or prior to March
31, 2004, and does not use the cash proceeds from such offering or
offerings to redeem a portion of the outstanding senior units. In
consideration of the granting of the waiver, Ferrellgas Partners agreed not
to redeem any outstanding senior units prior to March 31, 2004, and to
reimburse JEF Capital Management for its reasonable legal fees incurred in
connection with the execution of the waiver.
On December 1, 2003, Ferrellgas Partners received $47.4 million pursuant to
the issuance of 2.0 million common units to the public. In connection with
this transaction, the General Partner contributed $0.9 million to maintain
its effective 2% general partnership interest in Ferrellgas. Ferrellgas
then used the net proceeds to reduce the borrowings outstanding under its
bank credit facility by approximately $38.3 million. The remaining proceeds
will be used for general partnership purposes, including the repayment of
debt incurred to fund prior acquisitions.
11
O. Restatement of condensed consolidated statements of cash flows
Subsequent to the issuance of Ferrellgas' condensed consolidated financial
statements for the three months ended October 31, 2002, management of
Ferrellgas determined that the cash flows from Ferrellgas' accounts
receivable securitizations should be reflected gross in its consolidated
statements of cash flows and be included within operating activities rather
than a net presentation within investing activities. As a result,
Ferrellgas' condensed consolidated statement of cash flows for the three
months ended October 31, 2002 has been restated to present the gross cash
flow activities from the accounts receivable securitizations and within the
correct cash flow activity. A summary of the significant effects of the
restatement follows:
For the three
months ended
October 31, 2002
--------------------
Cash flows from operating activities:
Net cash used in operating activities, as
previously reported $(41,174)
Adjustment of cash flows
related to accounts receivable securitizations:
Proceeds from new accounts receivable
securitizations 40,000
Proceeds from collections reinvested in
revolving period accounts receivable
securitizations 28,237
Remittances of amounts collected as servicer
of accounts receivable securitizations (28,237)
--------------------
Net cash used in operating activities, as
restated $(1,174)
====================
Cash flows from investing activities:
Net cash provided by investing activities, as
previously reported $31,256
Adjustment of cash flows
related to accounts receivable securitizations (40,000)
--------------------
Net cash used in investing activities, as restated $(8,744)
====================
12
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED BALANCE SHEETS
(Amounts in dollars)
(unaudited)
October 31, July 31,
ASSETS 2003 2003
- ------------------------------------------------- ------------- -------------
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 2,508 2,463
Accumulated deficit (2,508) (2,463)
-------------- -------------
Total stockholder's equity $1,000 $1,000
=============== =============
CONDENSED STATEMENTS OF EARNINGS
(unaudited)
For the three months ended
--------------------------------
October 31, October 31,
2003 2002
----------- -----------
General and administrative expense $ (45) $ -
----------- -----------
Net loss $ (45) $ -
=========== ===========
See note to these condensed financial statements.
13
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in dollars)
(unaudited)
For the three months ended
----------------------------------
October 31, October 31,
2003 2002
--------------- ---------------
Cash flows from operating activities:
Net loss $ (45) $ -
--------------- ---------------
Cash used in operating activities (45) -
--------------- ---------------
Cash flows from financing activities:
Capital contribution 45 -
--------------- ---------------
Cash provided by financing activities
45 -
--------------- ---------------
Change in cash - -
Cash - beginning of period 1,000 1,000
--------------- ---------------
Cash - end of period $1,000 $1,000
=============== ===============
See note to these condensed financial statements.
NOTE TO CONDENSED FINANCIAL STATEMENTS
OCTOBER 31, 2003
(unaudited)
A. Organization
Ferrellgas Partners Finance Corp., a Delaware corporation, was formed on
March 28, 1996, and is a wholly-owned subsidiary of Ferrellgas Partners,
L.P.
The condensed 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 condensed financial statements
were of a normal, recurring nature.
14
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
October 31, July 31,
ASSETS 2003 2003
- ----------------------------------------------------------------------------- ------------- -------------
Current assets:
Cash and cash equivalents $ 11,981 $ 10,816
Accounts and notes receivable, net 63,495 56,742
Inventories 103,232 69,077
Prepaid expenses and other current assets 10,216 7,629
------------- -------------
Total current assets 188,924 144,264
Property, plant and equipment, net 683,581 684,917
Goodwill 124,190 124,190
Intangible assets, net 96,743 98,157
Other assets 4,930 4,163
------------- -------------
Total assets $1,098,368 $1,055,691
============= =============
LIABILITIES AND PARTNERS' CAPITAL
- -----------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 119,229 $ 59,261
Other current liabilities 57,425 77,211
Short-term borrowings 21,800 -
------------- -------------
Total current liabilities 198,454 136,472
Long-term debt 681,282 668,657
Other liabilities 19,607 18,747
Contingencies and commitments (Note H) - -
Partners' capital:
Limited partner 199,276 231,420
General partner 2,036 2,363
Accumulated other comprehensive loss (2,287) (1,968)
------------- -------------
Total partners' capital 199,025 231,815
------------- -------------
Total liabilities and partners' capital $1,098,368 $1,055,691
============= =============
See notes to these condensed consolidated financial statements.
15
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands)
(unaudited)
For the three months ended
------------------------------------
October 31, 2003 October 31, 2002
---------------- ----------------
Revenues:
Propane and other gas liquids sales $ 232,054 $ 194,900
Other 23,360 21,414
---------------- ----------------
Total revenues 255,414 216,314
Cost of product sold (exclusive of depreciation
shown with amortization below) 159,249 123,672
---------------- ----------------
Gross profit 96,165 92,642
Operating expense 72,412 68,428
Depreciation and amortization expense 11,195 9,895
General and administrative expense 6,891 6,902
Equipment lease expense 4,511 5,992
Employee stock ownership plan compensation charge 1,784 1,395
Loss on disposal of assets and other 1,626 671
----------------- ----------------
Operating loss (2,254) (641)
Interest expense (11,768) (10,755)
Interest income 331 58
----------------- ----------------
Loss before cumulative effect of change in
accounting principle (13,691) (11,338)
Cumulative effect of change in accounting principle - (2,782)
----------------- ----------------
Net loss $(13,691) $(14,120)
================= ================
See notes to these condensed consolidated financial statements.
16
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Accumulated other
comprehensive loss
-------------------------- Total
Limited General Risk Pension partners'
partner partner management liability capital
----------- ----------- ------------ ----------- -----------
August 1, 2003 $ 231,420 $ 2,363 $ - $ (1,968) $ 231,815
Contribution in connection with
ESOP compensation charge 1,765 19 - - 1,784
Quarterly cash and accrued distributions (21,058) (215) - - (21,273)
Net assets contributed by Ferrellgas Partners
and general partner in connection with
acquisitions 702 7 - - 709
Comprehensive income:
Net loss (13,553) (138) - - (13,691)
Other comprehensive loss:
Net losses on risk management
derivatives - - (319) - (319)
------------
Comprehensive loss (14,010)
----------- ----------- ------------ ----------- -----------
October 31, 2003 $ 199,276 $ 2,036 $ (319) $ (1,968) $ 199,025
=========== =========== ============ =========== ===========
See notes to these condensed consolidated financial statements.
