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, 2018
, Ferrell Companies, Inc. ("Ferrell Companies") beneficially owns
22.8 million
Ferrellgas Partners common units. Ferrellgas, Inc. (the "general partner"), a wholly-owned subsidiary of Ferrell Companies, has retained an approximate
1%
general partner interest in Ferrellgas Partners and also holds an approximate
1%
general partner interest in the operating partnership, representing an effective
2%
general partner interest in Ferrellgas on a combined basis. As general partner, it performs all management functions required by Ferrellgas. Unless contractually provided for, creditors of the operating partnership have no recourse with regards to Ferrellgas Partners.
Ferrellgas Partners is a holding entity that conducts no operations and has
two
subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners owns a
100%
equity interest in Ferrellgas Partners Finance Corp., whose only business activity is to act as the co-issuer and co-obligor of debt issued by Ferrellgas Partners. The operating partnership is the only operating subsidiary of Ferrellgas Partners.
Ferrellgas is engaged in the following primary businesses:
|
|
•
|
Propane operations 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 crude oil logistics and water solutions. Crude oil logistics primarily generates income by providing crude oil transportation and logistics services on behalf of producers and end-users of crude oil. Water solutions generates income primarily through the operation of salt water disposal wells in the Eagle Ford shale region of south Texas.
|
Due to seasonality, the results of operations for the
nine months ended
April 30, 2018
are not necessarily indicative of the results to be expected for the full fiscal year ending
July 31, 2018
.
The condensed consolidated financial statements of Ferrellgas reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed consolidated financial statements were of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) the consolidated financial statements and accompanying notes included in Ferrellgas' Annual Report on Form 10-K for fiscal
2017
.
B.
Summary of significant accounting policies
(1)
Accounting estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) New accounting standards:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board, ("FASB") issued Accounting Standard Update ("ASU") 2014-09,
Revenue from Contracts with Customers.
The issuance is part of a joint effort by the FASB and the International Accounting Standards Board ("IASB") to enhance financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards ("IFRS") and, thereby, improving the consistency of requirements, comparability of practices and usefulness of disclosures. The new standard will supersede much of the existing authoritative literature for revenue recognition. The standard and related amendments will be effective for Ferrellgas for its annual reporting period beginning August 1, 2018, including interim periods within that reporting period. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect. Ferrellgas is in the final stages of analyzing the impact of the new guidance using an integrated approach which includes evaluating differences in the amount and timing of revenue recognition from applying the requirements of the new guidance, reviewing its accounting policies and practices, and assessing the need for changes to its processes, accounting systems and design of internal controls. Ferrellgas has completed the assessment of a significant number of its contracts with customers under the new guidance. Although Ferrellgas has not completed its assessment of the impact of the new guidance, it does not expect its adoption will have a material impact on its consolidated financial statements. Ferrellgas expects to utilize the modified retrospective transition method, which recognizes the cumulative effect upon adoption, when it adopts the new standard, effective August 1, 2018.
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. We adopted ASU 2015-11 effective August 1, 2017. The adoption of this standard did not materially impact our 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. Ferrellgas has formed an implementation team, completed training on the new standard, and is working on an initial assessment.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326)
which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2017-12
In August 2017, the FASB issued ASU 2017-12,
Financial Instruments - Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities
which is intended to improve the financial reporting for hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. This standard 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 this standard on the consolidated financial statements.
C.
Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Propane gas and related products
|
|
$
|
58,142
|
|
|
$
|
67,049
|
|
Appliances, parts and supplies, and other
|
|
26,920
|
|
|
25,503
|
|
Inventories
|
|
$
|
85,062
|
|
|
$
|
92,552
|
|
In addition to inventories on hand, Ferrellgas enters into contracts to take delivery of propane for supply procurement purposes with terms that generally do not exceed
36 months
. Most of these contracts call for payment based on market prices at the date of delivery. As of
April 30, 2018
, Ferrellgas had committed, for supply procurement purposes, to take delivery of approximately
70.7
million gallons of propane at fixed prices.
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Notes receivable, less current portion
|
|
$
|
33,962
|
|
|
$
|
32,500
|
|
Other
|
|
38,132
|
|
|
41,557
|
|
Other assets, net
|
|
$
|
72,094
|
|
|
$
|
74,057
|
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Accrued interest
|
|
$
|
50,586
|
|
|
$
|
18,671
|
|
Customer deposits and advances
|
|
18,956
|
|
|
25,541
|
|
Other
|
|
89,333
|
|
|
82,012
|
|
Other current liabilities
|
|
$
|
158,875
|
|
|
$
|
126,224
|
|
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating expense
|
|
$
|
48,351
|
|
|
$
|
44,309
|
|
|
$
|
146,279
|
|
|
$
|
134,090
|
|
Depreciation and amortization expense
|
|
1,340
|
|
|
957
|
|
|
3,575
|
|
|
2,979
|
|
Equipment lease expense
|
|
6,507
|
|
|
6,564
|
|
|
18,872
|
|
|
19,882
|
|
Total shipping and handling expenses
|
|
$
|
56,198
|
|
|
$
|
51,830
|
|
|
$
|
168,726
|
|
|
$
|
156,951
|
|
During the quarter ended
January 31, 2018
, Ferrellgas committed to a plan to dispose of all of its rail cars utilized in the Midstream operations segment and recognized a loss on assets held for sale of
$35.5 million
. During the quarter ended
April 30, 2018
, Ferrellgas completed the sale of all
1,292
rail cars and received approximately
$51.3 million
in cash. For the
nine months ended April 30, 2018
, "Loss on asset sales and disposals" includes a loss of
$36.8 million
related to the sale of these rail cars. Proceeds from the transaction were used to reduce outstanding debt on Ferrellgas' secured credit facility.
During the quarter ended January 31, 2018, Ferrellgas completed the sale of Bridger Energy, LLC, included in the Midstream operations segment, in exchange for an
$8.5 million
secured promissory note due in May 2020. For the
nine months ended April 30, 2018
, "Loss on asset sales and disposals" includes a loss of
$3.8 million
related to this sale.
"Loss on asset sales and disposals" during the
three and nine months ended
April 30, 2018
and 2017 consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Loss on sale of assets classified as held for sale
|
|
$
|
1,237
|
|
|
$
|
—
|
|
|
$
|
36,752
|
|
|
$
|
—
|
|
Loss on sale of assets and other
|
|
5,033
|
|
|
2,393
|
|
|
9,662
|
|
|
8,861
|
|
Loss on asset sales and disposals
|
|
$
|
6,270
|
|
|
$
|
2,393
|
|
|
$
|
46,414
|
|
|
$
|
8,861
|
|
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
Cash paid (refunded) for:
|
|
|
|
|
Interest
|
|
$
|
85,171
|
|
|
$
|
73,276
|
|
Income taxes
|
|
$
|
(458
|
)
|
|
$
|
28
|
|
Non-cash investing and financing activities:
|
|
|
|
|
Liabilities incurred in connection with acquisitions
|
|
$
|
1,508
|
|
|
$
|
856
|
|
Change in accruals for property, plant and equipment additions
|
|
$
|
386
|
|
|
$
|
(111
|
)
|
D.
Accounts and notes receivable, net and accounts receivable securitization
As discussed further in Note M - Subsequent events, on May 14, 2018, the operating partnership entered into an amendment which extended the maturity date of its accounts receivable securitization facility by three years and increased the maximum borrowing capacity from
$225.0 million
to
$250.0 million
. The accounts receivable securitization facility disclosures below pertain to the facility that was in place as of April 30, 2018.
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Accounts receivable pledged as collateral
|
|
$
|
182,486
|
|
|
$
|
109,407
|
|
Accounts receivable
|
|
13,131
|
|
|
47,346
|
|
Note receivable - current portion
|
|
10,000
|
|
|
10,000
|
|
Other
|
|
232
|
|
|
307
|
|
Less: Allowance for doubtful accounts
|
|
(3,122
|
)
|
|
(1,976
|
)
|
Accounts and notes receivable, net
|
|
$
|
202,727
|
|
|
$
|
165,084
|
|
At
April 30, 2018
,
$182.5
million of trade accounts receivable were pledged as collateral against
$104.0
million of collateralized notes payable due to the commercial paper conduit. At
July 31, 2017
, $
109.4
million of trade accounts receivable were pledged as collateral against
$69.0
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, 2018
, Ferrellgas had received cash proceeds of
$104.0
million from trade accounts receivables securitized, with
$19.0
million of remaining capacity to receive additional proceeds. As of
July 31, 2017
, Ferrellgas had received cash proceeds of
$69.0
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
4.2%
and
4.0%
as of
April 30, 2018
and
July 31, 2017
, respectively.
E.
Debt
As discussed further in Note M - Subsequent events, on May 4, 2018, the operating partnership entered into a new
$575.0 million
senior secured credit facility, which replaced the
$575.0 million
secured credit facility that was scheduled to mature in October 2018. Credit facility disclosures below pertain to the secured credit facility that was in place as of April 30, 2018.
Short-term borrowings
Ferrellgas classifies as short-term the portion of its secured credit facility borrowings that were used to fund working capital needs and that management intends to pay down within the 12 month period following the balance sheet date. As of April 30, 2018, there were
no
amounts classified as short-term borrowings because all amounts outstanding were refinanced on May 4, 2018 under the five-year term loan discussed in Note M - Subsequent events. As of
July 31, 2017
,
$59.8 million
was classified as short-term borrowings. For further discussion see the senior secured credit facility section below.
Financial covenants
The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit Ferrellgas Partners' ability and its subsidiaries to, among other things, make restricted payments and incur additional indebtedness. The general partner believes that the most restrictive of these covenants is the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of Ferrellgas Partners.
Consolidated fixed charge coverage ratio
Before a restricted payment (as defined in the Ferrellgas Partners indenture) can be made by Ferrellgas Partners, Ferrellgas Partners must be in compliance with the consolidated fixed charge coverage ratio covenant under the Ferrellgas Partners indenture. If Ferrellgas Partners is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders.
This covenant requires that the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of Ferrellgas Partners be at least
1.75
x before a restricted payment (as defined in the indenture) can be made by Ferrellgas Partners. If this ratio were to drop below
1.75
x, the indenture allows Ferrellgas Partners to make restricted payments of up to
$50.0 million
in total over a 16 quarter period while below this ratio. As of
April 30, 2018
, the ratio was
1.56
x. As a result, the
$9.8 million
distribution to be paid to common unitholders on
June 14, 2018
will be taken from the
$50.0 million
restricted payment limitation, which after considering the
$9.8 million
deductions taken as a result of the distributions paid in September 2017, December 2017 and March 2018, leaves
$10.8 million
for future restricted payments. Unless the indenture governing the outstanding notes is amended or refinanced, if our consolidated fixed charge coverage ratio does not improve to at least
1.75
x and we continue our current quarterly distribution rate of
$0.10
per common unit, this covenant will not allow us to make common unit distributions for our quarter ending October 31, 2018 and beyond. Ferrellgas Partners is presently considering potential solutions to cure the limitation on distributions under the consolidated fixed charge covenant ratio related to the outstanding unsecured bonds due in June 2020. The potential solutions, among others, include a refinancing or a transaction to exchange new bonds for some or all of the bonds due June 2020.
Debt and interest expense reduction strategy
Ferrellgas continues to execute on a strategy to further reduce its debt and interest expense. This strategy included amending our secured credit facility and accounts receivable securitization facility, as discussed in Note M - Subsequent events, as well as certain asset sales executed to date, and may include refinancing existing debt agreements, additional asset sales, a reduction in Ferrellgas Partners' annual distribution rate or the issuance of equity. Ferrellgas believes any debt and interest expense reduction strategies would remain in effect until Ferrellgas' consolidated leverage ratio reaches 4.5x or a level Ferrellgas deems appropriate for its business.
Senior secured credit facility
As of
April 30, 2018
, Ferrellgas had total borrowings outstanding under its secured credit facility of
$184.9 million
, all of which was classified as long-term debt. Ferrellgas had
$252.3 million
of capacity under the secured credit facility as of
April 30, 2018
. As of
July 31, 2017
, Ferrellgas had total borrowings outstanding under its secured credit facility of
$245.5 million
, of which
$185.7 million
was classified as long-term debt. Ferrellgas had
$190.3 million
of capacity under the secured credit facility as of
July 31, 2017
. Borrowings outstanding at
April 30, 2018
and
July 31, 2017
under the secured credit facility had weighted average interest rates of
6.7%
and
6.0%
, respectively.
Letters of credit outstanding at
April 30, 2018
totaled
$111.8 million
and were used to secure commodity hedges, product purchases, and insurance arrangements. Letters of credit outstanding at
July 31, 2017
totaled
$139.2 million
and were used to secure commodity hedges, product purchases, and insurance arrangements. At
April 30, 2018
, Ferrellgas had remaining letter of credit capacity of
$88.2 million
. At
July 31, 2017
, Ferrellgas had remaining letter of credit capacity of
$60.8 million
.
F.
Partners' deficit
As of
April 30, 2018
and
July 31, 2017
, Ferrellgas Partners limited partner units, which are listed on the New York Stock Exchange under the symbol “FGP,” were beneficially owned by the following:
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Public common unitholders
|
|
69,612,939
|
|
|
69,612,939
|
|
Ferrell Companies (1)
|
|
22,529,361
|
|
|
22,529,361
|
|
FCI Trading Corp. (2)
|
|
195,686
|
|
|
195,686
|
|
Ferrell Propane, Inc. (3)
|
|
51,204
|
|
|
51,204
|
|
James E. Ferrell (4)
|
|
4,763,475
|
|
|
4,763,475
|
|
(1) Ferrell Companies is the owner of the general partner and is an approximate
23%
direct owner of Ferrellgas Partners' common units and thus a related party. Ferrell Companies also beneficially owns
195,686
and
51,204
common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies' beneficial ownership to
23.4%
at
April 30, 2018
.
