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
April 30, 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 a
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 reportable business segment activities:
|
|
•
|
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 two reportable operating segments: crude oil logistics and water solutions. 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 sales arrangements. The salt water disposal wells within the water solutions segment are located in the Eagle Ford shale region of south Texas and are a critical component of the oil and natural gas well drilling industry. Oil and natural gas wells generate significant volumes of salt water. In the oil and gas fields Ferrellgas services, these volumes of water are transported by truck away from the fields to salt water disposal wells where a combination of gravity and chemicals are used to separate crude oil that is residual in the salt water through a process that results in the collection of "skimming oil". This skimming oil is then captured and sold before the salt water is injected into underground geologic formations using high-pressure pumps.
|
Due to seasonality, the results of operations for the
nine months ended
April 30, 2016
are not necessarily indicative of the results to be expected for a full fiscal year ending July 31, 2016.
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. 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
2015
.
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 condensed consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, valuation methods used to value
intangibles and goodwill in business combination, allowance for doubtful accounts, fair value of assets held for sale, fair value of reporting units, fair value of derivative contracts and stock based compensation calculations.
(2)
Goodwill:
Ferrellgas records goodwill as the excess of the cost of acquisitions over the fair value of the related net assets at the date of acquisition. Ferrellgas has determined that it has five reporting units for goodwill impairment testing purposes. Three of these reporting units contain goodwill that is subject to at least an annual assessment for impairment by applying a fair-value-based test. Under this test, the carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of the evaluation on a specific identification basis. To the extent a reporting unit’s carrying value exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the second step of the impairment test must be performed. In the second step, the implied fair value of goodwill is determined by assigning the fair value of a reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for that excess. We completed our last annual goodwill impairment test on January 31, 2016 and did not incur an impairment loss.
During the three months ended April 30, 2016, Ferrellgas determined that the uncertainty surrounding the future cash flows associated with a logistics contract with its largest customer and Jamex, that customer’s crude oil supplier, constituted a triggering event for its Midstream operations - crude oil logistics business that required an update to the goodwill impairment assessment as of April 30, 2016. Additionally, during the three months ended October 31, 2015, Ferrellgas determined that the continued and prolonged decline in the price of crude oil constituted a triggering event for its Midstream operations - water solutions business that required an update to the goodwill impairment assessment as of October 31, 2015. See Note F – Goodwill and intangible assets, net – for further discussion of Ferrellgas' goodwill impairment assessment.
(3) Assets held for sale:
Assets held for sale represent tractor trucks that have met the criteria of “held for sale” accounting. During the first quarter of fiscal 2016, Ferrellgas committed to a plan to sell certain trucks held by the Midstream operations - crude oil logistics segment. These assets were reclassified from "Vehicles, including transport trailers" to Assets held for sale in the balance sheet as of October 31, 2015. Ferrellgas ceased depreciation on these assets during October 2015. Assets held for sale are recorded at the lower of the carrying amount or fair value less costs to sell. See Note D – Supplemental financial statement information – for further discussion of these held for sale assets.
(4) 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
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. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted. Ferrellgas is currently evaluating the impact of our pending adoption of ASU 2015-02 on the consolidated financial statements
.
FASB Accounting Standard Update No. 2015-03
In April 2015, the FASB issued ASU 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt liability. ASU 2015-03 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted, and retrospective application required. We do not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
FASB Accounting Standard Update No. 2015-06
In September 2015, the FASB issued ASU 2015-06,
Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments,
which requires all entities to record the effects on earnings, if any, of changes in provisional
amounts for items in a business combination in the same period in which the adjustment amounts are determined. The requirement to retrospectively account for the adjustments is eliminated by this amendment. ASU 2015-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, 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. 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.
(5)
Supplemental cash flow information:
For purposes of the condensed consolidated statements of cash flows, Ferrellgas considers cash equivalents to include all highly liquid debt instruments purchased with an original maturity of three months or less. Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
|
2016
|
|
2015
|
CASH PAID FOR:
|
|
|
|
Interest
|
$
|
71,409
|
|
|
$
|
49,021
|
|
Income taxes
|
$
|
432
|
|
|
$
|
333
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
Liabilities incurred in connection with acquisitions
|
$
|
1,239
|
|
|
$
|
—
|
|
Change in accruals for property, plant and equipment additions
|
$
|
1,293
|
|
|
$
|
1,316
|
|
(6)
Inventories:
Inventories are stated at the lower of cost or market using weighted average cost and actual cost methods.
C.
Business combinations
Ferrellgas records the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. An entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair values of the assets acquired and liabilities assumed in a business combination. The Bridger acquisition, which occurred during the year ended July 31, 2015 and is described below, is still within this measurement period, and as a result, the acquisition date fair values Ferrellgas recorded for the assets acquired and liabilities assumed are subject to change. Ferrellgas made certain adjustments during the nine months ended April 30, 2016 to its estimates of the acquisition date fair values of the Bridger assets acquired and liabilities assumed.
On June 24, 2015, Ferrellgas acquired Bridger and formed a new midstream operations - crude oil logistics segment based near Dallas, Texas. Ferrellgas paid
$560.0 million
of cash, net of cash acquired and issued
$260.0 million
of Ferrellgas Partners common units to the seller, along with
$2.5 million
of other seller costs and consideration for an aggregate value of
$822.5 million
. The purchase agreement for the Bridger acquisition contemplates post-closing payments for certain working capital items. Ferrellgas is in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in this business combination, and as a result, the estimates of fair value at April 30, 2016 remain subject to change to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Ferrellgas is currently determining the appropriate value of working capital acquired with the former owners of Bridger. Ferrellgas has preliminarily estimated the fair values of the assets acquired and liabilities assumed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated At
|
|
|
|
|
April 30, 2016 (as adjusted)
|
|
July 31, 2015 (as initially reported)
|
|
Measurement period adjustments
|
Working capital
|
|
$
|
(7,867
|
)
|
|
$
|
1,783
|
|
|
$
|
(9,650
|
)
|
Transportation equipment
|
|
293,491
|
|
|
293,491
|
|
|
—
|
|
Injection stations and pipelines
|
|
41,632
|
|
|
41,632
|
|
|
—
|
|
Goodwill
|
|
188,872
|
|
|
193,311
|
|
|
(4,439
|
)
|
Customer relationships
|
|
277,100
|
|
|
261,811
|
|
|
15,289
|
|
Non-compete agreements
|
|
10,000
|
|
|
14,800
|
|
|
(4,800
|
)
|
Trade names & trademarks
|
|
9,400
|
|
|
5,800
|
|
|
3,600
|
|
Office equipment
|
|
7,449
|
|
|
7,449
|
|
|
—
|
|
Other
|
|
2,375
|
|
|
2,375
|
|
|
—
|
|
Aggregate fair value of net assets acquired
|
|
$
|
822,452
|
|
|
$
|
822,452
|
|
|
$
|
—
|
|
Pro forma results of operations (unaudited)
:
The following summarized unaudited pro forma consolidated statement of earnings information assumes that the acquisition of Bridger during fiscal 2015 occurred as of August 1, 2014. These unaudited pro forma results are for comparative purposes only and may not be indicative of the results that would have occurred had this acquisition been completed on August 1, 2014 or the results that would be attained in the future.
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
2015
|
|
2015
|
Revenue
|
$
|
614,777
|
|
|
$
|
1,894,618
|
|
Net earnings
|
29,806
|
|
|
76,632
|
|
Net earnings per common unitholders' interest
|
$
|
0.35
|
|
|
$
|
0.91
|
|
The unaudited pro forma consolidated data presented above has also been prepared as if the following transactions had been completed on August 1, 2014:
|
|
•
|
the issuance of senior secured notes in June 2015;
|
|
|
•
|
the sale of common units in June 2015 in a public offering; and
|
|
|
•
|
the issuance of common units to the seller in June 2015.
|
D.
Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Propane gas and related products
|
|
$
|
51,502
|
|
|
$
|
68,731
|
|
Crude oil
|
|
9,871
|
|
|
—
|
|
Appliances, parts and supplies
|
|
26,366
|
|
|
28,023
|
|
Inventories
|
|
$
|
87,739
|
|
|
$
|
96,754
|
|
In addition to inventories on hand, Ferrellgas enters into contracts primarily to buy propane for supply procurement purposes with terms up to
36 months
. Most of these contracts call for payment based on market prices at the date of delivery. As of
April 30, 2016
, Ferrellgas had committed, for supply procurement purposes, to take delivery of approximately
92.7
million gallons of propane at fixed prices.
Property, plant and equipment, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
July 31,
|
|
Estimated Useful Lives
|
|
2016
|
|
2015
|
Land
|
Indefinite
|
|
$
|
35,220
|
|
|
$
|
34,389
|
|
Land improvements
|
2-20
|
|
13,776
|
|
|
13,249
|
|
Building and improvements
|
20
|
|
72,800
|
|
|
71,923
|
|
Vehicles, including transport trailers
|
8-20
|
|
205,892
|
|
|
228,646
|
|
Bulk equipment and district facilities
|
5-30
|
|
112,283
|
|
|
111,657
|
|
Tanks, cylinders and customer equipment
|
2-30
|
|
773,022
|
|
|
772,904
|
|
Salt water disposal wells and related equipment
|
2-30
|
|
55,569
|
|
|
38,460
|
|
Rail cars
|
30
|
|
199,240
|
|
|
150,235
|
|
Injection stations
|
20
|
|
32,178
|
|
|
37,619
|
|
Pipeline
|
15
|
|
4,074
|
|
|
4,074
|
|
Computer and office equipment
|
2-5
|
|
121,813
|
|
|
123,386
|
|
Construction in progress
|
n/a
|
|
22,080
|
|
|
16,841
|
|
|
|
|
1,647,947
|
|
|
1,603,383
|
|
Less: accumulated depreciation
|
|
|
666,494
|
|
|
638,166
|
|
Property, plant and equipment, net
|
|
|
$
|
981,453
|
|
|
$
|
965,217
|
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Accrued interest
|
|
$
|
45,039
|
|
|
$
|
17,281
|
|
Accrued payroll
|
|
18,354
|
|
|
17,485
|
|
Customer deposits and advances
|
|
21,335
|
|
|
28,792
|
|
Price risk management liabilities
|
|
20,077
|
|
|
31,450
|
|
Other
|
|
56,589
|
|
|
85,679
|
|
Other current liabilities
|
|
$
|
161,394
|
|
|
$
|
180,687
|
|
Shipping and handling expenses are classified in the following condensed consolidated statements of earnings line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
42,378
|
|
|
$
|
41,291
|
|
|
$
|
126,946
|
|
|
$
|
135,206
|
|
Depreciation and amortization expense
|
|
1,071
|
|
|
1,194
|
|
|
3,268
|
|
|
3,970
|
|
Equipment lease expense
|
|
6,470
|
|
|
5,900
|
|
|
19,385
|
|
|
16,479
|
|
|
|
$
|
49,919
|
|
|
$
|
48,385
|
|
|
$
|
149,599
|
|
|
$
|
155,655
|
|
During the three month period ended October 31, 2015, Ferrellgas committed to a plan to dispose of certain assets in its Midstream operations - crude oil logistics segment. As of October 31, 2015, this plan resulted in
69
tractor trucks sold and
136
tractor trucks reclassified from "Vehicles, including transport trailers" to Assets held for sale. The held for sale assets were recorded at the lower of carrying value or estimated fair value, less an estimate of costs to sell. The estimate of fair value included significant unobservable inputs (Level 3 fair value). Subsequent to October 31, 2015,
64
of these tractor trucks were sold,
59
were repurposed and reclassified to property, plant, and equipment as held for use within other Ferrellgas businesses, which constitutes a change in plan, and
13
tractor trucks remain classified as held for sale assets as of
April 30, 2016
. Loss on disposal of assets and other during the three and nine month periods ended
April 30, 2016
consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Loss on assets held for sale
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,112
|
|
|
$
|
—
|
|
Loss on sale of assets held for sale
|
|
896
|
|
|
—
|
|
|
1,687
|
|
|
—
|
|
Loss on sale of assets and other
|
|
4,883
|
|
|
2,203
|
|
|
9,421
|
|
|
4,578
|
|
Loss on disposal of assets and other
|
|
$
|
5,779
|
|
|
$
|
2,203
|
|
|
$
|
23,220
|
|
|
$
|
4,578
|
|
E.
Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Accounts receivable pledged as collateral
|
$
|
134,538
|
|
|
$
|
123,791
|
|
Accounts receivable
|
64,359
|
|
|
77,636
|
|
Other
|
382
|
|
|
307
|
|
Less: Allowance for doubtful accounts
|
(6,575
|
)
|
|
(4,816
|
)
|
Accounts and notes receivable, net
|
$
|
192,704
|
|
|
$
|
196,918
|
|
At
April 30, 2016
,
$134.5
million of trade accounts receivable were pledged as collateral against
$77.0
million of collateralized notes payable due to the commercial paper conduit. At
July 31, 2015
, $
123.8
million of trade accounts receivable were pledged as collateral against
$70.0
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
April 30, 2016
, the operating partnership had received cash proceeds of
$77.0
million from trade accounts receivables securitized, with
no
remaining capacity to receive additional proceeds. As of
July 31, 2015
, the operating partnership had received cash proceeds of
$70.0
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
2.9%
and
2.3%
as of
April 30, 2016
and
July 31, 2015
, respectively.
F.
Goodwill and intangible assets, net
Ferrellgas records goodwill as the excess of the cost of acquisitions over the fair value of the related net assets at the date of acquisition.
Ferrellgas tests goodwill for impairment annually during the second quarter or more frequently if events or changes in circumstances indicate that it is more likely than not the fair value of a reporting unit is less than the carrying value.
During the nine months ended April 30, 2016, approximately 60% of Midstream Operations - Crude oil logistics' segment gross margin was generated from its largest customer and Jamex, that customer's crude oil supplier, under a take-or-pay arrangement (the “contract”). Under the terms of the take-or-pay arrangement, Jamex is responsible for payments to Ferrellgas and also for sourcing crude oil volumes for that customer. Ferrellgas believes Jamex may not have financial resources sufficient to satisfy its payment obligations to Ferrellgas through June 2019, the remaining term of this agreement. If current market conditions persist, Ferrellgas also believes Jamex may not be able to fulfill its crude oil sourcing volume commitments to Ferrellgas’ customer throughout the remaining term of this agreement, which could cause a termination of the transportation and logistics agreement Ferrellgas has with that customer. Ferrellgas is currently negotiating alternative contractual arrangements to mitigate this risk. If Ferrellgas’ transportation and logistics agreement with that customer were to terminate and Ferrellgas was unable to negotiate an economically similar replacement agreement with that customer, Ferrellgas would likely experience a decrease in sales, gross margin and net income from crude oil logistics operations which would materially and adversely affect the results of operations and cash flows generated by the segment. As a result of the uncertainty surrounding the future cash flows associated with this contract, Ferrellgas considered whether the fair value of this reporting unit no longer exceeded the carrying value. Upon applying the fair-value-based test as described above for purposes of the interim impairment test, Ferrellgas concluded that there was no impairment of the Midstream operations - crude oil logistics reporting unit as of April 30, 2016. As of April 30, 2016, Ferrellgas determined that this reporting unit had an estimated fair value in excess of its respective carrying value of approximately 10%.
