FGP Ferrellgas Partners LP

Ferrellgas Partners, L.P. (NYSE:FGP) (“Ferrellgas” or the “Company”) today reported financial results for its first fiscal quarter ended October 31, 2016. The Company reported a net loss attributable to Ferrellgas Partners, L.P. of $43.1 million, compared to a net loss of $79.8 million for the same period in 2015.

Adjusted EBITDA was $29.0 million, compared to $48.9 million in the prior year period primarily due to the effect of the Jamex settlement reached in early September.

“While unusually warm weather conditions – including temperatures during our first quarter that were 35% higher than normal – continued to negatively impact our propane revenue, we are taking aggressive actions to position Ferrellgas for long-term growth and profitability,” said James E. Ferrell, the Company’s interim President and Chief Executive Officer. “This quarter’s results include a 9% reduction in operating expenses, reflecting our ongoing efforts to meaningfully reduce costs. We also remain focused on growing our customer base, and are very pleased with our success winning new customers and retaining existing customers during the quarter.”

Mr. Ferrell continued, “Although the termination of the Jamex contract impacted our crude oil logistics segment, we believe in the potential of this business and are taking steps to maximize profitability by increasing utilization of our assets. We remain confident in the upside potential of our company and believe we are taking the right steps to advance the long-term interests of our unitholders, employees and other stakeholders.”

Operating income generated by the propane and related equipment sales segment was up over 20% to $16.5 million, compared to $13.7 million in the prior year period despite temperatures that were 6% warmer than those of the prior year period. The increase was primarily due to decreased operating expenses related to vehicle fuel costs.

At the end of the first fiscal quarter, the Company’s leverage ratio was 5.81x, which was lower than the 6.05x limit allowed under its secured credit facility and accounts receivable securitization facility, as amended in September 2016.

Mr. Ferrell added, “We are committed to reducing debt and strengthening our balance sheet, with the goal of returning to a leverage ratio of 4.5x or below. While debt reduction is our primary objective at this time, increasing returns to our unitholders remains the top priority for Ferrellgas, and we will continue to take actions to deliver value to all stakeholders over the long term.”

About FerrellgasFerrellgas Partners, L.P., through its operating partnership, Ferrellgas, L.P., and subsidiaries, serves propane customers in all 50 states, the District of Columbia, and Puerto Rico, and provides midstream services to major energy companies in the United States. Ferrellgas employees indirectly own 22.8 million common units of the partnership, through an employee stock ownership plan. Ferrellgas Partners, L.P. filed a Form 10-K with the Securities and Exchange Commission on September 28, 2016. Investors can request a hard copy of this filing free of charge and obtain more information about the partnership online at www.ferrellgas.com. 

Forward Looking Statements Statements in this release concerning expectations for the future are forward-looking statements. 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. Forward-looking statements, include, but are not limited to: Ferrellgas’ debt reduction plans, statements regarding future unitholder returns, plans to increase the utilization of certain assets, and the anticipated impact of Ferrellgas’ actions on its balance sheet and liquidity position. While Ferrellgas believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: risks related to Ferrellgas’ ability to generate sufficient cash flow to pay distributions, to make payments on its debt obligations and to execute its business plan; Ferrellgas’ ability to access funds on acceptable terms, if at all, because of the terms and conditions governing its indebtedness or otherwise; local, regional and national economic conditions and the impact they may have on Ferrellgas and its customers; the effect of weather conditions on the demand for propane; the prices of wholesale propane, motor fuel and crude oil; disruptions to the supply of propane; the termination or non-renewal of certain arrangements or agreements; adverse changes in our relationships with our national propane customers; significant delays in the collection of, or uncollectibility of, accounts or notes receivable; the financial condition of Ferrellgas’ customers; and the failure of any customer to perform its contractual obligations. A variety of known and unknown risks, uncertainties and other factors could cause results, performance and expectations to differ materially from anticipated results, performance and expectations. These risks, uncertainties and other factors are discussed in the Form 10-K of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. for the fiscal year ended July 31, 2016, the Form 10-Q of these entities for the fiscal quarter ended October 31, 2016, and in other documents filed from time to time by these entities with the Securities and Exchange Commission.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements in this press release are qualified in their entirety by these cautionary statements. Except as required by law, Ferrellgas undertakes no obligation and does not intend to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.