(2) FCI Trading is an affiliate of the general partner and thus a related party.
(3) Ferrell Propane is controlled by the general partner and thus a related party.
(4) James E. Ferrell is the Interim Chief Executive Officer and President of the general partner; and is Chairman of the Board of Directors of the general partner and thus a related party. JEF Capital Management owns
4,758,859
of these common units and is wholly-owned by the James E. Ferrell Revocable Trust Two for which James E. Ferrell is the trustee and sole
beneficiary. The remaining
4,616
common units are held by Ferrell Resources Holding, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary.
Partnership distributions paid
Ferrellgas Partners has paid the following distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Public common unitholders
|
|
$
|
6,961
|
|
|
$
|
6,961
|
|
|
$
|
20,884
|
|
|
$
|
49,600
|
|
Ferrell Companies
|
|
2,253
|
|
|
2,253
|
|
|
6,759
|
|
|
16,052
|
|
FCI Trading Corp.
|
|
20
|
|
|
20
|
|
|
60
|
|
|
140
|
|
Ferrell Propane, Inc.
|
|
5
|
|
|
5
|
|
|
15
|
|
|
36
|
|
James E. Ferrell
|
|
476
|
|
|
476
|
|
|
1,428
|
|
|
3,393
|
|
General partner
|
|
98
|
|
|
98
|
|
|
294
|
|
|
699
|
|
|
|
$
|
9,813
|
|
|
$
|
9,813
|
|
|
$
|
29,440
|
|
|
$
|
69,920
|
|
On
May 24, 2018
, Ferrellgas Partners declared a cash distribution of
$0.10
per common unit for the three months ended
April 30, 2018
, which is expected to be paid on
June 14, 2018
. Included in this cash distribution are the following amounts to be paid to related parties:
|
|
|
|
|
|
Ferrell Companies
|
|
$
|
2,253
|
|
FCI Trading Corp.
|
|
20
|
|
Ferrell Propane, Inc.
|
|
5
|
|
James E. Ferrell
|
|
476
|
|
General partner
|
|
98
|
|
See additional discussions about transactions with related parties in Note I – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)
See Note H – 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, 2018
and
2017
.
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, 2018
, the general partner made non-cash contributions of
$0.2 million
to Ferrellgas to maintain its effective
2%
general partner interest.
During the
nine months ended
April 30, 2017
, the general partner made cash contributions of
$1.7 million
and non-cash contributions of
$0.3 million
to Ferrellgas to maintain its effective
2%
general partner interest.
G.
Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas’ financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
April 30, 2018
and
July 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2018:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
41
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
19,750
|
|
|
$
|
—
|
|
|
$
|
19,750
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(3,222
|
)
|
|
$
|
—
|
|
|
$
|
(3,222
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(2,239
|
)
|
|
$
|
—
|
|
|
$
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2017:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
583
|
|
|
$
|
—
|
|
|
$
|
583
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
16,212
|
|
|
$
|
—
|
|
|
$
|
16,212
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(707
|
)
|
|
$
|
—
|
|
|
$
|
(707
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(1,258
|
)
|
|
$
|
—
|
|
|
$
|
(1,258
|
)
|
Methodology
The fair values of Ferrellgas’ non-exchange traded commodity derivative contracts are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. The fair values of interest rate swap contracts are based upon third-party quotes or indicative values based on recent market transactions.
Other financial instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. The estimated fair value of various note receivable financial instruments classified in "Other assets, net" on the condensed consolidated balance sheets, are approximately
$29.3 million
, or
$4.7 million
less than their carrying amount as of
April 30, 2018
. The estimated fair values of these notes receivable were calculated using a discounted cash flow method which relied on significant unobservable inputs. At
April 30, 2018
and
July 31, 2017
, the estimated fair value of Ferrellgas’ long-term debt instruments was
$1,890.1 million
and
$1,966.6 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.
H.
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. Prior to the sale of Bridger Energy, LLC in January 2018, all other commodity derivative instruments were neither qualified nor were designated as cash flow hedges, therefore, changes in their fair value were 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, 2018
and
2017
, Ferrellgas did
no
t recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
The following tables provide a summary of the fair value of derivatives in Ferrellgas’ condensed consolidated balance sheets as of
April 30, 2018
and
July 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
|
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
|
|
$
|
14,449
|
|
|
Other current liabilities
|
|
$
|
2,207
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
5,301
|
|
|
Other liabilities
|
|
32
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
41
|
|
|
Other current liabilities
|
|
738
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
2,484
|
|
|
|
Total
|
|
$
|
19,791
|
|
|
Total
|
|
$
|
5,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2017
|
|
|
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
|
|
$
|
11,061
|
|
|
Other current liabilities
|
|
$
|
415
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
4,413
|
|
|
Other liabilities
|
|
15
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
583
|
|
|
Other current liabilities
|
|
595
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
112
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-crude oil
|
|
Prepaid expenses and other current assets
|
|
738
|
|
|
Other current liabilities
|
|
828
|
|
|
|
Total
|
|
$
|
16,795
|
|
|
Total
|
|
$
|
1,965
|
|
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. Liabilities represent cash margin deposits received by Ferrellgas for contracts that are in a positive mark-to-market position. The following tables provide a summary of cash margin balances as of
April 30, 2018
and
July 31, 2017
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
1,623
|
|
|
Other current liabilities
|
|
$
|
8,434
|
|
|
|
Other assets, net
|
|
1,405
|
|
|
Other liabilities
|
|
3,631
|
|
|
|
|
|
$
|
3,028
|
|
|
|
|
$
|
12,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2017
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
1,778
|
|
|
Other current liabilities
|
|
$
|
7,729
|
|
|
|
Other assets, net
|
|
1,631
|
|
|
Other liabilities
|
|
3,073
|
|
|
|
|
|
$
|
3,409
|
|
|
|
|
$
|
10,802
|
|
The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of operations for the
three and nine months ended
April 30, 2018
and
2017
due to derivatives designated as fair value hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized on Derivative
|
|
Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item)
|
Derivative Instrument
|
|
Location of Amounts Recognized on Derivative
|
|
For the three months ended April 30,
|
|
For the three months ended April 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
40
|
|
|
$
|
323
|
|
|
$
|
(2,275
|
)
|
|
$
|
(2,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized on Derivative
|
|
Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item)
|
Derivative Instrument
|
|
Location of Amounts Recognized on Derivative
|
|
For the nine months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
266
|
|
|
$
|
1,071
|
|
|
$
|
(6,825
|
)
|
|
$
|
(6,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide a summary of the effect on Ferrellgas’ condensed consolidated statements of comprehensive income (loss) for the
three and nine months ended
April 30, 2018
and
2017
due to derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 2018
|
|
|
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
|
|
$
|
(169
|
)
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
6,628
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
10
|
|
|
Interest expense
|
|
(60
|
)
|
|
—
|
|
|
|
$
|
(159
|
)
|
|
|
|
$
|
6,568
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 2017
|
|
|
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
|
|
$
|
(6,642
|
)
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
2,411
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
146
|
|
|
Interest expense
|
|
(478
|
)
|
|
—
|
|
|
|
$
|
(6,496
|
)
|
|
|
|
$
|
1,933
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2018
|
|
|
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
|
|
$
|
23,114
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
20,646
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
248
|
|
|
Interest expense
|
|
(386
|
)
|
|
—
|
|
|
|
$
|
23,362
|
|
|
|
|
$
|
20,260
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2017
|
|
|
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
|
|
$
|
12,930
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(1,112
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
974
|
|
|
Interest expense
|
|
(1,707
|
)
|
|
—
|
|
|
|
$
|
13,904
|
|
|
|
|
$
|
(2,819
|
)
|
|
$
|
—
|
|
The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of operations for the
three and nine months ended
April 30, 2018
and
2017
due to the change in fair value of derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 2018
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
—
|
|
|
Cost of sales - midstream operations
|
|
|
|
|
|
|
|
For the three months ended April 30, 2017
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
1,464
|
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
(393
|
)
|
|
Operating expense
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2018
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
(3,470
|
)
|
|
Cost of sales - midstream operations
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2017
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
(784
|
)
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
1,123
|
|
|
Operating expense
|
The changes in derivatives included in AOCI for the
nine months ended
April 30, 2018
and
2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
Gains and losses on derivatives included in AOCI
|
|
2018
|
|
2017
|
Beginning balance
|
|
$
|
14,648
|
|
|
$
|
(9,815
|
)
|
Change in value of risk management commodity derivatives
|
|
23,114
|
|
|
12,930
|
|
Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
|
|
(20,646
|
)
|
|
1,112
|
|
Change in value of risk management interest rate derivatives
|
|
248
|
|
|
974
|
|
Reclassification of losses on interest rate hedges to interest expense
|
|
386
|
|
|
1,707
|
|
Ending balance
|
|
$
|
17,750
|
|
|
$
|
6,908
|
|
Ferrellgas expects to reclassify net gains related to the risk management commodity derivatives of approximately
$12.2 million
to earnings during the next 12 months. These net gains are expected to be offset by decreased 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, 2018
and 2017, Ferrellgas had
no
reclassifications to operations 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, 2018
, Ferrellgas had financial derivative contracts covering
2.3 million
barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
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 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 in the forms of letters of credit, parent 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, 2018
, the maximum amount of loss due to credit risk that Ferrellgas would incur is $
5.7
million, which is based upon the gross fair values of the derivative financial instruments.
From time to time Ferrellgas enters into derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas' debt rating. There were
no
open derivative contracts with credit-risk-related contingent features as of
April 30, 2018
.
I.
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 the general partner in connection with operating Ferrellgas’ business. These costs primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas’ behalf and are reported in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating expense
|
|
$
|
58,842
|
|
|
$
|
53,747
|
|
|
$
|
181,484
|
|
|
$
|
170,953
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
5,707
|
|
|
$
|
6,913
|
|
|
$
|
21,637
|
|
|
$
|
23,713
|
|
See additional discussions about transactions with the general partner and related parties in Note F – Partners’ deficit.
J.
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, which were consolidated in the Western District of Missouri on October 16, 2014, 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 Federal Court for the Western District of Missouri initially 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 filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains 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.
Ferrellgas has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. At this time the derivative lawsuits remain stayed by agreement. Ferrellgas believes that it has defenses and will vigorously defend these cases. Ferrellgas does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
Ferrellgas and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude from rail onto barges. Eddystone alleges that Ferrellgas transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. Ferrellgas believes that Ferrellgas and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas believes that the amount of such damage claims, if ultimately owed to Eddystone, could be material to Ferrellgas. Ferrellgas intends to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, Ferrellgas filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. The Third-Party Defendants have filed motions to dismiss the third-party complaint for alleged lack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgas is vigorously opposing these motions.
K.
Net earnings (loss) per common unit
Below is a calculation of the basic and diluted net earnings (loss) per common unit in the condensed consolidated statements of operations for the periods indicated. Ferrellgas calculates net earnings (loss) per common unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings or loss for the period had been distributed according to the incentive distribution rights in the Ferrellgas partnership agreement. Due to the seasonality of the propane business, the dilutive effect of the two-class method typically impacts only the three months ending January 31. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners as follows:
|
|
|
|
|
|
|
|
|
|
Ratio of total distributions payable to:
|
Quarterly distribution per common unit
|
|
Common unitholder
|
|
General partner
|
$0.56 to $0.63
|
|
86.9
|
%
|
|
13.1
|
%
|
$0.64 to $0.82
|
|
76.8
|
%
|
|
23.2
|
%
|
$0.83 and above
|
|
51.5
|
%
|
|
48.5
|
%
|
There was no dilutive effect resulting from this method based on basic and diluted net earnings (loss) per common unit for the
three and nine months ended
April 30, 2018
or
2017
.
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,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
(in thousands, except per common unit amounts)
|
Common unitholders’ interest in net earnings (loss)
|
|
$
|
10,752
|
|
|
$
|
6,470
|
|
|
$
|
(38,508
|
)
|
|
$
|
1,545
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding - basic and diluted
|
|
97,152.7
|
|
|
97,152.7
|
|
|
97,152.7
|
|
|
97,255.4
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net earnings (loss) per common unit
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
(0.40
|
)
|
|
$
|
0.02
|
|
L.
Segment reporting
Ferrellgas has two primary operations that result in two reportable operating segments: propane operations and related equipment sales and midstream operations. During the quarter ended January 31, 2018, Ferrellgas recorded a goodwill impairment of
$10.0 million
related to a decline in future expected cash flows of an immaterial reporting unit of our Propane operations and related equipment sales segment.