This test primarily consists of using discounted future cash flow models to estimate fair value. Ferrellgas prepared various cash flow models involving certain potential scenarios and probability weighted these scenarios which included the following critical assumptions: (1) renewal of certain significant, long term logistics contracts upon their expiration; (2) the economic conditions present in the oil and gas sector at the time of these contract renewals; (3) the timing, success rate and capital required for certain organic growth projects; (4) the amount of capital expenditures required to maintain the existing cash flows; and (5) a terminal period growth rate equal to the expected rate of inflation. In addition to these critical cash flow assumptions, a discount rate of 11.3% was applied to the various projected cash flow models.
Judgments and assumptions are inherent in management’s estimates used to determine the fair value of Ferrellgas' reporting units and are consistent with what management believes would be utilized by primary market participants.
Additionally, during the three months ended October 31, 2015, Ferrellgas determined that the continued and prolonged decline in the price of crude oil constituted a triggering event for its Midstream operations - water solutions business that required an update to the goodwill impairment assessment as of October 31, 2015.
The first step of this test primarily consists of a discounted future cash flow model to predict fair value. The result of this first step is based on the following critical assumptions: (1) the NYMEX West Texas Intermediate (“WTI”) crude oil curve was used to estimate future oil prices; (2) the oil skimming rate was expected to increase or decrease consistent with the projected increases/decreases in the NYMEX WTI crude oil curve consistent with past history; and (3) certain organic growth projects were projected to increase the salt water volumes processed as new drilling activity increases associated with the projected NYMEX WTI crude oil curve. As noted in our discussion of this reporting unit in Ferrellgas' Annual Report on Form 10-K for the year ended July 31, 2015, Ferrellgas believes that the results of this business are closely tied to the price of WTI crude oil. The daily average closing price for WTI crude oil for the three months ended July 31, 2015 of
$56.63
decreased
20.7%
to
$44.90
during the three months ended October 31, 2015. Additionally, the projected NYMEX WTI crude oil curve decreased approximately
6.5%
from August 31, 2015 to October 31, 2015. These events have led to an overall decline in drilling activity and volumes in the Eagle Ford shale region of Texas. These market changes, in addition to previous declines noted during fiscal year 2015, negatively affected Ferrellgas' current period results and future projections sufficiently to indicate that the fair value of the reporting unit likely no longer exceeded its carrying value.
In the second step, the implied fair value of goodwill is determined by assigning the fair value of a reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for that excess.
As of October 31, 2015, Ferrellgas performed the first step of the goodwill impairment test for the Midstream operations - water solutions reporting unit and determined that the carrying value of the reporting unit exceeded the fair value. Ferrellgas then completed the second step of the goodwill impairment analysis comparing the implied fair value of the reporting unit to the carrying amount of goodwill and determined that goodwill was completely impaired and has written off the entire
$29.3 million
of goodwill related to this reporting unit.
Changes in the carrying amount of goodwill, by reportable segment, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and related equipment sales
|
|
Midstream operations - water solutions
|
|
Midstream operations - crude oil logistics
|
|
Total
|
Balance at July 31, 2015
|
$
|
256,120
|
|
|
$
|
29,316
|
|
|
$
|
193,311
|
|
|
$
|
478,747
|
|
Acquisitions
|
—
|
|
|
—
|
|
|
1,356
|
|
|
1,356
|
|
Measurement period adjustments
|
—
|
|
|
—
|
|
|
(4,439
|
)
|
|
(4,439
|
)
|
Dispositions
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
Impairment
|
—
|
|
|
(29,316
|
)
|
|
—
|
|
|
(29,316
|
)
|
Balance at April 30, 2016
|
$
|
256,105
|
|
|
$
|
—
|
|
|
$
|
190,228
|
|
|
$
|
446,333
|
|
G.
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
April 30, 2016
and
July 31, 2015
,
$9.1 million
and
$75.3 million
, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.
Secured credit facility
As of
April 30, 2016
, Ferrellgas had total borrowings outstanding under its secured credit facility of
$299.0 million
, of which
$289.9 million
was classified as long-term debt. As of
July 31, 2015
, Ferrellgas had total borrowings outstanding under its secured credit facility of
$211.4 million
, of which
$136.1 million
was classified as long-term debt. Borrowings outstanding at
April 30, 2016
and
July 31, 2015
under the secured credit facility had weighted average interest rates of
3.6%
and
3.5%
, 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 interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of Ferrellgas.
Letters of credit outstanding at
April 30, 2016
totaled
$69.5 million
and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. Letters of credit outstanding at
July 31, 2015
totaled
$61.2 million
and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. At
April 30, 2016
, Ferrellgas had remaining letter of credit capacity of
$130.5 million
. At
July 31, 2015
, Ferrellgas had remaining letter of credit capacity of
$138.8 million
.
H.
Partners' capital
As of
April 30, 2016
and
July 31, 2015
, limited partner units were beneficially owned by the following:
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Public common unitholders (1)
|
|
65,691,492
|
|
|
63,294,168
|
|
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) (7)
|
|
4,763,475
|
|
|
4,763,475
|
|
James H. Ballengee (6) (7)
|
|
4,771,447
|
|
|
9,542,895
|
|
|
|
(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
23.0%
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
23.2%
at
April 30, 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 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.
(6) Jamex Marketing, LLC, is the unitholder of record of these common units, with whom Bridger regularly conducts business in their normal operations.
(7) Beneficially owned limited partner units are based on the most recent Schedule 13G, Schedule 13D, or Section 16 SEC filing, or information provided by the beneficial owner.
Partnership distributions paid
Ferrellgas Partners has paid the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Public common unitholders
|
|
$
|
32,792
|
|
|
$
|
27,791
|
|
|
$
|
97,673
|
|
|
$
|
83,370
|
|
Ferrell Companies
|
|
11,546
|
|
|
11,265
|
|
|
34,638
|
|
|
33,795
|
|
FCI Trading Corp.
|
|
100
|
|
|
98
|
|
|
300
|
|
|
294
|
|
Ferrell Propane, Inc.
|
|
26
|
|
|
26
|
|
|
78
|
|
|
78
|
|
James E. Ferrell
|
|
2,441
|
|
|
2,179
|
|
|
7,323
|
|
|
6,537
|
|
James H. Ballengee
|
|
3,321
|
|
|
—
|
|
|
11,880
|
|
|
—
|
|
General partner
|
|
507
|
|
|
418
|
|
|
1,534
|
|
|
1,254
|
|
|
|
$
|
50,733
|
|
|
$
|
41,777
|
|
|
$
|
153,426
|
|
|
$
|
125,328
|
|
On
May 24, 2016
, Ferrellgas Partners declared a cash distribution of
$0.5125
per common unit for the three months ended
April 30, 2016
, which is expected to be paid on
June 14, 2016
. Included in this cash distribution are the following amounts to be paid to related parties:
|
|
|
|
|
Ferrell Companies
|
$
|
11,546
|
|
FCI Trading Corp.
|
100
|
|
Ferrell Propane, Inc.
|
26
|
|
James E. Ferrell (1)
|
2,441
|
|
James H. Ballengee (1)
|
2,445
|
|
General partner
|
507
|
|
(1) Beneficially owned limited partner units are based on the most recent Schedule 13G, Schedule 13D or Section 16 SEC filing, or information provided by the beneficial owner.
See additional discussions about transactions with related parties in Note K – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)
See Note J – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the three and
nine months ended
April 30, 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
nine months ended
April 30, 2016
, the general partner made non-cash contributions of
$0.5 million
to Ferrellgas to maintain its effective
2%
general partner interest.
During the
nine months ended
April 30, 2015
, the general partner made cash contributions of
$0.9 million
and non-cash contributions of
$0.7 million
to Ferrellgas to maintain its effective
2%
general partner interest.
I.
Fair value measurements
Derivative financial instruments and contingent consideration
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
April 30, 2016
and
July 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
April 30, 2016:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
4,582
|
|
|
$
|
—
|
|
|
$
|
4,582
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
6,344
|
|
|
$
|
—
|
|
|
$
|
6,344
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(3,856
|
)
|
|
$
|
—
|
|
|
$
|
(3,856
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(20,818
|
)
|
|
$
|
—
|
|
|
$
|
(20,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2015:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
1,828
|
|
|
$
|
—
|
|
|
$
|
1,828
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
4,655
|
|
|
$
|
—
|
|
|
$
|
4,655
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(4,748
|
)
|
|
$
|
—
|
|
|
$
|
(4,748
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(42,375
|
)
|
|
$
|
—
|
|
|
$
|
(42,375
|
)
|
Contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(100
|
)
|
|
$
|
(100
|
)
|
The following is a reconciliation of the opening and closing balances for the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period ended
April 30, 2016
:
|
|
|
|
|
|
|
|
Contingent consideration liability
|
Balance at July 31, 2015
|
|
$
|
100
|
|
Increase in fair value related to accretion
|
|
—
|
|
Change in fair value included in earnings
|
|
(100
|
)
|
Balance at April 30, 2016
|
|
$
|
—
|
|
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. The fair value of the trucks classified as assets held for sale represents Ferrellgas' estimate of expected sales price less costs to sell. The fair value measurements used to determine this value of the assets held for sale were based on a market approach utilizing prices from prior transactions and third party pricing information.
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. At
April 30, 2016
and
July 31, 2015
, the estimated fair value of Ferrellgas’ long-term debt instruments was
$1,873.2 million
and
$1,889.8 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.
J.
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
nine months ended
April 30, 2016
, Ferrellgas did
not
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. During the
nine months ended
April 30, 2015
, Ferrellgas recognized a
$0.2 million
loss 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
April 30, 2016
and
July 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 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
|
|
$
|
2,058
|
|
|
Other current liabilities
|
|
$
|
11,441
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
2,926
|
|
|
Other liabilities
|
|
2,301
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,676
|
|
|
Other current liabilities
|
|
2,315
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
2,906
|
|
|
Other liabilities
|
|
1,541
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
3,249
|
|
Commodity derivatives-vehicle fuel
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
755
|
|
Commodity derivatives- crude oil
|
|
Prepaid expenses and other current assets
|
|
1,360
|
|
|
Other current liabilities
|
|
3,072
|
|
|
|
Total
|
|
$
|
10,926
|
|
|
Total
|
|
$
|
24,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2015
|
|
|
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
|
|
$
|
3,614
|
|
|
Other current liabilities
|
|
$
|
27,929
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
1,041
|
|
|
Other liabilities
|
|
12,034
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,828
|
|
|
Other current liabilities
|
|
2,241
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
2,507
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
1,280
|
|
Commodity derivatives-vehicle fuel
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
1,132
|
|
|
|
Total
|
|
$
|
6,483
|
|
|
Total
|
|
$
|
47,123
|
|
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 deposit balances as of
April 30, 2016
and
July 31, 2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Deposits
|
|
Prepaid expenses and other current assets
|
|
$
|
8,100
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
|
Other assets, net
|
|
2,992
|
|
|
Other liabilities
|
|
—
|
|
|
|
|
|
$
|
11,092
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2015
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Deposits
|
|
Prepaid expenses and other current assets
|
|
$
|
18,009
|
|
|
Other current liabilities
|
|
$
|
15
|
|
|
|
Other assets, net
|
|
11,786
|
|
|
Other liabilities
|
|
—
|
|
|
|
|
|
$
|
29,795
|
|
|
|
|
$
|
15
|
|
The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of earnings for the three and
nine months ended
April 30, 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 April 30,
|
|
For the three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
433
|
|
|
$
|
601
|
|
|
$
|
(2,275
|
)
|
|
$
|
(2,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 nine months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
1,477
|
|
|
$
|
1,408
|
|
|
$
|
(6,825
|
)
|
|
$
|
(6,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide a summary of the effect on Ferrellgas’ condensed consolidated statements of comprehensive income for the three and
nine months ended
April 30, 2016
and
2015
due to derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
14,998
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(5,467
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(317
|
)
|
|
Interest expense
|
|
(671
|
)
|
|
—
|
|
|
|
$
|
14,681
|
|
|
|
|
$
|
(6,138
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
7,813
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(10,907
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
106
|
|
|
Interest expense
|
|
—
|
|
|
—
|
|
|
|
$
|
7,919
|
|
|
|
|
$
|
(10,907
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
5,823
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(20,729
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(2,262
|
)
|
|
Interest expense
|
|
(2,202
|
)
|
|
—
|
|
|
|
$
|
3,561
|
|
|
|
|
$
|
(22,931
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
(47,855
|
)
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(17,139
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(3,250
|
)
|
|
Interest expense
|
|
—
|
|
|
(199
|
)
|
|
|
$
|
(51,105
|
)
|
|
|
|
$
|
(17,139
|
)
|
|
$
|
(199
|
)
|
The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of earnings for the three and
nine months ended
April 30, 2016
and
2015
due to the change in fair value of derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
487
|
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
955
|
|
|
Operating expense
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
(3,532
|
)
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
(3,779
|
)
|
|
Operating expense
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
1,609
|
|
|
Operating expense
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
1,609
|
|
|
Operating expense
|
|
|
|
|
|
The changes in derivatives included in AOCI for the
nine months ended
April 30, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
Gains and losses on derivatives included in AOCI
|
|
2016
|
|
2015
|
Beginning balance
|
|
$
|
(38,906
|
)
|
|
$
|
6,483
|
|
Change in value of risk management commodity derivatives
|
|
5,823
|
|
|
(47,855
|
)
|
Reclassification of gains and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
|
|
20,729
|
|
|
17,139
|
|
Change in value of risk management interest rate derivatives
|
|
(2,262
|
)
|
|
(3,250
|
)
|
Reclassification of gains and losses on interest rate hedges to interest expense
|
|
2,202
|
|
|
199
|
|
Ending balance
|
|
$
|
(12,414
|
)
|
|
$
|
(27,284
|
)
|
Ferrellgas expects to reclassify net losses related to the risk management commodity derivatives of approximately
$9.4 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
nine months ended
April 30, 2016
and
2015
, 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
April 30, 2016
, Ferrellgas had financial derivative contracts covering
3.1 million
barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
As of
April 30, 2016
, Ferrellgas had financial derivative contracts covering
0.2 million
barrels of diesel and
35 thousand
barrels of unleaded gasoline related to fuel hedges in transportation of propane.
