News Column

Ferrellgas Partners Reports Strong Third-Quarter Results; Raises Adjusted EBITDA Guidance to Record $285-$290 Million

June 9, 2014

OVERLAND PARK, Kan., June 9, 2014 (GLOBE NEWSWIRE) -- Ferrellgas Partners, L.P. (NYSE:FGP) today reported strong financial results for the fiscal 2014 third quarter ended April 30, with Adjusted EBITDA and gross profit reaching record levels.

Adjusted EBITDA improved to $99.8 million from $98.5 million in the year-earlier quarter. Distributable cash flow to equity investors was $75.7 million producing distributable cash flow coverage on the partnership's quarterly distribution of 1.2x. Gross profit increased 3% to $230.5 million on anticipated margin improvement.

Reflecting the third-quarter performance and the establishment of midstream operations in May 2014, the partnership raised its fiscal 2014 Adjusted EBITDA guidance to a record $285 million to $290 million, up from previously provided guidance of $275 million to $285 million. The partnership posted record Adjusted EBITDA of $272 million for fiscal 2013.

President and Chief Executive Officer Steve Wambold pointed out, "I am extremely pleased with the way our propane operations team performed during what proved to be a very challenging quarter. While temperatures in the quarter were 5% colder than a year ago, the partnership contended with significant propane supply and infrastructure challenges that negatively impacted our efficiency metrics. However, these same industry challenges provided the partnership the opportunity to acquire many new customers due to service failures experienced by other providers."

Propane sales volumes for the quarter were 257.9 million gallons, slightly below a year ago, but consistent with planned levels. This year's winter heating season was more evenly spread over the partnership's fiscal second and third quarters contrasted with last year, which was heavily concentrated in the fiscal third quarter.

Operating expense in the quarter was $113.9 million, compared to $107.2 million in the year-earlier quarter, primarily reflecting the increased cost associated with meeting customer demand while contending with seasonably cold temperatures and propane supply shortages. General and administrative expense decreased to $12.2 million from $13.4 million, but excluding the timing of performance-based incentives was materially in line with the prior-year quarter. Interest expense declined 9% to $20.2 million, reflecting the favorable long-term debt refinancing completed last fall.

Wambold further commented, "Blue Rhino posted a strong start to the grilling season this quarter, as sales transactions grew by more than 18% over prior year levels. The partnership continued to experience increased sales transactions in May from its Blue Rhino brand and we believe that this positive momentum will continue throughout the summer grilling season."

For the nine-month period ended April 30, Adjusted EBITDA improved to $262.6 million from $246.2 million a year ago, while distributable cash flow increased to $190.6 million from $180.3 million. Propane sales volumes grew 6%, exceeding planned levels on nationwide temperatures that were 6% colder than normal. Gross profit rose 7% to $642.9 million, driven by higher sales volumes and, to a lesser extent, margins that improved $0.01 per gallon.

On May 1, the partnership announced the acquisition of Sable Environmental, LLC and a related entity ("Sable"), a fast-growing privately held fluid logistics provider in the Eagle Ford Shale region of South Texas. The acquisition, which prompted the establishment of a midstream division, demonstrated the partnership's commitment to strategic diversification and growth of cash flow.

On June 6, the partnership amended its secured credit facility to better facilitate its strategic focus on further business diversification. Immediately following the amendment, the partnership increased the size of this facility from $500 million to $600 million providing increased liquidity for future acquisitions.

Wambold reported, "Sable's management has hit the ground running, performing ahead of plan while capitalizing on growth opportunities. In May, the partnership acquired a sixth salt water disposal site and began construction of a seventh site that will be operational in the fall of 2014 supporting the growth of our customer base. The partnership estimates the Sable operations will contribute $25 million of Adjusted EBITDA in fiscal 2015." He added, "The business development team is assessing numerous opportunities to expand these operations and to further diversify cash flows from other lines of business. We look forward to further progress in this area in fiscal 2015."

On May 5, Ferrellgas acquired Viking Propane, based in Madison, Calif., which enhances the partnership's strong California presence, extending the service territory west of Sacramento. Viking represents the fourth retail propane acquisition in the current fiscal year that began August 1. Wambold observed, "The pipeline for propane acquisitions remains robust, and the partnership is confident it can increase its retail propane footprint not only through acquisitions, but also through organic growth."

Ferrellgas Partners, L.P., through its operating partnership, Ferrellgas, L.P., and subsidiaries, serves propane customers in all 50 states, the District of Columbia and Puerto Rico, and provides mainstream services to major energy companies in the United States. Ferrellgas employees indirectly own more than 21 million common units of the partnership through an employee stock ownership plan. More information about the partnership can be found online at www.ferrellgas.com.

