News Column

FERRELLGAS PARTNERS L P - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

June 9, 2014

Our management's discussion and analysis of financial condition and results of operations relates to Ferrellgas Partners and the operating partnership.

Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. have nominal assets, do not conduct any operations and have no employees other than officers. Ferrellgas Partners Finance Corp. serves as co-issuer and co-obligor for debt securities of Ferrellgas Partners while Ferrellgas Finance Corp. serves as co-issuer and co-obligor for debt securities of the operating partnership. Accordingly, and due to the reduced disclosure format, a discussion of the results of operations, liquidity and capital resources of Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. is not presented.



In this Item 2 of the Quarterly Report on Form 10-Q, unless the context indicates otherwise:

"us," "we," "our," "ours," or "consolidated" are references exclusively to

Ferrellgas Partners, L.P. together with its consolidated subsidiaries,

including Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and

Ferrellgas Finance Corp., except when used in connection with "common

units," in which case these terms refer to Ferrellgas Partners, L.P. without its consolidated subsidiaries;



"Ferrellgas Partners" refers to Ferrellgas Partners, L.P. itself, without

its consolidated subsidiaries; "operating partnership" refers to Ferrellgas, L.P., together with its consolidated subsidiaries, including Ferrellgas Finance Corp.;



"general partner" refers to Ferrellgas, Inc.;

"Ferrell Companies" refers to Ferrell Companies, Inc., the sole shareholder of our general partner;



"unitholders" refers to holders of common units of Ferrellgas Partners;

"retail sales" refers to Propane and other gas liquid sales: Retail -

Sales to End Users or the volume of propane sold primarily to our residential, industrial/commercial and agricultural customers;



"wholesale sales" refers to Propane and other gas liquid sales: Wholesale

- Sales to Resellers or the volume of propane sold primarily to our portable tank exchange customers and bulk propane sold to wholesale customers;



"other gas sales" refers to Propane and other gas liquid sales: Other Gas

Sales or the volume of bulk propane sold to other third party propane

distributors or marketers through our hedging activities and the volume of

refined fuel sold;



"propane sales volume" refers to the volume of propane sold to our retail

sales and wholesale sales customers; and



"Notes" refers to the notes to the condensed consolidated financial

statements of Ferrellgas Partners or the operating partnership, as applicable. Ferrellgas Partners is a holding entity that conducts no operations and has two direct subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners' only significant assets are its approximate 99% limited partnership interest in the operating partnership and its 100% equity interest in Ferrellgas Partners Finance Corp. The common units of Ferrellgas Partners are listed on the New York Stock Exchange and our activities are primarily conducted through the operating partnership.



The operating partnership was formed on April 22, 1994, and accounts for substantially all of our consolidated assets, sales and operating earnings, except for interest expense related to the senior notes co-issued by Ferrellgas Partners and Ferrellgas Partners Finance Corp.

Our general partner performs all management functions for us and our subsidiaries and holds a 1% general partner interest in Ferrellgas Partners and an approximate 1% general partner interest in the operating partnership. The parent company of our general partner, Ferrell Companies, beneficially owns approximately 27% of our outstanding common units. Ferrell Companies is owned 100% by an employee stock ownership trust. 42



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We file annual, quarterly, and other reports and information with the SEC. You may read and download our SEC filings over the Internet from several commercial document retrieval services as well as at the SEC's website at www.sec.gov. You may also read and copy our SEC filings at the SEC'sPublic Reference Room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information concerning the Public Reference Room and any applicable copy charges. Because our common units are traded on the New York Stock Exchange under the ticker symbol "FGP," we also provide our SEC filings and particular other information to the New York Stock Exchange. You may obtain copies of these filings and such other information at the offices of the New York Stock Exchange located at 11 Wall Street, New York, New York 10005. In addition, our SEC filings are available on our website at www.ferrellgas.com at no cost as soon as reasonably practicable after our electronic filing or furnishing thereof with the SEC. Please note that any Internet addresses provided in this Quarterly Report on Form 10-Q are for informational purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such Internet addresses is intended or deemed to be incorporated by reference herein. The following is a discussion of our historical financial condition and results of operations and should be read in conjunction with our historical condensed consolidated financial statements and accompanying Notes thereto included elsewhere in this Quarterly Report on Form 10-Q.



The discussions set forth in the "Results of Operations" and "Liquidity and Capital Resources" sections generally refer to Ferrellgas Partners and its consolidated subsidiaries. However, in these discussions there exist two material differences between Ferrellgas Partners and the operating partnership. Those material differences are:

because Ferrellgas Partners has outstanding $182.0 million in aggregate

principal amount of 8.625% senior notes due fiscal 2020, the two partnerships incur different amounts of interest expense on their outstanding indebtedness; see the statements of earnings in their respective condensed consolidated financial statements and Note E - Debt in the respective notes to their condensed consolidated financial statements; and



Ferrellgas Partners issued common units during both fiscal 2014 and 2013.

Overview



Strategic Diversification Acquisition

On May 1, 2014, we entered into a membership interest purchase agreement to acquire all of the issued and outstanding membership interests in each of Sable Environmental, LLC and Sable SWD 2, LLC (collectively, "Sable"), a fluid logistics provider in the Eagle Ford shale region of south Texas for consideration of $124.7 million, subject to certain purchase price adjustments. Consideration was paid in cash upon closing and a two year earn-out agreement was entered into entitling the sellers to additional cash consideration if the acquired business exceeds certain earnings targets. The acquisition was funded through the secured credit facility and Sable's ownership group subsequently purchased $50.0 million of our common units in a registered direct offering, which units are subject to certain transfer restrictions. With this acquisition we have established a new operating and reportable segment referred to as our "Midstream Operations". We expect this acquisition to be immediately accretive. With the acquisition of Sable we have two reportable operating segments: propane and related equipment sales and midstream operations.



Propane and related equipment sales

We believe we are the second largest retail marketer of propane in the United States as measured by the volume of our retail sales in fiscal 2013 and the largest national provider of propane by portable tank exchange. We serve residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all 50 states, the District of Columbia and Puerto Rico. Our operations primarily include the distribution and sale of propane and related equipment and supplies with concentrations in the Midwest, Southeast, Southwest and Northwest regions of the United States. Sales from propane distribution are generated principally from transporting propane purchased from third parties to propane distribution locations and then to tanks on customers' premises or to portable propane tanks delivered to nationwide and local retailers. Sales from portable tank exchanges, nationally branded under the name Blue Rhino, are generated through a network of independent and partnership-owned distribution outlets. Our market areas for our residential and agricultural customers are generally rural while our market areas for our industrial/commercial and portable tank exchange customers are generally urban. In the residential and industrial/commercial markets, propane is primarily used for space heating, water heating, cooking and other propane fueled appliances. In the portable tank exchange market, propane is used primarily for outdoor cooking using gas grills. In the agricultural market, propane is primarily used for crop drying, space heating, irrigation and 43



