UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A Amendment No. 1 [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended October 31, 1997 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: 33-53379 33-53379-01 Ferrellgas, L.P. Ferrellgas Finance Corp. (Exact name of registrants as specified in their charters) Delaware 43-1698481 Delaware 43-1677595 ---------------------------- ------------------------------- (States or other jurisdictions of (I.R.S. Employer Identification Nos. incorporation or organization) One Liberty Plaza, Liberty, Missouri 64068 (Address of principal executive offices) (Zip Code) Registrants' telephone number, including area code: (816) 792-1600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] At November 17, 1997, Ferrellgas Finance Corp. had 1,000 shares of $1.00 par value common stock outstanding. FERRELLGAS, L.P. FERRELLGAS FINANCE CORP. Table of Contents Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Ferrellgas, L.P. and Subsidiaries Consolidated Balance Sheets - October 31, 1997 and July 31, 1997 1 Consolidated Statements of Earnings - Three months ended October 31, 1997 and 1996 2 Consolidated Statement of Partners' Capital - Three months ended October 31, 1997 3 Consolidated Statements of Cash Flows - Three months ended October 31, 1997 and 1996 4 Notes to Consolidated Financial Statements 5 Ferrellgas Finance Corp. Balance Sheets - October 31, 1997 and July 31, 1997 6 Statements of Earnings - Three months ende October 31, 1997 and 1996 6 Note to Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FERRELLGAS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS October 31, 1997 July 31, 1997 - ------------------------------------------------------------- ----------------- ---------------- (unaudited) Current Assets: Cash and cash equivalents $ 9,335 $ 14,787 Accounts and notes receivable 77,266 61,835 Inventories 42,912 43,112 Prepaid expenses and other current assets 16,718 10,102 -------------- -------------- Total Current Assets 146,231 129,836 Property, plant and equipment, net 404,935 405,736 Intangible assets, net 111,257 112,058 Other assets, net 5,917 6,147 -------------- -------------- Total Assets $668,340 $653,777 ============== ============== LIABILITIES AND PARTNERS' CAPITAL - ------------------------------------------------------------- Current Liabilities: Accounts payable $ 63,596 $ 39,322 Other current liabilities 33,638 47,546 Short-term borrowings 44,546 21,786 -------------- -------------- Total Current Liabilities 141,780 108,654 Long-term debt 332,022 327,334 Other liabilities 12,511 12,354 Contingencies and commitments Partners' Capital Limited partner 180,188 203,360 General partner 1,839 2,075 -------------- -------------- Total Partners' Capital 182,027 205,435 -------------- -------------- Total Liabilities and Partners' Capital $668,340 $653,777 ============== ============== See notes to consolidated financial statements 1 FERRELLGAS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands) (unaudited) For the three months ended -------------------------------- October 31, 1997 October 31, 1996 ---------------- ---------------- Revenues: Gas liquids and related product sales $143,051 $156,764 Other 10,154 11,096 -------------- -------------- Total revenues 153,205 167,860 Cost of product sold (exclusive of depreciation, shown separately below) 86,616 101,572 -------------- -------------- Gross profit 66,589 66,288 Operating expense 50,063 48,967 Depreciation and amortization expense 11,537 10,831 General and administrative expense 4,421 3,767 Vehicle and tank lease expense 2,312 1,480 -------------- -------------- Operating income (loss) (1,744) 1,243 Interest expense (8,246) (7,642) Interest income 397 379 Gain (loss) on disposal of assets 66 (880) -------------- -------------- Net loss $ (9,527) $ (6,900) ============== ============== See notes to consolidated financial statements 2 FERRELLGAS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (in thousands) (unaudited) Limited General Total partners' partner partner capital ---------------- --------------- ------------------- July 31, 1997 $ 203,360 $ 2,075 $ 205,435 Additions to capital in connection with acquisitions 2,020 21 2,041 Quarterly distributions (15,761) (161) (15,922) Net loss (9,431) (96) (9,527) ---------------- --------------- ------------------- October 31, 1997 $ 180,188 $ 1,839 $ 182,027 ================ =============== =================== See notes to consolidated financial statements. 