UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 January 31, 2003
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
incorporation or organization) Identification Nos.)
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 registrants (1) have 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) have been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ X ] No [ ]
At February 28, 2003, the registrants had units or shares outstanding as
follows:
Ferrellgas Partners, L.P. 36,189,053 Common Units
Ferrellgas Partners Finance Corp. 1,000 Common Stock
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
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 - January 31, 2003
(unaudited) and July 31, 2002 1
Consolidated Statements of Earnings -
Three and six months ended January 31, 2003 and 2002
(unaudited) 2
Consolidated Statement of Partners' Capital -
Six months ended January 31, 2003 (unaudited) 3
Consolidated Statements of Cash Flows -
Six months ended January 31, 2003 and 2002 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Ferrellgas Partners Finance Corp.
---------------------------------
Balance Sheets - January 31, 2003 (unaudited)
and July 31, 2002 13
Statements of Earnings -
Three and six months ended January 31, 2003 and 2002
(unaudited) 13
Statements of Cash Flows -
Six months ended January 31, 2003 and 2002 (unaudited) 14
Notes to Financial Statements (unaudited) 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
ITEM 4. CONTROLS AND PROCEDURES 25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 25
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 25
ITEM 5. OTHER INFORMATION 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 26
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
January 31, July 31,
ASSETS 2003 2002
- --------------------------------------------------------------------- --------------- ---------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 26,245 $ 19,781
Accounts and notes receivable, net 113,199 74,274
Inventories 71,739 48,034
Prepaid expenses and other current assets 8,321 10,724
--------------- ---------------
Total Current Assets 219,504 152,813
Property, plant and equipment, net 687,426 506,531
Goodwill 124,190 124,190
Intangible assets, net 103,130 98,170
Other assets, net 23,354 3,424
--------------- ---------------
Total Assets $ 1,157,604 $ 885,128
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 100,408 $ 54,316
Other current liabilities 89,270 89,061
-------------- ---------------
Total Current Liabilities 189,678 143,377
Long-term debt 902,235 703,858
Other liabilities 17,718 14,861
Contingencies and commitments (Note I) - -
Minority interest 2,793 1,871
Partners' Capital:
Senior unitholder (2,743,020 and 2,782,211 units outstanding
at January 31, 2003 and July 31, 2002, respectively - liquidation
preference $109,721 and $111,288 at January 31, 2003 and
July 31, 2002, respectively) 109,721 111,288
Common unitholders (36,180,553 and 36,081,203 units outstanding
at January 31, 2003 and July 31, 2002, respectively) (3,769) (28,320)
General partner unitholder (393,167 and 392,556 units outstanding
at January 31, 2003 and July 31, 2002, respectively) (58,843) (59,035)
Accumulated other comprehensive loss (1,929) (2,772)
-------------- ---------------
Total Partners' Capital 45,180 21,161
--------------- ---------------
Total Liabilities and Partners' Capital $ 1,157,604 $ 885,128
=============== ===============
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 six months ended
------------------------------------ ------------------------------------
January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Revenues:
Propane and other gas liquids sales $ 439,301 $ 331,129 $ 634,201 $ 555,414
Other 25,165 24,609 46,579 45,567
---------------- ---------------- ---------------- ----------------
Total revenues 464,466 355,738 680,780 600,981
Cost of product sold (exclusive of
depreciation, shown with amortization below) 254,718 176,591 378,390 326,538
---------------- ---------------- ---------------- ----------------
Gross profit 209,748 179,147 302,390 274,443
Operating expense 79,677 70,373 148,105 137,500
Depreciation and amortization expense 10,261 10,765 20,156 22,219
General and administrative expense 7,759 6,632 14,661 13,457
Equipment lease expense 5,528 6,086 11,520 12,631
Employee stock ownership plan compensation charge 1,639 1,274 3,034 2,583
Loss on disposal of assets and other 1,125 431 1,796 1,278
---------------- ---------------- ---------------- ----------------
Operating income 103,759 83,586 103,118 84,775
Interest expense (16,084) (15,208) (30,780) (30,322)
Interest income 364 545 426 871
Early extinguishment of debt expense - (7,052)
---------------- ---------------- ---------------- ----------------
Earnings before minority interest and cumulative
effect of change in accounting principle 88,039 68,923 65,712 55,324
Minority interest 937 735 822 638
---------------- ---------------- ---------------- ----------------
Earnings before cumulative effect of change in
accounting principle 87,102 68,188 64,890 54,686
Cumulative effect of change in accounting principle,
net of minority interest of $28 - - (2,754) -
---------------- ---------------- ---------------- ----------------
Net earnings 87,102 68,188 62,136 54,686
Distribution to senior unitholder 2,743 2,802 5,525 5,604
Net earnings available to general partner unitholder 843 654 566 491
---------------- ---------------- ---------------- ----------------
Net earnings available to common unitholders $83,516 $64,732 $56,045 $48,591
================ ================ ================ ================
Basic earnings per common unit:
Net earnings available to common unitholders before
cumulative effect of change in accounting principle $ 2.31 $ 1.80 $ 1.62 $ 1.35
Cumulative effect of change in accounting principle - - (0.07) -
---------------- ---------------- ---------------- ----------------
Net earnings available to common unitholders $ 2.31 $ 1.80 $ 1.55 $ 1.35
================ ================ ================ ================
Diluted earnings per common unit:
Net earnings available to common unitholders before
cumulative effect of change in accounting principle $ 2.30 $ 1.79 $ 1.62 $ 1.35
Cumulative effect of change in accounting principle - - (0.07) -
---------------- ---------------- ---------------- ----------------
Net earnings available to common unitholders $ 2.30 $ 1.79 $ 1.55 $ 1.35
================ ================ ================ ================
See notes to consolidated financial statements.
2
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Number of units Accumulated
----------------------------------- other
General General compre- Total
Senior Common partner Senior Common partner hensive partners'
unitholder unitholders unitholder unitholder unitholders unitholder loss capital
---------- ----------- ---------- ---------- ----------- ---------- -------- ---------
August 1, 2002 2,782.2 36,081.2 392.6 $111,288 $ (28,320) $ (59,035) $ (2,772) $ 21,161
Contribution in connection with
ESOP compensation charge - - - - 2,974 30 - 3,004
Common unit cash distribution - - - - (36,110) (365) - (36,475)
Senior unit cash and accrued
distribution - - - - (5,502) (111) - (5,613)
Redemption of senior units (39.2) - (0.4) (1,567) - - - (1,567)
Common unit options exercised - 99.4 1.0 - 1,674 17 - 1,691
Comprehensive income:
Net earnings - - - - 61,515 621 - 62,136
Other comprehensive income:
Risk management fair
value adjustment - - - - - - 843 843
---------
Comprehensive income 62,979
---------- ----------- -------- ---------- ----------- ---------- -------- ---------
January 31, 2003 2,743.0 36,180.6 393.2 $109,721 $ (3,769) $ (58,843) $ (1,929) $45,180
========== =========== ======== ========== =========== ========== ======== =========
3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the six months ended
-------------------------------------
January 31, 2003 January 31, 2002
---------------- ----------------
Cash Flows From Operating Activities:
Earnings before cumulative effect of change in
accounting principle $64,890 $54,686
Adjustments to reconcile earnings before cumulative
effect of change in accounting principle to net cash
provided by operating activities:
Early extinguishment of debt expense 1,854 -
Depreciation and amortization expense 20,156 22,219
Employee stock ownership plan compensation charge 3,034 2,583
Minority interest 822 638
Other 4,968 757
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Accounts and notes receivable, net (111,337) (52,176)
Inventories (20,391) 13,812
Prepaid expenses and other current assets 1,285 615
Accounts payable 46,012 15,317
Other current liabilities (6,940) (10,169)
Other liabilities (315) 436
---------------- ----------------
Net cash provided by operating activities 4,038 48,718
---------------- ----------------
Cash Flows From Investing Activities:
Business acquisitions, net of cash acquired (34,120) (6,536)
Capital expenditures - tank lease buyout (155,600) -
Capital expenditures - technology initiative (10,993) (6,100)
Capital expenditures - other (7,509) (9,940)
Net activity from accounts receivable securitization 60,000 (12,000)
Other 1,516 2,088
---------------- ----------------
Net cash used in investing activities (146,706) (32,488)
---------------- ----------------
Cash Flows From Financing Activities:
Distributions (42,129) (41,992)
Proceeds from issuance of debt 359,715 30,107
Principal payments on debt (161,559) (11,655)
Net additions to short-term borrowings - 8,135
Cash paid for financing costs (7,001) -
Minority interest activity 97 (481)
Proceeds from exercise of common unit options 1,576 649
Redemption of senior units (1,567) -
Cash contribution from general partner - 23
---------------- ----------------
Net cash provided by (used in) financing activities 149,132 (15,214)
---------------- ----------------
Increase in cash and cash equivalents $ 6,464 $ 1,016
Cash and cash equivalents - beginning of period 19,781 25,386
---------------- ----------------
Cash and cash equivalents - end of period $26,245 $26,402
=============== ================
Cash paid for interest $28,551 $29,038
=============== ================
See notes to consolidated financial statements.
