# Ferrellgas Partners L P: Form 10-Q for the period ended Apr 30, 2019

- Company: [Ferrellgas Partners L P](/companies/fgpr.md) (CIK 922358)
- Form: 10-Q
- Filed: 2019-06-10
- Accepted by EDGAR: Jun 10, 2019, 08:01 ET
- Period: 2019-04-30
- Accession: 0001558370-19-005571
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/922358/000155837019005571/fgp-20190430x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/922358/000155837019005571/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-04-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-02-01 to 2019-04-30 | $479.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2018-08-01 to 2019-04-30 | $1.41bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2019-02-01 to 2019-04-30 | $64.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2018-08-01 to 2019-04-30 | $140.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2019-02-01 to 2019-04-30 | $123.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2018-08-01 to 2019-04-30 | $284.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-02-01 to 2019-04-30 | $20.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2018-08-01 to 2019-04-30 | $6.8m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2019-02-01 to 2019-04-30 | 97,152,700 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2018-08-01 to 2019-04-30 | 97,152,700 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2018-08-01 to 2019-04-30 | $70.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Current assets | at 2019-04-30 | $306.6m | us-gaap:AssetsCurrent |
| Total assets | at 2019-04-30 | $1.33bn | us-gaap:Assets |
| Current liabilities | at 2019-04-30 | $263.9m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2019-04-30 | $2.08bn | us-gaap:LongTermDebtNoncurrent |

## Management's discussion and analysis

As filed, 82,080 characters.

### Overview

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,” “consolidated,” or "Ferrellgas" 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;
- the “operating partnership” refers to Ferrellgas, L.P., together with its consolidated subsidiaries, including Ferrellgas Finance Corp.;
- our “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;
- "GAAP" refers to accounting principles generally accepted in the United States;
- “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 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;
- “Notes” refers to the notes of 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 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 an approximate 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 23% of our outstanding common units. Ferrell Companies is owned 100% by an employee stock ownership trust.

We file annual, quarterly, and other reports and information with the Securities and Exchange Commission (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. Our SEC filings are also 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 consolidated financial statements and accompanying Notes thereto included in our Annual Report on Form 10‑K for fiscal 2018 and in 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 exists one material difference between Ferrellgas Partners and the operating partnership: Ferrellgas Partners has outstanding $357 million aggregate principal amount of 8.625% senior notes due June 15, 2020, and accordingly has interest expense that the operating partnership does not have. Ferrellgas Partners’ access to liquidity is dependent on distributions from the operating partnership. See the statements of operations in their respective condensed consolidated financial statements.

### Cautionary Note Regarding Forward-looking Statements

Statements included in this report include 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 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. 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 the risk factors that may affect our business, financial condition or results of operations include:

- the effect of weather conditions on the demand for propane;
- the prices of wholesale propane, motor fuel and crude oil;
- disruptions to the supply of propane;
- competition from other industry participants and other energy sources;
- energy efficiency and technology advances;
- adverse changes in our relationships with our national tank exchange customers;
- significant delays in the collection of accounts or notes receivable;
- customer, counterparty, supplier or vendor defaults;
- changes in demand for, and production of, hydrocarbon products;
- increased trucking and rail regulations;
- inherent operating and litigation risks in gathering, transporting, handling and storing propane;
- our inability to complete acquisitions or to successfully integrate acquired operations;
- costs of complying with, or liabilities imposed under, environmental, health and safety laws;
- the impact of pending and future legal proceedings;
- the interruption, disruption, failure or malfunction of our information technology systems including due to cyber attack;
- the impact of changes in tax law that could adversely affect the tax treatment of Ferrellgas Partners for federal income tax purposes;
- economic and political instability, particularly in areas of the world tied to the energy industry; and
- disruptions in the capital and credit markets.
- access to available capital to meet the our operating requirements up to and including the refinancing of maturing debt instruments

When considering any forward-looking statement, you should also keep in mind the risk factors set forth in “Item 1A. Risk Factors” of our Annual Report on Form 10‑K for fiscal 2018. 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 pay interest on the principal of any of our debt securities. In addition, the trading price 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.

### Recent developments

#### Debt and interest expense reduction and refinancing strategy

We continue to pursue a strategy to further reduce our debt and interest expense. This strategy included entering into the new Senior Secured Credit Facility and amending its accounts receivable securitization facility in May 2018 and certain asset sales during fiscal 2018. We continue to evaluate our options to address our leverage.

### Financial covenants

The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit our ability and its subsidiaries to, among other things, make restricted payments and incur additional indebtedness. Our general partner believes that the most restrictive of these covenants are those related to the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of Ferrellgas Partners, and the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of the operating partnership.

#### Consolidated fixed charge coverage ratio - Ferrellgas Partners, L.P., the master limited partnership

Under the Ferrellgas Partners indenture, before a restricted payment (as defined in the indenture) can be made by Ferrellgas Partners, Ferrellgas Partners must satisfy a consolidated fixed charge coverage ratio requirement or have unused capacity under a limited exception to the ratio requirement. If Ferrellgas Partners is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders.

The restricted payments covenant requires that, for Ferrellgas Partners to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of Ferrellgas Partners be at least 1.75x, on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, Ferrellgas Partners may make restricted payments of up to $50.0 million in total over a sixteen quarter period. As of April 30, 2019, the ratio was 1.38x. As a result of distributions paid to common unitholders in September 2017, December 2017, March 2018, June 2018, and September 2018 while this ratio was less than 1.75x, Ferrellgas Partners has used substantially all of its capacity under the limited exception and therefore is currently restricted by this covenant from making future restricted payments, including distributions to common unitholders. Accordingly, no distributions will be paid to common unitholders in June 2019 for the three months ended April 30, 2019. Unless this indenture is amended or replaced, or Ferrellgas Partners’ consolidated fixed charge coverage ratio improves to at least 1.75x, this covenant will continue to restrict Ferrellgas Partners from making common unit distributions.

#### Consolidated fixed charge coverage ratio - Ferrellgas, L.P., the operating partnership

Under the operating partnership indentures, before a restricted payment (as defined in the indentures) can be made by the operating partnership to Ferrellgas Partners, the operating partnership must satisfy a consolidated fixed charge coverage ratio requirement or have unused capacity under a limited exception to the ratio requirement. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders or make interest payments on Ferrellgas Partners’ unsecured senior notes due 2020.

The restricted payments covenants require that, for the operating partnership to make a restricted payment, the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the operating partnership be at least 1.75x on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events, subject to its ability to make restricted payments under the limited exception described below. If this pro forma ratio is below 1.75x, the operating partnership may make restricted payments in limited amounts determined under the indentures. As of April 30, 2019, the ratio was 1.72x. As a result, it’s likely the distribution that will be made by the operating partnership on June 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due 2020 will be made from capacity under the limited exception to the ratio requirement. The operating partnership believes that its remaining capacity under the limited exception to the ratio requirement will allow it to make distributions to Ferrellgas Partners’ to cover interest payments on Ferrellgas Partners’ unsecured senior notes due 2020 through the maturity of those notes.