As of
April 30, 2016
, Ferrellgas had financial derivative contracts covering
0.5 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
April 30, 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
zero
.
Ferrellgas holds certain derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon the Ferrellgas' debt rating. As of
April 30, 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
April 30, 2016
and Ferrellgas had posted
no
collateral in the normal course of business related to such derivatives.
K.
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 earnings as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
59,907
|
|
|
$
|
53,155
|
|
|
$
|
174,943
|
|
|
$
|
163,417
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
7,957
|
|
|
$
|
5,394
|
|
|
$
|
22,297
|
|
|
$
|
20,059
|
|
In connection with the closing of the Bridger acquisition, Ferrellgas issued common units to Bridger Marketing, LLC (now known as Jamex Marketing, LLC) and entered into a ten-year transportation and logistics agreement (the "TLA") with Jamex Marketing, LLC. As of
April 30, 2016
, Jamex Marketing, LLC owned
4.9%
(1) of Ferrellgas Partners' limited partners' interest. Jamex Marketing, LLC, in connection with the TLA, enters into transactions with the operating partnership and its subsidiaries. Bridger provides crude oil logistics services for Jamex Marketing, LLC, including the transportation and storage of crude oil by truck, terminal and pipeline. During the three and
nine months ended April 30, 2016
, Ferrellgas' total revenues from these transactions were
$26.6 million
and
$36.7 million
, respectively. During the three and
nine months ended April 30, 2016
, Ferrellgas' total cost of sales from these transactions were
$1.4 million
and
$3.0 million
, respectively. There was no activity for the three and
nine months ended April 30, 2015
. The amounts due from and due to Jamex Marketing, LLC at
April 30, 2016
, were
$19.4 million
and
$0.8 million
, respectively. The amounts due from and due to Jamex Marketing, LLC at July 31, 2015, were
$4.8 million
and
$4.2 million
, respectively. On November 13, 2015, Ferrellgas Partners, L.P repurchased approximately
2.4 million
common units from Jamex Marketing, LLC, for approximately
$45.9 million
. During the three months ended April 30, 2016, Jamex Marketing, LLC sold approximately
2.4 million
units in the open market, bringing their unit ownership to
4.8 million
units as of April 30, 2016 (1).
See additional discussions about transactions with the general partner and related parties in Note H – Partners’ capital.
(1) Beneficially owned limited partner units are based on the most recent Schedule 13G, Schedule 13D, Schedule 16 SEC filing, or information provided by the beneficial owner.
L.
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.
M.
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 earnings 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 guidance based on basic and diluted net earnings per common unitholders' interest for both the three and nine months ended
April 30, 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 April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(in thousands, except per unitholders' interest amounts)
|
Common unitholders’ interest in net earnings (loss)
|
|
$
|
18,498
|
|
|
$
|
35,454
|
|
|
$
|
(3,941
|
)
|
|
$
|
87,511
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding - basic
|
|
98,002.7
|
|
|
82,717.6
|
|
|
98,911.2
|
|
|
82,536.1
|
|
Dilutive securities
|
|
0.5
|
|
|
5.7
|
|
|
—
|
|
|
7.2
|
|
Weighted average common units outstanding - diluted
|
|
98,003.2
|
|
|
82,723.3
|
|
|
98,911.2
|
|
|
82,543.3
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (earnings) loss per common unitholders’ interest
|
|
$
|
0.19
|
|
|
$
|
0.43
|
|
|
$
|
(0.04
|
)
|
|
$
|
1.06
|
|
N.
Segment reporting
Ferrellgas has two primary operations: propane and related equipment sales and midstream operations. These two operations result in three reportable operating segments: propane and related equipment sales, midstream operations - water solutions and midstream operations - crude oil logistics.
The chief operating decision maker evaluates the operating segments using an Adjusted EBITDA performance measure which is based on earnings before income tax expense, interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, goodwill impairment, loss on disposal of assets and other, other expense, net, change in fair value of contingent consideration, severance costs, litigation accrual and related legal fees associated with a class action lawsuit, unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments, acquisition and transition expenses and net earnings (loss) attributable to non-controlling interest. This performance measure is not a GAAP measure, however, the components are computed using amounts that are determined in accordance with GAAP. A reconciliation of this performance measure to net earnings, which is its nearest comparable GAAP measure, is included in the tables below. In management's evaluation of performance, costs such as compensation for certain administrative staff and executive management, are not allocated by segment and, accordingly, the following reportable segment results do not include such unallocated costs. The accounting policies of the operating segments are otherwise the same as those described in Note B - Summary of Significant Accounting Policies.
Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, plant and equipment, inventories, identifiable intangible assets and goodwill. Cash, certain prepaid assets and other assets are not allocated to segments. Although Ferrellgas can and does identify long-lived assets such as property, plant and equipment and identifiable intangible assets to reportable segments, Ferrellgas does not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges.
The propane and related equipment sales segment primarily includes the distribution and sale of propane and related equipment and supplies with concentrations in the Midwest, Southeast, Southwest and Northwest regions of the United States. Sales from propane distribution are generated principally from transporting propane purchased from third parties to propane distribution locations and then to tanks on customers’ premises or to portable propane tanks delivered to nationwide and local retailers. Sales from portable tank exchanges, nationally branded under the name Blue Rhino, are generated through a network of independent and partnership-owned distribution outlets.
The midstream operations - crude oil logistics segment primarily includes a domestic crude oil transportation and logistics provider with an integrated portfolio of midstream assets. These assets connect crude oil production in prolific unconventional resource plays to downstream markets. Bridger's truck, pipeline terminal, pipeline, rail and maritime assets form a comprehensive, fee-for-service business model, and substantially all of its cash flow is from fee-based commercial agreements. Bridger's fee-based business model generates income by providing crude oil transportation and logistics services on behalf of producers and end users of crude oil.
The midstream operations - water solutions segment primarily includes salt water disposal wells that are a critical component of the oil and natural gas well drilling industry. Oil and gas wells generate significant volumes of salt water known as “flowback” and “production” water. Flowback is a water based solution that flows back to the surface during and after the completion of the
hydraulic fracturing (“fracking”) process whereby large volumes of water, sand and chemicals are injected under high pressures into rock formations to stimulate production. Production water is salt water from underground formations that are brought to the surface during the normal course of oil or gas production. In the oil and gas fields Ferrellgas services, these volumes of water are transported by truck away from the fields to salt water disposal wells where it is injected into underground geologic formations using high-pressure pumps. Revenue is derived from fees charged to customers to dispose of salt water at the disposal facilities and crude oil sales from the skimming oil process.
Following is a summary of segment information for the three and nine months ended
April 30, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
404,048
|
|
|
$
|
101,996
|
|
|
$
|
3,907
|
|
|
$
|
—
|
|
|
$
|
(479
|
)
|
|
$
|
509,472
|
|
Direct costs (1)
|
|
307,708
|
|
|
76,826
|
|
|
5,301
|
|
|
11,684
|
|
|
(33
|
)
|
|
401,486
|
|
Adjusted EBITDA
|
|
$
|
96,340
|
|
|
$
|
25,170
|
|
|
$
|
(1,394
|
)
|
|
$
|
(11,684
|
)
|
|
$
|
(446
|
)
|
|
$
|
107,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
527,258
|
|
|
$
|
—
|
|
|
$
|
5,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
532,551
|
|
Direct costs (1)
|
|
422,837
|
|
|
—
|
|
|
4,871
|
|
|
8,570
|
|
|
—
|
|
|
436,278
|
|
Adjusted EBITDA
|
|
$
|
104,421
|
|
|
$
|
—
|
|
|
$
|
422
|
|
|
$
|
(8,570
|
)
|
|
$
|
—
|
|
|
$
|
96,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
1,142,429
|
|
|
$
|
475,162
|
|
|
$
|
12,744
|
|
|
$
|
—
|
|
|
$
|
(479
|
)
|
|
$
|
1,629,856
|
|
Direct costs (1)
|
|
888,380
|
|
|
396,468
|
|
|
15,538
|
|
|
34,289
|
|
|
(33
|
)
|
|
1,334,642
|
|
Adjusted EBITDA
|
|
$
|
254,049
|
|
|
$
|
78,694
|
|
|
$
|
(2,794
|
)
|
|
$
|
(34,289
|
)
|
|
$
|
(446
|
)
|
|
$
|
295,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
1,621,517
|
|
|
$
|
—
|
|
|
$
|
20,362
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,641,879
|
|
Direct costs (1)
|
|
1,329,648
|
|
|
—
|
|
|
14,741
|
|
|
29,928
|
|
|
—
|
|
|
1,374,317
|
|
Adjusted EBITDA
|
|
$
|
291,869
|
|
|
$
|
—
|
|
|
$
|
5,621
|
|
|
$
|
(29,928
|
)
|
|
$
|
—
|
|
|
$
|
267,562
|
|
(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 earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
Nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net earnings (loss) attributable to Ferrellgas Partners, L.P.
|
|
$
|
18,685
|
|
|
$
|
35,812
|
|
|
$
|
(3,981
|
)
|
|
$
|
88,395
|
|
Income tax expense
|
|
1,260
|
|
|
917
|
|
|
1,446
|
|
|
1,448
|
|
Interest expense
|
|
34,371
|
|
|
23,510
|
|
|
102,889
|
|
|
71,797
|
|
Depreciation and amortization expense
|
|
38,352
|
|
|
23,324
|
|
|
112,698
|
|
|
70,576
|
|
EBITDA
|
|
92,668
|
|
|
83,563
|
|
|
213,052
|
|
|
232,216
|
|
Non-cash employee stock ownership plan compensation charge
|
|
9,978
|
|
|
8,566
|
|
|
18,375
|
|
|
16,728
|
|
Non-cash stock-based compensation charge
|
|
1,091
|
|
|
3,271
|
|
|
6,757
|
|
|
19,701
|
|
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
29,316
|
|
|
—
|
|
Loss on disposal of assets and other
|
|
5,779
|
|
|
2,203
|
|
|
23,220
|
|
|
4,578
|
|
Other (income) expense, net
|
|
(331
|
)
|
|
(212
|
)
|
|
89
|
|
|
415
|
|
Change in fair value of contingent consideration
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
(6,300
|
)
|
Severance costs
|
|
469
|
|
|
—
|
|
|
1,325
|
|
|
—
|
|
Litigation accrual and related legal fees associated with a class action lawsuit
|
|
—
|
|
|
83
|
|
|
—
|
|
|
806
|
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments
|
|
(1,915
|
)
|
|
(1,609
|
)
|
|
2,993
|
|
|
(1,609
|
)
|
Acquisition and transition expenses
|
|
14
|
|
|
—
|
|
|
99
|
|
|
—
|
|
Net earnings attributable to noncontrolling interest
|
|
233
|
|
|
408
|
|
|
88
|
|
|
1,027
|
|
Adjusted EBITDA
|
|
$
|
107,986
|
|
|
$
|
96,273
|
|
|
$
|
295,214
|
|
|
$
|
267,562
|
|
|
|
|
|
|
|
|
|
|
Following are total assets by segment:
|
|
|
|
|
|
|
|
|
|
Assets
|
|
April 30, 2016
|
|
July 31, 2015
|
Propane and related equipment sales
|
|
$
|
1,257,965
|
|
|
$
|
1,295,831
|
|
Midstream operations - crude oil logistics
|
|
897,181
|
|
|
917,325
|
|
Midstream operations - water logistics
|
|
175,157
|
|
|
205,358
|
|
Corporate and unallocated
|
|
42,546
|
|
|
45,542
|
|
Total consolidated assets
|
|
$
|
2,372,849
|
|
|
$
|
2,464,056
|
|
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
12,705
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
991
|
|
|
$
|
13,728
|
|
Growth
|
|
28,461
|
|
|
52,315
|
|
|
10,553
|
|
|
—
|
|
|
91,329
|
|
Total
|
|
$
|
41,166
|
|
|
$
|
52,347
|
|
|
$
|
10,553
|
|
|
$
|
991
|
|
|
$
|
105,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
12,839
|
|
|
$
|
—
|
|
|
$
|
976
|
|
|
$
|
1,012
|
|
|
$
|
14,827
|
|
Growth
|
|
27,128
|
|
|
—
|
|
|
6,561
|
|
|
—
|
|
|
33,689
|
|
Total
|
|
$
|
39,967
|
|
|
$
|
—
|
|
|
$
|
7,537
|
|
|
$
|
1,012
|
|
|
$
|
48,516
|
|
O.
