NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data, unless otherwise designated)
(unaudited)
A.
Partnership organization and formation
Ferrellgas Partners, L.P. (“Ferrellgas Partners”) was formed
April 19, 1994
, and is a publicly traded limited partnership, owning an approximate
99%
limited partner interest in Ferrellgas, L.P. (the "operating partnership"). Ferrellgas Partners and the operating partnership, collectively referred to as “Ferrellgas,” are both Delaware limited partnerships and are governed by their respective partnership agreements. Ferrellgas Partners was formed to acquire and hold a limited partner interest in the operating partnership. As of
October 31, 2016
, Ferrell Companies, Inc. ("Ferrell Companies") beneficially owns
22.8 million
Ferrellgas Partners common units. Ferrellgas, Inc. (the "general partner"), a wholly-owned subsidiary of Ferrell Companies, has retained an approximate
1%
general partner interest in Ferrellgas Partners and also holds an approximate
1%
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. Unless contractually provided for, creditors of the operating partnership have no recourse with regards to Ferrellgas Partners.
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., whose only business activity is to act as the co-issuer and co-obligor of debt issued by Ferrellgas Partners. The operating partnership is the only operating subsidiary of Ferrellgas Partners.
Ferrellgas is engaged in the following primary businesses:
|
|
•
|
Propane and related equipment sales consists of the distribution of propane and related equipment and supplies. The propane distribution market is seasonal because propane is used primarily for heating in residential and commercial buildings. Ferrellgas serves residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all
50
states, the District of Columbia, and Puerto Rico.
|
|
|
•
|
Midstream operations consists of one reportable operating segment: crude oil logistics. The crude oil logistics segment ("Bridger") primarily generates income by providing crude oil transportation and logistics services on behalf of producers and end-users of crude oil. Bridger services include transportation through its operation of a fleet of trucks, tank trailers, railcars, pipeline injection stations and a barge. Bridger primarily operates in major oil and gas basins across the continental United States. Bridger also enters into crude oil purchase and sale arrangements.
|
Due to seasonality, the results of operations for the
three months ended
October 31, 2016
are not necessarily indicative of the results to be expected for the full fiscal year ending
July 31, 2017
.
The condensed consolidated financial statements of Ferrellgas reflect all adjustments that 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. Certain prior period amounts have been reclassified to conform to the current period presentation. 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 included in Ferrellgas' Annual Report on Form 10-K for fiscal
2016
.
B.
Summary of significant accounting policies
(1)
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 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, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) New accounting standards:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board, ("FASB") issued Accounting Standard Update ("ASU") 2014-09,
Revenue from Contracts with Customers.
The issuance is part of a joint effort by the FASB and the International Accounting Standards Board ("IASB") to enhance financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards ("IFRS") and, thereby, improving the consistency of requirements, comparability of practices and usefulness of disclosures. The new standard will supersede much of the existing authoritative literature for revenue recognition. The standard and related amendments will be effective for Ferrellgas for its annual reporting period beginning August 1, 2018, including interim periods within that reporting period. Early application is not permitted. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect. Ferrellgas is currently evaluating the newly issued guidance, including which transition approach will be applied and the estimated impact it will have on the consolidated financial statements.
FASB Accounting Standard Update No. 2015-02 and No. 2016-17
In February 2015, the FASB issued ASU 2015-02,
Consolidation: Amendments to the Consolidation Analysis
which provides additional guidance on the consolidation of limited partnerships and on the evaluation of variable interest entities. In October 2016, the FASB issued ASU 2016-17,
Consolidation: Interests Held through Related Parties That Are Under Common Control
which amended certain aspects of the additional guidance in ASU 2015-02. We adopted ASU 2015-02 and ASU 2016-17 effective August 1, 2016. The adoption of these standards did not impact our consolidated financial statements
.
FASB Accounting Standard Update No. 2015-11
In July 2015, the FASB issued ASU 2015-11,
Inventory (Topic 330) - Simplifying the Measurement of Inventory,
which requires that inventory within the scope of the guidance be measured at the lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
FASB Accounting Standard Update No. 2016-02
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Ferrellgas is currently evaluating the impact of its pending adoption of ASU 2016-02 on the consolidated financial statements.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326)
which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
C.
Significant transactions
Termination of Bridger agreement with Jamex Marketing, LLC
In connection with the closing of our acquisition of Bridger in June 2015, Bridger entered into a ten-year transportation and logistics agreement (the “Jamex TLA”) with Jamex pursuant to which Jamex would be responsible for certain payments to Bridger and also for sourcing crude oil volumes for Bridger’s largest customer at that time.
As a result of concerns regarding the collectability of amounts owed to Bridger from Jamex under the Jamex TLA and certain other matters between Bridger and Jamex, Bridger, Jamex, Ferrellgas Partners, L.P. and certain other affiliated parties entered into a group of agreements that terminated the Jamex TLA, facilitated Ferrellgas purchasing certain Ferrellgas common units from Jamex, and established payment terms for certain amounts owed by Jamex to Bridger under the Jamex TLA. Consequently, Ferrellgas does not anticipate any material contribution to revenue or EBITDA from Jamex or Bridger's former largest customer in the future.
On September 1, 2016, Bridger and Ferrellgas entered into a Termination, Settlement and Release Agreement (the “Jamex Termination Agreement”) with Jamex, certain of Jamex's affiliates, and James Ballengee (the owner of Jamex) pursuant to which:
|
|
(1)
|
Jamex agreed to execute and deliver a secured promissory note in favor of Bridger in original principal amount of
$49.5 million
(the "Jamex Secured Promissory Note") in satisfaction of all obligations owed to Bridger under the Jamex TLA;
|
|
|
(2)
|
Mr. Ballengee and Bacchus Capital Trading, LLC, an entity controlled by Mr. Ballengee, executed and delivered a joint guarantee of the Jamex Secured Promissory Note obligations up to a maximum aggregate amount of
$20.0 million
;
|
|
|
(3)
|
The operating partnership agreed to provide Jamex with a
$5.0 million
revolving secured working capital facility evidenced by a revolving promissory note (the “Jamex Revolving Promissory Note” and, together with the Jamex Secured Promissory Note, the “Jamex Notes”);
|
|
|
(4)
|
The other Jamex entities agreed to execute and deliver a security agreement and a full guarantee of the obligations under the Jamex Notes;
|
|
|
(5)
|
Ferrellgas paid approximately
$16.9 million
to Jamex and in return received
0.9 million
of Ferrellgas Partners' common units, which were cancelled upon receipt, and approximately
23 thousand
barrels of crude oil;
|
|
|
(6)
|
The parties agreed to terminate the Jamex TLA and certain other commercial agreements and arrangements between them, and release any claims between or among them that may exist (other than those arising under the Jamex Termination Agreement or the other agreements entered into in connection with the Jamex Termination Agreement); and
|
|
|
(7)
|
Ferrellgas waived the remaining lockup provision applicable to Jamex under the Registration Rights Agreement dated June 24, 2015 to which Jamex is party.
|
The Jamex Secured Promissory Note originally had an annual interest rate of
7%
(which rate would be reduced under certain circumstances, including if Ferrellgas' quarterly distributions are less than
$0.25
per common unit; accordingly, as a result of the distribution declared on November 22, 2016, the interest rate will decrease to
2.8%
), and contemplates quarterly amortizing principal payments, together with payments of accrued interest. The first payment, due December 17, 2016, will be an interest-only payment. The maturity date of the Jamex Secured Promissory Note will be December 17, 2021. Jamex will be allowed to prepay the Secured Promissory Note in whole or in part at any time.
The Jamex Revolving Promissory Note, which provides Jamex with access to working capital liquidity to meet their unrelated and ongoing crude oil marketing and other business needs, has an annual interest rate of
0%
(which rate would be increased in case of a default), and contains certain conditions precedent to the operating partnership’s obligation to make any advances thereunder. Each borrowing under the Jamex Revolving Promissory Note must be repaid within
10
days, and the ultimate maturity date of the Jamex Revolving Promissory Note is the earlier of September 1, 2021 and the date on which all obligations under the Jamex Secured Promissory Note are repaid.
The Jamex Secured Promissory Note is guaranteed, pursuant to a Guaranty Agreement, jointly by James Ballengee and Bacchus Capital Trading, LLC, an entity controlled by Mr. Ballengee (up to a maximum aggregate amount of
$20.0 million
), and each Note is fully guaranteed, pursuant to respective Guaranty Agreements, by the other Jamex entities. The obligations of Jamex and the other Jamex entities under the Notes are secured, pursuant to a Security Agreement, by a lien on certain of those entities’ assets, including common units, actively traded marketable securities and cash, which are held in a controlled account that can be seized by Ferrellgas in the event of default.
During the year ended July 31, 2016, approximately
60%
of Midstream Operations - Crude oil logistics' segment (Bridger) gross margin was generated from its largest customer and Jamex, that customer's supplier, under take-or-pay arrangements. Bridger’s largest customer during the fiscal year ended July 31, 2016 owned a refinery in Trainer, Pennsylvania. Bridger was party to an agreement with this customer under which Bridger provided logistics services to transport crude oil from the Bakken region in North Dakota to the Trainer refinery. That agreement had a minimum volume commitment and payment obligation from the refinery for logistics services associated with the delivery of
65
MBbls/d. However, if the quantity of crude oil delivered to the refinery dropped below
35
MBbls/d, the minimum volume commitment and payment obligation from the refinery would be suspended and Jamex would become responsible for payments to Bridger under the pay provisions of the Jamex TLA. During February 2016, Jamex ceased sourcing barrels for delivery to the refinery and since that time Bridger had been billing Jamex directly in accordance with the pay provisions of the Jamex TLA. During July 2016, Ferrellgas determined Jamex would not resume sourcing barrels for delivery to the refinery or be likely to continue to make payments under the pay provisions of the Jamex TLA. As a result, Ferrellgas negotiated a settlement with Jamex, and the Jamex TLA was terminated on September 1, 2016. While the agreement with the refinery owner was not terminated as a result of the execution and delivery of the Jamex Termination Agreement, Bridger has been unable to negotiate a revised transportation and logistics agreement with that customer; accordingly it is unlikely that Bridger will continue to make any deliveries under the existing agreement. Consequently, we do not anticipate any material contribution to revenue or gross margin from Jamex or Bridger's former largest customer in the future.
D.
Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Propane gas and related products
|
|
$
|
68,336
|
|
|
$
|
59,726
|
|
Crude oil
|
|
6,066
|
|
|
4,642
|
|
Appliances, parts and supplies
|
|
25,894
|
|
|
26,226
|
|
Inventories
|
|
$
|
100,296
|
|
|
$
|
90,594
|
|
In addition to inventories on hand, Ferrellgas enters into contracts primarily to buy propane for supply procurement purposes with terms generally up to
36 months
. Most of these contracts call for payment based on market prices at the date of delivery. As of
October 31, 2016
, Ferrellgas had committed, for supply procurement purposes, to take delivery of approximately
93.4
million gallons of propane at fixed prices.
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Note receivable - Jamex
|
|
$
|
40,000
|
|
|
$
|
39,760
|
|
Other
|
|
48,103
|
|
|
47,463
|
|
Other assets, net
|
|
$
|
88,103
|
|
|
$
|
87,223
|
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Accrued interest
|
|
$
|
45,118
|
|
|
$
|
16,623
|
|
Accrued payroll
|
|
25,738
|
|
|
13,438
|
|
Customer deposits and advances
|
|
40,238
|
|
|
27,391
|
|
Price risk management liabilities
|
|
8,030
|
|
|
18,401
|
|
Other
|
|
51,403
|
|
|
53,105
|
|
Other current liabilities
|
|
$
|
170,527
|
|
|
$
|
128,958
|
|
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
41,810
|
|
|
$
|
40,535
|
|
Depreciation and amortization expense
|
|
1,026
|
|
|
1,115
|
|
Equipment lease expense
|
|
6,666
|
|
|
6,429
|
|
|
|
$
|
49,502
|
|
|
$
|
48,079
|
|
Loss on asset sales and disposal consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Loss on assets held for sale
|
|
$
|
—
|
|
|
$
|
12,112
|
|
Loss on sale of assets held for sale
|
|
—
|
|
|
1,259
|
|
Loss on sale of assets and other
|
|
6,423
|
|
|
1,546
|
|
Loss on asset sales and disposal
|
|
$
|
6,423
|
|
|
$
|
14,917
|
|
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Cash paid for:
|
|
|
|
|
Interest
|
|
$
|
5,631
|
|
|
$
|
3,780
|
|
Non-cash investing and financing activities:
|
|
|
|
|
Change in accruals for property, plant and equipment additions
|
|
$
|
(189
|
)
|
|
$
|
1,727
|
|
E.
Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Accounts receivable pledged as collateral
|
|
$
|
105,320
|
|
|
$
|
106,464
|
|
Accounts receivable
|
|
37,515
|
|
|
43,148
|
|
Note receivable - Jamex, current portion
|
|
8,055
|
|
|
5,000
|
|
Other
|
|
170
|
|
|
38
|
|
Less: Allowance for doubtful accounts
|
|
(2,777
|
)
|
|
(5,067
|
)
|
Accounts and notes receivable, net
|
|
$
|
148,283
|
|
|
$
|
149,583
|
|
On September 27, 2016, Ferrellgas entered into a fourth amendment to its accounts receivable securitization facility to modify the maximum leverage ratio covenant as follows:
|
|
|
|
|
|
|
|
|
|
Maximum leverage ratio
|
|
Maximum leverage ratio
|
Date
|
|
(prior to amendments)
|
|
(after amendments)
|
October 31, 2016
|
|
5.50
|
|
|
6.05
|
|
January 31, 2017
|
|
5.50
|
|
|
5.95
|
|
April 30, 2017
|
|
5.50
|
|
|
5.95
|
|
July 31, 2017
|
|
5.50
|
|
|
6.05
|
|
October 31, 2017
|
|
5.50
|
|
|
5.95
|
|
January 31, 2018
|
|
5.50
|
|
|
5.95
|
|
April 30, 2018 & thereafter
|
|
5.50
|
|
|
5.50
|
|
The leverage ratio is defined as the ratio of total debt of the operating partnership to trailing twelve month EBITDA of the operating partnership (adjusted for certain, defined items), as detailed in Ferrellgas' secured credit facility. Ferrellgas' leverage ratio was
5.81
x as of October 31, 2016.
At
October 31, 2016
,
$105.3
million of trade accounts receivable were pledged as collateral against
$74.0
million of collateralized notes payable due to the commercial paper conduit. At
July 31, 2016
, $
106.5
million of trade accounts receivable were pledged as collateral against
$64.0
million of collateralized notes payable due to the commercial paper conduit. These accounts receivable pledged as collateral are bankruptcy remote from the operating partnership. The operating partnership does not provide any guarantee or similar support to the collectability of these accounts receivable pledged as collateral.
As of
October 31, 2016
, Ferrellgas had received cash proceeds of
$74.0
million from trade accounts receivables securitized, with
no
remaining capacity to receive additional proceeds. As of
July 31, 2016
, Ferrellgas had received cash proceeds of
$64.0
million from trade accounts receivables securitized, with
no
remaining capacity to receive additional proceeds. Borrowings under the accounts receivable securitization facility had a weighted average interest rate of
2.7%
and
3.0%
as of
October 31, 2016
and
July 31, 2016
, respectively.
F.
Debt
Short-term borrowings
Ferrellgas classified a portion of its secured credit facility borrowings as short-term because it was used to fund working capital needs that management had intended to pay down within the 12 month period following each balance sheet date. As of
October 31, 2016
and
July 31, 2016
,
$96.8 million
and
$101.3 million
, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.
Secured credit facility
On September 27, 2016, Ferrellgas entered into a fifth amendment to our secured credit facility to modify the maximum leverage ratio covenant as follows:
|
|
|
|
|
|
|
|
|
|
Maximum leverage ratio
|
|
Maximum leverage ratio
|
Date
|
|
(prior to amendments)
|
|
(after amendments)
|
October 31, 2016
|
|
5.50
|
|
|
6.05
|
|
January 31, 2017
|
|
5.50
|
|
|
5.95
|
|
April 30, 2017
|
|
5.50
|
|
|
5.95
|
|
July 31, 2017
|
|
5.50
|
|
|
6.05
|
|
October 31, 2017
|
|
5.50
|
|
|
5.95
|
|
January 31, 2018
|
|
5.50
|
|
|
5.95
|
|
April 30, 2018 & thereafter
|
|
5.50
|
|
|
5.50
|
|
The leverage ratio is defined as the ratio of total debt of the operating partnership to trailing twelve month EBITDA of the operating partnership (adjusted for certain, defined items), as detailed in Ferrellgas' secured credit facility. Ferrellgas' leverage ratio was
5.81
x as of
October 31, 2016
, which equates to headroom of
$78.9 million
or
4.0%
. Because of this leverage ratio requirement Ferrellgas continues to execute on a strategy to reduce its debt. This strategy may include issuance of equity, issuance of debt not subject to its leverage ratio calculations, asset sales or a further reduction in Ferrellgas' annual distribution, which was reduced during the quarter ended
October 31, 2016
from an annualized rate of
$2.05
to
$0.40
per common unit. We believe that any debt reducing actions taken would likely remain in effect until Ferrellgas' leverage ratio reaches 4.5x or a level that Ferrellgas deems appropriate for its business. However, if weather continues to remain unseasonably warm or our debt reduction initiatives are unsuccessful, Ferrellgas believes it is possible its leverage ratio will exceed
5.95
x at the end of the fiscal quarter ending January 31, 2017.
As of
October 31, 2016
, Ferrellgas had total borrowings outstanding under its secured credit facility of
$415.0 million
, of which
$318.2 million
was classified as long-term debt. Ferrellgas had
$173.6 million
of capacity under our secured credit facility as of
October 31, 2016
. However, the leverage ratio covenant under this facility limits additional borrowings to
$78.9 million
as of
October 31, 2016
. As of
July 31, 2016
, Ferrellgas had total borrowings outstanding under its secured credit facility of
$394.4 million
, of which
$293.1 million
was classified as long-term debt. Ferrellgas had
$219.3 million
of capacity under our secured credit facility as of
July 31, 2016
. However, the leverage ratio covenant under this facility limited additional borrowings to
$8.1 million
as of
July 31, 2016
. Borrowings outstanding at
October 31, 2016
and
July 31, 2016
under the secured credit facility had weighted average interest rates of
4.1%
and
3.7%
, respectively.
The obligations under this credit facility are secured by substantially all assets of Ferrellgas, the general partner and certain subsidiaries of Ferrellgas but specifically excluding (a) assets that are subject to Ferrellgas’ accounts receivable securitization facility, (b) the general partner’s equity interest in Ferrellgas Partners and (c) equity interests in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of Ferrellgas.
Letters of credit outstanding at
October 31, 2016
totaled
$111.4 million
and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. Letters of credit outstanding at
July 31, 2016
totaled
$86.3 million
and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. At
October 31, 2016
, Ferrellgas had remaining letter of credit capacity of
$88.6 million
. At
July 31, 2016
, Ferrellgas had remaining letter of credit capacity of
$113.7 million
.
G.
Partners' deficit
As of
October 31, 2016
and
July 31, 2016
, limited partner units were beneficially owned by the following:
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Public common unitholders (1)
|
|
69,612,939
|
|
|
70,462,939
|
|
Ferrell Companies (2)
|
|
22,529,361
|
|
|
22,529,361
|
|
FCI Trading Corp. (3)
|
|
195,686
|
|
|
195,686
|
|
Ferrell Propane, Inc. (4)
|
|
51,204
|
|
|
51,204
|
|
James E. Ferrell (5)
|
|
4,763,475
|
|
|
4,763,475
|
|
|
|
(1)
|
These common units are listed on the New York Stock Exchange under the symbol “FGP.”
|
(2) Ferrell Companies is the owner of the general partner and is an approximate
23%
direct owner of Ferrellgas Partners' common units and thus a related party. Ferrell Companies also beneficially owns
195,686
and
51,204
common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies' beneficial ownership to
23.4%
at
October 31, 2016
.
(3) FCI Trading is an affiliate of the general partner and thus a related party.
(4) Ferrell Propane is controlled by the general partner and thus a related party.
(5) James E. Ferrell is the Interim Chief Executive Officer and President of the general partner; and is Chairman of the Board of Directors of the general partner and thus a related party. JEF Capital Management owns
4,758,859
of these common units and is wholly-owned by the James E. Ferrell Revocable Trust Two for which James E. Ferrell is the trustee and sole beneficiary. The remaining
4,616
common units are held by Ferrell Resources Holding, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary.
Partnership distributions paid
Ferrellgas Partners has paid the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Public common unitholders
|
|
$
|
35,678
|
|
|
$
|
37,330
|
|
Ferrell Companies
|
|
11,546
|
|
|
11,546
|
|
FCI Trading Corp.
|
|
100
|
|
|
100
|
|
Ferrell Propane, Inc.
|
|
26
|
|
|
26
|
|
James E. Ferrell
|
|
2,441
|
|
|
2,441
|
|
General partner
|
|
503
|
|
|
520
|
|
|
|
$
|
50,294
|
|
|
$
|
51,963
|
|
On
November 22, 2016
, Ferrellgas Partners declared a cash distribution of
$0.10
per common unit for the three months ended
October 31, 2016
, which is expected to be paid on
December 15, 2016
. Included in this cash distribution are the following amounts to be paid to related parties:
|
|
|
|
|
|
Ferrell Companies
|
|
$
|
2,253
|
|
FCI Trading Corp.
|
|
20
|
|
Ferrell Propane, Inc.
|
|
5
|
|
James E. Ferrell
|
|
476
|
|
General partner
|
|
98
|
|
See additional discussions about transactions with related parties in Note J – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)
See Note I – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the
three months ended
October 31, 2016
and
2015
.
General partner’s commitment to maintain its capital account
Ferrellgas’ partnership agreements allow the general partner to have an option to maintain its effective
2%
general partner interest concurrent with the issuance of other additional equity.
During the
three months ended
October 31, 2016
, the general partner made non-cash contributions of
$0.1 million
to Ferrellgas to maintain its effective
2%
general partner interest.
During the
three months ended
October 31, 2015
, the general partner made non-cash contributions of
$0.3 million
to Ferrellgas to maintain its effective
2%
general partner interest.
H.
Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas’ financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
October 31, 2016
and
July 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (Liability)
|
|
|
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Unobservable Inputs (Level 3)
|
|
Total
|
October 31, 2016:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
4,133
|
|
|
$
|
—
|
|
|
$
|
4,133
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
6,672
|
|
|
$
|
—
|
|
|
$
|
6,672
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(2,645
|
)
|
|
$
|
—
|
|
|
$
|
(2,645
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(6,482
|
)
|
|
$
|
—
|
|
|
$
|
(6,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2016:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
5,830
|
|
|
$
|
—
|
|
|
$
|
5,830
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
8,241
|
|
|
$
|
—
|
|
|
$
|
8,241
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(3,553
|
)
|
|
$
|
—
|
|
|
$
|
(3,553
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(17,689
|
)
|
|
$
|
—
|
|
|
$
|
(17,689
|
)
|
Methodology
The fair values of Ferrellgas’ non-exchange traded commodity derivative contracts are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. The fair values of interest rate swap contracts are based upon third-party quotes or indicative values based on recent market transactions.
Other financial instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. The carrying amount of the Jamex note receivable, a financial instrument classified in "Other assets, net" on the consolidated balance sheet, approximates fair value due to the market interest rate. At
October 31, 2016
and
July 31, 2016
, the estimated fair value of Ferrellgas’ long-term debt instruments was
$1,979.9 million
and
$1,920.1 million
, respectively. Ferrellgas estimates the fair value of long-term debt based on quoted market prices. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
Ferrellgas has other financial instruments such as trade accounts receivable which could expose it to concentrations of credit risk. The credit risk from trade accounts receivable is limited because of a large customer base which extends across many different U.S. markets.
I.
Derivative instruments and hedging activities
Ferrellgas is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. All other commodity derivative instruments do not qualify or are not designated as cash flow hedges, therefore, the change in their fair value are recorded currently in earnings. Ferrellgas also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
Derivative instruments and hedging activity
During the
three months ended
October 31, 2016
and 2015, Ferrellgas did
no
t recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
The following tables provide a summary of the fair value of derivatives in Ferrellgas’ condensed consolidated balance sheets as of
October 31, 2016
and
July 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
Derivative Instrument
|
|
Location
|
|
Fair value
|
|
Location
|
|
Fair value
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane
|
|
Prepaid expenses and other current assets
|
|
$
|
2,458
|
|
|
Other current liabilities
|
|
$
|
3,820
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
3,738
|
|
|
Other liabilities
|
|
370
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,467
|
|
|
Other current liabilities
|
|
1,919
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
2,666
|
|
|
Other liabilities
|
|
726
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
2,119
|
|
Commodity derivatives- crude oil
|
|
Prepaid expenses and other current assets
|
|
476
|
|
|
Other current liabilities
|
|
173
|
|
|
|
Total
|
|
$
|
10,805
|
|
|
Total
|
|
$
|
9,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2016
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
Derivative Instrument
|
|
Location
|
|
Fair value
|
|
Location
|
|
Fair value
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane
|
|
Prepaid expenses and other current assets
|
|
$
|
2,263
|
|
|
Other current liabilities
|
|
$
|
10,184
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
3,056
|
|
|
Other liabilities
|
|
1,597
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,654
|
|
|
Other current liabilities
|
|
2,309
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
4,176
|
|
|
Other liabilities
|
|
1,244
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
3,996
|
|
Commodity derivatives-crude oil
|
|
Prepaid expenses and other current assets
|
|
2,922
|
|
|
Other current liabilities
|
|
1,912
|
|
|
|
Total
|
|
$
|
14,071
|
|
|
Total
|
|
$
|
21,242
|
|
Ferrellgas' exchange traded commodity derivative contracts require cash margin deposit as collateral for contracts that are in a negative mark-to-market position. These cash margin deposits will be returned if mark-to-market conditions improve or will be applied against cash settlement when the contracts are settled. The following tables provide a summary of cash margin balances as of
October 31, 2016
and
July 31, 2016
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
3,298
|
|
|
Other current liabilities
|
|
$
|
747
|
|
|
|
Other assets, net
|
|
1,287
|
|
|
Other liabilities
|
|
2,696
|
|
|
|
|
|
$
|
4,585
|
|
|
|
|
$
|
3,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2016
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
8,252
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
|
Other assets, net
|
|
1,275
|
|
|
Other liabilities
|
|
—
|
|
|
|
|
|
$
|
9,527
|
|
|
|
|
$
|
—
|
|
The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of operations for the
three months ended
October 31, 2016
and
2015
due to derivatives designated as fair value hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized on Derivative
|
|
Amount of Interest Expense Recognized on Fixed-Rated Debt (Related Hedged Item)
|
Derivative Instrument
|
|
Location of Gain Recognized on Derivative
|
|
For the three months ended October 31,
|
|
For the three months ended October 31,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
420
|
|
|
$
|
537
|
|
|
$
|
(2,275
|
)
|
|
$
|
(2,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide a summary of the effect on Ferrellgas’ condensed consolidated statements of comprehensive loss for the
three months ended
October 31, 2016
and
2015
due to derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2016
|
|
|
Derivative Instrument
|
|
Amount of Gain (Loss) Recognized in AOCI
|
|
Location of Gain (Loss) Reclassified from AOCI into Income
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income
|
|
|
|
Effective portion
|
|
Ineffective portion
|
Commodity derivatives
|
|
$
|
4,873
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(3,596
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
265
|
|
|
Interest expense
|
|
(642
|
)
|
|
—
|
|
|
|
$
|
5,138
|
|
|
|
|
$
|
(4,238
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2015
|
|
|
Derivative Instrument
|
|
Amount of Gain (Loss) Recognized in AOCI
|
|
Location of Gain (Loss) Reclassified from AOCI into Income
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income
|
|
|
|
Effective portion
|
|
Ineffective portion
|
Commodity derivatives
|
|
$
|
1,585
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(7,449
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(1,201
|
)
|
|
Interest expense
|
|
(777
|
)
|
|
—
|
|
|
|
$
|
384
|
|
|
|
|
$
|
(8,226
|
)
|
|
$
|
—
|
|
The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of operations for the
three months ended
October 31, 2016
and
2015
due to the change in fair value of derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2016
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
(1,241
|
)
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
1,027
|
|
|
Operating expense
|
|
|
|
|
|
|
|
For the three months ended October 31, 2015
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - vehicle fuel
|
|
$
|
(1,038
|
)
|
|
Operating expense
|
|
|
|
|
|
The changes in derivatives included in AOCI for the
three months ended
October 31, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
Gains and losses on derivatives included in AOCI
|
|
2016
|
|
2015
|
Beginning balance
|
|
$
|
(9,815
|
)
|
|
$
|
(38,906
|
)
|
Change in value of risk management commodity derivatives
|
|
4,873
|
|
|
1,585
|
|
Reclassification of gains and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
|
|
3,596
|
|
|
7,449
|
|
Change in value of risk management interest rate derivatives
|
|
265
|
|
|
(1,201
|
)
|
Reclassification of gains and losses on interest rate hedges to interest expense
|
|
642
|
|
|
777
|
|
Ending balance
|
|
$
|
(439
|
)
|
|
$
|
(30,296
|
)
|
Ferrellgas expects to reclassify net losses related to the risk management commodity derivatives of approximately
$1.4 million
to earnings during the next 12 months. These net losses are expected to be offset by increased margins on propane sales commitments Ferrellgas has with its customers that qualify for the normal purchase normal sales exception.
