UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended April 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file numbers: 1-11331
333-06693
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware 43-1698480
Delaware 43-1742520
---------------------------- -------------------------------
States or other jurisdictions of (I.R.S. Employer Identification Nos.)
incorporation or organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (816) 792-1600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
At May 20, 1998, the registrants had units or shares outstanding as follows:
Ferrellgas Partners, L.P. - 14,699,678 Common Units
16,593,721 Subordinated Units
Ferrellgas Partners Finance
Corp. 1,000 Common Stock
FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
Table of Contents
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ferrellgas Partners, L.P. and Subsidiaries
Consolidated Balance Sheets - April 30, 1998
and July 31, 1997 1
Consolidated Statements of Earnings -
Three and nine months ended April 30, 1998 and 1997 2
Consolidated Statement of Partners' Capital -
Nine months ended April 30, 1998 3
Consolidated Statements of Cash Flows -
Nine months ended April 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Ferrellgas Partners Finance Corp.
Balance Sheets - April 30, 1998 and July 31, 1997 7
Statements of Earnings - Three and nine months
ended April 30, 1998 and 1997 7
Statements of Cash Flows - Nine months ended
April 30, 1998 and 1997 8
Notes to Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
April 30, July 31,
ASSETS 1998 1997
- ---------------------------------------------------------- ---------------- -----------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 9,055 $ 14,788
Accounts and notes receivable, net 70,667 61,835
Inventories 26,916 43,112
Prepaid expenses and other current assets 6,800 8,906
---------------- -----------------
Total Current Assets 113,438 128,641
Property, plant and equipment, net 398,548 405,736
Intangible assets, net 103,661 112,058
Other assets, net 9,628 10,641
---------------- -----------------
Total Assets $625,275 $657,076
================ =================
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------------
Current Liabilities:
Accounts payable $ 38,099 $ 39,322
Other current liabilities 38,676 49,422
Short-term borrowings 5,663 21,786
---------------- -----------------
Total Current Liabilities 82,438 110,530
Long-term debt 498,437 487,334
Other liabilities 12,782 12,354
Contingencies and commitments
Minority interest 1,963 2,075
Partners' Capital:
Common unitholders (14,699,678 units outstanding
in April 1998 and 14,612,580 outstanding in July 1997) 46,930 52,863
Subordinated unitholders (16,593,721 units outstanding
in April 1998 and July 1997) 41,294 50,337
General partner (58,569) (58,417)
---------------- -----------------
Total Partners' Capital 29,655 44,783
---------------- -----------------
Total Liabilities and Partners' Capital $625,275 $657,076
================ =================
See notes to consolidated financial statements
1
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per unit data)
(unaudited)
For the three months ended For the nine months ended
-------------------------------- -------------------------------
April 30, 1998 April 30, 1997 April 30, 1998 April 30, 1997
-------------- -------------- -------------- -------------
(restated) (restated)
Revenues:
Gas liquids and related product sales $166,066 $181,426 $545,110 $672,604
Other 9,101 11,447 32,073 35,185
-------------- -------------- -------------- -------------
Total revenues 175,167 192,873 577,183 707,789
Cost of product sold (exclusive of
depreciation, shown separately below) 85,718 110,029 303,213 420,399
-------------- -------------- -------------- -------------
Gross profit 89,449 82,844 273,970 287,390
Operating expense 49,328 48,062 154,280 157,787
Depreciation and amortization expense 11,193 10,893 33,717 32,477
General and administrative expense 4,231 3,466 12,510 11,234
Vehicle and tank lease expense 2,621 1,949 7,432 5,356
-------------- -------------- -------------- -------------
Operating income 22,076 18,474 66,031 80,536
Interest expense (12,121) (11,170) (36,843) (34,254)
Interest income 548 613 1,347 1,498
Gain (loss) on disposal of assets 421 (114) 115 (864)
-------------- -------------- -------------- -------------
Earnings before minority interest 10,924 7,803 30,650 46,916
Minority interest 149 118 427 591
-------------- -------------- -------------- -------------