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)
|
|
April 30, 2016
|
|
July 31, 2015
|
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
|
17,760
|
|
|
17,485
|
|
Accumulated deficit
|
(17,760
|
)
|
|
(17,485
|
)
|
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 EARNINGS
|
(unaudited)
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
General and administrative expense
|
$
|
225
|
|
|
$
|
549
|
|
|
$
|
275
|
|
|
$
|
699
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(225
|
)
|
|
$
|
(549
|
)
|
|
$
|
(275
|
)
|
|
$
|
(699
|
)
|
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 nine months ended April 30,
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(275
|
)
|
|
$
|
(699
|
)
|
Cash used in operating activities
|
(275
|
)
|
|
(699
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Capital contribution
|
275
|
|
|
730
|
|
Cash provided by financing activities
|
275
|
|
|
730
|
|
|
|
|
|
Net change in cash
|
—
|
|
|
31
|
|
Cash - beginning of period
|
1,000
|
|
|
969
|
|
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 statement 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)
|
|
April 30, 2016
|
|
July 31, 2015
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
6,235
|
|
|
$
|
5,600
|
|
Accounts and notes receivable, net (including $134,538 and $123,791 of accounts receivable pledged as collateral at April 30, 2016 and July 31, 2015, respectively)
|
192,704
|
|
|
196,918
|
|
Inventories
|
87,739
|
|
|
96,754
|
|
Prepaid expenses and other current assets
|
35,975
|
|
|
64,211
|
|
Total current assets
|
322,653
|
|
|
363,483
|
|
|
|
|
|
Property, plant and equipment, net
|
981,453
|
|
|
965,217
|
|
Goodwill, net
|
446,333
|
|
|
478,747
|
|
Intangible assets (net of accumulated amortization of $421,475 and $375,119 at April 30, 2016 and July 31, 2015, respectively)
|
551,372
|
|
|
580,043
|
|
Assets held for sale
|
845
|
|
|
—
|
|
Other assets, net
|
68,628
|
|
|
72,472
|
|
Total assets
|
$
|
2,371,284
|
|
|
$
|
2,459,962
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$
|
78,063
|
|
|
$
|
83,974
|
|
Short-term borrowings
|
9,071
|
|
|
75,319
|
|
Collateralized note payable
|
77,000
|
|
|
70,000
|
|
Other current liabilities
|
155,464
|
|
|
176,176
|
|
Total current liabilities
|
319,598
|
|
|
405,469
|
|
|
|
|
|
Long-term debt
|
1,778,331
|
|
|
1,622,392
|
|
Other liabilities
|
33,347
|
|
|
41,975
|
|
Contingencies and commitments (Note L)
|
|
|
|
|
|
|
|
|
|
Partners' capital:
|
|
|
|
|
|
Limited partner
|
250,276
|
|
|
425,105
|
|
General partner
|
2,558
|
|
|
4,339
|
|
Accumulated other comprehensive loss
|
(12,826
|
)
|
|
(39,318
|
)
|
Total partners' capital
|
240,008
|
|
|
390,126
|
|
Total liabilities and partners' capital
|
$
|
2,371,284
|
|
|
$
|
2,459,962
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Propane and other gas liquids sales
|
$
|
338,929
|
|
|
$
|
445,667
|
|
|
$
|
961,086
|
|
|
$
|
1,400,895
|
|
Midstream operations
|
105,424
|
|
|
5,293
|
|
|
487,427
|
|
|
20,362
|
|
Other
|
65,119
|
|
|
81,591
|
|
|
181,343
|
|
|
220,622
|
|
Total revenues
|
509,472
|
|
|
532,551
|
|
|
1,629,856
|
|
|
1,641,879
|
|
|
|
|
|
|
|
|
|
Costs of sales:
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
152,261
|
|
|
253,684
|
|
|
448,841
|
|
|
849,190
|
|
Cost of sales - midstream operations
|
71,852
|
|
|
1,877
|
|
|
373,899
|
|
|
6,064
|
|
Cost of sales - other
|
41,203
|
|
|
57,709
|
|
|
111,425
|
|
|
147,672
|
|
Operating expense
|
115,271
|
|
|
107,418
|
|
|
347,467
|
|
|
321,063
|
|
Depreciation and amortization expense
|
38,352
|
|
|
23,324
|
|
|
112,698
|
|
|
70,576
|
|
General and administrative expense
|
13,214
|
|
|
10,902
|
|
|
42,032
|
|
|
45,169
|
|
Equipment lease expense
|
7,244
|
|
|
6,347
|
|
|
21,554
|
|
|
17,674
|
|
Non-cash employee stock ownership plan compensation charge
|
9,978
|
|
|
8,566
|
|
|
18,375
|
|
|
16,728
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
29,316
|
|
|
—
|
|
Loss on disposal of assets and other
|
5,779
|
|
|
2,203
|
|
|
23,220
|
|
|
4,578
|
|
|
|
|
|
|
|
|
|
Operating income
|
54,318
|
|
|
60,521
|
|
|
101,029
|
|
|
163,165
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(30,340
|
)
|
|
(19,476
|
)
|
|
(90,799
|
)
|
|
(59,695
|
)
|
Other income (expense), net
|
331
|
|
|
212
|
|
|
(89
|
)
|
|
(415
|
)
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
24,309
|
|
|
41,257
|
|
|
10,141
|
|
|
103,055
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
1,260
|
|
|
853
|
|
|
1,441
|
|
|
1,379
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
23,049
|
|
|
$
|
40,404
|
|
|
$
|
8,700
|
|
|
$
|
101,676
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(in thousands)
|
(unaudited)
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
23,049
|
|
|
$
|
40,404
|
|
|
$
|
8,700
|
|
|
$
|
101,676
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Change in value of risk management derivatives
|
|
14,681
|
|
|
7,919
|
|
|
3,561
|
|
|
(51,105
|
)
|
Reclassification of losses on derivatives to earnings, net
|
|
6,138
|
|
|
10,907
|
|
|
22,931
|
|
|
17,338
|
|
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Other comprehensive income (loss)
|
|
20,819
|
|
|
18,826
|
|
|
26,492
|
|
|
(33,769
|
)
|
Comprehensive income
|
|
$
|
43,868
|
|
|
$
|
59,230
|
|
|
$
|
35,192
|
|
|
$
|
67,907
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
other
|
|
Total
|
|
Limited
|
|
General
|
|
comprehensive
|
|
partners'
|
|
partner
|
|
partner
|
|
loss
|
|
capital
|
|
|
|
|
|
|
|
|
Balance at July 31, 2015
|
$
|
425,105
|
|
|
$
|
4,339
|
|
|
$
|
(39,318
|
)
|
|
$
|
390,126
|
|
Contributions in connection with non-cash ESOP and stock-based compensation charges
|
24,878
|
|
|
254
|
|
|
—
|
|
|
25,132
|
|
Contributions in connection with acquisitions
|
(284
|
)
|
|
—
|
|
|
—
|
|
|
(284
|
)
|
Distributions
|
(208,035
|
)
|
|
(2,123
|
)
|
|
—
|
|
|
(210,158
|
)
|
Net loss
|
8,612
|
|
|
88
|
|
|
—
|
|
|
8,700
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
26,492
|
|
|
26,492
|
|
Balance at April 30, 2016
|
$
|
250,276
|
|
|
$
|
2,558
|
|
|
$
|
(12,826
|
)
|
|
$
|
240,008
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in thousands)
|
(unaudited)
|
|
For the nine months ended April 30,
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
Net earnings
|
$
|
8,700
|
|
|
$
|
101,676
|
|
Reconciliation of net earnings to net cash provided by (used in) operating activities:
|
|
|
|
Depreciation and amortization expense
|
112,698
|
|
|
70,576
|
|
Non-cash employee stock ownership plan compensation charge
|
18,375
|
|
|
16,728
|
|
Non-cash stock-based compensation charge
|
6,757
|
|
|
19,701
|
|
Goodwill impairment
|
29,316
|
|
|
—
|
|
Loss on disposal of assets and other
|
23,220
|
|
|
4,578
|
|
Change in fair value of contingent consideration
|
(100
|
)
|
|
(6,300
|
)
|
Provision for doubtful accounts
|
1,974
|
|
|
3,194
|
|
Deferred income tax expense (benefit)
|
(124
|
)
|
|
102
|
|
Other
|
3,406
|
|
|
2,402
|
|
Changes in operating assets and liabilities, net of effects from business acquisitions:
|
|
|
|
Accounts and notes receivable, net of securitization
|
2,755
|
|
|
(14,073
|
)
|
Inventories
|
8,771
|
|
|
47,159
|
|
Prepaid expenses and other current assets
|
21,623
|
|
|
(17,621
|
)
|
Accounts payable
|
(5,194
|
)
|
|
(15,001
|
)
|
Accrued interest expense
|
23,834
|
|
|
16,121
|
|
Other current liabilities
|
(34,845
|
)
|
|
(19,128
|
)
|
Other assets and liabilities
|
9,328
|
|
|
(6,996
|
)
|
Net cash provided by operating activities
|
230,494
|
|
|
203,118
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Business acquisitions, net of cash acquired
|
(13,894
|
)
|
|
(68,902
|
)
|
Capital expenditures
|
(108,387
|
)
|
|
(51,321
|
)
|
Proceeds from sale of assets
|
11,862
|
|
|
4,060
|
|
Other
|
(499
|
)
|
|
—
|
|
Net cash used in investing activities
|
(110,918
|
)
|
|
(116,163
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Distributions
|
(210,158
|
)
|
|
(134,535
|
)
|
Contributions from partners
|
30
|
|
|
42,655
|
|
Proceeds from issuance of long-term debt
|
159,814
|
|
|
107,951
|
|
Payments on long-term debt
|
(8,739
|
)
|
|
(60,216
|
)
|
Net reductions in short-term borrowings
|
(66,248
|
)
|
|
(69,519
|
)
|
Net additions to collateralized short-term borrowings
|
7,000
|
|
|
26,000
|
|
Cash paid for financing costs
|
(640
|
)
|
|
(204
|
)
|
Net cash used in financing activities
|
(118,941
|
)
|
|
(87,868
|
)
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
(2
|
)
|
|
|
|
|
Net change in cash and cash equivalents
|
635
|
|
|
(915
|
)
|
Cash and cash equivalents - beginning of period
|
5,600
|
|
|
8,283
|
|
Cash and cash equivalents - end of period
|
$
|
6,235
|
|
|
$
|
7,368
|
|
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 services 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 reportable business segment activities:
|
|
•
|
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 two reportable operating segments: crude oil logistics and water solutions. 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 sales arrangements. The salt water disposal wells within the water solutions segment are located in the Eagle Ford shale region of south Texas and are a critical component of the oil and natural gas well drilling industry. Oil and natural gas wells generate significant volumes of salt water. In the oil and gas fields Ferrellgas, L.P. services, these volumes of water are transported by truck away from the fields to salt water disposal wells where a combination of gravity and chemicals are used to separate crude oil that is residual in the salt water through a process that results in the collection of "skimming oil". This skimming oil is then captured and sold before the salt water is injected into underground geologic formations using high-pressure pumps.
|
Due to seasonality, the results of operations for the
nine months ended
April 30, 2016
are not necessarily indicative of the results to be expected for a full fiscal year ending July 31, 2016.
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. 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
2015
.
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 condensed consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, valuation methods used to value intangibles and goodwill in business combinations, allowance for doubtful accounts, fair value of assets held for sale, fair value of reporting units, fair value of derivative contracts, and stock based compensation calculations.
(2)
Goodwill:
Ferrellgas, L.P. records goodwill as the excess of the cost of acquisitions over the fair value of the related net assets at the date of acquisition. Ferrellgas, L.P. has determined that it has five reporting units for goodwill impairment testing purposes. Three of these reporting units contain goodwill that is subject to at least an annual assessment for impairment by applying a fair-value-based test. Under this test, the carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of the evaluation on a
specific identification basis. To the extent a reporting unit’s carrying value exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the second step of the impairment test must be performed. In the second step, the implied fair value of goodwill is determined by assigning the fair value of a reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for that excess. We completed our last annual goodwill impairment test on January 31, 2016 and did not incur an impairment loss.
During the three months ended April 30, 2016, Ferrellgas, L.P. determined that the uncertainty surrounding the future cash flows associated with a logistics contract with its largest customer and Jamex, that customer’s crude oil supplier, constituted a triggering event for its Midstream operations - crude oil logistics business that required an update to the goodwill impairment assessment as of April 30, 2016. Additionally, during the three months ended October 31, 2015, Ferrellgas, L.P. determined that the continued and prolonged decline in the price of crude oil constituted a triggering event for its Midstream operations - water solutions business that required an update to the goodwill impairment assessment as of October 31, 2015. See Note F – Goodwill and intangible assets, net – for further discussion of Ferrellgas, L.P.'s goodwill impairment assessment.
(3) Assets held for sale:
Assets held for sale represent tractor trucks that have met the criteria of “held for sale” accounting. During the first quarter of fiscal 2016, Ferrellgas, L.P. committed to a plan to sell certain trucks held by the Midstream operations - crude oil logistics segment. These assets were reclassified from "Vehicles, including transport trailers" to Assets held for sale in the balance sheet as of October 31, 2015. Ferrellgas, L.P. ceased depreciation on these assets during October 2015. Assets held for sale are recorded at the lower of the carrying amount or fair value less costs to sell. See Note D – Supplemental financial statement information – for further discussion of these held for sale assets.
(4) 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
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. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted. Ferrellgas is currently evaluating the impact of our pending adoption of ASU 2015-02 on the consolidated financial statements
.
FASB Accounting Standard Update No. 2015-03
In April 2015, the FASB issued ASU 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt liability. ASU 2015-03 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted, and retrospective application required. We do not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
FASB Accounting Standard Update No. 2015-06
In September 2015, the FASB issued ASU 2015-06,
Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments,
which requires all entities to record the effects on earnings, if any, of changes in provisional amounts for items in a business combination in the same period in which the adjustment amounts are determined. The requirement to retrospectively account for the adjustments is eliminated by this amendment. ASU 2015-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, 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. 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.
(5)
Supplemental cash flow information:
For purposes of the condensed consolidated statements of cash flows, Ferrellgas, L.P. considers cash equivalents to include all highly liquid debt instruments purchased with an original maturity of three months or less. Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
|
2016
|
|
2015
|
CASH PAID FOR:
|
|
|
|
Interest
|
$
|
63,559
|
|
|
$
|
41,172
|
|
Income taxes
|
$
|
427
|
|
|
$
|
264
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
Liabilities incurred in connection with acquisitions
|
$
|
1,239
|
|
|
$
|
—
|
|
Change in accruals for property, plant and equipment additions
|
$
|
1,293
|
|
|
$
|
1,316
|
|
(6)
Inventories:
Inventories are stated at the lower of cost or market using weighted average cost and actual cost methods.
C.
Business combinations
Ferrellgas, L.P. records the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. An entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair values of the assets acquired and liabilities assumed in a business combination. The Bridger acquisition, which occurred during the year ended July 31, 2015 and is described below, is still within this measurement period, and as a result, the acquisition date fair values Ferrellgas, L.P. recorded for the assets acquired and liabilities assumed are subject to change. Ferrellgas, L.P. made certain adjustments during the nine months ended April 30, 2016 to its estimates of the acquisition date fair values of the Bridger assets acquired and liabilities assumed.