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weed control. In addition, propane is used for a variety of industrial applications, including as an engine fuel which is burned in internal combustion engines that power vehicles and forklifts and as a heating or energy source in manufacturing and drying processes. The market for propane is seasonal because of increased demand during the months of November through March (the "winter heating season") primarily for the purpose of providing heating in residential and commercial buildings. Consequently, sales and operating profits are concentrated in our second and third fiscal quarters, which are during the winter heating season. However, our propane by portable tank exchange sales volumes provide increased operating profits during our first and fourth fiscal quarters due to its counter-seasonal business activities. These sales also provide us the ability to better utilize our seasonal resources at our propane distribution locations. Other factors affecting our results of operations include competitive conditions, volatility in energy commodity prices, demand for propane, timing of acquisitions and general economic conditions in the United States. We use information on temperatures to understand how our results of operations are affected by temperatures that are warmer or colder than normal. We define "normal" temperatures based on 30 year historical information published by the National Oceanic and Atmospheric Administration ("NOAA"). Based on this information we calculate a ratio of actual heating degree days to normal heating degree days. Heating degree days are a general indicator of weather impacting propane usage. Weather conditions have a significant impact on demand for propane for heating purposes during the winter heating season. Accordingly, the volume of propane used by our customers for this purpose is affected by the severity of the winter weather in the regions we serve and can vary substantially from year to year. In any given region, sustained warmer-than-normal temperatures will tend to result in reduced propane usage, while sustained colder-than-normal temperatures will tend to result in greater usage. Although there is a strong correlation between weather and customer usage, general economic conditions in the United States and the wholesale price of propane can have a significant impact on this correlation. Additionally, there is a natural time lag between the onset of cold weather and increased sales to customers. If the United States were to experience a cooling trend, we could expect nationwide demand for propane to increase which could lead to greater sales, income and liquidity availability. Conversely, if the United States were to experience a warming trend, we could expect nationwide demand for propane to decrease which could lead to a reduction in our sales, income and liquidity availability. For the quarter ended April 30, 2014, weather in the more highly concentrated geographic areas we serve was 5% colder than that of the prior year and 10% colder than normal. Our gross margin from the retail distribution of propane is primarily based on the cents-per-gallon difference between the sales prices we charge our customers and our costs to purchase and deliver propane to our propane distribution locations. Our residential customers and portable tank exchange customers typically provide us a greater cents-per-gallon margin than our industrial/commercial, agricultural, wholesale and other customers. We track "Propane sales volumes," "Revenues - Propane and other gas liquids sales" and "Gross margin - Propane and other gas liquids sales" by customer; however, we are not able to specifically allocate operating and other costs in a manner that would determine their specific profitability with a high degree of accuracy. The wholesale propane price per gallon is subject to various market conditions, including inflation, and may fluctuate based on changes in demand, supply and other energy commodity prices, primarily crude oil and natural gas, as propane prices tend to correlate with the fluctuations of these underlying commodities. Propane prices continued to be volatile in fiscal 2014 as evidenced by increases in the average wholesale market prices at major supply points in Mt. Belvieu, Texas and Conway, Kansas. During the nine months ended April 30, 2014, the average wholesale market price was 34% more than the prior year period at Mt. Belvieu, Texas and 60% more than the prior year period at Conway, Kansas. We believe the sustained higher average wholesale prices during the nine months ended April 30, 2014 negatively impacted our propane sales volume as we passed price increases on to our customers. We employ risk management activities that attempt to mitigate price risks related to the purchase, storage, transport and sale of propane. We enter into propane sales commitments with a portion of our customers that provide for a contracted price agreement for a specified period of time. These commitments can expose us to product price risk if not immediately economically hedged with an offsetting propane purchase commitment. Moreover, customers may not fulfill their purchase agreement due to the effects of warmer than normal weather, customer conservation or economic conditions. Our open financial derivative purchase commitments are designated as hedges primarily for fiscal 2014 through 2016 sales commitments and, as of April 30, 2014, have experienced net mark to market gains of approximately $10.3 million. Because these financial derivative purchase commitments qualify for hedge accounting treatment, the resulting asset, liability and related mark to market gains or losses are recorded on the condensed consolidated balance sheets as "Prepaid expenses and other current assets," "Other assets, net," "Other current liabilities," "Other liabilities" and "Accumulated other comprehensive income (loss)," respectively, until settled. Upon settlement, realized gains or losses on these contracts will be reclassified to "Cost of product sold-propane and other gas liquid sales" in the condensed consolidated statements of earnings as the underlying inventory is sold. These financial derivative purchase commitment net gains are expected to be offset by decreased margins on propane sales commitments that qualify for the normal purchase normal sale exception. At April 30, 2014, we 44



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estimate 70% of currently open financial derivative purchase commitments, the related propane sales commitments and the resulting gross margin will be realized into earnings during the next twelve months.

We enter into interest rate derivative contracts, including swaps, to manage our exposure to interest rate risk associated with our fixed rate senior notes and our floating rate borrowings from both the secured credit facility and the accounts receivable securitization facility. Fluctuations in interest rates subject us to interest rate risk. Decreases in interest rates increase the fair value of our fixed rate debt, while increases in interest rates subject us to the risk of increased interest expense related to our variable rate borrowings. Midstream Operations - Disposal Wells We currently own and operate six disposal wells in and around the Eagle Ford shale in south Texas. Disposal wells are a critical component of the oil and natural gas well drilling industry. Oil and gas wells generate significant volumes of salt water known as "flowback" and "production" water. Flowback is a water based solution that flows back to the surface during and after the completion of the hydraulic fracturing ("fracking") process whereby large volumes of water, sand and chemicals are injected under high pressures into rock formations to stimulate production. Flowback contains clays, chemicals, dissolved metal ions, total dissolved solids and oil/condensate. Production water is saltwater from underground formations that are brought to the surface during the normal course of oil or gas production. Because this water has been in contact with hydrocarbon-bearing formations, it contains some of the chemical characteristics of the formations and the hydrocarbons. In the oil and gas fields we service, these volumes of water are transported by truck away from the fields to disposal wells where it is injected into underground geologic formations using high-pressure pumps. Our revenue is derived from fees we charge our customers to dispose of salt water at our facilities and crude oil sales from the process we use to separate crude oil that is dissolved in the salt water, known as "skimming oil". Our gross margin is highly dependent on production activity in the Eagle Ford shale and thus from the volume of salt water delivered to our wells for disposal. We do not attempt to hedge the price of crude oil sales from our skimming activities.



Our business strategy is to:

expand our operations through disciplined acquisitions and internal growth

both inside and outside our core propane operations as accretive

opportunities become available;

capitalize on our national presence and economies of scale;

maximize operating efficiencies through utilization of our technology

platform; and

align employee interests with our investors through significant employee

ownership.