### Distributions

As discussed above, no distributions will be paid to common unitholders in June 2019 for the three months ended April 30, 2019. Unless the indenture governing the outstanding Ferrellgas Partners notes is amended or replaced, if our consolidated fixed charge coverage ratio under that indenture does not improve to at least 1.75x, this covenant will not allow us to make common unit distributions for our quarter ending April 30, 2019 and beyond.

### How We Evaluate Our Operations

We evaluate our overall business performance based primarily on a metric we refer to as “Adjusted EBITDA”, which is not defined by GAAP and should not be considered an alternative to earnings measures defined by GAAP. We do not utilize depreciation, depletion and amortization expense in our key measures because we focus our performance management on cash flow generation and our revenue generating assets have long useful lives. For the definition of

Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Net earnings (loss) attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, see the subheading “Non-GAAP Financial Measures” below.

### Propane operations and related equipment sales

Based on our propane sales volumes in fiscal 2018, we believe that we are the second largest retail marketer of propane in the United States and a leading 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.

We use information on temperatures to understand how our results of operations are affected by temperatures that are warmer or colder than normal. Normal temperatures computed by us are the average of the last 10 years of information published by the National Oceanic and Atmospheric Administration. 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 primarily during the months of November through March (the “winter heating season”). Accordingly, the volume of propane used by our customers for this purpose is directly 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 continued warming trend, we could expect nationwide demand for propane for heating purposes to decrease which could lead to a reduction in our sales, income and liquidity availability as well as impact our ability to maintain compliance with our debt covenants.

We employ risk management activities that attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts. 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 hedged with an offsetting propane purchase commitment.

Our open financial derivative propane purchase commitments are designated as hedges primarily for fiscal 2019 and 2020 sales commitments and, as of April 30, 2019, have experienced net mark-to-market losses of approximately $1.0 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 loss,” respectively, until settled. Upon settlement, realized gains or losses on these contracts will be reclassified to “Cost of sales-propane and other gas liquid sales” in the condensed consolidated statements of operations as the underlying inventory is sold. These financial derivative purchase commitment net losses are expected to be offset by increased margins on propane sales commitments that qualify for the normal purchase normal sale exception. At April 30, 2019, we estimate 73% 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.

### Summary Discussion of Results of Operations:

### Items Impacting the Comparability of Our Financial Results

Our current and future results of operations will not be comparable to our historical results of operations for the periods presented due to the following transactions:

- During the fourth quarter of fiscal 2018, we completed the sale of a subsidiary and a group of assets within the Midstream operations segment. The subsidiary sold was Bridger Environmental LLC, which encompassed all saltwater disposal activities previously operated by us. The group of assets sold included all assets, excluding working capital, associated with the crude oil trucking operations previously operated by us. Additionally, the sale included two crude oil injection terminals.
- During the third quarter of fiscal 2018, we sold all 1,292 rail tank cars utilized in our Midstream operations segment.
- During the second quarter of fiscal 2018, we completed the sale of Bridger Energy, LLC, included in our Midstream operations segment.
- During the fourth quarter of fiscal 2018, we completed the sale of a group of assets encompassing an immaterial reporting unit within our Propane operations segment that sold lower margin propane related equipment.
- Operating loss and Adjusted EBITDA associated with these divestitures in the three months ended April 30, 2018 was $7.8 million and $2.3 million, respectively. Operating loss and Adjusted EBITDA associated with these divestitures in the nine months ended April 30, 2018 was $62.2 million and $13.4 million, respectively.

### For the three months ended April 30, 2019 and 2018

During the three months ended April 30, 2019, we generated net earnings attributable to Ferrellgas Partners L.P. of $20.5 million, compared to net earnings attributable to Ferrellgas Partners L.P. of $10.9 million during the three months ended April 30, 2018.

Our propane operations and related equipment sales segment generated operating income of $77.1 million during the three months ended April 30, 2019, compared to operating income of $74.5 million earned during the three months ended April 30, 2018. The increase in operating income is primarily due to an $18.3 million increase in “Gross margin – Propane and other gas liquid sales”, largely offset by a $9.3 million increase in "Operating, general and administrative expense", a $4.3 million decrease in “Gross margin – other”, and a $1.3 million increase in "Equipment lease expense". The increase in "Operating, general and administrative expense" and "Gross margin - Propane and other gas liquid sales" primarily resulted from a 4% increase in retail customer count and the increase in total gallons sold. The impact of the sale of a group of assets that sold lower margin propane related equipment at the end of fiscal 2018 resulted in the decrease in "Gross margin - other". The increase in “Equipment lease expense” is due to continued investment in new propane delivery trucks both to serve our expanding customer base and to reduce the age of our fleet. In addition, we purchased new propane delivery trucks as discussed below.

Our corporate and other operations recognized an operating loss of $12.3 million during the three months ended April 30, 2019, compared to an operating loss of $23.2 million during the three months ended April 30, 2018. This decrease in operating loss was primarily due to the $8.5 million operating loss related to our midstream operations in fiscal 2018.

“Interest expense” for Ferrellgas increased $3.8 million primarily due to increased interest rates on our secured credit facility.

Distributable cash flow attributable to equity investors decreased to $34.7 million in the current period from $43.9 million in the prior period primarily due to a $7.8 million increase in our maintenance capital expenditures and a $2.9 million increase in cash interest expense. This increase in maintenance capital expenditures primarily relates to the purchase of new propane delivery trucks which have historically been leased.

Distributable cash flow excess increased to $34.0 million in the current period from $33.3 million in the prior period, primarily due to an $7.8 million increase in our maintenance capital expenditures and a $2.9 million increase in cash interest expense, as discussed above, partially offset by a $9.7 million decrease in distributions to common unitholders.

### For the nine months ended April 30, 2019 and 2018

During the nine months ended April 30, 2019, we generated net earnings attributable to Ferrellgas Partners L.P. of $6.8 million, compared to net loss attributable to Ferrellgas Partners L.P. of $38.9 million during the nine months ended April 30, 2018.