On June 24, 2015, Ferrellgas Partners acquired Bridger and formed a new midstream operations - crude oil logistics segment based near Dallas, Texas. Ferrellgas paid
$560.0 million
of cash, net of cash acquired and issued
$260.0 million
of Ferrellgas Partners common units to the seller, along with
$2.5 million
of other seller costs and consideration for an aggregate value of
$822.5 million
. Ferrellgas Partners then contributed the Bridger assets and liabilities to Ferrellgas, L.P. The purchase agreement for the Bridger acquisition contemplates post-closing payments for certain working capital items. Ferrellgas, L.P. is in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in this business combination, and as a result, the estimates of fair value at April 30, 2016 remain subject to change to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Ferrellgas, L.P. is currently determining the appropriate value of working capital acquired with the former owners of Bridger. Ferrellgas, L.P. has preliminarily estimated the fair values of the assets acquired and liabilities assumed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated At
|
|
|
|
|
April 30, 2016
(as adjusted)
|
|
July 31, 2015 (as initially reported)
|
|
Measurement period adjustments
|
Working capital
|
|
$
|
(7,867
|
)
|
|
$
|
1,783
|
|
|
$
|
(9,650
|
)
|
Transportation equipment
|
|
293,491
|
|
|
293,491
|
|
|
—
|
|
Injection stations and pipelines
|
|
41,632
|
|
|
41,632
|
|
|
—
|
|
Goodwill
|
|
188,872
|
|
|
193,311
|
|
|
(4,439
|
)
|
Customer relationships
|
|
277,100
|
|
|
261,811
|
|
|
15,289
|
|
Non-compete agreements
|
|
10,000
|
|
|
14,800
|
|
|
(4,800
|
)
|
Trade names & trademarks
|
|
9,400
|
|
|
5,800
|
|
|
3,600
|
|
Office equipment
|
|
7,449
|
|
|
7,449
|
|
|
—
|
|
Other
|
|
2,375
|
|
|
2,375
|
|
|
—
|
|
Aggregate fair value of net assets acquired
|
|
$
|
822,452
|
|
|
$
|
822,452
|
|
|
$
|
—
|
|
Pro forma results of operations (unaudited)
:
The following summarized unaudited pro forma consolidated statement of earnings information assumes that the acquisition of Bridger during fiscal 2015 occurred as of August 1, 2014. These unaudited pro forma results are for comparative purposes only and may not be indicative of the results that would have occurred had this acquisition been completed on August 1, 2014 or the results that would be attained in the future.
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
2015
|
|
2015
|
Revenue
|
$
|
614,777
|
|
|
$
|
1,894,618
|
|
Net earnings
|
33,990
|
|
|
88,886
|
|
The unaudited pro forma consolidated data presented above has also been prepared as if the following transaction had been completed on August 1, 2014:
|
|
•
|
the issuance of senior secured notes in June 2015.
|
D.
Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Propane gas and related products
|
|
$
|
51,502
|
|
|
$
|
68,731
|
|
Crude oil
|
|
9,871
|
|
|
—
|
|
Appliances, parts and supplies
|
|
26,366
|
|
|
28,023
|
|
Inventories
|
|
$
|
87,739
|
|
|
$
|
96,754
|
|
In addition to inventories on hand, Ferrellgas, L.P. enters into contracts primarily to buy propane for supply procurement purposes with terms up to
36 months
. Most of these contracts call for payment based on market prices at the date of delivery. As of
April 30, 2016
, Ferrellgas, L.P. had committed, for supply procurement purposes, to take delivery of approximately
92.7
million gallons of propane at fixed prices.
Property, plant and equipment, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
July 31,
|
|
Estimated useful lives
|
|
2016
|
|
2015
|
Land
|
Indefinite
|
|
$
|
35,220
|
|
|
$
|
34,389
|
|
Land improvements
|
2-20
|
|
13,776
|
|
|
13,249
|
|
Building and improvements
|
20
|
|
72,800
|
|
|
71,923
|
|
Vehicles, including transport trailers
|
8-20
|
|
205,892
|
|
|
228,646
|
|
Bulk equipment and district facilities
|
5-30
|
|
112,283
|
|
|
111,657
|
|
Tanks, cylinders and customer equipment
|
2-30
|
|
773,022
|
|
|
772,904
|
|
Salt water disposal wells and related equipment
|
2-30
|
|
55,569
|
|
|
38,460
|
|
Rail cars
|
30
|
|
199,240
|
|
|
150,235
|
|
Injection stations
|
20
|
|
32,178
|
|
|
37,619
|
|
Pipeline
|
15
|
|
4,074
|
|
|
4,074
|
|
Computer and office equipment
|
2-5
|
|
121,813
|
|
|
123,386
|
|
Construction in progress
|
n/a
|
|
22,080
|
|
|
16,841
|
|
|
|
|
1,647,947
|
|
|
1,603,383
|
|
Less: accumulated depreciation
|
|
|
666,494
|
|
|
638,166
|
|
Property, plant and equipment, net
|
|
|
$
|
981,453
|
|
|
$
|
965,217
|
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Accrued interest
|
|
$
|
39,109
|
|
|
$
|
15,275
|
|
Accrued payroll
|
|
18,354
|
|
|
17,485
|
|
Customer deposits and advances
|
|
21,335
|
|
|
28,792
|
|
Price risk management liabilities
|
|
20,077
|
|
|
31,450
|
|
Other
|
|
56,589
|
|
|
83,174
|
|
Other current liabilities
|
|
$
|
155,464
|
|
|
$
|
176,176
|
|
Shipping and handling expenses are classified in the following condensed consolidated statements of earnings line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
42,378
|
|
|
$
|
41,291
|
|
|
$
|
126,946
|
|
|
$
|
135,206
|
|
Depreciation and amortization expense
|
|
1,071
|
|
|
1,194
|
|
|
3,268
|
|
|
3,970
|
|
Equipment lease expense
|
|
6,470
|
|
|
5,900
|
|
|
19,385
|
|
|
16,479
|
|
|
|
$
|
49,919
|
|
|
$
|
48,385
|
|
|
$
|
149,599
|
|
|
$
|
155,655
|
|
During the three month period ended October 31, 2015, Ferrellgas, L.P. committed to a plan to dispose of certain assets in its Midstream operations - crude oil logistics segment. As of October 31, 2015, this plan resulted in
69
tractor trucks sold and
136
tractor trucks reclassified from "Vehicles, including transport trailers" to Assets held for sale. The held for sale assets were recorded at the lower of carrying value or estimated fair value, less an estimate of costs to sell. The estimate of fair value included significant unobservable inputs (Level 3 fair value). Subsequent to October 31, 2015,
64
of these tractor trailers were sold,
59
were repurposed and reclassified to property, plant, and equipment as held for use within other Ferrellgas businesses, which constitutes a change in plan, and
13
tractor trucks remain classified as held for sale as of
April 30, 2016
. Loss on disposal of assets and other during the three and nine month periods ended
April 30, 2016
consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Loss on assets held for sale
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,112
|
|
|
$
|
—
|
|
Loss on sale of assets held for sale
|
|
896
|
|
|
—
|
|
|
1,687
|
|
|
—
|
|
Loss on sale of assets and other
|
|
4,883
|
|
|
2,203
|
|
|
9,421
|
|
|
4,578
|
|
Loss on disposal of assets and other
|
|
$
|
5,779
|
|
|
$
|
2,203
|
|
|
$
|
23,220
|
|
|
$
|
4,578
|
|
E.
Accounts and notes receivable, net and accounts receivable securitization
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
July 31, 2015
|
Accounts receivable pledged as collateral
|
$
|
134,538
|
|
|
$
|
123,791
|
|
Accounts receivable
|
64,359
|
|
|
77,636
|
|
Other
|
382
|
|
|
307
|
|
Less: Allowance for doubtful accounts
|
(6,575
|
)
|
|
(4,816
|
)
|
Accounts and notes receivable, net
|
$
|
192,704
|
|
|
$
|
196,918
|
|
At
April 30, 2016
,
$134.5
million of trade accounts receivable were pledged as collateral against
$77.0
million of collateralized notes payable due to a commercial paper conduit. At
July 31, 2015
,
$123.8 million
of trade accounts receivable were pledged as collateral against
$70.0 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
April 30, 2016
, Ferrellgas, L.P. had received cash proceeds of
$77.0
million from trade accounts receivables securitized, with
no
remaining capacity to receive additional proceeds. As of
July 31, 2015
, Ferrellgas, L.P. had received cash proceeds of
$70.0
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
2.9%
and
2.3%
as of
April 30, 2016
and
July 31, 2015
, respectively.
F.
Goodwill and intangible assets, net
Ferrellgas, L.P. records goodwill as the excess of the cost of acquisitions over the fair value of the related net assets at the date of acquisition.
Ferrellgas, L.P. tests goodwill for impairment annually during the second quarter or more frequently if events or changes in circumstances indicate that it is more likely than not the fair value of a reporting unit is less than the carrying value.
During the nine months ended April 30, 2016, approximately 60% of Midstream Operations - Crude oil logistics' segment gross margin was generated from its largest customer and Jamex, that customer's crude oil supplier, under a take-or-pay arrangement (the “contract”). Under the terms of the take-or-pay arrangement, Jamex is responsible for payments to Ferrellgas, L.P. and also for sourcing crude oil volumes for that customer. Ferrellgas, L.P. believes Jamex may not have financial resources sufficient to satisfy its payment obligations to Ferrellgas, L.P. through June 2019, the remaining term of this agreement. If current market conditions persist, Ferrellgas, L.P. also believes Jamex may not be able to fulfill its crude oil sourcing volume commitments to Ferrellgas, L.P.’s customer throughout the remaining term of this agreement, which could cause a termination of the transportation and logistics agreement Ferrellgas, L.P. has with that customer. Ferrellgas, L.P. is currently negotiating alternative contractual arrangements to mitigate this risk. If Ferrellgas, L.P.’s transportation and logistics agreement with that customer were to terminate and Ferrellgas, L.P. was unable to negotiate an economically similar replacement agreement with that customer, Ferrellgas, L.P. would likely experience a decrease in sales, gross margin and net income from crude oil logistics operations which would materially and adversely affect the results of operations and cash flows generated by the segment. As a result of the uncertainty surrounding the future cash flows associated with this contract, Ferrellgas, L.P. considered whether the fair value of this reporting unit no longer exceeded the carrying value. Upon applying the fair-value-based test as described above for purposes of the interim impairment test, Ferrellgas, L.P. concluded that there was no impairment of the Midstream operations - crude oil logistics reporting unit as of April 30, 2016. As of April 30, 2016, Ferrellgas, L.P. determined that this reporting unit had an estimated fair value in excess of its respective carrying value of approximately 10%.
This test primarily consists of using discounted future cash flow models to estimate fair value. Ferrellgas, L.P. prepared various cash flow models involving certain potential scenarios and probability weighted these scenarios which included the following critical assumptions: (1) renewal of certain significant, long term logistics contracts upon their expiration; (2) the economic conditions present in the oil and gas sector at the time of these contract renewals; (3) the timing, success rate and capital required for certain organic growth projects; (4) the amount of capital expenditures required to maintain the existing cash flows; and (5) a terminal period growth rate equal to the expected rate of inflation. In addition to these critical cash flow assumptions, a discount rate of 11.3% was applied to the various projected cash flow models.
Judgments and assumptions are inherent in management’s estimates used to determine the fair value of Ferrellgas, L.P.'s reporting units and are consistent with what management believes would be utilized by primary market participants.
Additionally, during the three months ended
October 31, 2015
, Ferrellgas, L.P. determined that the continued and prolonged decline in the price of crude oil constituted a triggering event for its Midstream operations - water solutions business that required an update to the goodwill impairment assessment as of
October 31, 2015
.
The first step of this test primarily consists of a discounted future cash flow model to predict fair value. The result of this first step is based on the following critical assumptions: (1) the NYMEX West Texas Intermediate (“WTI”) crude oil curve was used to estimate future oil prices; (2) the oil skimming rate was expected to increase or decrease consistent with the projected increases/decreases in the NYMEX WTI crude oil curve consistent with past history; and (3) certain organic growth projects were projected to increase the salt water volumes processed as new drilling activity increases associated with the projected NYMEX WTI crude oil curve. As noted in our discussion of this reporting unit in Ferrellgas, L.P.'s Annual Report on Form 10-K for the year ended July 31, 2015, Ferrellgas, L.P. believes that the results of this business are closely tied to the price of WTI crude oil. The daily average closing price for WTI crude oil for the three months ended July 31, 2015 of
$56.63
decreased
20.7%
to
$44.90
during the three months ended October 31, 2015. Additionally, the projected NYMEX WTI crude oil curve decreased approximately
6.5%
from August 31, 2015 to October 31, 2015. These events have led to an overall decline in drilling activity and volumes in the Eagle Ford shale region of Texas. These market changes negatively affected Ferrellgas, L.P.'s current period results and future projections sufficiently to indicate that the fair value of the reporting unit likely no longer exceeded its carrying value.
In the second step, the implied fair value of goodwill is determined by assigning the fair value of a reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for that excess.
As of October 31, 2015, Ferrellgas, L.P. performed the first step of the goodwill impairment test for the Midstream operations - water solutions reporting unit and determined that the carrying value of the reporting unit exceeded the fair value. Ferrellgas, L.P. then completed the second step of the goodwill impairment analysis comparing the implied fair value of the reporting unit to the carrying amount of goodwill and determined that goodwill was completely impaired and has written off the entire
$29.3 million
of goodwill related to this reporting unit.
Changes in the carrying amount of goodwill, by reportable segment, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane and related equipment sales
|
|
Midstream operations - water solutions
|
|
Midstream operations - crude oil logistics
|
|
Total
|
Balance at July 31, 2015
|
$
|
256,120
|
|
|
$
|
29,316
|
|
|
$
|
193,311
|
|
|
$
|
478,747
|
|
Acquisitions
|
—
|
|
|
—
|
|
|
1,356
|
|
|
1,356
|
|
Measurement period adjustments
|
—
|
|
|
—
|
|
|
(4,439
|
)
|
|
(4,439
|
)
|
Dispositions
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
Impairment
|
—
|
|
|
(29,316
|
)
|
|
—
|
|
|
(29,316
|
)
|
Balance at April 30, 2016
|
$
|
256,105
|
|
|
$
|
—
|
|
|
$
|
190,228
|
|
|
$
|
446,333
|
|
G.
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
April 30, 2016
and
July 31, 2015
,
$9.1 million
and
$75.3 million
, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.
Secured credit facility
As of
April 30, 2016
, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of
$299.0 million
, of which
$289.9 million
was classified as long-term debt. As of
July 31, 2015
, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of
$211.4 million
, of which
$136.1 million
was classified as long-term debt. Borrowings outstanding at
April 30, 2016
and
July 31, 2015
under the secured credit facility had weighted average interest rates of
3.6%
and
3.5%
, 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 interest 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
April 30, 2016
totaled
$69.5 million
and were used primarily to secure insurance arrangements and to a lesser extent, product purchases. Letters of credit outstanding at
July 31, 2015
totaled
$61.2 million
and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. At
April 30, 2016
, Ferrellgas, L.P. had remaining letter of credit capacity of
$130.5 million
. At
July 31, 2015
Ferrellgas, L.P. had remaining letter of credit capacity of
$138.8 million
.