17
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the three months ended
---------------------------
October 31, October 31,
2003 2002
----------- -----------
Cash flows from operating activities:
Net loss $ (13,691) $ (14,120)
Reconciliation of net loss to net cash provided by
(used in) operating activities:
Cumulative effect of change in accounting principle - 2,782
Depreciation and amortization expense 11,195 9,895
Employee stock ownership plan compensation charge 1,784 1,395
Loss on disposal of assets 1,321 240
Other 1,062 1,310
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Accounts and notes receivable, net (23,512) (24,485)
Inventories (34,155) (28,821)
Prepaid expenses and other current assets (2,600) (2,302)
Accounts payable 59,968 44,278
Accrued interest expense (10,256) (9,710)
Other current liabilities (10,260) (11,922)
Other liabilities 810 (465)
Accounts receivable securitization:
Proceeds from new accounts receivable securitizations 20,000 40,000
Proceeds from collections reinvested in revolving
period accounts receivable securitizations 157,108 28,237
Remittances of amounts collected as servicer of
accounts receivable securitizations (161,108) (28,237)
------------ -----------
Net cash provided by (used in) operating activities (2,334) 8,075
------------ -----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (1,787) (249)
Capital expenditures - technology initiative (2,947) (4,439)
Capital expenditures - other (5,513) (4,942)
Other 785 883
------------ -----------
Net cash used in investing activities (9,462) (8,747)
------------ -----------
Cash flows from financing activities:
Distributions (21,273) (25,391)
Proceeds from issuance of debt 13,300 -
Principal payments on debt (866) (1,042)
Net additions to short-term borrowings 21,800 21,500
------------ -----------
Net cash provided by (used in) financing activities 12,961 (4,933)
------------ -----------
Increase (decrease) in cash and cash equivalents $ 1,165 $ (5,605)
Cash and cash equivalents - beginning of period 10,816 19,388
------------ -----------
Cash and cash equivalents - end of period $ 11,981 $ 13,783
============ ===========
Cash paid for interest $ 21,587 $ 20,043
============ ===========
See notes to these condensed consolidated financial statements.
18
FERRELLGAS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2003
(Dollars in thousands)
(unaudited)
A. Organization
Ferrellgas, L.P. operates the propane business and assets of Ferrellgas
Partners, L.P. ("Ferrellgas Partners"). The general partner of Ferrellgas,
L.P. and Ferrellgas Partners is Ferrellgas, Inc. (the "General Partner"), a
wholly-owned subsidiary of Ferrell Companies, Inc. ("Ferrell Companies").
The General Partner holds an approximate 1% general partner interest in
Ferrellgas, L.P. and performs all management functions. Ferrellgas
Partners, a publicly traded limited partnership, holds an approximate 99%
interest in and consolidates Ferrellgas, L.P.
The condensed consolidated financial statements of Ferrellgas, L.P. and
subsidiaries reflect all adjustments, which are, in the opinion of
management, necessary for a fair statement of the interim periods
presented. All adjustments to the condensed consolidated financial
statements were of a normal, recurring nature. The information included in
this Quarterly Report on Form 10-Q should be read in conjunction with the
consolidated financial statements and accompanying notes included in
Ferrellgas, L.P.'s Annual Report on Form 10-K for the fiscal year ended
July 31, 2003.
B. Unit and stock-based compensation
Ferrellgas, L.P. accounts for the Ferrellgas Unit Option Plan (the "Unit
Option Plan") and the Ferrell Companies, Inc. Incentive Plan (the "ICP")
using the intrinsic value method under the provisions of Accounting
Principles Board ("APB") No. 25, "Accounting for Stock Issued to
Employees," for all periods presented and makes the fair value method pro
forma disclosures required under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." Accordingly, no compensation
cost has been recognized for the Unit Option Plan or for the ICP in the
condensed consolidated statements of earnings. Had compensation cost for
these plans been determined based upon the fair value at the grant date for
awards under these plans, consistent with the methodology recommended under
SFAS No. 123, Ferrellgas, L.P.'s net loss would have been adjusted as noted
in the table below:
For the three months ended
October 31,
--------------------------
2003 2002
---------- ----------
Net loss, as reported $(13,691) $(14,120)
Add: Total stock-based employee compensation
expense determined under fair value based method
for all awards (243) (213)
---------- ----------
Pro forma net loss $(13,934) $(14,333)
========== ==========
19
C. Accounting estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP")
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from these estimates. Significant estimates
impacting the condensed consolidated financial statements include accruals
that have been established for contingent liabilities, pending claims and
legal actions arising in the normal course of business, useful lives of
property, plant and equipment assets, residual values of tanks,
amortization methods of intangible assets and valuation methods of
derivative commodity contracts.
D. Nature of operations
Ferrellgas, L.P. is engaged primarily in the retail distribution of propane
and related equipment and supplies in the United States. The retail market
is seasonal because propane is used primarily for heating in residential
and commercial buildings. Therefore, the results of operations for the
three months ended October 31, 2003 and 2002 are not necessarily indicative
of the results to be expected for a full fiscal year.
E. Cash and cash equivalents and non-cash activities
For purposes of the condensed consolidated statements of cash flows,
Ferrellgas, L.P. considers cash equivalents to include all highly liquid
debt instruments purchased with an original maturity of three months or
less. Significant non-cash investing and financing activities are primarily
related to the accounts receivable securitization and transactions with
related parties and are disclosed in Note F - Accounts receivable
securitization and Note K - Transactions with related parties,
respectively.
F. Accounts receivable securitization
During the three months ended October 31, 2003, $16.0 million had been
funded from Ferrellgas, L.P.'s accounts receivable securitization facility.
Ferrellgas, L.P. renewed this facility effective September 23, 2003, for a
364-day commitment with Banc One, NA. In accordance with SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," this transaction is reflected in the
condensed consolidated financial statements as a sale of accounts
receivable and a retained interest in transferred accounts receivable. The
retained interest is classified on the condensed consolidated balance
sheets within "Accounts and notes receivable, net."
G. Supplemental financial statement information
Inventories consist of:
October 31, July 31,
2003 2003
--------------- ---------------
Propane gas and related products $ 84,956 $49,772
Appliances, parts and supplies 18,276 19,305
--------------- ---------------
$103,232 $69,077
=============== ===============
In addition to inventories on hand, Ferrellgas, L.P. enters into contracts
to buy and sell product, primarily propane for supply procurement 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 October 31, 2003,
Ferrellgas, L.P. had committed, for supply procurement purposes, to take
net delivery of approximately 5.0 million gallons of propane at a fixed
price.
20
Property, plant and equipment, net consist of:
October 31, July 31,
2003 2003
--------------- ---------------
Property, plant and equipment $1,006,440 $1,002,199
Less: accumulated depreciation 322,859 317,282
--------------- ---------------
$ 683,581 $ 684,917
=============== ===============
During the three months ended October 31, 2003, Ferrellgas, L.P. placed in
service $45.3 million of computer software, which will be depreciated using
the straight-line method over its estimated useful life of 5 years.
Intangible assets, net consist of:
October 31, 2003 July 31, 2003
------------------------------------------ ------------------------------------------
Gross Gross
carrying Accumulated carrying Accumulated
amount amortization Net amount amortization Net
------------ ---------------- ------------ ------------ ---------------- ------------
Customer lists $218,134 $(132,235) $85,899 $220,061 $(133,548) $86,513
Non-compete agreements 64,099 (53,255) 10,844 64,020 (52,376) 11,644
------------ ---------------- ------------ ------------ ---------------- ------------
$282,233 $(185,490) $96,743 $284,081 $(185,924) $98,157
============ ================ ============ ============ ================ ============
For the three months
ended October 31,
--------------------
2003 2002
-------- --------
Aggregate amortization expense $3,167 $3,105
Estimated amortization expense:
For the years ended July 31,
2004 $11,501
2005 10,980
2006 10,461
2007 9,783
2008 8,845
Loss on disposal of assets and other consists of:
For the three months ended
October 31,
--------------------------
2003 2002
---------- ----------
Loss on disposal of assets $1,321 $240
Loss on transfer of accounts receivable
related to the accounts receivable
securitization 616 464
Service income related to the accounts
receivable securitization (311) (33)
---------- ----------
$1,626 $671
========== ==========
21
Shipping and handling expenses are classified in the following condensed
consolidated statements of earnings line items:
For the three months ended
October 31,
--------------------------
2003 2002
---------- ----------
Operating expense $30,500 $29,779
Depreciation and amortization expense 2,036 1,672
Equipment lease expense 2,804 2,892
---------- ----------
$35,340 $34,343
========== ==========
H. Contingencies
Ferrellgas L.P.'s operations are subject to all operating hazards and risks
normally incidental to handling, storing, transporting and otherwise
providing for use by consumers of combustible liquids such as propane. As a
result, at any given time, Ferrellgas, L.P. is threatened with or named as
a defendant in various lawsuits arising in the ordinary course of business.
It is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
contingent claims that will have a material adverse effect on the financial
condition, results of operations and cash flows of Ferrellgas, L.P.