"Net earnings attributable to Ferrellgas Partners, L.P." in the nine months ended April 30, 2014 was $81.0 million compared to $85.2 million in the prior year period. This decrease was primarily due to:

a $21.2 million loss on extinguishment of debt related to the early

extinguishment of all of our $300.0 million 9.125% fixed rate senior notes

due October 1, 2017 and related interest rate swap termination;

an $26.2 million increase in "operating expenses" due primarily to the

increase in propane sales volume; and

a $8.6 million increase in "general and administrative expenses";

partially offset by the following:

a $40.6 million increase in "Gross margin - Propane and other gas liquid

sales" due primarily to the increase in propane sales volume;

a $3.9 million increase in "Gross margin - Other";

a $2.3 million decrease in "Non-cash employee stock ownership plan

compensation charge" due to a decrease in the allocation of Ferrell

Companies shares to employees; and

a $2.3 million decrease in "Loss on disposal of assets".

We completed our last annual goodwill impairment test on January 31, 2014. We are not aware of any indicators of impairment.

Forward-looking Statements

This report includes forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. These statements often 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. These statements often discuss plans, strategies, events or 45



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developments that we expect or anticipate will or may occur in the future and are based upon the beliefs and assumptions of our management and on the information currently available to them. In particular, statements, express or implied, concerning our future operating results or our ability to generate sales, income or cash flow are forward-looking statements. Forward-looking statements are not guarantees of performance. Undue reliance should not be put 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:

that we will continue to have sufficient access to capital markets at

yields acceptable to us to support our expected growth expenditures and

refinancing of debt maturities;

that our operating partnership will have sufficient funds to meet its

obligations, including its obligations under its debt securities, and to

enable it to distribute to Ferrellgas Partners sufficient funds to permit

Ferrellgas Partners to meet its obligations with respect to its existing

debt;

that Ferrellgas Partners and the operating partnership will continue to

meet all of the quarterly financial tests required by the agreements governing their indebtedness;



that our future capital expenditures and working capital needs will be

provided by a combination of cash generated from future operations, existing cash balances, the secured credit facility or the accounts receivable securitization facility; and our expectation that our acquisition of Sable will be immediately accretive to earnings. When considering any forward-looking statement, keep in mind the risk factors set forth in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for fiscal 2013 as well as any changes to these risk factors set forth in "Part II, Item 1A" of this Quarterly Report on From 10-Q. Any of these risks could impair our business, financial condition or results of operations. Any such impairment may affect our ability to make distributions to our unitholders or to pay interest on the principal of our debt securities. In addition, the trading price, if any, of our securities could decline as a result of any such impairment.



Except for our ongoing obligations to disclose material information as required by federal securities laws, we undertake no obligation to update any forward-looking statements or risk factors after the date of this Quarterly Report on Form 10-Q.

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Results of Operations

Three months ended April 30, 2014 compared to April 30, 2013

Favorable (amounts in thousands) (Unfavorable) Three months ended April 30, 2014 2013 Variance Propane sales volumes (gallons): Retail - Sales to End Users 185,961 196,009 (10,048 ) (5 )% Wholesale - Sales to Resellers 71,963 71,113 850 1 % 257,924 267,122 (9,198 ) (3 )% Revenues - Propane and other gas liquids sales: Retail - Sales to End Users $ 445,731$ 359,019$ 86,712 24 % Wholesale - Sales to Resellers 151,720 121,391 30,329 25 % Other Gas Sales (a) 27,666 27,998 (332 ) (1 )% $ 625,117$ 508,408$ 116,709 23 % Gross margin - Propane and other gas liquids sales: (b) Retail - Sales to End Users (a) $ 164,254$ 153,697$ 10,557 7 % Wholesale - Sales to Resellers (a) 38,607 41,504 (2,897 ) (7 )% $ 202,861$ 195,201$ 7,660 4 % Gross margin - Other $ 27,612$ 27,898$ (286 ) (1 )% Operating income 67,531 69,102 (1,571 ) (2 )% Adjusted EBITDA 99,815 98,494 1,321 1 % Interest expense (20,189 ) (22,084 )



1,895 9 % Interest expense - operating partnership (16,146 ) (18,040 ) 1,894 10 %

a) Gross margin from other gas sales is allocated to Gross margin Retail - Sales

to End Users and Wholesale - Sales to Resellers based on the volumes of fixed

price sales commitments in each respective category.

b) Gross margin from propane and other gas liquids sales represents "Revenues -

propane and other gas liquids sales" less "Cost of product sold - propane and

other gas liquids sales" and does not include depreciation and amortization.

c) Adjusted EBITDA is calculated as net earnings attributable to Ferrellgas

Partners, L.P. plus income tax expense, interest expense, depreciation and

amortization expense, loss on extinguishment of debt, non-cash employee stock

ownership plan compensation charge, non-cash stock and unit-based

compensation charge, loss on disposal of assets, other income, net,

litigation accrual and related legal fees associated with a class action

lawsuit, and net earnings attributable to noncontrolling interest. Management

believes the presentation of this measure is relevant and useful because it

allows investors to view the partnership's performance in a manner similar to

the method management uses, adjusted for items management believes makes it

easier to compare its results with other companies that have different

financing and capital structures. This method of calculating Adjusted EBITDA

may not be consistent with that of other companies and should be viewed in

conjunction with measurements that are computed in accordance with GAAP.

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The following table summarizes EBITDA, Adjusted EBITDA and Distributable cash flow attributable to common unitholders for the three months ended April 30, 2014 and 2013, respectively: (amounts in thousands) Three months ended April 30, 2014 2013 Net earnings attributable to Ferrellgas Partners, L.P. $ 45,385$ 44,681 Income tax expense 1,677 2,023 Interest expense 20,189 22,084 Depreciation and amortization expense 20,913



20,896

EBITDA 88,164



89,684

Non-cash employee stock ownership plan compensation charge

3,710



2,824

Non-cash stock and unit-based compensation charge 5,832 2,222 Loss on disposal of assets 1,732 3,337 Other income, net (225 )



(185 ) Litigation accrual and related legal fees associated with a class action lawsuit

97



113

Net earnings attributable to noncontrolling interest 505 499 Adjusted EBITDA 99,815 98,494 Net cash interest expense (a) (19,941 ) (20,631 ) Maintenance capital expenditures (b) (4,762 ) (3,466 ) Cash paid for taxes (225 ) (43 ) Proceeds from asset sales 785 1,850 Distributable cash flow to equity investors (c) 75,672



76,204

Distributable cash flow to general partner and non-controlling interest 1,513



1,524

Distributable cash flow attributable to common unitholders 74,159



74,680

Less: Distributions paid 39,594



39,536

Distributable cash flow excess $ 34,565$ 35,144



(a) Net cash interest expense is the sum of interest expense less non-cash

interest expense and other income, net. This amount includes interest expense

related to the accounts receivable securitization facility.

(b) Maintenance capital expenditures include capitalized expenditures for

betterment and replacement of property, plant and equipment.