Following is a summary of segment information for the
three and nine months ended
April 30, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2018
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
493,215
|
|
|
$
|
22,595
|
|
|
$
|
—
|
|
|
$
|
515,810
|
|
Direct costs (1)
|
|
397,568
|
|
|
21,593
|
|
|
9,727
|
|
|
428,888
|
|
Adjusted EBITDA
|
|
$
|
95,647
|
|
|
$
|
1,002
|
|
|
$
|
(9,727
|
)
|
|
$
|
86,922
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2017
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
411,433
|
|
|
$
|
126,676
|
|
|
$
|
—
|
|
|
$
|
538,109
|
|
Direct costs (1)
|
|
324,442
|
|
|
127,223
|
|
|
9,654
|
|
|
461,319
|
|
Adjusted EBITDA
|
|
$
|
86,991
|
|
|
$
|
(547
|
)
|
|
$
|
(9,654
|
)
|
|
$
|
76,790
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2018
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
1,464,990
|
|
|
$
|
260,631
|
|
|
$
|
—
|
|
|
$
|
1,725,621
|
|
Direct costs (1)
|
|
1,208,283
|
|
|
250,423
|
|
|
33,150
|
|
|
1,491,856
|
|
Adjusted EBITDA
|
|
$
|
256,707
|
|
|
$
|
10,208
|
|
|
$
|
(33,150
|
)
|
|
$
|
233,765
|
|
|
|
|
|
|
Nine months ended April 30, 2017
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
1,165,394
|
|
|
$
|
331,507
|
|
|
$
|
—
|
|
|
$
|
1,496,901
|
|
Direct costs (1)
|
|
931,631
|
|
|
323,714
|
|
|
30,717
|
|
|
1,286,062
|
|
Adjusted EBITDA
|
|
$
|
233,763
|
|
|
$
|
7,793
|
|
|
$
|
(30,717
|
)
|
|
$
|
210,839
|
|
|
|
|
|
|
|
|
|
|
(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 , "severance charge", "professional fees", and "unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments".
Following is a reconciliation of Ferrellgas' total segment performance measure to condensed consolidated net earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
Nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net earnings (loss) attributable to Ferrellgas Partners, L.P.
|
|
$
|
10,861
|
|
|
$
|
6,536
|
|
|
$
|
(38,897
|
)
|
|
$
|
1,561
|
|
Income tax expense (benefit)
|
|
67
|
|
|
(192
|
)
|
|
282
|
|
|
(194
|
)
|
Interest expense
|
|
40,375
|
|
|
39,860
|
|
|
123,855
|
|
|
112,107
|
|
Depreciation and amortization expense
|
|
25,348
|
|
|
25,737
|
|
|
76,565
|
|
|
77,546
|
|
EBITDA
|
|
76,651
|
|
|
71,941
|
|
|
161,805
|
|
|
191,020
|
|
Non-cash employee stock ownership plan compensation charge
|
|
2,738
|
|
|
4,697
|
|
|
10,731
|
|
|
11,396
|
|
Non-cash stock-based compensation charge
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,298
|
|
Asset impairments
|
|
—
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
Loss on asset sales and disposals
|
|
6,270
|
|
|
2,393
|
|
|
46,414
|
|
|
8,861
|
|
Other income, net
|
|
(227
|
)
|
|
(162
|
)
|
|
(1,422
|
)
|
|
(1,433
|
)
|
Severance costs
|
|
—
|
|
|
—
|
|
|
1,663
|
|
|
1,959
|
|
Professional fees
|
|
1,289
|
|
|
—
|
|
|
3,407
|
|
|
—
|
|
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments
|
|
—
|
|
|
(2,234
|
)
|
|
1,293
|
|
|
(4,449
|
)
|
Net earnings (loss) attributable to noncontrolling interest
|
|
201
|
|
|
155
|
|
|
(131
|
)
|
|
187
|
|
Adjusted EBITDA
|
|
$
|
86,922
|
|
|
$
|
76,790
|
|
|
$
|
233,765
|
|
|
$
|
210,839
|
|
Following are total assets by segment:
|
|
|
|
|
|
|
|
|
|
Assets
|
|
April 30, 2018
|
|
July 31, 2017
|
Propane operations and related equipment sales
|
|
$
|
1,274,360
|
|
|
$
|
1,194,905
|
|
Midstream operations
|
|
244,523
|
|
|
399,356
|
|
Corporate
|
|
13,693
|
|
|
15,708
|
|
Total consolidated assets
|
|
$
|
1,532,576
|
|
|
$
|
1,609,969
|
|
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2018
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
17,556
|
|
|
$
|
210
|
|
|
$
|
1,492
|
|
|
$
|
19,258
|
|
Growth
|
|
34,784
|
|
|
1,265
|
|
|
—
|
|
|
36,049
|
|
Total
|
|
$
|
52,340
|
|
|
$
|
1,475
|
|
|
$
|
1,492
|
|
|
$
|
55,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2017
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
8,533
|
|
|
$
|
241
|
|
|
$
|
1,905
|
|
|
$
|
10,679
|
|
Growth
|
|
21,246
|
|
|
—
|
|
|
—
|
|
|
21,246
|
|
Total
|
|
$
|
29,779
|
|
|
$
|
241
|
|
|
$
|
1,905
|
|
|
$
|
31,925
|
|
M.
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, other than as discussed below, there were no events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
New
$575.0 million
senior secured credit facility
On May 4, 2018, the operating partnership entered into a new
$575.0 million
senior secured credit facility to replace its previous
$575.0 million
senior secured credit facility that was scheduled to mature in October 2018. This new facility consists of a
$300.0 million
revolving line of credit as well as a
$275.0 million
term loan, both priced at LIBOR +
5.75%
and maturing May 4, 2023. The revolving line of credit includes a
$125.0 million
sublimit for the issuance of letters of credit. Borrowings under this facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness and acquisitions. At closing, the following transactions occurred: 1) the proceeds of the term loan were used to repay and terminate the operating partnership’s then existing credit facility, thus, no revolving credit loans were outstanding, 2) approximately
$100 million
of letters of credit were issued to replace the letters of credit under the operating partnership's then existing credit facility, and 3) the operating partnership held approximately
$75 million
of surplus cash.
The term loan does not include any scheduled principal payments and the revolving credit facility does not have any scheduled commitment reductions before maturity; however, the credit facility requires prepayments pursuant to the following: 1) certain asset sales, 2) 50% of any excess cash flow, as defined in the credit agreement, in any fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and 4) certain tax refunds.
This new senior secured credit facility is secured with substantially all of the assets of the operating partnership and its subsidiaries, and Ferrellgas Partners’ and the general partner’s partnership interests in the operating partnership, and contains various affirmative and negative covenants and default provisions, as well as requirements with respect to the maintenance of specified financial ratios and limitations on the making of loans and investments.
Amended accounts receivable securitization facility
On May 14, 2018, the operating partnership entered into a seventh amendment to its accounts receivable securitization facility which extends the maturity date by three years, as well as increases the size of the facility from a maximum borrowing capacity of
$225.0 million
to
$250.0 million
at a discount rate of LIBOR plus 200 basis points. The amended accounts receivable securitization facility also includes provisions for the issuance of letters of credit with a
$50.0 million
sublimit. The facility continues to contain provisions where maximum purchase levels are reduced during periods of the year when working capital requirements are lower to efficiently reduce unused capacity fees.
|
|
|
|
|
|
|
|
|
FERRELLGAS PARTNERS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
|
CONDENSED BALANCE SHEETS
|
(unaudited)
|
|
April 30, 2018
|
|
July 31, 2017
|
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
|
27,170
|
|
|
25,055
|
|
Accumulated deficit
|
(27,170
|
)
|
|
(25,055
|
)
|
Total stockholder's equity
|
$
|
1,000
|
|
|
$
|
1,000
|
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS PARTNERS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
|
CONDENSED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
General and administrative expense
|
$
|
1,840
|
|
|
$
|
3,225
|
|
|
$
|
2,115
|
|
|
$
|
3,317
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,840
|
)
|
|
$
|
(3,225
|
)
|
|
$
|
(2,115
|
)
|
|
$
|
(3,317
|
)
|
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,
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(2,115
|
)
|
|
$
|
(3,317
|
)
|
Cash used in operating activities
|
(2,115
|
)
|
|
(3,317
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Capital contribution
|
2,115
|
|
|
3,317
|
|
Cash provided by financing activities
|
2,115
|
|
|
3,317
|
|
|
|
|
|
Net change in cash
|
—
|
|
|
—
|
|
Cash - beginning of period
|
1,000
|
|
|
1,000
|
|
Cash - end of period
|
$
|
1,000
|
|
|
$
|
1,000
|
|
See notes to condensed financial statements.
|
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
(unaudited)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A.
Formation
Ferrellgas Partners Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on
March 28, 1996
and is a wholly-owned subsidiary of Ferrellgas Partners, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has
no
employees.
B.
Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
The indenture governing the senior unsecured notes contains various restrictive covenants applicable to the Partnership and its subsidiaries, the most restrictive relating to additional indebtedness and restricted payments. As of
April 30, 2018
, the Partnership is in compliance with all requirements, tests, limitations and covenants related to this debt agreement, except for the consolidated fixed charge coverage ratio.
The indenture governing the outstanding notes of the Partnership includes a consolidated fixed charge coverage ratio test for the incurrence of debt and the making of restricted payments. This covenant requires that the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the Partnership be at least
1.75
x before a restricted payment (as defined in the indenture) can be made by the Partnership. If this ratio were to drop below
1.75
x, the indenture allows the Partnership to make restricted payments of up to
$50.0 million
in total over a 16 quarter period while below this ratio. As of
April 30, 2018
, the ratio was
1.56
x. As a result, the
$9.8 million
distribution to be paid to common unitholders on
June 14, 2018
will be taken from the
$50.0 million
restricted payment limitation, which after considering the
$9.8 million
deductions taken as a result of the distributions paid in September 2017, December 2017 and March 2018, leaves
$10.8 million
for future restricted payments. Unless the indenture governing the outstanding notes is amended or refinanced, if the Partnership's consolidated fixed charge coverage ratio does not improve to at least
1.75
x and the Partnership continues its current quarterly distribution rate of
$0.10
per common unit, this covenant will not allow the Partnership to make common unit distributions for the quarter ending October 31, 2018 and beyond. The Partnership is presently considering potential solutions to cure the limitation on distributions under the consolidated fixed charge covenant ratio related to the outstanding unsecured bonds due in June 2020. The potential solutions, among others, include a refinancing or a transaction to exchange new bonds for some or all of the bonds due June 2020.