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2003
(Dollars in thousands, except per unit data)
(unaudited)
A. Organization
Ferrellgas Partners, L.P.'s activities are primarily conducted through its
subsidiary Ferrellgas, L.P. Ferrellgas Partners is the sole limited partner
of Ferrellgas, L.P. with an approximate 99% limited partner interest.
Ferrellgas Partners and its subsidiaries, including Ferrellgas, L.P., are
together referred to as Ferrellgas. The general partner of both Ferrellgas
Partners and Ferrellgas, L.P. is Ferrellgas, Inc., which owns an effective
2% general partner interest in Ferrellgas on a combined basis.
The consolidated financial statements of Ferrellgas Partners and
subsidiaries reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the interim periods
presented. All adjustments to the consolidated financial statements were of
a normal, recurring nature. The information included in this Quarterly
Report on Form 10-Q should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations,
and the consolidated financial statements and accompanying notes included
in Ferrellgas Partners' Annual Report on Form 10-K for the fiscal year
ended July 31, 2002.
B. 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 product liability and other claims.
C. Reclassifications
Certain reclassifications have been made to the six months ended January
31, 2002 consolidated financial statements to conform to the six months
ended January 31, 2003 consolidated financial statements presentation.
D. Nature of operations
Ferrellgas is engaged primarily in the retail distribution of propane and
related equipment and supplies in the United States. The retail market is
seasonal because propane is used primarily for heating in residential and
commercial buildings. Therefore, the results of operations for the six
months ended January 31, 2003 and 2002 are not necessarily indicative of
the results to be expected for a full fiscal year.
5
E. Supplemental Balance Sheet and Statement of Earnings Information:
Inventories consist of:
January 31, July 31,
2003 2002
--------------- ---------------
Propane gas and related products $54,311 $29,169
Appliances, parts and supplies 17,428 18,865
--------------- ---------------
$71,739 $48,034
=============== ===============
In addition to inventories on hand, Ferrellgas enters into contracts to buy
and sell product, primarily propane for supply procurement purposes. Nearly
all of these contracts have terms of less than one year and most call for
payment based on market prices at the date of delivery. All fixed price
contracts have terms of less than one year. As of January 31, 2003,
Ferrellgas had committed, for supply procurement purposes, to make net
delivery of approximately 5.7 million gallons of propane at a fixed price.
Property, plant and equipment, net consist of:
January 31, July 31,
2003 2002
--------------- ---------------
Property, plant and equipment $999,988 $810,416
Less: accumulated depreciation 312,562 303,885
--------------- ---------------
$687,426 $506,531
=============== ===============
On December 10, 2002, Ferrellgas purchased propane tanks and related assets
for $155.6 million that were previously leased. See Note F for a discussion
regarding the funding of this purchase.
Intangible assets consist of:
January 31, 2003 July 31, 2002
------------------------------------------- -------------------------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
---------- ------------ --------- ---------- ------------ ---------
Customer lists $217,465 $(129,112) $88,353 $208,662 $(124,860) $83,802
Non-compete agreements 65,354 (50,577) 14,777 62,893 (48,525) 14,368
---------- ------------ --------- ---------- ------------ ---------
Total $282,819 $(179,689) $103,130 $271,555 $(173,385) $98,170
========== ============ ========= ========== ============ =========
Aggregate Amortization Expense:
2003 2002
---------- ----------
For the six months ended January 31 $6,304 $7,982
Estimated Amortization Expense:
For the year ended July 31
2003 $12,275
2004 11,742
2005 11,570
2006 10,691
2007 10,051
6
Other assets, net consist of:
January 31, July 31,
2003 2002
-------------- --------------
Debt issue costs $7,722 $2,399
Investment in unconsolidated subsidiary 14,291 -
Other 1,341 1,025
-------------- --------------
$23,354 $3,424
============== ==============
On September 24, 2002, Ferrellgas issued $170.0 million of 8.75% senior
notes due 2012, the proceeds of which were used to repurchase and redeem
the $160.0 million of 9.375% senior secured notes due 2006. Debt issue
costs of $4.8 million, of which $4.3 million is classified as other assets,
related to the $170.0 million senior note issuance, were capitalized and
will be amortized to interest expense through fiscal 2012.
On December 10, 2002, Ferrellgas refinanced its $157.0 million bank credit
facility with an amended $307.5 million bank credit facility, which will
terminate on April 28, 2006, unless extended or renewed. Debt issue costs
of $1.9 million, of which $1.3 million is classified as other assets,
related to this refinancing, were capitalized and will be amortized to
interest expense through 2006.
The investment in unconsolidated subsidiary represents Ferrellgas'
investment in Ferrellgas Receivables, LLC and is accounted for using the
equity method. During the six months ended January 31, 2003, Ferrellgas
increased its investment in the subsidiary. See discussion of the
transactions between Ferrellgas and Ferrellgas Receivables in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Investing Activities."
F. Long-Term Debt
Long-term debt consists of:
January 31, July 31,
2003 2002
--------------- ---------------
Senior notes
Fixed rate, 7.16%, due 2005-2013 $350,000 $350,000
Fixed rate, 8.75%, due 2012 219,658 -
Fixed rate, 9.375%, due 2006 - 160,000
Fixed rate, 8.8%, due 2006-2009 184,000 184,000
Credit agreement, variable interest rates, due 2006 140,000 -
Notes payable, 7.4% and 7.6% weighted average
interest rates, respectively, due 2003 to 2011 11,057 12,177
--------------- ---------------
904,715 706,177
Less: current portion, included in other current
liabilities on the consolidated balance sheets 2,480 2,319
--------------- ---------------
$902,235 $703,858
=============== ===============
On September 24, 2002, Ferrellgas issued $170.0 million of 8.75% senior
notes due 2012, the proceeds of which were used to repurchase and redeem
its $160.0 million of 9.375% senior secured notes due 2006. During the
three months ended October 31, 2002, Ferrellgas recognized $7.1 million of
early extinguishment of debt expense related to the $5.2 million of premium
and other costs incurred to repurchase and redeem its $160.0 million senior
secured notes and the write-off of $1.9 million of unamortized debt issue
costs.
7
On December 18, 2002, Ferrellgas issued $48.0 million of 8.75% senior notes
due 2012, the proceeds of which were used to reduce borrowings under the
bank credit facility to provide increased availability of funds for working
capital, acquisition, capital expenditure and general corporate purposes.
The $48.0 million senior notes were issued with a debt premium of $1.7
million that will be amortized to interest expense through 2012.
Interest on the 8.75% senior notes due 2012 is payable semi-annually in
arrears on June 15 and December 15. Interest on the $170.0 million 8.75%
senior notes commenced on December 15, 2002 and interest on the $48.0
million 8.75% senior notes will commence on June 15, 2003. These notes are
unsecured and are not redeemable before June 15, 2007, except in specific
circumstances.
On December 10, 2002, Ferrellgas refinanced its $157.0 million bank credit
facility with a $307.5 million amended bank credit facility, using $155.6
million of the funds available to purchase propane tanks and related assets
that were previously leased, plus a $1.2 million payment of related accrued
lease expense. The remaining portion of the amended bank credit facility is
available for working capital, acquisition, capital expenditure and general
partnership purposes and will terminate on April 28, 2006, unless extended
or renewed. As of January 31, 2003, Ferrellgas had borrowings of $140.0
million, at a weighted average interest rate of 3.64%, under this amended
bank credit facility.
All borrowings under the amended bank credit facility bear interest, at
Ferrellgas' option, at a rate equal to either:
o the base rate, which is defined as the higher of the federal funds
rate plus 0.50% or Bank of America's prime rate (as of January 31,
2003, the federal funds rate and Bank of America's prime rate were
1.33% and 4.25%, respectively); or
o the Eurodollar Rate plus a margin varying from 1.75% to 2.75% (as of
January 31, 2003, the one-month Eurodollar Rate was 1.26%).
