FGP Ferrellgas Partners LP

Ferrellgas Partners LP's (FGP) reported net loss per unit of 53 cents for the fourth quarter of fiscal 2011, wider than the Zacks Consensus Estimate of a loss of 41 cents. The quarter’s loss was 5 cents less than the prior-year quarter loss of 58 cents.

The results of the partnership reflect the impacts of the seasonal retail propane distribution business, and the historical nature of the partnership’s performance during the first and fourth quarters of the fiscal year.

Ferrellgas Partners reported net loss per unit of 60 cents for fiscal 2011, wider than the Zacks Consensus Estimate of a loss of 48 cents. In the previous financial year, the company reported earnings of 47 cents per unit.

Total Revenue

Ferrellgas Partners' total revenue of $449.7 million in the quarter was 27.1% higher than $353.8 million reported in the comparable year-ago period. The favorable outcome in the quarter was driven by propane and other gas liquids sales which increased 35.1% to $421.7 million while other revenue decreased 32.9% to $27.9 million.

The top line also beat the Zacks Consensus Estimate of $441 million.

Ferrellgas Partners' total revenue for fiscal 2011 was $2.423 billion which was 15.4% higher than $2.09 billion reported in the previous fiscal year. Total revenue for the year was driven by propane and other gas liquids sales growth of 16.4% and other revenue growth of 6.1%.

Despite the positive contribution from both operating segments, the top-line results of the partnership were marginally lower than the Zacks Consensus Estimate of $2.427 billion.

Operating Highlights

Ferrellgas Partners' gross profit during the quarter declined 3.2% from the comparable quarter last year to $126.27 million. The 44.7% increase in input costs to $323.37 million was primarily responsible for the decline in gross margin.

The partnership incurred $23.68 million as interest expense during the fourth quarter versus $26.44 million in the year-earlier quarter. The decrease in interest expenses was attributable to the positive impact of debt financing.

Annual Highlights

Input costs for the partnership expanded 26.9% year over year, affecting Ferrellgas Partners' gross profit numbers for the fiscal year. The partnership’s gross profit dropped 5.9% to $689.4 million.

Operating expense declined marginally by 0.1% to $407.28 million while equipment lease expense increased to $14.43 million from $13.44 million in the prior year.

Even though the partnership registered a marginal fall in interest expenses during the reported quarter, overall fiscal interest expenses increased 0.6% to $101.9 million from $101.3 million a year ago.

Adjusted net loss during the fiscal year was $43.2 million versus a profit of $32.38 million in fiscal 2011. The net loss in the fiscal year was mainly  the outcome of a $40.49 million loss incurred in the reported quarter.

Financial Highlights

Cash and cash equivalents of the partnership were down from the year-ago level. Cash and cash equivalents as of July 31, 2011 were $7.43 million versus $11.4 million as of July 31, 2010.

The partnership's long-term debt as of July 31, 2011 was $1.05 billion compared with $1.1 billion as of July 31, 2010.

Peer Comparison

Suburban Propane Partners L.P (SPH) competes directly with Ferrellgas Partners. Suburban announced a net loss of 19 cents per common units for the third quarter fiscal 2011.

Our View

The partnership is trying hard to curb its expenditures. Strikingly, in the reported quarter, as well as the fiscal year, operating expenses of the partnership decreased as a percentage of total revenue.

Ferrellgas Partners currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Overland Park, Kansas-based Ferrellgas Partners L.P. is a leading distributor of propane and related equipment in the U.S. The partnership provides propane services to Residential, Industrial, Portable Tank Exchange, Agricultural and Wholesale customers.

 
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