Our propane operations and related equipment sales segment generated operating income of $192.1 million during the nine months ended April 30, 2019, compared to operating income of $187.5 million earned during the nine months ended April 30, 2018. The increase in operating income is primarily due to a $35.1 million increase in “Gross margin – Propane and other gas liquid sales” and a $10.0 million impairment of goodwill in the nine months ended April 30, 2018 related to an immaterial reporting unit that was not repeated in the current period, partially offset by a $19.3 million increase in "Operating, general and administrative expense", and a $12.5 million decrease in "Gross margin – other”. The increase in "Operating, general and administrative expense" and "Gross margin - Propane and other gas liquid sales" primarily resulted from a 4% increase in retail customer count and the increase in total gallons sold. The impact of the sale of a group of assets that sold lower margin propane related equipment at the end of fiscal 2018 resulted in the decrease in "Gross margin - other".

Our corporate and other operations recognized an operating loss of $52.1 million during the nine months ended April 30, 2019, compared to an operating loss of $103.8 million recognized during the nine months ended April 30, 2018. This decrease in operating loss was primarily due to a $53.6 million operating loss related to our midstream operations in fiscal 2018.

“Interest expense” for Ferrellgas increased $9.1 million primarily due to increased interest rates on our secured credit facility.

Distributable cash flow attributable to equity investors decreased to $60.1 million in the current period from $103.8 million in the prior period primarily due to a $26.0 million increase in our maintenance capital expenditures, a $10.2 million decrease in our Adjusted EBITDA related to midstream operations in fiscal 2018 and a $7.7 million increase in cash interest expense. This increase in maintenance capital expenditures primarily relates to the purchase of new propane delivery trucks, which have historically been leased.

Distributable cash flow excess decreased to $49.2 million in the current period from $72.6 million in the prior period, primarily due to a $26.0 million increase in our maintenance capital expenditures, a $10.2 million decrease in our Adjusted EBITDA related to midstream operations in fiscal 2018 and a $7.7 million increase in cash interest expense, partially offset by a $19.4 million decrease in distributions to common unitholders.

### Consolidated Results of Operations

*(amounts in thousands)*

|  | Three months ended April 30, 2019 | 2018 | Nine months ended April 30, 2019 | 2018 |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $479,625 | $515,810 | $1,405,311 | $1,725,621 |
| Total cost of sales | 252,709 | 294,787 | 774,845 | 1,086,901 |
| Operating expense | 119,991 | 116,579 | 351,541 | 350,757 |
| Depreciation and amortization expense | 20,617 | 25,348 | 59,214 | 76,565 |
| General and administrative expense | 11,516 | 11,678 | 42,037 | 39,733 |
| Equipment lease expense | 8,319 | 7,133 | 24,597 | 20,828 |
| Non-cash employee stock ownership plan compensation charge | (4) | 2,738 | 4,688 | 10,731 |
| Asset impairments | — | — | — | 10,005 |
| Loss on asset sales and disposals | 1,683 | 6,270 | 8,403 | 46,414 |
| Operating income | 64,794 | 51,277 | 139,986 | 83,687 |
| Interest expense | (44,162) | (40,375) | (132,931) | (123,855) |
| Other income, net | 251 | 227 | 356 | 1,422 |
| Earnings (loss) before income taxes | 20,883 | 11,129 | 7,411 | (38,746) |
| Income tax expense | 123 | 67 | 284 | 282 |
| Net earnings (loss) | 20,760 | 11,062 | 7,127 | (39,028) |
| Net earnings (loss) attributable to noncontrolling interest | 299 | 201 | 337 | (131) |
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | 20,461 | 10,861 | 6,790 | (38,897) |
| Less: General partner's interest in net earnings (loss) | 205 | 109 | 68 | (389) |
| Common unitholders' interest in net earnings (loss) | $20,256 | $10,752 | $6,722 | $(38,508) |

### Non-GAAP Financial Measures

In this Quarterly Report we present the following non-GAAP financial measures: Adjusted EBITDA, Distributable cash flow attributable to equity investors, Distributable cash flow attributable to common unitholders, and Distributable cash flow excess.

*Adjusted EBITDA*. Adjusted EBITDA is calculated as net earnings (loss) attributable to Ferrellgas Partners, L.P., less the sum of the following: income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, loss on asset sales and disposals, other income, net, severance costs, legal fees and settlements, multi-employer pension withdrawal settlement, unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments, and net earnings (loss) attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership’s performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA should be viewed in conjunction with measurements that are computed in accordance with GAAP.

*Distributable Cash Flow Attributable to Equity Investors*. Distributable cash flow attributable to equity investors is calculated as Adjusted EBITDA minus net cash interest expense, maintenance capital expenditures and cash paid for taxes, plus proceeds from asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to equity investors. Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to distributable cash flow attributable to equity investors or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to equity investors should be viewed in conjunction with measurements that are computed in accordance with GAAP.

*Distributable Cash Flow Attributable to Common Unitholders*. Distributable cash flow attributable to common unitholders is calculated as Distributable cash flow attributable to equity investors minus distributable cash flow attributable to general partner and noncontrolling interest. Management considers Distributable cash flow attributable to common unitholders a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to common unitholders. Distributable cash flow attributable to common unitholders, as management defines it, may not be comparable to distributable cash flow attributable to common unitholders or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow attributable to common unitholders that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to common unitholders should be viewed in conjunction with measurements that are computed in accordance with GAAP.

*Distributable Cash Flow Excess*. Distributable cash flow excess is calculated as Distributable cash flow attributable to common unitholders minus Distributions paid to common unitholders. Distributable cash flow excess, if any, is retained to establish reserves to reduce debt, fund capital expenditures and for other partnership purposes and management considers Distributable cash flow excess a meaningful measure of the partnership’s ability to effectuate those purposes. Items added into our calculation of distributable cash flow excess that will not occur on a continuing basis may have associated cash payments. Distributable cash excess should be viewed in conjunction with measurements that are computed in accordance with GAAP.

The following table reconciles EBITDA, Adjusted EBITDA, Distributable cash flow attributable to equity investors. Distributable cash flow attributable to common unitholders and Distributable cash flow excess to Net earnings (loss) attributable to Ferrellgas Partners, L.P. for the three and nine months ended April 30, 2019 and 2018:

*(amounts in thousands)*

|  | Three months ended April 30, 2019 | 2018 | Nine months ended April 30, 2019 | 2018 |
| --- | ---: | ---: | ---: | ---: |
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | $20,461 | $10,861 | $6,790 | $(38,897) |
| Income tax expense (benefit) | 123 | 67 | 284 | 282 |
| Interest expense | 44,162 | 40,375 | 132,931 | 123,855 |
| Depreciation and amortization expense | 20,617 | 25,348 | 59,214 | 76,565 |
| EBITDA | 85,363 | 76,651 | 199,219 | 161,805 |
| Non-cash employee stock ownership plan compensation charge | (4) | 2,738 | 4,688 | 10,731 |
| Assets impairments | — | — | — | 10,005 |
| Loss on asset sales and disposals | 1,683 | 6,270 | 8,403 | 46,414 |
| Other income (expense), net | (251) | (227) | (356) | (1,422) |
| Severance costs | — | — | 1,600 | 1,663 |
| Legal fees and settlements | 1,471 | 1,289 | 10,643 | 3,407 |
| Multi-employer pension plan withdrawal settlement | — | — | 1,524 | — |
| Unrealized (non-cash) loss on changes in fair value of derivatives not designated as hedging instruments | — | — | — | 1,293 |
| Net earnings (loss) attributable to noncontrolling interest | 299 | 201 | 337 | (131) |
| Adjusted EBITDA | 88,561 | 86,922 | 226,058 | 233,765 |
| Net cash interest expense (a) | (40,747) | (37,873) | (123,325) | (115,664) |
| Maintenance capital expenditures (b) | (13,506) | (5,741) | (45,038) | (19,085) |
| Cash refund from (paid for) taxes | (23) | 470 | (21) | 458 |
| Proceeds from certain asset sales | 456 | 148 | 2,416 | 4,355 |
| Distributable cash flow attributable to equity investors | 34,741 | 43,926 | 60,090 | 103,829 |
| Distributable cash flow attributable to general partner and non-controlling interest | (695) | (879) | (1,202) | (2,077) |
| Distributable cash flow attributable to common unitholders | 34,046 | 43,047 | 58,888 | 101,752 |
| Less: Distributions paid to common unitholders | — | (9,715) | (9,715) | (29,146) |
| Distributable cash flow excess | $34,046 | $33,332 | $49,173 | $72,606 |

(a) Net cash interest expense is the sum of interest expense less non-cash interest expense and other income (expense), 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.

### Segment Operating Results for the three months ended April 30, 2019 and 2018

### Propane operations and related equipment sales

The following table summarizes propane sales volumes and the Adjusted EBITDA results of our propane operations and related equipment sales segment for the periods indicated:

| As of April 30, | 2019 | 2018 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | ---: |
| Retail customers | 705,605 | 679,678 | 25,927 | 4% |
| Tank exchange selling locations | 54,308 | 51,165 | 3,143 | 6% |
| **(amounts in thousands)** |  |  |  |  |
| **Three months ended April 30,** |  |  |  |  |
| Propane sales volumes (gallons): |  |  |  |  |
| Retail - Sales to End Users | 204,441 | 189,183 | 15,258 | 8% |
| Wholesale - Sales to Resellers | 59,641 | 57,121 | 2,520 | 4% |
|  | 264,082 | 246,304 | 17,778 | 7% |
| Revenues - |  |  |  |  |
| Propane and other gas liquids sales: |  |  |  |  |
| Retail - Sales to End Users | $350,151 | $330,320 | $19,831 | 6% |
| Wholesale - Sales to Resellers | 99,311 | 97,689 | 1,622 | 2% |
| Other Gas Sales (a) | 10,094 | 23,293 | (13,199) | (57)% |
| Other (b) | 20,069 | 41,913 | (21,844) | (52)% |
| Propane and related equipment revenues | $479,625 | $493,215 | $(13,590) | (3)% |
| Gross Margin - |  |  |  |  |
| Propane and other gas liquids sales: (c) |  |  |  |  |
| Retail - Sales to End Users (a) | $167,179 | $151,084 | $16,095 | 11% |
| Wholesale - Sales to Resellers (a) | 41,988 | 39,799 | 2,189 | 6% |
| Other (b) | 17,749 | 22,063 | (4,314) | (20)% |
| Propane and related equipment gross margin | $226,916 | $212,946 | $13,970 | 7% |
| Operating, general and administrative expense (d) | $119,989 | $110,673 | $9,316 | 8% |
| Equipment lease expense | 7,939 | 6,626 | 1,313 | 20% |
| Operating income | $77,118 | $74,479 | $2,639 | 4% |
| Depreciation and amortization expense | 20,187 | 18,880 | 1,307 | 7% |
| Loss on asset sales and disposals | 1,683 | 2,288 | (605) | (26)% |
| Adjusted EBITDA | $98,988 | $95,647 | $3,341 | 3% |

(a) Gross margin for Other Gas Sales is allocated to Gross margin "Retail - Sales to End Users" and "Wholesale - Sales to Resellers" based on the volumes in each respective category.

(b) Other primarily includes appliance and material sales, and to a lesser extent various customer fee income.

(c) Gross margin from "Propane and other gas liquids sales" represents "Revenues - Propane and other gas liquids sales" less "Cost of sales - Propane and other gas liquids sales" and does not include depreciation and amortization.

(d) Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment.

Propane sales volumes during the three months ended April 30, 2019 increased 7% or 17.8 million gallons from the prior year period due to increased sales to retail customers of 15.2 million gallons, and an increase of 2.5 million gallons to wholesale customers. The increase in propane sales volumes to retail customers was primarily due to the 4% increase in retail customer count.

Weather in the more highly concentrated geographic areas we serve for the three months ended April 30, 2019 was approximately 6% colder than normal, and approximately 1% colder than the prior year period. Retail gallons increased due to efforts to increase market share and to a lesser extent colder weather.

Our wholesale sales price per gallon largely correlates to the change in the wholesale market price of propane. The Mt. Belvieu, Texas major supply point during the three months ended April 30, 2019 averaged 20% less than the prior year period, while at the Conway, Kansas major supply point prices averaged 15% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.66 and $0.82 per gallon during the three months ended April 30, 2019 and 2018, respectively, while the wholesale market price at Conway, Kansas averaged $0.58 and $0.68 per gallon during the three months ended April 30, 2019 and 2018, respectively. We believe this decrease in the wholesale cost of propane contributed to our decrease in revenues, but an increase in gross margin.

#### Revenues

Retail sales increased $19.8 million compared to the prior period. This increase resulted from a $26.6 million increase in sales volumes, partially offset by a $6.8 million decrease in sales price per gallon, as discussed above.

Wholesale sales increased $1.6 million compared to the prior period. This increase primarily resulted from a $7.8 million increase in sales volumes, largely offset by a $6.1 million decrease in sales price per gallon, as discussed above, and due to the impact of increased competitive pressures.

Other gas sales decreased $13.2 million compared to the prior year period primarily due to a decrease in sales volume.

Other revenues decreased $21.8 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.

#### Gross margin - Propane and other gas liquids sales

Gross margin increased $18.3 million primarily due to the increase in gallon sales, as discussed above. The increase in retail gross margin of $16.1 million resulted from an increase in retail customer counts and to a lesser extent increases in gross margin per gallon, both as discussed above. The increase in retail gross margin of $16.1 million resulted primarily from an increase in retail customer accounts and to a lesser extent an increase in gross margin per gallon. The $2.2 million increase in wholesale gross margin primarily relates to increased volumes, as discussed above, partially offset by decreased gross margin per gallon due to the impact of increased competitive pressures on the sales price per gallon, as discussed above.