H.
Partners’ capital
Partnership distributions paid
Ferrellgas, L.P. has paid the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Ferrellgas Partners
|
|
$
|
50,733
|
|
|
$
|
41,777
|
|
|
$
|
208,035
|
|
|
$
|
133,177
|
|
General partner
|
|
518
|
|
|
426
|
|
|
2,123
|
|
|
1,358
|
|
|
|
$
|
51,251
|
|
|
$
|
42,203
|
|
|
$
|
210,158
|
|
|
$
|
134,535
|
|
On
May 24, 2016
, Ferrellgas, L.P. declared distributions for the three months ended
April 30, 2016
to Ferrellgas Partners and the general partner of
$58.8 million
and
$0.6 million
, respectively, which are expected to be paid on
June 14, 2016
.
See additional discussions about transactions with related parties in Note K – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)
See Note J – Derivative instruments and hedging activities – for details regarding changes in the fair value of risk management financial derivatives recorded within AOCI for the three and
nine months ended
April 30, 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
nine months ended
April 30, 2016
, the general partner made non-cash contributions of
$0.3 million
to Ferrellgas, L.P. to maintain its
1.0101%
general partner interest.
During the
nine months ended
April 30, 2015
, the general partner made cash contributions of
$0.4 million
and non-cash contributions of
$0.4 million
to Ferrellgas, L.P. to maintain its
1.0101%
general partner interest.
I.
Fair value measurements
Derivative financial instruments and contingent consideration
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
April 30, 2016
and
July 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
April 30, 2016:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
4,582
|
|
|
$
|
—
|
|
|
$
|
4,582
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
6,344
|
|
|
$
|
—
|
|
|
$
|
6,344
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(3,856
|
)
|
|
$
|
—
|
|
|
$
|
(3,856
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(20,818
|
)
|
|
$
|
—
|
|
|
$
|
(20,818
|
)
|
|
|
|
|
|
|
|
|
|
July 31, 2015:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
1,828
|
|
|
$
|
—
|
|
|
$
|
1,828
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
4,655
|
|
|
$
|
—
|
|
|
$
|
4,655
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(4,748
|
)
|
|
$
|
—
|
|
|
$
|
(4,748
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(42,375
|
)
|
|
$
|
—
|
|
|
$
|
(42,375
|
)
|
Contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(100
|
)
|
|
$
|
(100
|
)
|
The following is a reconciliation of the opening and closing balances for the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period ended
April 30, 2016
:
|
|
|
|
|
|
|
|
Contingent consideration liability
|
Balance at July 31, 2015
|
|
$
|
100
|
|
Increase in fair value related to accretion
|
|
—
|
|
Change in fair value included in earnings
|
|
(100
|
)
|
Balance at April 30, 2016
|
|
$
|
—
|
|
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. The fair value of the trucks classified as assets held for sale represents Ferrellgas, L.P.'s estimate of expected sales price less costs to sell. The fair value measurements used to determine this value of the assets held for sale were based on a market approach utilizing prices from prior transactions and third party pricing information.
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. At
April 30, 2016
and
July 31, 2015
, the estimated fair value of Ferrellgas, L.P.’s long-term debt instruments was
$1,694.8 million
and
$1,700.5 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.
J.
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
nine months ended
April 30, 2016
Ferrellgas, L.P. did not 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. During the
nine months ended
April 30, 2015
, Ferrellgas, L.P. recognized a
$0.2 million
loss 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
April 30, 2016
and
July 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 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
|
|
$
|
2,058
|
|
|
Other current liabilities
|
|
$
|
11,441
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
2,926
|
|
|
Other liabilities
|
|
2,301
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,676
|
|
|
Other current liabilities
|
|
2,315
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
2,906
|
|
|
Other liabilities
|
|
1,541
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
3,249
|
|
Commodity derivatives-vehicle fuel
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
755
|
|
Commodity derivatives- crude oil
|
|
Prepaid expenses and other current assets
|
|
1,360
|
|
|
Other current liabilities
|
|
3,072
|
|
|
|
Total
|
|
$
|
10,926
|
|
|
Total
|
|
$
|
24,674
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2015
|
|
|
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
|
|
$
|
3,614
|
|
|
Other current liabilities
|
|
$
|
27,929
|
|
Commodity derivatives
|
|
Other assets, net
|
|
1,041
|
|
|
Other liabilities
|
|
12,034
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
1,828
|
|
|
Other current liabilities
|
|
2,241
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
2,507
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives - vehicle fuel
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
Other current liabilities
|
|
1,280
|
|
Commodity derivatives - vehicle fuel
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
1,132
|
|
|
|
Total
|
|
$
|
6,483
|
|
|
Total
|
|
$
|
47,123
|
|
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 deposit balances as of
April 30, 2016
and
July 31, 2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Deposits
|
|
Prepaid expenses and other current assets
|
|
$
|
8,100
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
|
Other assets, net
|
|
2,992
|
|
|
Other liabilities
|
|
—
|
|
|
|
|
|
$
|
11,092
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2015
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Deposits
|
|
Prepaid expenses and other current assets
|
|
$
|
18,009
|
|
|
Other current liabilities
|
|
$
|
15
|
|
|
|
Other assets, net
|
|
11,786
|
|
|
Other liabilities
|
|
—
|
|
|
|
|
|
$
|
29,795
|
|
|
|
|
$
|
15
|
|
The following table provides a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of earnings for the three and
nine months ended
April 30, 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 April 30,
|
|
For the three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
433
|
|
|
$
|
601
|
|
|
$
|
(2,275
|
)
|
|
$
|
(2,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 nine months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
1,477
|
|
|
$
|
1,408
|
|
|
$
|
(6,825
|
)
|
|
$
|
(6,825
|
)
|
The following tables provide a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of comprehensive income for the three and
nine months ended
April 30, 2016
and
2015
due to derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
14,998
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(5,467
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(317
|
)
|
|
Interest expense
|
|
(671
|
)
|
|
—
|
|
|
|
$
|
14,681
|
|
|
|
|
$
|
(6,138
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
7,813
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(10,907
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
106
|
|
|
Interest expense
|
|
—
|
|
|
—
|
|
|
|
$
|
7,919
|
|
|
|
|
$
|
(10,907
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
5,823
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(20,729
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(2,262
|
)
|
|
Interest expense
|
|
(2,202
|
)
|
|
—
|
|
|
|
$
|
3,561
|
|
|
|
|
$
|
(22,931
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
(47,855
|
)
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(17,139
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
(3,250
|
)
|
|
Interest expense
|
|
—
|
|
|
(199
|
)
|
|
|
$
|
(51,105
|
)
|
|
|
|
$
|
(17,139
|
)
|
|
$
|
(199
|
)
|
The following tables provide a summary of the effect on Ferrellgas, L.P.'s condensed consolidated statements of earnings for the three and
nine months ended
April 30, 2016
and
2015
due to the change in fair value of derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
487
|
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
955
|
|
|
Operating expense
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
(3,532
|
)
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
(3,779
|
)
|
|
Operating expense
|
|
|
|
|
|
|
|
For the three months ended April 30, 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
|
|
$
|
1,609
|
|
|
Operating expense
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
|
$
|
1,609
|
|
|
Operating expense
|
|
|
|
|
|
The changes in derivatives included in AOCI for the
nine months ended
April 30, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
Gains and losses on derivatives included in AOCI
|
|
2016
|
|
2015
|
Beginning balance
|
|
$
|
(38,906
|
)
|
|
$
|
6,483
|
|
Change in value of risk management commodity derivatives
|
|
5,823
|
|
|
(47,855
|
)
|
Reclassification of gains and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
|
|
20,729
|
|
|
17,139
|
|
Change in value of risk management interest rate derivatives
|
|
(2,262
|
)
|
|
(3,250
|
)
|
Reclassification of gains and losses on interest rate hedges to interest expense
|
|
2,202
|
|
|
199
|
|
Ending balance
|
|
$
|
(12,414
|
)
|
|
$
|
(27,284
|
)
|
Ferrellgas, L.P. expects to reclassify net losses related to the risk management commodity derivatives of approximately
$9.4 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
nine months ended
April 30, 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
April 30, 2016
, Ferrellgas, L.P. had financial derivative contracts covering
3.1 million
barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
As of
April 30, 2016
, Ferrellgas, L.P. had financial derivative contracts covering
0.2 million
barrels of diesel and
35 thousand
barrels of unleaded gasoline related to fuel hedges in transportation of propane.
As of
April 30, 2016
, Ferrellgas, L.P. financial derivative contracts covering
0.5 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
April 30, 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
zero
.
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
April 30, 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
April 30, 2016
and Ferrellgas, L.P. had posted
no
collateral in the normal course of business related to such derivatives.
K.
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 earnings as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Operating expense
|
|
$
|
59,907
|
|
|
$
|
53,155
|
|
|
$
|
174,943
|
|
|
$
|
163,417
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
7,957
|
|
|
$
|
5,394
|
|
|
$
|
22,297
|
|
|
$
|
20,059
|
|
In connection with the closing of the Bridger acquisition, Ferrellgas Partners, L.P. issued common units to Bridger Marketing, LLC (now known as Jamex Marketing, LLC) and Ferrellgas, L.P. entered into a ten-year transportation and logistics agreement (the "TLA") with Jamex Marketing, LLC. As a result of that issuance, As of
April 30, 2016
, Jamex Marketing, LLC owned
4.9%
(1) of Ferrellgas Partners' limited partners' interest. Jamex Marketing, LLC, in connection with the TLA, enters into transactions with Ferrellgas, L.P. and its subsidiaries. Bridger provides crude oil logistics services for Jamex Marketing, LLC, including the transportation and storage of crude oil by truck, terminal and pipeline. During the three and
nine months ended April 30, 2016
, Ferrellgas L.P.'s total revenues from these transactions were
$26.6 million
and
$36.7 million
, respectively. During the three and
nine months ended April 30, 2016
, Ferrellgas L.P.'s total cost of sales from these transactions were
$1.4 million
and
$3.0 million
, respectively. There was no activity for the three and
nine months ended April 30, 2015
. The amounts due from and due to Jamex Marketing, LLC at
April 30, 2016
, were
$19.4 million
and
$0.8 million
, respectively. The amounts due from and due to Jamex Marketing, LLC at July 31, 2015, were
$4.8 million
and
$4.2 million
, respectively. On November 13, 2015, Ferrellgas Partners repurchased approximately
2.4 million
common units from Jamex Marketing, LLC, for approximately
$45.9 million
. During the three months ended April 30, 2016, Jamex Marketing, LLC sold approximately
2.4 million
units in the open market, bringing their unit ownership to
4.8 million
units as of
April 30, 2016
(1).
See additional discussions about transactions with the general partner and related parties in Note H – Partners’ capital.
(1) Beneficially owned limited partner units are based on the most recent Schedule 13G, Schedule 13D, Schedule 16 SEC filing, or information provided by the beneficial owner.
L.
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 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 does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
M.
Segment reporting
Ferrellgas, L.P. has two primary operations: propane and related equipment sales and midstream operations. These two operations result in three reportable operating segments: propane and related equipment sales, midstream operations - water solutions and midstream operations - crude oil logistics.
The chief operating decision maker evaluates the operating segments using an Adjusted EBITDA performance measure which is based on earnings before income tax expense, interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, goodwill impairment, loss on disposal of assets and other, other expense, net, change in fair value of contingent consideration, severance costs, litigation accrual and related legal fees associated with a class action lawsuit, unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments and acquisition and transition expenses. This performance measure is not a GAAP measure, however, the components are computed using amounts that are determined in accordance with GAAP. A reconciliation of this performance measure to net earnings, which is its nearest comparable GAAP measure, is included in the tables below. In management's evaluation of performance, costs such as compensation for certain administrative staff and executive management, are not allocated by segment and, accordingly, the following reportable segment results do not include such unallocated costs. The accounting policies of the operating segments are otherwise the same as those described in Note B - Summary of Significant Accounting Policies.
Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, plant and equipment, inventories, identifiable intangible assets and goodwill. Cash, certain prepaid assets and other assets are not allocated to segments. Although Ferrellgas, L.P. can and does identify long-lived assets such as property, plant and equipment and identifiable intangible assets to reportable segments, Ferrellgas, L.P. does not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges.
The propane and related equipment sales segment primarily includes the distribution and sale of propane and related equipment and supplies with concentrations in the Midwest, Southeast, Southwest and Northwest regions of the United States. Sales from propane distribution are generated principally from transporting propane purchased from third parties to propane distribution locations and then to tanks on customers’ premises or to portable propane tanks delivered to nationwide and local retailers.
Sales from portable tank exchanges, nationally branded under the name Blue Rhino, are generated through a network of independent and partnership-owned distribution outlets.
The midstream operations - crude oil logistics segment primarily includes a domestic crude oil transportation and logistics provider with an integrated portfolio of midstream assets. These assets connect crude oil production in prolific unconventional resource plays to downstream markets. Bridger's truck, pipeline terminal, pipeline, rail and maritime assets form a comprehensive, fee-for-service business model, and substantially all of its cash flow is generated from fee-based commercial agreements. Bridger's fee-based business model generates income by providing crude oil transportation and logistics services on behalf of producers and end users of crude oil.
The midstream operations - water solutions segment primarily includes salt water disposal wells that are a critical component of the oil and natural gas well drilling industry. Oil and gas wells generate significant volumes of salt water known as “flowback” and “production” water. Flowback is a water based solution that flows back to the surface during and after the completion of the hydraulic fracturing (“fracking”) process whereby large volumes of water, sand and chemicals are injected under high pressures into rock formations to stimulate production. Production water is salt water from underground formations that are brought to the surface during the normal course of oil or gas production. In the oil and gas fields Ferrellgas, L.P. services, these volumes of water are transported by truck away from the fields to salt water disposal wells where it is injected into underground geologic formations using high-pressure pumps. Revenue is derived from fees charged to customers to dispose of salt water at the disposal facilities and crude oil sales from the skimming oil process.