The scheduled annual principal payments on long-term debt as of January 31,
2003, are as follows:
Scheduled annual
Fiscal year ending July 31, principal payments
--------------------------- --------------------
Payments remaining in 2003 $ 760
2004 2,134
2005 2,299
2006 251,313
2007 59,039
Thereafter 587,512
G. Asset Retirement Obligations
Statement of Financial Accounting Standard (SFAS) No. 143 provides
accounting requirements for retirement obligations associated with tangible
long-lived assets, including the requirement that a liability be recognized
if there is a legal or financial obligation associated with the retirement
of the assets. Ferrellgas adopted SFAS No. 143 beginning in the year ending
July 31, 2003. This cumulative effect of a change in accounting principle
resulted in a one-time charge to earnings of $2.8 million during the three
months ended October 31, 2002, together with the recognition of a $3.1
million long-term liability and a $0.3 million long-term asset. Ferrellgas
believes the implementation will not have a material ongoing effect on its
financial position, results of operations and cash flows. These obligations
relate primarily to the estimated future expenditures required to retire
Ferrellgas' underground storage facilities. These facilities will likely
require closure and remediation expenditures in approximately 50 years. The
following table presents a reconciliation of the beginning and ending
carrying amounts of the asset retirement obligation:
8
Six months
ended
January 31,
2003
---------------
Asset retirement obligation as of August 1, 2002 $3,073
Add: Accretion 99
---------------
Asset retirement obligation as of January 31, 2003 $3,172
===============
The related asset carried for the purpose of settling the asset retirement
obligation is $0.3 million as of January 31, 2003, and is not a legally
restricted asset. Assuming retroactive application of the change in
accounting principle as of August 1, 2001, there would be no material
change in the pro forma net earnings for the six months ended January 31,
2002. Other liabilities, assuming retroactive application of the change in
accounting principle as of August 1, 2001 and July 31, 2002, would have
increased $2.9 million and $3.1 million, respectively.
H. Guarantees
FASB Financial Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," expands the existing disclosure requirements for
guarantees and requires recognition of a liability for the fair value of
guarantees issued after December 31, 2002. As of January 31, 2003, the only
material guarantees that Ferrellgas had outstanding were associated with
residual value guarantees of operating leases. These operating leases are
related to transportation equipment with remaining lease periods scheduled
to expire over the next seven fiscal years. Upon completion of the lease
period, Ferrellgas guarantees that the fair value of the equipment will
equal or exceed the guaranteed amount, or Ferrellgas will pay the lessor
the difference. The fair value of these residual value guarantees entered
into after December 31, 2002 was $29.5 thousand as of January 31, 2003.
Although the fair values at the end of the lease terms have historically
exceeded these guaranteed amounts, the maximum potential amount of
aggregate future payments Ferrellgas could be required to make under these
leasing arrangements, assuming the equipment is worthless at the end of the
lease term, is $16.6 million.
I. Contingencies
Ferrellgas is threatened with or named as a defendant in various lawsuits
that, 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 would reasonably be expected to have a material adverse effect
on the financial condition, results of operations and cash flows of
Ferrellgas. Currently, Ferrellgas is not a party to any legal proceedings
other than various claims and lawsuits arising in the ordinary course of
business.
J. Distributions
On September 13, 2002 and December 13, 2002, Ferrellgas paid cash
distributions of $1.00 and $0.50 per senior and common unit, respectively,
for the three months ended July 31, 2002 and October 31, 2002. On February
17, 2003, Ferrellgas declared cash distributions of $1.00 and $0.50 per
senior and common unit, respectively, for the three months ended January
31, 2003, that will be paid on March 14, 2003.
9
K. Earnings Per Common Unit
Below is a calculation of the basic and diluted earnings per common unit in
the consolidated statements of earnings for the periods indicated. For
diluted earnings per common unit purposes, the senior units were excluded
as they are considered contingently issuable common units for which all
necessary conditions for their issuance have not been satisfied as of the
end of the reporting period. In order to compute the basic and diluted
earnings per common unit, the distributions on senior units are subtracted
from net earnings to compute net earnings available to common unitholders.
Three months ended Six months ended
------------------------------ ------------------------------
January 31 January 31 January 31 January 31
2003 2002 2003 2002
------------- --------------- ------------- ---------------
Net earnings available to common
unitholders before cumulative
effect of change in accounting
principle $83,516 $64,732 $58,771 $48,591
Cumulative effect of change in
accounting principle, net of
minority interest and general partner
interest of $56 - - (2,726) -
------------- --------------- ------------- ---------------
Net earnings available to common
unitholders $83,516 $64,732 $56,045 $48,591
============= =============== ============= ===============
-----------------------------------------------------------------------------------------------------------------
Weighted average common units
outstanding 36,144.0 36,022.7 36,116.0 35,970.9
Dilutive securities 92.7 64.3 84.3 32.9
------------- --------------- ------------- ---------------
Weighted average common units outstanding
plus dilutive securities 36,236.7 36,087.0 36,200.3 36,003.8
-----------------------------------------------------------------------------------------------------------------
Basic earnings per common unit:
-------------------------------
Net earnings available to common
unitholders before cumulative
effect of change in accounting
principle $2.31 $1.80 $1.62 $1.35
Cumulative effect of change in
accounting principle, net of
minority interest and general partner
interest of $56 - - (0.07) -
------------- --------------- ------------- ---------------
Net earnings available to common
unitholders $2.31 $1.80 $1.55 $1.35
============= =============== ============= ===============
-----------------------------------------------------------------------------------------------------------------
Diluted earnings per common unit:
--------------------------------
Net earnings available to common
unitholders before cumulative
effect of change in accounting
principle $2.30 $1.79 $1.62 $1.35
Cumulative effect of change in
accounting principle - - (0.07) -
------------- --------------- ------------- ---------------
Net earnings available to common
unitholders $2.30 $1.79 $1.55 $1.35
============= =============== ============= ===============
10
L. Business Combinations
During the six months ended January 31, 2003, Ferrellgas acquired the
following retail propane businesses with an aggregate value at $43.6
million:
o ProAm, Inc., based primarily in Georgia and Texas, acquired December,
2002;
o a branch of Cenex Propane Partners Co., based in Iowa, acquired
November, 2002; and
o Northstar Propane, based in Nevada, acquired November, 2002.
These purchases were primarily funded by $34.1 million of cash payments and
the issuance of a $10.0 million non-interest bearing note due in December
2003.
The aggregate value of $43.6 million of these three retail propane
businesses was preliminarily allocated as follows: $25.9 million for fixed
assets such as customer tanks, buildings and land, $9.4 million for
customer lists, $2.5 million for non-compete agreements and $5.8 million
for net working capital. Net working capital was comprised of $7.8 million
of current assets and $2.0 million of current liabilities. The estimated
fair values and useful lives of assets acquired are based on a preliminary
valuation and are subject to final valuation adjustments. Ferrellgas
intends to continue its analysis of the net assets of these acquired
businesses to determine the final allocation of the total purchase price to
the various assets acquired. The weighted average amortization period for
non-compete agreements and customer lists are five and 15 years,
respectively.
The results of operations of all acquisitions have been included in the
consolidated financial statements from their dates of acquisition. The pro
forma effect of these transactions was not material to the results of
operations.
M. Adoption of New Accounting Standards
The Financial Accounting Standards Board recently issued SFAS No. 143
"Accounting for Asset Retirement Obligations", SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-lived Assets", SFAS No. 145 "Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections," SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities," SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure," FASB Financial Interpretation
No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" and FASB Financial
Interpretation No. 46 "Consolidation of Variable Interest Entities."
SFAS No. 143 requires the recognition of a liability if a company has a
legal or contractual financial obligation in connection with the retirement
of a tangible long-lived asset. Ferrellgas implemented SFAS No. 143
beginning in the year ending July 31, 2003. This cumulative effect of a
change in accounting principle resulted in a one-time charge to earnings of
$2.8 million during the three months ended October 31, 2002, together with
the recognition of a $3.1 million long-term liability and a $0.3 million
long-term asset. See Note G for further discussion of these obligations.
Ferrellgas believes this implementation will not have a material ongoing
effect on its financial position, results of operations and cash flows.
SFAS No. 144 modifies the financial accounting and reporting for long-lived
assets to be disposed of by sale and it broadens the presentation of
discontinued operations to include more disposal transactions. Ferrellgas
implemented SFAS No. 144 beginning in the year ending July 31, 2003, with
no material effect on its financial position, results of operations and
cash flows.
11
SFAS No. 145 eliminates the requirement that material gains and losses
resulting from the early extinguishment of debt be classified as an
extraordinary item in the consolidated statements of earnings. Instead,
companies must evaluate whether the transaction meets both the criteria of
being unusual in nature and infrequent in occurrence. Other aspects of SFAS
No. 145 relating to accounting for intangible assets of motor carriers and
accounting for certain lease modifications do not currently apply to
Ferrellgas. Ferrellgas implemented SFAS No. 145 beginning in the year
ending July 31, 2003, and began reporting expenses associated with early
extinguishment of debt in income from continuing operations. For the three
months ended October 31, 2002, Ferrellgas recognized $7.1 million of
expenses associated with the early extinguishment of the $160.0 million
senior secured notes. Prior to the adoption of SFAS No. 145, Ferrellgas
would have classified this type of expense as an extraordinary item.
SFAS No. 146 modifies the financial accounting and reporting for costs
associated with exit or disposal activities. This statement requires that a
liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Additionally, the statement
requires the liability to be recognized and measured initially at fair
value. Under previous rules, liabilities for exit costs were recognized at
the date of the entity's commitment to an exit plan. Ferrellgas has adopted
and implemented SFAS No. 146 for all exit or disposal activities initiated
after July 31, 2002. Ferrellgas believes the implementation will not have a
material effect on its financial position, results of operations and cash
flows.
SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation"
to provide alternative methods of transition for a voluntary change to the
fair-value based method of accounting for stock-based employee
compensation. This statement also amends SFAS 123 disclosure requirements
for annual and interim financial statements to provide more prominent
disclosures about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. This
statement is effective for the fiscal year ending July 31, 2003, with
earlier application permitted. However, the interim disclosure requirements
will be effective for the three months ending April 30, 2003. Ferrellgas is
currently studying SFAS 148 and the related implications of SFAS 123.
FASB Financial Interpretation No. 45 expands the existing disclosure
requirements for guarantees and requires that companies recognize a
liability for guarantees issued after December 31, 2002. Ferrellgas
implemented this interpretation beginning in the three months ended January
31, 2003. The implementation resulted in the recognition of a liability of
$29.8 thousand, and a related prepaid asset of $29.8 thousand, both of
which will be amortized over the life of the guarantees. See Note H for
further discussion about these guarantees.
FASB Financial Interpretation No. 46 clarified Accounting Research Bulletin
No. 51, "Consolidated Financial Statements." If certain conditions are met,
this interpretation requires the primary beneficiary to consolidate certain
variable interest entities in which equity investors lack the
characteristics of a controlling financial interest or do not have
sufficient equity investment at risk to permit the variable interest entity
to finance its activities without additional subordinated financial support
from other parties. This interpretation is effective immediately for
variable interest entities created or obtained after January 31, 2003. For
variable interest entities acquired before February 1, 2003, the
interpretation is effective for the first fiscal year or interim period
beginning after June 15, 2003. Ferrellgas currently does not have any
variable interest entities that would be subject to this interpretation.
12
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
BALANCE SHEETS
(Amounts in dollars)
January 31, July 31,
ASSETS 2003 2002
- ----------------------------------------------- ------------------ -------------------
(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 2,061 2,061
Accumulated deficit (2,061) (2,061)
------------------ -------------------
Total Stockholder's Equity $1,000 $1,000
================== ===================
STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended Six Months Ended
----------------------------------- -----------------------------------
January 31, January 31, January 31, January 31,
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
General and administrative expense $ - $ 50 $ - $ 95
--------------- --------------- --------------- ---------------
Net loss $ - $ (50) $ - $(95)
=============== =============== =============== ===============
See notes to financial statements.
13
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF CASH FLOWS
(unaudited)
(Amounts in dollars)
For the six months ended
--------------------------------------------
January 31, January 31,
2003 2002
------------------ -------------------
Cash Flows From Operating Activities:
Net loss $ - $ (95)
------------------ ------------------
Cash used in operating activities $ - (95)
------------------ -------------------
Cash Flows From Financing Activities:
Capital contribution - 95
------------------ -------------------
Cash provided by financing activities - 95
------------------ -------------------
Change 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
JANUARY 31, 2003
(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.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Ferrellgas Partners, L.P. is a Delaware limited partnership. Our common
units are listed on the New York Stock Exchange and our activities are primarily
conducted through our operating partnership Ferrellgas, L.P., a Delaware limited
partnership. We are the sole limited partner of Ferrellgas, L.P. with an
approximate 99% limited partner interest. In this report, unless the context
indicates otherwise, the terms "our," "we" and "its" are used sometimes as
abbreviated references to Ferrellgas Partners, L.P. and its consolidated
subsidiaries, including Ferrellgas, L.P.
The following is a discussion of our historical financial condition and
results of operations and should be read in conjunction with our historical
consolidated financial statements and accompanying notes thereto included
elsewhere in this Quarterly Report on Form 10-Q.
Forward-looking statements
Statements included in this report include forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. These forward-looking statements are
identified as any statement that does not relate strictly to historical or
current facts. They use words such as "anticipate," "believe," "intend," "plan,"
"projection," "forecast," "strategy," "position," "continue," "estimate,"
"expect," "may," "will," or the negative of those terms or other variations of
them or comparable terminology. In particular, statements, express or implied,
concerning future operating results, or the ability to generate sales, income or
cash flow are forward-looking statements.
Forward-looking statements are not guarantees of future performance. You
should not put undue reliance on any forward-looking statements. All
forward-looking statements are subject to risks, uncertainties and assumptions
that could cause our actual results to differ materially from those expressed in
or implied by these forward-looking statements. Many of the factors that will
affect our future results are beyond our ability to control or predict.
Some of our forward-looking statements include the following:
o whether Ferrellgas, L.P. will have sufficient funds to meet its
obligations, including its obligations under its debt securities, and
enable it to distribute to Ferrellgas Partners sufficient funds to
permit Ferrellgas Partners to meet its obligations with respect to its
existing securities;
o whether we will continue to meet all of the quarterly financial tests
required by the agreements governing our indebtedness; and
o the expectation that propane and other gas liquids sales and cost of
product sold in the second half of fiscal 2003 will exceed the second
half of fiscal 2002 amounts.
For a more detailed description of these particular forward-looking
statements and for risk factors that may affect any forward-looking statements,
see the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 of our Annual Report on Form 10-K
filed October 23, 2002.
Results of Operations
Due to the seasonality of the retail distribution of propane, results of
our operations for the six months ended January 31, 2003 and 2002 are not
necessarily indicative of the results to be expected for a full fiscal year.
Other factors affecting the results of our operations include competitive
conditions, demand for product, timing of acquisitions, general economic
conditions in the United States, variations in the weather and fluctuations in
commodity prices.
15
As we have grown through acquisitions, fixed costs such as personnel costs,
equipment leases, depreciation and interest expense have increased.
Historically, due to the seasonality of our business, these fixed costs have
caused net losses in the first and fourth fiscal quarters.
Three Months Ended January 31, 2003 vs. January 31, 2002
PROPANE AND OTHER GAS LIQUIDS SALES. Propane and other gas liquids sales
increased $74.6 million primarily due to an increase in retail propane sales
volume and an additional $33.6 million primarily due to an increase in the
average propane sales price per gallon.
Retail sales volumes increased 70.0 million gallons compared to the prior
year period primarily due to colder winter temperatures, and to a lesser extent,
acquisitions. In addition, the average propane sales price per gallon increased
due to the effect of the increase in our weighted average cost of propane
inventory.
For the three months ended January 31, 2003, national temperatures as
reported by the National Oceanic and Atmospheric Administration, were 2% warmer
than normal as compared to 16% warmer than normal in the prior year period. The
prior year quarter was the warmest November through January period in recorded
history, according to the National Oceanic and Atmospheric Administration.
The average sales price per gallon of propane increased due to the effect
of a significant increase in the wholesale cost of propane during fiscal 2003.
The wholesale cost of propane for the second quarter of fiscal 2003 was
significantly higher than the prior year period. The wholesale market price at
one of the major supply points, Mt. Belvieu, Texas, averaged $0.54 per gallon,
and reached a high of $0.78 during the second quarter of fiscal 2003, compared
to an average of $0.31 per gallon in the prior year period. Other major supply
points in the United States also experienced significant increases.
COST OF PRODUCT SOLD. Cost of product sold increased $38.8 million
primarily due to an increase in our weighted average cost of propane inventory.
Additionally, our cost of product sold increased $44.6 million primarily due to
the effect of a 24.1% increase in our retail propane sales volume compared to
the prior year period. Improved results from our risk management trading
activities caused a decrease of $5.3 million in our cost of product sold
compared to the prior year period.
GROSS PROFIT. Gross profit increased 17.1% primarily due to the effect of
the increase in our retail propane volumes. Improved results from our risk
management trading activities were partially offset by retail margins that were
better than expected for the quarter but less than the prior year period. Retail
margins in the prior year period were temporarily increased to partially offset
the impact of significantly warmer winter temperatures. See additional
discussion regarding risk management trading activities in Item 3 "Quantitative
and Qualitative Disclosures about Market Risk."
OPERATING EXPENSE. Operating expense increased 13.2% primarily due to
increased sales volume and performance-based variable expenses.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased 17.0% primarily due to performance-based incentives.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense decreased 4.7% primarily due to the effect of an intangible asset
completing its amortizable life in December 2001.
EQUIPMENT LEASE EXPENSE. Equipment lease expense decreased 9.2% primarily
due to the effect of the December 2002 buyout of our operating tank leases. See
further discussion about the buyout of these leases in "Liquidity and Capital
Resources - Investing Activities."
INTEREST EXPENSE. Interest expense increased 5.8% due to increased
borrowings to buyout our previously leased propane tanks in December 2002 and
acquisitions, partially offset by capitalized interest and the effect of
refinancing fixed-rate debt and lower interest rates on credit facility
borrowings. See further discussion about increased borrowings to buyout these
leases in "Liquidity and Capital Resources - Financing Activities."
16
NET EARNINGS. Net earnings increased 27.7% primarily due to the effect of
an increase in delivered retail propane volumes, partially offset by the
increased operating expenses incurred to deliver the increased retail propane
volumes.