During the
three months ended
October 31, 2016
, Ferrellgas had no reclassifications to earnings resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
As of
October 31, 2016
, Ferrellgas had financial derivative contracts covering
2.4 million
barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
As of
October 31, 2016
, Ferrellgas had financial derivative contracts covering
0.1 million
barrels of diesel and
21 thousand
barrels of unleaded gasoline related to fuel hedges in transportation of propane.
As of
October 31, 2016
, Ferrellgas had financial derivative contracts covering
0.2 million
barrels of crude oil related to the hedging of crude oil line fill and inventory.
Derivative financial instruments credit risk
Ferrellgas is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas’ counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas maintains credit policies with regard to its counterparties that it believes reduce its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas in the forms of letters of credit, parental guarantees or cash. Ferrellgas has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at
October 31, 2016
, the maximum amount of loss due to credit risk that, based upon the gross fair values of the derivative financial instruments, Ferrellgas would incur is $
2.7
million.
Ferrellgas holds certain derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas' debt rating. As of
October 31, 2016
, a downgrade in Ferrellgas' debt rating could trigger a reduction in credit limit and would result in an additional collateral requirement of
zero
. There were
no
derivatives with credit-risk-related contingent features in a liability position on
October 31, 2016
and Ferrellgas had posted
no
collateral in the normal course of business related to such derivatives.
J.
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 primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas’ behalf and are reported in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
55,714
|
|
|
$
|
56,010
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
8,583
|
|
|
$
|
7,093
|
|
See additional discussions about transactions with the general partner and related parties in Note G – Partners’ deficit.
K.
Contingencies and commitments
Litigation
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 and crude oil. As a result, at any given time, Ferrellgas can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, Ferrellgas is not a party to any legal proceedings other than various claims and 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 are reasonably expected to have a material adverse effect on the consolidated financial condition, results of operations and cash flows of Ferrellgas.
Ferrellgas has been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits allege that Ferrellgas and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Court has dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs have filed an appeal, which is pending. Ferrellgas believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
In addition, putative class action cases have been filed in California relating to residual propane remaining in the tank after use. Ferrellgas has prevailed at the trial court on a motion to dismiss those claims. It is uncertain whether plaintiffs will appeal; Ferrellgas intends to vigorously defend any such appeal. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. A derivative lawsuit with similar allegations has been filed in state court in Missouri naming Ferrellgas and several current and former officers and directors as defendants. Ferrellgas believes that it has defenses and will vigorously defend these cases. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative action.
On October 21, 2016, Julio E. Rios II, an Executive Vice President of the general partner and the President and Chief Executive Officer of Bridger Logistics, LLC, and Jeremy H. Gamboa, also an Executive Vice President of the general partner and the Chief Operating Officer of Bridger Logistics, LLC both delivered notice of "good reason" for resignation to the general partner pursuant to their employment agreements alleging that the general partner had materially diminished their responsibilities and stating their intention to resign as a result if such purported material diminution is not cured within 30 days.
On November 28, 2016, Mr. Rios and Mr. Gamboa each resigned from their positions, purportedly for "good reason" pursuant to their employment agreements. Each has indicated that they intend to make a claim for severance. The general partner denies that Mr. Rios and Mr. Gamboa had "good reason" to resign and has other defenses to their claims for severance. Ferrellgas does not believe a loss is probable or reasonably estimable at this time related to this matter.
L.
Net earnings per common unitholders’ interest
Below is a calculation of the basic and diluted net earnings per common unitholders’ interest in the condensed consolidated statements of operations for the periods indicated. Ferrellgas calculates net earnings (loss) per common unitholders’ interest for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the
earnings or loss for the period had been distributed according to the incentive distribution rights in the Ferrellgas partnership agreement. Due to the seasonality of the propane business, the dilutive effect of the two-class method typically impacts only the three months ending January 31. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners as follows:
|
|
|
|
|
|
|
|
|
|
Ratio of total distributions payable to:
|
Quarterly distribution per common unit
|
|
Common unitholder
|
|
General partner
|
$0.56 to $0.63
|
|
86.9
|
%
|
|
13.1
|
%
|
$0.64 to $0.82
|
|
76.8
|
%
|
|
23.2
|
%
|
$0.83 and above
|
|
51.5
|
%
|
|
48.5
|
%
|
There was no dilutive effect resulting from this method based on basic and diluted net earnings per common unitholders' interest for the three months ended
October 31, 2016
or
2015
.
In periods with net losses, the allocation of the net losses to the limited partners and the general partner will be determined based on the same allocation basis specified in Ferrellgas Partners’ partnership agreement that would apply to periods in which there were no undistributed earnings. Additionally, there are no dilutive securities in periods with net losses.
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
|
|
(in thousands, except per unitholders' interest amounts)
|
Common unitholders’ interest in net loss
|
|
$
|
(42,642
|
)
|
|
$
|
(78,995
|
)
|
|
|
|
|
|
Weighted average common units outstanding - basic
|
|
97,457.6
|
|
|
100,376.8
|
|
Dilutive securities
|
|
—
|
|
|
—
|
|
Weighted average common units outstanding - diluted
|
|
97,457.6
|
|
|
100,376.8
|
|
|
|
|
|
|
Basic and diluted net loss per common unitholders’ interest
|
|
$
|
(0.44
|
)
|
|
$
|
(0.79
|
)
|
M.
Segment reporting
Following is a summary of segment information for the three months ended
October 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
271,498
|
|
|
$
|
106,327
|
|
|
$
|
2,946
|
|
|
$
|
(1,229
|
)
|
|
$
|
379,542
|
|
Direct costs (1)
|
|
237,014
|
|
|
101,556
|
|
|
13,831
|
|
|
(1,878
|
)
|
|
350,523
|
|
Adjusted EBITDA
|
|
$
|
34,484
|
|
|
$
|
4,771
|
|
|
$
|
(10,885
|
)
|
|
$
|
649
|
|
|
$
|
29,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
277,476
|
|
|
$
|
189,373
|
|
|
$
|
4,297
|
|
|
$
|
—
|
|
|
$
|
471,146
|
|
Direct costs (1)
|
|
241,877
|
|
|
164,570
|
|
|
15,800
|
|
|
—
|
|
|
422,247
|
|
Adjusted EBITDA
|
|
$
|
35,599
|
|
|
$
|
24,803
|
|
|
$
|
(11,503
|
)
|
|
$
|
—
|
|
|
$
|
48,899
|
|
(1) Direct costs are comprised of "cost of products sold-propane and other gas liquids sales", "cost of products sold-midstream operations", "cost of products sold-other", "operating expense", "general and administrative expense", and "equipment lease expense" less "non-cash stock-based compensation charge", "change in fair value of contingent consideration", "severance charge", "litigation accrual and related legal fees associated with a class action lawsuit", "unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments" and "acquisition and transition expenses".
Following is a reconciliation of Ferrellgas' total segment performance measure to condensed consolidated net loss:
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31,
|
|
|
2016
|
|
2015
|
Net loss attributable to Ferrellgas Partners, L.P.
|
|
$
|
(43,073
|
)
|
|
$
|
(79,793
|
)
|
Income tax benefit
|
|
(590
|
)
|
|
(844
|
)
|
Interest expense
|
|
35,428
|
|
|
33,788
|
|
Depreciation and amortization expense
|
|
26,202
|
|
|
36,979
|
|
EBITDA
|
|
17,967
|
|
|
(9,870
|
)
|
Non-cash employee stock ownership plan compensation charge
|
|
3,754
|
|
|
5,256
|
|
Non-cash stock-based compensation charge
|
|
1,881
|
|
|
8,122
|
|
Asset impairments
|
|
—
|
|
|
29,316
|
|
Loss on asset sales and disposal
|
|
6,423
|
|
|
14,917
|
|
Other (income) expense, net
|
|
(508
|
)
|
|
122
|
|
Change in fair value of contingent consideration
|
|
—
|
|
|
(100
|
)
|
Severance costs
|
|
1,469
|
|
|
856
|
|
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments
|
|
(1,569
|
)
|
|
1,038
|
|
Acquisition and transition expenses
|
|
—
|
|
|
15
|
|
Net loss attributable to noncontrolling interest
|
|
(398
|
)
|
|
(773
|
)
|
Adjusted EBITDA
|
|
$
|
29,019
|
|
|
$
|
48,899
|
|
Following are total assets by segment:
|
|
|
|
|
|
|
|
|
|
Assets
|
|
October 31, 2016
|
|
July 31, 2016
|
Propane and related equipment sales
|
|
$
|
1,255,584
|
|
|
$
|
1,202,214
|
|
Midstream operations - crude oil logistics
|
|
228,708
|
|
|
275,303
|
|
Corporate and unallocated
|
|
182,923
|
|
|
205,789
|
|
Total consolidated assets
|
|
$
|
1,667,215
|
|
|
$
|
1,683,306
|
|
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
1,831
|
|
|
$
|
127
|
|
|
$
|
1,306
|
|
|
$
|
3,264
|
|
Growth
|
|
5,414
|
|
|
—
|
|
|
—
|
|
|
5,414
|
|
Total
|
|
$
|
7,245
|
|
|
$
|
127
|
|
|
$
|
1,306
|
|
|
$
|
8,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
5,898
|
|
|
$
|
—
|
|
|
$
|
284
|
|
|
$
|
6,182
|
|
Growth
|
|
8,615
|
|
|
3,303
|
|
|
6,401
|
|
|
18,319
|
|
Total
|
|
$
|
14,513
|
|
|
$
|
3,303
|
|
|
$
|
6,685
|
|
|
$
|
24,501
|
|
N.
Subsequent events
Ferrellgas evaluated events and transactions occurring after the balance sheet date through the date Ferrellgas' condensed consolidated financial statements were issued and concluded that there were no events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
FERRELLGAS PARTNERS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
|
CONDENSED BALANCE SHEETS
|
(unaudited)
|
|
October 31, 2016
|
|
July 31, 2016
|
ASSETS
|
|
|
|
|
|
Cash
|
$
|
1,000
|
|
|
$
|
1,000
|
|
Total assets
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
|
|
|
Contingencies and commitments (Note B)
|
|
|
|
|
|
|
|
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
|
19,839
|
|
|
19,747
|
|
Accumulated deficit
|
(19,839
|
)
|
|
(19,747
|
)
|
Total stockholder's equity
|
$
|
1,000
|
|
|
$
|
1,000
|
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
FERRELLGAS PARTNERS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
|
CONDENSED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
|
For the three months ended October 31,
|
|
2016
|
|
2015
|
|
|
|
|
General and administrative expense
|
$
|
92
|
|
|
$
|
50
|
|
|
|
|
|
Net loss
|
$
|
(92
|
)
|
|
$
|
(50
|
)
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
FERRELLGAS PARTNERS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
|
CONDENSED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
|
For the three months ended October 31,
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(92
|
)
|
|
$
|
(50
|
)
|
Cash used in operating activities
|
(92
|
)
|
|
(50
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Capital contribution
|
92
|
|
|
50
|
|
Cash provided by financing activities
|
92
|
|
|
50
|
|
|
|
|
|
Net change in cash
|
—
|
|
|
—
|
|
Cash - beginning of period
|
1,000
|
|
|
1,000
|
|
Cash - end of period
|
$
|
1,000
|
|
|
$
|
1,000
|
|
See notes to condensed financial statements.
|
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
(unaudited)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A.
