UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended April 30, 2004
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 jurisdictions of (I.R.S. Employer
incorporation or organization) Identification Nos.)
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 May 28, 2004, the registrants had common units or shares outstanding as
follows:
Ferrellgas Partners, L.P. 48,771,875 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.
2
FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited) Page
------
Ferrellgas Partners, L.P. and Subsidiaries
------------------------------------------
Condensed Consolidated Balance Sheets -
April 30, 2004 and July 31, 2003 5
Condensed Consolidated Statements of Earnings -
Three and nine months ended April 30, 2004 and 2003 6
Condensed Consolidated Statement of Partners' Capital -
Nine months ended April 30, 2004 7
Condensed Consolidated Statements of Cash Flows -
Nine months ended April 30, 2004 and 2003 8
Notes to Condensed Consolidated Financial Statements 9
Ferrellgas Partners Finance Corp.
---------------------------------
Condensed Balance Sheets - April 30, 2004 and July 31, 2003 22
Condensed Statements of Earnings -
Three and nine months ended April 30, 2004 and 2003 22
Condensed Statements of Cash Flows -
Nine months ended April 30, 2004 and 2003 23
Note to Condensed Financial Statements 23
Ferrellgas, L.P. and Subsidiaries
---------------------------------
Condensed Consolidated Balance Sheets -
April 30, 2004 and July 31, 2003 24
Condensed Consolidated Statements of Earnings -
Three and nine months ended April 30, 2004 and 2003 25
Condensed Consolidated Statement of Partners' Capital -
Nine months ended April 30, 2004 26
Condensed Consolidated Statements of Cash Flows -
Nine months ended April 30, 2004 and 2003 27
Notes to Condensed Consolidated Financial Statements 28
Ferrellgas Finance Corp.
------------------------
Condensed Balance Sheets -
April 30, 2004 and July 31, 2003 38
Condensed Statements of Earnings -
Three and nine months ended April 30, 2004,
three months ended April 30, 2003 and from
inception to April 30, 2003 38
Condensed Statements of Cash Flows -
Nine months ended April 30, 2004 and
from inception to April 30, 2003 39
3
Note to Condensed Financial Statements 39
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 53
ITEM 4. CONTROLS AND PROCEDURES 54
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 54
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 55
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 55
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 55
ITEM 5. OTHER INFORMATION 55
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 56
4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
April 30, July 31,
ASSETS 2004 2003
- -------------------------------------------------------------------------------- --------------- ---------------
Current assets:
Cash and cash equivalents $ 21,027 $ 11,154
Accounts and notes receivable, net 147,211 56,742
Inventories 78,871 69,077
Prepaid expenses and other current assets 12,942 8,306
--------------- ---------------
Total current assets 260,051 145,279
Property, plant and equipment, net 785,050 684,917
Goodwill 259,391 124,190
Intangible assets, net 270,910 98,157
Other assets 14,608 8,853
--------------- ---------------
Total assets $ 1,590,010 $ 1,061,396
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
- --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 94,314 $ 59,454
Other current liabilities 83,572 89,687
--------------- ---------------
Total current liabilities 177,886 149,141
Long-term debt 1,113,762 888,226
Other liabilities 21,216 18,747
Contingencies and commitments (Note K) - -
Minority interest 5,051 2,363
Partners' capital:
Senior unitholder (1,994,146 units outstanding at April 30, 2004 and July 31,
2003 - liquidation preference $79,766 at
April 30, 2004 and July 31, 2003) 79,766 79,766
Common unitholders (48,771,875 and 37,673,455 units outstanding
at April 30, 2004 and July 31, 2003, respectively) 250,767 (15,602)
General partner unitholder (512,788 and 400,683 units outstanding
at April 30, 2004 and July 31, 2003, respectively) (56,647) (59,277)
Accumulated other comprehensive loss (1,791) (1,968)
--------------- ---------------
Total partners' capital 272,095 2,919
--------------- ---------------
Total liabilities and partners' capital $ 1,590,010 $ 1,061,396
================ ===============
See notes to condensed consolidated financial statements.
5
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per unit data)
(unaudited)
For the three months ended For the nine months ended
-------------------------------- --------------------------------
April 30, 2004 April 30, 2003 April 30, 2004 April 30, 2003
-------------- -------------- -------------- --------------
Revenues:
Propane and other gas liquids sales $ 368,264 $ 351,338 $1,057,751 $ 985,539
Other 21,883 18,027 69,591 64,606
-------------- -------------- -------------- --------------
Total revenues 390,147 369,365 1,127,342 1,050,145
Cost of product sold (exclusive of
depreciation, shown with amortization below) 234,331 207,934 680,479 586,324
-------------- -------------- -------------- --------------
Gross profit 155,816 161,431 446,863 463,821
Operating expense 80,858 79,121 233,141 227,226
Depreciation and amortization expense 13,270 10,563 37,130 30,719
General and administrative expense 7,888 7,202 23,761 21,863
Equipment lease expense 5,029 4,990 14,272 16,510
Employee stock ownership plan compensation charge 2,042 1,619 5,990 4,653
Loss on disposal of assets and other 925 1,985 4,477 3,781
-------------- -------------- -------------- --------------
Operating income 45,804 55,951 128,092 159,069
Interest expense (17,998) (16,548) (52,083) (47,328)
Interest income 459 424 1,260 850
Early extinguishment of debt expense - - - (7,052)
-------------- -------------- -------------- --------------
Earnings before income taxes, minority
interest and cumulative effect of change
in accounting principle 28,265 39,827 77,269 105,539
Income taxes 17 - 17 -
Minority interest 336 454 931 1,276
-------------- -------------- -------------- --------------
Earnings before cumulative effect of change in
accounting principle 27,912 39,373 76,321 104,263
Cumulative effect of change in accounting principle,
net of minority interest of $28 - - - (2,754)
-------------- -------------- -------------- --------------
Net earnings 27,912 39,373 76,321 101,509
Distribution to senior unitholder 1,994 2,775 5,982 8,300
Net earnings available to general partner unitholder 259 366 703 932
-------------- -------------- -------------- --------------
Net earnings available to common unitholders $ 25,659 $ 36,232 $ 69,636 $ 92,277
============== ============== ============== ==============
Basic earnings per common unit:
Earnings available to common unitholders before
cumulative effect of change in accounting principle $ 0.63 $ 1.00 $ 1.78 $ 2.62
Cumulative effect of change in accounting principle - - - (0.07)
-------------- -------------- -------------- --------------
Net earnings available to common unitholders $ 0.63 $ 1.00 $ 1.78 $ 2.55
============== ============== ============== ==============
Diluted earnings per common unit:
Earnings available to common unitholders before
cumulative effect of change in accounting principle $ 0.63 $ 1.00 1.77 $ 2.62
Cumulative effect of change in accounting principle - - - (0.07)
-------------- -------------- -------------- --------------
Net earnings available to common unitholders $ 0.63 $ 1.00 $ 1.77 $ 2.55
============== ============== ============== ==============
See notes to condensed consolidated financial statements.
6
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Number of units
--------------------------------- Accumulated
General General other Total
Senior Common partner Senior Common partner comprehensive partners'
unitholder unitholders unitholder unitholder unitholders unitholder loss capital
---------- ----------- ---------- ---------- ----------- ---------- ------------- ---------
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 - - - - 5,870 59 - 5,929
Common unit cash distribution - - - - (58,602) (592) - (59,194)
Senior unit cash and accrued
distribution - - - - (5,922) (120) - (6,042)
Common units issued in public
offerings - 9,000.0 90.9 - 203,156 2,052 - 205,208
Common units issued in private
offerings - 1,607.7 16.2 - 35,928 363 - 36,291
Common unit issued in connection
with acquistions - 62.1 0.6 - 1490 15 - 1,505
Common units issued to affiliate in
connection with contribution of
membership interests in Blue Rhino LLC - 195.7 2.0 - 4,685 47 - 4,732
Common unit options exercised - 232.9 2.4 - 4,206 43 - 4,249
Comprehensive income:
Net earnings - - - - 75,558 763 - 76,321
Other comprehensive income:
Pension liability adjustment - - - - - - 177 177
---------
Comprehensive income 76,498
---------- ----------- ---------- ---------- ----------- ---------- ------------- ---------
April 30, 2004 1,994.1 48,771.9 512.8 $ 79,766 $250,767 $(56,647) $(1,791) $272,095
========== =========== ========== ========== =========== ========== ============= =========
See notes to these condensed consolidated financial statements.
7
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the nine months ended
--------------------------
April 30, April 30,
2004 2003
--------- ---------
Cash flows from operating activities:
Net earnings $ 76,321 $ 101,509
Reconciliation of net earnings to net cash provided
by operating activities:
Cumulative effect of change in accounting principle - 2,754
Early extinguishment of debt expense - 1,854
Depreciation and amortization expense 37,130 30,719
Employee stock ownership plan compensation charge 5,990 4,653
Loss on disposal of assets 3,579 2,380
Minority interest 931 1,276
Other 4,931 5,677
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Accounts and notes receivable, net (57,430) (60,276)
Inventories 17,806 2,984
Prepaid expenses and other current assets (1,606) 2,170
Accounts payable 7,245 (3,775)
Other current liabilities (8,695) (6,740)
Other liabilities 486 (381)
Accounts receivable securitization:
Proceeds from new accounts receivable securitizations 30,000 60,000
Proceeds from collections reinvested in revolving
period accounts receivable securitizations 568,155 505,065
Remittances of amounts collected as servicer of
accounts receivable securitizations (610,455) (515,065)
--------- ---------
Net cash provided by operating activities 74,388 134,804
--------- ---------
Cash flows from investing activities:
Cash paid for assumed merger and related obligations (343,414) -
Business acquisitions, net of cash acquired (37,443) (36,329)
Cash paid for acquisition transaction fees (1,269) -
Capital expenditures - tank lease buyout - (155,600)
Capital expenditures - technology initiative (4,782) (18,517)
Capital expenditures - other (20,422) (11,087)
Other 538 1,691
--------- ---------
Net cash used in investing activities (406,792) (219,842)
--------- ---------
Cash flows from financing activities:
Distributions (65,236) (63,176)
Issuance of common units, net of issuance costs of $48 236,479 -
Net reductions to short-term borrowings (43,719) -
Proceeds from issuance of debt 262,423 359,715
Principal payments on debt (46,400) (210,662)
Cash paid for financing costs (5,613) (7,093)
Proceeds from exercise of common unit options 4,141 2,241
Cash contribution from general partner 565 19
Redemption of senior units - (1,567)
Minority interest activity (363) (116)
--------- ---------
Net cash provided by financing activities 342,277 79,361
--------- ---------
Increase (decrease) in cash and cash equivalents $ 9,873 $ (5,677)
Cash and cash equivalents - beginning of period 11,154 19,781
--------- ---------
Cash and cash equivalents - end of period $ 21,027 $ 14,104
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 55,496 $ 49,833
Income taxes $ - $ -
See notes to condensed consolidated financial statements.
8
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004
(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 (i) the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
and (ii) the consolidated financial statements and accompanying notes as
set forth 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 earnings and earnings per unit would have
been adjusted as noted in the table below:
9
---------------------------- -----------------------------
For the three months For the nine months
ended April 30, ended April 30,
---------------------------- -----------------------------
2004 2003 2004 2003
------------ ----------- ------------ ------------
Net earnings available to common unitholders, as
reported $25,659 $36,232 $69,636 $92,277
Deduct: Total stock based employee compensation
expense determined under fair value based
method for all awards
240 207 716 620
------------ ----------- ------------ ------------
Pro forma net earnings available to common
unitholders $25,419 $36,025 $68,920 $91,657
============ =========== ============ ============
Earnings per common unit:
Basic earnings available to common unitholders
before cumulative effect of change in
accounting principle, as reported $0.63 $1.00 $1.78 $2.62
Basic earnings available to common unitholders,
as reported 0.63 1.00 1.78 2.55
Basic earnings available to common unitholders
before cumulative effect of change in
accounting principle, pro forma 0.63 1.00 1.76 2.61
Basic earnings available to common unitholders,
pro forma 0.63 1.00 1.76 2.54
Diluted earnings available to common unit holders
before cumulative effect of change in accounting
principle, as reported 0.63 1.00 1.77 2.62
Diluted earnings available to common
unitholders, as reported 0.63 1.00 1.77 2.55
Diluted earnings available to common unitholders
before cumulative effect of change in account
principle, pro forma 0.62 0.99 1.76 2.61
Diluted earnings available to common
unitholders, pro forma 0.62 0.99 1.76 2.53
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
intangible assets and derivative commodity contracts.