Net earnings 10,775 7,685 30,223 46,325
General partner's interest in net earnings 107 77 302 463
-------------- -------------- -------------- -------------
Limited partners' interest in net earnings $10,668 $7,608 $29,921 $45,862
============== ============== ============== =============
Net earnings per limited partner unit
Basic $ 0.34 $ 0.24 $ 0.96 $ 1.47
Diluted $ 0.34 $ 0.24 $ 0.95 $ 1.47
Weighted average number of units outstanding
Basic 31,293.40 31,206.30 31,269.15 31,206.30
Diluted 31,355.25 31,286.94 31,347.42 31,289.00
See notes to consolidated financial statements
2
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Number of units Total
--------------------------
Sub- Sub- General partners'
Common ordinated Common ordinated partner capital
------------ ------------ ----------- ------------ ------------ ------------
July 31, 1997 14,612.6 16,593.7 $52,863 $50,337 $(58,417) $44,783
Common units issued in
connection with
acquisitions 87.1 0 2,000 0 20 2,020
Quarterly distributions (22,006) (24,891) (474) (47,371)
Net earnings 14,073 15,848 302 30,223
------------ ------------ ----------- ------------ ------------ ------------
April 30, 1998 14,699.7 16,593.7 $46,930 $41,294 $(58,569) $29,655
============ ============ =========== ============ ============ ============
See notes to consolidated financial statements.
3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the nine months ended
---------------------------------
April 30, 1998 April 30, 1997
--------------- ---------------
(restated)
Cash Flows From Operating Activities:
Net earnings $30,223 $46,325
Reconciliation of net earnings to net cash from
operating activities:
Depreciation and amortization 33,717 32,477
Other 3,290 4,475
Changes in operating assets and liabilities
net of effects from busines acquisitions:
Accounts and notes receivable (9,842) (33,933)
Inventories 15,708 5,187
Prepaid expenses and other current assets 2,106 (2,736)
Accounts payable (1,223) 3,737
Other current liabilities (9,874) 3,420
Other liabilities 428 38
--------------- ---------------
Net cash provided by operating activities 64,533 58,990
--------------- ---------------
Cash Flows From Investing Activities:
Business acquisitions (4,080) (11,663)
Capital expenditures (15,267) (12,299)
Other 3,278 2,187
--------------- ---------------
Net cash used by investing activities (16,069) (21,775)
--------------- ---------------
Cash Flows From Financing Activities:
Net reductions to short-term borrowings (16,123) (6,954)
Additions to long-term debt 11,438 20,951
Reductions of long-term debt (1,622) (2,118)
Distributions (47,371) (47,283)
Other (519) (638)
--------------- ---------------
Net cash used by financing activities (54,197) (36,042)
--------------- ---------------
Increase in cash and cash equivalents (5,733) 1,173
Cash and cash equivalents - beginning of period 14,788 13,770
--------------- ---------------
Cash and cash equivalents - end of period $9,055 $14,943
=============== ===============
Cash paid for interest $36,540 $35,394
=============== ===============
See notes to consolidated financial statements
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1998
(unaudited)
A. The financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of the interim periods
presented. All adjustments to the financial statements were of a normal,
recurring nature.
B. The preparation of financial statements in conformity with generally
accepted accounting principles ("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.
C. The propane industry is seasonal in nature with peak activity during the
winter months. Therefore, the results of operations for the periods ended
April 30, 1998 and April 30, 1997 are not necessarily indicative of the
results to be expected for a full year.
D. Inventories consist of:
April 30, July 31,
(in thousands) 1998 1997
---------------- --------------
Liquefied propane gas and related products $18,341 $35,351
Appliances, parts and supplies 8,575 7,761
---------------- --------------
$26,916 $43,112
================ ==============
In addition to inventories on hand, the Partnership enters into contracts
to buy product for supply purposes. Nearly all such contracts have terms
of less than one year and most call for payment based on market prices at
date of delivery. All fixed price contracts have terms of less than one
year. As of April 30, 1998, the Partnership does not have a material
commitment to purchase propane from its suppliers whereby the volume,
price and date of delivery have been agreed.