(c) Management considers distributable cash flow to equity investors a meaningful

non-GAAP measure of the partnership's ability to declare and pay quarterly

distributions to common unitholders. Distributable cash flow to equity

investors, as management defines it, may not be comparable to distributable

cash flow to equity investors or similarly titled measurements used by other

corporations and partnerships. Items added into our calculation of

distributable cash flow to equity investors that will not occur on a

continuing basis may have associated cash payments. Distributable cash flow

to equity investors may not be consistent with that of other companies and

should be viewed in conjunction with measurements that are computed in accordance with GAAP. Our sales price per gallon correlates to the wholesale market price of propane. The wholesale market price at major supply points in Mt. Belvieu, Texas and Conway, Kansas during the three months ended April 30, 2014 averaged 33% and 44% more than the prior year period, respectively. The wholesale market price at Mt. Belvieu, Texas averaged $1.20 and $0.90 per gallon during the three months ended April 30, 2014 and 2013, respectively, while the wholesale market price at Conway, Kansas averaged $1.22 and $0.85 per gallon during the three months ended April 30, 2014 and 2013, respectively. Propane sales volumes during the three months ended April 30, 2014 decreased 3%, or 9.2 million gallons, from that of the prior year period primarily due to 10.0 million of decreased gallon sales to retail customers. The propane industry experienced significant logistical and infrastructure challenges caused by industry-wide storage and transportation issues during the three months ended April 30, 2014. As a result, wholesale propane prices rose to historic levels in certain geographic areas. We attempted to supply propane to as many of our customers in these locations as possible by delivering propane in reduced quantities to many individual customers, thereby incurring greater operating expense per delivery. Once these issues were resolved the wholesale cost of propane decreased significantly and dramatically in these geographic 48



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locations. During February 2014 the wholesale cost of propane in Conway, Kansas decreased from $2.49 per gallon to $1.16 per gallon. Additionally, during this period of rapidly decreasing wholesale propane prices our gross margin per gallon sold increased on certain contracted sales volumes to commercial customers. Weather in the more highly concentrated geographic areas we serve was approximately 5% colder than that of the prior year period. Although fiscal year to date sales volumes are greater than those of the prior fiscal year, volumes sold during the three months ended April 30, 2014 were less than those of the prior year period. We believe the timing of winter weather during our fiscal second and third quarters, combined with the impact of inefficient deliveries, as described above, contributed to this anticipated volume decline.



Revenues - Propane and other gas liquids sales

Retail sales increased $86.7 million compared to the prior year period. This increase resulted primarily from a $103.9 million increase in sales price per gallon, partially offset by $17.2 million of decreased sales volumes, both as discussed above.



Wholesale sales increased $30.3 million compared to the prior year period. This increase resulted primarily from $21.8 million of increased sales price per gallon as discussed above.

Gross margin - Propane and other gas liquids sales

Gross margin increased $7.7 million compared to the prior year period. This increase resulted primarily from a $10.1 million increase in gross margin per gallon nationally, partially offset by $2.4 million of decreased sales volumes each as discussed above. Operating income "Operating income" decreased $1.6 million compared to the prior year period primarily due to a $7.5 million increase in "Operating expense" and a $1.6 million increase in "General and administrative expense", partially offset by a $7.7 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above. "Operating expense" increased $12.8 million primarily due to inefficient deliveries as discussed above. This increase was partially offset by $3.2 million in lower delivery costs associated with the decrease in gallons sold during the current period and the timing of a $3.2 million decrease in performance based incentive expenses. "General and administrative expense" increased primarily due to $2.9 million of increased non-cash stock based compensation charges, partially offset by the timing of a $1.3 million decrease in performance based incentive expenses.



Adjusted EBITDA and distributable cash flow attributable to common unitholders

Adjusted EBITDA increased $1.3 million compared to the prior year period primarily due to $7.7 million of increased "Gross margin - Propane and other gas liquid sales" as discussed above, partially offset by a $6.7 million increase in operating expense each as discussed above.



Operating expense increased $6.7 million primarily due to inefficient deliveries, partially offset by lower delivery costs associated with the decrease in gallons sold during the current period and the timing of a decrease in performance based incentive expenses, all as discussed above.

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Nine months ended April 30, 2014 compared to April 30, 2013

Favorable (amounts in thousands) (Unfavorable) Nine months ended April 30, 2014 2013 Variance Propane sales volumes (gallons): Retail - Sales to End Users 558,142 542,688 15,454 3 % Wholesale - Sales to Resellers 233,664 202,396 31,268 15 % 791,806 745,084 46,722 6 % Revenues - Propane and other gas liquids sales: Retail - Sales to End Users $ 1,215,655$ 967,954$ 247,701 26 % Wholesale - Sales to Resellers 469,960 345,448 124,512 36 % Other Gas Sales (a) 111,171 113,361 (2,190 ) (2 )% $ 1,796,786$ 1,426,763$ 370,023 26 % Gross margin - Propane and other gas liquids sales: (b) Retail - Sales to End Users (a) $ 432,735$ 410,619$ 22,116 5 % Wholesale - Sales to Resellers (a) 131,535 113,044 18,491 16 % $ 564,270$ 523,663$ 40,607 8 % Gross margin - Other $ 78,601$ 74,683$ 3,918 5 % Operating income 169,423 155,524 13,899 9 % Adjusted EBITDA (c) 262,613 246,219 16,394 7 % Interest expense (64,372 ) (67,138 ) 2,766 4 % Interest expense - operating partnership (52,242 ) (55,010 ) 2,768 5 % Loss on extinguishment of debt (21,202 ) - (21,202 ) NM



NM - Not Meaningful a) Gross margin from other gas sales is allocated to Gross margin Retail - Sales

to End Users and Wholesale - Sales to Resellers based on the volumes of fixed

price sales commitments in each respective category.

b) Gross margin from propane and other gas liquids sales represents "Revenues -

propane and other gas liquids sales" less "Cost of product sold - propane and

other gas liquids sales" and does not include depreciation and amortization.

c) Adjusted EBITDA is calculated as net earnings attributable to Ferrellgas

Partners, L.P. plus income tax expense, interest expense, depreciation and

amortization expense, loss on extinguishment of debt, non-cash employee stock

ownership plan compensation charge, non-cash stock and unit-based

compensation charge, loss on disposal of assets, other income, net,

Litigation accrual and related legal fees associated with a class action

lawsuit, and net earnings attributable to noncontrolling interest. Management

believes the presentation of this measure is relevant and useful because it

allows investors to view the partnership's performance in a manner similar to

the method management uses, adjusted for items management believes makes it

easier to compare its results with other companies that have different

financing and capital structures. This method of calculating Adjusted EBITDA

may not be consistent with that of other companies and should be viewed in

conjunction with measurements that are computed in accordance with GAAP.