10
D. Reclassifications
Certain reclassifications have been made to the nine months ended April 30,
2003 condensed consolidated statement of cash flows to conform to the nine
months ended April 30, 2004 condensed consolidated statement of cash flows
presentation. "Loss on disposal of assets" is disclosed separately in net
cash provided by operating activities on the condensed consolidated
statements of cash flows. This amount was previously classified as "Other"
in net cash provided by operating activities in the nine months ended April
30, 2003.
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 and nine months ended April 30, 2004 and 2003 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. As of April 21,
2004, the Operating Partnership became the leading national provider of
branded propane tank exchange. See Note F - Business combinations - for
additional discussion about the Blue Rhino contribution.
F. Business combinations
During the nine months ended April 30, 2004, Ferrellgas completed one
material business combination and seven smaller business combinations. Each
of the business combinations was accounted for under the purchase method
and the assets acquired and liabilities assumed were recorded at their
estimated fair market values as of the acquisition date. The preliminary
allocation of assets and liabilities may be adjusted to reflect the final
determined amounts during a period of time following each business
combination. The Blue Rhino contribution allocation is preliminary pending
the completion of the valuation of tangible and intangible assets and the
calculation of other costs. The results of operations from these business
combinations are included in Ferrellgas' condensed consolidated financial
statements from the date of the business combinations.
Allocation of Purchase Price
-----------------------------------------------------------------------------------
Property
Purchase Working Plant & Intangible
Business combinations Price Capital Equipment Assets Goodwill Other
------------ ----------- ------------- ------------ ------------ ------------
Blue Rhino (April 2004) $406,184 $21,334 $ 85,088 $164,100 $135,201 $461
Others (various) 41,114 - 23,180 17,934 - -
------------ ----------- ------------- ------------ ------------ ------------
$447,298 $21,334 $108,268 $182,034 $135,201 $461
============ =========== ============= ============ ============ ============
11
Blue Rhino contribution
On April 20, 2004, FCI Trading Corp. ("FCI Trading"), an affiliate of the
General Partner, acquired all of the outstanding common stock of Blue Rhino
Corporation in an all-cash merger. Pursuant to an Agreement and Plan of
Merger dated February 8, 2004, a subsidiary of FCI Trading merged with and
into Blue Rhino Corporation whereby the then current stockholders of Blue
Rhino Corporation were granted the right to receive a payment from FCI
Trading of $17.00 in cash for each share of Blue Rhino Corporation common
stock outstanding on April 20, 2004. FCI Trading thereafter became the sole
stockholder of Blue Rhino Corporation and immediately after the merger, FCI
Trading converted Blue Rhino Corporation into a limited liability company,
Blue Rhino LLC.
In a non-cash contribution, pursuant to a Contribution Agreement dated
February 8, 2004, FCI Trading contributed on April 21, 2004 all of the
membership interests in Blue Rhino LLC to the Operating Partnership through
a series of transactions and the Operating Partnership assumed FCI
Trading's obligation under the Agreement and Plan Of Merger to pay the
$17.00 per share to the former stockholders of Blue Rhino Corporation
together with other specific obligations, as detailed in the following
table:
Assumption of obligations under the contribution agreement $343,414
Common units and general partner interest issued 8,700
Assumption of Blue Rhino's bank credit facility outstanding balance 43,719
Assumption of other liabilities and acquisition costs 10,351
------------
$406,184
============
In consideration of this contribution, Ferrellgas Partners issued 195,686
common units to FCI Trading. Both Ferrellgas Partners and FCI Trading have
agreed to indemnify the General Partner from any damages incurred by the
General Partner in connection with the assumption of any of the obligations
described above. Also on April 21, 2004, subsequent to the contribution
described above, Blue Rhino LLC merged with and into the Operating
Partnership. The former operations of Blue Rhino LLC will hereafter be
referred to as "Blue Rhino."
In addition to the payment of $17.00 per share to the former stockholders
of Blue Rhino Corporation, each vested stock option and warrant that
permitted its holder to purchase common stock of Blue Rhino Corporation
that was outstanding immediately prior to the merger was converted into the
right to receive a cash payment from Blue Rhino Corporation equal to the
difference between $17.00 per share and the applicable exercise price of
the stock option or warrant. Unvested options and warrants not otherwise
subject to automatic accelerated vesting upon a change in control vested on
a pro rata basis through April 19, 2004, based on their original vesting
date. The total payment to the former Blue Rhino Corporation stockholders
for all common stock outstanding on April 20, 2004 and for those Blue Rhino
Corporation options and warrants then outstanding was $343.4 million.
Prior to this contribution, Blue Rhino Corporation was the leading national
provider of branded propane tank exchange as well as a leading supplier of
complementary propane and non-propane products to consumers through many of
the nation's largest retailers.
Ferrellgas' valuation of the tangible and intangible assets of the Blue
Rhino LLC contribution resulted in the recognition of goodwill of $135.2
million. This preliminary valuation of goodwill was based on Ferrellgas'
belief that the contributions of Blue Rhino LLC will be beneficial to
Ferrellgas' and Blue Rhino LLC's operations as Blue Rhino's
counter-seasonal business activities and anticipated future growth is
expected to provide Ferrellgas with the ability to better utilize its
seasonal resources to complement Ferrellgas' retail locations with Blue
Rhino's existing distributor network.
12
The results of operations of Blue Rhino for the period from April 21, 2004
through April 30, 2004 are included in the statement of earnings of the
combined entity for the three and nine months ended April 30, 2004.
Pro forma results of operations The following summarized unaudited pro
forma results of operations for the three and nine months ended April 30,
2004 and 2003, assumes that the Blue Rhino contribution had occurred as of
the beginning of the period presented. These unaudited pro forma financial
results have been prepared for comparative purposes only and may not be
indicative of (i) the results that would have occurred if Ferrellgas had
completed the Blue Rhino contribution as of the beginning of the periods
presented or (ii) the results that will be attained in the future.
Nonrecurring items included in the reported pro forma results of operations
for the three and nine months ended April 30, 2003 include $2.5 million of
income related to net proceeds from a litigation settlement in March 2003.
Items not included in the reported pro forma results of operations for the
three and nine months ended April 30, 2004, are $3.3 million of
nonrecurring charges incurred by Blue Rhino Corporation in the period from
February 1, 2004 through April 20, 2004, that were directly attributable to
the Blue Rhino contribution.
For the three months For the nine months
ended April 30, ended April 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Revenues $443,778 $429,265 $1,289,485 $1,222,915
Earnings before cumulative
effect of change in
accounting principle 21,319 36,821 59,456 94,166
Net earnings $ 21,319 $36,821 $ 59,456 $ 91,412
Basic and diluted net
earnings available to
common unitholders:
Earnings before cumulative
effect of change in
accounting principle $0.52 $1.01 $1.66 $2.61
Net earnings $0.52 $1.01 $1.66 $2.50
G. 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 F - Business combinations, Note H
- Accounts receivable securitization, Note L - Partners' capital and Note P
- Transactions with related parties, respectively.
H. Accounts receivable securitization
During the nine months ended April 30, 2004, $12.3 million had been
remitted to 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. At April 30, 2004, Ferrellgas
had the ability to transfer, at its option, an additional $47.9 million of
its trade accounts receivable. 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."
13
I. Supplemental financial statement information
Inventories consist of:
April 30, July 31,
2004 2003
--------------- --------------
Propane gas and related products $34,741 $49,772
Appliances, parts and supplies 44,130 19,305
--------------- ---------------
$78,871 $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 April 30, 2004,
Ferrellgas had committed, for supply procurement purposes, to make net
delivery of approximately 2.5 million gallons of propane at a fixed price.
On April 21, 2004, inventory increased $27.6 million in connection with the
Blue Rhino contribution. See Note F - Business combinations - for
additional discussion about the Blue Rhino contribution.
Property, plant and equipment, net consist of:
April 30, July 31,
2004 2003
--------------- --------------
Property, plant and equipment $1,118,916 $1,002,199
Less: accumulated depreciation 333,866 317,282
--------------- --------------
$ 785,050 $ 684,917
=============== ==============
On April 21, 2004, property, plant and equipment increased $85.1 million in
connection with the Blue Rhino contribution. See Note F - Business
combinations - for additional discussion about the Blue Rhino contribution.
During the nine months ended April 30, 2004, Ferrellgas placed in service
$48.5 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:
April 30, 2004 July 31, 2003
------------------------------------------ ------------------------------------------
Gross Gross
carrying Accumulated carrying Accumulated
amount Amortization Net amount Amortization Net
------------ ---------------- ----------- ------------ ---------------- -----------
Customer lists $325,932 $(136,764) $189,168 $220,061 $(133,548) $86,513
Tradenames & trademarks 59,000 - 59,000 - - -
Non-compete agreements 71,562 (55,120) 16,442 64,020 (52,376) 11,644
Patented technology 3,500 - 3,500 - - -
Other 2,800 - 2,800 - - -
------------ ---------------- ----------- --------------- ---------------- ------------
$462,794 $(191,884) $270,910 $284,081 $(185,924) $98,157
============ ================ =========== =============== ================ ============
On April 21, 2004, intangible assets, net increased $164.1 million in
connection with the Blue Rhino contribution. See Note F - Business
combinations - for additional discussion about the Blue Rhino contribution.
14
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Aggregate amortization expense $3,521 $3,341 $9,564 $9,645
Estimated amortization expense:
For the years ended July 31,
Amortization remaining in 2004 $14,673
2005 20,062
2006 19,134
2007 17,796
2008 16,837
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- --------------------------
Loss on disposal of assets and other
consist of: 2004 2003 2004 2003
---------- ---------- ---------- ----------
Loss on disposal of assets $755 $1,594 $3,579 $2,380
Loss on transfer of accounts receivable
related to the accounts receivable
securitization 594 760 2,141 2,134
Service income related to the accounts
receivable securitization (424) (369) (1,243) (733)
---------- ---------- ---------- ----------
$925 $1,985 $4,477 $3,781
========== ========== ========== ==========
Shipping and handling expenses are classified in the following condensed
consolidated statements of earnings line items:
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Operating expense $34,089 $33,750 $105,209 $100,820
Depreciation and amortization expense 1,500 1,168 5,682 4,345
Equipment lease expense 4,966 3,039 10,590 8,971
---------- ---------- ---------- ----------
$40,555 $37,957 $121,481 $114,136
========== ========== ========== ==========
15
J. Long-term debt
Long-term debt consists of:
April 30, July 31,
2004 2003
------------- -------------
Senior notes
Fixed rate, 7.16% due 2005-2013 $ 350,000 $350,000
Fixed rate, 6.75% due 2014, net of unamortized discount 249,090 -
Fixed rate, 8.75% due 2012, net of unamortized premium 219,437 219,569
Fixed rate, 8.8% due 2006-2009 184,000 184,000
Credit agreement, variable interest rates, expiring 2006 103,700 126,700
Notes payable, 7.5% weighted average interest rate each year,
due 2003 to 2011
10,019 10,108
Capitalized lease obligations 487 -
------------- -------------
1,116,733 890,377
Less: current portion, included in other current liabilities on the
consolidated balance sheets 2,971 2,151
------------- -------------
$1,113,762 $888,226
============= =============
Senior notes
On April 20, 2004, subsidiaries of the Operating Partnership completed a
private placement of $250.0 million in principal amount of 6.75% senior
notes due 2014 at a price to the noteholders of 99.637% per note. In the
offering, the subsidiaries of the Operating Partnership received proceeds,
net of underwriting discounts and commissions, of $243.5 million. The
subsidiaries then merged into the Operating Partnership and Ferrellgas
Finance Corp., a subsidiary of the Operating Partnership, on April 20, 2004
with the Operating Partnership and Ferrellgas Finance Corp. assuming the
payment obligation of the notes. The proceeds of the notes were used to pay
a portion of the assumed merger consideration of $17.00 per share to the
then former common stockholders of Blue Rhino Corporation in connection
with the contribution of Blue Rhino LLC to the Operating Partnership by an
affiliate of the General Partner. See additional discussion about the Blue
Rhino contribution in Note F - Business combinations.