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(in thousands)
|
(unaudited)
|
|
April 30, 2018
|
|
July 31, 2017
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
9,491
|
|
|
$
|
5,701
|
|
Accounts and notes receivable, net (including $182,486 and $109,407 of accounts receivable pledged as collateral at April 30, 2018 and July 31, 2017, respectively)
|
202,727
|
|
|
165,084
|
|
Inventories
|
85,062
|
|
|
92,552
|
|
Prepaid expenses and other current assets
|
44,059
|
|
|
33,426
|
|
Total current assets
|
341,339
|
|
|
296,763
|
|
|
|
|
|
Property, plant and equipment, net
|
637,688
|
|
|
731,923
|
|
Goodwill, net
|
246,098
|
|
|
256,103
|
|
Intangible assets (net of accumulated amortization of $460,011 and $436,428 at April 30, 2018 and July 31, 2017, respectively)
|
235,318
|
|
|
251,102
|
|
Other assets, net
|
72,094
|
|
|
74,057
|
|
Total assets
|
$
|
1,532,537
|
|
|
$
|
1,609,948
|
|
|
|
|
|
LIABILITIES AND PARTNERS' DEFICIT
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$
|
52,472
|
|
|
$
|
85,561
|
|
Short-term borrowings
|
—
|
|
|
59,781
|
|
Collateralized note payable
|
104,000
|
|
|
69,000
|
|
Other current liabilities
|
147,243
|
|
|
122,016
|
|
Total current liabilities
|
303,715
|
|
|
336,358
|
|
|
|
|
|
Long-term debt
|
1,646,069
|
|
|
1,649,270
|
|
Other liabilities
|
34,225
|
|
|
31,118
|
|
Contingencies and commitments (Note J)
|
|
|
|
|
|
|
|
|
|
Partners' deficit:
|
|
|
|
|
|
Limited partner
|
(464,761
|
)
|
|
(417,467
|
)
|
General partner
|
(4,577
|
)
|
|
(4,095
|
)
|
Accumulated other comprehensive income
|
17,866
|
|
|
14,764
|
|
Total partners' deficit
|
(451,472
|
)
|
|
(406,798
|
)
|
Total liabilities and partners' deficit
|
$
|
1,532,537
|
|
|
$
|
1,609,948
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Propane and other gas liquids sales
|
|
$
|
451,302
|
|
|
$
|
369,437
|
|
|
$
|
1,346,299
|
|
|
$
|
1,049,211
|
|
|
Midstream operations
|
|
22,595
|
|
|
126,676
|
|
|
260,631
|
|
|
331,507
|
|
|
Other
|
|
41,913
|
|
|
41,996
|
|
|
118,691
|
|
|
116,183
|
|
|
Total revenues
|
|
515,810
|
|
|
538,109
|
|
|
1,725,621
|
|
|
1,496,901
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
|
260,419
|
|
|
197,487
|
|
|
802,852
|
|
|
551,728
|
|
|
Cost of sales - midstream operations
|
|
14,518
|
|
|
118,767
|
|
|
229,710
|
|
|
300,433
|
|
|
Cost of sales - other
|
|
19,850
|
|
|
20,810
|
|
|
54,339
|
|
|
53,213
|
|
|
Operating expense
|
|
116,579
|
|
|
104,773
|
|
|
350,757
|
|
|
322,935
|
|
|
Depreciation and amortization expense
|
|
25,348
|
|
|
25,737
|
|
|
76,565
|
|
|
77,546
|
|
|
General and administrative expense
|
|
11,546
|
|
|
9,869
|
|
|
39,600
|
|
|
36,416
|
|
|
Equipment lease expense
|
|
7,133
|
|
|
7,270
|
|
|
20,828
|
|
|
22,035
|
|
|
Non-cash employee stock ownership plan compensation charge
|
|
2,738
|
|
|
4,697
|
|
|
10,731
|
|
|
11,396
|
|
|
Asset impairments
|
|
—
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
|
Loss on asset sales and disposals
|
|
6,270
|
|
|
2,393
|
|
|
46,414
|
|
|
8,861
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
51,409
|
|
|
46,306
|
|
|
83,820
|
|
|
112,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(31,739
|
)
|
|
(31,270
|
)
|
|
(97,993
|
)
|
|
(95,416
|
)
|
|
Other income, net
|
|
227
|
|
|
162
|
|
|
1,422
|
|
|
1,433
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
19,897
|
|
|
15,198
|
|
|
(12,751
|
)
|
|
18,355
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
57
|
|
|
(197
|
)
|
|
261
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
19,840
|
|
|
$
|
15,395
|
|
|
$
|
(13,012
|
)
|
|
$
|
18,555
|
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
19,840
|
|
|
$
|
15,395
|
|
|
$
|
(13,012
|
)
|
|
$
|
18,555
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Change in value of risk management derivatives
|
|
(159
|
)
|
|
(6,496
|
)
|
|
23,362
|
|
|
13,904
|
|
|
Reclassification of (gains) losses on derivatives to earnings, net
|
|
(6,568
|
)
|
|
(1,933
|
)
|
|
(20,260
|
)
|
|
2,819
|
|
|
Other comprehensive income (loss)
|
|
(6,727
|
)
|
|
(8,429
|
)
|
|
3,102
|
|
|
16,723
|
|
|
Comprehensive income (loss)
|
|
$
|
13,113
|
|
|
$
|
6,966
|
|
|
$
|
(9,910
|
)
|
|
$
|
35,278
|
|
|
See notes to condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
|
(in thousands)
|
(unaudited)
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
other
|
|
Total
|
|
Limited
|
|
General
|
|
comprehensive
|
|
partners'
|
|
partner
|
|
partner
|
|
income
|
|
deficit
|
|
|
|
|
|
|
|
|
Balance at July 31, 2017
|
$
|
(417,467
|
)
|
|
$
|
(4,095
|
)
|
|
$
|
14,764
|
|
|
$
|
(406,798
|
)
|
Contributions in connection with non-cash ESOP and stock-based compensation charges
|
10,623
|
|
|
108
|
|
|
—
|
|
|
10,731
|
|
Distributions
|
(45,036
|
)
|
|
(459
|
)
|
|
—
|
|
|
(45,495
|
)
|
Net loss
|
(12,881
|
)
|
|
(131
|
)
|
|
—
|
|
|
(13,012
|
)
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
3,102
|
|
|
3,102
|
|
Balance at April 30, 2018
|
$
|
(464,761
|
)
|
|
$
|
(4,577
|
)
|
|
$
|
17,866
|
|
|
$
|
(451,472
|
)
|
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,
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
Net earnings (loss)
|
$
|
(13,012
|
)
|
|
$
|
18,555
|
|
Reconciliation of net earnings (loss) to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization expense
|
76,565
|
|
|
77,546
|
|
Non-cash employee stock ownership plan compensation charge
|
10,731
|
|
|
11,396
|
|
Non-cash stock-based compensation charge
|
—
|
|
|
3,298
|
|
Asset impairments
|
10,005
|
|
|
—
|
|
Loss on asset sales and disposals
|
46,414
|
|
|
8,861
|
|
Unrealized gain on derivative instruments
|
(91
|
)
|
|
(3,888
|
)
|
Provision for doubtful accounts
|
1,906
|
|
|
39
|
|
Deferred income tax expense
|
423
|
|
|
45
|
|
Other
|
3,987
|
|
|
4,147
|
|
Changes in operating assets and liabilities, net of effects from business acquisitions:
|
|
|
|
Accounts and notes receivable, net of securitization
|
(46,771
|
)
|
|
(58,923
|
)
|
Inventories
|
7,755
|
|
|
(2,163
|
)
|
Prepaid expenses and other current assets
|
(4,001
|
)
|
|
12,111
|
|
Accounts payable
|
(18,429
|
)
|
|
18,830
|
|
Accrued interest expense
|
24,217
|
|
|
24,428
|
|
Other current liabilities
|
(809
|
)
|
|
5,047
|
|
Other assets and liabilities
|
(4,944
|
)
|
|
5,070
|
|
Net cash provided by operating activities
|
93,946
|
|
|
124,399
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Business acquisitions, net of cash acquired
|
(14,862
|
)
|
|
(3,539
|
)
|
Capital expenditures
|
(58,961
|
)
|
|
(35,412
|
)
|
Proceeds from sale of assets
|
57,802
|
|
|
4,721
|
|
Other
|
—
|
|
|
(37
|
)
|
Net cash used in investing activities
|
(16,021
|
)
|
|
(34,267
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Distributions
|
(45,495
|
)
|
|
(94,413
|
)
|
Contributions from partners
|
—
|
|
|
167,640
|
|
Proceeds from issuance of long-term debt
|
23,580
|
|
|
52,354
|
|
Payments on long-term debt
|
(1,892
|
)
|
|
(173,471
|
)
|
Net reductions in short-term borrowings
|
(84,179
|
)
|
|
(62,902
|
)
|
Net additions to collateralized short-term borrowings
|
35,000
|
|
|
27,000
|
|
Cash paid for financing costs
|
(1,149
|
)
|
|
(2,064
|
)
|
Net cash used in financing activities
|
(74,135
|
)
|
|
(85,856
|
)
|
|
|
|
|
Net change in cash and cash equivalents
|
3,790
|
|
|
4,276
|
|
Cash and cash equivalents - beginning of period
|
5,701
|
|
|
4,890
|
|
Cash and cash equivalents - end of period
|
$
|
9,491
|
|
|
$
|
9,166
|
|
See notes to condensed consolidated financial statements.
|
FERRELLGAS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise designated)
(unaudited)
A.
Partnership organization and formation
Ferrellgas, L.P. is a limited partnership that owns and operates propane distribution and related assets, crude oil transportation and logistics related assets and salt water disposal wells in south Texas. Ferrellgas Partners, L.P. (“Ferrellgas Partners”), a publicly traded limited partnership, holds an approximate
99%
limited partner interest in, and consolidates, Ferrellgas, L.P. Ferrellgas, Inc. (the “general partner”), a wholly-owned subsidiary of Ferrell Companies, Inc. (“Ferrell Companies”), holds an approximate
1%
general partner interest in Ferrellgas, L.P. and performs all management functions required by Ferrellgas, L.P.
Ferrellgas, L.P. owns a
100%
equity interest in Ferrellgas Finance Corp., whose only business activity is to act as the co-issuer and co-obligor of debt issued by Ferrellgas, L.P.
Ferrellgas, L.P. is engaged in the following primary businesses:
|
|
•
|
Propane operations 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 crude oil logistics and water solutions. Crude oil logistics primarily generates income by providing crude oil transportation and logistics services on behalf of producers and end-users of crude oil. Water solutions generates income primarily through the operation of salt water disposal wells in the Eagle Ford shale region of south Texas.
|
Due to seasonality, the results of operations for the
nine months ended
April 30, 2018
are not necessarily indicative of the results to be expected for the full fiscal year ending
July 31, 2018
.
The condensed consolidated financial statements of Ferrellgas, L.P. and subsidiaries reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed consolidated financial statements were of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (ii) the consolidated financial statements and accompanying notes included in Ferrellgas, L.P.’s Annual Report on Form 10-K for fiscal
2017
.
B.
Summary of significant accounting policies
(1)
Accounting estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair value of reporting units, recoverability of long-lived assets, assumptions used to value business combinations, fair values of derivative contracts and stock-based compensation calculations.
(2) New accounting standards:
FASB Accounting Standard Update No. 2014-09
In May 2014, the Financial Accounting Standards Board, ("FASB") issued Accounting Standard Update ("ASU") 2014-09,
Revenue from Contracts with Customers.
The issuance is part of a joint effort by the FASB and the International Accounting Standards Board ("IASB") to enhance financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards ("IFRS") and, thereby, improving the consistency of requirements, comparability of practices and usefulness of disclosures. The new standard will supersede much of the existing authoritative literature for revenue recognition. The standard and related amendments will be effective for Ferrellgas, L.P. for its annual reporting period beginning August 1, 2018, including interim periods within that reporting period. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect. Ferrellgas, L.P. is in the final stages of analyzing the impact of the new guidance using an integrated approach which includes evaluating differences in
the amount and timing of revenue recognition from applying the requirements of the new guidance, reviewing its accounting policies and practices, and assessing the need for changes to its processes, accounting systems and design of internal controls. Ferrellgas, L.P. has completed the assessment of a significant number of its contracts with customers under the new guidance. Although Ferrellgas, L.P. has not completed its assessment of the impact of the new guidance, it does not expect its adoption will have a material impact on its consolidated financial statements. Ferrellgas, L.P. expects to utilize the modified retrospective transition method, which recognizes the cumulative effect upon adoption, when it adopts the new standard, effective August 1, 2018.
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. We adopted ASU 2015-11 effective August 1, 2017. The adoption of this standard did not materially impact our 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. Ferrellgas, L.P. has formed an implementation team, completed training on the new standard, and is working on an initial assessment.
FASB Accounting Standard Update No. 2016-13
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326)
which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Ferrellgas, L.P. is currently evaluating the impact of its pending adoption of this standard on the consolidated financial statements.
FASB Accounting Standard Update No. 2017-12
In August 2017, the FASB issued ASU 2017-12,
Financial Instruments - Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities
which is intended to improve the financial reporting for hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. This standard 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 its pending adoption of this standard on the consolidated financial statements.
C.
Supplemental financial statement information
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Propane gas and related products
|
|
$
|
58,142
|
|
|
$
|
67,049
|
|
Appliances, parts and supplies, and other
|
|
26,920
|
|
|
25,503
|
|
Inventories
|
|
$
|
85,062
|
|
|
$
|
92,552
|
|
In addition to inventories on hand, Ferrellgas, L.P. enters into contracts to take delivery of propane for supply procurement purposes with terms that generally do not exceed
36 months
. Most of these contracts call for payment based on market prices at the date of delivery. As of
April 30, 2018
, Ferrellgas, L.P. had committed, for supply procurement purposes, to take delivery of approximately
70.7
million gallons of propane at fixed prices.
Other assets, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Notes receivable, less current portion
|
|
$
|
33,962
|
|
|
$
|
32,500
|
|
Other
|
|
38,132
|
|
|
41,557
|
|
Other assets, net
|
|
$
|
72,094
|
|
|
$
|
74,057
|
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Accrued interest
|
|
$
|
38,954
|
|
|
$
|
14,737
|
|
Customer deposits and advances
|
|
18,956
|
|
|
25,541
|
|
Other
|
|
89,333
|
|
|
81,738
|
|
Other current liabilities
|
|
$
|
147,243
|
|
|
$
|
122,016
|
|
Shipping and handling expenses are classified in the following condensed consolidated statements of operations line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating expense
|
|
$
|
48,351
|
|
|
$
|
44,309
|
|
|
$
|
146,279
|
|
|
$
|
134,090
|
|
Depreciation and amortization expense
|
|
1,340
|
|
|
957
|
|
|
3,575
|
|
|
2,979
|
|
Equipment lease expense
|
|
6,507
|
|
|
6,564
|
|
|
18,872
|
|
|
19,882
|
|
Total shipping and handling expenses
|
|
$
|
56,198
|
|
|
$
|
51,830
|
|
|
$
|
168,726
|
|
|
$
|
156,951
|
|
During the quarter ended
January 31, 2018
, Ferrellgas, L.P. committed to a plan to dispose of all of its rail cars utilized in the Midstream operations segment and recognized a loss on assets held for sale of
$35.5 million
. During the quarter ended
April 30, 2018
, Ferrellgas, L.P. completed the sale of all
1,292
of these rail cars and received approximately
$51.3 million
in cash. For the
nine months ended April 30, 2018
, "Loss on asset sales and disposals" includes a loss of
$36.8 million
related to the sale of these rail cars. Proceeds from the transaction were used to reduce outstanding debt on Ferrellgas L.P.'s secured credit facility.
During the quarter ended
January 31, 2018
, Ferrellgas, L.P. completed the sale of Bridger Energy, LLC, included in the Midstream operations segment, in exchange for an
$8.5 million
secured promissory note due in May 2020. For the
nine months ended April 30, 2018
, "Loss on asset sales and disposals" includes a loss of
$3.8 million
related to this sale.
"Loss on asset sales and disposals" during the
three and nine months ended
April 30, 2018
and 2017 consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Loss on sale of assets classified as held for sale
|
|
$
|
1,237
|
|
|
$
|
—
|
|
|
$
|
36,752
|
|
|
$
|
—
|
|
Loss on sale of assets and other
|
|
5,033
|
|
|
2,393
|
|
|
9,662
|
|
|
8,861
|
|
Loss on asset sales and disposals
|
|
$
|
6,270
|
|
|
$
|
2,393
|
|
|
$
|
46,414
|
|
|
$
|
8,861
|
|
Certain cash flow and significant non-cash activities are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
Cash paid (refunded) for:
|
|
|
|
|
Interest
|
|
$
|
69,775
|
|
|
$
|
67,314
|
|
Income taxes
|
|
$
|
(479
|
)
|
|
$
|
23
|
|
Non-cash investing and financing activities:
|
|
|
|
|
Liabilities incurred in connection with acquisitions
|
|
$
|
1,508
|
|
|
$
|
856
|
|
Change in accruals for property, plant and equipment additions
|
|
$
|
386
|
|
|
$
|
(111
|
)
|
D.