3 FERRELLGAS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) For the three months ended --------------------------------- October 31, 1997 October 31, 1996 --------------- --------------- Cash Flows From Operating Activities: Net loss ($9,527) ($6,900) Reconciliation of net loss to net cash from operating activities: Depreciation and amortization 11,537 10,831 Other 920 1,669 Changes in operating assets and liabilities net of effects from business acquisitions: Accounts and notes receivable (15,869) (25,032) Inventories (422) (13,367) Prepaid expenses and other current assets (6,614) (3,080) Accounts payable 23,726 40,237 Other current liabilities (13,590) 2,331 Other 157 (134) --------------- --------------- Net cash provided (used) by operating activities (9,682) 6,555 --------------- --------------- Cash Flows From Investing Activities: Business acquisitions (2,744) (8,247) Capital expenditures (4,480) (3,832) Other 958 1,219 --------------- --------------- Net cash used by investing activities (6,266) (10,860) --------------- --------------- Cash Flows From Financing Activities: Net additions to short-term borrowings 22,760 15,253 Additions to long-term debt 3,853 12,747 Reductions of long-term debt (234) (337) Distributions (15,922) (15,922) Other 39 (397) --------------- --------------- Net cash provided by financing activities 10,496 11,344 --------------- --------------- Increase (decrease) in cash and cash equivalents (5,452) 7,039 Cash and cash equivalents - beginning of period 14,787 13,769 --------------- --------------- Cash and cash equivalents - end of period $9,335 $20,808 --------------- --------------- Cash paid for interest $12,923 $10,795 =============== =============== See notes to consolidated financial statements 4 FERRELLGAS, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1997 (unaudited) A. The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the interim periods presented. All adjustments to the financial statements were of a normal, recurring nature. B. The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. C. The propane industry is seasonal in nature with peak activity during the winter months. Therefore, the results of operations for the periods ended October 31, 1997 and October 31, 1996 are not necessarily indicative of the results to be expected for a full year. D. Inventories consist of: October 31, July 31, (in thousands) 1997 1997 ---------------- -------------- Liquefied propane gas and related products $35,231 $35,351 Appliances, parts and supplies 7,681 7,761 ---------------- -------------- $42,912 $43,112 ================ ============== In addition to inventories on hand, the Partnership enters into contracts to buy product for supply purposes. Nearly all such contracts have terms of less than one year and most call for payment based on market prices at date of delivery. All fixed price contracts have terms of less than one year. Property, plant and equipment, net consist of: October 31, July 31, (in thousands) 1997 1997 --------------- --------------- Property, plant and equipment $620,013 $614,974 Less: accumulated depreciation 215,078 209,238 --------------- --------------- $404,935 $405,736 =============== =============== Intangible assets, net consist of: October 31, July 31, (in thousands) 1997 1997 --------------- --------------- Intangible assets $224,008 $221,269 Less: accumulated amortization 112,751 109,211 =============== =============== $111,257 $112,058 =============== =============== E. The Partnership is threatened with or named as a defendant in various lawsuits which, among other items, claim damages for product liability. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are likely to have a material adverse effect on the results of operations or financial condition of the Partnership. 5 FERRELLGAS FINANCE CORP. (a wholly owned subsidiary of Ferrellgas, L.P.) BALANCE SHEETS October 31, July 31, ASSETS 1997 1997 - -------------------------------------------------------------------- ------------------- ------------------- (unaudited) Cash $1,000 $1,000 ------------------- ------------------- Total Assets $1,000 $1,000 =================== =================== STOCKHOLDER'S EQUITY - -------------------------------------------------------------------- Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding $1,000 $1,000 Additional paid in capital 759 759 Accumulated deficit (759) (759) ------------------- ------------------- Total Stockholder's Equity $1,000 $1,000 =================== =================== STATEMENTS OF EARNINGS (unaudited) Three Months Ended --------------------------------------- October 31, October 31, 1997 1996 ------------------- ----------------- General and administrative expense $ - $ - ------------------- ----------------- Net loss $ - $ - =================== ================= NOTE TO FINANCIAL STATEMENTS OCTOBER 31, 1997 (unaudited) The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the interim periods presented. All adjustments to the financial statements were of a normal, recurring nature. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion of the results of operations and liquidity and capital resources of the Ferrellgas, L.P. (the "Partnership" or "OLP"). Ferrellgas Finance Corp. has nominal assets and does not conduct any operations. Accordingly, a discussion of the results of operations and liquidity and capital resources is not presented. Statements included in this report that are not historical facts, including a statement concerning the Partnership's belief that the it will have sufficient funds to meet its obligations to enable it to distribute to Ferrellgas Partners, L.P. ("the MLP") sufficient funds to permit the MLP to meet its obligations with respect to the MLP Senior Notes issued in April 1996, and to enable it to distribute the Minimum Quarterly Distribution ($0.50 per Unit) on all Common Units and Subordinated Units, are forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. The risks and uncertainties include but are not limited to the following and their effect on the Partnership's operations: a) the effect of weather conditions on demand for propane, b) price and availability of propane supplies, c) the availability of capacity to transport propane to market areas, d) competition from other energy sources and within the propane industry, e) operating risks incidental to transporting, storing, and distributing propane, f) changes in interest rates, g) governmental legislation and regulations, h) energy efficiency and technology trends and i) other factors that are discussed in the Partnership's filings with the Securities and Exchange Commission. Results of Operations The propane industry is seasonal in nature with peak activity during the winter months. Due to the seasonality of the business, results of operations for the three months ended October 31, 1997 and 1996, are not necessarily indicative of the results to be expected for a full year. Other factors affecting the results of operations include competitive conditions, demand for product, variations in weather and fluctuations in propane prices. In the Form 10-K originally filed on October 29, 1997, an inventory costing adjustment affecting all quarters during fiscal 1997 was quantified and discussed in the "Selected Quarterly Financial Data" section of Item 7. The Partnership reflected the entire adjustment in the fourth quarter of fiscal 1997 instead of restating each quarter affected. Subsequent to the original filing of Form 10-K, the Partnership has determined that the quarters affected by the inventory costing adjustment should be restated to more accurately reflect the Partnership's fiscal 1997 quarterly results used for comparative purposes. Thus, the Partnership restated the fiscal 1997 quarterly results affected by this adjustment with the filing of a Form 10-K/A on January 28, 1998. This Form 10-Q/A restates the Statement of Earnings and Statements of Cash Flows for the three months ended October 31, 1996 after giving effect to the inventory costing adjustments. Three Months Ended October 31, 1997 vs. October 31, 1996 Total Revenues. Total revenues decreased 8.7% to $153,205,000 as compared to $167,860,000 in the first quarter of fiscal 1997, primarily due to decreased retail propane volumes and sales price per gallon and a decrease in revenues from other operations (wholesale marketing, chemical feedstocks and net trading operations), partially offset by increased sales volume due to the effect of acquisitions. Retail volumes decreased 4.8% to 154,495,000 gallons as compared to 162,281,000 gallons for the first quarter of fiscal 1997, primarily due to a delay in deliveries of retail gallons caused by a lack of sustained cold weather and due to a reduction in demand for crop drying gallons compared to the same quarter last year. Revenue from other operations decreased by $6,102,000 primarily due to decreased wholesale marketing sales price per gallon and volumes related to a weaker demand for agricultural gallons as compared to the same quarter last year. 7 Gross Profit. Gross profit increased 0.5% to $66,589,000 as compared to $66,288,000 in the first quarter of fiscal 1997, primarily due to the effect of increased retail margins and the effect of acquisitions offset by the effect of decreased retail propane volumes and a decrease in wholesale marketing, trading and chemical feedstocks marketing operations. Operating Expenses. Operating expenses increased 2.2% to $50,063,000 as compared to $48,967,000 in the first quarter of fiscal 1997 primarily due to acquisition related increases in personnel costs, plant and office expenses, and vehicle and other expenses. Depreciation and Amortization. Depreciation and amortization expense increased 6.5% to $11,537,000 as compared to $10,831,000 for the first quarter of fiscal 1997 primarily due to acquisitions of propane businesses. Interest expense. Interest expense increased 7.9% to $8,246,000 as compared to $7,642,000 from the year ago quarter. This increase is primarily the result of increased borrowings, offset by a small decrease in the overall average interest rate paid by the Partnership on its borrowings. Liquidity and Capital Resources The ability of the OLP to satisfy its obligations is dependent upon future performance, which will be subject to prevailing economic, financial, business and weather conditions and other factors, many of which are beyond its control. For the fiscal year ending July 31, 1998, the General Partner believes that the OLP will have sufficient funds to meet its obligations and