Interest on the 6.75% senior notes due 2014 is payable semi-annually in
arrears on May 1 and November 1 of each year, commencing on November 1,
2004. These notes are unsecured and are not redeemable before May 1, 2009,
except in specific circumstances.
The scheduled annual principal payments on long-term debt are as follows:
Scheduled annual
For the year ended July 31, principal payments
--------------------
Payments remaining in 2004 $ 601
2005 2,811
2006 111,271
2007 38,539
2008 74,172
Thereafter 888,812
--------------------
$1,116,206
====================
16
K. 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.
L. Partners' capital
As of April 30, 2004 and July 31, 2003, partners' capital consisted of the
following limited partner units:
April 30, July 31,
2004 2003
------------- --------------
Senior units 1,994,146 1,994,146
Common units 48,771,875 37,673,455
As of April 30, 2004, total common units outstanding consisted of (i) 30.7
million held by third parties, (ii) 17.8 million held by Ferrell Companies,
(iii) 0.2 million held by FCI Trading, a subsidiary of Ferrell Companies,
and (iv) 0.1 million held by Ferrell Propane, Inc. ("Ferrell Propane")
which is controlled by the General Partner. As of July 31, 2003, total
common units outstanding consisted of (i) 19.8 million held by third
parties, (ii) 17.8 million held by Ferrell Companies and (iii) 0.1 million
held by Ferrell Propane.
On April 21, 2004, Ferrellgas Partners issued, in five separate private
placements, an aggregate of 1.6 million of common units at a price of
$22.35 per unit for net proceeds of $32.8 million in cash and $3.2 million
in land for the issuance of these common units. These common units were
issued as follows:
o to Mr. Billy D. Prim ("Mr. Prim"), $15.0 million for cash; prior
to the contribution of Blue Rhino Mr. Prim was the Chairman and
Chief Executive Officer of Blue Rhino Corporation; subsequent to
the Blue Rhino contribution and pursuant to an employment
agreement among Ferrell Companies and the General Partner, (i)
the General Partner paid Mr. Prim a non-compete and
non-solicitation payment of $2.5 million and (ii) he was
appointed Executive Vice President and a director of the General
Partner;
o to Mr. Prim $3.2 million in exchange for land;
o to Mr. Andrew J. Filipowski ("Mr. Filipowski"), brother-in-law of
Mr. Prim, $15.0 million for cash; prior to the contribution of
Blue Rhino Mr Filipowski was the Vice Chairman of Blue Rhino
Corporation;
o to Mr. Malcom McQuilkin, $1.0 million for cash; and
o to Mr. James E. Ferrell ("Mr. Ferrell"), Chairman, President and
Chief Executive Officer of the General Partner, $1.8 million for
cash.
These cash proceeds were used to pay a portion of the assumed merger
consideration to the then former common stockholders of Blue Rhino
Corporation. The transactions with Mr. Prim and Mr. Filipowski were
consummated prior to Mr. Prim becoming an officer and director of the
General Partner. See additional discussion about the Blue Rhino
contribution in Note F - Business combinations.
On April 21, 2004, Ferrellgas Partners issued to FCI Trading 0.2 million of
common units at a price of $23.94 per unit. This $4.7 million of common
units was issued to FCI Trading in connection with the Blue Rhino
contribution as consideration for FCI Trading's net contribution of its
membership interests in Blue Rhino LLC to the Operating Partnership. See
additional discussion about the Blue Rhino contribution in Note F -
Business combinations. See Note P - Related parties - for additional
discussion of the involvement of related parties in this transaction.
17
On April 21, 2004, Ferrellgas Partners issued, pursuant to the exercise of
common unit options by Mr. Ferrell, Chairman, President and Chief Executive
Officer of the General Partner, 0.2 million of common units at a strike
price of $17.90 per unit. Ferrellgas Partners received net proceeds of $3.2
million for the issuance of these common units. The proceeds were used to
pay a portion of the assumed merger consideration to the then former common
stockholders of Blue Rhino Corporation. See additional discussion about the
Blue Rhino contribution in Note F- Business combinations. See Note P -
Related parties - for additional discussion of the involvement of related
parties in this transaction.
On April 21, 2004, Ferrellgas Partners issued $2.0 million of general
partner units to the General Partner as consideration for the Blue Rhino
LLC membership interest contributed by the General Partner. Also on April
21, 2004, the General Partner contributed a membership interest in Blue
Rhino LLC to the Operating Partnership to maintain its 1.0101% general
partner interest in the Operating Partnership. See Note P - Related parties
- for additional discussion of the involvement of related parties in this
transaction.
On April 14, 2004, Ferrellgas Partners issued, in a public offering, 7.0
million of its common units at a price of $23.34 per unit, less commissions
and underwriting expenses. After commissions and underwriting expenses,
Ferrellgas Partners received net proceeds of $156.4 million for the
issuance of these common units. The proceeds were used to pay a portion of
the assumed merger consideration to the then former common stockholders of
Blue Rhino Corporation. See additional discussion about the Blue Rhino
contribution in Note F - Business combinations.
On March 4, 2004 and August 3, 2003, Ferrellgas Partners issued
approximately 32 thousand and approximately 30 thousand common units,
respectively, pursuant to a purchase and non-competition agreement as a
portion of the consideration for our acquisition of propane-related assets
from third parties.
On December 1, 2003, Ferrellgas Partners issued, in a public offering, 2.0
million of common units at a price of $24.75 per unit, less commissions and
underwriting expenses. After commissions and underwriting expenses,
Ferrellgas Partners received net proceeds of $47.3 million for the issuance
of these common units. Ferrellgas Partners contributed the proceeds to the
Operating Partnership to reduce borrowings outstanding under its bank
credit facility and for general partnership purposes, including the
repayment of debt incurred to fund prior acquisitions.
Ferrellgas Partners' partnership agreement generally provides that it must
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, Inc. ("JEF Capital") 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. The number of common units issuable
upon conversion of a senior unit is equal to the senior unit liquidation
preference, currently $40 plus any accrued and unpaid distributions,
divided by the then current market price of a common unit. By letter
agreement dated November 20, 2003, JEF Capital 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 for its
reasonable legal fees incurred in connection with the execution of the
waiver. On February 25, 2004, JEF Capital and Ferrellgas Partners extended
the letter agreement through December 31, 2004. Other "Material Events"
include (i) a change in control, (ii) Ferrellgas' treatment as an
association taxable as a corporation for federal income tax purposes or
(iii) the failure to pay the senior unit distribution in full for any
fiscal quarter. These "other" types of Material Events are not affected by
the JEF Waiver. The conversion of these senior units into common units upon
the occurrence of a Material Event may be dilutive to Ferrellgas Partners'
existing common unitholders.
18
M. Earnings per common unit
Below is a calculation of the basic and diluted earnings per common unit in
the condensed consolidated statements of earnings for the periods
indicated. For diluted earnings per common unit purposes, the senior units
were excluded as they are considered contingently issuable common units for
which all necessary conditions for their issuance have not been satisfied
as of the end of the reporting period. Distributions to the senior
unitholder decrease the net earnings available to common unitholders.
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net earnings available to common
unitholders before cumulative
effect of change in accounting
principle $25,659 $36,232 $69,636 $95,003
Cumulative effect of change in
accounting principle, net of
minority interest and general partner
interest of $56 - - - (2,726)
---------- ---------- ---------- ----------
Net earnings available to common
unitholders $25,659 $36,232 $69,636 $92,277
========== ========== ========== ==========
-----------------------------------------------------------------------------------------------------
(in thousands)
Weighted average common units
outstanding 40,664.1 36,197.3 39,128.4 36,142.5
Dilutive securities 118.3 104.2 110.2 68.1
---------- ---------- ---------- ----------
Weighted average common units outstanding
plus dilutive securities 40,782.4 36,301.5 39,238.6 36,210.6
-----------------------------------------------------------------------------------------------------
Basic earnings per common unit:
-------------------------------
Net earnings available to common
unitholders before cumulative
effect of change in accounting
principle $0.63 $1.00 $1.78 $ 2.62
Cumulative effect of change in
accounting principle, net of
minority interest and general partner
interest of $56 - - - (0.07)
---------- ---------- ---------- ----------
Net earnings available to common
unitholders $0.63 $1.00 $1.78 $ 2.55
========== ========== ========== ==========
-----------------------------------------------------------------------------------------------------
Diluted earnings per common unit:
--------------------------------
Net earnings available to common
unitholders before cumulative
effect of change in accounting
principle $0.63 $1.00 $1.77 $ 2.62
Cumulative effect of change in
accounting principle, net of
minority interest and general partner
interest of $56 - - - (0.07)
---------- ---------- ---------- ----------
Net earnings available to common
unitholders $0.63 $1.00 $1.77 $ 2.55
========== ========== ========== ==========
19
N. Distributions
On September 12, 2003, December 15, 2003 and March 15, 2004, Ferrellgas
paid cash distributions of $1.00 and $0.50 per senior and common unit,
respectively, for the three months ended July 31, 2003, October 31, 2003
and January 31, 2004. On May 24, 2004, Ferrellgas declared cash
distributions of $1.00 and $0.50 per senior and common unit, respectively,
for the three months ended April 30, 2004, that are expected to be paid on
June 14, 2004.
O. 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 ("FIN 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. In December 2003, the FASB issued a revision to FIN 46,
which addresses new effective dates and certain implementation issues. The
interpretation is generally effective for the periods ending after December
15, 2003. Among these issues is the addition of a scope exception for
certain entities that meet the definition of a business, provided certain
criteria are met. Ferrellgas currently believes it does not have any
variable interest entities that would be subject to this revised
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.
P. 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 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, are as
follows:
20
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Reimbursable costs $52,768 $53,563 $156,812 $152,855
JEF Capital is beneficially owned by Mr. Ferrell and thus is an affiliate.
Ferrellgas paid senior unit distributions of $6.0 million and $8.3 million
to JEF Capital during the nine months ended April 30, 2004 and 2003,
respectively. On April 30, 2004, Ferrellgas accrued a senior unit
distribution of $2.0 million that Ferrellgas expects to pay to JEF Capital
on June 14 2004. See Note L - Partners' capital - for disclosure of related
party transactions among Ferrellgas, the General Partner, JEF Capital and
Mr. Ferrell in connection with (i) the issuance of common units on December
1, 2003, April 14, 2004 and April 21, 2004 and (ii) the issuance of common
units in connection with the exercise of common unit options by Mr. Ferrell
on April 21, 2004.
Ferrell Companies is the sole shareholder of the General Partner and owns
17.8 million common units of Ferrellgas Partners. FCI Trading owns 0.2
million common units of Ferrellgas Partners. Ferrell Propane owns 0.1
million common units. During the nine months ended April 30, 2004 and 2003,
Ferrellgas Partners paid common unit distributions of $26.7 million, $0.1
million and $0.7 million to Ferrell Companies, Ferrell Propane and the
General Partner, respectively. On May 24, 2004, Ferrellgas declared
distributions to Ferrell Companies, FCI Trading, Ferrell Propane and the
General Partner of $8.9 million, $0.1 million, $26 thousand and $0.6
million, respectively, that are expected to be paid on June 14, 2004. See
Note L - Partners' capital - for disclosure of related party transactions
among Ferrellgas, FCI Trading and the General Partner related (i) to the
issuance of common units on December 1, 2003, April 14, 2004 and April 20,
2004 and (ii) the issuance of general partner units in December 2003 and
April 2004.
Ferrell International Limited ("Ferrell International") is beneficially
owned by Mr. Ferrell and thus is an affiliate. Ferrellgas enters into
transactions with Ferrell International 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.
Ferrellgas recognized the following net receipts (disbursements) from
purchases, sales and commodity derivative transactions and for providing
accounting services with Ferrell International:
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
$328 $ - $328 $(245)
Net receipts (disbursements)
Receipts from providing accounting services 10 10 30 30
These net purchases, sales and commodity derivative transactions with
Ferrell International 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 at April 30, 2004.
See additional discussions about transactions with related parties in Note
L - Partners' capital.