The following table summarizes EBITDA, Adjusted EBITDA and Distributable cash flow attributable to common unitholders for the nine months ended April 30, 2014 and 2013, respectively: 50



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Table of Contents (amounts in thousands) Nine months ended April 30, 2014 2013 Net earnings attributable to Ferrellgas Partners, L.P. $ 81,006$ 85,230 Income tax expense 2,391 2,676 Interest expense 64,372 67,138 Depreciation and amortization expense 61,771



62,522

EBITDA 209,540



217,566

Loss on extinguishment of debt 21,202



-

Non-cash employee stock ownership plan compensation charge

10,389



12,673

Non-cash stock and unit-based compensation charge 16,182 8,434 Loss on disposal of assets 3,426 5,728 Other income, net (498 )



(517 ) Litigation accrual and related legal fees associated with a class action lawsuit

1,422



1,338

Net earnings attributable to noncontrolling interest 950 997 Adjusted EBITDA 262,613 246,219 Net cash interest expense (a) (61,507 ) (62,829 ) Maintenance capital expenditures (b) (13,345 ) (10,996 ) Cash paid for taxes (403 ) (88 ) Proceeds from asset sales 3,267 8,013 Distributable cash flow to equity investors (c) 190,625



180,319

Distributable cash flow to general partner and non-controlling interest 3,813



3,606

Distributable cash flow attributable to common unitholders 186,812



176,713

Less: Distributions paid 118,702



118,552

Distributable cash flow excess $ 68,110



$ 58,161

(a) Net cash interest expense is the sum of interest expense less non-cash

interest expense and other income, net. This amount includes interest expense

related to the accounts receivable securitization facility.

(b) Maintenance capital expenditures include capitalized expenditures for

betterment and replacement of property, plant and equipment.

(c) Management considers distributable cash flow to equity investors a meaningful

non-GAAP measure of the partnership's ability to declare and pay quarterly

distributions to common unitholders. Distributable cash flow to equity

investors, as management defines it, may not be comparable to distributable

cash flow to equity investors or similarly titled measurements used by other

corporations and partnerships. Items added into our calculation of

distributable cash flow to equity investors that will not occur on a

continuing basis may have associated cash payments. Distributable cash flow

to equity investors may not be consistent with that of other companies and

should be viewed in conjunction with measurements that are computed in accordance with GAAP. Our sales price per gallon correlates to the wholesale market price of propane. The wholesale market price at major supply points in Mt. Belvieu, Texas and Conway, Kansas during the nine months ended April 30, 2014 averaged 34% and 60% more than the prior year period, respectively. The wholesale market price at Mt. Belvieu, Texas averaged $1.19 and $0.89 per gallon during the nine months ended April 30, 2014 and 2013, respectively, while the wholesale market price at Conway, Kansas averaged $1.28 and $0.80 per gallon during the nine months ended April 30, 2014 and 2013, respectively. Propane sales volumes during the nine months ended April 30, 2014 increased 6%, or 46.7 million gallons, from that of the prior year period due to 31.3 million of increased gallon sales to wholesale customers and 15.4 million of increased gallons to retail customers. The propane industry experienced significant logistical and infrastructure challenges caused by industry-wide storage and transportation issues during the three months ended April 30, 2014. As a result, wholesale propane prices rose to historic levels in certain geographic areas. Once these issues were resolved, the wholesale cost of propane decreased significantly and dramatically in these geographic locations. During February 2014 the wholesale cost of propane in Conway, Kansas decreased from $2.49 per gallon to $1.16 per gallon. During this period of rapidly decreasing wholesale propane prices our gross margin per gallon sold increased on certain contracted sales volumes to commercial customers. 51



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Weather in the more highly concentrated geographic areas we serve for the nine months ended April 30, 2014 was approximately 10% colder than that of the prior year period and 6% colder than normal. We believe retail and wholesale customer sales volume increased due to colder weather and heavier than normal propane use for crop drying during an unusually wet harvest season.



Revenues - Propane and other gas liquids sales

Retail sales increased $247.7 million compared to the prior year period. This increase resulted primarily from a $220.1 million increase in sales price per gallon and $27.6 million of increased sales volumes, both as discussed above.



Wholesale sales increased $124.5 million compared to the prior year period. This increase resulted primarily from $80.2 million of increased sales price per gallon and $44.3 million of increased sales volumes, both as discussed above.

Gross margin - Propane and other gas liquids sales

Gross margin increased $40.6 million primarily due to a $23.0 million increase in gallon sales and a $17.6 million increase in gross margin per gallon sold nationally, both as discussed above.



Gross margin - Other

Gross margin - Other increased $3.9 million primarily due to $7.7 million of grilling tool and accessory sales gained through acquisitions, partially offset by $3.2 million decrease in miscellaneous fees billed to customers.



Operating income

"Operating income" increased $13.9 million compared to the prior year period primarily due to $40.6 million of increased "Gross margin - Propane and other gas liquid sales", a $3.9 million increase in Gross margin - Other, both as discussed above, a $2.3 million decrease in "Loss on disposal of assets" and a $2.3 million decrease in "Non-cash employee stock ownership plan compensation charge", partially offset by a $26.2 million increase in "Operating expense" and an $8.6 million increase in "General and administrative expense". "Loss on disposal of assets" decreased due to the one time sale of underutilized assets during the prior year period that was not repeated during the current year period. "Non-cash employee stock ownership plan compensation charge" decreased primarily due to an additional allocation of Ferrell Companies shares to employees during the prior year period that was not repeated in the current year period. "Operating expense" increased $17.4 million primarily due to variable delivery costs related to the increase in propane sales volume as discussed above. "General and administrative expense" increased primarily due to $6.0 million of increased non-cash stock based compensation charges and $2.4 million in personnel and other corporate costs.



Adjusted EBITDA and distributable cash flow attributable to common unitholders

Adjusted EBITDA increased $16.4 million compared to the prior year period primarily due to $40.6 million of increased Gross margin - Propane and other gas liquid sales, a $3.9 million increase in Gross margin - Other, both as discussed above, partially offset by a $24.4 million increase in operating expense and a $1.9 million increase in general and administrative expense. Operating expense increased $17.4 million primarily due to variable delivery costs related to the increase in propane sales volume as discussed above. General and administrative expense increased primarily due to $1.6 million in personnel and other corporate costs. Distributable cash flow attributable to common unitholders increased $10.1 million compared to the prior year period primarily due to the $16.4 million increase in Adjusted EBITDA as discussed above as well as a $1.3 million decrease in net cash interest expense. These increases were partially offset by a $4.7 million decrease in proceeds from asset sales due to a one time sale of underutilized assets in the prior year period that was not repeated in the current year period and a $2.3 million increase in maintenance capital expenditures due to timing.



Interest expense - consolidated

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"Interest expense" decreased $2.8 million primarily due to a $2.7 million decrease due to the issuance of new senior debt at lower rates than the debt retired.

Interest expense - operating partnership

"Interest expense" decreased $2.8 million primarily due to a $2.7 million decrease due to the issuance of new senior debt at lower rates than the debt retired.

Loss on extinguishment of debt

During the nine months ended April 30, 2014, we redeemed the outstanding principal amount on our $300.0 million 9.125% fixed rate senior notes due October 1, 2017, incurring a loss on extinguishment of debt of $20.9 million. We incurred an additional $0.3 million loss on extinguishment of debt related to the write-off of capitalized financing costs as a result of amending our secured credit facility.