Property, plant and equipment, net consist of:
April 30, July 31,
(in thousands) 1998 1997
--------------- ---------------
Property, plant and equipment $622,878 $614,974
Less: accumulated depreciation 224,330 209,238
--------------- ---------------
$398,548 $405,736
=============== ===============
Intangible assets, net consist of:
April 30, July 31,
(in thousands) 1998 1997
--------------- ---------------
Intangible assets $223,540 $221,269
Less: accumulated amortization 119,879 109,211
--------------- ---------------
$103,661 $112,058
=============== ===============
E. The Partnership is threatened with or named as a defendant in various
lawsuits which, among other items, claim damages for product liability. 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 likely to have a material adverse effect on the
results of operations or financial condition of the Partnership.
5
F. On September 12, 1997, December 12, 1997, and March 16, 1998, the
Partnership paid cash distributions of $0.50 per unit for each of the
quarters ended July 31, 1997, October 31, 1997, and January 31, 1998,
respectively. On May 19, 1998, the Partnership declared its third quarter
cash distribution of $0.50 per unit, payable June 12, 1998.
G. The Financial Accounting Standards Board recently issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share".
SFAS No. 128 was adopted by the Partnership during the three-month
period ending January 31, 1998. Below is a calculation of the basic
and diluted units used to calculate earnings per basic and dilutive unit
on the Statement of Earnings.
(in thousands, except per unit data)
Three months ended Nine months ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
Income available to common and
subordinate unitholders $10,688 $7,608 $29,921 $45,862
Weighted average outstanding units
31,293.40 31,206.30 31,269.15 31,206.30
Basic EPU $0.34 $.024 $0.96 $1.47
================ ================= ================ =================
Income available to common and
subordinate unitholders $10,688 $7,608 $29,921 $45,862
Weighted average outstanding units
31,293.40 31,206.30 31,269.15 31,206.30
Dilutive securities - options 61.85 80.64 78.27 82.70
---------------- ----------------- ---------------- -----------------
Weighted average outstanding units
+ dilutive 31,355.25 31,286.94 31,347.42 31,289.00
Diluted EPU $0.34 $0.24 $0.95 $1.47
================ ================= ================ =================
6
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
BALANCE SHEETS
April 30, July 31,
ASSETS 1998 1997
- -------------------------------------------------------------------- ------------------- -------------------
(unaudited)
Cash $1,000 $1,000
------------------- -------------------
Total Assets $1,000 $1,000
=================== ===================
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 618 327
Accumulated deficit (618) (327)
------------------- -------------------
Total Stockholder's Equity 1,000 1,000
------------------- -------------------
Total Liabilities and Stockholder's Equity $1,000 $1,000
=================== ===================
STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended Nine Months Ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
--------------------- ------------------- --------------- ------------------
General and administrative expense $ 176 $ 189 $ 291 $ 285
--------------------- ------------------- --------------- ------------------
Net loss $(176) $(189) $(291) $(285)
===================== =================== =============== ==================
See notes to financial statements.
7
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas
Partners, L.P.)
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended Nine Months Ended
April 30, April 30,
1998 1997
-------------------- --------------------
Cash Flows From Operating Activities:
Net loss $ (291) $ (285)
-------------------- --------------------
Cash used by operating activities (291) (285)
-------------------- --------------------
Cash Flows From Financing Activities:
Capital contribution 291 285
-------------------- --------------------
Cash provided by financing activities 291 285
-------------------- --------------------
Increase (decrease) in cash - -
Cash - beginning of period 1,000 1,000
-------------------- --------------------
Cash - end of period $1,000 $1,000
==================== ====================
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
(unaudited)
A. Ferrellgas Partners Finance Corp., a Delaware corporation, was formed
on March 28, 1996, and is a wholly-owned subsidiary of Ferrellgas
Partners, L.P.
B. The financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of the interim periods
presented. All adjustments to the financial statements were of a normal,
recurring nature.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the results of operations and liquidity
and capital resources of Ferrellgas Partners, L.P. (the "Partnership" or "MLP").