Currently, Ferrellgas L.P. is not a party to any legal proceedings other
than various claims and lawsuits arising in the ordinary course of
business.
I. Distributions
On September 12, 2003, Ferrellgas, L.P. paid a cash distribution of $21.3
million for the three months ended July 31, 2003. On September 13, 2002,
Ferrellgas, L.P. paid a cash distribution of $25.4 million for the three
months ended July 31, 2002. On November 17, 2003, Ferrellgas, L.P. declared
a cash distribution of $31.9 million for the three months ended October 31,
2003, that is expected to be paid on December 15, 2003.
J. Adoption of new accounting standards
The Financial Accounting Standards Board ("FASB") recently issued SFAS No.
150 "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity," FASB Financial Interpretation No. 46
"Consolidation of Variable Interest Entities" and Emerging Issues Task
Force ("EITF") 00-21 "Accounting for Revenue Arrangements with Multiple
Deliverables."
SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as
equity. This statement is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective for the fiscal
year ending July 31, 2004. Ferrellgas, L.P. has studied SFAS No. 150 and
believes it will not have a material effect on its financial position,
results of operations and cash flows.
FASB Financial Interpretation No. 46 clarified Accounting Research Bulletin
No. 51, "Consolidated Financial Statements." If certain conditions are met,
this interpretation requires the primary beneficiary to consolidate certain
variable interest entities in which equity investors lack the
characteristics of a controlling financial interest or do not have
sufficient equity investment at risk to permit the variable interest entity
to finance its activities without additional subordinated financial support
from other parties. For variable interest entities created or obtained
before February 1, 2003, the interpretation is effective for the first
fiscal year or interim period ending after December 15, 2003. Ferrellgas,
L.P. currently believes it does not have any variable interest entities
that would be subject to this interpretation.
22
EITF No. 00-21 addresses how to account for arrangements that may involve
multiple revenue-generating activities, such as the delivery or performance
of multiple products, services, and/or rights to use assets. In applying
this guidance, separate contracts with the same party, entered into at or
near the same time, will be presumed to be a bundled transaction, and the
consideration will be measured and allocated to the separate units based on
their relative fair values. This consensus guidance will be applicable to
agreements entered into in quarters beginning after June 15, 2003.
Ferrellgas, L.P. adopted this new accounting pronouncement beginning August
1, 2003. The implementation of this pronouncement did not have a material
impact on Ferrellgas, L.P.'s financial position, results of operations and
cash flows, because it does not enter into a significant number of
arrangements that may involve multiple revenue-generating activities.
K. Transactions with related parties
Ferrellgas, L.P. has no employees and is managed and controlled by the
General Partner. Pursuant to Ferrellgas, L.P.'s partnership agreement, the
General Partner is entitled to reimbursement for all direct and indirect
expenses incurred or payments it makes on behalf of Ferrellgas, L.P., and
all other necessary or appropriate expenses allocable to Ferrellgas, L.P.
or otherwise reasonably incurred by the General Partner in connection with
operating Ferrellgas L.P.'s business. These costs, which totaled $48.8
million and $45.2 million for the three months ended October 31, 2003 and
2002, respectively, include compensation and benefits paid to employees of
the General Partner who perform services on their behalf, as well as
related general and administrative costs.
On September 12, 2003, Ferrellgas, L.P. paid to Ferrellgas Partners and the
General Partner distributions of $21.1 million and $0.2 million,
respectively, for the three months ended July 31, 2003. On September 13,
2002, Ferrellgas, L.P. paid to Ferrellgas Partners and the General Partner
distributions of $25.1 million and $0.3 million, respectively, for the
three months ended July 31, 2002. On November 17, 2003, Ferrellgas, L.P.
declared distributions to Ferrellgas Partners, L.P. and the General Partner
of $31.6 million and $0.3 million, respectively, that are expected to be
paid on December 15, 2003. See Note L - Subsequent events - for disclosure
of related party transactions with Ferrellgas Partners and the General
Partner that occurred after October 31, 2003.
Ferrell International Limited is beneficially owned by James E. Ferrell and
thus is an affiliate. Ferrellgas, L.P. enters into transactions with
Ferrell International Limited in connection with Ferrellgas L.P.'s risk
management activities and does so at market prices in accordance with
Ferrellgas L.P.'s affiliate trading policy approved by the General
Partner's Board of Directors. These transactions include forward, option
and swap contracts and are all reviewed for compliance with the policy.
Ferrellgas also provides limited accounting services for Ferrell
International Limited. Ferrellgas, L.P. recognized the following net
receipts (disbursements) from purchases, sales and commodity derivative
transactions and for providing accounting services with Ferrell
International Limited:
For the three months ended
October 31,
--------------------------
2003 2002
---------- ----------
Net disbursements $ - $ (310)
Receipts from providing accounting services 10 10
These net purchases, sales and commodity derivative transactions with
Ferrell International Limited are classified as cost of product sold on the
condensed consolidated statements of earnings. There were no amounts due
from or due to Ferrell International Limited at October 31, 2003.
L. Subsequent events
On December 1, 2003, Ferrellgas, L.P. received $37.9 million and $0.4
million in contributions from Ferrellgas Partners and the General Partner,
respectively. Ferrellgas, L.P. then used the net proceeds to reduce the
borrowings outstanding under its bank credit facility.
23
FERRELLGAS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED BALANCE SHEETS
(Amounts in dollars)
(unaudited)
October 31, July 31,
ASSETS 2003 2003
- -------------------------------------------------------------------- ------------ ------------
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 700 515
Accumulated deficit (700) (515)
------------ ------------
Total stockholder's equity $1,000 $1,000
============ ============
CONDENSED STATEMENT OF EARNINGS
(unaudited)
Three months
ended
October 31,
2003
--------------
General and administrative expense $ 185
--------------
Net loss $ (185)
==============
See note to these condensed financial statements.
24
FERRELLGAS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED STATEMENT OF CASH FLOWS
(Amounts in dollars)
(unaudited)
Three months ended
October 31,
2003
------------------
Cash flows from operating activities:
Net loss $ (185)
------------------
Cash used in operating activities (185)
------------------
Cash flows from financing activities:
Capital contribution 185
------------------
Cash provided by financing activities 185
------------------
Change in cash -
Cash - beginning of period 1,000
------------------
Cash - end of period $ 1,000
==================
See note to these condensed financial statements.
NOTE TO CONDENSED FINANCIAL STATEMENTS
OCTOBER 31, 2003
(unaudited)
A. Organization
Ferrellgas Finance Corp., a Delaware corporation, was formed on January 16,
2003 and is a wholly-owned subsidiary of Ferrellgas, L.P.
The condensed 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 condensed financial statements
were of a normal, recurring nature.
25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our management's discussion and analysis of financial condition and results
of operations relates to Ferrellgas Partners, L.P. and Ferrellgas, L.P.
Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. have nominal
assets, do not conduct any operations and have no employees. Ferrellgas Partners
Finance Corp. may act as a co-obligor of future issuances of debt securities of
Ferrellgas Partners and Ferrellgas Finance Corp. may act as co-obligor of future
issuances of debt securities of Ferrellgas, L.P. Accordingly, and due to the
reduced disclosure format, a discussion of the results of operations, liquidity
and capital resources of Ferrellgas Partners Finance Corp. and Ferrellgas
Finance Corp. are not presented in this section.
In this report, unless the context indicates otherwise:
o when we refer to "us," "we," "our," or "ours," we generally mean Ferrellgas
Partners, L.P. together with its consolidated subsidiaries, including
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas Finance
Corp., except when used in connection with "common units" or "senior
units," in which case these terms refer to Ferrellgas Partners, L.P.;
o references to "Ferrellgas Partners" refer to Ferrellgas Partners, L.P.
itself, without its consolidated subsidiaries;
o references to the "operating partnership" refer to Ferrellgas, L.P.,
together with its consolidated subsidiaries, including Ferrellgas Finance
Corp.;
o references to our "general partner" refer to Ferrellgas, Inc.;
o the term "unitholders" refers to holders of common units of Ferrellgas
Partners; and
o references to "Notes" refers to the notes to the condensed consolidated
financial statements of Ferrellgas Partners and subsidiaries, as filed
herewith.