Liquidity and Capital Resources

General

Our liquidity and capital resources enable us to fund our working capital requirements, letter of credit requirements, debt service payments, acquisition and capital expenditures and distributions to our unitholders. Our liquidity and capital resources may be affected by our ability to access the capital markets or by unforeseen demands on cash, or other events beyond our control. On June 6, 2014, we executed a third amendment to our secured credit facility to better facilitate our strategic focus on further business diversification. Immediately following the amendment, we increased the size of this facility from $500.0 million to $600.0 million providing increased liquidity for future acquisitions. There was no change to the size of the letter of credit sublimit which remains at $200.0 million. This amendment did not change the interest rate or the maturity date of the secured credit facility which remains at October 2018. Borrowings under this amended facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness. During October 2013, we executed an amendment to our secured credit facility. This amendment extended the maturity date to October 2018 and increased the size of the facility from $400.0 million to $500.0 million with no change to the size of the letter of credit sub-limit which remains at $200.0 million. On May 1, 2014, we entered into a series of transactions to acquire all of the issued and outstanding membership interests in Sable, a fluid logistics provider in the Eagle Ford shale region of south Texas. These transactions resulted in borrowings of $74.7 million from our secured credit facility and the issuance of $50.0 million of common units in a registered direct offering, which units are subject to certain transfer restrictions pursuant to a shelf registration statement on Form S-3 which became effective on June 12, 2012. On April 30, 2014, in anticipation of this acquisition, we borrowed $125.0 million from our secured credit facility, which was reflected in our cash holdings at April 30, 2014. During November 2013, we issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. We received $319.3 million of net proceeds after deducting underwriters' fees. We applied the net proceeds to redeem all of our $300.0 million 9.125% fixed rate senior notes due October 1, 2017. We used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. This redemption also resulted in $6.0 million of non-cash write-offs of unamortized debt discount and related capitalized debt costs. The make whole and consent payments and the non-cash write-offs of unamortized debt discount and related capitalized debt costs are classified as loss on extinguishment of debt.



Distributable Cash Flow

A reconciliation of distributable cash flow to distributions paid for the twelve months ended April 30, 2014 to the twelve months ended January 31, 2014 is as follows (in thousands): 53



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Table of Contents Changes in cash reserves Distributable Cash approved by our Cash distributions Flow General Partner paid DCF ratio Nine months ended April 30, 2014 $ 190,625$ 69,420$ 121,205 Year ended July 31, 2013 183,114 21,642 161,472 Less: Nine months ended April 30, 2013 180,319 59,269 121,050 Twelve months ended April 30, 2014 $ 193,420$ 31,793$ 161,627 1.20 Six months ended January 31, 2014 $ 114,953$ 34,150 $ 80,803 Year ended July 31, 2013 183,114 21,642 161,472 Less: Six months ended January 31, 2013 104,115 23,407 80,708 Twelve months ended January 31, 2014 $ 193,952$ 32,385$ 161,567 1.20 Increase (decrease) $ (532 ) $ (592 ) $ 60 - For the twelve months ended April 30, 2014 distributable cash flow decreased $0.5 million, while cash distributions paid remained virtually unchanged which resulted in our distribution coverage ratio remaining unchanged at 120% for the twelve months ended April 30, 2014 as compared to the twelve months ended January 31, 2014. Subject to meeting the financial tests discussed below and also subject to the risk factors identified in our Annual Report on Form 10-K for fiscal 2013 entitled, "Item 1A. Risk Factors" as well as any changes to these risk factors set forth in "Part II, Item 1A" of this Quarterly Report on From 10-Q, we believe we will continue to have sufficient access to capital markets at yields acceptable to us to support our expected growth expenditures and refinancing of debt maturities. Our disciplined approach to fund necessary capital spending and other partnership needs, combined with sufficient trade credit to operate our business efficiently and available credit under our secured credit facility and our accounts receivable securitization facility should provide us the means to meet our anticipated liquidity and capital resource requirements. During periods of high volatility, our risk management activities may expose us to the risk of counterparty margin calls in amounts greater than we have the capacity to fund. Likewise our counterparties may not be able to fulfill their margin calls from us or may default on the settlement of positions with us. Our working capital requirements are subject to, among other things, the price of propane, delays in the collection of receivables, volatility in energy commodity prices, liquidity imposed by insurance providers, downgrades in our credit ratings, decreased trade credit, significant acquisitions, the weather, customer retention and purchasing patterns and other changes in the demand for propane. Relatively colder weather or higher propane prices during the winter heating season are factors that could significantly increase our working capital requirements. Our ability to satisfy our obligations is dependent upon our 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 generated during the winter heating season. Our net cash provided by operating activities primarily reflects earnings from our business activities adjusted for depreciation and amortization and changes in our working capital accounts. Historically, we generate significantly lower net cash from operating activities in our first and fourth fiscal quarters as compared to the second and third fiscal quarters due to the seasonality of our business. A quarterly distribution of $0.50 will be paid on June 13, 2014 to all common units that were outstanding on June 6, 2014. This represents the seventy-ninth consecutive minimum quarterly distribution paid to our common unitholders dating back to October 1994. Our secured credit facility, publicly-held 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 secured credit and accounts receivable securitization facilities and limitations on the payment of distributions within our 8.625% senior notes due 2020. 54



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As of April 30, 2014, we met all of our 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 our required quarterly financial tests and covenants in fiscal 2014. However, we may not meet the applicable financial tests in future quarters if we were to experience:



significantly warmer than normal temperatures during the winter heating

season;

a more volatile energy commodity cost environment;

an unexpected downturn in business operations;

a change in customer retention or purchasing patterns due to economic or

other factors in the United States; or

a material downturn in the credit and/or equity markets.

Failure to meet applicable financial tests could have a material 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. We expect our future capital expenditures and working capital needs to be provided by a combination of cash generated from future operations, existing cash balances, the secured credit facility or the accounts receivable securitization facility. See additional information about the accounts receivable securitization facility in "Financing Activities - Accounts receivable securitization." In order to reduce existing indebtedness, fund future acquisitions and expansive capital projects, 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, the following registration statements were effective upon filing or declared effective by the SEC:

a shelf registration statement for the periodic sale of up to $750.0

million in common units, debt securities and/or other securities;

Ferrellgas Partners Finance Corp. may, at our election, be the co-issuer

and co-obligor on any debt securities issued by Ferrellgas Partners under this shelf registration statement; as of May 31, 2014, these two registrants collectively had $700.0 million available under this shelf registration statement; and



an "acquisition" shelf registration statement for the periodic sale of up

to $250.0 million in common units to fund acquisitions; as of May 31, 2014, Ferrellgas Partners had $225.8 million available under this shelf registration statement.



Operating Activities

Net cash provided by operating activities was $103.9 million for the nine months ended April 30, 2014, compared to net cash provided by operating activities of $173.2 million for the nine months ended April 30, 2013. This decrease in cash provided by operating activities was primarily due to a $72.5 million increase in working capital requirements partially offset by a $6.2 million increase in cash flow from operations. The increase in working capital requirements was primarily due to a $52.2 million increase in accounts receivable resulting from the increase in the wholesale price of propane, a $19.5 million increase in inventory from the increase in the wholesale price of propane as well as the timing of inventory purchases and a $14.1 million increase in prepaid expenses and other current assets primarily due to the timing of deposits made toward the purchase of propane appliances. These increases in working capital requirements were partially offset by a $8.7 million increase in accrued interest expense due to the timing of interest payments due and a $7.0 million increase in accounts payable from the timing of purchases and disbursements. The increase in cash flow from operations is primarily due to $40.6 million of increased "Gross margin - Propane and other gas liquid sales" and a $3.9 million increase in "Gross margin - Other," each as discussed above, partially offset by a $24.4 million increase in operating expenses, a $2.7 million increase in general and administrative expenses and $14.7 million of make whole and consent payments related to the early extinguishment of all of our $300.0 million 9.125% fixed rate senior notes due October 1, 2017.