Q. Subsequent event - issuance of $50.0 million of publicly-held senior note
On June 10, 2004, Ferrellgas Partners issued in a public offering $50.0
million in principal amount of fixed rate 8.75% senior notes due 2012 at a
price of 103.25% per note. The proceeds of the notes were used to make a
capital contribution to the Operating Partnership to reduce indebtedness
under its bank credit facility.
21
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED BALANCE SHEETS
(in dollars)
(unaudited)
April 30, July 31,
ASSETS 2004 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)
Three months ended Nine months ended
---------------------------- ---------------------------
April 30, April 30, April 30, April 30,
2004 2003 2004 2003
------------- ------------- ------------ ------------
General and administrative expense $ - $ 307 $ (45) $ 307
------------- ------------- ------------ ------------
Net loss $ - $(307) $ (45) $(307)
============= ============= ============ ============
See note to condensed financial statements.
22
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(in dollars)
(unaudited)
For the nine months ended
--------------------------------------------
April 30, April 30,
2004 2003
----------------- -----------------
Cash flows from operating activities:
Net loss $ (45) $ (307)
----------------- -----------------
Cash used in operating activities
(45) (307)
----------------- -----------------
Cash flows from financing activities:
Capital contribution 45
307
----------------- -----------------
Cash provided by financing activities
45 307
----------------- -----------------
Change in cash
- -
Cash - beginning of period 1,000 1,000
----------------- -----------------
Cash - end of period $1,000 $1,000
================= =================
See note to condensed financial statements.
NOTE TO CONDENSED FINANCIAL STATEMENTS
APRIL 30, 2004
(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.
23
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
April 30 July 31,
ASSETS 2004 2003
- -------------------------------------------------------------------------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 18,847 $ 10,816
Accounts and notes receivable, net 147,146 56,742
Inventories 78,871 69,077
Prepaid expenses and other current assets 12,165 7,629
------------ ------------
Total current assets 257,029 144,264
Property, plant and equipment, net 785,050 684,917
Goodwill 259,391 124,190
Intangible assets, net 270,910 98,157
Other assets 10,370 4,163
------------ ------------
Total assets $1,582,750 $1,055,691
============ ============
LIABILITIES AND PARTNERS' CAPITAL
- --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 94,099 $ 59,261
Other current liabilities 74,387 77,211
------------ ------------
Total current liabilities 168,486 136,472
Long-term debt 894,325 668,657
Other liabilities 21,216 18,747
Contingencies and commitments (Note K) - -
Partners' capital:
Limited partner 495,463 231,420
General partner 5,051 2,363
Accumulated other comprehensive loss (1,791) (1,968)
------------ ------------
Total partners' capital 498,723 231,815
------------ ------------
Total liabilities and partners' capital $1,582,750 $1,055,691
============ ============
See notes to condensed consolidated financial statements.
24
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands)
(unaudited)
For the three months ended For the nine months ended
-------------------------------- --------------------------------
April 30, 2004 April 30, 2003 April 30, 2004 April 30, 2003
-------------- --------------- -------------- --------------
Revenues:
Propane and other gas liquids sales $ 368,264 $ 351,338 $ 1,057,751 $ 985,539
Other 21,883 18,027 69,591 64,606
-------------- --------------- -------------- --------------
Total revenues 390,147 369,365 1,127,342 1,050,145
Cost of product sold (exclusive of
depreciation, shown with amortization below) 234,331 207,934 680,479 586,324
-------------- --------------- -------------- --------------
Gross profit 155,816 161,431 446,863 463,821
Operating expense 80,787 79,022 232,938 226,856
Depreciation and amortization expense 13,270 10,563 37,130 30,719
General and administrative expense 7,888 7,202 23,761 21,863
Equipment lease expense 5,029 4,990 14,272 16,510
Employee stock ownership plan compensation charge 2,042 1,619 5,990 4,653
Loss on disposal of assets and other 925 1,985 4,477 3,781
-------------- --------------- -------------- --------------
Operating income 45,875 56,050 128,295 159,439
Interest expense (13,082) (11,550) (37,386) (33,992)
Interest income 459 423 1,260 841
-------------- --------------- -------------- --------------
Earnings before income taxes and cumulative
effect of change in accounting principle 33,252 44,923 92,169 126,288
Income taxes 17 - 17 -
-------------- --------------- -------------- --------------
Earnings before cumulative effect of
change in accounting principle 33,235 44,923 92,152 126,288
Cumulative effect of change in accounting principle - - - (2,782)
-------------- --------------- -------------- --------------
Net earnings $ 33,235 $ 44,923 $ 92,152 $ 123,506
============== =============== ============== =============
See notes to condensed consolidated financial statements.
25
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Accumulated
other Total
Limited General comprehensive partners'
partner partner loss capital
----------- ----------- -------------- -----------
August 1, 2003 $ 231,420 $ 2,363 $ (1,968) $231,815
Contribution in connection with
ESOP compensation charge 5,929 61 - 5,990
Quarterly cash and accrued distributions (74,774) (764) - (75,538)
Net assets contributed by Ferrellgas
Partners and general partner in
connection with acquistions 241,667 2,460 - 244,127
Comprehensive income:
Net earnings 91,221 931 - 92,152
Other comprehensive income:
Pension liability adjustment 177 177
-----------
Comprehensive income 92,329
----------- ----------- -------------- -----------
April 30, 2004 $ 495,463 $ 5,051 $ (1,791) $498,723
=========== =========== ============== ===========
See notes to condensed consolidated financial statements.
26
FERRELLGAS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the nine months ended
---------------------------------
April 30, 2004 April 30, 2003
-------------- --------------
Cash flows from operating activities:
Net earnings $ 92,152 $ 123,506
Reconciliation of net earnings to net cash provided
by operating activities:
Cumulative effect of change in accounting principle - 2,782
Depreciation and amortization expense 37,130 30,719
Employee stock ownership plan compensation charge 5,990 4,653
Loss on disposal of assets 3,579 2,380
Other 4,541 5,094
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Accounts and notes receivable, net (57,430) (60,276)
Inventories 17,806 2,984
Prepaid expenses and other current assets (1,506) 2,170
Accounts payable 7,245 (4,204)
Other current liabilities (13,451) (11,953)
Other liabilities 486 (381)
Accounts receivable securitization:
Proceeds from new accounts receivable securitizations 30,000 60,000
Proceeds from collections reinvested in revolving
period accounts receivable securitizations 568,155 505,065
Remittances of amounts collected as servicer of
accounts receivable securitizations (610,455) (515,065)
-------------- --------------
Net cash provided by operating activities 84,242 147,474
-------------- --------------
Cash flows from investing activities:
Cash paid for assumed merger and related obligations (343,414) -
Business acquisitions, net of cash acquired (37,443) (4,330)
Cash paid for acquisition transaction fees (1,269) -
Capital expenditures - tank lease buyout - (155,600)
Capital expenditures - technology initiative (4,782) (18,517)
Capital expenditures - other (20,422) (11,087)
Other 679 1,748
-------------- --------------
Net cash used in investing activities (406,651) (187,786)
-------------- --------------
Cash flows from financing activities:
Distributions (75,538) (71,311)
Cash contribution from partners 230,789 18,179
Proceeds from issuance of debt 262,423 140,000
Principal payments on debt (37,946) (50,662)
Net reductions to short-term borrowings (43,719) -
Cash paid for financing costs (5,569) (1,922)
-------------- --------------
Net cash provided by financing activities 330,440 34,284
-------------- --------------
Increase (decrease) in cash and cash equivalents $ 8,031 $ (6,028)
Cash and cash equivalents - beginning of period 10,816 19,388
-------------- --------------
Cash and cash equivalents - end of period $ 18,847 $ 13,360
============== ==============
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 45,958 $ 42,564
Income taxes $ - $ -
See notes to condensed consolidated financial statements.
27
FERRELLGAS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004
(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 (i)
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and (ii) the consolidated financial
statements and accompanying notes, as set forth 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 earnings would have been adjusted as
noted in the table below:
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- ---------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net earnings, as reported $33,235 $44,923 $92,152 $123,506
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards 245 211 730 633
---------- ---------- ---------- ----------
$32,990 $44,712 $91,422 $122,873
Pro forma net earnings ========== ========== ========== ==========
28
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
intangible assets and derivative commodity contracts.
D. Reclassifications
Certain reclassifications have been made to the nine months ended April 30,
2003 condensed consolidated statement of cash flows to conform to the nine
months ended April 30, 2004 condensed consolidated statement of cash flows
presentation. "Loss on disposal of assets" is disclosed separately in net
cash provided by operating activities on the condensed consolidated
statements of cash flows. This amount was previously classified as "Other"
in net cash provided by operating activities in the nine months ended April
30, 2003.
E. 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 and nine months ended April 30, 2004 and 2003 are not necessarily
indicative of the results to be expected for a full fiscal year.
Ferrellgas, L.P. serves more than one million residential,
industrial/commercial, agricultural and other customers. As of April 21,
2004, Ferrellgas, L.P. became the leading national provider of branded
propane tank exchange. See Note F - Business combinations - for additional
discussion about the Blue Rhino contribution.
F. Business combinations
During the nine months ended April 30, 2004, Ferrellgas, L.P. completed one
material business combination and seven business combinations. Each of the
business combinations was accounted for under the purchase method and the
assets acquired and liabilities assumed were recorded at their estimated
fair market values as of the acquisition date. The preliminary allocation
of assets and liabilities may be adjusted to reflect the final determined
amounts during a period of time following each business combination. The
Blue Rhino contribution allocation is preliminary pending the completion of
the valuation of tangible and intangible assets and the calculation of
other costs. The results of operations from these business combinations are
included in Ferrellgas, L.P.'s condensed consolidated financial statements
from the dates of the business combinations.
Allocation of Purchase Price
--------------------------------------------------------------------------------------
Property
Purchase Working Plant & Intangible
Business combinations Price Capital Equipment Assets Goodwill Other
------------ ----------- ------------- -------------- ------------ ---------
Blue Rhino (April 2004) $406,184 $21,334 $ 85,088 $164,100 $135,201 $461
Others (various) 41,114 - 23,180 17,934 - -
------------ ----------- ------------- -------------- ------------ ---------
$447,298 $21,334 $108,268 $182,034 $135,201 $461
============ =========== ============= ============== ============ =========
29
Blue Rhino contribution
On April 20, 2004, FCI Trading Corp. ("FCI Trading"), an affiliate of the
General Partner, acquired all of the outstanding common stock of Blue Rhino
Corporation in an all-cash merger. Pursuant to an Agreement and Plan of
Merger dated February 8, 2004, a subsidiary of FCI Trading merged with and
into Blue Rhino Corporation whereby the then current stockholders of Blue
Rhino Corporation were granted the right to receive a payment from FCI
Trading of $17.00 in cash for each share of Blue Rhino Corporation common
stock outstanding on April 20, 2004. FCI Trading thereafter became the sole
stockholder of Blue Rhino Corporation and immediately after the merger, FCI
Trading converted Blue Rhino Corporation into a limited liability company,
Blue Rhino LLC.
In a non-cash contribution, pursuant to a Contribution Agreement dated
February 8, 2004, FCI Trading contributed on April 21, 2004 all of the
membership interests in Blue Rhino LLC to Ferrellgas, L.P. through a series
of transactions and Ferrellgas, L.P. assumed FCI Trading's obligation under
the Agreement and Plan Of Merger to pay the $17.00 per share to the former
stockholders of Blue Rhino Corporation together with other specific
obligations, as detailed in the following table:
Assumption of obligations under the contribution agreement $343,414
Limited partner and general partner interests issued 8,700
Assumption of Blue Rhino's bank credit facility outstanding balance 43,719
Assumption of other liabilities and acquisition costs 10,351
------------
$406,184
============
In consideration of this contribution, Ferrellgas Partners issued 195,686
common units to FCI Trading. Both Ferrellgas Partners and FCI Trading have
agreed to indemnify the General Partner from any damages incurred by the
General Partner in connection with the assumption of any of the obligations
described above. Also on April 21, 2004, subsequent to the contribution
described above, Blue Rhino LLC merged with and into Ferrellgas, L.P. The
former operations of Blue Rhino LLC will hereafter be referred to as "Blue
Rhino."