Except for the $160,000,000 of 9 3/8% Senior Secured Notes issued in April 1996
by the MLP (the "MLP Senior Notes") and the related interest expense,
Ferrellgas, L.P. (the "Operating Partnership" or "OLP") accounts for nearly all
of the consolidated assets, liabilities, sales and earnings of the MLP. When the
discussion refers to the consolidated MLP, the term Partnership will be used.
Ferrellgas Partners Finance Corp. has nominal assets and does not conduct
any operations. Accordingly, a discussion of the results of operations and
liquidity and capital resources is not presented.
Forward-looking statements
Statements included in this report that are not historical facts, including
a statement concerning the General Partner's belief that the OLP will have
sufficient funds to meet its obligations and to enable it to distribute to the
MLP sufficient funds to permit the MLP to meet its obligations with respect to
the MLP Senior Notes issued in April 1996, and sufficient funds to fund the
Minimum Quarterly Distribution ($0.50 per Unit) on all Common and Subordinated
Units, are forward-looking statements.
Such statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in or implied by the
statements. The risks and uncertainties include but are not limited to the
following and their effect on the Partnership's operations: a) the effect of
weather conditions on demand for propane, b) price and availability of propane
supplies, c) the availability of capacity to transport propane to market areas,
d) competition from other energy sources and within the propane industry, e)
operating risks incidental to transporting, storing, and distributing propane,
f) changes in interest rates, g) governmental legislation and regulations, h)
energy efficiency and technology trends and i) other factors that are discussed
in the Partnership's filings with the Securities and Exchange Commission.
Fiscal 1997 Quarterly Restatement
In the Form 10-K originally filed on October 29, 1997, an inventory costing
adjustment affecting all quarters during fiscal 1997 was quantified and
discussed in the "Selected Quarterly Financial Data" section of Item 7. The
Partnership originally reflected the entire adjustment in the fourth quarter of
fiscal 1997 instead of restating each quarter affected. Subsequent to the
original filing of Form 10-K, the Partnership determined that the quarters
affected by the inventory costing adjustment should be restated to more
accurately reflect the Partnership's fiscal 1997 quarterly results used for
comparative purposes. Thus, the Partnership restated all fiscal 1997 quarterly
results affected by this adjustment with the filing of a Form 10-K/A on January
28, 1998. This Form 10-Q reflects the restatement of the Statements of Earnings
for the three and nine months ended Aprill 30, 1997 and the Statements of Cash
Flows for the nine months ended April 30, 1997, after giving retroactive effect
to the inventory costing adjustments.
Year 2000 Compliance
The Partnership has evaluated the "Year 2000" computer programming issue
and does not expect that the total cost of related modifications and conversions
will have a material effect on its financial position, results of operations or
cash flows and is being expensed as incurred. The Year 2000 issue may also
affect the systems and applications of the Partnership's customers or vendors.
The Partnership is contacting others with whom it conducts business to receive
appropriate assurances that those third parties are, or will be, Year 2000
compliant. If compliance by the Partnership's customers and vendors is not
achieved in a timely manner, it is unknown what effect, if any, the Year 2000
issue could on the Partnership's operations.
9
Results of Operations
The propane industry is seasonal in nature with peak activity during the
winter months. Due to the seasonality of the business, results of operations for
the three and nine months ended April 30, 1998 and 1997, are not necessarily
indicative of the results to be expected for a full year. Other factors
affecting the results of operations include competitive conditions, demand for
product, variations in weather and fluctuations in propane prices. As the
Partnership has grown through acquisitions, fixed costs such as personnel costs,
depreciation and interest expense have increased. Over time, these fixed cost
increases have caused losses in the first and fourth quarters and net income in
the second and third quarters to be more pronounced.
Three Months Ended April 30, 1998 as compared to April 30, 1997
Total Revenues. Total revenues decreased 9.2% to $175,167,000 as compared
to $192,873,000 in the third quarter of fiscal 1997, primarily due to decreased
sales price per retail gallon, a decrease in revenues from other operations
(wholesale marketing, chemical feedstocks and net trading operations), partially
offset by an increase in retail propane volumes.