Statements in this release concerning expectations for the future are forward-looking statements. A variety of known and unknown risks, uncertainties and other factors could cause results, performance and expectations to differ materially from anticipated results, performance and expectations. These risks, uncertainties and other factors are discussed in the Form 10-K of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. for the fiscal year ended July 31, 2013, the Form 10-Q for the quarter ended April 30, 2014 and in other documents filed from time to time by these entities with the Securities and Exchange Commission.

 
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE, NINE AND TWELVE MONTHS ENDED APRIL 30, 2014 AND 2013
(in thousands, except per unit data)
(unaudited)
             
 Three months ended Nine months endedTwelve months ended
 April 30April 30April 30
 201420132014201320142013
Revenues:            
Propane and other gas liquids sales  $ 625,117  $ 508,408  $ 1,796,786  $ 1,426,763  $ 2,109,290  $ 1,737,278
Other 97,000 94,612 210,044 198,031 248,213 229,291
Total revenues 722,117 603,020 2,006,830 1,624,794 2,357,503 1,966,569
             
Cost of product sold:            
Propane and other gas liquids sales 422,256 313,207 1,232,516 903,100 1,421,677 1,099,743
Other 69,388 66,714 131,443 123,348 152,551 138,460
             
Gross profit  230,473 223,099 642,871 598,346 783,275 728,366
             
Operating expense (including $126 of severance charges for the twelve month period ended April 30, 2013) 113,923 107,188 333,632 309,221 434,470 409,227
Depreciation and amortization expense 20,913 20,896 61,771 62,522 82,593 83,524
General and administrative expense (including $166 of severance charges for the twelve month period ended April 30, 2013) 12,194 13,432 35,070 32,396 44,701 40,841
Equipment lease expense 4,638 4,098 12,978 11,848 17,113 15,650
Non-cash employee stock ownership plan compensation charge 3,710 2,824 10,389 12,673 13,485 15,394
Non-cash stock and unit-based compensation charge (a) 5,832 2,222 16,182 8,434 21,293 12,410
Loss on disposal of assets and other 1,732 3,337 3,426 5,728 8,119 9,711
             
Operating income 67,531 69,102 169,423 155,524 161,501 141,609
             
Interest expense (20,189) (22,084) (64,372) (67,138) (86,379) (89,488)
Loss on extinguishment of debt  --  --  (21,202)  --  (21,202)  --
Other income, net 225 185 498 517 546 775
             
Earnings before income taxes 47,567 47,203 84,347 88,903 54,466 52,896
             
Income tax expense  1,677  2,023  2,391  2,676  1,570  2,519
             
Net earnings 45,890 45,180 81,956 86,227 52,896 50,377
             
Net earnings attributable to noncontrolling interest (b) 505 499 950 997 694 676
             
Net earnings attributable to Ferrellgas Partners, L.P.  45,385  44,681  81,006  85,230  52,202  49,701
             
Less: General partner's interest in net earnings  454  447  810  852  522  497
             
Common unitholders' interest in net earnings  $ 44,931  $ 44,234  $ 80,196  $ 84,378  $ 51,680  $ 49,204
             
Earnings Per Unit            
Basic and diluted net earnings per common unitholders' interest  $ 0.57  $ 0.56  $ 1.01  $ 1.07  $ 0.65  $ 0.62
             
Weighted average common units outstanding 79,177.8 79,054.4 79,127.1 79,027.5 79,113.2 79,018.5
             
             
Supplemental Data and Reconciliation of Non-GAAP Items:
             
 Three months ended Nine months endedTwelve months ended
 April 30April 30April 30
 201420132014201320142013
             