Accounts and notes receivable, net and accounts receivable securitization
As discussed further in Note M - Subsequent events, on May 14, 2018, Ferrellgas, L.P. entered into an amendment which extended the maturity date of its accounts receivable securitization facility by three years and increased the maximum borrowing capacity from
$225.0
million to
$250.0
million. The accounts receivable securitization facility disclosures below pertain to the facility that was in place as of April 30, 2018.
Accounts and notes receivable, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
July 31, 2017
|
Accounts receivable pledged as collateral
|
|
$
|
182,486
|
|
|
$
|
109,407
|
|
Accounts receivable
|
|
13,131
|
|
|
47,346
|
|
Note receivable - current portion
|
|
10,000
|
|
|
10,000
|
|
Other
|
|
232
|
|
|
307
|
|
Less: Allowance for doubtful accounts
|
|
(3,122
|
)
|
|
(1,976
|
)
|
Accounts and notes receivable, net
|
|
$
|
202,727
|
|
|
$
|
165,084
|
|
At
April 30, 2018
,
$182.5
million of trade accounts receivable were pledged as collateral against
$104.0
million of collateralized notes payable due to a commercial paper conduit. At
July 31, 2017
,
$109.4 million
of trade accounts receivable were pledged as collateral against
$69.0 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, 2018
, Ferrellgas, L.P. had received cash proceeds of
$104.0
million from trade accounts receivables securitized, with
$19.0
million of remaining capacity to receive additional proceeds. As of
July 31, 2017
, Ferrellgas, L.P. had received cash proceeds of
$69.0
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
4.2%
and
4.0%
as of
April 30, 2018
and
July 31, 2017
, respectively.
E.
Debt
As discussed further in Note M - Subsequent events, on May 4, 2018, Ferrellgas, L.P. entered into a new
$575.0
million senior secured credit facility, which replaced the
$575.0
million secured credit facility that was scheduled to mature in October 2018. Credit facility disclosures below pertain to the secured credit facility that was in place as of April 30, 2018.
Short-term borrowings
Ferrellgas, L.P. classifies as short-term the portion of its secured credit facility borrowings that were used to fund working capital needs and that management intends to pay down within the 12 month period following the balance sheet date. As of April 30, 2018, there were
no
amounts classified as short-term borrowings because all amounts outstanding were refinanced on May 4, 2018 under the five-year term loan discussed in Note M - Subsequent events. As of
July 31, 2017
,
$59.8 million
was classified as short-term borrowings. For further discussion see the senior secured credit facility section below.
Debt and interest expense reduction strategy
Ferrellgas, L.P. continues to execute on a strategy to further reduce its debt and interest expense. This strategy included amending our secured credit facility and accounts receivable securitization facility, as discussed in Note M - Subsequent events, as well as certain asset sales executed to date, and may include refinancing existing debt agreements, additional asset sales, a reduction in Ferrellgas Partners' annual distribution rate or the issuance of equity. Ferrellgas, L.P. believes any debt and interest expense reduction strategies would remain in effect until Ferrellgas, L.P.'s consolidated leverage ratio reaches 4.5x or a level Ferrellgas, L.P. deems appropriate for its business.
Senior secured credit facility
As of
April 30, 2018
, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of
$184.9 million
, all of which was classified as long-term. Ferrellgas, L.P. had
$252.3 million
of capacity under the secured credit facility as of
April 30, 2018
. As of
July 31, 2017
, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of
$245.5 million
, of which
$185.7 million
was classified as long-term debt. Ferrellgas, L.P. had
$190.3 million
of capacity under our secured credit facility as of
July 31, 2017
. Borrowings outstanding at
April 30, 2018
and
July 31, 2017
under the secured credit facility had weighted average interest rates of
6.7%
and
6.0%
, respectively.
Letters of credit outstanding at
April 30, 2018
totaled
$111.8 million
and were used to secure commodity hedges, product purchases, and insurance arrangements. Letters of credit outstanding at
July 31, 2017
totaled
$139.2 million
and were used to secure commodity hedges, product purchases, and insurance arrangements. At
April 30, 2018
, Ferrellgas, L.P. had remaining letter of credit capacity of
$88.2 million
. At
July 31, 2017
, Ferrellgas, L.P. had remaining letter of credit capacity of
$60.8 million
.
F.
Partners’ deficit
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,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Ferrellgas Partners
|
|
$
|
10,013
|
|
|
$
|
9,813
|
|
|
$
|
45,036
|
|
|
$
|
93,620
|
|
General partner
|
|
102
|
|
|
100
|
|
|
459
|
|
|
793
|
|
|
|
$
|
10,115
|
|
|
$
|
9,913
|
|
|
$
|
45,495
|
|
|
$
|
94,413
|
|
On
May 24, 2018
, Ferrellgas, L.P. declared distributions for the three months ended
April 30, 2018
to Ferrellgas Partners and the general partner of
$25.3 million
and
$0.3 million
, respectively, which are expected to be paid on
June 14, 2018
.
See additional discussions about transactions with related parties in Note I – Transactions with related parties.
Accumulated other comprehensive income (loss)
(“AOCI”)
See Note H – 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, 2018
and
2017
.
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, 2018
, the general partner made non-cash contributions of
$0.1 million
to Ferrellgas, L.P. to maintain its
1.0101%
general partner interest.
During the
nine months ended
April 30, 2017
, the general partner made cash contributions of
$1.7 million
and non-cash contributions of
$0.1 million
to Ferrellgas, L.P. to maintain its
1.0101%
general partner interest.
G.
Fair value measurements
Derivative financial instruments
The following table presents Ferrellgas, L.P.’s financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of
April 30, 2018
and
July 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2018:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
41
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
19,750
|
|
|
$
|
—
|
|
|
$
|
19,750
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(3,222
|
)
|
|
$
|
—
|
|
|
$
|
(3,222
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(2,239
|
)
|
|
$
|
—
|
|
|
$
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
July 31, 2017:
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
583
|
|
|
$
|
—
|
|
|
$
|
583
|
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
16,212
|
|
|
$
|
—
|
|
|
$
|
16,212
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
(707
|
)
|
|
$
|
—
|
|
|
$
|
(707
|
)
|
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
(1,258
|
)
|
|
$
|
—
|
|
|
$
|
(1,258
|
)
|
Methodology
The fair values of Ferrellgas, L.P.’s non-exchange traded commodity derivative contracts are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. The fair values of interest rate swap contracts are based upon third-party quotes or indicative values based on recent market transactions.
Other financial instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. The estimated fair value of various note receivable financial instruments classified in "Other assets, net" on the condensed consolidated balance sheets, are approximately
$29.3 million
, or
$4.7 million
less than their carrying amount as of
April 30, 2018
. The estimated fair values of these notes receivable were calculated using a discounted cash flow method which relied on significant unobservable inputs. At
April 30, 2018
and
July 31, 2017
, the estimated fair value of Ferrellgas, L.P.’s long-term debt instruments was
$1,560.8 million
and
$1,645.3 million
, respectively. Ferrellgas, L.P. 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.
H.
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. Prior to the sale of Bridger Energy, LLC in January 2018, all other commodity derivative instruments were neither qualified nor were designated as cash flow hedges, therefore, changes in their fair value were 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 activity
During the
nine months ended
April 30, 2018
and
2017
, Ferrellgas, L.P. did
no
t recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
The following tables provide a summary of the fair value of derivatives in Ferrellgas, L.P.’s condensed consolidated balance sheets as of
April 30, 2018
and
July 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
|
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
|
|
$
|
14,449
|
|
|
Other current liabilities
|
|
$
|
2,207
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
5,301
|
|
|
Other liabilities
|
|
32
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
41
|
|
|
Other current liabilities
|
|
738
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
2,484
|
|
|
|
Total
|
|
$
|
19,791
|
|
|
Total
|
|
$
|
5,461
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2017
|
|
|
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
|
|
$
|
11,061
|
|
|
Other current liabilities
|
|
$
|
415
|
|
Commodity derivatives-propane
|
|
Other assets, net
|
|
4,413
|
|
|
Other liabilities
|
|
15
|
|
Interest rate swap agreements
|
|
Prepaid expenses and other current assets
|
|
583
|
|
|
Other current liabilities
|
|
595
|
|
Interest rate swap agreements
|
|
Other assets, net
|
|
—
|
|
|
Other liabilities
|
|
112
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Commodity derivatives-crude oil
|
|
Prepaid expenses and other current assets
|
|
738
|
|
|
Other current liabilities
|
|
828
|
|
|
|
Total
|
|
$
|
16,795
|
|
|
Total
|
|
$
|
1,965
|
|
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. Liabilities represent cash margin deposits received by Ferrellgas, L.P. for contracts that are in a positive mark-to-market position. The following tables provide a summary of cash margin balances as of
April 30, 2018
and
July 31, 2017
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
1,623
|
|
|
Other current liabilities
|
|
$
|
8,434
|
|
|
|
Other assets, net
|
|
1,405
|
|
|
Other liabilities
|
|
3,631
|
|
|
|
|
|
$
|
3,028
|
|
|
|
|
$
|
12,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2017
|
|
|
Assets
|
|
Liabilities
|
Description
|
|
Location
|
|
Amount
|
|
Location
|
|
Amount
|
Margin Balances
|
|
Prepaid expenses and other current assets
|
|
$
|
1,778
|
|
|
Other current liabilities
|
|
$
|
7,729
|
|
|
|
Other assets, net
|
|
1,631
|
|
|
Other liabilities
|
|
3,073
|
|
|
|
|
|
$
|
3,409
|
|
|
|
|
$
|
10,802
|
|
The following tables provides a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of operations for the
three and nine months ended
April 30, 2018
and
2017
due to derivatives designated as fair value hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized on Derivative
|
|
Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item)
|
Derivative Instrument
|
|
Location of Amounts Recognized on Derivative
|
|
For the three months ended April 30,
|
|
For the three months ended April 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
40
|
|
|
$
|
323
|
|
|
$
|
(2,275
|
)
|
|
$
|
(2,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized on Derivative
|
|
Amount of Interest Expense Recognized on Fixed-Rate Debt (Related Hedged Item)
|
Derivative Instrument
|
|
Location of Amounts Recognized on Derivative
|
|
For the nine months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Interest rate swap agreements
|
|
Interest expense
|
|
$
|
266
|
|
|
$
|
1,071
|
|
|
$
|
(6,825
|
)
|
|
$
|
(6,825
|
)
|
The following tables provide a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of comprehensive income (loss) for the
three and nine months ended
April 30, 2018
and
2017
due to derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 2018
|
|
|
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
|
|
$
|
(169
|
)
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
6,628
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
10
|
|
|
Interest expense
|
|
(60
|
)
|
|
—
|
|
|
|
$
|
(159
|
)
|
|
|
|
$
|
6,568
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 2017
|
|
|
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
|
|
$
|
(6,642
|
)
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
2,411
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
146
|
|
|
Interest expense
|
|
(478
|
)
|
|
—
|
|
|
|
$
|
(6,496
|
)
|
|
|
|
$
|
1,933
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2018
|
|
|
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
|
|
$
|
23,114
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
20,646
|
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
248
|
|
|
Interest expense
|
|
(386
|
)
|
|
—
|
|
|
|
$
|
23,362
|
|
|
|
|
$
|
20,260
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2017
|
|
|
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
|
|
$
|
12,930
|
|
|
Cost of sales-propane and other gas liquids sales
|
|
$
|
(1,112
|
)
|
|
$
|
—
|
|
Interest rate swap agreements
|
|
974
|
|
|
Interest expense
|
|
(1,707
|
)
|
|
—
|
|
|
|
$
|
13,904
|
|
|
|
|
$
|
(2,819
|
)
|
|
$
|
—
|
|
The following tables provide a summary of the effect on Ferrellgas, L.P.'s condensed consolidated statements of operations for the
three and nine months ended
April 30, 2018
and
2017
due to the change in fair value of derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30, 2018
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
—
|
|
|
Cost of sales - midstream operations
|
|
|
|
|
|
|
|
For the three months ended April 30, 2017
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
1,464
|
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
(393
|
)
|
|
Operating expense
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2018
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
(3,470
|
)
|
|
Cost of sales - midstream operations
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2017
|
Derivatives Not Designated as Hedging Instruments
|
|
Amount of Gain (Loss) Recognized in Income
|
|
Location of Gain (Loss) Recognized in Income
|
Commodity derivatives - crude oil
|
|
$
|
(784
|
)
|
|
Cost of sales - midstream operations
|
Commodity derivatives - vehicle fuel
|
|
$
|
1,123
|
|
|
Operating expense
|
The changes in derivatives included in AOCI for the
nine months ended
April 30, 2018
and
2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30,
|
Gains and losses on derivatives included in AOCI
|
|
2018
|
|
2017
|
Beginning balance
|
|
$
|
14,648
|
|
|
$
|
(9,815
|
)
|
Change in value of risk management commodity derivatives
|
|
23,114
|
|
|
12,930
|
|
Reclassification of (gains) and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
|
|
(20,646
|
)
|
|
1,112
|
|
Change in value of risk management interest rate derivatives
|
|
248
|
|
|
974
|
|
Reclassification of losses on interest rate hedges to interest expense
|
|
386
|
|
|
1,707
|
|
Ending balance
|
|
$
|
17,750
|
|
|
$
|
6,908
|
|
Ferrellgas, L.P. expects to reclassify net gains related to the risk management commodity derivatives of approximately
$12.2 million
to earnings during the next 12 months. These net gains are expected to be offset by decreased 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, 2018
and
2017
, Ferrellgas, L.P. had
no
reclassifications to operations 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, 2018
, Ferrellgas, L.P. had financial derivative contracts covering
2.3 million
barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.