#### Gross margin - other

Gross margin decreased $4.3 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.

#### Operating income

Operating income increased $2.6 million primarily due to an $18.3 million increase in “Gross margin – Propane and other gas liquid sales”, as discussed above, largely offset by a $9.3 million increase in "Operating, general and administrative expense" primarily resulting from the increase in retail customer count, as discussed above, a $4.3 million decrease in “Gross margin – other”, as discussed above, and a $1.3 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $7.5 million increase in field personnel costs, a $4.2 million increase in general liability and worker compensation costs, and a $1.2 million increase in vehicle fuel costs, partially offset by $3.3 million of costs incurred in the prior year period related to a business sold in fiscal 2018. Equipment lease expense increased due to continued investment in new propane delivery trucks both to serve our expanding customer base and to reduce the age of our fleet.

#### Adjusted EBITDA

Adjusted EBITDA increased $3.3 million primarily due to an $18.3 million increase in “Gross margin – Propane and other gas liquid sales”, as discussed above, largely offset by a $9.3 million increase in "Operating, general and administrative expense", a $4.3 million decrease in “Gross margin – other”, as discussed above, and a $1.3 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $7.5 million increase in field personnel costs, and a $4.2 million increase in general liability and worker compensation costs, partially offset by $3.3 million of costs incurred in the prior year period related to a business sold in fiscal 2018.

### Corporate and other operations

The following table summarizes the financial results of our corporate operations for the periods indicated. Prior period amounts also include results of our midstream operations.

*(amounts in thousands)*

| Three months ended April 30, Volumes (barrels): | 2019 | 2018 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | --- |
| Crude oil hauled | — | 11,640 | (11,640) | NM |
| Crude oil sold | — | 27 | (27) | NM |
| Salt water volume processed | — | 4,761 | (4,761) | NM |
| Revenues - |  |  |  |  |
| Crude oil logistics | $— | $17,500 | $(17,500) | NM |
| Crude oil sales | — | 1,619 | (1,619) | NM |
| Other | — | 3,476 | (3,476) | NM |
|  | $— | $22,595 | $(22,595) | NM |
| Gross margin (a) - |  |  |  |  |
| Crude oil logistics | $— | $5,540 | $(5,540) | NM |
| Crude oil sales | — | 1,400 | (1,400) | NM |
| Other | — | 1,137 | (1,137) | NM |
|  | $— | $8,077 | $(8,077) | NM |
| Operating, general and administrative expense | $11,518 | $17,584 | $(6,066) | (34)% |
| Equipment lease expense | 380 | 507 | (127) | (25)% |
| Operating loss | $(12,324) | $(23,202) | $10,878 | 47% |
| Depreciation and amortization expense | 430 | 6,468 | (6,038) | (93)% |
| Non-cash employee stock ownership plan compensation charge | (4) | 2,738 | (2,742) | (100)% |
| Loss on asset sales and disposals | — | 3,982 | (3,982) | NM |
| Legal fees and settlements | 1,471 | 1,289 | 182 | 14% |
| Adjusted EBITDA | $(10,427) | $(8,725) | $(1,702) | (20)% |

NM - Not meaningful

(a) Gross margin represents "Revenues - Midstream operations" less "Cost of sales - Midstream operations" and does not include depreciation and amortization.

In various dispositions that occurred during fiscal 2018, we sold our midstream businesses. Accordingly, much of the significant variances reported above result from the cessation of the midstream business by the end of fiscal 2018.

#### Operating loss

Operating loss decreased by $10.9 million during the three months ended April 30, 2019 as compared to the three months ended April 30, 2018. This decrease in operating loss was primarily due to the $8.5 million operating loss related to our midstream operations in fiscal 2018 and decreased corporate costs of $2.3 million. Corporate costs decreased primarily due to a $2.7 million decrease in non-cash employee stock ownership plan compensation costs, and $0.4 million decrease in depreciation and amortization, partially offset by a $1.2 million increase in legal costs.

#### Adjusted EBITDA

Adjusted EBITDA decreased $1.7 million primarily due to the $1.0 million decrease in Adjusted EBITDA related to our midstream operations in fiscal 2018 and a $0.7 million increase in Adjusted EBITDA related to corporate costs. Corporate costs increased primarily due to a $1.0 million increase in legal costs.

### Segment Operating Results for the nine months ended April 30, 2019 and 2018

### Propane operations and related equipment sales

The following table summarizes propane sales volumes and the Adjusted EBITDA results of our propane operations and related equipment sales segment for the periods indicated:

| As of April 30, | 2019 | 2018 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | ---: |
| Retail customers | 705,605 | 679,678 | 25,927 | 4% |
| Tank exchange selling locations | 54,308 | 51,165 | 3,143 | 6% |
| **(amounts in thousands)** |  |  |  |  |
| **Nine months ended April 30,** |  |  |  |  |
| Propane sales volumes (gallons): |  |  |  |  |
| Retail - Sales to End Users | 573,152 | 543,548 | 29,604 | 5% |
| Wholesale - Sales to Resellers | 179,256 | 185,492 | (6,236) | (3)% |
|  | 752,408 | 729,040 | 23,368 | 3% |
| Revenues - |  |  |  |  |
| Propane and other gas liquids sales: |  |  |  |  |
| Retail - Sales to End Users | $983,742 | $931,495 | $52,247 | 6% |
| Wholesale - Sales to Resellers | 308,647 | 324,863 | (16,216) | (5)% |
| Other Gas Sales (a) | 52,245 | 89,941 | (37,696) | (42)% |
| Other (b) | 60,677 | 118,691 | (58,014) | (49)% |
| Propane and related equipment revenues | $1,405,311 | $1,464,990 | $(59,679) | (4)% |
| Gross Margin - |  |  |  |  |
| Propane and other gas liquids sales: (c) |  |  |  |  |
| Retail - Sales to End Users (a) | $450,401 | $411,644 | $38,757 | 9% |
| Wholesale - Sales to Resellers (a) | 128,177 | 131,803 | (3,626) | (3)% |
| Other (b) | 51,888 | 64,352 | (12,464) | (19)% |
| Propane and related equipment gross margin | $630,466 | $607,799 | $22,667 | 4% |
| Operating, general and administrative expense (d) | $351,537 | $332,244 | $19,293 | 6% |
| Equipment lease expense | 23,596 | 19,206 | 4,390 | 23% |
| Operating income | $192,086 | $187,458 | $4,628 | 2% |
| Depreciation and amortization expense | 57,523 | 55,135 | 2,388 | 4% |
| Loss on asset sales and disposals | 5,724 | 3,751 | 1,973 | 53% |
| Asset impairments | — | 10,005 | (10,005) | NM |
| Severance costs | 690 | 358 | 332 | 93% |
| Multi-employer pension plan withdrawal settlement | 1,524 | — | 1,524 | NM |
| Adjusted EBITDA | $257,547 | $256,707 | $840 | 0% |

(a) Gross margin for Other Gas Sales is allocated to Gross margin "Retail - Sales to End Users" and "Wholesale - Sales to Resellers" based on the volumes in each respective category.