FERRELLGAS PARTNERS, L.P.  AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
ASSETS		October 31, 2016				July 31, 2016
Current Assets:
Cash and cash equivalents		$	12,639			$	4,965
Accounts and notes receivable, net (including $105,320 and $106,464 of
accounts receivable pledged as collateral at October 31, 2016
and July 31, 2016, respectively)			148,283				149,583
Inventories			100,296				90,594
Prepaid expenses and other current assets			31,820				39,973
Total Current Assets			293,038				285,115
Property, plant and equipment, net			757,940				774,680
Goodwill, net			256,103				256,103
Intangible assets, net			272,031				280,185
Other assets, net			88,103				87,223
Total Assets		$	1,667,215			$	1,683,306
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities:
Accounts payable		$	74,788			$	67,928
Short-term borrowings			96,824				101,291
Collateralized note payable			74,000				64,000
Other current liabilities			170,527				128,958
Total Current Liabilities			416,139				362,177
Long-term debt (a)			1,965,219				1,941,335
Other liabilities			32,755				31,574
Contingencies and commitments
Partners' Deficit:
Common unitholders (97,152,665 and 98,002,665 units outstanding at
October 31, 2016 and July 31, 2016, respectively)			(673,516	)			(570,754	)
General partner unitholder (989,926 units outstanding at October 31, 2016
and July 31, 2016)			(66,713	)			(65,835	)
Accumulated other comprehensive loss			(1,186	)			(10,468	)
Total Ferrellgas Partners, L.P. Partners' Deficit			(741,415	)			(647,057	)
Noncontrolling Interest			(5,483	)			(4,723	)
Total Partners' Deficit			(746,898	)			(651,780	)
Total Liabilities and Partners' Deficit		$	1,667,215			$	1,683,306
(a) The principal difference between the Ferrellgas Partners, L.P. balance sheet and that of Ferrellgas, L.P., is $182 million of 8.625% notes
which are liabilities of Ferrellgas Partners, L.P. and not of Ferrellgas, L.P.

 