In addition to the payment of $17.00 per share to the former stockholders
of Blue Rhino Corporation, each vested stock option and warrant that
permitted its holder to purchase common stock of Blue Rhino Corporation
that was outstanding immediately prior to the merger was converted into the
right to receive a cash payment from Blue Rhino Corporation equal to the
difference between $17.00 per share and the applicable exercise price of
the stock option or warrant. Unvested options and warrants not otherwise
subject to automatic accelerated vesting upon a change in control vested on
a pro rata basis through April 19, 2004, based on their original vesting
date. The total payment to the former Blue Rhino Corporation stockholders
for all common stock outstanding on April 20, 2004 and for those Blue Rhino
Corporation options and warrants then outstanding was $343.4 million.
Prior to this contribution, Blue Rhino Corporation was the leading national
provider of branded propane tank exchange as well as a leading supplier of
complementary propane and non-propane products to consumers through many of
the nation's largest retailers.
Ferrellgas, L.P.'s valuation of the tangible and intangible assets of the
Blue Rhino LLC contribution resulted in the recognition of goodwill of
$135.2 million. This preliminary valuation of goodwill was based on
Ferrellgas, L.P.'s belief that the contributions of Blue Rhino LLC will be
beneficial to Ferrellgas, L.P.'s and Blue Rhino LLC's operations as Blue
Rhino LLC's counter-seasonal business activities and anticipated future
growth is expected to provide Ferrellgas, L.P. with the ability to better
utilize its seasonal resources to complement Ferrellgas L.P.'s retail
locations with Blue Rhino's existing distributor network.
30
The results of operations of Blue Rhino for the period from April 21, 2004
through April 30, 2004 are included in the statement of earnings of the
combined entity for the three and nine months ended April 30, 2004.
Pro forma information
The following summarized unaudited pro forma results of operations for the
three and nine months ended April 30, 2004 and 2003, assumes that the Blue
Rhino contribution completed by the Ferrellgas, L.P. had occurred as of the
beginning of the period presented. These unaudited pro forma financial
results have been prepared for comparative purposes only and may not be
indicative of (i) the results that would have occurred if Ferrellgas, L.P.
had completed the Blue Rhino contribution as of the beginning of the period
presented or (ii) the results that will be attained in the future.
Nonrecurring items included in the reported pro forma results of operations
for the three and nine months ended April 30, 2003 include $2.5 million of
income related to net proceeds from a litigation settlement in March 2003.
Items not included in the reported pro forma results of operations for the
three and nine months ended April 30, 2004, are $3.3 million of
nonrecurring charges incurred by Blue Rhino Corporation in the period from
February 1, 2004 through April 20, 2004, that were directly attributable to
the Blue Rhino contribution.
For the three months For the nine months
ended April 30, ended April 30,
---------------------------------------- -------------------------------------------
2004 2003 2004 2003
------------------ ------------------ -------------------- --------------------
Revenues $443,778 $429,265 $1,289,485 $1,222,915
Earnings before
cumulative effect
of change in
accounting principle 26,590 42,300 75,092 116,018
Net earnings $ 26,590 $ 42,300 $ 75,092 $ 113,264
G. 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 - Business combinations, Note H
- Accounts receivable securitization, Note L - Partners' capital and Note O
- Transactions with related parties, respectively.
H. Accounts receivable securitization
During the nine months ended April 30, 2004, $12.3 million had been
remitted to 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. At April 30, 2004, Ferrellgas, L.P.
had the ability to transfer, at its option, an additional $47.9 million of
its trade accounts receivable. 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."
31
I. Supplemental financial statement information
Inventories consist of:
April 30, July 31,
2004 2003
--------------- --------------
Propane gas and related products $34,741 $49,772
Appliances, parts and supplies 44,130 19,305
--------------- --------------
$78,871 $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 April 30, 2004,
Ferrellgas, L.P. had committed, for supply procurement purposes, to make
net delivery of approximately 2.5 million gallons of propane at a fixed
price. On April 21, 2004, inventory increased $27.6 million in connection
with the Blue Rhino contribution. See Note F - Business combinations - for
additional discussion about the Blue Rhino contribution.
Property, plant and equipment, net consist of:
April 30, July 31,
2004 2003
---------------- -----------------
Property, plant and equipment $1,118,916 $1,002,199
Less: accumulated depreciation 333,866 317,282
---------------- -----------------
$ 785,050 $ 684,917
================ =================
On April 21, 2004, property, plant and equipment increased $85.1 million in
connection with the Blue Rhino contribution. See Note F - Business
combinations - for additional discussion about the Blue Rhino contribution.
During the nine months ended April 30, 2004, Ferrellgas, L.P. placed in
service $48.5 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:
April 30, 2004 July 31, 2003
----------------------------------------- -----------------------------------------
Gross Gross
carrying Accumulated carrying Accumulated
amount amortization Net amount amortization Net
------------ ---------------- ----------- ------------ ---------------- -----------
Customer lists $325,932 $(136,764) $189,168 $220,061 $(133,548) $86,513
Tradenames & trademarks 59,000 - 59,000 - - -
Non-compete agreements 71,562 (55,120) 16,442 64,020 (52,376) 11,644
Patented technology 3,500 - 3,500 - - -
Other 2,800 - 2,800 - - -
------------ ---------------- ----------- ------------ ---------------- -----------
$462,794 $(191,884) $270,910 $284,081 $(185,924) $98,157
============ ================ ============ ============ ================ ===========
On April 21, 2004, intangible assets, net increased $164.1 million in
connection with the Blue Rhino contribution. See Note F - Business
combinations - for additional discussion about the Blue Rhino contribution.
32
For the three months For the nine months ended
ended April 30, April 30,
------------------------ ------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Aggregate amortization expense $3,521 $3,341 $9,564 $9,645
Estimated amortization expense:
For the years ended July 31,
Amortization remaining in 2004 $14,673
2005 20,062
2006 19,134
2007 17,796
2008 16,837
Loss on disposal of assets and other consists of:
For the three months For the nine months ended
ended April 30, April 30,
------------------------ ------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Loss on disposal of assets $ 755 $1,594 $ 3,579 $2,380
Loss on transfer of accounts receivable
related to the accounts receivable
securitization 594 760 2,141 2,134
Service income related to the accounts
receivable securitization (424) (369) (1,243) (733)
-------- -------- -------- --------
$ 925 $1,985 $ 4,477 $3,781
======== ======== ======== ========
Shipping and handling expenses are classified in the following condensed
consolidated statements of earnings line items:
For the three months For the nine months ended
ended April 30, April 30,
------------------------ ------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Operating expense $34,089 $33,750 $105,209 $100,820
Depreciation and amortization expense 1,500 1,168 5,682 4,345
Equipment lease expense 4,966 3,039 10,590 8,971
-------- -------- -------- --------
$40,555 $37,957 $121,481 $114,136
======== ======== ======== ========
33
J. Long-term debt
Long-term debt consists of:
April 30, July 31,
2004 2003
------------- ------------
Senior notes
Fixed rate, 7.16% due 2005-2013 $350,000 $350,000
Fixed rate, 6.75% due 2014, net of unamortized discount 249,090 -
Fixed rate, 8.8% due 2006-2009 184,000 184,000
Credit agreement, variable interest rates, expiring 2006 103,700 126,700
Notes payable, 7.5% weighted average interest rate for each year, due 2003 to
2011 10,019 10,108
Capitalized lease obligations 487 -
------------- ------------
897,296 670,808
Less: current portion, included in other current liabilities on the
consolidated balance sheets 2,971 2,151
------------- ------------
$894,325 $668,657
============= ============
Senior notes
On April 20, 2004, subsidiaries of Ferrellgas, L.P. completed a private
placement of $250.0 million in principal amount of 6.75% senior notes due
2014 at a price to the noteholders of 99.637% per note. In the offering,
the subsidiaries received proceeds, net of underwriting discounts and
commissions, of $243.5 million. The subsidiaries then merged into
Ferrellgas, L.P. and Ferrellgas Finance Corp., a subsidiary of Ferrellgas,
L.P., on April 20, 2004 with Ferrellgas, L.P. and Ferrellgas Finance Corp.
assuming the payment obligation of the notes. The proceeds of the notes
were used to pay a portion of the assumed merger consideration of $17.00
per share to the then former common stockholders of Blue Rhino Corporation
in connection with the contribution of Blue Rhino LLC to Ferrellgas, L.P.
by an affiliate of the General Partner. See additional discussion about the
Blue Rhino contribution in Note F - Business combinations.
Interest on the 6.75% senior notes due 2014 is payable semi-annually in
arrears on May 1 and November 1 of each year, commencing on November 1,
2004. These notes are unsecured and are not redeemable before May 1, 2009,
except in specific circumstances.
The scheduled annual principal payments on long-term debt are as follows:
Scheduled annual
For the year ended July 31, principal payments
--------------------
Payments remaining in 2004 $ 601
2005 2,811
2006 111,271
2007 38,539
2008 74,172
Thereafter 670,812
--------------------
$898,206
====================
34
K. 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.
L. Partner's capital
Partner's capital consists of a 98.9899% limited partner interest held by
Ferrellgas Partners and a 1.0101% general partner interest held by the
General Partner. During April 2004, in connection with the Blue Rhino
contribution and related transactions, Ferrellgas Partners made a cash
contribution of $192.5 million and a non-cash contribution of $9.8 million.
See additional discussion about the Blue Rhino contribution in Note F -
Business combinations. On December 1, 2003, Ferrellgas Partners made a
capital contribution of $37.9 million in cash to Ferrellgas, L.P. and these
proceeds were used to reduce borrowings outstanding under its bank credit
facility and for general partnership purposes, including the repayment of
debt incurred to fund prior acquisitions.
M. Distributions
During the nine months ended April 30, 2004, Ferrellgas, L.P. paid cash
distributions of $75.5 million. On May 24, 2004, Ferrellgas L.P. declared a
cash distribution of $36.6 million for the three months ended April 30,
2004, that is expected to be paid on June 14, 2004.
N. 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 ("FIN 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. In December 2003, the FASB issued a revision to FIN 46,
which addresses new effective dates and certain implementation issues. The
interpretation is generally effective for the periods ending after December
15, 2003. Among these issues is the addition of a scope exception for
certain entities that meet the definition of a business, provided certain
criteria are met. Ferrellgas, L.P. currently believes it does not have any
variable interest entities that would be subject to this revised
interpretation.
35
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.
O. 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 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, are as follows:
For the three months ended For the nine months ended
April 30, April 30,
---------------------------- ---------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Reimbursable costs $52,768 $53,563 $156,812 $152,855
Ferrellgas, L.P. paid to Ferrellgas Partners and the General Partner
distributions of $74.8 million and $0.7 million, respectively, during the
nine months ended April 30, 2004. On May 24, 2004, Ferrellgas, L.P.
declared distributions to Ferrellgas Partners, L.P. and the General Partner
of $36.2 million and $0.4 million, respectively, that are expected to be
paid on June 14, 2004.
On December 1, 2003, Ferrellgas, L.P. received $37.9 million and $0.4
million in cash and net asset contributions from Ferrellgas Partners and
the General Partner, respectively. Ferrellgas, L.P. then used the net cash
proceeds to reduce the borrowings outstanding under its bank credit
facility and for general partnership purposes, including the repayment of
debt incurred to fund prior acquisitions.
During April, 2004, Ferrellgas, L.P. received an aggregate of $204.3
million in cash and net asset contributions from Ferrellgas Partners and
the General Partner related to the Blue Rhino contribution. See Note F -
Business combinations - for additional discussion about the contributions.
Ferrell International Limited ("Ferrell International") is beneficially
owned by James E. Ferrell, the Chairman, President and Chief Executive
Officer of the General Partner, and thus is an affiliate. Ferrellgas, L.P.
enters into transactions with Ferrell International 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. Ferrellgas, L.P. recognized the following net
receipts (disbursements) from purchases, sales and commodity derivative
transactions and for providing accounting services with Ferrell
International:
36
For the three months ended For the nine months ended
April 30, April 30,
---------------------------- ----------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
$328 $ - $328 $(245)
Net receipts (disbursements)
Receipts from providing accounting services 10 10 30 30
These net purchases, sales and commodity derivative transactions with
Ferrell International 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 at April 30, 2004.