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, parent 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, 2018
, the maximum amount of loss due to credit risk that Ferrellgas, L.P. would incur is $
5.7
million, which is based upon the gross fair values of the derivative financial instruments.
From time to time Ferrellgas, L.P. enters into derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas, L.P.’s debt rating. There were
no
open derivative contracts with credit-risk-related contingent features as of
April 30, 2018
.
I.
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 the general partner in connection with operating Ferrellgas, L.P.’s business. These costs primarily include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas, L.P.’s behalf and are reported in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating expense
|
|
$
|
58,842
|
|
|
$
|
53,747
|
|
|
$
|
181,484
|
|
|
$
|
170,953
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
5,707
|
|
|
$
|
6,913
|
|
|
$
|
21,637
|
|
|
$
|
23,713
|
|
See additional discussions about transactions with the general partner and related parties in Note F – Partners’ deficit.
J.
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, which were consolidated in the Western District of Missouri on October 16, 2014, 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 Federal Court for the Western District of Missouri initially 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 filed an appeal, which resulted in a reversal of the district court’s dismissal. We filed a petition for a writ of certiorari which was denied. An appeal by the indirect customer plaintiffs remains pending. Ferrellgas, L.P. believes it has strong defenses to the claims and intends to vigorously defend against the consolidated case. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuit.
Ferrellgas, L.P. has been named, along with several current and former officers, in several class action lawsuits alleging violations of certain securities laws based on alleged materially false and misleading statements in certain of our public disclosures. The lawsuits, the first of which was filed on October 6, 2016 in the Southern District of New York, seek unspecified compensatory damages. Derivative lawsuits with similar allegations have been filed naming Ferrellgas, L.P. and several current and former officers and directors as defendants. On April 2, 2018, the securities class action lawsuits were dismissed with prejudice. On April 30, 2018, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. At this time the derivative lawsuits remain stayed by agreement. Ferrellgas, L.P. believes that it has defenses and will vigorously defend these cases. Ferrellgas, L.P. does not believe loss is probable or reasonably estimable at this time related to the putative class action lawsuits or the derivative actions.
Ferrellgas, L.P. and Bridger Logistics, LLC, have been named, along with two former officers, in a lawsuit filed by Eddystone Rail Company ("Eddystone") on February 2, 2017 in the Eastern District of Pennsylvania (the "EDPA Lawsuit"). Eddystone indicated that it has prevailed or settled an arbitration against Jamex Transfer Services (“JTS”), then named Bridger Transfer Services, a former subsidiary of Bridger Logistics, LLC (“Bridger”). The arbitration involved a claim against JTS for money due for deficiency payments under a contract for the use of an Eddystone facility used to offload crude from rail onto barges. Eddystone alleges that Ferrellgas, L.P. transferred assets out of JTS prior to the sale of the membership interest in JTS to Jamex Transfer Holdings, and that those transfers should be avoided so that the assets can be used to satisfy the amount owed by JTS to Eddystone under the arbitration. Eddystone also alleges that JTS was an “alter ego” of Bridger and Ferrellgas. Ferrellgas, L.P. believes that Ferrellgas, L.P. and Bridger have valid defenses to these claims and to Eddystone’s primary claim against JTS on the contract claim. The lawsuit does not specify a specific amount of damages that Eddystone is seeking; however, Ferrellgas, L.P. believes that the amount of such damage claims, if ultimately owed to Eddystone, could be material to Ferrellgas, L.P. Ferrellgas, L.P. intends to vigorously defend this claim. The lawsuit is in its early stages; as such, management does not currently believe a loss is probable or reasonably estimable at this time. On August 24, 2017, Ferrellgas, L.P. filed a third-party complaint against JTS, Jamex Transfer Holdings, and other related persons and entities (the "Third-Party Defendants"), asserting claims for breach of contract, indemnification of any losses in the EDPA Lawsuit, tortious interference with contract, and contribution. The Third-Party Defendants have filed motions to dismiss the third-party complaint for alleged lack of personal jurisdiction, failure to state claim, and forum non-conveniens. Ferrellgas, L.P. is vigorously opposing these motions.
K.
Segment reporting
Ferrellgas, L.P. has two primary operations that result in two reportable operating segments: Propane operations and related equipment sales and Midstream operations. During the quarter ended January 31, 2018, Ferrellgas, L.P. recorded a goodwill impairment of
$10.0 million
related to a decline in future expected cash flows of an immaterial reporting unit of our Propane operations and related equipment sales segment.
Following is a summary of segment information for the
three and nine months ended
April 30, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2018
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
493,215
|
|
|
$
|
22,595
|
|
|
$
|
—
|
|
|
$
|
515,810
|
|
Direct costs (1)
|
|
397,568
|
|
|
21,593
|
|
|
9,595
|
|
|
428,756
|
|
Adjusted EBITDA
|
|
$
|
95,647
|
|
|
$
|
1,002
|
|
|
$
|
(9,595
|
)
|
|
$
|
87,054
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30, 2017
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
411,433
|
|
|
$
|
126,676
|
|
|
$
|
—
|
|
|
$
|
538,109
|
|
Direct costs (1)
|
|
324,442
|
|
|
127,223
|
|
|
9,545
|
|
|
461,210
|
|
Adjusted EBITDA
|
|
$
|
86,991
|
|
|
$
|
(547
|
)
|
|
$
|
(9,545
|
)
|
|
$
|
76,899
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2018
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
1,464,990
|
|
|
$
|
260,631
|
|
|
$
|
—
|
|
|
$
|
1,725,621
|
|
Direct costs (1)
|
|
1,208,283
|
|
|
250,423
|
|
|
33,017
|
|
|
1,491,723
|
|
Adjusted EBITDA
|
|
$
|
256,707
|
|
|
$
|
10,208
|
|
|
$
|
(33,017
|
)
|
|
$
|
233,898
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2017
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Segment revenues
|
|
$
|
1,165,394
|
|
|
$
|
331,507
|
|
|
$
|
—
|
|
|
$
|
1,496,901
|
|
Direct costs (1)
|
|
931,631
|
|
|
323,714
|
|
|
30,607
|
|
|
1,285,952
|
|
Adjusted EBITDA
|
|
$
|
233,763
|
|
|
$
|
7,793
|
|
|
$
|
(30,607
|
)
|
|
$
|
210,949
|
|
|
|
|
|
|
|
|
|
|
(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 , "severance charge", "professional fees", and "unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments".
Following is a reconciliation of Ferrellgas, L.P.'s total segment performance measure to condensed consolidated net earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
Nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net earnings (loss)
|
|
$
|
19,840
|
|
|
$
|
15,395
|
|
|
$
|
(13,012
|
)
|
|
$
|
18,555
|
|
Income tax expense (benefit)
|
|
57
|
|
|
(197
|
)
|
|
261
|
|
|
(200
|
)
|
Interest expense
|
|
31,739
|
|
|
31,270
|
|
|
97,993
|
|
|
95,416
|
|
Depreciation and amortization expense
|
|
25,348
|
|
|
25,737
|
|
|
76,565
|
|
|
77,546
|
|
EBITDA
|
|
76,984
|
|
|
72,205
|
|
|
161,807
|
|
|
191,317
|
|
Non-cash employee stock ownership plan compensation charge
|
|
2,738
|
|
|
4,697
|
|
|
10,731
|
|
|
11,396
|
|
Non-cash stock-based compensation charge
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,298
|
|
Asset impairments
|
|
—
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
Loss on asset sales and disposals
|
|
6,270
|
|
|
2,393
|
|
|
46,414
|
|
|
8,861
|
|
Other income, net
|
|
(227
|
)
|
|
(162
|
)
|
|
(1,422
|
)
|
|
(1,433
|
)
|
Severance costs
|
|
—
|
|
|
—
|
|
|
1,663
|
|
|
1,959
|
|
Professional fees
|
|
1,289
|
|
|
—
|
|
|
3,407
|
|
|
—
|
|
Unrealized (non-cash) loss (gain) on changes in fair value of derivatives not designated as hedging instruments
|
|
—
|
|
|
(2,234
|
)
|
|
1,293
|
|
|
(4,449
|
)
|
Adjusted EBITDA
|
|
$
|
87,054
|
|
|
$
|
76,899
|
|
|
$
|
233,898
|
|
|
$
|
210,949
|
|
Following are total assets by segment:
|
|
|
|
|
|
|
|
|
|
Assets
|
|
April 30, 2018
|
|
July 31, 2017
|
Propane operations and related equipment sales
|
|
$
|
1,274,360
|
|
|
$
|
1,194,905
|
|
Midstream operations
|
|
244,523
|
|
|
399,356
|
|
Corporate
|
|
13,654
|
|
|
15,687
|
|
Total consolidated assets
|
|
$
|
1,532,537
|
|
|
$
|
1,609,948
|
|
Following are capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2018
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
17,556
|
|
|
$
|
210
|
|
|
$
|
1,492
|
|
|
$
|
19,258
|
|
Growth
|
|
34,784
|
|
|
1,265
|
|
|
—
|
|
|
36,049
|
|
Total
|
|
$
|
52,340
|
|
|
$
|
1,475
|
|
|
$
|
1,492
|
|
|
$
|
55,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended April 30, 2017
|
|
|
Propane operations and related equipment sales
|
|
Midstream operations
|
|
Corporate
|
|
Total
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
8,533
|
|
|
$
|
241
|
|
|
$
|
1,905
|
|
|
$
|
10,679
|
|
Growth
|
|
21,246
|
|
|
—
|
|
|
—
|
|
|
21,246
|
|
Total
|
|
$
|
29,779
|
|
|
$
|
241
|
|
|
$
|
1,905
|
|
|
$
|
31,925
|
|
L.
Guarantor financial information
The
$500.0 million
aggregate principal amount of
6.75%
senior notes due
2023
co-issued by Ferrellgas, L.P. and Ferrellgas Finance Corp. are fully and unconditionally and jointly and severally guaranteed by all of Ferrellgas, L.P.’s
100%
owned subsidiaries except: (i) Ferrellgas Finance Corp; (ii) certain special purposes subsidiaries formed for use in connection with our accounts receivable securitization; and (iii) foreign subsidiaries. Guarantees of these senior notes will be released under certain circumstances, including (i) in connection with any sale or other disposition of (a) all or substantially all of the assets of a guarantor or (b) all of the capital stock of such guarantor (including by way of merger or consolidation), in each case, to a person that is not Ferrellgas, L.P. or a restricted subsidiary of Ferrellgas, L.P., (ii) if Ferrellgas, L.P. designates any restricted subsidiary that is a guarantor as an unrestricted subsidiary, (iii) upon defeasance or discharge of the notes, (iv) upon the liquidation or dissolution of such guarantor, or (v) at such time as such guarantor ceases to guarantee any other indebtedness of either of the issuers and any other guarantor.