             
Net earnings attributable to Ferrellgas Partners, L.P.  $ 45,385  $ 44,681  $ 81,006  $ 85,230  $ 52,202  $ 49,701
Income tax expense  1,677  2,023  2,391  2,676  1,570  2,519
Interest expense 20,189 22,084 64,372 67,138 86,379 89,488
Depreciation and amortization expense 20,913 20,896 61,771 62,522 82,593 83,524
EBITDA  88,164  89,684  209,540  217,566  222,744  225,232
Loss on extinguishment of debt  --  --  21,202  --  21,202  --
Non-cash employee stock ownership plan compensation charge 3,710 2,824 10,389 12,673 13,485 15,394
Non-cash stock and unit-based compensation charge (a)  5,832 2,222 16,182 8,434 21,293 12,410
Loss on disposal of assets and other 1,732 3,337 3,426 5,728 8,119 9,711
Other income, net (225) (185) (498) (517) (546) (775)
Severance costs  --  --  --  --  --  292
Litigation accrual and related legal fees associated with a class action lawsuit  97  113 1,422 1,338  1,652 1,338
Net earnings attributable to noncontrolling interest (b) 505 499 950 997 694 676
Adjusted EBITDA (c)  99,815  98,494  262,613  246,219  288,643  264,278
Net cash interest expense (d)  (19,941)  (20,631)  (61,507)  (62,829)  (82,173) (83,656)
Maintenance capital expenditures (e)  (4,762)  (3,466)  (13,345)  (10,996)  (17,419) (15,522)
Cash paid for taxes  (225)  (43)  (403)  (88)  (865) (752)
Proceeds from asset sales  785  1,850  3,267  8,013  5,234 9,441
Distributable cash flow to equity investors (f)  75,672  76,204  190,625  180,319  193,420  173,789
Distributable cash flow to general partner and non-controlling interest  1,513  1,524  3,813  3,606  3,868  3,476
Distributable cash flow to common unitholder  74,159  74,680  186,812  176,713  189,552  170,313
Less: Distributions paid  39,594  39,536  118,702  118,552  158,237  158,054
Distributable cash flow excess  $ 34,565  $ 35,144  $ 68,110  $ 58,161  $ 31,315  $ 12,259
Propane gallons sales            
Retail - Sales to End Users 185,961 196,009 558,142 542,688 653,377 637,719
Wholesale - Sales to Resellers 71,963 71,113 233,664 202,396 294,715 258,237
Total propane gallons sales 257,924 267,122 791,806 745,084 948,092 895,956
             
(a) Non-cash stock and unit-based compensation charges consist of the following:          
             
  Three months ended  Nine months ended Twelve months ended
 April 30April 30April 30
  2014 2013 2014 2013 2014 2013
 Operating expense  $ 1,166  $ 422  $ 3,503  $ 1,726  $ 4,168 2,521
 General and administrative expense  4,666  1,800  12,679  6,708  17,125  9,889
 Total  $ 5,832  $ 2,222  $ 16,182  $ 8,434  $ 21,293  $ 12,410
 
(b) Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P.
(c) Adjusted EBITDA is calculated as earnings before 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 and other, other income, net, severance costs, 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.
(d) 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. 
(e) Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment.
(f) 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.
 
 
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
     
ASSETSApril 30, 2014July 31, 2013
     
Current Assets:    
Cash and cash equivalents  $ 134,397  $ 6,464
Accounts and notes receivable, net (including $230,798 and $130,025 of accounts receivable pledged as collateral at April 30, 2014 and July 31, 2013, respectively) 247,576 131,791
Inventories 110,721 117,116
Prepaid expenses and other current assets 37,496 25,608
Total Current Assets 530,190 280,979
     
Property, plant and equipment, net 584,991 589,727
Goodwill 253,331 253,362
Intangible assets, net 177,817 189,516
Other assets, net 43,540 42,444
Total Assets  $ 1,589,869  $ 1,356,028
     
LIABILITIES AND PARTNERS' DEFICIT    
     
Current Liabilities:    
Accounts payable  $ 79,105  $ 49,128
Short-term borrowings 77,956 50,054
Collateralized note payable 155,000 82,000
Other current liabilities 129,124 121,102
Total Current Liabilities 441,185 302,284
     
Long-term debt (a) 1,205,370 1,106,940
Other liabilities 32,238 33,431
Contingencies and commitments  --  --
     
Partners' Deficit:     
Common unitholders (79,187,419 and 79,072,819 units outstanding at April 30, 2014 and July 31, 2013, respectively) (39,292) (28,931)
General partner unitholder (799,873 and 798,715 units outstanding at April 30, 2014 and July 31, 2013, respectively) (60,467) (60,362)
Accumulated other comprehensive income 9,848 1,697
Total Ferrellgas Partners, L.P. Partners' Deficit (89,911) (87,596)
Noncontrolling Interest 987 969
Total Partners' Deficit (88,924) (86,627)
Total Liabilities and Partners' Deficit  $ 1,589,869  $ 1,356,028
     
(a) The principal difference between the Ferrellgas Partners, L.P. balance sheet and that of Ferrellgas, L.P., is $182 million of 8.625% notes which are liabilities of Ferrellgas Partners, L.P. and not of Ferrellgas, L.P.

CONTACT: Alan Heitmann, Investor Relations alheitmann@ferrellgas.com or (816) 792-6879 Scott Brockelmeyer, Media Relations scottbrockelmeyer@ferrellgas.com or (913) 661-1830

Source: Ferrellgas Partners, L.P.


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