Retail sales prices per gallon were significantly lower than those in same
quarter last year due to the unusually higher wholesale cost of propane
experienced in the prior year. Retail volumes increased 7.3% to 175,168,000
gallons as compared to 163,323,000 gallons for the same quarter last year,
primarily due to increases in the base business due to demand resulting from
customer deferrals during the mild winter when compared with the same period as
last year. Fiscal 1998 winter temperatures, as reported by the American Gas
Association ("AGA"), were unchanged compared to the same quarter last year and
11.4% warmer than normal. Fiscal 1998 warmer than normal temperatures were also
compounded by the El Nino weather factors of reduced wind chill, humidity, snow
and cloud cover. Revenues from other operations decreased by $8,824,000
primarily due to a decreased wholesale marketing price per gallon.
Gross Profit. Gross profit increased 8.0% to $89,449,000 as compared to
$82,844,000 in the third quarter of fiscal 1997, primarily as the result of
increased retail propane volumes and to a lesser extent the effect of
acquisitions and slightly higher retail margins.
Operating Expenses. Operating expenses increased 2.6% to $49,328,000 as
compared to $48,062,000 in the third quarter of fiscal 1997 primarily due to
acquisition related increases in personnel costs, plant and office expenses,
vehicle and other expenses.
Depreciation and Amortization. Depreciation and amortization expense
increased 2.8% to $11,193,000 as compared to $10,893,000, primarily due to
acquisitions of propane businesses since the third quarter of fiscal 1997.
Interest expense. Interest expense increased 8.5% to $12,121,000 as
compared to $11,170,000 in the third quarter of fiscal 1997. This increase is
primarily the result of increased borrowings for the financing of acquisitions
in the fourth quarter of fiscal year 1997, partially offset by a slight decrease
in the overall average interest rate paid by the Partnership on its borrowings.
Nine Months Ended April 30, 1998 as compared to April 30, 1997
Total Revenues. Total revenues decreased 18.5% to $577,183,000 as compared
to $707,789,000 for the prior period, primarily due to decreased sales price per
retail gallon, decreased retail propane volumes, a decrease in revenues from
other operations (wholesale marketing, chemical feedstocks and net trading
operations), and warmer weather, partially offset by an increase in retail sales
volume due to the effect of acquisitions.
10
Retail sales prices per gallon were significantly lower than those during
the prior year due to the unusually higher wholesale cost of propane experienced
in the prior year. Retail volumes decreased 4.4% to 573,644,000 gallons as
compared to 600,021,000 gallons for the year ago period, primarily due to warmer
weather than the prior year. Fiscal 1998 winter temperatures, as reported by the
AGA, were 4.0% warmer than the same period as last year and 8.1% warmer than
normal. Fiscal 1998 warmer than normal temperatures were also compounded by the
El Nino weather factors of reduced wind chill, humidity, snow and cloud cover.
Revenues from other operations decreased by $24,993,000 primarily due to
decreased wholesale marketing price per gallon and volume and decreased chemical
feedstocks marketing volumes.
Gross Profit. Gross profit decreased 4.7% to $273,970,000 as compared to
$287,390,000 in the same period last year, primarily as the result of decreased
retail propane volumes, warmer weather, and to a lesser extent decreased trading
profits, partially offset by the effect of acquisitions.
Operating Expenses. Operating expenses decreased 2.2% to $154,280,000 as
compared to $157,787,000 in the same period last year primarily due to lower
variable costs associated with delivering fewer gallons partially offset by
acquisition related increases in personnel costs, plant and office expenses, and
vehicle and other expenses.
Depreciation and Amortization. Depreciation and amortization expense
increased 3.8% to $33,717,000 as compared to $32,477,000, primarily due to
acquisitions of propane businesses since the third quarter of fiscal 1997.
Interest expense. Interest expense increased 7.6% to $36,843,000 as
compared to $34,254,000 in the same period last year. This increase is primarily
the result of increased borrowings for the financing of acquisitions in the
fourth quarter of fiscal year 1997, partially offset by a slight decrease in the
overall average interest rate paid by the Partnership on its borrowings.