P. Subsequent event - cash contribution received and bank credit facility
reduced
On June 10, 2004, Ferrellgas Partners made a capital contribution of $51.1
million in cash to Ferrellgas, L.P. and these proceeds were used to reduce
borrowings under its bank credit facility.
37
FERRELLGAS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED BALANCE SHEETS
(in dollars)
(unaudited)
April 30, July 31,
ASSETS 2004 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 STATEMENTS OF EARNINGS
(unaudited)
Three months Three months Nine months From inception
ended ended ended to
April 30, April 30, April 30, April 30,
2004 2003 2004 2003
-------------- -------------- ------------- --------------
General and administrative expense $ - $ 515 $ 185 $ 515
-------------- -------------- ------------- --------------
Net loss $ - $ (515) $ (185) $ (515)
============== ============== ============= ==============
See note to condensed financial statements.
38
FERRELLGAS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(in dollars)
(unaudited)
Nine months ended From inception to
April 30, April 30,
2004 2003
--------------------- ---------------------
Cash flows from operating activities:
Net loss
$ (185) $(515)
--------------------- ---------------------
Cash used in operating activities (185) (515)
--------------------- ---------------------
Cash flows from financing activities:
Capital contribution
185 515
--------------------- ---------------------
Cash provided by financing activities
185 515
--------------------- ---------------------
Change in cash - -
Cash - beginning of period 1,000 1,000
--------------------- ---------------------
Cash - end of period $1,000 $1,000
===================== =====================
See note to condensed financial statements.
NOTE TO CONDENSED FINANCIAL STATEMENTS
APRIL 30, 2004
(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.
39
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 and co-issuer of future issuances of debt
securities of Ferrellgas Partners and Ferrellgas Finance Corp. may act as
co-obligor and co-issuer 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" refer 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 exists four material differences
between Ferrellgas Partners and the operating partnership. Those four material
differences are:
o the partnerships incur different amounts of interest expense on their
outstanding indebtedness; see pages 2 and 21 in their respective
condensed consolidated financial statements;
o Ferrellgas Partners issued common units in several transactions during
the nine months ended April 30, 2004;
o during the nine months ended April 30, 2003, Ferrellgas Partners
incurred $7.1 million in expenses related to the early extinguishment
of its debt; and
o during the nine months ended April 30, 2004, Ferrellgas Partners paid
$8.5 million in cash on a short-term, non-interest bearing note
related to a prior acquisition in fiscal 2003.
40
Forward-looking statements
Statements included in this report include forward-looking statements.
These forward-looking statements are identified as any statement that does not
relate strictly to historical or current facts. These statements often use words
such as "anticipate," "believe," "intend," "plan," "projection," "forecast,"
"strategy," "position," "continue," "estimate," "expect," "may," "will," or the
negative of those terms or other variations of them or comparable terminology.
These statements often discuss plans, strategies, events or developments that we
expect or anticipate will or may occur in the future and are based upon the
beliefs and assumptions of our management and on the information currently
available to them. In particular, statements, express or implied, concerning
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 its ability 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; and
o the expectation that gross profit, operating income and net earnings
will increase in the fourth quarter of fiscal 2004 compared to the
amounts reported in the prior year period, primarily due to the effect
of the Blue Rhino contribution;
o the expectation that propane and other gas liquid sales and cost of
product sold will increase in the fourth quarter of fiscal 2004
compared to the prior year period due to the effect of relatively
higher wholesale propane costs.
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
Overview
We are the second largest retail marketer of propane in the United States
based on retail gallons sold during fiscal 2003 and the leading national
provider of branded propane tank exchange. We serve more than one million
residential, industrial/commercial, agricultural, cylinder exchange and other
customers in 50 states, Puerto Rico, the U.S. Virgin Islands and Canada. Our
operations primarily include the retail distribution and sale of propane and
related equipment and supplies and extend from coast to coast with
concentrations in the Midwest, Southeast, Southwest and Northwest regions of the
country.
Weather conditions have a significant impact on demand for propane for
heating purposes. Accordingly, the volume of propane sold is directly affected
by the severity of the winter weather in the regions we serve and can vary
substantially from year to year. In any given area, sustained warmer-than-normal
temperatures will tend to result in reduced propane use, while sustained
colder-than-normal temperatures will tend to result in greater use.
41
The market for propane is seasonal because of increased demand during the
winter months primarily for the purpose of providing heating in residential and
commercial buildings. Consequently, sales and operating profits are concentrated
in our second and third fiscal quarters, which are during the winter heating
season of November through March. Due to the seasonality of the retail
distribution of propane, results of our operations for the nine months ended
April 30, 2004 and 2003 are not necessarily indicative of the results to be
expected for a full fiscal year. Other factors affecting our results of
operations include competitive conditions, energy commodity prices, demand for
propane, timing of acquisitions and general economic conditions in the United
States.
Our gross profit from the retail distribution of propane is primarily based
on margins; that is the cents-per-gallon difference between our costs to
purchase and distribute propane and the sale prices we charge our retail
customers. The wholesale propane price per gallon is subject to various market
conditions and may fluctuate based on changes in demand, supply and other energy
commodity prices. We employ risk management activities that attempt to mitigate
risks related to the purchasing, storing and transporting of propane.
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. Gross profit
earned in our second and third quarters provide sources of cash for these fixed
costs.
We continue to pursue our business strategies of using technology to
improve operations, capitalizing on our national presence and economies of
scale, employing a disciplined acquisition strategy and achieving internal
growth and aligning employee interest with our investors.
On April 20, 2004, we announced that a subsidiary of Ferrell Companies, Inc.,
the parent of the general partner, pursuant to a contribution agreement,
contributed to Ferrellgas Partners, and subsequently to the operating
partnership, the membership interests in Blue Rhino LLC and its payment and
specified other obligations under the merger agreement pursuant to which the
subsidiary acquired that entity. The subsidiary had previously merged with Blue
Rhino Corporation and thereafter converted it into a limited liability company.
The contribution agreement called for the assumption by the operating
partnership of the subsidiary's obligation to pay $17 in cash for each share of
Blue Rhino Corporation stock outstanding on the date of the closing of the
merger. The total obligation assumed was $343.4 million. Blue Rhino is the
nations' leading provider of branded propane tank exchange service and
complimentary products with 30,000 retail locations in 50 states, Puerto Rico,
the U.S. Virgin Islands and Canada. The results of operations of the contributed
Blue Rhino operations for the period from April 21, 2004 through April 30, 2004
are included in our statement of earnings for the three months ended April 30,
2004. The contribution did not have a material effect on the results of
operations for that period. Due to the seasonality of the branded propane tank
exchange business, a significant portion of the net earnings related to the
branded propane tank exchange business is generated during the summer which
corresponds to our fourth fiscal quarter.
Three Months Ended April 30, 2004 and April 30, 2003
(amounts in thousands)
Increase/ Percentage
Three months ended April 30, 2004 2003 (Decrease) Change
- ----------------------------- -------- -------- ----------- ----------
Retail propane gallons sold 249,424 250,620 (1,196) (0.5)%
Propane and other gas liquids sales $368,264 $351,338 $16,926 4.8%
Gross profit 155,816 161,431 (5,615) (3.5)%
Operating income 45,804 55,951 (10,147) (18.1)%
Interest expense 17,998 16,548 1,450 8.8%
42
Heating degree days, as reported by the National Oceanic and Atmospheric
Administration ("NOAA"), were 7% warmer than normal during the three months
ended April 30, 2004 as compared to 2% colder than normal during the three
months ended April 30, 2003. Customer conservation and delayed deliveries caused
by the sustained higher commodity prices also contributed to the shortfall in
gallons sold this quarter. This decrease was partially offset by increased
retail gallons sold from acquisitions.
Wholesale market prices at one of the major supply points, Mt. Belvieu,
Texas fluctuated differently during the three month ended April 30, 2004
compared to the prior year period. During February, 2004 Mt. Belvieu, Texas
wholesale market prices averaged $0.70 per gallon compared to $0.77 per gallon
in the prior year period. Wholesale market prices in March, 2004 at Mt. Belvieu,
Texas averaged $0.59 per gallon compared to $0.63 per gallon in the prior year
period. Wholesale market prices in April, 2004 at Mt. Belvieu, Texas averaged
$0.61 per gallon compared to $0.50 per gallon in the prior year period. Other
major supply points in the United States also experienced the same average sales
price per gallon fluctuations as during the prior year periods.
Propane and other gas liquids sales increased $9.9 million primarily due to
an increase in the wholesale marketing average propane sales price per gallon,
and an additional $7.0 million primarily due to acquisitions, partially offset
by the previously mentioned warmer temperatures and customer reaction to the
sustained higher average retail propane sales prices.
Gross profit decreased $5.6 million primarily due to a lower contribution
from our risk management trading activities, and to a lesser extent, due to the
decrease in our retail propane price margins. This decrease in gross profit was
partially offset by increased gross profit from acquisitions.
Operating income decreased $10.1 million reflecting the previously
mentioned decrease in gross profit and, to a lesser extent, an increase in
depreciation and amortization expense. Depreciation and amortization expense
increased primarily due to assets related to our technology initiative that were
placed in service during the three months ended October 31, 2003 and
acquisitions completed during fiscal 2003 and 2004.
Interest expense increased 8.8% primarily due to increased borrowings to
finance acquisitions completed in fiscal 2004.
Interest expense of the operating partnership
Interest expense increased 13.3% primarily due to increased borrowings to
finance acquisitions in fiscal 2004.
Nine Months Ended April 30, 2004 and April 30, 2003
(amounts in thousands)
Increase/ Percentage
Three months ended April 30, 2004 2003 (Decrease) Change
- ----------------------------- ---------- ---------- ----------- ----------
Retail propane gallons sold 743,763 783,034 (39,271) (5.0)%
Propane and other gas liquids sales $1,057,751 $985,539 $72,212 7.3%
Gross profit 446,863 463,821 (16,958) (3.7)%
Operating income 128,092 159,069 (30,977) (19.5)%
Interest expense 52,083 47,328 4,755 10.0%
Heating degree days, as reported by NOAA, were 5% warmer than normal during
the nine months ended April 30, 2004 compared to being relatively normal during
the nine months ended April 30, 2003. Customer conservation and delayed
deliveries caused by higher commodity prices also contributed significantly to
the volume shortfall this period. This decrease in volumes was partially offset
by increased retail volumes from acquisitions.
43
The average sales price per gallon increased due to the effect of a
significant increase in the wholesale cost of propane during fiscal 2004 as
compared to the prior year period. The wholesale market price at one of the
major supply points, Mt. Belvieu, Texas, averaged $0.60 per gallon during the
nine months ended April 30, 2004, compared to an average of $0.54 per gallon in
the prior year period. Other major supply points in the United States have also
experienced significant increases.
Propane and other gas liquids sales increased $110.4 million compared to
the prior year period primarily due to an increase in the average propane sales
price per gallon. This increase was partially offset by the $38.2 million sales
decrease due to reduced retail sales volumes. The decrease in retail sales
volumes was primarily caused by the previously mentioned warmer temperatures and
customer reaction to the sustained higher average retail propane sales prices,
partially offset by acquisitions.
Gross profit decreased $17.0 million primarily due to the decrease in our
retail propane volumes and lower contribution from our risk management trading
activities. This decrease in gross profit was partially offset by increased
gross profit from acquisitions.
Operating income decreased $31.0 million reflecting the previously
mentioned decrease in gross profit, an increase in depreciation and amortization
expense and to a lesser extent, an increase in operating expense, partially
offset by a decrease in equipment lease expense. Depreciation and amortization
expense increased primarily due to assets related to our technology initiative
that were placed in service during the three months ended October 31, 2003 and
acquisitions completed during fiscal 2003 and 2004. Operating expense increased
primarily due to increased personnel expense related to acquisitions completed
during fiscal 2003 and 2004. Equipment lease expense decreased due to the effect
of the buyout of operating tank leases in December 2002.
Interest expense increased 10.0% primarily due to increased borrowings
related to the buyout of operating tank leases in December 2002 and to finance
acquisitions completed in fiscal 2003 and 2004.
Interest expense of the operating partnership
Interest expense increased 10.0% primarily due to increased borrowings
related to the buyout of operating tank leases in December 2002 and to finance
acquisitions in fiscal 2003 and 2004.