Formation
Ferrellgas Partners Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on
March 28, 1996
and is a wholly-owned subsidiary of Ferrellgas Partners, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has
no
employees.
B.
Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for the Partnership's
$182.0 million
,
8.625%
senior notes due
2020
.
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(in thousands)
|
(unaudited)
|
|
October 31, 2016
|
|
July 31, 2016
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
12,565
|
|
|
$
|
4,890
|
|
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
|
31,803
|
|
|
39,955
|
|
Total current assets
|
292,947
|
|
|
285,022
|
|
|
|
|
|
Property, plant and equipment, net
|
757,940
|
|
|
774,680
|
|
Goodwill, net
|
256,103
|
|
|
256,103
|
|
Intangible assets (net of accumulated amortization of $412,425 and $404,271 at October 31, 2016 and July 31, 2016, respectively)
|
272,031
|
|
|
280,185
|
|
Other assets, net
|
88,103
|
|
|
87,223
|
|
Total assets
|
$
|
1,667,124
|
|
|
$
|
1,683,213
|
|
|
|
|
|
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
|
164,597
|
|
|
126,952
|
|
Total current liabilities
|
410,209
|
|
|
360,171
|
|
|
|
|
|
Long-term debt
|
1,784,660
|
|
|
1,760,881
|
|
Other liabilities
|
32,755
|
|
|
31,574
|
|
Contingencies and commitments (Note K)
|
|
|
|
|
|
|
|
|
|
Partners' deficit:
|
|
|
|
|
|
Limited partner
|
(553,831
|
)
|
|
(454,222
|
)
|
General partner
|
(5,485
|
)
|
|
(4,631
|
)
|
Accumulated other comprehensive loss
|
(1,184
|
)
|
|
(10,560
|
)
|
Total partners' deficit
|
(560,500
|
)
|
|
(469,413
|
)
|
Total liabilities and partners' deficit
|
$
|
1,667,124
|
|
|
$
|
1,683,213
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands)
|
(unaudited)
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
|
Revenues:
|
|
|
|
|
Propane and other gas liquids sales
|
$
|
242,399
|
|
|
$
|
245,301
|
|
|
Midstream operations
|
108,044
|
|
|
193,670
|
|
|
Other
|
29,099
|
|
|
32,175
|
|
|
Total revenues
|
379,542
|
|
|
471,146
|
|
|
|
|
|
|
|
Costs of sales:
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
119,212
|
|
|
121,751
|
|
|
Cost of sales - midstream operations
|
94,642
|
|
|
153,604
|
|
|
Cost of sales - other
|
11,746
|
|
|
14,448
|
|
|
Operating expense
|
105,086
|
|
|
116,199
|
|
|
Depreciation and amortization expense
|
26,202
|
|
|
36,979
|
|
|
General and administrative expense
|
14,269
|
|
|
19,144
|
|
|
Equipment lease expense
|
7,349
|
|
|
7,032
|
|
|
Non-cash employee stock ownership plan compensation charge
|
3,754
|
|
|
5,256
|
|
|
Asset impairments
|
—
|
|
|
29,316
|
|
|
Loss on asset sales and disposal
|
6,423
|
|
|
14,917
|
|
|
|
|
|
|
|
Operating loss
|
(9,141
|
)
|
|
(47,500
|
)
|
|
|
|
|
|
|
Interest expense
|
(31,398
|
)
|
|
(29,758
|
)
|
|
Other income (expense), net
|
508
|
|
|
(122
|
)
|
|
|
|
|
|
|
Loss before income taxes
|
(40,031
|
)
|
|
(77,380
|
)
|
|
|
|
|
|
|
Income tax benefit
|
(591
|
)
|
|
(844
|
)
|
|
|
|
|
|
|
Net loss
|
$
|
(39,440
|
)
|
|
$
|
(76,536
|
)
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
(in thousands)
|
(unaudited)
|
|
|
For the three months ended October 31,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(39,440
|
)
|
|
$
|
(76,536
|
)
|
|
Other comprehensive income:
|
|
|
|
|
|
Change in value of risk management derivatives
|
|
5,138
|
|
|
384
|
|
|
Reclassification of losses on derivatives to earnings, net
|
|
4,238
|
|
|
8,226
|
|
|
Other comprehensive income
|
|
9,376
|
|
|
8,610
|
|
|
Comprehensive loss
|
|
$
|
(30,064
|
)
|
|
$
|
(67,926
|
)
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
other
|
|
Total
|
|
Limited
|
|
General
|
|
comprehensive
|
|
partners'
|
|
partner
|
|
partner
|
|
loss
|
|
deficit
|
|
|
|
|
|
|
|
|
Balance at July 31, 2016
|
$
|
(454,222
|
)
|
|
$
|
(4,631
|
)
|
|
$
|
(10,560
|
)
|
|
$
|
(469,413
|
)
|
Contributions in connection with non-cash ESOP and stock-based compensation charges
|
5,578
|
|
|
57
|
|
|
—
|
|
|
5,635
|
|
Distributions
|
(66,145
|
)
|
|
(513
|
)
|
|
—
|
|
|
(66,658
|
)
|
Net loss
|
(39,042
|
)
|
|
(398
|
)
|
|
—
|
|
|
(39,440
|
)
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
9,376
|
|
|
9,376
|
|
Balance at October 31, 2016
|
$
|
(553,831
|
)
|
|
$
|
(5,485
|
)
|
|
$
|
(1,184
|
)
|
|
$
|
(560,500
|
)
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in thousands)
|
(unaudited)
|
|
For the three months ended October 31,
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(39,440
|
)
|
|
$
|
(76,536
|
)
|
Reconciliation of net loss to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization expense
|
26,202
|
|
|
36,979
|
|
Non-cash employee stock ownership plan compensation charge
|
3,754
|
|
|
5,256
|
|
Non-cash stock-based compensation charge
|
1,881
|
|
|
8,122
|
|
Asset impairments
|
—
|
|
|
29,316
|
|
Loss on asset sales and disposal
|
6,423
|
|
|
14,917
|
|
Change in fair value of contingent consideration
|
—
|
|
|
(100
|
)
|
Provision for doubtful accounts
|
9
|
|
|
952
|
|
Deferred income tax expense (benefit)
|
143
|
|
|
280
|
|
Other
|
1,197
|
|
|
1,304
|
|
Changes in operating assets and liabilities, net of effects from business acquisitions:
|
|
|
|
Accounts and notes receivable, net of securitization
|
1,310
|
|
|
9,200
|
|
Inventories
|
(9,702
|
)
|
|
675
|
|
Prepaid expenses and other current assets
|
8,031
|
|
|
6,114
|
|
Accounts payable
|
7,049
|
|
|
(20,139
|
)
|
Accrued interest expense
|
24,571
|
|
|
24,676
|
|
Other current liabilities
|
21,251
|
|
|
(1,504
|
)
|
Other assets and liabilities
|
1,872
|
|
|
3,134
|
|
Net cash provided by operating activities
|
54,551
|
|
|
42,646
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Capital expenditures
|
(10,005
|
)
|
|
(25,607
|
)
|
Proceeds from sale of assets
|
2,279
|
|
|
3,575
|
|
Other
|
—
|
|
|
(14
|
)
|
Net cash used in investing activities
|
(7,726
|
)
|
|
(22,046
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Distributions
|
(66,658
|
)
|
|
(52,493
|
)
|
Contributions from partners
|
—
|
|
|
30
|
|
Proceeds from issuance of long-term debt
|
25,626
|
|
|
21,321
|
|
Payments on long-term debt
|
(2,261
|
)
|
|
(4,380
|
)
|
Net reductions in short-term borrowings
|
(4,467
|
)
|
|
20,072
|
|
Net additions to collateralized short-term borrowings
|
10,000
|
|
|
(2,000
|
)
|
Cash paid for financing costs
|
(1,390
|
)
|
|
(142
|
)
|
Net cash used in financing activities
|
(39,150
|
)
|
|
(17,592
|
)
|
|
|
|
|
Net change in cash and cash equivalents
|
7,675
|
|
|
3,008
|
|
Cash and cash equivalents - beginning of period
|
4,890
|
|
|
5,600
|
|
Cash and cash equivalents - end of period
|
$
|
12,565
|
|
|
$
|
8,608
|
|
See notes to condensed consolidated financial statements.
|
FERRELLGAS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise designated)
(unaudited)
A.
Partnership organization and formation
Ferrellgas, L.P. is a limited partnership that owns and operates propane distribution and related assets, crude oil transportation and logistics related assets and salt water disposal wells in south Texas. Ferrellgas Partners, L.P. (“Ferrellgas Partners”), a publicly traded limited partnership, holds an approximate
99%
limited partner interest in, and consolidates, Ferrellgas, L.P. Ferrellgas, Inc. (the “general partner”), a wholly-owned subsidiary of Ferrell Companies, Inc. (“Ferrell Companies”), holds an approximate
1%
general partner interest in Ferrellgas, L.P. and performs all management functions required by Ferrellgas, L.P.
Ferrellgas, L.P. owns a
100%
equity interest in Ferrellgas Finance Corp., whose only business activity is to act as the co-issuer and co-obligor of debt issued by Ferrellgas, L.P.
Ferrellgas, L.P. is engaged in the following primary businesses:
|
|
•
|
Propane and related equipment sales consists of the distribution of propane and related equipment and supplies. The propane distribution market is seasonal because propane is used primarily for heating in residential and commercial buildings. Ferrellgas, L.P. serves residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all
50
states, the District of Columbia, and Puerto Rico.
|
|
|
•
|
Midstream operations consists of one reportable operating segment: crude oil logistics. The crude oil logistics segment ("Bridger") primarily generates income by providing crude oil transportation and logistics services on behalf of producers and end-users of crude oil. Bridger services include transportation through its operation of a fleet of trucks, tank trailers, railcars, pipeline injection terminals, and a barge. Bridger primarily operates in major oil and gas basins across the continental United States. Bridger also enters into crude oil purchase and sale arrangements.
|
Due to seasonality, the results of operations for the
three months ended
October 31, 2016
are not necessarily indicative of the results to be expected for the full fiscal year ending July 31, 2017.
The condensed consolidated financial statements of Ferrellgas, L.P. and subsidiaries reflect all adjustments that 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. Certain prior period amounts have been reclassified to conform to the current period presentation. 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 included in Ferrellgas, L.P.’s Annual Report on Form 10-K for fiscal
2016
.
B.
Summary of significant accounting policies
(1)
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 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, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) New accounting standards:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board, ("FASB") issued Accounting Standard Update ("ASU") 2014-09,
Revenue from Contracts with Customers.
The issuance is part of a joint effort by the FASB and the International Accounting Standards Board ("IASB") to enhance financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards ("IFRS") and, thereby, improving the consistency of requirements, comparability of practices and usefulness of disclosures. The new standard will supersede much of the existing authoritative literature for revenue recognition. The standard and related amendments will be effective for Ferrellgas for its annual reporting period beginning August 1, 2018, including interim periods within that reporting period. Early application is not permitted. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect.
Ferrellgas is currently evaluating the newly issued guidance, including which transition approach will be applied and the estimated impact it will have on the consolidated financial statements.
FASB Accounting Standard Update No. 2015-02 and No. 2016-17
In February 2015, the FASB issued ASU 2015-02,
Consolidation: Amendments to the Consolidation Analysis
which provides additional guidance on the consolidation of limited partnerships and on the evaluation of variable interest entities. In October 2016, the FASB issued ASU 2016-17,
Consolidation: Interests Held through Related Parties That Are Under Common Control
which amended certain aspects of the additional guidance in ASU 2015-02. We adopted ASU 2015-02 and ASU 2016-17 effective August 1, 2016. The adoption of these standards did not impact our consolidated financial statements
.
FASB Accounting Standard Update No. 2015-11
In July 2015, the FASB issued ASU 2015-11,
Inventory (Topic 330) - Simplifying the Measurement of Inventory,
which requires that inventory within the scope of the guidance be measured at the lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
FASB Accounting Standard Update No. 2016-02
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Ferrellgas, L.P. is currently evaluating the impact of our pending adoption of ASU 2016-02 on the consolidated financial statements.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326)
which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
C.
Significant transactions
Termination of Bridger agreement with Jamex Marketing, LLC
In connection with the closing of our acquisition of Bridger in June 2015, Bridger entered into a ten-year transportation and logistics agreement (the “Jamex TLA”) with Jamex pursuant to which Jamex would be responsible for certain payments to Bridger and also for sourcing crude oil volumes for Bridger’s largest customer at that time.
As a result of concerns regarding the collectability of amounts owed to Bridger from Jamex under the Jamex TLA and certain other matters between Bridger and Jamex, Bridger, Jamex, Ferrellgas Partners and certain other affiliated parties entered into a group of agreements that terminated the Jamex TLA, facilitated Ferrellgas Partners purchasing certain Ferrellgas Partners common units from Jamex, and established payment terms for certain amounts owed by Jamex to Bridger under the Jamex TLA. Consequently, Ferrellgas Partners does not anticipate any material contribution to revenue or EBITDA from Jamex or Bridger's former largest customer in the future.