(b) Other primarily includes appliance and material sales, and to a lesser extent various customer fee income.

(c) Gross margin from "Propane and other gas liquids sales" represents "Revenues - Propane and other gas liquids sales" less "Cost of sales - Propane and other gas liquids sales" and does not include depreciation and amortization.

(d) Operating, general, and administrative expenses are included in the calculation of Adjusted EBITDA. General and administrative expenses include only certain items that were directly attributable to the propane operations and related equipment sales segment.

Propane sales volumes during the nine months ended April 30, 2019 increased 3% or 23.4 million gallons, from the prior year period due to increased sales to retail customers of 29.6 million gallons, partially offset by a decrease of 6.2 million gallons to wholesale customers. The increase in propane sales volumes to retail customers was primarily due to the 4% increase in retail customer count. The decrease in propane sales to wholesale customers relates to the impact of increased competitive pressures.

Weather in the more highly concentrated geographic areas we serve for the nine months ended April 30, 2019 was approximately 4% colder than normal and 2% colder than the prior year period. Retail gallons increased due to efforts to increase market share and to a lesser extent colder weather.

Our wholesale sales price per gallon partially correlates to the change in the wholesale market price of propane. The wholesale market price at major supply points in Mt. Belvieu, Texas during the nine months ended April 30, 2019 averaged 9% less than the prior year period, while at the Conway, Kansas major supply point prices averaged 18% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.79 and $0.87 per gallon during the nine months ended April 30, 2019 and 2018, respectively, while the wholesale market price at Conway, Kansas averaged $0.66 and $0.80 per gallon during the nine months ended April 30, 2019 and 2018, respectively. We believe this decrease in the wholesale cost of propane contributed to our decrease in revenues, but an increase in gross margin.

#### Revenues

Retail sales increased $52.2 million compared to the prior period. This increase resulted from $50.7 million in increased sales volumes as discussed above.

Wholesale sales decreased $16.2 million compared to the prior period. This decrease primarily resulted from a $20.2 million decrease in sales price per gallon partially offset by a $4.0 million increase in sales volumes, both as discussed above. Additionally, we believe the decrease in sales price per gallon was caused by the impact of increased competitive pressures.

Other gas sales decreased $37.7 million compared to the prior year period primarily due to decreased sales volumes.

Other revenues decreased $58.0 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.

#### Gross margin - Propane and other gas liquids sales

Gross margin increased $35.1 million primarily due to the increase in gallon sales, as discussed above, and to a lesser extent increased gross margin per gallon. The increase in retail gross margin of $38.8 million resulted from an increase in retail customer counts and to a lesser extent an increase in gross margin, both as discussed above. The $3.7 million decrease in wholesale gross margin primarily relates to decreased gross margin per gallon due to the impact of increased competitive pressures on the sales price per gallon, partially offset by increased volumes, both as discussed above.

#### Gross margin - other

Gross margin decreased $12.5 million compared to the prior year period primarily due to the sale of our lower margin propane related equipment business at the end of fiscal 2018.

#### Operating income

Operating income increased $4.6 million primarily due to a $35.1 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above, and a $10.0 million impairment of goodwill related to an immaterial reporting unit that was not repeated in the current period, partially offset by a $19.3 million increase in "Operating, general and administrative expense" primarily resulting from the increase in retail customer count, as discussed above, and a $12.5 million decrease in "Gross margin - other", as discussed above, and a $4.4 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $17.8 million increase in field personnel costs, a $6.7 million increase in general liability and worker compensation costs, a $2.9 million increase in vehicle fuel costs, and a $1.5 million pension settlement charge associated with the withdrawal from a multi-employer pension plan, partially offset by $9.8 million of costs incurred in the prior year period related to a business sold in fiscal 2018. Equipment lease expense increased due to continued investment in new propane delivery trucks to both serve our expanding customer base and to reduce the age of our fleet.

#### Adjusted EBITDA

Adjusted EBITDA increased $0.8 million primarily due to a $35.1 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above, partially offset by a $17.4 million increase in "Operating, general and administrative expense" and a $12.5 million decrease in "Gross margin - other", as discussed above, and a $4.4 million increase in "Equipment lease expense". "Operating, general and administrative expense" increased primarily due to a $17.5 million increase in field personnel costs, a $6.7 million increase in general liability and worker compensation costs, and a $2.9 million increase in vehicle fuel costs, partially offset by $9.8 million of costs incurred in the prior year period related to a business sold in fiscal 2018.

### Corporate and other operations

The following table summarizes the financial results of our corporate operations for the periods indicated. Prior period amounts also include results of our midstream operations.

*(amounts in thousands)*

| Nine months ended April 30, Volumes (barrels): | 2019 | 2018 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | --- |
| Crude oil hauled | — | 34,855 | (34,855) | NM |
| Crude oil sold | — | 3,412 | (3,412) | NM |
| Salt water volume processed | — | 14,552 | (14,552) | NM |
| Revenues - |  |  |  |  |
| Crude oil logistics | $— | $50,727 | $(50,727) | NM |
| Crude oil sales | — | 198,283 | (198,283) | NM |
| Other | — | 11,620 | (11,620) | NM |
|  | $— | $260,630 | $(260,630) | NM |
| Gross margin (a) - |  |  |  |  |
| Crude oil logistics | $— | $23,046 | $(23,046) | NM |
| Crude oil sales | — | 4,414 | (4,414) | NM |
| Other | — | 3,461 | (3,461) | NM |
|  | $— | $30,921 | $(30,921) | NM |
| Operating, general, and administrative expenses | $42,041 | $58,246 | $(16,205) | (28)% |
| Equipment lease expense | 1,001 | 1,622 | (621) | (38)% |
| Operating loss | $(52,100) | $(103,771) | $51,671 | (50)% |
| Depreciation and amortization expense | 1,691 | 21,430 | (19,739) | (92)% |
| Non-cash employee stock ownership plan compensation charge | 4,688 | 10,731 | (6,043) | (56)% |
| Loss on asset sales and disposals | 2,679 | 42,663 | (39,984) | (94)% |
| Legal fees and settlements | 10,643 | 3,407 | 7,236 | 212% |
| Severance costs | 910 | 1,305 | (395) | (30)% |
| Unrealized (non-cash) gain on changes in fair value of derivatives not designated as hedging instruments | — | 1,293 | (1,293) | NM |
| Adjusted EBITDA | $(31,489) | $(22,942) | $(8,547) | 37% |

NM - Not meaningful

(a) Gross margin represents "Revenues - Midstream operations" less "Cost of sales - Midstream operations" and does not include depreciation and amortization.