Forward-looking statements
We expect gross profit, operating income and net earnings in the statement
of earnings to increase in the fourth quarter of fiscal 2004 compared to the
amounts reported in the prior year period, primarily due to the effect of the
Blue Rhino contribution. Blue Rhino generates most of its gross profit,
operating income and net earnings in the summer months, which generally
corresponds to our fourth fiscal quarter. We also expect propane and other gas
liquid sales and cost of product sold to increase in the fourth quarter of
fiscal 2004 compared to the prior year period due to the effect of relatively
higher wholesale propane costs.
44
Liquidity and Capital Resources
General
Our cash requirements include working capital requirements, debt service
payments, the required quarterly senior unit distribution, the minimum quarterly
common unit distribution, capital expenditures and acquisitions. The minimum
quarterly distribution of $0.50 expected to be paid on June 14, 2004 to all
common units that were outstanding on June 3, 2004, represents the thirty-ninth
consecutive minimum quarterly distribution paid to our common unitholders dating
back to October 1994. Working capital requirements are subject to the price of
propane, the weather and other changes in the demand for propane. Relatively
colder weather and higher propane prices during the winter heating season
increase our working capital requirements.
Our ability to satisfy our cash requirements 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.
Our net cash provided by operating activities primarily reflect earnings from
our business activities adjusted for depreciation and amortization and changes
in our working capital accounts. Typically, we generate significantly lower net
cash from operating activities in our first and fourth fiscal quarters as
compared to the second and third fiscal quarters because fixed costs generally
exceed gross profit during the non-peak heating season.
Subject to meeting the financial tests discussed above, 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.
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 April 30, 2004, our general partner believes that we met all the
required quarterly financial tests and covenants during the first, second and
third quarters 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.
45
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, in June 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 securities related to this registration
statement 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 partnership purposes.
On June 10, 2004, we issued in a public offering $50.0 million in principal
amount of fixed rate 8.75% senior notes due 2012 at a price of 103.25% per note.
Interest is payable semi-annually in arrears on June 15 and December 15,
commencing on June 15, 2004. These senior notes are unsecured and not redeemable
before June 15, 2007, except under specific circumstances. We used the proceeds
from the $50.0 million senior note issuance to make a capital contribution to
the operating partnership to reduce indebtedness under its bank credit facility.
On April 14, 2004, we received $156.4 million, after underwriting discounts
and commissions, from the issuance of 7.0 million common units to the public
pursuant to the registration statement described above. We used the net
proceeds, together with contributions made by the general partner to maintain
its effective 2% general partner interest in us, to pay a portion of the assumed
merger consideration to the former stockholders of Blue Rhino Corporation. See
Financing Activities - Blue Rhino contribution for additional discussion about
the contribution. See Note L - Partners' capital - to our condensed consolidated
financial statements for further discussion of this common unit issuance and
Note F - Business combinations - for further discussion of the Blue Rhino
contribution.
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, also pursuant to the registration statement described above. 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 and to repay debt incurred to fund prior acquisitions of $8.5 million.
The remaining proceeds were used for general partnership purposes of Ferrellgas
Partners. See Note L - Partners' capital - to our condensed consolidated
financial statements for further discussion of this common unit issuance.
As of June 10, 2004, we had $206.5 million available under the shelf
registration statement described above.
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 provided by operating activities was $74.4 million for the nine
months ended April 30, 2004, compared to net cash provided by operating
activities of $134.8 million for the prior fiscal year period. This decrease in
cash provided by operating activities is primarily due to the lower proceeds
from the accounts receivable securitization activity, and to a lesser extent a
decrease in cash flow from operating activities before changes in working
capital. Our working capital needs are typically highest during the winter
heating season. Cash required to fund working capital during the nine months
ended April 30, 2004 was $42.2 million as compared to $66.0 million for the
prior fiscal period. This use of working capital is primarily due to the timing
of cash received from customers on accounts receivable and the cash needed to
purchase inventory.
46
Accounts receivable securitization
Cash flows from the accounts receivable securitization facility decreased
$62.3 million primarily due to management's decision at the end of fiscal 2003
to reduce the bank credit facility rather than remit greater amounts collected
as servicer of accounts receivable securitizations. At the end of fiscal 2002,
we did not have outstanding balances on either the bank credit facility or the
accounts receivable securitization facility. This decision to use lower costs of
capital at July 31, 2003, for working capital needs left the accounts receivable
securitization facility with an effective $34.0 million outstanding as compared
to no balance outstanding at July 31, 2002. During the winter heating season, we
typically use the accounts receivable facility to meet our increased working
capital needs. Consequently, we remitted $12.3 million to this facility during
the nine months ended April 30, 2004 as compared to having received funding of
$50.0 million in the prior year period. We renewed this facility effective
September 23, 2003, for a 364-day commitment with Banc One, NA. At April 30,
2004, we had the ability to transfer, at our option, an additional $47.9 million
of trade accounts receivable. 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 provided by operating activities was $84.2 million for the nine
months ended April 30, 2004, compared to net cash provided by operating
activities of $147.5 million for the prior fiscal year period. This decrease in
cash provided by operating activities is primarily due to the previously
mentioned lower proceeds from accounts receivable securitization activity and to
a lesser extent a decrease in cash flow from operating activities before changes
in working capital.
Investing Activities
During the nine months ended April 30, 2004, net cash used in investing
activities was $406.8 million, compared to $219.8 million for the prior fiscal
year period. This increase in cash used in investing activities is primarily due
to the payment of the assumed merger obligation related to the Blue Rhino
contribution.
Blue Rhino contribution
On April 20, 2004, we paid $343.4 million in cash as payment of obligations
that were assumed in connection with the Blue Rhino contribution. See Note F -
Business combinations - in our condensed consolidated financial statements for
further discussion about the Blue Rhino contribution. We also used $1.3 million
in cash for transaction fees related to the Blue Rhino contribution.
Acquisitions
During the nine months ended April 30, 2004, we used $37.4 million in cash
for the acquisition of seven retail propane companies, not including the Blue
Rhino contribution, as compared to $36.3 million in the prior year period for
the acquisition of three retail propane companies.
Capital expenditures
We made cash capital expenditures of $25.2 million during the nine months
ended April 30, 2004 as compared to $29.6 million in the prior year period
primarily due to the reduced capital expenditures related to our technology
initiative that was placed in service during fiscal 2004. Capital expenditures
during fiscal 2004 consisted primarily of expenditures for the betterment and
replacement of property, plant and equipment.
47
Financing Activities
During the nine months ended April 30, 2004, net cash provided by financing
activities was $342.3 million compared to net cash provided of $79.4 million for
the prior fiscal year period. This increase in cash provided by financing
activities was primarily due to proceeds from the issuance of common units and
debt.
April Common Unit offering
On April 14, 2004, we issued, in a public offering, an additional 7.0
million of our common units at a price of $23.34 per unit, less commissions and
underwriting expenses. After commissions and underwriting expenses, we received
net proceeds of $156.4 million for the issuance of these common units. The
proceeds were used to pay a portion of the assumed merger consideration to the
former common stockholders of Blue Rhino Corporation and to pay a portion of the
outstanding bank credit facility balance.
Other April financing activities
On April 21, 2004, we issued, in five separate private placements, an
aggregate of 1.6 million common units at a price of $22.35 per unit. We received
aggregate net proceeds of $32.8 million in cash and $3.2 million in land for the
issuance of these common units. These common units were issued as follows:
o to Mr. Billy D. Prim, $15.0 million for cash; prior to the
contribution of Blue Rhino Mr. Prim was the Chairman and Chief
Executive Officer of Blue Rhino Corporation; subsequent to the Blue
Rhino contribution and pursuant to an employment agreement among
Ferrell Companies and our general partner, (i) our general partner
paid Mr. Prim a non-compete and non-solicitation payment of $2.5
million and (ii) he was appointed Executive Vice President and a
director of our general partner;
o to Mr. Prim $3.2 million in exchange for land;
o to Mr. Andrew J. Filipowski, brother-in-law of Mr. Prim, $15.0 million
for cash; prior to the contribution of Blue Rhino Mr. Filipowski was
the Vice Chairman of Blue Rhino Corporation; o to Mr. Malcom
McQuilkin, $1.0 million for cash; and
o to Mr. James E. Ferrell, Chairman, President and Chief Executive
Officer of our general partner, $1.8 million for cash.
These cash proceeds were used to pay a portion of the assumed merger
consideration to the former common stockholders of Blue Rhino Corporation. The
transactions with Mr. Prim and Mr. Filipowski were consummated prior to Mr. Prim
becoming an officer and director of our general partner.
On April 21, 2004, Ferrellgas Partners issued, pursuant to the exercise of
common unit options by Mr. James E. Ferrell, Chairman, President and Chief
Executive Officer of our general partner, an additional 0.2 million of common
units at a strike price of $17.90 per unit. We received net proceeds of $3.2
million for the issuance of these common units. The proceeds were used to pay a
portion of the assumed merger consideration to the former common stockholders of
Blue Rhino Corporation.
On April 21, 2004, Ferrellgas Partners issued to FCI Trading 0.2 million of
common units at a price of $23.94 per unit. This $4.7 million of common units
were issued to FCI Trading in connection with the Blue Rhino contribution as
consideration for FCI Trading's net contribution of its membership interests in
Blue Rhino LLC to the operating partnership.
On April 21, 2004, Ferrellgas Partners issued $2.0 million of general
partner units to our general partner in consideration for the Blue Rhino LLC
membership interest contributed by our general partner. Also on April 21, 2004,
our general partner contributed a membership interest in Blue Rhino LLC to the
operating partnership to maintain its 1.0101% general partner interest in the
operating partnership. See Note P - Transactions with related parties - for
additional discussion of the involvement of related parties in these
transactions. Also on April 21, 2004, the operating partnership issued $2.1
million of general partner units to the general partner. The fair value of the
general partner units were issued as consideration for the general partner's net
contribution of its membership interests in Blue Rhino LLC to the operating
partnership.
48
In connection with the Blue Rhino contribution, we assumed Blue Rhino's
outstanding bank credit facility balance of $43.7 million, which we immediately
repaid.
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 $65.2 million during the nine months ended April 30, 2004.
The required quarterly distribution on the senior units and the minimum
quarterly distribution on all common units for the three months ended April 30,
2004 of $26.4 million are expected to be paid on June 14, 2004 to holders of
record on June 3, 2004. See related disclosure about the distributions of senior
units in "-Disclosures about Effects of Transactions with Related Parties."
Credit Facility
At April 30, 2004, $103.7 million of borrowings and $54.8 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
April 30, 2004, we had $149.0 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 April 30, 2004, 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
April 30, 2004, the one-month Eurodollar Rate was 1.03%).
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 April 30, 2004, the commitment fee per annum rate was 0.5%).
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.
49
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.
Long-term debt
On April 20, 2004, subsidiaries of the operating partnership completed a
private placement of $250.0 million in principal amount of 6.75% senior notes
due 2014 at a price to the noteholders of 99.637% per note. In the offering, the
subsidiaries of the operating partnership received proceeds, net of underwriting
discounts and commissions, of $243.5 million. The subsidiaries then merged into
the operating artnership and Ferrellgas Finance Corp., a subsidiary of the
operating partnership, on April 20, 2004 with the operating partnership and
Ferrellgas Finance Corp. assuming the payment obligation of the notes. The
proceeds of the notes were used to pay a portion of the assumed merger
consideration to the then former common stockholders of Blue Rhino Corporation.
Interest on the 6.75% senior notes due 2014 is payable semi-annually in
arrears on May 1 and November 1 of each year, commencing on November 1, 2004.
These notes are unsecured and are not redeemable before May 1, 2009, except in
specific circumstances.
The following table summarizes our long-term debt obligations as of April
30, 2004:
Principal payments due by fiscal year
--------------------------------------------------------------------------------
Remainder 2008 and
(in thousands) of 2004 2005 2006 2007 thereafter Total
------------- ----------- ------------ ------------ ------------ ---------------
Long-term debt, including
current portion $601 $2,811 $111,271 $38,539 $962,984 $1,116,206
On June 10, 2004, we issued in a public offering $50.0 million in principal
amount of fixed rate 8.75% senior notes due 2012 at a price of 103.25% per note.