The guarantor financial information discloses in separate columns the financial position, results of operations and the cash flows of Ferrellgas, L.P. (Parent), Ferrellgas Finance Corp. (co-issuer), Ferrellgas, L.P.’s guarantor subsidiaries on a combined basis, and Ferrellgas, L.P.’s non-guarantor subsidiaries on a combined basis. The dates and the periods presented in the guarantor financial information are consistent with the periods presented in Ferrellgas, L.P.’s condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(in thousands)
|
|
As of April 30, 2018
|
|
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
|
$
|
9,126
|
|
|
$
|
1
|
|
|
$
|
364
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,491
|
|
Accounts and notes receivable, net
|
(3,346
|
)
|
|
—
|
|
|
23,493
|
|
|
182,580
|
|
|
—
|
|
|
202,727
|
|
Intercompany receivables
|
65,801
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65,801
|
)
|
|
—
|
|
Inventories
|
70,893
|
|
|
—
|
|
|
14,169
|
|
|
—
|
|
|
—
|
|
|
85,062
|
|
Prepaid expenses and other current assets
|
31,167
|
|
|
—
|
|
|
12,890
|
|
|
2
|
|
|
—
|
|
|
44,059
|
|
Total current assets
|
173,641
|
|
|
1
|
|
|
50,916
|
|
|
182,582
|
|
|
(65,801
|
)
|
|
341,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
552,551
|
|
|
—
|
|
|
85,137
|
|
|
—
|
|
|
—
|
|
|
637,688
|
|
Goodwill, net
|
246,098
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
246,098
|
|
Intangible assets, net
|
123,177
|
|
|
—
|
|
|
112,141
|
|
|
—
|
|
|
—
|
|
|
235,318
|
|
Intercompany receivables
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
(164,031
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
164,031
|
|
|
—
|
|
Other assets, net
|
36,744
|
|
|
—
|
|
|
34,987
|
|
|
363
|
|
|
—
|
|
|
72,094
|
|
Total assets
|
$
|
1,418,180
|
|
|
$
|
1
|
|
|
$
|
283,181
|
|
|
$
|
182,945
|
|
|
$
|
(351,770
|
)
|
|
$
|
1,532,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
50,164
|
|
|
$
|
—
|
|
|
$
|
2,221
|
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
52,472
|
|
Short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Collateralized note payable
|
—
|
|
|
—
|
|
|
—
|
|
|
104,000
|
|
|
—
|
|
|
104,000
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
45,554
|
|
|
20,247
|
|
|
(65,801
|
)
|
|
—
|
|
Other current liabilities
|
143,804
|
|
|
—
|
|
|
3,041
|
|
|
398
|
|
|
—
|
|
|
147,243
|
|
Total current liabilities
|
193,968
|
|
|
—
|
|
|
50,816
|
|
|
124,732
|
|
|
(65,801
|
)
|
|
303,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
1,646,069
|
|
|
—
|
|
|
450,000
|
|
|
—
|
|
|
(450,000
|
)
|
|
1,646,069
|
|
Other liabilities
|
29,615
|
|
|
—
|
|
|
4,610
|
|
|
—
|
|
|
—
|
|
|
34,225
|
|
Contingencies and commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity
|
(469,338
|
)
|
|
1
|
|
|
(222,245
|
)
|
|
58,213
|
|
|
164,031
|
|
|
(469,338
|
)
|
Accumulated other comprehensive income
|
17,866
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,866
|
|
Total partners' capital (deficit)
|
(451,472
|
)
|
|
1
|
|
|
(222,245
|
)
|
|
58,213
|
|
|
164,031
|
|
|
(451,472
|
)
|
Total liabilities and partners' capital (deficit)
|
$
|
1,418,180
|
|
|
$
|
1
|
|
|
$
|
283,181
|
|
|
$
|
182,945
|
|
|
$
|
(351,770
|
)
|
|
$
|
1,532,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
(in thousands)
|
|
As of July 31, 2017
|
|
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
|
$
|
5,327
|
|
|
$
|
1
|
|
|
$
|
373
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,701
|
|
Accounts and notes receivable, net
|
(3,132
|
)
|
|
—
|
|
|
58,618
|
|
|
109,598
|
|
|
—
|
|
|
165,084
|
|
Intercompany receivables
|
39,877
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39,877
|
)
|
|
—
|
|
Inventories
|
78,963
|
|
|
—
|
|
|
13,589
|
|
|
—
|
|
|
—
|
|
|
92,552
|
|
Prepaid expenses and other current assets
|
26,106
|
|
|
—
|
|
|
7,314
|
|
|
6
|
|
|
—
|
|
|
33,426
|
|
Total current assets
|
147,141
|
|
|
1
|
|
|
79,894
|
|
|
109,604
|
|
|
(39,877
|
)
|
|
296,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
537,582
|
|
|
—
|
|
|
194,341
|
|
|
—
|
|
|
—
|
|
|
731,923
|
|
Goodwill, net
|
246,098
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
|
—
|
|
|
256,103
|
|
Intangible assets, net
|
128,209
|
|
|
—
|
|
|
122,893
|
|
|
—
|
|
|
—
|
|
|
251,102
|
|
Intercompany receivables
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(450,000
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
(53,915
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53,915
|
|
|
—
|
|
Other assets, net
|
35,862
|
|
|
—
|
|
|
37,618
|
|
|
577
|
|
|
—
|
|
|
74,057
|
|
Total assets
|
$
|
1,490,977
|
|
|
$
|
1
|
|
|
$
|
444,751
|
|
|
$
|
110,181
|
|
|
$
|
(435,962
|
)
|
|
$
|
1,609,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
44,026
|
|
|
$
|
—
|
|
|
$
|
41,345
|
|
|
$
|
190
|
|
|
$
|
—
|
|
|
$
|
85,561
|
|
Short-term borrowings
|
59,781
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59,781
|
|
Collateralized note payable
|
—
|
|
|
—
|
|
|
—
|
|
|
69,000
|
|
|
—
|
|
|
69,000
|
|
Intercompany payables
|
—
|
|
|
—
|
|
|
41,645
|
|
|
(1,768
|
)
|
|
(39,877
|
)
|
|
—
|
|
Other current liabilities
|
118,039
|
|
|
—
|
|
|
3,776
|
|
|
201
|
|
|
—
|
|
|
122,016
|
|
Total current liabilities
|
221,846
|
|
|
—
|
|
|
86,766
|
|
|
67,623
|
|
|
(39,877
|
)
|
|
336,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
1,649,139
|
|
|
—
|
|
|
450,131
|
|
|
—
|
|
|
(450,000
|
)
|
|
1,649,270
|
|
Other liabilities
|
26,790
|
|
|
—
|
|
|
4,300
|
|
|
28
|
|
|
—
|
|
|
31,118
|
|
Contingencies and commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' equity
|
(421,562
|
)
|
|
1
|
|
|
(96,446
|
)
|
|
42,530
|
|
|
53,915
|
|
|
(421,562
|
)
|
Accumulated other comprehensive income
|
14,764
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,764
|
|
Total partners' capital (deficit)
|
(406,798
|
)
|
|
1
|
|
|
(96,446
|
)
|
|
42,530
|
|
|
53,915
|
|
|
(406,798
|
)
|
Total liabilities and partners' capital (deficit)
|
$
|
1,490,977
|
|
|
$
|
1
|
|
|
$
|
444,751
|
|
|
$
|
110,181
|
|
|
$
|
(435,962
|
)
|
|
$
|
1,609,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
(in thousands)
|
|
|
|
For the three months ended April 30, 2018
|
|
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
|
$
|
451,212
|
|
|
$
|
—
|
|
|
$
|
90
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
451,302
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
22,595
|
|
|
—
|
|
|
—
|
|
|
22,595
|
|
Other
|
19,701
|
|
|
—
|
|
|
22,212
|
|
|
—
|
|
|
—
|
|
|
41,913
|
|
Total revenues
|
470,913
|
|
|
—
|
|
|
44,897
|
|
|
—
|
|
|
—
|
|
|
515,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
260,317
|
|
|
—
|
|
|
102
|
|
|
—
|
|
|
—
|
|
|
260,419
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
14,518
|
|
|
—
|
|
|
—
|
|
|
14,518
|
|
Cost of sales - other
|
2,328
|
|
|
—
|
|
|
17,522
|
|
|
—
|
|
|
—
|
|
|
19,850
|
|
Operating expense
|
108,291
|
|
|
—
|
|
|
9,262
|
|
|
1,459
|
|
|
(2,433
|
)
|
|
116,579
|
|
Depreciation and amortization expense
|
19,105
|
|
|
—
|
|
|
6,171
|
|
|
72
|
|
|
—
|
|
|
25,348
|
|
General and administrative expense
|
10,460
|
|
|
—
|
|
|
1,086
|
|
|
—
|
|
|
—
|
|
|
11,546
|
|
Equipment lease expense
|
7,045
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
7,133
|
|
Non-cash employee stock ownership plan compensation charge
|
2,738
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,738
|
|
Loss on asset sales and disposals
|
2,243
|
|
|
—
|
|
|
4,027
|
|
|
—
|
|
|
—
|
|
|
6,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
58,386
|
|
|
—
|
|
|
(7,879
|
)
|
|
(1,531
|
)
|
|
2,433
|
|
|
51,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(20,297
|
)
|
|
—
|
|
|
(10,104
|
)
|
|
(1,338
|
)
|
|
—
|
|
|
(31,739
|
)
|
Other income (expense), net
|
(133
|
)
|
|
—
|
|
|
360
|
|
|
2,433
|
|
|
(2,433
|
)
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
37,956
|
|
|
—
|
|
|
(17,623
|
)
|
|
(436
|
)
|
|
—
|
|
|
19,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
102
|
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
57
|
|
Equity in earnings (loss) of subsidiary
|
(18,014
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,014
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
19,840
|
|
|
—
|
|
|
(17,578
|
)
|
|
(436
|
)
|
|
18,014
|
|
|
19,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
(6,727
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
13,113
|
|
|
$
|
—
|
|
|
$
|
(17,578
|
)
|
|
$
|
(436
|
)
|
|
$
|
18,014
|
|
|
$
|
13,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
(in thousands)
|
|
|
|
For the three months ended April 30, 2017
|
|
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
|
$
|
369,437
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
369,437
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
126,676
|
|
|
—
|
|
|
—
|
|
|
126,676
|
|
Other
|
17,850
|
|
|
—
|
|
|
24,146
|
|
|
—
|
|
|
—
|
|
|
41,996
|
|
Total revenues
|
387,287
|
|
|
—
|
|
|
150,822
|
|
|
—
|
|
|
—
|
|
|
538,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
197,487
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197,487
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
118,767
|
|
|
—
|
|
|
—
|
|
|
118,767
|
|
Cost of sales - other
|
1,992
|
|
|
—
|
|
|
18,818
|
|
|
—
|
|
|
—
|
|
|
20,810
|
|
Operating expense
|
96,264
|
|
|
—
|
|
|
8,594
|
|
|
1,315
|
|
|
(1,400
|
)
|
|
104,773
|
|
Depreciation and amortization expense
|
18,261
|
|
|
—
|
|
|
7,418
|
|
|
58
|
|
|
—
|
|
|
25,737
|
|
General and administrative expense
|
8,930
|
|
|
—
|
|
|
939
|
|
|
—
|
|
|
—
|
|
|
9,869
|
|
Equipment lease expense
|
7,108
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
7,270
|
|
Non-cash employee stock ownership plan compensation charge
|
4,697
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,697
|
|
Loss on asset sales and disposals
|
2,146
|
|
|
—
|
|
|
247
|
|
|
—
|
|
|
—
|
|
|
2,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
50,402
|
|
|
—
|
|
|
(4,123
|
)
|
|
(1,373
|
)
|
|
1,400
|
|
|
46,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(19,452
|
)
|
|
—
|
|
|
(11,019
|
)
|
|
(799
|
)
|
|
—
|
|
|
(31,270
|
)
|
Other income (expense), net
|
(157
|
)
|
|
—
|
|
|
319
|
|
|
1,400
|
|
|
(1,400
|
)
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
30,793
|
|
|
—
|
|
|
(14,823
|
)
|
|
(772
|
)
|
|
—
|
|
|
15,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
97
|
|
|
—
|
|
|
(294
|
)
|
|
—
|
|
|
—
|
|
|
(197
|
)
|
Equity in earnings (loss) of subsidiary
|
(15,301
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,301
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
15,395
|
|
|
—
|
|
|
(14,529
|
)
|
|
(772
|
)
|
|
15,301
|
|
|
15,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
(8,429
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
6,966
|
|
|
$
|
—
|
|
|
$
|
(14,529
|
)
|
|
$
|
(772
|
)
|
|
$
|
15,301
|
|
|
$
|
6,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
(in thousands)
|
|
|
|
For the nine months ended April 30, 2018
|
|
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
|
$
|
1,345,604
|
|
|
$
|
—
|
|
|
$
|
695
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,346,299
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
260,631
|
|
|
—
|
|
|
—
|
|
|
260,631
|
|
Other
|
59,085
|
|
|
—
|
|
|
59,606
|
|
|
—
|
|
|
—
|
|
|
118,691
|
|
Total revenues
|
1,404,689
|
|
|
—
|
|
|
320,932
|
|
|
—
|
|
|
—
|
|
|
1,725,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
802,063
|
|
|
—
|
|
|
789
|
|
|
—
|
|
|
—
|
|
|
802,852
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
229,710
|
|
|
—
|
|
|
—
|
|
|
229,710
|
|
Cost of sales - other
|
7,890
|
|
|
—
|
|
|
46,449
|
|
|
—
|
|
|
—
|
|
|
54,339
|
|
Operating expense
|
323,619
|
|
|
—
|
|
|
28,320
|
|
|
4,474
|
|
|
(5,656
|
)
|
|
350,757
|
|
Depreciation and amortization expense
|
55,973
|
|
|
—
|
|
|
20,377
|
|
|
215
|
|
|
—
|
|
|
76,565
|
|
General and administrative expense
|
35,048
|
|
|
5
|
|
|
4,547
|
|
|
—
|
|
|
—
|
|
|
39,600
|
|
Equipment lease expense
|
20,555
|
|
|
—
|
|
|
273
|
|
|
—
|
|
|
—
|
|
|
20,828
|
|
Non-cash employee stock ownership plan compensation charge
|
10,731
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,731
|
|
Asset impairments
|
—
|
|
|
—
|
|
|
10,005
|
|
|
—
|
|
|
—
|
|
|
10,005
|
|
Loss on asset sales and disposals
|
3,706
|
|
|
—
|
|
|
42,708
|
|
|
—
|
|
|
—
|
|
|
46,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
145,104
|
|
|
(5
|
)
|
|
(62,246
|
)
|
|
(4,689
|
)
|
|
5,656
|
|
|
83,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(61,903
|
)
|
|
—
|
|
|
(33,028
|
)
|
|
(3,062
|
)
|
|
—
|
|
|
(97,993
|
)
|
Other income (expense), net
|
490
|
|
|
—
|
|
|
932
|
|
|
5,656
|
|
|
(5,656
|
)
|
|
1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
83,691
|
|
|
(5
|
)
|
|
(94,342
|
)
|
|
(2,095
|
)
|
|
—
|
|
|
(12,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
174
|
|
|
—
|
|
|
87
|
|
|
—
|
|
|
—
|
|
|
261
|
|
Equity in earnings (loss) of subsidiary
|
(96,529
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
96,529
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
(13,012
|
)
|
|
(5
|
)
|
|
(94,429
|
)
|
|
(2,095
|
)
|
|
96,529
|
|
|
(13,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
3,102
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
(9,910
|
)