Six Months Ended January 31, 2003 vs. January 31, 2002
PROPANE AND OTHER GAS LIQUIDS SALES. Propane and other gas liquids sales
increased $52.2 million primarily due to an increase in retail propane sales
volume and an additional $26.6 million primarily due to an increase in the
average propane sales price per gallon.
Retail sales volumes increased 52.1 million gallons compared to the prior
year period, primarily due to colder winter temperatures, and to a lesser
extent, acquisitions. In addition, the average propane sales price per gallon
increased due to the effect of the increase in our weighted average cost of
propane inventory.
For the six months ended January 31, 2003, temperatures as reported by the
National Oceanic and Atmospheric Administration, were 1% warmer than normal as
compared to 14% warmer than normal in the prior year period. The prior year
period was the second warmest August through January period in recorded United
States history, according to National Oceanic and Atmospheric Administration
data.
The average sales price per gallon increased due to the effect of a
significant increase in the wholesale cost of propane during fiscal 2003. The
wholesale cost of propane for the first half of fiscal 2003 was significantly
higher than the first half of fiscal 2002. The wholesale market price at one of
the major supply points, Mt. Belvieu, Texas, averaged $0.49 per gallon during
the first half of fiscal 2003, and reached a high of $0.78, compared to an
average of $0.36 per gallon in the prior year period. Other major supply points
in the United States also experienced significant increases.
COST OF PRODUCT SOLD. Cost of product sold increased $32.4 million
primarily due to an increase in our weighted average cost of propane inventory.
Additionally, our cost of product sold increased $31.8 million primarily due to
the effect of a 10.8% increase in our retail sales volume compared to the prior
year period. This increase was offset by improved results from risk management
trading activities that caused a decrease of $12.3 million in our cost of
product sold compared to the prior year period.
GROSS PROFIT. Gross profit increased 10.2% primarily due to the effect of
the increase in our retail propane volumes. Improved results from our risk
management trading activities were largely offset by retail margins that were
better than expected but less than the prior year period. Retail margins in the
prior year period were temporarily increased to partially offset the impact of
significantly warmer winter temperatures. See additional discussion regarding
risk management trading activities in Item 3 "Quantitative and Qualitative
Disclosures about Market Risk."
OPERATING EXPENSE. Operating expense increased 7.7% primarily due to
increased sales volume, increased expenses related to our operational
improvement initiative and increased self-insurance costs.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased 8.9% due to increased information technology and other expenses.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense decreased 9.3% primarily due to the effect of an intangible asset
completing its amortizable life in December 2001.
17
EQUIPMENT LEASE EXPENSE. Equipment lease expense decreased 8.8% due to
effect of the December 2002 buyout of our operating tank leases. See further
discussion about the buyout of these leases in "Liquidity and Capital Resources
- - Investing Activities."
INTEREST EXPENSE. Interest expense increased 1.5% due to increased
borrowings to buyout previously leased propane tanks in December 2002 and
acquisitions, partially offset by capitalized interest, the effect of
refinancing fixed-rate debt and lower interest rates on credit facility
borrowings. See further discussion about the increased borrowings to buyout
these leases in "Liquidity and Capital Resources - Financing Activities."
NET EARNINGS. Net earnings increased 13.6% primarily due to the effect of
an increase in retail propane volumes, partially offset by the increased
operating expenses incurred to deliver the increased retail propane volumes, a
$7.1 million early extinguishment of debt expense related to the repurchase and
redemption of our $160.0 million senior secured notes and the $2.8 million
cumulative effect of a change in accounting principle related to the adoption of
Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset
Retirement Obligations."
Forward-looking statements
Our propane and other gas liquids sales, cost of product sold, gross
profit, operating expenses, general and administrative expenses and net earnings
increased between eight and 16% in the six months ended January 31, 2003 as
compared to the same period last year. Assuming that the wholesale cost of
propane remains at relatively higher levels, we expect propane and other gas
liquids sales and cost of product sold in the second half of fiscal 2003 to
exceed the second half of fiscal 2002 amounts.
Liquidity and Capital Resources
Our ability to satisfy our 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 our control.
Due to the seasonality of the retail propane distribution business, a
significant portion of our cash flow from operations is typically generated
during the winter heating season, which occurs during our second and third
fiscal quarters. Typically, we generate significantly lower cash flows from
operations in our first and fourth fiscal quarters as compared to the second and
third fiscal quarters because our fixed costs generally exceed gross profit
during the non-peak heating season. However, the second quarter of fiscal 2003
generated lower than historical cash flows from operating activities, despite
recording higher operating and net earnings than in the second quarter of fiscal
2002. This decrease was primarily caused by significant increases in customer
receivables related to significantly higher than historical retail prices,
increases in retail propane volumes and, to a lesser extent, increases in our
cost of propane inventory. We expect to generate higher than normal cash from
operating activities in the third quarter of fiscal 2003 as customers remit
payment of the receivables billed during the second quarter of fiscal 2003.
Subject to meeting the financial tests discussed below, our general partner
believes that Ferrellgas, L.P. will have sufficient funds available to meet its
obligations, and to distribute to Ferrellgas Partners sufficient funds to permit
Ferrellgas Partners to meet its obligations with respect to its 8.75% senior
notes due 2012. In addition, our general partner believes that Ferrellgas, L.P.
will have sufficient funds available to distribute to Ferrellgas Partners
sufficient cash to pay the required quarterly distribution on its senior units
and the minimum quarterly distribution on all of its common units during the
fiscal year ending July 31, 2003. The minimum quarterly distribution of $0.50 to
be paid on all common units on March 14, 2003, represents the thirty-fourth
consecutive minimum quarterly distribution paid to our common unitholders dating
back to October 1994.
18
Our bank credit facility, public debt, private debt and accounts receivable
securitization facility contain several financial tests and covenants
restricting our ability to pay distributions, incur debt and engage in certain
other business transactions. In general, these tests are based on our debt to
cash flow ratio and cash flow to interest expense ratio. Our general partner
currently believes that the most restrictive of these tests are debt incurrence
limitations under the terms of our bank credit and accounts receivable
securitization facilities and limitations on the payment of distributions within
our 8.75% senior notes. The bank credit and accounts receivable securitization
facilities generally limit Ferrellgas, L.P.'s ability to incur debt if it
exceeds prescribed ratios of either debt to cash flow or cash flow to interest
expense. Our 8.75% senior notes restrict payments if a minimum ratio of cash
flow to interest expense is not met, assuming certain exceptions to this ratio
limit have previously been exhausted. This restriction places limitations on our
ability to make restricted payments such as the payment of cash distributions to
our unitholders. The cash flow used to determine these financial tests generally
is based upon our most recent cash flow performance giving pro forma effect for
acquisitions and divestitures made during the test period. It should be noted
that our bank credit facility, public debt, private debt and accounts receivable
securitization facility do not contain repayment provisions related to a decline
in our credit rating.
As of January 31, 2003, our general partner believes that we met all the
required quarterly financial tests and covenants. Based upon current estimates
of our cash flow, our general partner believes that we will be able to continue
to meet all of the required quarterly financial tests and covenants for the
remainder of the year ending July 31, 2003. However, if we were to encounter
unexpected downturns in business operations in the future, such as significantly
warmer than normal winter temperatures, a volatile energy commodity cost
environment or continued economic downturn, we may not meet the applicable
financial tests in future quarters. This could have a materially adverse effect
on our operating capacity and cash flows and could restrict our ability to incur
debt or to make cash distributions to our unitholders, even if sufficient funds
were available. Depending on the circumstances, we may consider alternatives to
permit the incurrence of debt or the continued payment of the quarterly cash
distribution to our unitholders. No assurances can be given, however, that such
alternatives can or will be implemented with respect to any given quarter.
Our future capital expenditures and working capital needs are expected to
be provided by cash generated from future operations, existing cash balances,
the bank credit facility or the accounts receivable securitization facility. To
fund expansive capital projects and future acquisitions, we may obtain funds
from our facilities, we may issue additional debt to the extent permitted under
existing financing arrangements or we may issue additional equity securities,
including, among others, common units.
Toward this purpose, on February 18, 2003, we filed a shelf registration
statement with the Securities and Exchange Commission for the periodic sale of
$500 million of equity and/or debt securities. Upon effectiveness of the
registration statement, the registered securities will be available to us for
sale in the future to fund acquisitions, to reduce indebtedness, to redeem
senior units or to provide funds for general partnership purposes.
We also maintain a shelf registration statement with the Securities and
Exchange Commission for approximately 2.0 million common units. We may issue
these common units in connection with our acquisition of other businesses,
properties or securities in business combination transactions.
Operating Activities
Cash provided by operating activities was $4.0 million for the six months
ended January 31, 2003, compared to cash provided by operating activities of
$48.7 million for the prior fiscal year period. This decrease in cash provided
by operating activities is primarily due to the effect of higher wholesale cost
of product, the timing of collections of accounts receivable and the timing of
purchases of inventory. The fiscal 2003 winter heating season has required more
working capital to finance operating activities than the fiscal 2002 winter
heating season because of the effect of financing the purchase and sale of
greater volumes of retail propane at higher average wholesale costs.