Ferrellgas Partners and the operating partnership are Delaware limited
partnerships. Ferrellgas Partners is a holding entity that conducts no
operations and has two direct subsidiaries, Ferrellgas Partners Finance Corp.
and the operating partnership. Ferrellgas Partner's only significant assets are
its approximate 99% limited partnership interest in the operating partnership
and its 100% equity interest in Ferrellgas Partners Finance Corp. Our common
units are listed on the New York Stock Exchange and our activities are
substantially conducted through the operating partnership.
The following is a discussion of our historical financial condition and
results of operations and should be read in conjunction with our historical
condensed consolidated financial statements and accompanying notes thereto
included elsewhere in this Quarterly Report on Form 10-Q.
The discussions set forth in the "Results of Operations" and "Liquidity and
Capital Resources" sections generally refer to Ferrellgas Partners and its
consolidated subsidiaries. However, there do exist two material differences
between Ferrellgas Partners and the operating partnership. Those two material
differences are:
o the partnerships incur different amounts of interest expense on their
outstanding indebtedness; see pages 2 and 16 in their respective condensed
consolidated financial statements; and
o during the three months ended October 31, 2002, Ferrellgas Partners
incurred $7.1 million in expenses related to the early extinguishment of
its debt.
As discussed in "Note O - Restatement of condensed consolidated statements
of cash flows," we have restated the condensed consolidated statements of cash
flows of Ferrellgas Partners for the three months ended October 31, 2002.
Management's Discussion and Analysis of Operating Activities gives effect to
this restatement.
26
Forward-looking statements
Statements included in this report include forward-looking statements.
These forward-looking statements are identified as any statement that does not
relate strictly to historical or current facts. They often use words such as
"anticipate," "believe," "intend," "plan," "projection," "forecast," "strategy,"
"position," "continue," "estimate," "expect," "may," "will," or the negative of
those terms or other variations of them or comparable terminology. These
statements often discuss plans, strategies, events or developments that we
expect or anticipate will or may occur in the future and are based upon the
beliefs and assumptions of our management and on the information currently
available to them. In particular, statements, express or implied, concerning
future operating results, or our ability to generate sales, income or cash flow
are forward-looking statements.
Forward-looking statements are not guarantees of future performance. You
should not put undue reliance on any forward-looking statements. All
forward-looking statements are subject to risks, uncertainties and assumptions
that could cause our actual results to differ materially from those expressed in
or implied by these forward-looking statements. Many of the factors that will
affect our future results are beyond our ability to control or predict.
Some of our forward-looking statements include the following:
o whether the operating partnership will have sufficient funds to meet its
obligations, including its obligations under its debt securities, and to
enable it to distribute to Ferrellgas Partners sufficient funds to permit
Ferrellgas Partners to meet its obligations with respect to its existing
securities;
o whether Ferrellgas Partners and the operating partnership will continue to
meet all of the quarterly financial tests required by the agreements
governing their indebtedness;
o the expectation that future periods may not have the same percentage
increase in revenues, cost of sales and interest expense as experienced
during fiscal 2003; and
o the expectation that future periods will have increased depreciation
expense over the amount recognized during fiscal 2003.
For a more detailed description of these and other forward-looking
statements and for risk factors that may affect any forward-looking statements,
see the sections entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Risk Factors" in Items 7 and 1,
respectively, of our Annual Report on Form 10-K for our fiscal year ended July
31, 2003, as filed with the SEC on October 21, 2003.
Results of Operations
Due to the seasonality of the retail distribution of propane, results of
our operations for the three months ended October 31, 2003 and 2002 are not
necessarily indicative of the results to be expected for a full fiscal year.
Other factors affecting the results of our operations include competitive
conditions, demand for product, timing of acquisitions, general economic
conditions in the United States, variations in the weather and fluctuations in
commodity prices.
As we have grown through acquisitions, fixed costs such as personnel costs,
equipment leases, depreciation and interest expense have increased.
Historically, due to the seasonality of our business, these fixed costs have
contributed to net losses in the first and fourth fiscal quarters.
Three Months Ended October 31, 2003 vs. October 31, 2002
Propane and other gas liquids sales. Propane and other gas liquids sales
increased $37.2 million primarily due to an increase in the average propane
sales price per gallon and increased retail sales volumes primarily due to
acquisitions. This increase in retail sales volumes was partially offset by the
lack of sustained cold temperatures this quarter.
27
The average sales price per gallon increased due to the effect of a
significant increase in the wholesale cost of propane during the first three
months of fiscal 2004 as compared to the prior year period. The wholesale market
price at one of the major supply points, Mt. Belvieu, Texas, averaged $0.54 per
gallon during the first three months of fiscal 2004, compared to an average of
$0.46 per gallon in the prior year period. Other major supply points in the
United States have also experienced significant increases.
Other revenues. Other revenues increased 9.1% primarily due to acquisitions
completed during fiscal 2003.
Cost of product sold. Cost of product sold increased $35.6 million
primarily due to an increase in the wholesale price of propane and increased
retail propane volumes primarily due to acquisitions. This increase was
partially offset by improved results from our risk management trading
activities, which resulted in a decrease of $1.6 million in our cost of product
sold compared to the prior year period.
Gross profit. Gross profit increased 3.8% primarily due to the effect of
the increase in our retail propane volumes and improved results from our risk
management trading activities, partially offset by lower retail margins. See
additional discussion regarding risk management trading activities in Item 3
"Quantitative and Qualitative Disclosures about Market Risk."
Operating expense. Operating expense increased 5.9% primarily due to
expenses related to acquisitions completed during fiscal 2003.
Depreciation and amortization expense. Depreciation and amortization
expense increased 13.1% primarily due to software assets related to our
technology initiative that were placed in service during the three months ended
October 31, 2003, the buyout of operating tank leases in December 2002 and
acquisitions completed during fiscal 2003.
Equipment lease expense. Equipment lease expense decreased 24.7% primarily
due to the effect of the December 2002 buyout of operating tank leases.
Interest expense. Interest expense increased 14.3% due to increased
borrowings related to the buyout of operating tank leases in December 2002 and
to finance acquisitions completed in fiscal 2003. This increase was partially
offset by lower interest rates on credit facility borrowings and the effect of
refinancing fixed-rate debt at a lower interest rate.
Net loss. Net loss decreased 25.3% primarily due to certain transactions
recognized during the three months ended October 31, 2002 that were not repeated
in the current fiscal quarter. These prior year transactions included a $7.1
million early extinguishment of debt expense related to the repurchase and
redemption of senior secured notes and a $2.8 million cumulative change in
accounting principle related to the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement
Obligations." This decrease in net loss was partially offset by increased
depreciation and amortization expense and interest expense.
Interest expense and net loss of the operating partnership
- ----------------------------------------------------------
Interest expense. The operating partnership's interest expense increased
9.4% due to increased borrowings related to the buyout of operating tank leases
in December 2002. This increase was partially offset by lower interest rates on
credit facility borrowings.
Net loss. The operating partnership's net loss decreased 3.0% primarily due
to the effect of a $2.8 million cumulative effect of a change in accounting
principle related to the adoption of SFAS No. 143 recognized during the three
months ended October 31, 2002. This decrease was partially offset by increased
depreciation and amortization expense and interest expense in the current fiscal
quarter.
28
Forward-looking statements
We do not anticipate similar percentage increases in fiscal 2004 for
revenue, cost of sales, operating expenses and interest expense as was
recognized in fiscal 2003 versus fiscal 2002, assuming that winter temperatures
and interest rates remain unchanged compared to fiscal 2003. We do expect an
increase in depreciation and amortization expense related to software for our
technology initiative which was placed in service during the first quarter of
fiscal 2004.
Liquidity and Capital Resources
Our ability to satisfy our obligations is dependent upon our future
performance, which will be subject to prevailing economic, financial, business
and weather conditions and other factors, many of which are beyond our control.
Due to the seasonality of the retail propane distribution business, a
significant portion of our cash flow from operations is generated during the
winter heating season which occurs during our second and third fiscal quarters.
