Ferrellgas Partners, L.P. Reports Fiscal Second Quarter 2019 Results

March 8, 2019 7:01 AM

LIBERTY, Mo., March 08, 2019 (GLOBE NEWSWIRE) -- Ferrellgas Partners, L.P. (NYSE: FGP) (“Ferrellgas” or the “Company”) today reported financial results for its fiscal second quarter ended January 31, 2019.

For the quarter, the Company reported a net earnings attributable to Ferrellgas Partners, L.P. of $43.3 million, or $.44 per common unit, compared to prior year period net loss of $1.8 million, or $(.02) per common unit.

Adjusted EBITDA, a non-GAAP measure, was $119.7 million compared to $120.6 million in the prior year. The following table represents the contribution to adjusted EBITDA from ongoing propane operations as well as from assets that were sold during 2018.

(in millions) Q2 2019 Q2 2018
Propane Operations and Corporate Support $119.7 $116.7
Results from Assets Sold in 2018 - $3.9
Consolidated Adjusted EBITDA $119.7 $120.6

On a trailing twelve month basis, adjusted EBITDA from ongoing propane operations and corporate support as of January 31, 2019 is $229.4 million compared to $226.5 million as of October 31, 2018.

The Company’s propane operations reported that total gallons sold of 309.7 million were consistent with the prior year. Margins were 3.1¢, or 4.2 percent higher than the prior year despite increased competitive pressure in the tank exchange business. The Company continues its aggressive approach to gaining market share. This strategic focus resulted in approximately 25,000 new customers, or approximately 4 percent more than prior year. Additionally, the Company’s current Blue Rhino tank exchange sales locations have increased over 10 percent from prior year to over 53,700 locations. Overall, the increase in sales volume growth and margins per gallon resulted in an increase in gross margin dollars of $9.3 million. The Company’s ongoing commitment to investing in the business led to higher operating expenses during the quarter which were largely associated with serving over 25,000 new customers, 5,000 new tank exchange locations and additional non-transport gallons sold. As a result of this investment and the growth in sales volumes, operating, general and administrative expenses in our Propane segment were $5.6 million higher than the prior year.

Liquidity of $236.8 million at January 31, 2019 resulted from $196.2 million of available borrowing capacity on the Company’s secured credit facility and $40.6 million of cash.

“We continue to pursue our strategy to invest in the growth of the business and are achieving success faster than anticipated,” said James E. Ferrell, Interim Chief Executive Officer and President of Ferrellgas. “We are committed to growing market share organically and through acquisitions. We continue the successful integration of Blue Rhino independent distributors as we capture more EBITDA from this business. We continue to invest in our best-in-class fleet. Additionally, continued favorable weather led to extremely strong performance in February that we expect to continue through the midpoint of our third quarter.”

As previously announced, the Company indefinitely suspended its quarterly cash distribution as a result of not meeting the required fixed charge coverage ratio contained in the senior unsecured notes due 2020.

In addition to solidifying the Company’s liquidity with the fourth quarter 2018 closing of the $575 million secured credit facility and extension of its accounts receivable securitization facility and cash from 2018 announced asset sales, the Company continues to make progress in evaluating options to address its leverage.

“Our Company is focused on growth and operational excellence,” said Ferrell. “We have the liquidity to be flexible and continue this focused effort and I expect to resolve our leverage situation to the benefit of our Company for continued success.”

About Ferrellgas Ferrellgas Partners, L.P., through its operating partnership, Ferrellgas, L.P., and subsidiaries, serves propane customers in all 50 states, the District of Columbia, and Puerto Rico. Ferrellgas employees indirectly own 22.8 million common units of the partnership, through an employee stock ownership plan. Ferrellgas Partners, L.P. filed a Form 10-K with the Securities and Exchange Commission on September 27, 2018. Investors can request a hard copy of this filing free of charge and obtain more information about the partnership online at www.ferrellgas.com.

Forward Looking Statements Statements in this release concerning expectations for the future are forward-looking statements. A variety of known and unknown risks, uncertainties and other factors could cause results, performance, and expectations to differ materially from anticipated results, performance, and expectations. These risks, uncertainties, and other factors include those discussed in the Form 10-K of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. for the fiscal year ended July 31, 2018, and in other documents filed from time to time by these entities with the Securities and Exchange Commission.