In various dispositions that occurred during fiscal 2018, we sold our midstream businesses. Accordingly, much of the significant variances reported above result from the cessation of the midstream business by the end of fiscal 2018.

#### Operating loss

Operating loss decreased by $51.7 million during the nine months ended April 30, 2019 as compared to the nine months ended April 30, 2018. This decrease in operating loss was primarily due to the $53.6 million operating loss related to our midstream operations in fiscal 2018 and decreased corporate costs of $0.8 million.

#### Adjusted EBITDA

Adjusted EBITDA decreased $8.5 million primarily due to the $10.2 million in Adjusted EBITDA related to our midstream operations in fiscal 2018, partially offset by a $1.7 million decrease in corporate costs. Corporate costs decreased primarily due to a $0.6 million decrease in legal costs and a $0.4 million decrease in equipment lease expense.

### Liquidity and Capital Resources

### General

Our primary sources of liquidity and capital resources are cash flows from operating activities, borrowings under our secured credit facility and our accounts receivable securitization facility and funds received from sales of debt and equity securities. As of April 30, 2019, our total liquidity was $292.3 million, which is comprised of $45.4 million in cash and $246.9 million of availability under our secured credit and accounts receivable securitization facilities. These sources of liquidity and short term capital resources are intended to fund our working capital requirements, letter of credit requirements, and acquisition and capital expenditures. Our access to long term capital resources, in order to address our leverage, may be affected by our ability to access the capital markets, covenants in our debt agreements, unforeseen demands on cash, or other events beyond our control.

### Financial Covenants

As more fully described in Item 2. Management’s Discussion and Analysis under the subheading “Financial Covenants” above, the indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit our ability to, among other things, incur additional indebtedness and make distribution payments to our common unitholders. Given the limitations of these covenants, we continue to pursue a strategy to reduce our debt and interest expense. If we are unsuccessful with our strategy to further reduce debt and interest expense, we will continue to be restricted from making distribution payments to our common unitholders.

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;
- significant and sustained increases in the wholesale cost of propane that we are unable to pass along to our customers;
- a more volatile energy commodity cost environment;
- an unexpected downturn in business operations;
- a significant delay in the collection of accounts or notes receivable;
- a failure to execute our debt and interest expense reduction and refinancing initiatives;
- a change in customer retention or purchasing patterns due to economic or other factors in the United States;
- a material downturn in the credit and/or equity markets; or
- a large uninsured, unfavorable lawsuit judgment or settlement.

We may seek additional capital as part of our debt reduction strategy.

As discussed above, no distributions will be paid to common unitholders in June 2019 for the three months ended April 30, 2019. Unless the indenture governing the outstanding notes is amended or replaced, or the Ferrellgas Partners’ consolidated fixed charge coverage ratio improves to at least 1.75x, this covenant will continue to restrict us from making common unit distributions.

### Distributable Cash Flow

Distributable cash flow attributable to equity investors is reconciled to net earnings (loss) attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, in Item 2. Management’s Discuss and Analysis under the subheading "Non-GAAP Financial Measures" above. A comparison of distributable cash flow attributable to equity investors to cash distributions paid to equity investors for the twelve months ended April 30, 2019 to the twelve months ended January 31, 2019 is as follows (in thousands):

|  | Distributable cash flow attributable to equity investors | Cash reserves (deficiency) approved by our General Partner | Cash distributions paid to equity investors | DCF ratio |
| --- | ---: | ---: | ---: | ---: |
| Nine months ended April 30, 2019 | $60,090 | $50,018 | $10,072 |  |
| For the year ended July 31, 2018 | 62,904 | 22,934 | 39,970 |  |
| Less: Nine months ended April 30, 2018 | 103,829 | 73,930 | 29,899 |  |
| Twelve months ended April 30, 2019 | $19,165 | $(978) | $20,143 | 0.95 |
| Twelve months ended January 31, 2019 | 28,350 | (1,708) | 30,058 | 0.94 |
| Change | $(9,185) | $730 | $(9,915) | 0.01 |

(a) DCF ratio is calculated as Distributable cash flow attributable to equity investors divided by Cash distributions paid to equity investors.

For the twelve months ended April 30, 2019, distributable cash flow attributable to equity investors decreased $9.2 million compared to the twelve months ended January 31, 2019, primarily due to the purchase of new propane delivery trucks funded with cash on hand. Cash distributions paid to equity investors decreased by $9.9 million during that twelve month period, because no distributions have been made for the nine months ended April 30, 2019. Our distribution coverage ratio increased to 0.95 for the twelve months ended April 30, 2019, compared with 0.94 for the twelve months ended January 31, 2019. Cash reserves, which we utilize to meet future anticipated expenditures, decreased by $1.0 million during the twelve months ended April 30, 2019 compared to a decrease of $1.7 million in the twelve months ended January 31, 2019.

We believe that the liquidity available from our cash on hand, cash flows from operating activities, our senior secured credit facility, and the accounts receivable securitization facility, combined with our other debt and interest expense reduction initiatives, will be sufficient to meet our capital expenditure, working capital and letter of credit 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 weather, economic, financial and business 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 propane operations and related products cash flows 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 propane operations and related equipment sales operations.

### Operating Activities

#### Ferrellgas Partners

Net cash provided by operating activities was $70.8 million for the nine months ended April 30, 2019, compared to net cash provided by operating activities of $78.3 million for the nine months ended April 30, 2018. This decrease in cash provided by operating activities was primarily due to a $22.9 million decrease in cash flow from operations, partially offset by an $8.2 million decrease in working capital requirements and a $7.1 million inflow associated with other assets and other liabilities.

The decrease in cash flow from operations is primarily due to an $8.3 million decrease in gross profit, as well as a net increase in "General and administrative expense" and "Equipment lease expense" of $6.1 million, and a $9.1 million increase in "Interest expense," due to increased interest rates on our secured credit facility.

The decrease in working capital requirements for the nine months ended April 30, 2019 compared to the nine months ended April 30, 2018 was primarily due to a $13.7 million decrease in requirements for accounts receivable in our propane operations and related equipment sales segment due to declining propane prices in the current quarter, partially offset by increases in the volume of propane sold, and a $12.7 million decrease in accounts payable. These decreases were partially offset by a $12.4 million increase in requirements for other current liabilities due primarily to an increase in margin deposits paid by us during the nine months ended April 30, 2019 compared to the nine months ended April 30, 2018, a $2.5 million increase in requirements for inventory due to decreases in inventory driven by increases in gallons sold, a $1.7 million increase in accrued interest expense and a $1.5 million increase in prepaid expenses and other current assets.