Typically, we generate significantly lower cash flows from operations in our
first and fourth fiscal quarters as compared to the second and third fiscal
quarters because fixed costs generally exceed gross profit during the non-peak
heating season. Subject to meeting the financial tests discussed below, our
general partner believes that the operating partnership will have sufficient
funds available to meet its obligations, and to distribute to Ferrellgas
Partners sufficient funds to permit Ferrellgas Partners to meet its obligations
during fiscal 2004. In addition, our general partner believes that the operating
partnership will have sufficient funds available to distribute to Ferrellgas
Partners sufficient cash to pay the required quarterly distribution on the
senior units and the minimum quarterly distribution on all of its common units
during the remainder of fiscal 2004. The minimum quarterly distribution of $0.50
expected to be paid on all common units on December 15, 2003, represents the
thirty-seventh consecutive minimum quarterly distribution paid to our common
unitholders dating back to October 1994.
Our bank credit facility, public debt, private debt and accounts receivable
securitization facility contain several financial tests and covenants
restricting our ability to pay distributions, incur debt and engage in certain
other business transactions. In general, these tests are based on our debt to
cash flow ratio and cash flow to interest expense ratio. Our general partner
currently believes that the most restrictive of these tests are debt incurrence
limitations under the terms of our bank credit and accounts receivable
securitization facilities and limitations on the payment of distributions within
our 8.75% senior notes due 2012. The bank credit and accounts receivable
securitization facilities generally limit the operating partnership's ability to
incur debt if it exceeds prescribed ratios of either debt to cash flow or cash
flow to interest expense. Our 8.75% senior notes restrict payments if a minimum
ratio of cash flow to interest expense is not met, assuming certain exceptions
to this ratio limit have previously been exhausted. This restriction places
limitations on our ability to make restricted payments such as the payment of
cash distributions to our unitholders. The cash flow used to determine these
financial tests generally is based upon our most recent cash flow performance
giving pro forma effect for acquisitions and divestitures made during the test
period. Our bank credit facility, public debt, private debt and accounts
receivable securitization facility do not contain early repayment provisions
related to a decline in our credit rating.
As of October 31, 2003, our general partner believes that we met all the
required quarterly financial tests and covenants during the first quarter of
fiscal 2004. Based upon current estimates of our cash flow, our general partner
believes that we will be able to continue to meet all of the required quarterly
financial tests and covenants for the remainder of fiscal 2004. However, if we
were to encounter unexpected downturns in business operations in the future,
such as significantly warmer than normal winter temperatures, a volatile energy
commodity cost environment or continued economic downturn, we may not meet the
applicable financial tests in future quarters. This failure could have a
materially adverse effect on our operating capacity and cash flows and could
restrict our ability to incur debt or to make cash distributions to our
unitholders, even if sufficient funds were available. Depending on the
circumstances, we may consider alternatives to permit the incurrence of debt or
the continued payment of the quarterly cash distribution to our unitholders. No
assurances can be given, however, that such alternatives can or will be
implemented with respect to any given quarter.
29
Our future capital expenditures and working capital needs are expected to
be provided by a combination of cash generated from future operations, existing
cash balances, the bank credit facility or the accounts receivable
securitization facility. To fund expansive capital projects and future
acquisitions, we may obtain funds on our facilities, we may issue additional
debt to the extent permitted under existing financing arrangements or we may
issue additional equity securities, including, among others, common units.
Toward this purpose, on June 11, 2003, a shelf registration statement was
declared effective by the SEC for the periodic sale by us of up to $500 million
of equity and/or debt securities. The registered securities are available to us
for sale from time to time in the future to fund acquisitions, to reduce
indebtedness, to redeem senior units or to provide funds for general corporate
purposes. On December 1, 2003, we received $47.4 million, after underwriting
discounts and commissions, from the issuance of 2.0 million common units to the
public from this shelf registration statement. See further discussion about this
equity offering in "Liquidity and Capital Resources - Financing Activities."
We also maintain a shelf registration statement with the SEC for the
issuance of approximately 2.0 million common units. We may issue these common
units in connection with our acquisition of other businesses, properties or
securities in business combination transactions.
Operating Activities
Net cash used in operating activities was $2.3 million for the three months
ended October 31, 2003, compared to net cash used in operating activities of
$1.2 million for the prior fiscal year period. This increase in cash used in
operating activities is primarily due to the effect of higher wholesale cost of
product, the timing of collections of accounts receivable, the timing of
purchases of inventory and lower proceeds from the accounts receivable
securitization activity, partially offset by the prior year quarter's cash paid
for the early extinguishment of debt not repeated in the current fiscal quarter.
Accounts receivable securitization
During the three months ended October 31, 2003, $16.0 million had been
funded from our accounts receivable securitization facility. This funding
resulted from our increased liquidity needs caused primarily by the seasonal
increase in accounts receivable outstanding and in propane inventory levels. We
renewed this facility effective September 23, 2003, for a 364-day commitment
with Banc One, NA. In accordance with SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities," this
transaction is reflected in our condensed consolidated financial statements as a
sale of accounts receivable and a retained interest in transferred accounts
receivable.
The operating partnership
- -------------------------
Net cash used in operating activities was $2.3 million for the three months
ended October 31, 2003, compared to net cash provided by operating activities of
$8.1 million for the three months ended October 31, 2002. This decrease in cash
provided by operating activities is primarily due to the effect of higher
wholesale cost of product, the timing of collections of accounts receivable, the
timing of purchases of inventory and lower proceeds from accounts receivable
securitization activity.
Investing Activities
Capital expenditures
During the three months ended October 31, 2003, we made cash capital
expenditures of $10.2 million primarily for the following:
30
o technology initiative;
o acquisitions of retail propane operations;
o upgrading district plant facilities;
o purchase of vehicles at the end of the lease terms;
o purchase of additional propane storage tanks and cylinders, and
o upgrading computer hardware and software.
We lease property, computer equipment, propane tanks, light and medium duty
trucks, tractors and trailers. We believe leasing is a cost-effective method for
meeting our equipment needs.
Financing Activities
Credit Facility
- ---------------
At October 31, 2003, $161.8 million of borrowings and $52.9 million of
letters of credit were outstanding under our unsecured $307.5 million bank
credit facility, which will terminate on April 28, 2006. Letters of credit are
currently used to cover obligations primarily relating to requirements for
insurance coverage and, and to a lesser extent, risk management activities. At
October 31, 2003, we had $92.8 million available for working capital,
acquisition, capital expenditure and general partnership purposes under the
$307.5 million bank credit facility.
All borrowings under our $307.5 million bank credit facility bear interest, at
our option, at a rate equal to either:
o a base rate, which is defined as the higher of the federal funds rate plus
0.50% or Bank of America's prime rate (as of October 31, 2003, the federal
funds rate and Bank of America's prime rate were 1.03% and 4.0%,
respectively); or
o the Eurodollar Rate plus a margin varying from 1.75% to 2.75% (as of
October 31, 2003, the one-month Eurodollar Rate was 1.04%).
In addition, an annual commitment fee is payable on the daily unused portion of
our $307.5 million bank credit facility at a per annum rate varying from 0.375%
to 0.625% (as of October 31, 2003, the commitment fee per annum rate was
0.375%).
We believe that the liquidity available from our $307.5 million bank credit
facility and the accounts receivable securitization facility will be sufficient
to meet our future working capital needs for fiscal 2004. See "Operating
Activities" for discussion about our accounts receivable securitization
facility. However, if we were to experience an unexpected significant increase
in working capital requirements, our working capital needs could exceed our
immediately available resources. Events that could cause increases in working
capital borrowings or letter of credit requirements include, but are not limited
to the following:
o a significant increase in the wholesale cost of propane;
o a significant delay in the collections of accounts receivable;
o increased volatility in energy commodity prices related to risk management
activities;
o increased liquidity requirements imposed by insurance providers;
o a significant downgrade in our credit rating; o decreased trade credit; or
o a significant acquisition.
If one or more of these or other events caused a significant use of available
funding, we may consider alternatives to provide increased working capital
funding. No assurances can be given, however, that such alternatives would be
available, or, if available, could be implemented.