Contacts

William Ruisinger, Interim Chief Financial Officer – billruisinger@ferrellgas.com 816-792-7914

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
ASSETS January 31, 2019 July 31, 2018
Current Assets:
Cash and cash equivalents $ 40,647 $ 119,311
Accounts and notes receivable, net (including $201,717 and $120,079 of accounts receivable pledged as collateral at January 31, 2019 and July 31, 2018, respectively) 203,164 126,054
Inventories 89,784 83,694
Prepaid expenses and other current assets 36,616 34,862
Total Current Assets 370,211 363,921
Property, plant and equipment, net 584,334 557,723
Goodwill, net 247,478 246,098
Intangible assets, net 113,558 120,951
Other assets, net 72,539 74,588
Total Assets $ 1,388,120 $ 1,363,281
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities:
Accounts payable $ 63,639 $ 46,820
Short-term borrowings - 32,800
Collateralized note payable 140,000 58,000
Other current liabilities 147,253 142,025
Total Current Liabilities 350,892 279,645
Long-term debt (a) 2,083,031 2,078,637
Other liabilities 37,547 39,476
Contingencies and commitments
Partners Deficit:
Common unitholders (97,152,665 units outstanding at January 31, 2019 and July 31, 2018) (997,154) (978,503)
General partner unitholder (989,926 units outstanding at January 31, 2019 and July 31, 2018) (69,981) (69,792)
Accumulated other comprehensive income (loss) (9,049) 20,510
Total Ferrellgas Partners, L.P. Partners' Deficit (1,076,184) (1,027,785)
Noncontrolling interest (7,166) (6,692)
Total Partners' Deficit (1,083,350) (1,034,477)
Total Liabilities and Partners' Deficit $ 1,388,120 $ 1,363,281
(a) The principal difference between the Ferrellgas Partners, L.P. balance sheet and that of Ferrellgas, L.P., is $357 million of 8.625% notes which are liabilities of Ferrellgas Partners, L.P. and not of Ferrellgas, L.P.