|
|
$
|
(5
|
)
|
|
$
|
(94,429
|
)
|
|
$
|
(2,095
|
)
|
|
$
|
96,529
|
|
|
$
|
(9,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
(in thousands)
|
|
|
|
For the nine months ended April 30, 2017
|
|
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
|
$
|
1,049,211
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,049,211
|
|
Midstream operations
|
—
|
|
|
—
|
|
|
331,507
|
|
|
—
|
|
|
—
|
|
|
331,507
|
|
Other
|
56,785
|
|
|
—
|
|
|
59,398
|
|
|
—
|
|
|
—
|
|
|
116,183
|
|
Total revenues
|
1,105,996
|
|
|
—
|
|
|
390,905
|
|
|
—
|
|
|
—
|
|
|
1,496,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales - propane and other gas liquids sales
|
551,728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
551,728
|
|
Cost of sales - midstream operations
|
—
|
|
|
—
|
|
|
300,433
|
|
|
—
|
|
|
—
|
|
|
300,433
|
|
Cost of sales - other
|
6,993
|
|
|
—
|
|
|
46,220
|
|
|
—
|
|
|
—
|
|
|
53,213
|
|
Operating expense
|
297,905
|
|
|
—
|
|
|
28,482
|
|
|
(251
|
)
|
|
(3,201
|
)
|
|
322,935
|
|
Depreciation and amortization expense
|
54,552
|
|
|
—
|
|
|
22,817
|
|
|
177
|
|
|
—
|
|
|
77,546
|
|
General and administrative expense
|
32,886
|
|
|
5
|
|
|
3,525
|
|
|
—
|
|
|
—
|
|
|
36,416
|
|
Equipment lease expense
|
21,585
|
|
|
—
|
|
|
450
|
|
|
—
|
|
|
—
|
|
|
22,035
|
|
Non-cash employee stock ownership plan compensation charge
|
11,396
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,396
|
|
Loss on asset sales and disposals
|
3,666
|
|
|
—
|
|
|
5,195
|
|
|
—
|
|
|
—
|
|
|
8,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
125,285
|
|
|
(5
|
)
|
|
(16,217
|
)
|
|
74
|
|
|
3,201
|
|
|
112,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(60,893
|
)
|
|
—
|
|
|
(32,694
|
)
|
|
(1,826
|
)
|
|
(3
|
)
|
|
(95,416
|
)
|
Other income (expense), net
|
100
|
|
|
—
|
|
|
1,333
|
|
|
3,198
|
|
|
(3,198
|
)
|
|
1,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
64,492
|
|
|
(5
|
)
|
|
(47,578
|
)
|
|
1,446
|
|
|
—
|
|
|
18,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
171
|
|
|
—
|
|
|
(371
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
Equity in earnings (loss) of subsidiary
|
(45,766
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,766
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
18,555
|
|
|
(5
|
)
|
|
(47,207
|
)
|
|
1,446
|
|
|
45,766
|
|
|
18,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
16,723
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
35,278
|
|
|
$
|
(5
|
)
|
|
$
|
(47,207
|
)
|
|
$
|
1,446
|
|
|
$
|
45,766
|
|
|
$
|
35,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2018
|
|
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
|
$
|
65,604
|
|
|
$
|
(5
|
)
|
|
$
|
(3,531
|
)
|
|
$
|
66,878
|
|
|
$
|
(35,000
|
)
|
|
$
|
93,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired
|
(14,862
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,862
|
)
|
Capital expenditures
|
(57,158
|
)
|
|
—
|
|
|
(1,803
|
)
|
|
—
|
|
|
—
|
|
|
(58,961
|
)
|
Proceeds from sale of assets
|
2,479
|
|
|
—
|
|
|
55,323
|
|
|
—
|
|
|
—
|
|
|
57,802
|
|
Cash collected for purchase of interest in accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
985,084
|
|
|
(985,084
|
)
|
|
—
|
|
Cash remitted to Ferrellgas, L.P. for accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,020,084
|
)
|
|
1,020,084
|
|
|
—
|
|
Net changes in advances with consolidated entities
|
116,871
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(116,871
|
)
|
|
—
|
|
Net cash provided by (used in) investing activities
|
47,330
|
|
|
—
|
|
|
53,520
|
|
|
(35,000
|
)
|
|
(81,871
|
)
|
|
(16,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
(45,495
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,495
|
)
|
Proceeds from increase in long-term debt
|
23,580
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,580
|
|
Payments on long-term debt
|
(1,892
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,892
|
)
|
Net reductions in short-term borrowings
|
(84,179
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(84,179
|
)
|
Net additions to collateralized short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
35,000
|
|
|
—
|
|
|
35,000
|
|
Net changes in advances with parent
|
—
|
|
|
5
|
|
|
(49,998
|
)
|
|
(66,878
|
)
|
|
116,871
|
|
|
—
|
|
Cash paid for financing costs
|
(1,149
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,149
|
)
|
Net cash provided by (used in) financing activities
|
(109,135
|
)
|
|
5
|
|
|
(49,998
|
)
|
|
(31,878
|
)
|
|
116,871
|
|
|
(74,135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
3,799
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
3,790
|
|
Cash and cash equivalents - beginning of year
|
5,327
|
|
|
1
|
|
|
373
|
|
|
—
|
|
|
—
|
|
|
5,701
|
|
Cash and cash equivalents - end of year
|
$
|
9,126
|
|
|
$
|
1
|
|
|
$
|
364
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS, L.P. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the nine months ended April 30, 2017
|
|
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
|
$
|
186,530
|
|
|
$
|
(5
|
)
|
|
$
|
(73,168
|
)
|
|
$
|
38,042
|
|
|
$
|
(27,000
|
)
|
|
$
|
124,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions, net of cash acquired
|
(3,539
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,539
|
)
|
Capital expenditures
|
(35,116
|
)
|
|
—
|
|
|
(296
|
)
|
|
—
|
|
|
—
|
|
|
(35,412
|
)
|
Proceeds from sale of assets
|
4,721
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,721
|
|
Cash collected for purchase of interest in accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
803,109
|
|
|
(803,109
|
)
|
|
—
|
|
Cash remitted to Ferrellgas, L.P. for accounts receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
(830,109
|
)
|
|
830,109
|
|
|
—
|
|
Net changes in advances with consolidated entities
|
(35,476
|
)
|
|
—
|
|
|
—
|
|
|
244
|
|
|
35,232
|
|
|
—
|
|
Other
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
Net cash provided by (used in) investing activities
|
(69,447
|
)
|
|
—
|
|
|
(296
|
)
|
|
(26,756
|
)
|
|
62,232
|
|
|
(34,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
(94,413
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(94,413
|
)
|
Contributions from Partners
|
167,640
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
167,640
|
|
Proceeds from increase in long-term debt
|
52,354
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,354
|
|
Payments on long-term debt
|
(173,471
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(173,471
|
)
|
Net reductions in short-term borrowings
|
(62,902
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62,902
|
)
|
Net additions to collateralized short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
27,000
|
|
|
—
|
|
|
27,000
|
|
Net changes in advances with parent
|
—
|
|
|
5
|
|
|
73,269
|
|
|
(38,042
|
)
|
|
(35,232
|
)
|
|
—
|
|
Cash paid for financing costs
|
(1,820
|
)
|
|
—
|
|
|
—
|
|
|
(244
|
)
|
|
—
|
|
|
(2,064
|
)
|
Net cash provided by (used in) financing activities
|
(112,612
|
)
|
|
5
|
|
|
73,269
|
|
|
(11,286
|
)
|
|
(35,232
|
)
|
|
(85,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
4,471
|
|
|
—
|
|
|
(195
|
)
|
|
—
|
|
|
—
|
|
|
4,276
|
|
Cash and cash equivalents - beginning of year
|
4,472
|
|
|
1
|
|
|
417
|
|
|
—
|
|
|
—
|
|
|
4,890
|
|
Cash and cash equivalents - end of year
|
$
|
8,943
|
|
|
$
|
1
|
|
|
$
|
222
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,166
|
|
|
|
|
|
|
|
|
M.
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, other than as discussed below, there were no events or transactions occurring during this period that require recognition or disclosure in its condensed consolidated financial statements.
New
$575.0 million
senior secured credit facility
On May 4, 2018, Ferrellgas, L.P. entered into a new
$575.0 million
senior secured credit facility to replace its previous
$575.0 million
senior secured credit facility that was scheduled to mature in October 2018. This new facility consists of a
$300.0 million
revolving line of credit as well as a
$275.0 million
term loan, both priced at LIBOR +
5.75%
and maturing May 4, 2023. The revolving line of credit includes a
$125.0 million
sublimit for the issuance of letters of credit. Borrowings under this facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness and acquisitions. At closing, the following transactions occurred: 1) the proceeds of the term loan were used to repay and terminate Ferrellgas, L.P.’s then existing credit facility, thus, no revolving credit loans were outstanding, 2) approximately
$100 million
of letters of credit were issued to replace the letters of credit under the operating partnership's then existing credit facility, and 3) Ferrellgas, L.P. held approximately
$75 million
of surplus cash.
The term loan does not include any scheduled principal payments and the revolving credit facility does not have any scheduled commitment reductions before maturity; however, the credit facility requires prepayments pursuant to the following: 1) certain asset sales, 2) 50% of any excess cash flow, as defined in the credit agreement, in any fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and 4) certain tax refunds.
This new senior secured credit facility is secured with substantially all of the assets of Ferrellgas, L.P. and its subsidiaries, and Ferrellgas Partners’ and the general partner’s partnership interests in Ferrellgas, L.P., and contains various affirmative and negative covenants and default provisions, as well as requirements with respect to the maintenance of specified financial ratios and limitations on the making of loans and investments.
Amended accounts receivable securitization facility
On May 14, 2018, Ferrellgas, L.P. entered into a seventh amendment to its accounts receivable securitization facility which extends the maturity date by three years, as well as increases the size of the facility from a maximum borrowing capacity of
$225.0 million
to
$250.0 million
at a discount rate of LIBOR plus 200 basis points. The amended accounts receivable securitization facility also includes provisions for the issuance of letters of credit with a
$50.0 million
sublimit. The facility continues to contain provisions where maximum purchase levels are reduced during periods of the year when working capital requirements are lower to efficiently reduce unused capacity fees.
|
|
|
|
|
|
|
|
|
FERRELLGAS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas, L.P.)
|
CONDENSED BALANCE SHEETS
|
(unaudited)
|
|
April 30, 2018
|
|
July 31, 2017
|
ASSETS
|
|
|
|
|
|
Cash
|
$
|
1,100
|
|
|
$
|
1,100
|
|
Other current assets
|
—
|
|
|
1,500
|
|
Total assets
|
$
|
1,100
|
|
|
$
|
2,600
|
|
|
|
|
|
Contingencies and commitments (Note B)
|
|
|
|
|
|
|
|
|
|
STOCKHOLDER'S EQUITY
|
|
|
|
Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding
|
$
|
1,000
|
|
|
$
|
1,000
|
|
Additional paid in capital
|
71,052
|
|
|
67,336
|
|
Accumulated deficit
|
(70,952
|
)
|
|
(65,736
|
)
|
Total stockholder's equity
|
$
|
1,100
|
|
|
$
|
2,600
|
|
See notes to condensed financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERRELLGAS FINANCE CORP.
|
(a wholly-owned subsidiary of Ferrellgas, L.P.)
|
CONDENSED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
|
|
|
|
|
For the three months ended April 30,
|
|
For the nine months ended April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$
|
—
|
|
|
$
|
225
|
|
|
$
|
5,216
|
|
|
$
|
5,175
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
—
|
|
|
$
|
(225
|
)
|
|
$
|
(5,216
|
)
|
|
$
|
(5,175
|
)
|
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,
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(5,216
|
)
|
|
$
|
(5,175
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Other current assets
|
1,500
|
|
|
1,500
|
|
Cash used in operating activities
|
(3,716
|
)
|
|
(3,675
|
)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Capital contribution
|
3,716
|
|
|
3,675
|
|
Cash provided by financing activities
|
3,716
|
|
|
3,675
|
|
|
|
|
|
Net change in cash
|
—
|
|
|
—
|
|
Cash - beginning of period
|
1,100
|
|
|
1,100
|
|
Cash - end of period
|
$
|
1,100
|
|
|
$
|
1,100
|
|
See notes to condensed financial statements.
|
FERRELLGAS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas, L.P.)
(unaudited)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A.
Formation
Ferrellgas Finance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on
January 16, 2003
and is a wholly-owned subsidiary of Ferrellgas, L.P. (the “Partnership”).
The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed financial statements were of a normal recurring nature.
The Finance Corp. has nominal assets, does not conduct any operations and has
no
employees.
B.
Contingencies and commitments
The Finance Corp. serves as co-issuer and co-obligor for debt securities of the Partnership.
The indentures governing the senior notes agreements contains various restrictive covenants applicable to the Partnership and its subsidiaries, the most restrictive relating to additional indebtedness and restricted payments. As of
April 30, 2018
, the Partnership is in compliance with all requirements, tests, limitations and covenants related to these debt agreements.