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE AND TWELVE MONTHS ENDED OCTOBER 31, 2016 AND 2015
(in thousands, except per unit data)
(unaudited)
		Three months ended								Twelve months ended
		October 31								October 31
			2016				2015				2016				2015
Revenues:
Propane and other gas liquids sales		$	242,399			$	245,301			$	1,199,466			$	1,507,956
Midstream operations			108,044				193,670				539,612				292,943
Other			29,099				32,175				208,685				251,282
Total revenues			379,542				471,146				1,947,763				2,052,181
Cost of sales:
Propane and other gas liquids sales			119,212				121,751				561,894				834,161
Midstream operations			94,642				153,604				412,272				228,226
Other			11,746				14,448				123,535				163,253
Gross profit			153,942				181,343				850,062				826,541
Operating expense			104,992				114,981				447,921				444,380
Depreciation and amortization expense			26,202				36,979				139,736				112,249
General and administrative expense			12,482				12,240				48,821				57,843
Equipment lease expense			7,349				7,032				29,150				25,773
Non-cash employee stock ownership plan compensation charge			3,754				5,256				26,093				25,595
Non-cash stock-based compensation charge (a)			1,881				8,122				3,083				17,992
Asset impairments			-				29,316				628,802				29,316
Loss on asset sales and disposal			6,423				14,917				22,341				21,055
Operating income (loss)			(9,141	)			(47,500	)			(495,885	)			92,338
Interest expense			(35,428	)			(33,788	)			(139,577	)			(110,272	)
Other income (expense), net			508				(122	)			740				(23	)
Loss before income taxes			(44,061	)			(81,410	)			(634,722	)			(17,957	)
Income tax expense (benefit)			(590	)			(844	)			218				(649	)
Net loss			(43,471	)			(80,566	)			(634,940	)			(17,308	)
Net loss attributable to noncontrolling interest (b)			(398	)			(773	)			(6,245	)			(10	)
Net loss attributable to Ferrellgas Partners, L.P.			(43,073	)			(79,793	)			(628,695	)			(17,298	)
Less: General partner's interest in net loss			(431	)			(798	)			(6,287	)			(173	)
Common unitholders' interest in net loss		$	(42,642	)		$	(78,995	)		$	(622,408	)		$	(17,125	)
Loss Per Unit
Basic and diluted net loss per common unitholders' interest		$	(0.44	)		$	(0.79	)		$	(6.35	)		$	(0.19	)
Weighted average common units outstanding			97,457.6				100,376.8				97,949.0				89,232.9
Supplemental Data and Reconciliation of Non-GAAP Items:
		Three months ended								Twelve months ended
		October 31								October 31
			2016				2015				2016				2015
Net loss attributable to Ferrellgas Partners, L.P.		$	(43,073	)		$	(79,793	)		$	(628,695	)		$	(17,298	)
Income tax expense (benefit)			(590	)			(844	)			218				(649	)
Interest expense			35,428				33,788				139,577				110,272
Depreciation and amortization expense			26,202				36,979				139,736				112,249
EBITDA			17,967				(9,870	)			(349,164	)			204,574
Non-cash employee stock ownership plan compensation charge			3,754				5,256				26,093				25,595
Non-cash stock based compensation charge (a)			1,881				8,122				3,083				17,992
Asset impairments			-				29,316				628,802				29,316
Loss on asset sales and disposal			6,423				14,917				22,341				21,055
Other (income) expense, net			(508	)			122				(740	)			23
Change in fair value of contingent consideration (included in operating expense)			-				(100	)			-				(4,600	)
Severance costs $414 and $938 included in operating costs for the three and twelve months ended period
October 31, 2016 and $1,055 and $1,128 included in general and administrative costs for the three and twelve months
ended period October 31, 2016. Also includes $805 in operating costs for the three and twelve months ended
October 31, 2015 and $51 included in general and administrative costs for the three and twelve months ended
October 31, 2015.			1,469				856				2,066				856
Litigation accrual and related legal fees associated with a class action lawsuit (included in general
and administrative expense)			-				-				-				83
Unrealized (non-cash) losses (gains) on changes in fair value of derivatives $(1,877) and $(1,330) included in operating
expense for the three and twelve months ended October 31, 2016 and $1,038 and $3,450 for the three and twelve
months ended October 31, 2015. Also includes $308 and $(140) included in midstream operations cost of sales
for the three and twelve months ended October 31, 2016, respectively.			(1,569	)			1,038				(1,470	)			3,450
Acquisition and transition expenses (included in general and administrative expense)			-				15				84				16,388
Net loss attributable to noncontrolling interest (b)			(398	)			(773	)			(6,245	)			(10	)
Adjusted EBITDA (c)			29,019				48,899				324,850				314,722
Net cash interest expense (d)			(33,618	)			(32,502	)			(133,976	)			(105,762	)
Maintenance capital expenditures (e)			(3,322	)			(6,215	)			(14,244	)			(20,739	)
Cash paid for taxes			(1	)			-				(778	)			(452	)
Proceeds from asset sales			1,720				1,013				6,730				5,501
Distributable cash flow to equity investors (f)			(6,202	)			11,195				182,582				193,270
Distributable cash flow attributable to general partner and non-controlling interest			(124	)			224				3,652				3,865
Distributable cash flow attributable to common unitholders			(6,078	)			10,971				178,930				189,405
Less: Distributions paid to common unitholders			49,791				51,443				200,467				175,520
Distributable cash flow excess/(shortage)		$	(55,869	)		$	(40,472	)		$	(21,537	)		$	13,885
Propane gallons sales
Retail - Sales to End Users			111,188				110,973				552,986				595,607
Wholesale - Sales to Resellers			51,990				50,566				227,545				258,696
Total propane gallons sales			163,178				161,539				780,531				854,303
Midstream operations barrels
Salt water volume processed			3,703				4,734				15,512				17,766
Crude oil hauled			11,264				24,264				66,411				34,711
Crude oil sold			1,792				1,510				7,142				2,006
(a)  Non-cash stock-based compensation charges consist of the following:
		Three months ended								Twelve months ended
		October 31								October 31
			2016				2015				2016				2015
Operating expense		$	94			$	1,218			$	144			$	2,848
General and administrative expense			1,787				6,904				2,939				15,144
Total		$	1,881			$	8,122			$	3,083			$	17,992
(b)  Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P.
(c)  Adjusted EBITDA is calculated as net loss attributable to Ferrellgas Partners, L.P., less the sum of the following: income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, asset impairments, loss on asset sales and disposal, other (income) expense, net, change in fair value of contingent consideration, severance costs, litigation accrual, and related legal fees associated with a class action lawsuit, unrealized (non-cash) losses (gains) on changes in fair value of derivatives, acquisition and transition expenses and net loss attributable to noncontrolling interest.  Management believes the presentation of this measure is relevant and useful, because it allows investors to view the partnership's performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
(d)  Net cash interest expense is the sum of interest expense less non-cash interest expense and other expense, net. This amount includes interest expense related to the accounts receivable securitization facility.
(e)  Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment.
(f)  Distributable cash flow attributable to equity investors is calculated as Adjusted EBITDA minus net cash interest, maintenance capital expenditures, cash paid for taxes, and proceeds from asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to equity investors. Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to distributable cash flow attributable to equity investors or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to equity investors may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Contacts

Jack Herrold, Investor Relations – jackherrold@ferrellgas.com, 913-661-1851

Jim Saladin, Media Relations – jimsaladin@ferrellgas.com, 913-661-1833