Liquidity and Capital Resources
The ability of the MLP to satisfy its obligations is dependent upon future
performance, which will be subject to prevailing economic, financial, business
and weather conditions and other factors, many of which are beyond its control.
For the fiscal year ended July 31, 1998, the General Partner believes that the
OLP will have sufficient funds to meet its obligations and enable it to
distribute to the MLP sufficient funds to permit the MLP to meet its obligations
with respect to the MLP Senior Notes issued in April 1996.
The $160,000,000 Senior Secured Notes Indenture ("MLP Indenture"), the
$200,000,000 Senior Notes Indenture ("OLP Indenture") and the Amended and
Restated Credit Agreement ("OLP Credit Facility") contain several financial
tests which restrict the Partnership's ability to pay distributions, incur
indebtedness and engage in certain other business transactions. These tests, in
general, are based on the ratio of the Partnership's consolidated cash flow to
fixed charges, primarily interest expense. Because the Partnership is more
highly leveraged at the MLP than at the OLP, the tests related to the MLP Senior
Notes Indenture are more sensitive to fluctuations in consolidated cash flows
and fixed charges. The most sensitive of the MLP related tests restricts the
Partnership's ability to make certain Restricted Payments which includes, but is
not limted to, the payment of the Minimum Quarterly Distribution ("MQD") to
unitholders.
Although the MLP's financial performance during the first three quarters of
fiscal 1998 has been adversely impacted by the El Nino weather pattern and
associated unseasonably warmer temperatures, the Partnership believes it will
meet the MLP Indenture Restricted Payment test for the remainder of the calendar
year, in addition to meeting the other financial tests in both the MLP and OLP
Indentures and OLP Credit Facility. However, if the Partnership were to
encounter any unexpected downturns in business operations, it could result in
the Partnership not meeting certain financial tests in future quarters,
including but not limited to, the MLP Indenture Restricted Payment test.
Depending on the circumstances, the Partnership would pursue alternatives to
permit the continued payment of MQD to its Common Unitholders. No assurances can
be given, however, that such alternatives will be successful with respect to any
given quarter.
11
Future maintenance and working capital needs of the MLP are expected to be
provided by cash generated from future operations, existing cash balances and
the working capital borrowing facility. In order to fund expansive capital
projects and future acquisitions, the OLP may borrow on existing bank lines or
the MLP may issue additional Common Units. Toward this purpose the MLP maintains
a shelf registration statement with the Securities and Exchange Commission for
1,800,322 Common Units representing limited partner interests in the MLP. The
Common Units may be issued from time to time by the MLP in connection with the
OLP's acquisition of other businesses, properties or securities in business
combination transactions.
Operating Activities. Cash provided by operating activities was $64,533,000
for the nine months ended April 30, 1998, compared to $58,990,000 for the prior
period. This increase is primarily due to the decreased receivables and
inventory partially offset by decreased net income as compared to April 30,
1997. These results were caused primarily by a decrease in propane prices, the
decrease in volumes held in inventory and reduced retail volume activity as
compared to those experienced during fiscal 1997.
Investing Activities. During the nine months ended April 30, 1998, the
Partnership made total acquisition capital expenditures of $6,203,000. This
amount was funded by $4,080,000 cash payments (including $1,232,000 for
transition costs previously accrued for fiscal 1997 acquisitions) $2,000,000 of
common units issued $867,000 of noncompete notes and $488,000 of other costs.
During the nine months ended April 30, 1998, the Partnership made growth
and maintenance capital expenditures of $15,267,000 consisting primarily of the
following: 1) relocating and upgrading district plant facilities, 2) additions
to Partnership-owned customer tanks and cylinders, 3) vehicle lease buyouts, and
4) upgrading computer equipment and software. Capital requirements for repair
and maintenance of property, plant and equipment are relatively low since
technological change is limited and the useful lives of propane tanks and
cylinders, the Partnership's principal physical assets, are generally long.