enable it to distribute to the MLP sufficient funds to permit the MLP to meet its obligations with respect to the MLP Senior Notes issued in April 1996, and enable it to distribute the Minimum Quarterly Distribution ($0.50 per Unit) on all Common Units and Subordinated Units. Future maintenance and working capital needs of the OLP are expected to be provided by cash generated from future operations, existing cash balances and the working capital borrowing facility. In order to fund expansive capital projects and future acquisitions, the OLP may borrow on existing bank lines or the MLP may issue additional Common Units. Toward this purpose the MLP maintains a shelf registration statement with the Securities and Exchange Commission for 1,800,322 Common Units representing limited partner interests in the MLP. The Common Units may be issued from time to time by the MLP in connection with the OLP's acquisition of other businesses, properties or securities in business combination transactions. Operating Activities. Cash used by operating activities was $(9,682,000) for the three months ended October 31, 1997, compared to cash provided by operating activities of $6,555,000 for the prior period. This decrease is primarily due to a decrease in volumes from other operations during the quarter as compared to the first quarter of last year and its affect on accounts receivable and accounts payable, and due to the timing of payments for purchases of inventory. Investing Activities. During the three months ended October 31, 1997, the Partnership made total acquisition capital expenditures of $5,270,000. This amount was funded by $2,744,000 cash payments (including $619,000 for transition costs previously accrued for fiscal 1997 acquisitions) and $3,145,000 in other costs and consideration. During the three months ended October 31, 1997, the Partnership made growth and maintenance capital expenditures of $4,480,000 consisting primarily of the following: 1) relocating and upgrading district plant facilities, 2) additions to Partnership-owned customer tanks and cylinders, 3) vehicle lease buyouts and 4) upgrading computer equipment and software. Capital requirements for repair and maintenance of property, plant and equipment are relatively low since technological change is limited and the useful lives of propane tanks and cylinders, the Partnership's principal physical assets, are generally long. 8 The Partnership meets its vehicle and transportation equipment fleet needs by leasing light and medium duty trucks and tractors. The General Partner believes vehicle leasing is a cost effective method for meeting the Partnership's transportation equipment needs. The Partnership continues seeking to expand its operations through strategic acquisitions of smaller retail propane operations located throughout the United States. These acquisitions will be funded through internal cash flow, external borrowings or the issuance of additional Partnership interests. The Partnership does not have any material commitments of funds for capital expenditures other than to support the current level of operations. In fiscal 1998, the Partnership expects growth and maintenance capital expenditures to increase slightly over fiscal 1997 levels. Financing Activities. During the three months ended October 31, 1997, the Partnership borrowed $26,613,000 from its Credit Facility to fund working capital, business acquisitions and capital expenditures needs. At October 31, 1997, $113,150,000 of borrowings were outstanding under the revolving portion of the Credit Facility. Letters of credit outstanding, used primarily to secure obligations under certain insurance arrangements, totaled $24,791,000. At October 31, 1997, the Partnership had $67,059,000 available for general corporate, acquisition and working capital purposes under the Credit Facility. On November 17, 1997, the Partnership declared a cash distribution of $23,542,550 to partners, payable December 12, 1997. The distribution will fund Ferrellgas Partners, L.P.'s cash distribution of $15,804,747 to its partners and the $7,500,000 interest payment on its Senior Subordinated Notes. Adoption of New Accounting Standards: The Financial Accounting Standards Board recently issued the following new accounting standards: Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information." SFAS Nos. 130 and 131 are required to be adopted by the Partnership for the fiscal year ended July 31, 1999. The adoption of both standards is not expected to have a material effect on the Partnership's financial position or results of operations. 9 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, L.P. By Ferrellgas, Inc. (General Partner) Date: January 28, 1998 By /s/ Danley K. Sheldon ------------------------ Danley K. Sheldon President and Chief Financial Officer (Principal Financial and Accounting Officer) FERRELLGAS FINANCE CORP. Date: January 28, 1998 By /s/ Danley K. Sheldon ------------------------ Danley K. Sheldon Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 10