Interest is payable semi-annually in arrears on June 15 and December 15,
commencing on June 15, 2004. These senior notes are unsecured and not redeemable
before June 15, 2007, except under specific circumstances. We used the proceeds
from the $50.0 million senior note issuance to make a capital contribution to
the operating partnership to reduce indebtedness under its bank credit facility.
The operating partnership
The financing activities discussion above also applies to the operating
partnership except for cash flows related to distributions and Ferrellgas
Partners' $8.5 million payment on a non-interest bearing note related to a prior
acquisition.
Distributions
The operating partnership paid cash distributions of $75.5 million during
the nine months ended April 30, 2004. On May 24, 2004, the operating partnership
declared a cash distribution of $36.5 million for the three months ended April
30, 2004, that is expected to be paid on June 14, 2004.
Contributions from partners
In April 2004, the operating partnership received $192.5 million in cash
contributions and $9.8 million in non-cash contributions from its limited
partner, Ferrellgas Partners. The operating partnership also received $2.1
million in non-cash contributions from its general partner. The operating
partnership then used $192.5 million to pay a portion of the assumed merger
obligations related to the Blue Rhino contribution and the remaining $38.3
million to reduce the borrowings outstanding under its $307.5 million bank
credit facility.
50
In December 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.
The following table summarizes the operating partnership's long-term debt
obligations as of April 30, 2004:
Principal payments due by fiscal year
--------------------------------------------------------------------------------
Remainder 2008 and
(in thousands) of 2004 2005 2006 2007 thereafter Total
------------- ------------ ------------- ------------ ------------- ------------
Long-term debt, including
current portion $601 $2,811 $111,271 $38,539 $744,984 $898,206
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
April 30, 2004:
Three Nine
months ended months ended
April 30, 2004 April 30, 2004
(in thousands) ---------------- ----------------
Unrealized losses in fair value of contracts
outstanding at beginning of period $(1,539) $(1,718)
Other unrealized gains recognized 199 3,271
Less: realized losses recognized (1,462) 1,431
---------------- ----------------
Unrealized losses in fair value of contracts
outstanding at April 30, 2004 $ 122 $ 122
================ ================
The following table summarizes the maturity of contracts from our risk
management trading activities for the valuation methodologies we utilized as of
April 30, 2004:
(in thousands)
Fair value of
contracts at
period-end
------------------
Maturity less
Source of fair value than 1 year
- -------------------------------------------------------------------------------- ------------------
Prices actively quoted $(719)
Prices provided by other external sources 841
Prices based on models and other valuation methods -
------------------
Unrealized losses in fair value of contracts
outstanding at April 30, 2004 $ 122
==================
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 $156.8 million
for the nine months ended April 30, 2004, 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.
51
Ferrell Companies, Inc. is the sole shareholder of our general partner and
owns 17.8 million of our common units. FCI Trading, Inc. is wholly-owned by
Ferrell Companies and owns 0.2 million of our common units. FCI Trading was
formed during the three months ended January 31, 2004. Ferrell Propane, Inc. is
wholly owned by our general partner and owns 51 thousand common units. During
the nine months ended April 30, 2004, Ferrellgas Partners paid common unit
distributions of $26.7 million and $0.1 million to Ferrell Companies and Ferrell
Propane, respectively, for the three months ended July 31, 2003, January 31,
2004 and April 30, 2004. Also during the nine months ended April 30, 2004,
Ferrellgas Partners and the operating partnership together paid the general
partner distributions of $1.4 million for the three months ended July 31, 2003,
January 31, 2004 and April 30, 2004.
JEF Capital Management, Inc. is beneficially owned by Mr. Ferrell, the
Chairman, President and Chief Executive Officer of our general partner, and thus
is an affiliate. JEF Capital 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, 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 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 for its reasonable legal fees not
to exceed $70 thousand incurred in connection with the execution of the waiver.
On February 25, 2004, JEF Capital and Ferrellgas Partners extended the letter
agreement through December 31, 2004.
We paid JEF Capital $6.0 million in senior unit distributions during the
nine months ended April 30, 2004. On May 24, 2004, we accrued a senior unit
distribution of $2.0 million that is expected to be paid to JEF Capital on June
14, 2004.
Ferrell International Limited is beneficially owned by Mr. Ferrell and thus
is an affiliate. We enter into transactions with Ferrell International in
connection with our risk management activities and do so at market prices in
accordance with our affiliate trading policy approved by our general partner's
Board of Directors. These transactions include forward, option and swap
contracts and are all reviewed for compliance with the policy. During the nine
months ended April 30, 2004, we recognized net sales from purchases, sales and
commodity derivative transaction of $0.3 million. These net purchases, sales and
commodity derivatives transactions with Ferrell International are classified as
cost of product sold on our condensed consolidated statements of earnings. We
provide limited accounting services to Ferrell International. During the nine
months ended April 30, 2004, we recognized net receipts from providing limited
accounting services of $30 thousand. There were no amounts due from or due to
Ferrell International at April 30, 2004.
See "Financing Activities" for additional information regarding
transactions with related parties.
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.
52
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 $13.9 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 April 30, 2004:
Future Minimum Rental and Buyout Amounts by Fiscal Year
-----------------------------------------------------------------------------------
(in thousands) Remainder of 2008 and
2004 2005 2006 2007 Thereafter Total
-------------- ------------- ------------- ------------- ------------- ------------
Operating lease
rental payments $12,685 $22,818 $17,960 $13,156 $29,820 $96,439
Operating lease buyouts 590 6,037 2,247 7,148 8,622 24,644
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.
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 gross profit found in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Results of
Operations" 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.
53
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
over-the-counter traded 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. 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 April 30, 2004, 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 $0.1 million for risk management trading activities
as of April 30, 2004. The preceding hypothetical analysis is limited because
changes in prices may or may not equal 10%, thus actual results may differ.
At April 30, 2004, we had $103.7 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 $1.0 million for the twelve months ending April 30, 2005. 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 April 30, 2004 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
None.
54
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 4, 2004, we issued 31,717 restricted common units pursuant to a
purchase and noncompetition agreement as a portion of the consideration for our
acquisition of propane-related assets. These common units were issued in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.
On April 21, 2004, we issued, in five separate private placements, an
aggregate of 1,607,664 common units at a price of $22.35 per unit. We received
net proceeds of $32.8 million in cash and $3.2 million in land for the issuance
of these common units. The cash proceeds were used to pay a portion of the
assumed merger consideration to the then former common stockholders of Blue
Rhino Corporation. These common units were issued in reliance upon the exemption
from registration under Section 4(2) of the Securities Act. See Note L -
Partners' capital - for additional information on the private placement of
common units in our condensed consolidated financial statements.
On April 21, 2004, we issued to FCI Trading, 195,686 of common units at a
price of $23.94 per unit. These common units, valued at $4.7 million, were
issued to FCI Trading in connection with the Blue Rhino contribution as
consideration for FCI Trading's net contribution of its membership interests in
Blue Rhino LLC to the operating partnership. These common units were issued in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act. See Note L - Partners' capital - for additional information on
the private placement of common units in our condensed consolidated financial
statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
55
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed below are furnished 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
------- -----------
2.1 Contribution Agreement dated February 8, 2004, by and among FCI
Trading Corp., Ferrellgas, Inc., Ferrellgas Partners, L.P. and
Ferrellgas, L.P. Incorporated by reference to Exhibit 2.1 to
our Current Report on Form 8-K filed February 12, 2004.
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 Third Amended and Restated Agreement of Limited Partnership of
Ferrellgas, L.P., dated as of April 7, 2004. Incorporated by
reference to Exhibit 3.1 to our Current Report on Form 8-K filed
April 22, 2004.
3.5 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.
3.6 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.
4.3 Indenture, dated as of April 20, 2004, with form of Note
attached, among Ferrellgas Escrow LLC and Ferrellgas Finance
Escrow Corporation and U.S. Bank National Association, as
trustee, relating to 6 3/4% Senior Notes due 2014. Incorporated
by reference to Exhibit 4.1 to our Current Report on Form 8-K
filed April 22, 2004.
56
Exhibit
Number Description
------- -----------
4.4 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.
4.5 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.
4.6 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.
4.7 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.
4.8 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.
4.9 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.
4.10 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.
4.11 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.
4.12 Extension of Waiver and Acknowledgement of No Material Event
dated February 25, 2004, by and among Ferrellgas Partners, L.P.,
Ferrellgas, L.P., Ferrellgas, Inc. and JEF Capital Management,
Inc.
57
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.
58
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 Agreement and Plan of Merger dated as of February 8, 2004, by
and among Blue Rhino Corporation, FCI Trading Corp., Diesel
Acquisition, LLC and Ferrell Companies, Inc. Incorporated by
reference to Exhibit 99.2 to our Current Report on Form 8-K
filed February 12, 2004.
10.14 First amendment to the Agreement and Plan of Merger, dated as of
March 16, 2004, by and among Blue Rhino Corporation, FCI Trading
Corp., Diesel Acquisition, LLC, and Ferrell Companies, Inc.
Incorporated by reference to Exhibit 99.1 to our Current Report
on Form 8-K filed April 2, 2004.
* 10.15 Real Property Contribution Agreement, dated February 8, 2004,
between Ferrellgas Partners, L.P. and Billy D. Prim.
10.16 Unit Purchase Agreement, dated February 8, 2004, between
Ferrellgas Partners, L.P. and Billy D. Prim. Incorporated by
reference to Exhibit 4.5 to our Form S-3 filed May 21, 2004.
10.17 Registration Rights Agreement, dated February 8, 2004, between
Ferrellgas Partners, L.P. and Billy D. Prim. Incorporated by
reference to Exhibit 4.2 to our Form S-3 filed May 21, 2004.
10.18 Registration Rights Agreement, dated February 8, 2004, between
Ferrellgas Partners, L.P. and Andrew J. Filipowski. Incorporated
by reference to Exhibit 4.3 to our Form S-3 filed May 21, 2004.
10.19 Registration Rights Agreement, dated February 8, 2004, between
Ferrellgas Partners, L.P. and Malcom R. McQuilkin. Incorporated
by reference to Exhibit 4.4 to our Form S-3 filed May 21, 2004.
10.20 Unit Purchase Agreement dated February 8, 2004, between
Ferrellgas Partners, L.P. and James E. Ferrell. Incorporated by
reference to Exhibit 99.3 to our Current Report on Form 8-K
filed February 12, 2004.
# 10.21 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.
59
Exhibit
Number Description
------- -----------
# 10.22 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.
# 10.23 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.
# 10.24 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.
# 10.25 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.
# 10.26 Employment Agreement, dated February 8, 2004, by and among
Ferrellgas, Inc., Ferrell Companies, Inc. and Billy D. Prim.
Incorporated by reference to Exhibit 99.6 to our Current Report
on Form 8-K filed April 22, 2004.
# 10.27 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.
* 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.
60
(b) Reports on Form 8-K
Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P.
and Ferrellgas Finance Corp. filed eight Form 8-K's during the three months
ended April 30, 2004.
Items
Date of Report Reported Financial Statements Furnished
- ------------------------------------------- -------- ------------------------------
Filed February 5, 2004 5, 7 Unaudited interim balance sheets and footnotes of
Ferrellgas, Inc.
Filed February 13, 2004 5, 7 None
Filed April 2, 2004 5, 7 Audited financial statements and footnotes of
Blue Rhino Corporation
Filed April 2, 2004, as amended 5, 7 Audited financial statements and footnotes of
Blue Rhino Corporation
Filed April 12, 2004 5 None
Filed April 15, 2004 5, 7 None
Filed April 22, 2004 2, 5, 7 None
Filed April 30, 2004 5, 7 Unaudited interim balance sheets and footnotes
of Ferrellgas, Inc.
Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P.
and Ferrellgas Finance Corp. furnished two Form 8-K's during the three months
ended April 30, 2004.
Items
Date of Report Reported Financial Statements Furnished
- ------------------------------------------- -------- ------------------------------
Furnished February 18, 2004 9 None
Furnished February 26, 2004 7, 9, 12 None
61
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: June 14, 2004 By /s/ Kevin T. Kelly
---------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS PARTNERS FINANCE CORP.
Date: June 14, 2004 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: June 14, 2004 By /s/ Kevin T. Kelly
---------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS FINANCE CORP.
Date: June 14, 2004 By /s/ Kevin T. Kelly
---------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
62