19
Investing Activities
CAPITAL EXPENDITURES
During the six months ended January 31, 2003, we made cash capital expenditures
of $11.0 million related to our technology initiative and $7.5 million primarily
for the following:
o upgrading district plant facilities;
o purchase of vehicles at the end of the lease terms; and
o purchase of additional propane storage tanks and cylinders.
Our capital requirements for repair and maintenance of property, plant and
equipment are expected to remain relatively low.
We lease property, computer equipment, propane tanks, light and medium duty
trucks, tractors and trailers. We believe leasing is a cost-effective method for
meeting our equipment needs. On December 10, 2003, we purchased $155.6 million
of equipment whose lease terms would have expired in June 2003. See "Financing
Activities" and Note F to our consolidated financial statements for discussions
about the financing of the equipment lease buyouts.
ACCOUNTS RECEIVABLE SECURITIZATION
At January 31, 2003, $60.0 million had been funded from our accounts
receivable securitization facility. This funding resulted from our increased
liquidity needs caused primarily by the seasonal increase in accounts receivable
outstanding and in propane inventory levels. We renewed this facility effective
September 24, 2002, for a 364-day commitment with Banc One, N.A. In accordance
with SFAS No. 140, this transaction is reflected on our consolidated financial
statements as a sale of accounts receivable and an investment in an
unconsolidated subsidiary. See Note E to our consolidated financial statements
for further discussion about this facility.
BUSINESS ACQUISITIONS
We continue to consider opportunities to expand our operations through
strategic acquisitions of retail propane operations located throughout the
United States. During the six months ended January 31, 2003, we made total
acquisition capital expenditures of $43.6 million for three retail propane
companies, which included the acquisition of $5.8 million of working capital.
These expenditures were funded by $34.1 million in cash payments and the
issuance of a $10.0 million non-interest bearing note due in December 2003.
Financing Activities
CREDIT FACILITY
On December 10, 2002, we refinanced our $157.0 million bank credit facility
with a $307.5 million amended bank credit facility. This amended bank credit
facility will terminate on April 28, 2006, unless extended or renewed. This
$307.5 million amended bank credit facility consists of the following:
o a $151.5 million revolving working capital facility, general corporate and
acquisition facility, including an $80.0 million letter of credit
sub-facility; and
o a $156.0 million revolving facility, which was used on December 10, 2002,
to purchase propane tanks and related assets that we previously leased.
20
All borrowings under the amended bank credit facility bear interest, at our
option, at a rate equal to either:
o a base rate, which is defined as the higher of the federal funds rate plus
0.50% or Bank of America's prime rate (as of January 31, 2003, the federal
funds rate and Bank of America's prime rate were 1.33% and 4.25%,
respectively); or
o the Eurodollar Rate plus a margin varying from 1.75% to 2.75% (as of
January 31, 2003, the one-month Eurodollar Rate was 1.26%).
At January 31, 2003, $140.0 million of borrowings and $50.6 million of
letters of credit were outstanding under the amended bank credit facility.
Letters of credit are currently used to cover obligations primarily relating to
requirements for our insurance coverage and, and to a lesser extent, our risk
management activities. At January 31, 2003, we had $116.9 million available for
working capital, acquisition, capital expenditure and general partnership
purposes under the amended bank credit facility.
We believe that the liquidity available from the amended bank credit
facility and the accounts receivable securitization facility will be sufficient
to meet our future working capital needs for the year ending July 31, 2003. See
"Investing Activities." However, if we were to experience an unexpected
significant increase in working capital requirements, our working capital needs
could exceed our immediately available resources. Events that could cause
increases in working capital borrowings or letter of credit requirements
include, but are not limited to the following:
o a significant increase in the wholesale cost of propane;
o a significant delay in the collections of accounts receivable;
o increased volatility in energy commodity prices related to risk management
activities;
o increased liquidity requirements imposed by insurance providers;
o a significant downgrade in our credit rating; or
o decreased trade credit.
If one or more of these or other events caused a significant use of available
funding, we would consider alternatives to provide increased working capital
funding. No assurances can be given, however, that such alternatives could, or
would, be implemented.
LONG-TERM DEBT
On September 24, 2002, we issued, in a public offering, $170.0 million of
8.75% senior notes due 2012. Interest is payable semi-annually in arrears on
June 15 and December 15, commencing on December 15, 2002. These senior notes are
unsecured and not redeemable before June 15, 2007, except under specific
circumstances. We used the proceeds from the $170.0 million senior note issuance
to repurchase and redeem our $160.0 million 9.375% senior secured notes due 2006
and fund related premiums, fees, accrued and unpaid interest and tender consent
payments
On December 18, 2002, we issued, in a public offering, $48.0 million of
8.75% senior notes with the same terms as those on the $170.0 million 8.75%
senior notes. We used the proceeds from the $48.0 million senior note issuance
to reduce borrowings under the amended bank credit facility and to provide
increased availability of funds for working capital, acquisition, capital
expenditure and general partnership purposes. The $48.0 million senior notes
were issued with a debt premium of $1.7 million that will be amortized to
interest expense through fiscal 2012.
21
The following table summarizes our long-term debt obligations as of January
31, 2003:
Principal Payments due by Fiscal Year
--------------------------------------------------------------------------------
Remainder 2007 and
of 2003 2004 2005 2006 Thereafter Total
------------- ---------- ---------- ---------- ------------ -----------
Long-term debt, including
current portion $760 $2,134 $2,299 $251,313 $646,551 $903,057
See Note F in the footnotes to our consolidated financial statements for further
discussion of the maturity dates and interest rates related to our long-term
debt.
DISTRIBUTIONS
During the six months ended January 31, 2003, we declared and paid the
required quarterly distribution on our senior units and the minimum quarterly
distribution on all common units for the three months ended July 31, 2002 and
the three months ended October 31, 2002. The required quarterly distribution on
the senior units and the minimum quarterly distribution on all common units for
the three months ended January 31, 2003 will be paid on March 14, 2003 to
holders of record on February 28, 2003.
Disclosures about Risk Management Activities Accounted for at Fair Value
The following table summarizes the change in the unrealized fair value of
contracts from our risk management trading activities for the three and six
months ended January 31, 2003. This table summarizes the contracts where
settlement has not yet occurred:
Three months Six months
ended ended
January 31, 2003 January 31, 2003
---------------- ----------------
Unrealized losses in fair value of contracts
outstanding at beginning of period $(3,816) $(4,569)
Other unrealized gains recognized 6,611 9,473
Less: realized gains recognized 1,213 3,322
---------------- ----------------
Unrealized gains in fair value of contracts
outstanding at January 31, 2003 $1,582 $1,582
================ ================
The following table summarizes the maturity of contracts from our risk
management trading activities for the valuation methodologies we utilized as of
January 31, 2003. This table summarizes the contracts where settlement has not
yet occurred:
Fair Value of Contracts at
Period-End
-------------------------------------
Maturity
greater than 1
Maturity less year and less
Source of Fair Value than 1 year than 18 months
- ------------------------------------------- ---------------- ----------------
Prices actively quoted $ 824 $ -
Prices provided by other external sources 758 -
Prices based on models and other
valuation methods - -
---------------- ----------------
Unrealized gains in fair value of contracts
outstanding at January 31, 2003 $1,582 $ -
================ ================
22
See additional discussion about market, counterparty credit and liquidity risks
related to our risk management trading activities and other risk management
activities in Item 3 "Quantitative and Qualitative Disclosures about Market
Risk."
Disclosures about Effects of Transactions with Related Parties
We have no employees and are managed and controlled by our general partner.
Pursuant to our partnership agreement, our general partner is entitled to
reimbursement for all direct and indirect expenses incurred or payments it makes
on our behalf, and all other necessary or appropriate expenses allocable to us
or otherwise reasonably incurred by our general partner in connection with
operating our business. These reimbursable costs, which totaled $99.3 million
for the six months ended January 31, 2003, include compensation and benefits
paid to employees of our general partner who perform services on our behalf, as
well as related general and administrative costs.
We paid senior unit distributions of $2.8 million to JEF Capital Management
on both September 13, 2002 and December 14, 2002. On January 31, 2003, in a
noncash transaction, we accrued a senior unit distribution of $2.7 million that
we will pay to JEF Capital Management on March 14, 2003. JEF Capital Management
is beneficially owned by James E. Ferrell, the Chairman, President and CEO of
our general partner, and thus is an affiliate. On January 15, 2003, we redeemed
39.2 thousand senior units held by JEF Capital Management with a cash payment of
$1.6 million.
Ferrell International Limited is beneficially owned by James E. Ferrell and
thus is an affiliate. We enter into transactions with Ferrell International
Limited in connection with our risk management activities and do so at market
prices in accordance with our affiliate trading policy approved by our general
partner's Board of Directors. These transactions include forward, option and
swap contracts and are all reviewed for compliance with the policy. During the
six months ended January 31, 2003, we recognized net receipts from purchases,
sales and commodity derivative transactions of $0.2 million. These net
purchases, sales and commodity derivative transactions with Ferrell
International Limited are classified as cost of product sold on our consolidated
statements of earnings. There were no amounts due from or due to Ferrell
International Limited at January 31, 2003.