31
Long-term debt
- --------------
The following table summarizes our long-term debt obligations as of
October 31, 2003:
Principal payments due by fiscal year
--------------------------------------------------------------------------------
Remainder 2008 and
(in thousands) of 2004 2005 2006 2007 thereafter Total
------------- ----------- ------------ ------------ ------------- --------------
Long-term debt, including
current portion $1,319 $2,367 $111,161 $38,455 $748,195 $901,497
Distributions
- -------------
We paid the required distributions on the senior units and the minimum
quarterly distribution on all common units, as well as general partner
interests, totaling $21.1 million during the three months ended October 31,
2003. The required quarterly distribution on the senior units and the minimum
quarterly distribution on all common units for the three months ended October
31, 2003 are expected to be paid on December 15, 2003 to holders of record on
December 3, 2003. See related disclosure about the distributions of senior units
in "Disclosures about Effects of Transactions with Related Parties."
Common unit equity issuance
- ---------------------------
On December 1, 2003, we received $47.4 million, after underwriting
discounts and commissions, from the issuance of 2.0 million common units to the
public. We used the net proceeds, together with contributions made by the
general partner to maintain its effective 2% general partner interest in us, to
reduce borrowings outstanding under the bank credit facility of the operating
partnership by $38.3 million. The remaining proceeds will be used for general
partnership purposes of Ferrellgas Partners, including the repayment of debt
incurred to fund prior acquisitions.
The operating partnership
- -------------------------
The financing activities discussion above also applies to the operating
partnership except for cash flows related to distributions. The following table
summarizes the operating partnership's long-term debt obligations as of October
31, 2003:
Principal payments due by fiscal year
--------------------------------------------------------------------------------
Remainder 2008 and
(in thousands) of 2004 2005 2006 2007 thereafter Total
------------- ----------- ------------ ------------ ------------- --------------
Long-term debt, including current
portion $1,319 $2,367 $111,161 $38,455 $530,195 $683,497
Distributions
- -------------
The operating partnership paid cash distributions of $21.3 million during
the three months ended October 31, 2003. On November 17, 2003, the operating
partnership declared cash distributions of $31.9 million for the three months
ended October 31, 2003, that is expected to be paid on December 15, 2003.
Cash contributions from partners
- --------------------------------
On December 1, 2003, the operating partnership received cash contributions
of $37.9 million and $0.4 million from its limited partner, Ferrellgas Partners
and its general partner, respectively. The operating partnership then used these
net proceeds to reduce the borrowings outstanding under its $307.5 million bank
credit facility.
32
Disclosures about Risk Management Activities Accounted for at Fair Value
The following table summarizes the change in the unrealized fair value of
contracts from our risk management trading activities for the three months ended
October 31, 2003:
Three
months ended
October 31, 2003
(in thousands) ------------------
Unrealized losses in fair value of contracts
outstanding at beginning of period $(1,718)
Other unrealized gains recognized 8
Less: realized losses recognized (291)
------------------
Unrealized losses in fair value of contracts
outstanding at October 31, 2003 $(1,419)
==================
The following table summarizes the maturity of contracts from our risk
management trading activities for the valuation methodologies we utilized as of
October 31, 2003:
(in thousands) Fair value of
contracts at
period-end
------------------
Maturity less
Source of fair value than 1 year
- ------------------------------------------------------ ------------------
Prices actively quoted $ 121
Prices provided by other external sources (1,540)
Prices based on models and other valuation methods -
------------------
Unrealized losses in fair value of contracts
outstanding at October 31, 2003 $(1,419)
==================
See additional discussion about market, counterparty credit and liquidity risks
related to our risk management trading activities and other risk management
activities in Item 3 "Quantitative and Qualitative Disclosures about Market
Risk."
Disclosures about Effects of Transactions with Related Parties
We have no employees and are managed and controlled by our general partner.
Pursuant to our partnership agreements, our general partner is entitled to
reimbursement for all direct and indirect expenses incurred or payments it makes
on our behalf, and all other necessary or appropriate expenses allocable to us
or otherwise reasonably incurred by our general partner in connection with
operating our business. These reimbursable costs, which totaled $48.8 million
for the three months ended October 31, 2003, include compensation and benefits
paid to employees of our general partner who perform services on our behalf, as
well as related general and administrative costs.
Ferrell Companies, Inc. ("Ferrell Companies") is the sole shareholder of
our general partner and owns 17.8 million of our common units. Ferrell Propane,
Inc. ("Ferrell Propane") is wholly owned by our general partner. On September
12, 2003, Ferrellgas Partners paid common unit distributions of $8.9 million and
$26 thousand to Ferrell Companies and Ferrell Propane, respectively, for the
three months ended July 31, 2003. Also on September 12, 2003, Ferrellgas
Partners and the operating partnership each paid the general partner
distributions of $0.2 million for the three months ended July 31, 2003.
33
JEF Capital Management, Inc. ("JEF Capital Management") is beneficially
owned by James E. Ferrell, the Chairman, President and Chief Executive Officer
of our general partner, and thus is an affiliate. JEF Capital Management is the
holder of all of Ferrellgas Partners' issued and outstanding senior units.
Ferrellgas Partners' partnership agreement generally provides that it use the
cash proceeds of any offering of common units to redeem a portion of the
outstanding senior units, otherwise a "Material Event" would be deemed to have
occurred and JEF Capital Management, as the holder of the senior units, would
thereafter have specified rights, such as the right to convert the senior units
into common units or the right to register the senior units. By letter agreement
dated November 20, 2003, JEF Capital Management agreed to waive the occurrence
of a "Material Event" if Ferrellgas Partners issues common units at any time and
from time to time on or prior to March 31, 2004, and does not use the cash
proceeds from such offering or offerings to redeem a portion of the outstanding
senior units. In consideration of the granting of the waiver, Ferrellgas
Partners agreed not to redeem any outstanding senior units prior to March 31,
2004, and to reimburse JEF Capital Management for its reasonable legal fees not
to exceed $70 thousand incurred in connection with the execution of the waiver.
We paid JEF Capital Management a $2.0 million senior unit distribution on
September 12, 2003. On October 31, 2003, we accrued a senior unit distribution
of $2.0 million that is expected to be paid to JEF Capital Management on
December 15, 2003.
Ferrell International Limited is beneficially owned by James E. Ferrell and
thus is an affiliate. We provide limited accounting services to Ferrell
International Limited. During the three months ended October 31, 2003, we
recognized net receipts from providing limited accounting services of $10
thousand. There were no amounts due from or due to Ferrell International Limited
at October 31, 2003.
We believe these related party transactions were under terms that were no
less favorable to us than those available with third parties.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements include the leasing of transportation
equipment, property, computer equipment and propane tanks. We account for these
arrangements as operating leases. We believe these arrangements are a
cost-effective method for financing our equipment needs. These off-balance sheet
arrangements enable us to lease equipment from third parties rather than, among
other options, purchase the equipment using on-balance sheet financing.
Most of the operating leases involving our transportation equipment contain
residual value guarantees. These transportation equipment lease arrangements are
scheduled to expire over the next seven years. Most of these arrangements
provide that the fair value of the equipment will equal or exceed a guaranteed
amount, or we will be required to pay the lessor the difference. Although the
fair values at the end of the lease terms have historically exceeded these
guaranteed amounts, the maximum potential amount of aggregate future payments we
could be required to make under these leasing arrangements, assuming the
equipment is worthless at the end of the lease term, is currently $14.0 million.
We do not know of any event, demand, commitment, trend or uncertainty that would
result in a material change to these arrangements.
The following table summarizes our future minimum rental payments and
operating lease buyouts as of October 31, 2003:
Future Minimum Rental and Buyout Amounts by Fiscal year
--------------------------------------------------------------------------------
Remainder 2008 and
(in thousands) of 2004 2005 2006 2007 thereafter Total
------------- ----------- ------------ ------------ ------------- --------------
Operating lease
rental payments $14,340 $14,840 $12,226 $ 8,253 $ 9,610 $59,269
Operating lease buyouts
4,477 5,316 2,077 6,319 5,622 23,811
Operating lease buyouts represent the maximum amount we would pay if we
were to exercise our right to buyout the assets at the end of their lease term.