On September 1, 2016, Bridger and Ferrellgas Partners entered into a Termination, Settlement and Release Agreement (the “Jamex Termination Agreement”) with Jamex, certain of Jamex's affiliates, and James Ballengee (the owner of Jamex) pursuant to which:
|
|
(1)
|
Jamex agreed to execute and deliver a secured promissory note in favor of Bridger in original principal amount of
$49.5 million
(the "Jamex Secured Promissory Note") in satisfaction of all obligations owed to Bridger under the Jamex TLA;
|
|
|
(2)
|
Mr. Ballengee and Bacchus Capital Trading, LLC, an entity controlled by Mr. Ballengee, executed and delivered a joint guarantee of the Jamex Secured Promissory Note obligations up to a maximum aggregate amount of
$20.0 million
;
|
|
|
(3)
|
The operating partnership agreed to provide Jamex with a
$5.0 million
revolving secured working capital facility evidenced by a revolving promissory note (the “Jamex Revolving Promissory Note” and, together with the Jamex Secured Promissory Note, the “Jamex Notes”);
|
|
|
(4)
|
The other Jamex entities agreed to execute and deliver a security agreement and a full guarantee of the obligations under the Jamex Notes;
|
|
|
(5)
|
Ferrellgas Partners paid approximately
$16.9 million
to Jamex and in return received
0.9 million
of Ferrellgas Partners' common units, which were cancelled upon receipt, and approximately
23 thousand
barrels of crude oil;
|
|
|
(6)
|
The parties agreed to terminate the Jamex TLA and certain other commercial agreements and arrangements between them, and release any claims between or among them that may exist (other than those arising under the Jamex Termination Agreement or the other agreements entered into in connection with the Jamex Termination Agreement); and
|
|
|
(7)
|
Ferrellgas Partners waived the remaining lockup provision applicable to Jamex under the Registration Rights Agreement dated June 24, 2015 to which Jamex is party.
|
The Jamex Secured Promissory Note originally had an annual interest rate of
7%
(which rate would be reduced under certain circumstances including if Ferrellgas Partners' quarterly distributions are less than
$0.25
per common unit; accordingly, as a result of the distribution declared on November 22, 2016, the interest rate will decrease to
2.8%
), and contemplates quarterly amortizing principal payments, together with payments of accrued interest. The first payment, due December 17, 2016, will be an interest-only payment. The maturity date of the Jamex Secured Promissory Note will be December 17, 2021. Jamex will be allowed to prepay the Secured Promissory Note in whole or in part at any time.
The Jamex Revolving Promissory Note, which provides Jamex with access to working capital liquidity to meet their unrelated and ongoing crude oil marketing and other business needs, has an annual interest rate of
0%
(which rate would be increased in case of a default), and contains certain conditions precedent to the operating partnership’s obligation to make any advances thereunder. Each borrowing under the Jamex Revolving Promissory Note must be repaid within
10
days, and the ultimate maturity date of the Jamex Revolving Promissory Note is the earlier of September 1, 2021 and the date on which all obligations under the Jamex Secured Promissory Note are repaid.
The Jamex Secured Promissory Note is guaranteed, pursuant to a Guaranty Agreement, jointly by James Ballengee and Bacchus Capital Trading, LLC, an entity controlled by Mr. Ballengee (up to a maximum aggregate amount of
$20.0 million
), and each Note is fully guaranteed, pursuant to respective Guaranty Agreements, by the other Jamex entities. The obligations of Jamex and the other Jamex entities under the Notes are secured, pursuant to a Security Agreement, by a lien on certain of those entities’ assets, including common units, actively traded marketable securities and cash, which are held in a controlled account that can be seized by Ferrellgas, L.P. in the event of default.
During the year ended July 31, 2016, approximately
60%
of Midstream Operations - Crude oil logistics' segment (Bridger) gross margin was generated from its largest customer and Jamex, that customer's supplier, under take-or-pay arrangements. Bridger’s largest customer during the fiscal year ended July 31, 2016 owned a refinery in Trainer, Pennsylvania. Bridger was party to an agreement with this customer under which Bridger provided logistics services to transport crude oil from the Bakken region in North Dakota to the Trainer refinery. That agreement had a minimum volume commitment and payment obligation from the refinery for logistics services associated with the delivery of
65
MBbls/d. However, if the quantity of crude oil delivered to the refinery dropped below
35
MBbls/d, the minimum volume commitment and payment obligation from the refinery would be suspended and Jamex would become responsible for payments to Bridger under the pay provisions of the Jamex TLA. During February 2016, Jamex ceased sourcing barrels for delivery to the refinery and since that time Bridger had been billing Jamex directly in accordance with the pay provisions of the Jamex TLA. During July 2016, Ferrellgas, L.P. determined Jamex would not resume sourcing barrels for delivery to the refinery or be likely to continue to make payments under the pay provisions of the Jamex TLA. As a result, we negotiated a settlement with Jamex, and the Jamex TLA was terminated on September 1, 2016. While the agreement with the refinery owner was not terminated as a result of the execution and delivery of the Jamex Termination Agreement, Bridger has been unable to negotiate a revised transportation and logistics agreement with that customer; accordingly it is unlikely that Bridger will continue to make any deliveries under the existing agreement. Consequently, we do not anticipate any material contribution to revenue or gross margin from Jamex or Bridger's former largest customer in the future.
D.
Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Propane gas and related products
|
|
$
|
68,336
|
|
|
$
|
59,726
|
|
Crude oil
|
|
6,066
|
|
|
4,642
|
|
Appliances, parts and supplies
|
|
25,894
|
|
|
26,226
|
|
Inventories
|
|
$
|
100,296
|
|
|
$
|
90,594
|
|
In addition to inventories on hand, Ferrellgas, L.P. enters into contracts primarily to buy propane for supply procurement purposes with terms generally up to
36 months
. Most of these contracts call for payment based on market prices at the date of delivery. As of
October 31, 2016
, Ferrellgas, L.P. had committed, for supply procurement purposes, to take delivery of approximately
93.4
million gallons of propane at fixed prices.
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Note receivable - Jamex
|
|
$
|
40,000
|
|
|
$
|
39,760
|
|
Other
|
|
48,103
|
|
|
47,463
|
|
Other assets, net
|
|
$
|
88,103
|
|
|
$
|
87,223
|
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Accrued interest
|
|
$
|
39,188
|
|
|
$
|
14,617
|
|
Accrued payroll
|
|
25,738
|
|
|
13,438
|
|
Customer deposits and advances
|
|
40,238
|
|
|
27,391
|
|
Price risk management liabilities
|
|
8,030
|
|
|
18,401
|
|
Other
|
|
51,403
|
|
|
53,105
|
|
Other current liabilities
|
|
$
|
164,597
|
|
|
$
|
126,952
|
|
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
41,810
|
|
|
$
|
40,535
|
|
Depreciation and amortization expense
|
|
1,026
|
|
|
1,115
|
|
Equipment lease expense
|
|
6,666
|
|
|
6,429
|
|
|
|
$
|
49,502
|
|
|
$
|
48,079
|
|
Loss on asset sales and disposal consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Loss on assets held for sale
|
|
$
|
—
|
|
|
$
|
12,112
|
|
Loss on sale of assets held for sale
|
|
—
|
|
|
1,259
|
|
Loss on sale of assets and other
|
|
6,423
|
|
|
1,546
|
|
Loss on asset sales and disposal
|
|
$
|
6,423
|
|
|
$
|
14,917
|
|
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
2016
|
|
2015
|
Cash paid for:
|
|
|
|
Interest
|
$
|
5,630
|
|
|
$
|
3,779
|
|
Non-cash investing and financing activities:
|
|
|
|
Change in accruals for property, plant and equipment additions
|
$
|
(189
|
)
|
|
$
|
1,727
|
|
Contributions in connection with acquisitions
|
$
|
—
|
|
|
$
|
(284
|
)
|
E.
Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
July 31, 2016
|
Accounts receivable pledged as collateral
|
|
$
|
105,320
|
|
|
$
|
106,464
|
|
Accounts receivable
|
|
37,515
|
|
|
43,148
|
|
Note receivable - Jamex, current portion
|
|
8,055
|
|
|
5,000
|
|
Other
|
|
170
|
|
|
38
|
|
Less: Allowance for doubtful accounts
|
|
(2,777
|
)
|
|
(5,067
|
)
|
Accounts and notes receivable, net
|
|
$
|
148,283
|
|
|
$
|
149,583
|
|
On September 27, 2016, Ferrellgas, L.P. entered into a fourth amendment to its accounts receivable securitization facility to modify the maximum leverage ratio covenant as follows:
|
|
|
|
|
|
|
|
|
|
Maximum leverage ratio
|
|
Maximum leverage ratio
|
Date
|
|
(prior to amendments)
|
|
(after amendments)
|
October 31, 2016
|
|
5.50
|
|
|
6.05
|
|
January 31, 2017
|
|
5.50
|
|
|
5.95
|
|
April 30, 2017
|
|
5.50
|
|
|
5.95
|
|
July 31, 2017
|
|
5.50
|
|
|
6.05
|
|
October 31, 2017
|
|
5.50
|
|
|
5.95
|
|
January 31, 2018
|
|
5.50
|
|
|
5.95
|
|
April 30, 2018 & thereafter
|
|
5.50
|
|
|
5.50
|
|
The leverage ratio is defined as the ratio of total debt of the operating partnership to trailing twelve month EBITDA of the operating partnership (adjusted for certain, defined items), as detailed in Ferrellgas, L.P.'s secured credit facility. Ferrellgas, L.P.'s leverage ratio was
5.81
x as of October 31, 2016.
At
October 31, 2016
,
$105.3
million of trade accounts receivable were pledged as collateral against
$74.0
million of collateralized notes payable due to a commercial paper conduit. At
July 31, 2016
,
$106.5 million
of trade accounts receivable were pledged as collateral against
$64.0 million
of collateralized notes payable due to the commercial paper conduit. These accounts receivable pledged as collateral are bankruptcy remote from Ferrellgas, L.P. Ferrellgas, L.P. does not provide any guarantee or similar support to the collectability of these accounts receivable pledged as collateral.
As of
October 31, 2016
, Ferrellgas, L.P. had received cash proceeds of
$74.0
million from trade accounts receivables securitized, with
no
remaining capacity to receive additional proceeds. As of
July 31, 2016
, Ferrellgas, L.P. had received cash proceeds of
$64.0
million from trade accounts receivables securitized, with
no
remaining capacity to receive additional proceeds. Borrowings under the accounts receivable securitization facility had a weighted average interest rate of
2.7%
and
3.0%
as of
October 31, 2016
and
July 31, 2016
, respectively.
F.
Debt
Short-term borrowings
Ferrellgas, L.P. classified a portion of its secured credit facility borrowings as short-term because it was used to fund working capital needs that management had intended to pay down within the 12 month period following each balance sheet date. As of
October 31, 2016
and
July 31, 2016
,
$96.8 million
and
$101.3 million
, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.
Secured credit facility
On September 27, 2016, Ferrellgas, L.P. entered into a fifth amendment to our secured credit facility to modify the maximum leverage ratio covenant as follows:
|
|
|
|
|
|
|
|
|
|
Maximum leverage ratio
|
|
Maximum leverage ratio
|
Date
|
|
(prior to amendments)
|
|
(after amendments)
|
October 31, 2016
|
|
5.50
|
|
|
6.05
|
|
January 31, 2017
|
|
5.50
|
|
|
5.95
|
|
April 30, 2017
|
|
5.50
|
|
|
5.95
|
|
July 31, 2017
|
|
5.50
|
|
|
6.05
|
|
October 31, 2017
|
|
5.50
|
|
|
5.95
|
|
January 31, 2018
|
|
5.50
|
|
|
5.95
|
|
April 30, 2018 & thereafter
|
|
5.50
|
|
|
5.50
|
|
The leverage ratio is defined as the ratio of total debt of the operating partnership to trailing twelve month EBITDA of the operating partnership (adjusted for certain, defined items), as detailed in Ferrellgas, L.P.'s secured credit facility. Ferrellgas, L.P.'s leverage ratio was
5.81
x as of
October 31, 2016
, which equates to headroom of
$78.9 million
or
4.0%
. Because of this leverage ratio requirement Ferrellgas, L.P. continues to execute on a strategy to reduce its debt. This strategy may include issuance of equity, issuance of debt not subject to its leverage ratio calculations, asset sales or a further reduction in Ferrellgas Partners' annual distribution, which was reduced during the quarter ended October 31, 2016 from an annualized rate of
$2.05
to
$0.40
per common unit. We believe that any debt reducing actions taken would likely remain in effect until Ferrellgas, L.P.'s leverage ratio reaches 4.5x or a level that Ferrellgas, L.P. deems appropriate for its business. However, if weather continues to remain unseasonably warm or our debt reduction initiatives are unsuccessful, Ferrellgas, L.P. believes it is possible its leverage ratio will exceed
5.95
x at the end of the fiscal quarter ending January 31, 2017.