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
(unaudited)
Three months ended Six months ended Twelve months ended
January 31 January 31 January 31
2019 2018 2019 2018 2019 2018
Revenues:
Propane and other gas liquids sales $ 550,112 $ 592,239 $ 885,078 $ 894,997 $ 1,633,057 $ 1,533,635
Midstream operations - 117,276 - 238,036 44,283 499,908
Other 23,265 45,641 40,608 76,778 111,677 147,753
Total revenues 573,377 755,156 925,686 1,209,811 1,789,017 2,181,296
Cost of sales:
Propane and other gas liquids sales 311,531 362,918 515,667 542,433 946,648 882,347
Midstream operations - 107,067 - 215,192 40,367 462,965
Other 3,422 20,787 6,469 34,489 40,634 69,353
Gross profit 258,424 264,384 403,550 417,697 761,368 766,631
Operating expense 121,219 123,716 231,550 234,178 469,120 448,428
Depreciation and amortization expense 19,605 25,485 38,597 51,217 89,175 102,759
General and administrative expense 16,342 14,891 30,521 28,055 56,867 51,124
Equipment lease expense 8,415 6,954 16,278 13,695 30,855 28,054
Non-cash employee stock ownership plan compensation charge 1,944 4,031 4,692 7,993 10,558 16,382
Asset impairments - 10,005 - 10,005 - 10,005
Loss on asset sales and disposals 2,216 39,249 6,720 40,144 153,975 48,133
Operating income (loss) 88,683 40,053 75,192 32,410 (49,182) 61,746
Interest expense (44,891) (42,673) (88,769) (83,480) (173,756) (163,718)
Other income, net 86 684 105 1,195 (162) 1,398
Earnings (loss) before income tax benefit 43,878 (1,936) (13,472) (49,875) (223,100) (100,574)
Income tax expense (benefit) 3 (162) 161 215 (2,732) (926)
Net earnings (loss) 43,875 (1,774) (13,633) (50,090) (220,368) (99,648)
Net earnings (loss) attributable to noncontrolling interest (b) 531 69 38 (332) (1,874) (658)
Net earnings (loss) attributable to Ferrellgas Partners, L.P. 43,344 (1,843) (13,671) (49,758) (218,494) (98,990)
Less: General partner's interest in net earnings (loss) 433 (19) (137) (498) (2,185) (990)
Common unitholders' interest in net earnings (loss) $ 42,911 $ (1,824) $ (13,534) $ (49,260) $ (216,309) $ (98,000)
Earnings (loss) Per Common Unit
Basic and diluted net earnings (loss) per common unitholders' interest $ 0.44 $ (0.02) $ (0.14) $ (0.51) $ (2.23) $ (1.01)
Weighted average common units outstanding - basic 97,152.7 97,152.7 97,152.7 97,152.7 97,152.7 97,152.7
Supplemental Data and Reconciliation of Non-GAAP Items:
Three months ended Six months ended Twelve months ended
January 31 January 31 January 31
2019 2018 2019 2018 2019 2018
Net earnings (loss) attributable to Ferrellgas Partners, L.P. $ 43,344 $ (1,843) $ (13,671) $ (49,758) $ (218,494) $ (98,990)
Income tax expense (benefit) 3 (162) 161 215 (2,732) (926)
Interest expense 44,891 42,673 88,769 83,480 173,756 163,718
Depreciation and amortization expense 19,605 25,485 38,597 51,217 89,175 102,759
EBITDA 107,843 66,153 113,856 85,154 41,705 166,561
Non-cash employee stock ownership plan compensation charge 1,944 4,031 4,692 7,993 10,558 16,382
Asset impairments - 10,005 - 10,005 - 10,005
Loss on asset sales and disposal 2,216 39,249 6,720 40,144 153,975 48,133
Other income, net (86) (684) (105) (1,195) 162 (1,398)
Severance costs $690 included in operating costs for the three, six and twelve months ended period January 31, 2019 and $910 included in general and administrative costs for the three, six and twelve months ended January 31, 2019. Also includes $358 in operating costs for the six and twelve months ended period January 31, 2018 and $1,305 included in general and administrative costs for the six and twelve months ended January 31, 2018. 1,600 - 1,600 1,663 1,600 1,663
Legal fees and settlements 5,608 2,118 9,172 2,118 13,119 2,118
Multi-employer pension plan withdrawal settlement - - 1,524 - 1,524 -
Exit costs associated with contracts - Midstream dispositions - - - - 11,804 -
Unrealized (non-cash) losses (gains) on changes in fair value of derivatives $(986) included in operating expense for the twelve months ended January 31, 2018. Also includes $(314), $1,293 and $1,037 included in midstream operations cost of sales for the three, six and twelve months ended January 31, 2018, respectively. - (314) - 1,293 - 51
Net earnings (loss) attributable to noncontrolling interest (b) 531 69 38 (332) (1,874) (658)
Adjusted EBITDA (c) 119,656 120,627 137,497 146,843 232,573 242,857
Net cash interest expense (d) (41,679) (39,734) (82,578) (77,791) (165,679) (153,049)
Maintenance capital expenditures (e) (26,147) (4,640) (31,532) (13,344) (45,805) (23,203)
Cash refund from (paid for) taxes 4 (6) 2 (12) 305 (296)
Proceeds from certain asset sales 899 2,999 1,960 4,207 6,956 8,126
Distributable cash flow attributable to equity investors (f) 52,733 79,246 25,349 59,903 28,350 74,435
Distributable cash flow attributable to general partner and non-controlling interest 1,055 1,585 507 1,198 567 1,489
Distributable cash flow attributable to common unitholders (g) 51,678 77,661 24,842 58,705 27,783 72,946
Less: Distributions paid to common unitholders - 9,716 9,715 19,431 29,145 38,861
Distributable cash flow excess/(shortage) $51,678 $67,945 $15,127 $39,274 $(1,362) $34,085
Propane gallons sales
Retail - Sales to End Users 239,044 235,071 368,711 354,365 651,314 606,469
Wholesale - Sales to Resellers 70,655 74,942 119,615 128,371 231,454 236,480
Total propane gallons sales 309,699 310,013 488,326 482,736 882,768 842,949
(b)Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P.
(c)Adjusted EBITDA is calculated as net earnings (loss) attributable to Ferrellgas Partners, L.P., less the sum of the following: income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, asset impairments, loss on asset sales and disposal, other income, net, severance expense, legal fees and settlements, multi-employer pension plan withdrawal settlement, exit costs associated with contracts - Midstream dispositions, unrealized (non-cash) loss (gain) on changes in fair value of derivatives, and net earnings (loss) attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful, because it allows investors to view the partnership's performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
(d)Net cash interest expense is the sum of interest expense less non-cash interest expense and other expense, net. This amount includes interest expense related to the accounts receivable securitization facility.
(e)Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment.
(f)Distributable cash flow attributable to equity investors is calculated as Adjusted EBITDA minus net cash interest expense, maintenance capital expenditures and cash paid for taxes plus proceeds from certain asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to equity investors. Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to distributable cash flow attributable to equity investors or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to equity investors may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
(g)Distributable cash flow attributable to common unitholders is calculated as Distributable cash flow attributable to equity investors minus distributable cash flow attributable to general partner and noncontrolling interest. Management considers distributable cash flow attributable to common unitholders a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to common unitholders. Distributable cash flow attributable to common unitholders, as management defines it, may not be comparable to distributable cash flow attributable to common unitholders or similarly titled measurements used by other corporations and partnerships. Items added to our calculation of distributable cash flow attributable to common unit holders that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to common unitholders may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Source: Ferrellgas Partners, L.P.

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