Historically, we have been successful in renewing certain leases that are
subject to buyouts. However, there is no assurance we will be successful in the
future.
34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our risk management activities primarily attempt to mitigate risks related
to the purchasing, storing and transporting of propane. We generally purchase
propane in the contract and spot markets from major domestic energy companies on
a short-term basis. Our costs to purchase and distribute propane fluctuate with
the movement of market prices. This fluctuation subjects us to potential price
risk, which we attempt to minimize through the use of risk management
activities.
Our risk management activities include the use of energy commodity forward
contracts, swaps and options traded on the over-the-counter financial markets
and futures and options traded on the New York Mercantile Exchange. These risk
management activities are conducted primarily to offset the effect of market
price fluctuations on propane inventory and purchase commitments and to mitigate
the price and inventory risk on sale commitments to our customers.
Our risk management activities are intended to generate a profit, which we
then apply to reduce our cost of product sold. The results of our risk
management activities directly related to the delivery of propane to our retail
customers, which include our supply procurement, storage and transportation
activities, are presented in our discussion of retail margins and are accounted
for at cost. The results of our other risk management activities are presented
separately in our discussion of cost of product sold and gross profit as risk
management trading activities and are accounted for at fair value.
Market risks associated with energy commodities are monitored daily by
senior management for compliance with our commodity risk management policy. This
policy includes an aggregate dollar loss limit and limits on the term of various
contracts. We also utilize volume limits for various energy commodities and
review our positions daily where we remain exposed to market risk, so as to
manage exposures to changing market prices.
Market, Credit and Liquidity Risk. New York Mercantile Exchange traded
futures and options are guaranteed by the New York Mercantile Exchange and have
nominal credit risk. We are exposed to credit risk associated with forwards,
swaps and option transactions in the event of nonperformance by counterparties.
For each counterparty, we analyze its financial condition prior to entering into
an agreement, establish a credit limit and monitor the appropriateness of the
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. In order to minimize the liquidity risk of cash, margin or
collateral requirements of counterparties for over-the-counter instruments, we
attempt to balance maturities and positions with individual counterparties.
Historically, our risk management activities have not experienced significant
credit-related losses in any year or with any individual counterparty. Our risk
management contracts do not contain material repayment provisions related to a
decline in our credit rating.
Sensitivity Analysis. We have prepared a sensitivity analysis to estimate
the exposure to market risk of our energy commodity positions. Forward
contracts, futures, swaps and options outstanding as of October 31, 2003, that
were used in our risk management trading activities were analyzed assuming a
hypothetical 10% adverse change in prices for the delivery month for all energy
commodities. The potential loss in future earnings regarding these positions
from a 10% adverse movement in market prices of the underlying energy
commodities was estimated at $0.8 million for risk management trading activities
and $0.1 million for other risk management activities as of October 31, 2003.
The preceding hypothetical analysis is limited because changes in prices may or
may not equal 10%, thus actual results may differ.
35
At October 31, 2003, we had $161.8 million in variable rate amended bank
credit facility borrowings. Thus, assuming a one percent increase in our
variable interest rate, our interest rate risk related to the borrowings on our
variable rate amended bank credit facility would result in a loss in future
earnings of $1.6 million for the twelve months ending October 31, 2004. The
preceding hypothetical analysis is limited because changes in interest rates may
or may not equal one percent, thus actual results may differ.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed with the participation of our management,
including the principal executive officer and principal financial officer of our
general partner, of the effectiveness of our disclosure controls and procedures
(as such terms are defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act).
Based on that evaluation, our management, including the principal executive
officer and principal financial officer of our general partner, concluded that
such disclosure controls and procedures were designed to be and were effective
as of October 31, 2003 to reasonably ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act are
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms.
It should be noted that any system of disclosure controls and procedures,
however well designed and operated, can provide only reasonable, and not
absolute, assurance that the objectives of the system are met. In addition, the
design of any system of disclosure controls and procedures is based in part upon
assumptions about the likelihood of future events. Because of these and other
inherent limitations of any such system, there can be no assurance that any
design will always succeed in achieving its stated goals under all potential
future conditions, regardless of how remote.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note I - Contingencies - to our condensed consolidated financial
statements included elsewhere in this report.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 8, 2003, we issued 30,429 restricted common units to Chapman
Propane Co., Inc. pursuant to a purchase and noncompetition agreement as a
portion of our consideration for our acquisition of assets from Chapman Propane.
These common units were issued to Chapman Propane in reliance upon the exemption
from registration under Section 4(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
36
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed below are filed as part of this Quarterly Report on Form
10-Q. Exhibits required by Item 601 of Regulation S-K of the Securities Act,
which are not listed, are not applicable.
Exhibit
Number Description
------- -----------
3.1 Fourth Amended and Restated Agreement of Limited Partnership
of Ferrellgas Partners, L.P., dated as of February 18, 2003.
Incorporated by reference to Exhibit 4.3 to our Current
Report on Form 8-K filed February 18, 2003.
3.2 Certificate of Incorporation for Ferrellgas Partners Finance
Corp. Incorporated by reference to the same numbered Exhibit
to our Quarterly Report on Form 10-Q filed June 13, 1997.
3.3 Bylaws of Ferrellgas Partners Finance Corp. Incorporated by
reference to the same numbered Exhibit to our Quarterly
Report on Form 10-Q filed June 13, 1997.
3.4 Second Amended and Restated Agreement of Limited Partnership
of Ferrellgas, L.P., dated as of October 14, 1998.
Incorporated by reference to Exhibit 10.1 to our Quarterly
Report on Form 10-Q filed March 17, 1999.
3.5 First Amendment to the Second Amended and Restated Agreement
of Limited Partnership of Ferrellgas, L.P. Incorporated by
reference to Exhibit 10.2 to our Quarterly Report on Form
10-Q filed June 14, 2000.
3.6 Certificate of Incorporation of Ferrellgas Finance Corp.
Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Ferrellgas Partners, L.P. filed
February 18, 2003.
3.7 Bylaws of Ferrellgas Finance Corp. Incorporated by
reference to Exhibit 4.2 to the Current Report on Form 8-K
of Ferrellgas Partners, L.P. filed February 18, 2003.
4.1 Specimen Certificate evidencing Common Units representing
Limited Partner Interests (contained in Exhibit 3.1 hereto
as Exhibit A thereto).
4.2 Indenture, dated as of September 24, 2002, with form of Note
attached, among Ferrellgas Partners, L.P., Ferrellgas
Partners Finance Corp., and U.S. Bank National Association,
as trustee, relating to 8 3/4% Senior Notes due 2012.
Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K filed September 24, 2002.
37
Exhibit
Number Description
------- -----------
4.3 Ferrellgas, L.P., Note Purchase Agreement, dated as of
July 1, 1998, relating to: $109,000,000 6.99% Senior Notes,
Series A, due August 1, 2005, $37,000,000 7.08% Senior
Notes, Series B, due August 1, 2006, $52,000,000 7.12%
Senior Notes, Series C, due August 1, 2008, $82,000,000
7.24% Senior Notes, Series D, due August 1, 2010, and
$70,000,000 7.42% Senior Notes, Series E, due August 1,
2013. Incorporated by reference to Exhibit 4.4 to our
Annual Report on Form 10-K filed October 29, 1998.
4.4 Ferrellgas, L.P., Note Purchase Agreement, dated as of
February 28, 2000, relating to: $21,000,000 8.68% Senior
Notes, Series A, due August 1, 2006, $70,000,000 8.78%
Senior Notes, Series B, due August 1, 2007, and $93,000,000
8.87% Senior Notes, Series C, due August 1, 2009.
Incorporated by reference to Exhibit 4.2 to our Quarterly
Report on Form 10-Q filed March 16, 2000.
4.5 Registration Rights Agreement, dated as of December 17,
1999, by and between Ferrellgas Partners, L.P. and Williams
Natural Gas Liquids, Inc. Incorporated by reference to
Exhibit 4.2 to our Current Report on Form 8-K filed
December 29, 2000.