Following is a summary of segment information for the three and nine months ended
April 30, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
404,048
|
|
|
$
|
101,996
|
|
|
$
|
3,907
|
|
|
$
|
—
|
|
|
$
|
(479
|
)
|
|
$
|
509,472
|
|
Direct costs (1)
|
|
307,708
|
|
|
76,826
|
|
|
5,301
|
|
|
11,584
|
|
|
(33
|
)
|
|
401,386
|
|
Adjusted EBITDA
|
|
$
|
96,340
|
|
|
$
|
25,170
|
|
|
$
|
(1,394
|
)
|
|
$
|
(11,584
|
)
|
|
$
|
(446
|
)
|
|
$
|
108,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
527,258
|
|
|
$
|
—
|
|
|
$
|
5,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
532,551
|
|
Direct costs (1)
|
|
422,751
|
|
|
—
|
|
|
4,871
|
|
|
8,570
|
|
|
—
|
|
|
436,192
|
|
Adjusted EBITDA
|
|
$
|
104,507
|
|
|
$
|
—
|
|
|
$
|
422
|
|
|
$
|
(8,570
|
)
|
|
$
|
—
|
|
|
$
|
96,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
1,142,429
|
|
|
$
|
475,162
|
|
|
$
|
12,744
|
|
|
$
|
—
|
|
|
$
|
(479
|
)
|
|
$
|
1,629,856
|
|
Direct costs (1)
|
|
888,380
|
|
|
396,468
|
|
|
15,538
|
|
|
33,791
|
|
|
(33
|
)
|
|
1,334,144
|
|
Adjusted EBITDA
|
|
$
|
254,049
|
|
|
$
|
78,694
|
|
|
$
|
(2,794
|
)
|
|
$
|
(33,791
|
)
|
|
$
|
(446
|
)
|
|
$
|
295,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Eliminations
|
|
Total
|
Segment revenues
|
|
$
|
1,621,517
|
|
|
$
|
—
|
|
|
$
|
20,362
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,641,879
|
|
Direct costs (1)
|
|
1,329,565
|
|
|
—
|
|
|
14,741
|
|
|
29,928
|
|
|
—
|
|
|
1,374,234
|
|
Adjusted EBITDA
|
|
$
|
291,952
|
|
|
$
|
—
|
|
|
$
|
5,621
|
|
|
$
|
(29,928
|
)
|
|
$
|
—
|
|
|
$
|
267,645
|
|
(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 earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
Nine months ended April 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net earnings
|
|
$
|
23,049
|
|
|
$
|
40,404
|
|
|
$
|
8,700
|
|
|
$
|
101,676
|
|
Income tax expense
|
|
1,260
|
|
|
853
|
|
|
1,441
|
|
|
1,379
|
|
Interest expense
|
|
30,340
|
|
|
19,476
|
|
|
90,799
|
|
|
59,695
|
|
Depreciation and amortization expense
|
|
38,352
|
|
|
23,324
|
|
|
112,698
|
|
|
70,576
|
|
EBITDA
|
|
93,001
|
|
|
84,057
|
|
|
213,638
|
|
|
233,326
|
|
Non-cash employee stock ownership plan compensation charge
|
|
9,978
|
|
|
8,566
|
|
|
18,375
|
|
|
16,728
|
|
Non-cash stock-based compensation charge
|
|
1,091
|
|
|
3,271
|
|
|
6,757
|
|
|
19,701
|
|
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
29,316
|
|
|
—
|
|
Loss on disposal of assets and other
|
|
5,779
|
|
|
2,203
|
|
|
23,220
|
|
|
4,578
|
|
Other (income) expense, net
|
|
(331
|
)
|
|
(212
|
)
|
|
89
|
|
|
415
|
|
Change in fair value of contingent consideration
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
(6,300
|
)
|
Severance costs
|
|
469
|
|
|
—
|
|
|
1,325
|
|
|
—
|
|
Litigation accrual and related legal fees associated with a class action lawsuit
|
|
—
|
|
|
83
|
|
|
—
|
|
|
806
|
|
Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments
|
|
(1,915
|
)
|
|
(1,609
|
)
|
|
2,993
|
|
|
(1,609
|
)
|
Acquisition and transition expenses
|
|
14
|
|
|
—
|
|
|
99
|
|
|
—
|
|
Adjusted EBITDA
|
|
$
|
108,086
|
|
|
$
|
96,359
|
|
|
$
|
295,712
|
|
|
$
|
267,645
|
|
Following are total assets by segment:
|
|
|
|
|
|
|
|
|
|
Assets
|
|
April 30, 2016
|
|
July 31, 2015
|
Propane and related equipment sales
|
|
$
|
1,257,965
|
|
|
$
|
1,291,737
|
|
Midstream operations - crude oil logistics
|
|
897,181
|
|
|
917,325
|
|
Midstream operations - water logistics
|
|
175,157
|
|
|
205,358
|
|
Corporate and unallocated
|
|
40,981
|
|
|
45,542
|
|
Total consolidated assets
|
|
$
|
2,371,284
|
|
|
$
|
2,459,962
|
|
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2016
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
12,705
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
991
|
|
|
$
|
13,728
|
|
Growth
|
|
28,461
|
|
|
52,315
|
|
|
10,553
|
|
|
—
|
|
|
91,329
|
|
Total
|
|
$
|
41,166
|
|
|
$
|
52,347
|
|
|
$
|
10,553
|
|
|
$
|
991
|
|
|
$
|
105,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2015
|
|
|
Propane and related equipment sales
|
|
Midstream operations - Crude oil logistics
|
|
Midstream operations - Water Solutions
|
|
Corporate and other
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
12,839
|
|
|
$
|
—
|
|
|
$
|
976
|
|
|
$
|
1,012
|
|
|
$
|
14,827
|
|
Growth
|
|
27,128
|
|
|
—
|
|
|
6,561
|
|
|
—
|
|
|
33,689
|
|
Total
|
|
$
|
39,967
|
|
|
$
|
—
|
|
|
$
|
7,537
|
|
|
$
|
1,012
|
|
|
$
|
48,516
|
|
N.
Guarantor financial information
The
$500.0 million
aggregate principal amount of unregistered
6.75%
senior notes due 2023 co-issued by Ferrellgas, L.P. and Ferrellgas Finance Corp. are, and any notes registered under the Securities Act of 1933 and issued in exchange for such unregistered notes will be, fully and unconditionally and joint 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 April 30, 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
|
$
|
5,742
|
|
|
$
|
1
|
|
|
$
|
492
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,235
|
|
Accounts and notes receivable
|
(3,863
|
)
|
|
—
|
|
|
66,079
|
|
|
130,488
|
|
|
—
|
|
|
192,704
|
|
Intercompany receivables
|
44,309
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44,309
|
)
|
|
—
|
|
Inventories
|
63,313
|
|
|
—
|
|
|
24,426
|
|
|
—
|
|
|
—
|
|
|
87,739
|
|
Prepaid expenses and other current assets
|
26,155
|
|
|
—
|
|
|
9,818
|
|
|
2
|
|
|
—
|
|
|
35,975
|
|
Total current assets
|
135,656
|
|
|
1
|
|
|
100,815
|
|
|
130,490
|
|
|
(44,309
|
)
|
|
322,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
566,750
|
|
|
—
|
|
|
414,703
|
|
|
—
|
|
|
—
|
|
|
981,453
|
|
Goodwill
|
243,598
|
|
|
—
|
|
|
202,735
|
|
|
—
|
|
|
—
|
|
|
446,333
|
|
Intangible assets, net
|
145,188
|
|
|
—
|
|
|
406,184
|
|
|
—
|
|
|
—
|
|
|
551,372
|
|
Intercompany receivables
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
640,282
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(640,282
|
)
|
|
—
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
845
|
|
|
—
|
|
|
—
|
|
|
845
|
|
Other assets, net
|
60,773
|
|
|
—
|
|
|
7,676
|
|
|
179
|
|
|
—
|
|
|
68,628
|
|
Total assets
|
$
|
2,242,247
|
|
|
$
|
1
|
|
|
$
|
1,132,958
|
|
|
$
|
130,669
|
|
|
$
|
(1,134,591
|
)
|
|
$
|
2,371,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
42,536
|
|
|
$
|
—
|
|
|
$
|
35,527
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78,063
|
|
Short-term borrowings
|
9,071
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,071
|
|
Collateralized note payable
|
—
|
|
|
—
|
|
|
—
|
|
|
77,000
|
|
|
—
|
|
|
77,000
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
34,210
|
|
|
10,099
|
|
|
(44,309
|
)
|
|
—
|
|
Other current liabilities
|
144,259
|
|
|
—
|
|
|
11,012
|
|
|
193
|
|
|
—
|
|
|
155,464
|
|
Total current liabilities
|
195,866
|
|
|
—
|
|
|
80,749
|
|
|
87,292
|
|
|
(44,309
|
)
|
|
319,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
1,777,331
|
|
|
—
|
|
|
451,000
|
|
|
—
|
|
|
(450,000
|
)
|
|
1,778,331
|
|
Other liabilities
|
29,042
|
|
|
—
|
|
|
4,080
|
|
|
225
|
|
|
—
|
|
|
33,347
|
|
Contingencies and commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity
|
252,834
|
|
|
1
|
|
|
597,776
|
|
|
42,827
|
|
|
(640,604
|
)
|
|
252,834
|
|
Accumulated other comprehensive income (loss)
|
(12,826
|
)
|
|
—
|
|
|
(647
|
)
|
|
325
|
|
|
322
|
|
|
(12,826
|
)
|
Total partners' capital
|
240,008
|
|
|
1
|
|
|
597,129
|
|
|
43,152
|
|
|
(640,282
|
)
|
|
240,008
|
|
Total liabilities and partners' capital
|
$
|
2,242,247
|
|
|
$
|
1
|
|
|
$
|
1,132,958
|
|
|
$
|
130,669
|
|
|
$
|
(1,134,591
|
)
|
|
$
|
2,371,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(in thousands)
|
|
As of July 31, 2015
|
|
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
|
$
|
5,579
|
|
|
$
|
1
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,600
|
|
Accounts and notes receivable
|
(2,858
|
)
|
|
—
|
|
|
80,657
|
|
|
119,119
|
|
|
—
|
|
|
196,918
|
|
Intercompany receivables
|
39,238
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39,238
|
)
|
|
—
|
|
Inventories
|
78,132
|
|
|
—
|
|
|
18,622
|
|
|
—
|
|
|
—
|
|
|
96,754
|
|
Prepaid expenses and other current assets
|
42,069
|
|
|
—
|
|
|
22,140
|
|
|
2
|
|
|
—
|
|
|
64,211
|
|
Total current assets
|
162,160
|
|
|
1
|
|
|
121,439
|
|
|
119,121
|
|
|
(39,238
|
)
|
|
363,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
569,640
|
|
|
—
|
|
|
395,577
|
|
|
—
|
|
|
—
|
|
|
965,217
|
|
Goodwill
|
246,116
|
|
|
—
|
|
|
232,631
|
|
|
—
|
|
|
—
|
|
|
478,747
|
|
Intangible assets, net
|
155,659
|
|
|
—
|
|
|
424,384
|
|
|
—
|
|
|
—
|
|
|
580,043
|
|
Intercompany receivables
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
661,081
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(661,081
|
)
|
|
—
|
|
Other assets, net
|
62,019
|
|
|
—
|
|
|
10,087
|
|
|
366
|
|
|
—
|
|
|
72,472
|
|
Total assets
|
$
|
2,306,675
|
|
|
$
|
1
|
|
|
$
|
1,184,118
|
|
|
$
|
119,487
|
|
|
$
|
(1,150,319
|
)
|
|
$
|
2,459,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
40,210
|
|
|
$
|
—
|
|
|
$
|
43,764
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
83,974
|
|
Short-term borrowings
|
75,319
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,319
|
|
Collateralized note payable
|
—
|
|
|
—
|
|
|
—
|
|
|
70,000
|
|
|
—
|
|
|
70,000
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
30,289
|
|
|
8,949
|
|
|
(39,238
|
)
|
|
—
|
|
Other current liabilities
|
142,137
|
|
|
—
|
|
|
33,903
|
|
|
136
|
|
|
—
|
|
|
176,176
|
|
Total current liabilities
|
257,666
|
|
|
—
|
|
|
107,956
|
|
|
79,085
|
|
|
(39,238
|
)
|
|
405,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
1,621,439
|
|
|
—
|
|
|
450,953
|
|
|
—
|
|
|
(450,000
|
)
|
|
1,622,392
|
|
Other liabilities
|
37,444
|
|
|
—
|
|
|
4,306
|
|
|
225
|
|
|
—
|
|
|
41,975
|
|
Contingencies and commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity
|
429,444
|
|
|
1
|
|
|
621,550
|
|
|
39,852
|
|
|
(661,403
|
)
|
|
429,444
|
|
Accumulated other comprehensive income (loss)
|
(39,318
|
)
|
|
—
|
|
|
(647
|
)
|
|
325
|
|
|
322
|
|
|
(39,318
|
)
|
Total partners' capital
|
390,126
|
|
|
1
|
|
|
620,903
|
|
|
40,177
|
|
|
(661,081
|
)
|
|
390,126
|
|
Total liabilities and partners' capital
|
$
|
2,306,675
|
|
|
$
|
1
|
|
|
$
|
1,184,118
|
|
|
$
|
119,487
|
|
|
$
|
(1,150,319
|
)
|
|
$
|
2,459,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
|
(in thousands)
|
|
|
|
For the three months ended April 30, 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
|
$
|
338,929
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
338,929
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
105,424
|
|
|
—
|
|
|
—
|
|
|
105,424
|
|
Other
|
19,739
|
|
|
—
|
|
|
45,380
|
|
|
—
|
|
|
—
|
|
|
65,119
|
|
Total revenues
|
358,668
|
|
|
—
|
|
|
150,804
|
|
|
—
|
|
|
—
|
|
|
509,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
152,261
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
152,261
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
71,852
|
|
|
—
|
|
|
—
|
|
|
71,852
|
|
Cost of sales - other
|
2,009
|
|
|
—
|
|
|
39,194
|
|
|
—
|
|
|
—
|
|
|
41,203
|
|
Operating expense
|
100,998
|
|
|
—
|
|
|
13,999
|
|
|
1,376
|
|
|
(1,102
|
)
|
|
115,271
|
|
Depreciation and amortization expense
|
18,247
|
|
|
—
|
|
|
19,918
|
|
|
187
|
|
|
—
|
|
|
38,352
|
|
General and administrative expense
|
11,884
|
|
|
—
|
|
|
1,330
|
|
|
—
|
|
|
—
|
|
|
13,214
|
|
Equipment lease expense
|
7,127
|
|
|
—
|
|
|
117
|
|
|
—
|
|
|
—
|
|
|
7,244
|
|
Non-cash employee stock ownership plan compensation charge
|
9,978
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,978
|
|
Loss on disposal of assets
|
1,775
|
|
|
—
|
|
|
4,004
|
|
|
—
|
|
|
—
|
|
|
5,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
54,389
|
|
|
—
|
|
|
390
|
|
|
(1,563
|
)
|
|
1,102
|
|
|
54,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(19,316
|
)
|
|
—
|
|
|
(10,499
|
)
|
|
(536
|
)
|
|
11
|
|
|
(30,340
|
)
|
Other income (expense), net
|
331
|
|
|
—
|
|
|
—
|
|
|
1,113
|
|
|
(1,113
|
)
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
35,404
|
|
|
—
|
|
|
(10,109
|
)
|
|
(986
|
)
|
|
—
|
|
|
24,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
395
|
|
|
—
|
|
|
865
|
|
|
—
|
|
|
—
|
|
|
1,260
|
|
Equity in earnings of subsidiary
|
(11,960
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,960
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
23,049
|
|
|
—
|
|
|
(10,974
|
)
|
|
(986
|
)
|
|
11,960
|
|
|
23,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
20,819
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
43,868
|
|
|
$
|
—
|
|
|
$
|
(10,974
|
)
|
|
$
|
(986
|
)
|
|
$
|
11,960
|
|
|
$
|
43,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
|
(in thousands)
|
|
|
|
For the three months ended April 30, 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
|
$
|
445,667
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
445,667
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
5,293
|
|
|
—
|
|
|
—
|
|
|
5,293
|
|