The Partnership maintains its vehicle and transportation equipment fleet by
leasing light and medium duty trucks and tractors. The General Partner believes
vehicle leasing is a cost effective method for meeting the Partnership's
transportation equipment needs. The Partnership continues seeking to expand its
operations through strategic acquisitions of smaller retail propane operations
located throughout the United States. These acquisitions will be funded through
internal cash flow, external borrowings or the issuance of additional
Partnership interests. The Partnership does not have any material commitments of
funds for capital expenditures other than to support the current level of
operations. In fiscal 1998, the Partnership expects growth and maintenance
capital expenditures to increase over fiscal 1997 levels.
Financing Activities. During the nine months ended April 30, 1998, the
Partnership repaid $4,685,000 to its Credit Facility as it related to fund
working capital, business acquisitions, and capital expenditure needs. At April
30, 1998, $81,850,000 of borrowings were outstanding under the revolving portion
of the Credit Facility. Letters of credit outstanding, used primarily to secure
obligations under certain insurance arrangements, totaled $27,535,000. At April
30, 1998, the Operating Partnership had $95,615,000 available for general
corporate, acquisition and working capital purposes under the Credit Facility.
On May 19, 1998, the Partnership declared a cash distribution of $0.50 per unit,
payable June 12, 1998.
The Operating Partnership is currently negotiating the issuance of debt
that will effectively refinance its Notes under the OLP Indenture and balances
outstanding under its Credit Facility. If consummated, the Operating Partnership
will pay a call premium of five percent of the Notes under the OLP Indenture in
anticipation of an overall reduced borrowing rate.
12
Adoption of New Accounting Standards. The Financial Accounting Standards
Board recently issued the following new accounting standards: SFAS No. 130
"Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About Segments of
an Enterprise and Related Information." SFAS Nos. 130 and 131 are required to be
adopted by the Partnership for the fiscal year ended July 31, 1999. . The
American Institute of Certified Public Accountants has issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use" and is effective for financial statements for
fiscal years beginning after December 15, 1998. This SOP requires that entities
capitalize certain internal-use software costs once certain capitalization
requirements are met. The Partnership does not expect that the implementation of
these rules will have a material effect on the Partnership's financial position
or results of operations.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1 Agreement of Limited Partnership of Ferrellgas Partners,
L.P. (Incorporated by reference to the same numbered
Exhibit to the Partnership's Current Report on Form 8-K
filed August 15, 1994.)
3.2 Articles of Incorporation for Ferrellgas Partners Finance
Corp. (Incorporated by reference to the same numbered
Exhibit to the Partnership's Quarterly Report on Form 10-Q
filed December 13, 1996.)
3.3 By-laws of Ferrellgas Partners Finance Corp. (Incorporated
by reference to the same numbered Exhibit to the
Partnership's Quarterly Report on Form 10-Q filed
June 13, 1997.)
27.1 Financial Data Schedule - Ferrellgas Partners, L.P.
(filed in electronic format only)
27.2 Financial Data Schedule - Ferrellgas Partners Finance
Corp. (filed in electronic format only)
(b) Reports on Form 8-K
None.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
.
ERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: June 15, 1998 By /s/ Danley K. Sheldon
Danley K. Sheldon
President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS PARTNERS FINANCE CORP.
Date: June 15, 1998 By /s/ Danley K. Sheldon
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
5
0000922358
Ferrellgas Partners, L.P.
1,000
U.S. Dollars
9-MOS
JUL-31-1998
AUG-01-1997
APR-30-1998
1
9,055
0
70,667
0
26,916
113,438
622,878
224,330
625,275
82,438
498,437
88,224
0
0
(58,569)
625,275
545,110
577,183
303,213
498,642
0
0
36,843
30,223
0
30,223
0
0
0
30,223
.96
.95
5
001012493
Ferrellgas Partners Finance, L.P.
1
U.S. Dollars
9-MOS
JUL-31-1998
AUG-01-1997
APR-30-1998
1
1,000
0
0
0
0
1,000
0
0
1,000
0
0
1,000
0
0
0
1,000
0
0
0
0
0
0
0
(291)
0
(291)
0
0
0
(291)
0
0