As of
October 31, 2016
, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of
$415.0 million
, of which
$318.2 million
was classified as long-term debt. Ferrellgas, L.P. had
$173.6 million
of capacity under our secured credit facility as of
October 31, 2016
. However, the leverage ratio covenant under this facility limits additional borrowings to
$78.9 million
as of
October 31, 2016
. As of
July 31, 2016
, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of
$394.4 million
, of which
$293.1 million
was classified as long-term debt. Ferrellgas, L.P. had
$219.3 million
of capacity under our secured credit facility as of
July 31, 2016
. However, the leverage ratio covenant under this facility limited additional borrowings to
$8.1 million
as of
July 31, 2016
. Borrowings outstanding at
October 31, 2016
and
July 31, 2016
under the secured credit facility had weighted average interest rates of
4.1%
and
3.7%
, respectively.
The obligations under this credit facility are secured by substantially all assets of Ferrellgas, L.P., the general partner and certain subsidiaries of Ferrellgas, L.P. but specifically excluding (a) assets that are subject to Ferrellgas, L.P.’s accounts receivable securitization facility, (b) the general partner’s equity interests in Ferrellgas Partners and (c) equity interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of Ferrellgas, L.P.
Letters of credit outstanding at
October 31, 2016
totaled
$111.4 million
and were used primarily to secure insurance arrangements and to a lesser extent, product purchases. Letters of credit outstanding at
July 31, 2016
totaled
$86.3 million
and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. At
October 31, 2016
, Ferrellgas, L.P. had remaining letter of credit capacity of
$88.6 million
. At
July 31, 2016
Ferrellgas, L.P. had remaining letter of credit capacity of
$113.7 million
.
G.
Partners’ deficit
Partnership distributions paid
Ferrellgas, L.P. has paid the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Ferrellgas Partners
|
|
$
|
66,145
|
|
|
$
|
51,963
|
|
General partner
|
|
513
|
|
|
530
|
|
|
|
$
|
66,658
|
|
|
$
|
52,493
|
|
On
November 22, 2016
, Ferrellgas, L.P. declared distributions for the three months ended
October 31, 2016
to Ferrellgas Partners and the general partner of
$17.7 million
and
$0.2 million
, respectively, which are expected to be paid on
December 15, 2016
.
See additional discussions about transactions with related parties in Note J – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)
See Note I – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the
three months ended
October 31, 2016
and
2015
.
General partner’s commitment to maintain its capital account
Ferrellgas, L.P.’s partnership agreement allows the general partner to have an option to maintain its
1.0101%
general partner interest concurrent with the issuance of other additional equity.
During the
three months ended
October 31, 2016
, the general partner made non-cash contributions of
$0.1 million
to Ferrellgas, L.P. to maintain its
1.0101%
general partner interest.
During the
three months ended
October 31, 2015
, the general partner made non-cash contributions of
$0.1 million
to Ferrellgas, L.P. to maintain its
1.0101%
general partner interest.
H.
Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas, L.P.’s financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
October 31, 2016
and
July 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (Liability)
|
|
|
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Unobservable Inputs (Level 3)
|
|
Total
|
October 31, 2016:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
4,133
|
|
|
$
|
—
|
|
|
$
|
4,133
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
6,672
|
|
|
$
|
—
|
|
|
$
|
6,672
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(2,645
|
)
|
|
$
|
—
|
|
|
$
|
(2,645
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(6,482
|
)
|
|
$
|
—
|
|
|
$
|
(6,482
|
)
|
|
|
|
|
|
|
|
|
|
July 31, 2016:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
5,830
|
|
|
$
|
—
|
|
|
$
|
5,830
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
8,241
|
|
|
$
|
—
|
|
|
$
|
8,241
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(3,553
|
)
|
|
$
|
—
|
|
|
$
|
(3,553
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(17,689
|
)
|
|
$
|
—
|
|
|
$
|
(17,689
|
)
|
Methodology
The fair values of Ferrellgas, L.P.’s non-exchange traded commodity derivative contracts are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. The fair values of interest rate swap contracts are based upon third-party quotes or indicative values based on recent market transactions.
Other financial instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. The carrying amount of the Jamex note receivable, a financial instrument classified in "Other assets, net" on the consolidated balance sheet, approximates fair value due to the market interest rate. At
October 31, 2016
and
July 31, 2016
, the estimated fair value of Ferrellgas, L.P.’s long-term debt instruments was
$1,803.4 million
and
$1,736.2 million
, respectively. Ferrellgas estimates the fair value of long-term debt based on quoted market prices. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
Ferrellgas, L.P. has other financial instruments such as trade accounts receivable which could expose it to concentrations of credit risk. The credit risk from trade accounts receivable is limited because of a large customer base which extends across many different U.S. markets.
I.
Derivative instruments and hedging activities
Ferrellgas, L.P. is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas, L.P. utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. All other commodity derivative instruments do not qualify or are not designated as cash flow hedges, therefore, the change in their fair value are recorded currently in earnings. Ferrellgas, L.P. also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
Derivative instruments and hedging activities
During the
three months ended
October 31, 2016
and 2015, Ferrellgas, L.P. did
no
t recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
The following tables provide a summary of the fair value of derivatives in Ferrellgas, L.P.’s condensed consolidated balance sheets as of
October 31, 2016
and
July 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
Derivative Instrument
|
|
Location
|
|
Fair value
|
|
Location
|
|
Fair value
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-propane
|
|
Prepaid expenses and other current assets
|
|
$
|
2,458
|
|
|
Other current liabilities
|
|
$
|
3,820
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
3,738
|
|
|
Other liabilities
|
|
370
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,467
|
|
|
Other current liabilities
|
|
1,919
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
2,666
|
|
|
Other liabilities
|
|
726
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
2,119
|
|
Commodity derivatives- crude oil
|
|
Prepaid expenses and other current assets
|
|
476
|
|
|
Other current liabilities
|
|
173
|
|
|
|
Total
|
|
$
|
10,805
|
|
|
Total
|
|
$
|
9,127
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2016
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
Derivative Instrument
|
|
Location
|
|
Fair value
|
|
Location
|
|
Fair value
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
|
Prepaid expenses and other current assets
|
|
$
|
2,263
|
|
|
Other current liabilities
|
|
$
|
10,184
|
|
Commodity derivatives
|
|
Other assets, net
|
|
3,056
|
|
|
Other liabilities
|
|
1,597
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,654
|
|
|
Other current liabilities
|
|
2,309
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
4,176
|
|
|
Other liabilities
|
|
1,244
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives - vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
3,996
|
|
Commodity derivatives-crude oil
|
|
Prepaid expenses and other current assets
|
|
2,922
|
|
|
Other current liabilities
|
|
1,912
|
|
|
|
Total
|
|
$
|
14,071
|
|
|
Total
|
|
$
|
21,242
|
|
Ferrellgas, L.P.'s exchange traded commodity derivative contracts require cash margin deposit as collateral for contracts that are in a negative mark-to-market position. These cash margin deposits will be returned if mark-to-market conditions improve or will be applied against cash settlement when the contracts are settled. The following tables provide a summary of cash margin balances as of
October 31, 2016
and
July 31, 2016
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
3,298
|
|
|
Other current liabilities
|
|
$
|
747
|
|
|
|
Other assets, net
|
|
1,287
|
|
|
Other liabilities
|
|
2,696
|
|
|
|
|
|
$
|
4,585
|
|
|
|
|
$
|
3,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2016
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
8,252
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
|
Other assets, net
|
|
1,275
|
|
|
Other liabilities
|
|
—
|
|
|
|
|
|
$
|
9,527
|
|
|
|
|
$
|
—
|
|
The following table provides a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of operations for the three and
three months ended
October 31, 2016
and
2015
due to derivatives designated as fair value hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized on Derivative
|
|
Amount of Interest Expense Recognized on Fixed-Rated Debt (Related Hedged Item)
|
Derivative Instrument
|
|
Location of Gain Recognized on Derivative
|
|
For the three months ended October 31,
|
|
For the three months ended October 31,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
420
|
|
|
$
|
537
|
|
|
$
|
(2,275
|
)
|
|
$
|
(2,275
|
)
|
The following tables provide a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of comprehensive loss for the
three months ended
October 31, 2016
and
2015
due to derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2016
|
|
|
Derivative Instrument
|
|
Amount of Gain (Loss) Recognized in AOCI
|
|
Location of Gain (Loss) Reclassified from AOCL into Income
|
|
Amount of Gain (Loss) Reclassified from AOCL into Income
|
|
|
|
Effective portion
|
|
Ineffective portion
|
Commodity derivatives
|
|
$
|
4,873
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(3,596
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
265
|
|
|
Interest expense
|
|
(642
|
)
|
|
—
|
|
|
|
$
|
5,138
|
|
|
|
|
$
|
(4,238
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2015
|
|
|
Derivative Instrument
|
|
Amount of Gain (Loss) Recognized in AOCI
|
|
Location of Gain (Loss) Reclassified from AOCL into Income
|
|
Amount of Gain (Loss) Reclassified from AOCL into Income
|
|
|
|
Effective portion
|
|
Ineffective portion
|
Commodity derivatives
|
|
$
|
1,585
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(7,449
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(1,201
|
)
|
|
Interest expense
|
|
(777
|
)
|
|
—
|
|
|
|
$
|
384
|
|
|
|
|
$
|
(8,226
|
)
|
|
$
|
—
|
|
The following tables provide a summary of the effect on Ferrellgas, L.P.'s condensed consolidated statements of operations for the
three months ended
October 31, 2016
and
2015
due to the change in fair value of derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2016
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
(1,241
|
)
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
1,027
|
|
|
Operating expense
|
|
|
|
|
|
|
|
For the three months ended October 31, 2015
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - vehicle fuel
|
|
$
|
(1,038
|
)
|
|
Operating expense
|
|
|
|
|
|
The changes in derivatives included in AOCI for the
three months ended
October 31, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
Gains and losses on derivatives included in AOCI
|
|
2016
|
|
2015
|
Beginning balance
|
|
$
|
(9,815
|
)
|
|
$
|
(38,906
|
)
|
Change in value of risk management commodity derivatives
|
|
4,873
|
|
|
1,585
|
|
Reclassification of gains and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
|
|
3,596
|
|
|
7,449
|
|
Change in value of risk management interest rate derivatives
|
|
265
|
|
|
(1,201
|
)
|
Reclassification of gains and losses on interest rate hedges to interest expense
|
|
642
|
|
|
777
|
|
Ending balance
|
|
$
|
(439
|
)
|
|
$
|
(30,296
|
)
|
Ferrellgas, L.P. expects to reclassify net losses related to the risk management commodity derivatives of approximately
$1.4 million
to earnings during the next 12 months. These net losses are expected to be offset by increased margins on propane sales commitments Ferrellgas, L.P. has with its customers that qualify for the normal purchase normal sales exception.
During the
three months ended
October 31, 2016
and
2015
, Ferrellgas, L.P. had no reclassifications to earnings resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
As of
October 31, 2016
, Ferrellgas, L.P. had financial derivative contracts covering
2.4 million
barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
As of
October 31, 2016
, Ferrellgas, L.P. had financial derivative contracts covering
0.1 million
barrels of diesel and
21 thousand
barrels of unleaded gasoline related to fuel hedges in transportation of propane.
As of
October 31, 2016
, Ferrellgas, L.P. financial derivative contracts covering
0.2 million
barrels of crude oil related to the hedging of crude oil line fill and inventory.
Derivative financial instruments credit risk
Ferrellgas, L.P. is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas, L.P.’s counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas, L.P. maintains credit policies with regard to its counterparties that it believes reduces its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas, L.P. in the forms of letters of credit, parental guarantees or cash. Ferrellgas, L.P. has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at
October 31, 2016
, the maximum amount of loss due to credit risk that, based upon the gross fair values of the derivative financial instruments, Ferrellgas, L.P. would incur is $
2.7
million.
Ferrellgas, L.P. holds certain derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas, L.P.’s debt rating. As of
October 31, 2016
, a downgrade in Ferrellgas, L.P.'s debt rating could trigger a reduction in credit limit and would result in an additional collateral requirement of
zero
. There were
no
derivatives with credit-risk-related contingent features in a liability position on
October 31, 2016
and Ferrellgas, L.P. had posted
no
collateral in the normal course of business related to such derivatives.
J.
Transactions with related parties
Ferrellgas, L.P. has
no
employees and is managed and controlled by its 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 its general partner in connection with operating Ferrellgas, L.P.’s business. These costs primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas, L.P.’s behalf and are reported in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
55,714
|
|
|
$
|
56,010
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
8,583
|
|
|
$
|
7,093
|
|
See additional discussions about transactions with the general partner and related parties in Note G – Partners’ deficit.
K.
Contingencies and commitments
Litigation
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 and crude oil. As a result, at any given time, Ferrellgas, L.P. can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Other than as discussed below, Ferrellgas, L.P. is not a party to any legal proceedings other than various claims and 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 are reasonably expected to have a material adverse effect on the consolidated financial condition, results of operations and cash flows of Ferrellgas, L.P.
Ferrellgas, L.P. has been named as a defendant, along with a competitor, in putative class action lawsuits filed in multiple jurisdictions. The lawsuits allege that Ferrellgas, L.P. and a competitor coordinated in 2008 to reduce the fill level in barbeque cylinders and combined to persuade a common customer to accept that fill reduction, resulting in increased cylinder costs to direct customers and end-user customers in violation of federal and certain state antitrust laws. The lawsuits seek treble damages, attorneys’ fees, injunctive relief and costs on behalf of the putative class. These lawsuits have been consolidated into one case by a multidistrict litigation panel. The Court has dismissed all claims brought by direct and indirect customers other than state law claims of indirect customers under Wisconsin, Maine and Vermont law. The direct customer plaintiffs have filed an appeal, which is pending. Ferrellgas, L.P. believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
In addition, putative class action cases have been filed in California relating to residual propane remaining in the tank after use. Ferrellgas, L.P. has prevailed at the trial court on a motion to dismiss those claims. It is uncertain whether plaintiffs will appeal; Ferrellgas, L.P. intends to vigorously defend any such appeal. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas, L.P. has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. A derivative lawsuit with similar allegations has been filed in state court in Missouri naming Ferrellgas, L.P. and several current and former officers and directors as defendants. Ferrellgas, L.P. believes that it has defenses and will vigorously defend these cases. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative action.