We believe these related party transactions were conducted in the ordinary
course of business and under terms that were no less favorable to us than those
available with third parties.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements include the leasing of transportation
equipment, property, computer equipment and propane tanks. We account for these
arrangements as operating leases. We believe these arrangements are a
cost-effective method for financing our equipment needs. These off-balance sheet
arrangements enable us to lease equipment from third parties rather than, among
other options, purchasing the equipment using on-balance sheet financing. See
further discussion about these leases in "Investing Activities."
Most of the operating leases involving our transportation equipment contain
residual value guarantees. These transportation equipment lease arrangements are
scheduled to expire over the next seven years. Most of these arrangements
provide that the fair value of the equipment will equal or exceed a guaranteed
amount, or we will be required to pay the lessor the difference. Although the
fair values at the end of the lease terms have historically exceeded these
guaranteed amounts, the maximum potential amount of aggregate future payments we
could be required to make under these leasing arrangements, assuming the
equipment is worthless at the end of the lease term, is $16.6 million. We do not
know of any event, demand, commitment, trend or uncertainty that would result in
a material change to these arrangements. See Note H to our consolidated
financial statements for further discussion of Financial Accounting Standards
Board Financial Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others."
23
The following table summarizes our future minimum rental payments as of
January 31, 2003:
Future Minimum Rental and Buyout Amounts by Fiscal Year
------------------------------------------------------------------------------
Remainder 2007 and
of 2003 2004 2005 2006 Thereafter Total
------------- ---------- ---------- ---------- ------------ -----------
Operating lease
rental payments $7,543 $13,478 $10,222 $8,228 $9,661 $49,132
Operating lease buyouts
3,237 4,738 4,105 2,076 9,162 23,318
Historically, we have been successful in renewing certain leases that are
subject to buyouts. However, there is no assurance that we will be successful in
the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our risk management activities primarily attempt to mitigate risks related
to the purchasing, storing and transporting of propane. We generally purchase
propane in the contract and spot markets from major domestic energy companies on
a short-term basis. Our costs to purchase and distribute propane fluctuate with
the movement of market prices. This fluctuation subjects us to potential price
risk, which we attempt to minimize through the use of risk management
activities.
Our risk management activities include the use of energy commodity forward
contracts, swaps and options traded on the over-the-counter financial markets
and futures and options traded on the New York Mercantile Exchange. These risk
management activities are conducted primarily to offset the effect of market
price fluctuations on propane inventory and purchase commitments and to mitigate
the price and inventory risk on sale commitments to our customers.
Our risk management activities are intended to generate a profit, which we
then apply to reduce our cost of product sold. The results of our risk
management activities directly related to the delivery of propane to our retail
customers, which include our supply procurement, storage and transportation
activities, are presented in our discussion of retail margins and are accounted
for at cost. The results of our other risk management activities are presented
separately in our discussion of cost of product sold and gross profit as risk
management trading activities and are accounted for at fair value.
Market risks associated with energy commodities are monitored daily by
senior management for compliance with our commodity risk management policy. This
policy includes an aggregate dollar loss limit and limits on the term of various
contracts. We also utilize volume limits for various energy commodities and
review our positions daily where we remain exposed to market risk, so as to
manage exposures to changing market prices.
MARKET, CREDIT AND LIQUIDITY RISK. New York Mercantile Exchange traded
futures are guaranteed by the New York Mercantile Exchange and have nominal
credit risk. We are exposed to credit risk associated with forwards, swaps and
option transactions in the event of nonperformance by counterparties. For each
counterparty, we analyze its financial condition prior to entering into an
agreement, establish a credit limit and monitor the appropriateness of the
limit. The change in market value of Exchange-traded futures contracts requires
daily cash settlement in margin accounts with brokers. Forwards and most other
over-the-counter instruments are generally settled at the expiration of the
contract term. In order to minimize the liquidity risk of cash, margin or
collateral requirements of counterparties for over-the-counter instruments, we
attempt to balance maturities and positions with individual counterparties.
Historically, our risk management activities have not experienced significant
credit related losses in any year or with any individual counterparty. Our risk
management contracts do not contain material repayment provisions related to a
decline in our credit rating.
24
SENSITIVITY ANALYSIS. We have prepared a sensitivity analysis to estimate
the exposure to market risk of our energy commodity positions. Forward
contracts, futures, swaps and options used in our risk management trading
activities were analyzed assuming a hypothetical 10% adverse change in prices
for the delivery month for all energy commodities. The potential loss in future
earnings regarding these positions from a 10% adverse movement in market prices
of the underlying energy commodities is estimated at $0.9 million for risk
management trading activities and $0.3 million for other risk management
activities as of January 31, 2003. The preceding hypothetical analysis is
limited because changes in prices may or may not equal 10%, thus actual results
may differ.
Additionally, we seek to mitigate our variable rate interest rate risk exposure
on operating leases by entering into interest rate cap agreements. At January
31, 2003, we had $140.0 million in variable rate amended bank credit facility
borrowings and $60.0 million in funding from our variable rate accounts
receivable securitization facility. Thus, assuming a one percent increase in our
variable interest rate, our interest rate risk related to the operating leases
and the associated interest rate cap agreements, the borrowings on the variable
rate amended bank credit facility and the funding from the variable rate
accounts receivable securitization facility would be a loss in future earnings
of $2.0 million for the twelve months ending January 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this Quarterly Report on Form 10-Q,
an evaluation was performed under the supervision and with the participation of
our management, including the Chief Executive Officer and Chief Financial
Officer of our general partner, of the effectiveness of the design and operation
of our disclosure controls and procedures (as such terms are defined in Rule
13a-14(c) and 15d-14(c) of the Exchange Act). Based on that evaluation, our
management, including the Chief Executive Officer and Chief Financial Officer of
our general partner, concluded that our disclosure controls and procedures were
adequate and effective as of the date of evaluation to ensure that material
information relating to us was made known to our management, including the Chief
Executive Officer and Chief Financial Officer of our general partner, by others
within our company, particularly during the period to which this report relates
and the period in which it was prepared.
There have been no significant changes in our internal controls or in other
factors that could significantly affect our internal controls subsequent to the
evaluation referenced above, including no corrective actions with respect to
significant deficiencies and material weaknesses in our internal controls.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note I to our consolidated financial statements included elsewhere
in this report.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
25
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed below are filed as part of this Quarterly Report on Form
10-Q. Exhibits required by Item 601 of Regulation S-K of the Securities Act,
which are not listed, are not applicable.
Exhibit
Number Description
------- -----------
3.1 Fourth Amended and Restated Agreement of Limited
Partnership of Ferrellgas Partners, L.P., dated as of
February 18, 2003. Incorporated by reference to Exhibit
4.3 to our Current Report on Form 8-K filed
February 18, 2003.
3.2 Articles of Incorporation for Ferrellgas Partners Finance
Corp. Incorporated by reference to the same numbered
Exhibit to our Quarterly Report on Form 10-Q filed
June 13, 1997.
3.3 Bylaws of Ferrellgas Partners Finance Corp. Incorporated
by reference to the same numbered Exhibit to our Quarterly
Report on Form 10-Q filed June 13, 1997.
4.1 Indenture, dated as of September 24, 2002, with Form of
Note attached, by and among Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., and U.S. Bank National
Association, as trustee, relating to $170,000,000
aggregate principal amount of our 8 3/4% Senior Notes due
2012. Incorporated by reference to Exhibit 4.1 to our
Current Report on Form 8-K filed September 24, 2002.
4.2 Ferrellgas, L.P., Note Purchase Agreement, dated as of
July 1, 1998, relating to: $109,000,000 6.99% Senior
Notes, Series A, due August 1, 2005, $37,000,000 7.08%
Senior Notes, Series B, due August 1, 2006, $52,000,000
7.12% Senior Notes, Series C, due August 1, 2008,
$82,000,000 7.24% Senior Notes, Series D, due August 1,
2010, and $70,000,000 7.42% Senior Notes, Series E, due
August 1, 2013. Incorporated by reference to Exhibit 4.4
to our Annual Report on Form 10-K filed October 29, 1998.
4.3 Ferrellgas, L.P., Note Purchase Agreement, dated as
of February 28, 2000, relating to: $21,000,000 8.68%
Senior Notes, Series A, due August 1, 2006, $70,000,000
8.78% Senior Notes, Series B, due August 1, 2007, and
$93,000,000 8.87% Senior Notes, Series C, due August 1,
2009. Incorporated by reference to Exhibit 4.2 to our
Quarterly Report on Form 10-Q filed March 16, 2000.
4.4 Registration Rights Agreement, dated as of December 17,
1999, by and between Ferrellgas Partners, L.P. and
Williams Natural Gas Liquids, Inc. Incorporated by
reference to Exhibit 4.2 to our Current Report on Form 8-K
filed December 29, 2000.