Other
|
18,893
|
|
|
—
|
|
|
62,698
|
|
|
—
|
|
|
—
|
|
|
81,591
|
|
Total revenues
|
464,560
|
|
|
—
|
|
|
67,991
|
|
|
—
|
|
|
—
|
|
|
532,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
253,684
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
253,684
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
1,877
|
|
|
—
|
|
|
—
|
|
|
1,877
|
|
Cost of sales - other
|
1,626
|
|
|
—
|
|
|
56,083
|
|
|
—
|
|
|
—
|
|
|
57,709
|
|
Operating expense
|
100,155
|
|
|
—
|
|
|
7,135
|
|
|
2,171
|
|
|
(2,043
|
)
|
|
107,418
|
|
Depreciation and amortization expense
|
18,675
|
|
|
—
|
|
|
4,462
|
|
|
187
|
|
|
—
|
|
|
23,324
|
|
General and administrative expense
|
10,902
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,902
|
|
Equipment lease expense
|
6,327
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
6,347
|
|
Non-cash employee stock ownership plan compensation charge
|
8,566
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,566
|
|
Loss on disposal of assets
|
2,199
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
62,426
|
|
|
—
|
|
|
(1,590
|
)
|
|
(2,358
|
)
|
|
2,043
|
|
|
60,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(16,969
|
)
|
|
—
|
|
|
(1,256
|
)
|
|
(750
|
)
|
|
(501
|
)
|
|
(19,476
|
)
|
Other income (expense), net
|
212
|
|
|
—
|
|
|
—
|
|
|
1,542
|
|
|
(1,542
|
)
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
45,669
|
|
|
—
|
|
|
(2,846
|
)
|
|
(1,566
|
)
|
|
—
|
|
|
41,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
86
|
|
|
—
|
|
|
767
|
|
|
—
|
|
|
—
|
|
|
853
|
|
Equity in earnings of subsidiary
|
(5,179
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,179
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
40,404
|
|
|
—
|
|
|
(3,613
|
)
|
|
(1,566
|
)
|
|
5,179
|
|
|
40,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
18,826
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
59,230
|
|
|
$
|
—
|
|
|
$
|
(3,613
|
)
|
|
$
|
(1,566
|
)
|
|
$
|
5,179
|
|
|
$
|
59,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
|
(in thousands)
|
|
|
|
For the nine months ended April 30, 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
|
$
|
961,086
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
961,086
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
487,427
|
|
|
—
|
|
|
—
|
|
|
487,427
|
|
Other
|
58,687
|
|
|
—
|
|
|
122,656
|
|
|
—
|
|
|
—
|
|
|
181,343
|
|
Total revenues
|
1,019,773
|
|
|
—
|
|
|
610,083
|
|
|
—
|
|
|
—
|
|
|
1,629,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
448,841
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
448,841
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
373,899
|
|
|
—
|
|
|
—
|
|
|
373,899
|
|
Cost of sales - other
|
6,804
|
|
|
—
|
|
|
104,621
|
|
|
—
|
|
|
—
|
|
|
111,425
|
|
Operating expense
|
299,660
|
|
|
—
|
|
|
46,380
|
|
|
3,981
|
|
|
(2,554
|
)
|
|
347,467
|
|
Depreciation and amortization expense
|
55,602
|
|
|
—
|
|
|
56,909
|
|
|
187
|
|
|
—
|
|
|
112,698
|
|
General and administrative expense
|
37,619
|
|
|
3
|
|
|
4,410
|
|
|
—
|
|
|
—
|
|
|
42,032
|
|
Equipment lease expense
|
21,170
|
|
|
—
|
|
|
384
|
|
|
—
|
|
|
—
|
|
|
21,554
|
|
Non-cash employee stock ownership plan compensation charge
|
18,375
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,375
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
29,316
|
|
|
—
|
|
|
—
|
|
|
29,316
|
|
Loss on disposal of assets
|
5,420
|
|
|
—
|
|
|
17,800
|
|
|
—
|
|
|
—
|
|
|
23,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
126,282
|
|
|
(3
|
)
|
|
(23,636
|
)
|
|
(4,168
|
)
|
|
2,554
|
|
|
101,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(57,467
|
)
|
|
—
|
|
|
(31,819
|
)
|
|
(1,669
|
)
|
|
156
|
|
|
(90,799
|
)
|
Other income (expense), net
|
(89
|
)
|
|
—
|
|
|
—
|
|
|
2,710
|
|
|
(2,710
|
)
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
68,726
|
|
|
(3
|
)
|
|
(55,455
|
)
|
|
(3,127
|
)
|
|
—
|
|
|
10,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
673
|
|
|
—
|
|
|
768
|
|
|
—
|
|
|
—
|
|
|
1,441
|
|
Equity in earnings of subsidiary
|
(59,353
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59,353
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
8,700
|
|
|
(3
|
)
|
|
(56,223
|
)
|
|
(3,127
|
)
|
|
59,353
|
|
|
8,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
26,492
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
35,192
|
|
|
$
|
(3
|
)
|
|
$
|
(56,223
|
)
|
|
$
|
(3,127
|
)
|
|
$
|
59,353
|
|
|
$
|
35,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
|
(in thousands)
|
|
|
|
For the nine months ended April 30, 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
|
$
|
1,400,895
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,400,895
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
20,362
|
|
|
—
|
|
|
—
|
|
|
20,362
|
|
Other
|
59,480
|
|
|
—
|
|
|
161,142
|
|
|
—
|
|
|
—
|
|
|
220,622
|
|
Total revenues
|
1,460,375
|
|
|
—
|
|
|
181,504
|
|
|
—
|
|
|
—
|
|
|
1,641,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
849,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
849,190
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
6,064
|
|
|
—
|
|
|
—
|
|
|
6,064
|
|
Cost of sales - other
|
5,624
|
|
|
—
|
|
|
142,048
|
|
|
—
|
|
|
—
|
|
|
147,672
|
|
Operating expense
|
306,184
|
|
|
—
|
|
|
14,460
|
|
|
5,211
|
|
|
(4,792
|
)
|
|
321,063
|
|
Depreciation and amortization expense
|
57,529
|
|
|
—
|
|
|
12,860
|
|
|
187
|
|
|
—
|
|
|
70,576
|
|
General and administrative expense
|
45,166
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,169
|
|
Equipment lease expense
|
17,642
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
17,674
|
|
Non-cash employee stock ownership plan compensation charge
|
16,728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,728
|
|
Loss on disposal of assets
|
4,574
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
157,738
|
|
|
(3
|
)
|
|
6,036
|
|
|
(5,398
|
)
|
|
4,792
|
|
|
163,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(54,217
|
)
|
|
—
|
|
|
(3,639
|
)
|
|
(1,883
|
)
|
|
44
|
|
|
(59,695
|
)
|
Other income (expense), net
|
(415
|
)
|
|
—
|
|
|
—
|
|
|
4,836
|
|
|
(4,836
|
)
|
|
(415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
103,106
|
|
|
(3
|
)
|
|
2,397
|
|
|
(2,445
|
)
|
|
—
|
|
|
103,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
249
|
|
|
—
|
|
|
1,130
|
|
|
—
|
|
|
—
|
|
|
1,379
|
|
Equity in earnings of subsidiary
|
(1,181
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,181
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
101,676
|
|
|
(3
|
)
|
|
1,267
|
|
|
(2,445
|
)
|
|
1,181
|
|
|
101,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
(33,769
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
67,907
|
|
|
$
|
(3
|
)
|
|
$
|
1,267
|
|
|
$
|
(2,445
|
)
|
|
$
|
1,181
|
|
|
$
|
67,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
$
|
193,703
|
|
|
$
|
(3
|
)
|
|
$
|
57,450
|
|
|
$
|
(13,656
|
)
|
|
$
|
(7,000
|
)
|
|
$
|
230,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired
|
(13,894
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,894
|
)
|
Capital expenditures
|
(44,330
|
)
|
|
—
|
|
|
(64,057
|
)
|
|
—
|
|
|
—
|
|
|
(108,387
|
)
|
Proceeds from sale of assets
|
11,862
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,862
|
|
Cash collected for purchase of interest in accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
763,604
|
|
|
(763,604
|
)
|
|
—
|
|
Cash remitted to Ferrellgas, L.P for accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
(770,604
|
)
|
|
770,604
|
|
|
—
|
|
Net changes in advances with consolidated entities
|
(20,740
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,740
|
|
|
—
|
|
Other
|
(499
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(499
|
)
|
Net cash used in investing activities
|
(67,601
|
)
|
|
—
|
|
|
(64,057
|
)
|
|
(7,000
|
)
|
|
27,740
|
|
|
(110,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
(210,158
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(210,158
|
)
|
Contributions from Partners
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
Proceeds from increase in long-term debt
|
159,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159,814
|
|
Reductions in long-term debt
|
(8,739
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,739
|
)
|
Net reductions in short-term borrowings
|
(66,248
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,248
|
)
|
Net additions to collateralized short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
7,000
|
|
|
—
|
|
|
7,000
|
|
Net changes in advances with parent
|
—
|
|
|
3
|
|
|
7,079
|
|
|
13,658
|
|
|
(20,740
|
)
|
|
—
|
|
Cash paid for financing costs
|
(640
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(640
|
)
|
Net cash provided by (used in) financing activities
|
(125,941
|
)
|
|
3
|
|
|
7,079
|
|
|
20,658
|
|
|
(20,740
|
)
|
|
(118,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
2
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
163
|
|
|
—
|
|
|
472
|
|
|
—
|
|
|
—
|
|
|
635
|
|
Cash and cash equivalents - beginning of year
|
5,579
|
|
|
1
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
5,600
|
|
Cash and cash equivalents - end of year
|
$
|
5,742
|
|
|
$
|
1
|
|
|
$
|
492
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 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
|
$
|
241,141
|
|
|
$
|
(3
|
)
|
|
$
|
12,307
|
|
|
$
|
(24,327
|
)
|
|
$
|
(26,000
|
)
|
|
$
|
203,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired
|
(68,901
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(68,902
|
)
|
Capital expenditures
|
(42,854
|
)
|
|
—
|
|
|
(8,467
|
)
|
|
—
|
|
|
—
|
|
|
(51,321
|
)
|
Proceeds from sale of assets
|
4,060
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,060
|
|
Cash collected for purchase of interest in accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,079,031
|
|
|
(1,079,031
|
)
|
|
—
|
|
Cash remitted to Ferrellgas, L.P for accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,105,031
|
)
|
|
1,105,031
|
|
|
—
|
|
Net changes in advances with consolidated entities
|
(20,087
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,087
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net cash used in investing activities
|
(127,782
|
)
|
|
—
|
|
|
(8,468
|
)
|
|
(26,000
|
)
|
|
46,087
|
|
|
(116,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
(134,535
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(134,535
|
)
|
Contributions from Partners
|
42,655
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,655
|
|
Proceeds from increase in long-term debt
|
107,951
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
107,951
|
|
Reductions in long-term debt
|
(60,216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60,216
|
)
|
Net reductions in short-term borrowings
|
(69,519
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(69,519
|
)
|
Net additions to collateralized short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
26,000
|
|
|
—
|
|
|
26,000
|
|
Net changes in advances with parent
|
—
|
|
|
3
|
|
|
(4,245
|
)
|
|
24,329
|
|
|
(20,087
|
)
|
|
—
|
|
Cash paid for financing costs
|
(204
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
Net cash provided by (used in) financing activities
|
(113,868
|
)
|
|
3
|
|
|
(4,245
|
)
|
|
50,329
|
|
|
(20,087
|
)
|
|
(87,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
(509
|
)
|
|
—
|
|
|
(406
|
)
|
|
—
|
|
|
—
|
|
|
(915
|
)
|
Cash and cash equivalents - beginning of year
|
7,798
|
|
|
1
|
|
|
484
|
|
|
—
|
|
|
—
|
|
|
8,283
|
|
Cash and cash equivalents - end of year
|
$
|
7,289
|
|
|
$
|
1
|
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,368
|
|
|
|
|
|
|
|
|
O.
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)
|
|
April 30, 2016
|
|
July 31, 2015
|
ASSETS
|
|
|
|
|
|
Cash
|
$
|
1,100
|
|
|
$
|
1,100
|
|
Total assets
|
$
|
1,100
|
|
|
$
|
1,100
|
|
|
|
|
|
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
|
56,583
|
|
|
53,267
|
|
Accumulated deficit
|
(56,483
|
)
|
|
(53,167
|
)
|
Total stockholder's equity
|
$
|
1,100
|
|
|
$
|
1,100
|
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas, L.P.)
|
CONDENSED STATEMENTS OF EARNINGS
|
(unaudited)
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
General and administrative expense
|
$
|
225
|
|
|
$
|
548
|
|
|
3,316
|
|
|
$
|
4,108
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(225
|
)
|
|
$
|
(548
|
)
|
|
$
|
(3,316
|
)
|
|
$
|
(4,108
|
)
|
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 nine months ended April 30,
|
|
2016
|
|
2015
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(3,316
|
)
|
|
$
|
(4,108
|
)
|
Cash used in operating activities
|
(3,316
|
)
|
|
(4,108
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Capital contribution
|
3,316
|
|
|
4,108
|
|
Cash provided by financing activities
|
3,316
|
|
|
4,108
|
|
|
|
|
|
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 statement 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.