On October 21, 2016, Julio E. Rios II, an Executive Vice President of the general partner and the President and Chief Executive Officer of Bridger Logistics, LLC, and Jeremy H. Gamboa, also an Executive Vice President of the general partner and the Chief Operating Officer of Bridger Logistics, LLC both delivered notice of "good reason" for resignation to the general partner pursuant to their employment agreements alleging that the general partner had materially diminished their responsibilities and stating their intention to resign as a result if such purported material diminution is not cured within 30 days.
On November 28, 2016, Mr. Rios and Mr. Gamboa each resigned from their positions, purportedly for "good reason" pursuant to their employment agreements. Each has indicated that they intend to make a claim for severance. The general partner denies that Mr. Rios and Mr. Gamboa had "good reason" to resign and has other defenses to their claims for severance. Ferrellgas, L.P. does not believe a loss is probable or reasonably estimable at this time related to this matter.
L.
Segment reporting
Following is a summary of segment information for the three months ended
October 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
271,498
|
|
|
$
|
106,327
|
|
|
$
|
2,946
|
|
|
$
|
(1,229
|
)
|
|
$
|
379,542
|
|
Direct costs (1)
|
|
237,014
|
|
|
101,556
|
|
|
13,831
|
|
|
(1,878
|
)
|
|
350,523
|
|
Adjusted EBITDA
|
|
$
|
34,484
|
|
|
$
|
4,771
|
|
|
$
|
(10,885
|
)
|
|
$
|
649
|
|
|
$
|
29,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
277,476
|
|
|
$
|
189,373
|
|
|
$
|
4,297
|
|
|
$
|
—
|
|
|
$
|
471,146
|
|
Direct costs (1)
|
|
241,877
|
|
|
164,570
|
|
|
15,800
|
|
|
—
|
|
|
422,247
|
|
Adjusted EBITDA
|
|
$
|
35,599
|
|
|
$
|
24,803
|
|
|
$
|
(11,503
|
)
|
|
$
|
—
|
|
|
$
|
48,899
|
|
(1) Direct costs are comprised of "cost of sales-propane and other gas liquids sales", "cost of products sold-midstream operations", "cost of products sold-other", "operating expense", "general and administrative expense", and "equipment lease expense" less "non-cash stock-based compensation charge", "change in fair value of contingent consideration", "severance charge", "litigation accrual and related legal fees associated with a class action lawsuit", "unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments" and "acquisition and transition expenses".
Following is a reconciliation of Ferrellgas, L.P.'s total segment performance measure to condensed consolidated net loss:
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31,
|
|
|
2016
|
|
2015
|
Net loss
|
|
$
|
(39,440
|
)
|
|
$
|
(76,536
|
)
|
Income tax benefit
|
|
(591
|
)
|
|
(844
|
)
|
Interest expense
|
|
31,398
|
|
|
29,758
|
|
Depreciation and amortization expense
|
|
26,202
|
|
|
36,979
|
|
EBITDA
|
|
17,569
|
|
|
(10,643
|
)
|
Non-cash employee stock ownership plan compensation charge
|
|
3,754
|
|
|
5,256
|
|
Non-cash stock-based compensation charge
|
|
1,881
|
|
|
8,122
|
|
Goodwill impairment
|
|
—
|
|
|
29,316
|
|
Loss on asset sales and disposal
|
|
6,423
|
|
|
14,917
|
|
Other (income) expense, net
|
|
(508
|
)
|
|
122
|
|
Change in fair value of contingent consideration
|
|
—
|
|
|
(100
|
)
|
Severance costs
|
|
1,469
|
|
|
856
|
|
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments
|
|
(1,569
|
)
|
|
1,038
|
|
Acquisition and transition expenses
|
|
—
|
|
|
15
|
|
Adjusted EBITDA
|
|
$
|
29,019
|
|
|
$
|
48,899
|
|
Following are total assets by segment:
|
|
|
|
|
|
|
|
|
|
Assets
|
|
October 31, 2016
|
|
July 31, 2016
|
Propane and related equipment sales
|
|
$
|
1,255,584
|
|
|
$
|
1,202,214
|
|
Midstream operations - crude oil logistics
|
|
228,708
|
|
|
275,303
|
|
Corporate and unallocated
|
|
182,832
|
|
|
205,696
|
|
Total consolidated assets
|
|
$
|
1,667,124
|
|
|
$
|
1,683,213
|
|
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
1,831
|
|
|
$
|
127
|
|
|
$
|
1,306
|
|
|
$
|
3,264
|
|
Growth
|
|
5,414
|
|
|
—
|
|
|
—
|
|
|
5,414
|
|
Total
|
|
$
|
7,245
|
|
|
$
|
127
|
|
|
$
|
1,306
|
|
|
$
|
8,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
5,898
|
|
|
$
|
—
|
|
|
$
|
284
|
|
|
$
|
6,182
|
|
Growth
|
|
8,615
|
|
|
3,303
|
|
|
6,401
|
|
|
18,319
|
|
Total
|
|
$
|
14,513
|
|
|
$
|
3,303
|
|
|
$
|
6,685
|
|
|
$
|
24,501
|
|
M.
Guarantor financial information
The
$500.0 million
aggregate principal amount of
6.75%
senior notes due 2023 co-issued by Ferrellgas, L.P. and Ferrellgas Finance Corp. are fully and unconditionally and jointly and severally guaranteed by all of Ferrellgas, L.P.’s
100%
owned subsidiaries except: i) Ferrellgas Finance Corp; ii) certain special purposes subsidiaries formed for use in connection with our accounts receivable securitization; and iii) foreign subsidiaries. Guarantees of these senior notes will be released under certain circumstances, including (i) in connection with any sale or other disposition of (a) all or substantially all of the assets of a guarantor or (b) all of the capital stock of such guarantor (including by way of merger or consolidation), in each case, to a person that is not Ferrellgas, L.P. or a restricted subsidiary of Ferrellgas, L.P., (ii) if Ferrellgas, L.P. designates any restricted subsidiary that is a guarantor as an unrestricted subsidiary, (iii) upon defeasance or discharge of the notes, (iv) upon the liquidation or dissolution of such guarantor, or (v) at such time as such guarantor ceases to guarantee any other indebtedness of either of the issuers and any other guarantor.
The guarantor financial information discloses in separate columns the financial position, results of operations and the cash flows of Ferrellgas, L.P. (Parent), Ferrellgas Finance Corp. (co-issuer), Ferrellgas L.P.’s guarantor subsidiaries on a combined basis, and Ferrellgas L.P.’s non-guarantor subsidiaries on a combined basis. The dates and the periods presented in the guarantor financial information are consistent with the periods presented in Ferrellgas, L.P.’s consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(in thousands)
|
|
As of October 31, 2016
|
|
Ferrellgas, L.P. (Parent and Co-Issuer)
|
|
Ferrellgas Finance Corp. (Co-Issuer)
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
12,368
|
|
|
$
|
1
|
|
|
$
|
196
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,565
|
|
Accounts and notes receivable
|
(9,133
|
)
|
|
—
|
|
|
56,051
|
|
|
101,365
|
|
|
—
|
|
|
148,283
|
|
Intercompany receivables
|
21,421
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,421
|
)
|
|
—
|
|
Inventories
|
79,814
|
|
|
—
|
|
|
20,482
|
|
|
—
|
|
|
—
|
|
|
100,296
|
|
Prepaid expenses and other current assets
|
22,616
|
|
|
—
|
|
|
9,185
|
|
|
2
|
|
|
—
|
|
|
31,803
|
|
Total current assets
|
127,086
|
|
|
1
|
|
|
85,914
|
|
|
101,367
|
|
|
(21,421
|
)
|
|
292,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
550,113
|
|
|
—
|
|
|
207,827
|
|
|
—
|
|
|
—
|
|
|
757,940
|
|
Goodwill
|
246,098
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
|
—
|
|
|
256,103
|
|
Intangible assets, net
|
137,625
|
|
|
—
|
|
|
134,406
|
|
|
—
|
|
|
—
|
|
|
272,031
|
|
Intercompany receivables
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
1,890
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,890
|
)
|
|
—
|
|
Other assets, net
|
38,168
|
|
|
—
|
|
|
49,282
|
|
|
653
|
|
|
—
|
|
|
88,103
|
|
Total assets
|
$
|
1,550,980
|
|
|
$
|
1
|
|
|
$
|
487,434
|
|
|
$
|
102,020
|
|
|
$
|
(473,311
|
)
|
|
$
|
1,667,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
41,161
|
|
|
$
|
—
|
|
|
$
|
33,627
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
74,788
|
|
Short-term borrowings
|
96,824
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
96,824
|
|
Collateralized note payable
|
—
|
|
|
—
|
|
|
—
|
|
|
74,000
|
|
|
—
|
|
|
74,000
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
36,798
|
|
|
(15,377
|
)
|
|
(21,421
|
)
|
|
—
|
|
Other current liabilities
|
161,172
|
|
|
—
|
|
|
3,293
|
|
|
132
|
|
|
—
|
|
|
164,597
|
|
Total current liabilities
|
299,157
|
|
|
—
|
|
|
73,718
|
|
|
58,755
|
|
|
(21,421
|
)
|
|
410,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
1,783,634
|
|
|
—
|
|
|
451,026
|
|
|
—
|
|
|
(450,000
|
)
|
|
1,784,660
|
|
Other liabilities
|
28,689
|
|
|
—
|
|
|
3,841
|
|
|
225
|
|
|
—
|
|
|
32,755
|
|
Contingencies and commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity
|
(559,316
|
)
|
|
1
|
|
|
(40,504
|
)
|
|
42,715
|
|
|
(2,212
|
)
|
|
(559,316
|
)
|
Accumulated other comprehensive income (loss)
|
(1,184
|
)
|
|
—
|
|
|
(647
|
)
|
|
325
|
|
|
322
|
|
|
(1,184
|
)
|
Total partners' capital (deficit)
|
(560,500
|
)
|
|
1
|
|
|
(41,151
|
)
|
|
43,040
|
|
|
(1,890
|
)
|
|
(560,500
|
)
|
Total liabilities and partners' capital (deficit)
|
$
|
1,550,980
|
|
|
$
|
1
|
|
|
$
|
487,434
|
|
|
$
|
102,020
|
|
|
$
|
(473,311
|
)
|
|
$
|
1,667,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(in thousands)
|
|
As of July 31, 2016
|
|
Ferrellgas, L.P. (Parent and Co-Issuer)
|
|
Ferrellgas Finance Corp. (Co-Issuer)
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
4,472
|
|
|
$
|
1
|
|
|
$
|
417
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,890
|
|
Accounts and notes receivable
|
(2,703
|
)
|
|
—
|
|
|
45,822
|
|
|
106,464
|
|
|
—
|
|
|
149,583
|
|
Intercompany receivables
|
34,089
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,089
|
)
|
|
—
|
|
Inventories
|
71,422
|
|
|
—
|
|
|
19,172
|
|
|
—
|
|
|
—
|
|
|
90,594
|
|
Prepaid expenses and other current assets
|
27,922
|
|
|
2
|
|
|
12,029
|
|
|
2
|
|
|
—
|
|
|
39,955
|
|
Total current assets
|
135,202
|
|
|
3
|
|
|
77,440
|
|
|
106,466
|
|
|
(34,089
|
)
|
|
285,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
557,460
|
|
|
—
|
|
|
217,220
|
|
|
—
|
|
|
—
|
|
|
774,680
|
|
Goodwill
|
246,098
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
|
—
|
|
|
256,103
|
|
Intangible assets, net
|
141,794
|
|
|
—
|
|
|
138,391
|
|
|
—
|
|
|
—
|
|
|
280,185
|
|
Intercompany receivables
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
3,630
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,630
|
)
|
|
—
|
|
Other assets, net
|
37,742
|
|
|
—
|
|
|
49,016
|
|
|
465
|
|
|
—
|
|
|
87,223
|
|
Total assets
|
$
|
1,571,926
|
|
|
$
|
3
|
|
|
$
|
492,072
|
|
|
$
|
106,931
|
|
|
$
|
(487,719
|
)
|
|
$
|
1,683,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
33,781
|
|
|
$
|
—
|
|
|
$
|
34,147
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
67,928
|
|
Short-term borrowings
|
101,291
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101,291
|
|
Collateralized note payable
|
—
|
|
|
—
|
|
|
—
|
|
|
64,000
|
|
|
—
|
|
|
64,000
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
35,491
|
|
|
(1,402
|
)
|
|
(34,089
|
)
|
|
—
|
|
Other current liabilities
|
119,048
|
|
|
—
|
|
|
7,754
|
|
|
150
|
|
|
—
|
|
|
126,952
|
|
Total current liabilities
|
254,120
|
|
|
—
|
|
|
77,392
|
|
|
62,748
|
|
|
(34,089
|
)
|
|
360,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
1,759,868
|
|
|
—
|
|
|
451,013
|
|
|
—
|
|
|
(450,000
|
)
|
|
1,760,881
|
|
Other liabilities
|
27,351
|
|
|
—
|
|
|
3,998
|
|
|
225
|
|
|
—
|
|
|
31,574
|
|
Contingencies and commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity
|
(458,853
|
)
|
|
3
|
|
|
(39,684
|
)
|
|
43,633
|
|
|
(3,952
|
)
|
|
(458,853
|
)
|
Accumulated other comprehensive income (loss)
|
(10,560
|
)
|
|
—
|
|
|
(647
|
)
|
|
325
|
|
|
322
|
|
|
(10,560
|
)
|
Total partners' capital (deficit)
|
(469,413
|
)
|
|
3
|
|
|
(40,331
|
)
|
|
43,958
|
|
|
(3,630
|
)
|
|
(469,413
|
)
|
Total liabilities and partners' capital (deficit)
|
$
|
1,571,926
|
|
|
$
|
3
|
|
|
$
|
492,072
|
|
|
$
|
106,931
|
|
|
$
|
(487,719
|
)
|
|
$
|
1,683,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
(in thousands)
|
|
|
|
For the three months ended October 31, 2016
|
|
Ferrellgas, L.P. (Parent and Co-Issuer)
|
|
Ferrellgas Finance Corp. (Co-Issuer)
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales
|
$
|
242,399