4.6 First Amendment to the Registration Rights Agreement, dated
as of March 14, 2000, by and between Ferrellgas Partners,
L.P. and Williams Natural Gas Liquids, Inc. Incorporated by
reference to Exhibit 4.1 to our Quarterly Report on Form
10-Q filed March 16, 2000.
4.7 Second Amendment to the Registration Rights Agreement, dated
as of April 6, 2001, by and between Ferrellgas Partners,
L.P. and The Williams Companies, Inc. Incorporated by
reference to Exhibit 10.3 to our Current Report on Form 8-K
filed April 6, 2001.
4.8 Representations Agreement, dated as of December 17, 1999, by
and among Ferrellgas Partners, L.P., Ferrellgas, Inc.,
Ferrellgas, L.P. and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 2.3 to our Current
Report on Form 8-K filed December 29, 1999.
4.9 First Amendment to Representations Agreement, dated as of
April 6, 2001, by and among Ferrellgas Partners, L.P.,
Ferrellgas, Inc., Ferrellgas, L.P. and The Williams
Companies, Inc. Incorporated by reference to Exhibit 10.2 to
our Current Report on Form 8-K filed April 6, 2001.
4.10 Waiver and Acknowledgement of No Material Event dated
November 20, 2003, by and among Ferrellgas Partners, L.P.,
Ferrellgas, L.P., Ferrellgas, Inc. and JEF Capital
Management, Inc. Incorporated by reference to Exhibit 4.1
to our Current Report on Form 8-K filed November 24, 2003.
38
Exhibit
Number Description
------- -----------
10.2 Receivable Interest Sale Agreement, dated as of September
26, 2000, by and between Ferrellgas, L.P., as originator,
and Ferrellgas Receivables, L.L.C., as buyer. Incorporated
by reference to Exhibit 10.17 to our Annual Report on Form
10-K filed October 26, 2000.
10.3 First Amendment to the Receivable Interest Sale Agreement
dated as of January 17, 2001, by and between Ferrellgas,
L.P., as originator, and Ferrellgas Receivables, L.L.C., as
buyer. Incorporated by reference to Exhibit 10.5 to our
Quarterly Report on Form 10-Q filed March 14, 2001.
10.4 Receivables Purchase Agreement, dated as of September 26,
2000, by and among Ferrellgas Receivables, L.L.C., as
seller, Ferrellgas, L.P., as servicer, Jupiter
Securitization Corporation, the financial institutions from
time to time party hereto, and Bank One, NA, main office
Chicago, as agent. Incorporated by reference to Exhibit
10.18 to our Annual Report on Form 10-K filed October 26,
2000.
10.5 First Amendment to the Receivables Purchase Agreement, dated
as of January 17, 2001, by and among Ferrellgas Receivables,
L.L.C., as seller, Ferrellgas, L.P., as servicer, Jupiter
Securitization Corporation, the financial institutions from
time to time party hereto, and Bank One, N.A., main office
Chicago, as agent. Incorporated by reference to Exhibit
10.4 to our Quarterly Report on Form 10-Q filed March 14,
2001.
10.6 Second Amendment to the Receivables Purchase Agreement dated
as of September 25, 2001, by and among Ferrellgas
Receivables, L.L.C., as seller, Ferrellgas, L.P., as
servicer, Jupiter Securitization Corporation, the financial
institutions from time to time party hereto, and Bank One,
N.A., main office Chicago, as agent. Incorporated by
reference to Exhibit 10.29 to our Annual Report on Form 10-K
filed October 25, 2001.
10.7 Third Amendment to the Receivables Purchase Agreement, dated
as of September 24, 2002, by and among Ferrellgas
Receivables, L.L.C., as seller, Ferrellgas, L.P., as
servicer, Jupiter Securitization Corporation, the financial
institutions from time to time party hereto, and Bank One,
NA, main office Chicago, as agent.
10.8 Fourth Amendment to the Receivables Purchase Agreement,
dated as of September 23, 2003, by and among Ferrellgas
Receivables, L.L.C., as seller, Ferrellgas, L.P., as
servicer, Jupiter Securitization Corporation, the financial
institutions from time to time party hereto, and Bank One,
NA, main office Chicago, as agent. Incorporated by
reference to Exhibit 10.8 to our Annual Report on Form 10-K
filed October 21, 2003.
10.9 Purchase Agreement, dated as of November 7, 1999, by and
among Ferrellgas Partners, L.P., Ferrellgas, L.P. and
Williams Natural Gas Liquids, Inc. Incorporated by reference
to Exhibit 99.1 to our Current Report on Form 8-K filed
November 12, 1999.
39
Exhibit
Number Description
------- -----------
10.10 First Amendment to Purchase Agreement, dated as of December
17, 1999, by and among Ferrellgas Partners, L.P.,
Ferrellgas, L.P., and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 2.2 to our Current
Report on Form 8-K filed December 29, 1999.
10.11 Second Amendment to Purchase Agreement, dated as of March
14, 2000, by and among Ferrellgas Partners, L.P.,
Ferrellgas L.P., and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 2.1 to our Quarterly
Report on Form 10-Q filed March 16, 2000.
10.12 Third Amendment to Purchase Agreement dated as of April 6,
2001, by and among Ferrellgas Partners, L.P., Ferrellgas
L.P. and The Williams Companies, Inc. Incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K
filed April 6, 2001.
# 10.13 Ferrell Companies, Inc. Supplemental Savings Plan, restated
January 1, 2000. Incorporated by reference to Exhibit 99.1
to our Current Report on Form 8-K filed February 18, 2003.
# 10.14 Second Amended and Restated Ferrellgas Unit Option Plan.
Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed June 5, 2001.
# 10.15 Ferrell Companies, Inc. 1998 Incentive Compensation Plan -
Incorporated by reference to Exhibit 10.12 to our Annual
Report on Form 10-K filed October 29, 1998.
# 10.16 Employment agreement between James E. Ferrell and
Ferrellgas, Inc., dated July 31, 1998. Incorporated by
reference to Exhibit 10.13 to our Annual Report on Form 10-K
filed October 29, 1998.
# 10.17 Employment agreement between Patrick Chesterman and
Ferrellgas, Inc. dated July 31, 2000. Incorporated by
reference to Exhibit 10.19 to our Annual Report on Form 10-K
filed October 26, 2000.
# 10.18 Employment agreement between Kevin Kelly and Ferrellgas,
Inc. dated July 31, 2000. Incorporated by reference to
Exhibit 10.22 to our Annual Report on Form 10-K filed
October 26, 2000.
* 31.1 Certification of Ferrellgas Partners, L.P. pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act.
* 31.2 Certification of Ferrellgas Partners Finance Corp. pursuant
to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
* 31.3 Certification of Ferrellgas, L.P. pursuant to Rule 13a-14(a)
or Rule 15d-14(a) of the Exchange Act.
* 31.4 Certification of Ferrellgas Finance Corp. pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act.
* 32.1 Certification of Ferrellgas Partners, L.P. pursuant to 18
U.S.C. Section 1350.
40
Exhibit
Number Description
------- -----------
* 32.2 Certification of Ferrellgas Partners Finance Corp. pursuant
to 18 U.S.C. Section 1350.
* 32.3 Certification of Ferrellgas, L.P. pursuant to 18 U.S.C.
Section 1350.
* 32.4 Certification of Ferrellgas Finance Corp. pursuant to 18
U.S.C. Section 1350.
- -------------------------------------------------------------------------------
* Filed herewith
# Management contracts or compensatory plans.
(b) Reports on Form 8-K
Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P.
and Ferrellgas Finance Corp. filed no Form 8-K's during the three months ended
October 31, 2003.
Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P.
and Ferrellgas Finance Corp. furnished three Form 8-K's during the three months
ended October 31, 2003.
Items
Date of Report Reported Financial Statements Furnished
- ------------------------------------------- -------- ------------------------------
Furnished September 17, 2003 9 None
Furnished September 25, 2003 7, 9, 12 None
Furnished September 26, 2003 9 None
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: December 11, 2003 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: December 11, 2003 By /s/ Kevin T. Kelly
---------------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: December 11, 2003 By /s/ Kevin T. Kelly
---------------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS FINANCE CORP.
Date: December 11, 2003 By /s/ Kevin T. Kelly
---------------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)