26
Exhibit
Number Description
------- -----------
4.5 First Amendment to the Registration Rights Agreement,
dated as of March 14, 2000, by and between Ferrellgas
Partners, L.P. and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 4.1 to our Quarterly
Report on Form 10-Q filed March 16, 2000.
4.6 Second Amendment to the Registration Rights Agreement,
dated as of April 6, 2001, by and between Ferrellgas
Partners, L.P. and The Williams Companies, Inc.
Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K filed April 6, 2001.
4.7 Representations Agreement, dated as of December 17, 1999,
by and among Ferrellgas Partners, L.P., Ferrellgas, Inc.,
Ferrellgas, L.P. and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 2.3 to our Current
Report on Form 8-K filed December 29, 1999.
4.8 First Amendment to Representations Agreement, dated as of
April 6, 2001, by and among Ferrellgas Partners, L.P.,
Ferrellgas, Inc., Ferrellgas, L.P. and The Williams
Companies, Inc. Incorporated by reference to Exhibit 10.2
to our Current Report on Form 8-K filed April 6, 2001.
10.1 Second Amended and Restated Agreement of Limited
Partnership of Ferrellgas, L.P., dated as of October 14,
1998. Incorporated by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q filed March 17, 1999.
10.2 First Amendment to the Second Amended and Restated
Agreement of Limited Partnership of Ferrellgas, L.P.
Incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q filed June 14, 2000.
10.3 Certificate of Incorporation of Ferrellgas Finance Corp.
filed with the Delaware Secretary of State on January 16,
2003. Incorporated by reference to Exhibit 4.1 to
our Current Report on Form 8-K filed February 18, 2003.
10.4 Bylaws of Ferrellgas Finance Corp. adopted as of
January 16, 2003. Incorporated by reference to Exhibit
4.2 to our Current Report on Form 8-K filed February 18,
2003.
10.5 Fourth Amended and Restated Credit Agreement, dated as of
December 10, 2002, by and among Ferrellgas, L.P.,
Ferrellgas, Inc., Bank of America National Trust and
Savings Association, as agent, and the other financial
institutions party. Incorporated by reference to Exhibit
10.3 to our Quarterly Report on Form 10-Q filed
December 11, 2002.
10.6 Receivable Interest Sale Agreement, dated as of
September 26, 2000, by and between Ferrellgas, L.P.,
as originator, and Ferrellgas Receivables, L.L.C., as
buyer. Incorporated by reference to Exhibit 10.17 to our
Annual Report on Form 10-K filed October 26, 2000.
10.7 First Amendment to the Receivable Interest Sale Agreement
dated as of January 17, 2001, by and between Ferrellgas,
L.P., as originator, and Ferrellgas Receivables, L.L.C.,
as buyer. Incorporated by reference to Exhibit 10.5 to our
Quarterly Report on Form 10-Q filed March 14, 2001.
27
Exhibit
Number Description
------- -----------
10.8 Receivables Purchase Agreement, dated as of September 26,
2000, by and among Ferrellgas Receivables, L.L.C., as
seller, Ferrellgas, L.P., as servicer, Jupiter
Securitization Corporation, the financial institutions
from time to time party hereto, and Bank One, NA, main
office Chicago, as agent. Incorporated by reference to
Exhibit 10.18 to our Annual Report on Form 10-K filed
October 26, 2000.
10.9 First Amendment to the Receivables Purchase Agreement,
dated as of January 17, 2001, by and among Ferrellgas
Receivables, L.L.C., as seller, Ferrellgas, L.P., as
servicer, Jupiter Securitization Corporation, the
financial institutions from time to time party hereto, and
Bank One, N.A., main office Chicago, as agent.
Incorporated by reference to Exhibit 10.4 to our Quarterly
Report on Form 10-Q filed March 14, 2001.
10.10 Second Amendment to the Receivables Purchase Agreement
dated as of September 25, 2001, by and among Ferrellgas
Receivables, L.L.C., as seller, Ferrellgas, L.P., as
servicer, Jupiter Securitization Corporation, the
financial institutions from time to time party hereto, and
Bank One, N.A., main office Chicago, as agent.
Incorporated by reference to Exhibit 10.29 to our
Annual Report on Form 10-K filed October 25, 2001.
10.11 Third Amendment to the Receivables Purchase Agreement,
dated as of September 24, 2002, by and among Ferrellgas
Receivables, L.L.C., as seller, Ferrellgas, L.P., as
servicer, Jupiter Secruritization Corporation, the
financial institutions from time to time party hereto, and
Bank One, NA, main office Chicago, as agent.
10.12 Purchase Agreement, dated as of November 7, 1999, by
and among Ferrellgas Partners, L.P., Ferrellgas, L.P
and Williams Natural Gas Liquids, Inc. Incorporated
by reference to Exhibit 2.1 to our Current Report on
Form 8-K filed November 12, 1999.
10.13 First Amendment to Purchase Agreement, dated as of
December 17, 1999, by and among Ferrellgas Partners, L.P.,
Ferrellgas, L.P., and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 2.2 to our Current
Report on Form 8-K filed December 29, 1999.
10.14 Second Amendment to Purchase Agreement, dated as of
March 14, 2000, by and among Ferrellgas Partners, L.P.,
Ferrellgas L.P., and Williams Natural Gas Liquids, Inc.
Incorporated by reference to Exhibit 2.1 to our Quarterly
Report on Form 10-Q filed March 16, 2000.
10.15 Third Amendment to Purchase Agreement dated as of April 6,
2001, by and among Ferrellgas Partners, L.P., Ferrellgas
L.P. and The Williams Companies, Inc. Incorporated by
reference to Exhibit 10.1 to our Current Report on Form
8-K filed April 6, 2001.
# 10.16 Ferrell Companies, Inc. Supplemental Savings Plan,
restated January 1, 2000. Incorporated by reference to
Exhibit 99.1 to our Current Report on Form 8-K filed
February 18, 2003.
28
Exhibit
Number Description
------- -----------
# 10.17 Second Amended and Restated Ferrellgas Unit Option Plan.
Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed June 5, 2001.
# 10.18 Ferrell Companies, Inc. 1998 Incentive Compensation Plan -
Incorporated by reference to Exhibit 10.12 to our Annual
Report on Form 10-K filed October 29, 1998.
# 10.19 Employment agreement between James E. Ferrell and
Ferrellgas, Inc., dated July 31, 1998. Incorporated by
reference to Exhibit 10.13 to our Annual Report on Form
10-K filed October 29, 1998.
# 10.20 Employment agreement between Patrick Chesterman and
Ferrellgas, Inc. dated July 31, 2000. Incorporated by
reference to Exhibit 10.19 to our Annual Report on Form
10-K filed October 26, 2000.
# 10.21 Employment agreement between Kevin Kelly and Ferrellgas,
Inc. dated July 31, 2000. Incorporated by reference to
Exhibit 10.22 to our Annual Report on Form 10-K filed
October 26, 2000.
- ---------------
# Management contracts or compensatory plans.
(b) Reports on Form 8-K
The Partnership filed no Form 8-K's during the three months ended January 31,
2003.
The Partnership furnished one Form 8-K during the three months ended January 31,
2003.
Items
Date of Report Reported Financial Statements Furnished
- --------------------------- -------- ------------------------------
Furnished November 19, 2003 9 None
29
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.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: March 12, 2003 By /s/ Kevin T. Kelly
-----------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS PARTNERS FINANCE CORP.
Date: March 12, 2003 By /s/ Kevin T. Kelly
-----------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
30
CERTIFICATIONS
FERRELLGAS PARTNERS, L.P.
I, James E. Ferrell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas
Partners, L.P.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of circumstances under
which such statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons forming
the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 12, 2003
/s/ James E. Ferrell
-------------------------------------------
James E. Ferrell
Chairman, President and Chief
Executive Officer of Ferrellgas, Inc.,
the Registrant's general partner
31
CERTIFICATIONS
FERRELLGAS PARTNERS, L.P.
I, Kevin T. Kelly, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas
Partners, L.P.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of circumstances under
which such statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons forming
the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 12, 2003
/s/ Kevin T. Kelly
-----------------------------------------
Kevin T. Kelly
Senior Vice President and Chief
Financial Officer of Ferrellgas, Inc.,
the Registrant's general partner
32
CERTIFICATIONS
FERRELLGAS PARTNERS FINANCE CORP.
I, James E. Ferrell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas
Partners Finance Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of circumstances under
which such statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons forming
the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 12, 2003
/s/ James E. Ferrell
-------------------------------------
James E. Ferrell
President and Chief Executive Officer
33
CERTIFICATIONS
FERRELLGAS PARTNERS FINANCE CORP.
I, Kevin T. Kelly, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas Partners
Finance Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons forming the
equivalent function):
d. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
e. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 12, 2003
/s/ Kevin T. Kelly
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Kevin T. Kelly
Senior Vice President and Chief Financial Officer
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