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
242,399
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
108,044
|
|
|
—
|
|
|
—
|
|
|
108,044
|
|
Other
|
17,326
|
|
|
—
|
|
|
11,773
|
|
|
—
|
|
|
—
|
|
|
29,099
|
|
Total revenues
|
259,725
|
|
|
—
|
|
|
119,817
|
|
|
—
|
|
|
—
|
|
|
379,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
119,212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,212
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
94,642
|
|
|
—
|
|
|
—
|
|
|
94,642
|
|
Cost of sales - other
|
2,430
|
|
|
—
|
|
|
9,316
|
|
|
—
|
|
|
—
|
|
|
11,746
|
|
Operating expense
|
97,655
|
|
|
—
|
|
|
10,246
|
|
|
(2,105
|
)
|
|
(710
|
)
|
|
105,086
|
|
Depreciation and amortization expense
|
18,277
|
|
|
—
|
|
|
7,872
|
|
|
53
|
|
|
—
|
|
|
26,202
|
|
General and administrative expense
|
12,863
|
|
|
2
|
|
|
1,404
|
|
|
—
|
|
|
—
|
|
|
14,269
|
|
Equipment lease expense
|
7,210
|
|
|
—
|
|
|
139
|
|
|
—
|
|
|
—
|
|
|
7,349
|
|
Non-cash employee stock ownership plan compensation charge
|
3,754
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,754
|
|
Loss on asset sales and disposal
|
1,447
|
|
|
—
|
|
|
4,976
|
|
|
—
|
|
|
—
|
|
|
6,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
(3,123
|
)
|
|
(2
|
)
|
|
(8,778
|
)
|
|
2,052
|
|
|
710
|
|
|
(9,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(20,352
|
)
|
|
—
|
|
|
(10,673
|
)
|
|
(370
|
)
|
|
(3
|
)
|
|
(31,398
|
)
|
Other income (expense), net
|
(47
|
)
|
|
—
|
|
|
555
|
|
|
707
|
|
|
(707
|
)
|
|
508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
(23,522
|
)
|
|
(2
|
)
|
|
(18,896
|
)
|
|
2,389
|
|
|
—
|
|
|
(40,031
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
(29
|
)
|
|
—
|
|
|
(562
|
)
|
|
—
|
|
|
—
|
|
|
(591
|
)
|
Equity in earnings of subsidiary
|
(15,947
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,947
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
(39,440
|
)
|
|
(2
|
)
|
|
(18,334
|
)
|
|
2,389
|
|
|
15,947
|
|
|
(39,440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
9,376
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
(30,064
|
)
|
|
$
|
(2
|
)
|
|
$
|
(18,334
|
)
|
|
$
|
2,389
|
|
|
$
|
15,947
|
|
|
$
|
(30,064
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
(in thousands)
|
|
|
|
For the three months ended October 31, 2015
|
|
Ferrellgas, L.P. (Parent and Co-Issuer)
|
|
Ferrellgas Finance Corp. (Co-Issuer)
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales
|
$
|
245,301
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
245,301
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
193,670
|
|
|
—
|
|
|
—
|
|
|
193,670
|
|
Other
|
17,377
|
|
|
—
|
|
|
14,798
|
|
|
—
|
|
|
—
|
|
|
32,175
|
|
Total revenues
|
262,678
|
|
|
—
|
|
|
208,468
|
|
|
—
|
|
|
—
|
|
|
471,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
121,748
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
121,751
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
153,604
|
|
|
—
|
|
|
—
|
|
|
153,604
|
|
Cost of sales - other
|
2,538
|
|
|
—
|
|
|
11,910
|
|
|
—
|
|
|
—
|
|
|
14,448
|
|
Operating expense
|
96,974
|
|
|
—
|
|
|
17,659
|
|
|
2,370
|
|
|
(804
|
)
|
|
116,199
|
|
Depreciation and amortization expense
|
18,550
|
|
|
—
|
|
|
18,429
|
|
|
—
|
|
|
—
|
|
|
36,979
|
|
General and administrative expense
|
17,429
|
|
|
3
|
|
|
1,712
|
|
|
—
|
|
|
—
|
|
|
19,144
|
|
Equipment lease expense
|
6,882
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
7,032
|
|
Non-cash employee stock ownership plan compensation charge
|
5,256
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,256
|
|
Asset impairments
|
—
|
|
|
—
|
|
|
29,316
|
|
|
—
|
|
|
—
|
|
|
29,316
|
|
Loss on asset sales and disposal
|
1,545
|
|
|
—
|
|
|
13,372
|
|
|
—
|
|
|
—
|
|
|
14,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
(8,244
|
)
|
|
(3
|
)
|
|
(37,687
|
)
|
|
(2,370
|
)
|
|
804
|
|
|
(47,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(18,521
|
)
|
|
—
|
|
|
(10,688
|
)
|
|
(441
|
)
|
|
(108
|
)
|
|
(29,758
|
)
|
Other income (expense), net
|
(122
|
)
|
|
—
|
|
|
—
|
|
|
696
|
|
|
(696
|
)
|
|
(122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
(26,887
|
)
|
|
(3
|
)
|
|
(48,375
|
)
|
|
(2,115
|
)
|
|
—
|
|
|
(77,380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
168
|
|
|
—
|
|
|
(1,012
|
)
|
|
—
|
|
|
—
|
|
|
(844
|
)
|
Equity in earnings of subsidiary
|
(49,481
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49,481
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
(76,536
|
)
|
|
(3
|
)
|
|
(47,363
|
)
|
|
(2,115
|
)
|
|
49,481
|
|
|
(76,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
8,610
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
(67,926
|
)
|
|
$
|
(3
|
)
|
|
$
|
(47,363
|
)
|
|
$
|
(2,115
|
)
|
|
$
|
49,481
|
|
|
$
|
(67,926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2016
|
|
Ferrellgas, L.P. (Parent and Co-Issuer)
|
|
Ferrellgas Finance Corp. (Co-Issuer)
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
79,220
|
|
|
$
|
(2
|
)
|
|
$
|
(15,354
|
)
|
|
$
|
687
|
|
|
$
|
(10,000
|
)
|
|
$
|
54,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(10,000
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(10,005
|
)
|
Proceeds from sale of assets
|
2,279
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,279
|
|
Cash collected for purchase of interest in accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
183,939
|
|
|
(183,939
|
)
|
|
—
|
|
Cash remitted to Ferrellgas, L.P for accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
(193,939
|
)
|
|
193,939
|
|
|
—
|
|
Net changes in advances with consolidated entities
|
(14,453
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,453
|
|
|
—
|
|
Net cash provided by (used in) investing activities
|
(22,174
|
)
|
|
—
|
|
|
(5
|
)
|
|
(10,000
|
)
|
|
24,453
|
|
|
(7,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
(66,658
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,658
|
)
|
Proceeds from increase in long-term debt
|
25,626
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,626
|
|
Reductions in long-term debt
|
(2,261
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,261
|
)
|
Net reductions in short-term borrowings
|
(4,467
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,467
|
)
|
Net additions to collateralized short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
—
|
|
|
10,000
|
|
Net changes in advances with parent
|
—
|
|
|
2
|
|
|
15,138
|
|
|
(687
|
)
|
|
(14,453
|
)
|
|
—
|
|
Cash paid for financing costs
|
(1,390
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,390
|
)
|
Net cash provided by (used in) financing activities
|
(49,150
|
)
|
|
2
|
|
|
15,138
|
|
|
9,313
|
|
|
(14,453
|
)
|
|
(39,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
7,896
|
|
|
—
|
|
|
(221
|
)
|
|
—
|
|
|
—
|
|
|
7,675
|
|
Cash and cash equivalents - beginning of year
|
4,472
|
|
|
1
|
|
|
417
|
|
|
—
|
|
|
—
|
|
|
4,890
|
|
Cash and cash equivalents - end of year
|
$
|
12,368
|
|
|
$
|
1
|
|
|
$
|
196
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the three months ended October 31, 2015
|
|
Ferrellgas, L.P. (Parent and Co-Issuer)
|
|
Ferrellgas Finance Corp. (Co-Issuer)
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
12,807
|
|
|
$
|
(3
|
)
|
|
$
|
22,041
|
|
|
$
|
5,801
|
|
|
$
|
2,000
|
|
|
$
|
42,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital expenditures
|
(14,674
|
)
|
|
—
|
|
|
(10,933
|
)
|
|
—
|
|
|
—
|
|
|
(25,607
|
)
|
Proceeds from sale of assets
|
1,013
|
|
|
—
|
|
|
2,562
|
|
|
—
|
|
|
—
|
|
|
3,575
|
|
Cash collected for purchase of interest in accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
186,280
|
|
|
(186,280
|
)
|
|
—
|
|
Cash remitted to Ferrellgas, L.P for accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
(184,280
|
)
|
|
184,280
|
|
|
—
|
|
Net changes in advances with consolidated entities
|
16,908
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,908
|
)
|
|
—
|
|
Other
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
Net cash provided by (used in) investing activities
|
3,233
|
|
|
—
|
|
|
(8,371
|
)
|
|
2,000
|
|
|
(18,908
|
)
|
|
(22,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
(52,493
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52,493
|
)
|
Contributions from Partners
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
Proceeds from increase in long-term debt
|
21,321
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,321
|
|
Reductions in long-term debt
|
(4,380
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,380
|
)
|
Net additions to short-term borrowings
|
20,072
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,072
|
|
Net reductions in collateralized short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,000
|
)
|
|
—
|
|
|
(2,000
|
)
|
Net changes in advances with parent
|
—
|
|
|
3
|
|
|
(11,112
|
)
|
|
(5,799
|
)
|
|
16,908
|
|
|
—
|
|
Cash paid for financing costs
|
(142
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(142
|
)
|
Net cash provided by (used in) financing activities
|
(15,592
|
)
|
|
3
|
|
|
(11,112
|
)
|
|
(7,799
|
)
|
|
16,908
|
|
|
(17,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
2
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
450
|
|
|
—
|
|
|
2,558
|
|
|
—
|
|
|
—
|
|
|
3,008
|
|
Cash and cash equivalents - beginning of year
|
5,579
|
|
|
1
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
5,600
|
|
Cash and cash equivalents - end of year
|
$
|
6,029
|
|
|
$
|
1
|
|
|
$
|
2,578
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,608
|
|
|
|
|
|
|
|
|
N.
Subsequent events
Ferrellgas, L.P. evaluated events and transactions occurring after the balance sheet date through the date Ferrellgas L.P.'s condensed consolidated financial statements were issued and concluded that there were no events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
FERRELLGAS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas, L.P.)
|
CONDENSED BALANCE SHEETS
|
(unaudited)
|
|
October 31, 2016
|
|
July 31, 2016
|
ASSETS
|
|
|
|
|
|
Cash
|
$
|
1,100
|
|
|
$
|
1,100
|
|
Other current assets
|
—
|
|
|
1,500
|
|
Total assets
|
$
|
1,100
|
|
|
$
|
2,600
|
|
|
|
|
|
Contingencies and commitments (Note B)
|
|
|
|
|
|
|
|
|
|
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
|
61,870
|
|
|
61,820
|
|
Accumulated deficit
|
(61,770
|
)
|
|
(60,220
|
)
|
Total stockholder's equity
|
$
|
1,100
|
|
|
$
|
2,600
|
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas, L.P.)
|
CONDENSED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
|
|
|
For the three months ended October 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
General and administrative expense
|
|
$
|
1,550
|
|
|
$
|
3,050
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,550
|
)
|
|
$
|
(3,050
|
)
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
FERRELLGAS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas, L.P.)
|
CONDENSED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
|
For the three months ended October 31,
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(1,550
|
)
|
|
$
|
(3,050
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Other current assets
|
1,500
|
|
|
—
|
|
Cash used in operating activities
|
(50
|
)
|
|
(3,050
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Capital contribution
|
50
|
|
|
3,050
|
|
Cash provided by financing activities
|
50
|
|
|
3,050
|
|
|
|
|
|
Net change in cash
|
—
|
|
|
—
|
|
Cash - beginning of period
|
1,100
|
|
|
1,100
|
|
Cash - end of period
|
$
|
1,100
|
|
|
$
|
1,100
|
|
See notes to condensed financial statements.
|
FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
(unaudited)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A.
Formation
Ferrellgas Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on
January 16, 2003
and is a wholly-owned subsidiary of Ferrellgas, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has
no
employees.
B.
Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.