The operating partnership

Net cash provided by operating activities was $111.8 million for the nine months ended April 30, 2014, compared to net cash provided by operating activities of $181.2 million for the nine months ended April 30, 2013. This decrease in cash provided by operating activities was primarily due to a $72.2 million increase in working capital requirements partially offset by a $5.9 million increase in cash flow from operations. 55



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The increase in working capital requirements was primarily due to a $52.2 million increase in accounts receivable resulting from the increase in the wholesale price of propane, a $19.5 million increase in inventory from the increase in the wholesale price of propane as well as the timing of inventory purchases, a $14.1 million increase in prepaid expenses and other current assets primarily due to the timing of deposits made toward the purchase of propane appliances. These increases in working capital requirements were partially offset by a $8.7 million increase in accrued interest expense due to the timing of interest payments due and a $7.0 million increase in accounts payable from the timing of purchases and disbursements. The increase in cash flow from operations is primarily due to $40.6 million of increased "Gross margin - Propane and other gas liquid sales" and a $3.9 million increase in "Gross margin - Other," each as discussed above, partially offset by a $24.4 million increase in operating expenses, a $2.7 million increase in general and administrative expenses and $14.7 million of make whole and consent payments related to the early extinguishment of all of our $300.0 million 9.125% fixed rate senior notes due October 1, 2017.



Investing Activities

Capital Requirements

Our business requires continual investments to upgrade or enhance existing operations and to ensure compliance with safety and environmental regulations. Capital expenditures for our business consist primarily of:

Maintenance capital expenditures. These capital expenditures include

expenditures for betterment and replacement of property, plant and

equipment rather than to generate incremental distributable cash flow.

Examples of maintenance capital expenditures include a routine replacement

of a worn-out asset or replacement of major vehicle components;



Growth capital expenditures. These expenditures are undertaken primarily

to generate incremental distributable cash flow. Examples include

expenditures for purchases of both bulk and portable propane tanks and

other equipment to facilitate expansion of our customer base and operating

capacity. Net cash used in investing activities was $45.1 million for the nine months ended April 30, 2014, compared to net cash used in investing activities of $62.4 million for the nine months ended April 30, 2013. This decrease in net cash used in investing activities is primarily due to a decrease of $30.1 million in "Business acquisitions, net of cash acquired", partially offset by a $8.0 million increase in "Capital expenditures" and a $4.7 million decrease in "Proceeds from sale of assets" resulting primarily from the one-time sale of underutilized assets during the prior year period that was not repeated during the current year period. The increase in "Capital expenditures" relates primarily to $2.4 million of increased operating facilities construction projects and $1.5 million related to the timing of purchases of tank exchange propane cylinders in preparation of the summer grilling season. Maintenance capital expenditures increased $2.3 million primarily due to timing. Due to the mature nature of our business we have not incurred and do not anticipate significant fluctuations in maintenance capital expenditures. However, future fluctuations in growth capital expenditures could occur due to the opportunistic nature of these projects.



Financing Activities

Net cash provided by financing activities was $69.3 million for the nine months ended April 30, 2014, compared to net cash used in financing activities of $107.0 million for the nine months ended April 30, 2013. This increase in net cash provided by financing activities was primarily due to a $125.0 million borrowing on our secured credit facility on April 30, 2014 in anticipation of our acquisition of Sable. The remaining increase in cash provided by financing activities was primarily due to a $34.5 million net increase in our secured credit facility and accounts receivable securitization facility borrowings, both of which are primarily a result of the working capital requirements discussed above and a $25.0 million increase in long term borrowings as discussed below. These increases were somewhat offset by a $7.9 million increase in "Cash paid for financing costs". During November 2013, we issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. We received $319.3 million of net proceeds after deducting underwriters' fees. We used the net proceeds to redeem all of our $300.0 million 9.125% fixed rate senior notes due October 1, 2017. We used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. This redemption also resulted in $6.0 million of non-cash write-offs of unamortized debt discount and related capitalized debt costs. The make whole and consent payments and the non-cash write-offs of unamortized debt discount and related capitalized debt costs are classified as loss on extinguishment of debt. 56



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Distributions

Ferrellgas Partners paid a $0.50 per unit quarterly distribution on all common units, as well as the related general partner distributions, totaling $119.9 million during the nine months ended April 30, 2014 in connection with the distributions declared for the three months ended July 31, 2013, October 31, 2013 and January 31, 2014. The quarterly distribution on all common units and the related general partner distribution for the three months ended April 30, 2014 of $41.0 million are expected to be paid on June 13, 2014 to holders of record on June 6, 2014. Secured credit facility On June 6, 2014, Ferrellgas, L.P. executed a third amendment to its secured credit facility to better facilitate its strategic focus on further business diversification. Immediately following the amendment, Ferrellgas, L.P. increased the size of this facility from $500.0 million to $600.0 million providing increased liquidity for future acquisitions. There was no change to the size of the letter of credit sublimit which remains at $200.0 million. This amendment did not change the interest rate or the maturity date of the secured credit facility which remains at October 2018. Borrowings under this amended facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness. During October 2013, we executed an amendment to our secured credit facility. This amendment extended the maturity date to October 2018 and increased the size of the facility from $400.0 million to $500.0 million with no change to the size of the letter of credit sublimit which remains at $200.0 million. As of April 30, 2014, we had total borrowings outstanding under our secured credit facility of $273.6 million, of which $195.6 million was classified as long-term debt. Additionally, Ferrellgas had $166.1 million and $205.4 million of available borrowing capacity under our secured credit facility as of April 30, 2014 and April 30, 2013, respectively. On April 30, 2014, we borrowed $125.0 million on our secured credit facility in anticipation of our acquisition of Sable, which occurred on May 1, 2014. Borrowings outstanding at April 30, 2014 under the secured credit facility had a weighted average interest rate of 3.3%. All borrowings under the secured credit facility bear interest, at our option, at a rate equal to either:



for Base Rate Loans or Swing Line Loans, the Base Rate, which is defined

as the higher of i) the federal funds rate plus 0.50%, ii) Bank of America's prime rate; or iii) the Eurodollar Rate plus 1.00%; plus a margin varying from 0.75% to 1.75%; or



for Eurodollar Rate Loans, the Eurodollar Rate, which is defined as the

LIBOR Rate plus a margin varying from 1.75% to 2.75%.

As of April 30, 2014, the federal funds rate and Bank of America's prime rate were 0.09% and 3.25%, respectively. As of April 30, 2014, the one-month and three-month Eurodollar Rates were 0.19% and 0.26%, respectively.

In addition, an annual commitment fee is payable at a per annum rate ranging from 0.35% to 0.50% times the actual daily amount by which the facility exceeds the sum of (i) the outstanding amount of revolving credit loans and (ii) the outstanding amount of letter of credit obligations. The obligations under this credit facility are secured by substantially all assets of the operating partnership, the general partner and certain subsidiaries of the operating partnership but specifically excluding (a) assets that are subject to the operating partnership's accounts receivable securitization facility, (b) the general partner's equity interest in Ferrellgas Partners and (c) equity interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of the operating partnership. Letters of credit outstanding at April 30, 2014 totaled $60.3 million and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. At April 30, 2014, we had remaining letter of credit capacity of $139.7 million. All standby letter of credit commitments under our secured credit facility bear a per annum rate varying from 1.75% to 2.75% (as of April 30, 2014, the rate was 2.25%) times the daily maximum amount available to be drawn under such letter of credit. Letter of credit fees are computed on a quarterly basis in arrears.



Accounts receivable securitization

Ferrellgas Receivables, LLC is accounted for as a consolidated subsidiary. Expenses associated with accounts receivable securitization transactions are recorded in "Interest expense" in the consolidated statements of earnings.

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Additionally, borrowings and repayments associated with these transactions are recorded in "Cash flows from financing activities" in the consolidated statements of cash flows.

Cash flows from our accounts receivable securitization facility increased $31.0 million. We received net funding of $73.0 million from this facility during the nine months ended April 30, 2014 as compared to receiving net funding of $42.0 million from this facility in the prior year period. Our strategy is to maximize liquidity by utilizing the accounts receivable securitization facility along with borrowings under the secured credit facility. See additional discussion about the secured credit facility in "Financing Activities - Secured credit facility." Our utilization of the accounts receivable securitization facility is limited by the amount of accounts receivable that we are permitted to securitize according to the facility agreement. As of April 30, 2014, we had received cash proceeds of $155.0 million related to the securitization of our trade accounts receivable, with no remaining capacity to receive additional proceeds. As of April 30, 2014, the weighted average interest rate was 1.8%. As our trade accounts receivable increase during the winter heating season, the securitization facility permits us to receive greater proceeds as eligible trade accounts receivable increases, thereby providing additional cash for working capital needs.



Debt issuances and repayments

During November 2013, we issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. We received $319.3 million of net proceeds after deducting underwriters' fees. We applied the net proceeds to redeem all of our $300.0 million 9.125% fixed rate senior notes due October 1, 2017. We used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. This redemption also resulted in $6.0 million of non-cash write-offs of unamortized debt discount and related capitalized debt costs. The make whole and consent payments and the non-cash write-offs of unamortized debt discount and related capitalized debt costs are classified as loss on extinguishment of debt. On April 30, 2014, we borrowed $125.0 million from our secured credit facility in anticipation of our acquisition of Sable, which occurred on May 1, 2014. This borrowing is reflected in cash holdings at April 30, 2014. On May 1, 2014, the former owners of Sable purchased $50.0 million of our common units with the proceeds used to repay a portion of the acquisition borrowing.



The operating partnership

The financing activities discussed above also apply to the operating partnership except for cash flows related to distributions and contributions received, as discussed below. Distributions The operating partnership paid cash distributions of $129.1 million and $128.9 million during the nine months ended April 30, 2014 and 2013, respectively. The operating partnership expects to pay cash distributions of $49.4 million on June 13, 2014.



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 $189.4 million for the nine months ended April 30, 2014, include operating expenses such as compensation and benefits paid to employees of our general partner who perform services on our behalf as well as related general and administrative expenses.



Related party common unitholder information consisted of the following:

Distributions (in thousands) paid during the nine months Common unit ownership at ended April 30, 2014 April 30, 2014 Ferrell Companies (1) 21,469,664 $ 32,205 FCI Trading Corp. (2) 195,686 294 Ferrell Propane, Inc. (3) 51,204 78 James E. Ferrell (4) 4,358,475 6,537 58



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(1) Ferrell Companies is the sole shareholder of our general partner.

(2) FCI Trading Corp. is an affiliate of the general partner and is wholly-owned

by Ferrell Companies.

(3) Ferrell Propane, Inc. is wholly-owned by our general partner.

(4) James E. Ferrell is the Chairman of the Board of Directors of our general

partner.



During the nine months ended April 30, 2014, Ferrellgas Partners and the operating partnership together paid the general partner distributions of $2.5 million.

On June 13, 2014, Ferrellgas Partners expects to pay distributions to Ferrell Companies, FCI Trading Corp., Ferrell Propane, Inc., James E. Ferrell (indirectly) and the general partner of $10.7 million, $0.1 million, $26 thousand, $2.2 million and $0.9 million, respectively.

Contractual Obligations In the performance of our operations, we are bound by certain contractual obligations. The following table summarizes our long-term debt and fixed rate interest obligations at April 30, 2014. These obligations reflect the issuance of $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par and the subsequent redemption of $300.0 million 9.125% fixed rate senior notes due October 1, 2017, as discussed above. Payment or settlement due by fiscal year (in thousands) 2014 2015 2016 2017 2018 Thereafter Total Long-term debt, including current portion (1) $ 520$ 3,103$ 3,043$ 2,706$ 1,124$ 1,204,186$ 1,214,682 Fixed rate interest obligations (2) 39,394 70,135 70,135 70,135 70,135 205,676 525,610



_________________________________

(1) We have long and short-term payment obligations under agreements such as our

senior notes and our credit facility. Amounts shown in the table represent

our scheduled future maturities of long-term debt (including current

maturities thereof) for the periods indicated. For additional information

regarding our debt obligations, please see "Liquidity and Capital Resources -

Financing Activities."



(2) Fixed rate interest obligations represent the amount of interest due on fixed

rate long-term debt. These amounts do not include interest on the long term

portion of our credit facility, a variable rate debt obligation.

The operating partnership The contractual obligation updates included in the table above also apply to the operating partnership and are summarized in the table below: Payment or settlement due by fiscal year (in thousands) 2014 2015 2016 2017 2018 Thereafter Total Long-term debt, including current portion (1) $ 520$ 3,103$ 3,043$ 2,706$ 1,124$ 1,022,186$ 1,032,682 Fixed rate interest obligations (2) 31,545 54,438 54,438 54,438 54,438 174,280 423,577



_________________________________

(1) The operating partnership has long and short-term payment obligations under

agreements such as the operating partnership's senior notes and credit

facility. Amounts shown in the table represent the operating partnership's

scheduled future maturities of long-term debt (including current maturities

thereof) for the periods indicated. For additional information regarding the

operating partnership's debt obligations, please see "Liquidity and Capital

Resources - Financing Activities."

(2) Fixed rate interest obligations represent the amount of interest due on fixed

rate long-term debt. These amounts do not include interest on the long term

portion of our credit facility, a variable rate debt obligation.


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Source: Edgar Glimpses