#### The operating partnership

Net cash provided by operating activities was $86.2 million for the nine months ended April 30, 2019, compared to net cash provided by operating activities of $93.9 million for the nine months ended April 30, 2018. This decrease in cash provided by operating activities was primarily due to a $23.1 million decrease in cash flow from operations, partially offset by a $7.9 million decrease in working capital requirements and a $7.4 million inflow associated with other assets and other liabilities.

The decrease in cash flow from operations is primarily due to an $8.3 million decrease in gross profit, as well as a net increase in "General and administrative expense" and "Equipment lease expense" of $6.2 million, and a $8.7 million increase in "Interest expense," due to increased interest rates on our secured credit facility.

The decrease in working capital requirements for the nine months ended April 30, 2019 compared to the nine months ended April 30, 2018 was primarily due to a $13.7 million decrease in requirements for accounts receivable in our propane operations and related equipment sales segment due to declining propane prices in the current quarter partially offset by increases in the volume of propane sold, and a $12.7 million decrease in accounts payable. These decreases were partially offset by a $12.7 million increase in requirements for other current liabilities due primarily to a increase in margin deposits paid by us during the nine months ended April 30, 2019 compared to the nine months ended April 30, 2018, a $2.5 million increase in requirements for inventory due to decreases in inventory driven by increases in gallons sold, a $1.7 million increase in accrued interest expense and a $1.6 million increase prepaid expenses and other current assets.

### Investing Activities

#### Ferrellgas Partners

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; and
- 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 $103.6 million for the nine months ended April 30, 2019, compared to net cash used in investing activities of $16.0 million for the nine months ended April 30, 2018. This increase in net cash used in investing activities is primarily due to a decrease of $55.4 million in "Proceeds from sale of assets" which is primarily due to the sale of our midstream rail cars during the three months ended April 30, 2018, as well as a $35.7 million increase in "Capital expenditures", partially offset by a $3.5 million decrease in "Business acquisitions, net of cash acquired".

The increase in "Capital expenditures" is primarily due to increases in both maintenance capital expenditures and in growth capital expenditures, in our Propane operations and related equipment sales segment during the nine months ended April 30, 2019. The increase in maintenance capital expenditures is primarily related to the purchase of new propane delivery trucks funded through cash on hand, compared to the nine months ended April 30, 2018. Funding for these trucks has historically been secured through lease financing. The increase in growth capital expenditures is primarily due to the continued rise in the number of cylinders and cages purchased to support increases in tank exchange sales and selling locations, as well as the number of cylinders purchased for industrial and commercial forklift sales, and to a lesser extent, increases in growth capital expenditures related to the purchase of new propane delivery trucks.

The decrease in "Business acquisitions, net of cash acquired" is attributable to seven smaller acquisitions by our Propane operations and related equipment sales segment during the nine months ended April 30, 2019 compared to the four acquisitions completed during the nine months ended April 30, 2018.

Due to the mature nature of our Propane operations and related equipment sales operations segment, we do not anticipate significant fluctuations in maintenance capital expenditures, with the exception of future decisions regarding lease versus buy financing options. However, future fluctuations in growth capital expenditures could occur due to the opportunistic nature of these projects.

On February 20, 2019, we received full payment for our $8.5 million secured promissory note due in May 2020 from Bridger Energy, LLC.

#### The operating partnership

The investing activities discussed above also apply to the operating partnership.

### Financing Activities

#### Ferrellgas Partners

Net cash used in financing activities was $41.1 million for the nine months ended April 30, 2019, compared to net cash used in financing activities of $58.6 million for the nine months ended April 30, 2018. This decrease in cash flow used in financing activities was primarily due to a $51.4 million net reduction in short-term borrowings and a $19.6 million reduction in distributions, partially offset by a $23.6 million decrease in proceeds from long-term debt and a $31.0 million reduction in net proceeds from the accounts receivable securitization.

#### Distributions

During the three months ended October 31, 2018, Ferrellgas Partners paid a per unit distribution on all common units of $0.10 in connection with the distributions declared for the three month period ended July 31, 2018. No distribution on common units was made for the three month periods ended October 31, 2018, January 31, 2019, or for the three month period ended April 30, 2019.

Total distributions paid to common unitholders during the nine months ended April 30, 2019, including the related general partner distributions, was $9.8 million. As discussed above, no distribution on common units was made in December 2018 or March 2019, and will not be made in June 2019 for the nine months ended April 30, 2019 or for any future quarterly period until Ferrellgas Partners’ fixed charge coverage ratio is at least 1.75x, or the indenture governing the notes of Ferrellgas Partners is amended or replaced.

#### Secured credit facility

The Senior Secured Credit Facility consists of a $300.0 million revolving line of credit (the "Revolving Facility") as well as a $275.0 million term loan (the "Term Loan"), which mature on May 4, 2023. Revolving Facility borrowings bear interest at the Prime Rate + 4.75% and Term Loan borrowings bear interest at LIBOR + 5.75%. The Revolving Facility includes a $125.0 million sublimit for the issuance of letters of credit. Borrowings under the Senior Secured Credit Facility are available for working capital needs, capital expenditures and other general partnership purposes, including the refinancing of existing indebtedness and acquisitions, within certain limits.

The Term Loan does not include any scheduled principal payments and the Revolving Facility does not have any scheduled commitment reductions before maturity; however, the Term Loan requires prepayments pursuant to the following: 1) certain asset sales, 2) 50% of any excess cash flow, as defined by the Term Loan, in any fiscal year beginning with fiscal year 2019, 3) certain insurance proceeds, and 4) certain tax refunds.

The Senior Secured Credit Facility is secured with substantially all of the assets of the operating partnership and its subsidiaries, and Ferrellgas Partners’ and the general partner’s partnership interests in the operating partnership, and contains various affirmative and negative covenants and default provisions, as well as requirements with respect to the maintenance of specified financial ratios and limitations on the making of loans and investments.

As of April 30, 2019, the operating partnership had borrowings of $275.0 million under the Term Loan at a rate of 8.26%, which was classified as long-term debt, and no borrowings under the Revolving Facility. As of April 30, 2019, Ferrellgas had available borrowing capacity under the Revolving Facility of $197.9 million. As of July 31, 2018, the operating partnership had borrowings of $275.0 million under the Term Loan at a rate of 7.86%, which was classified as long-term debt, and $32.8 million under the Revolving Facility at a rate of 9.75%, which was classified as short-term borrowings. As of July 31, 2018, Ferrellgas had available borrowing capacity under its Revolving Facility of $159.3 million.

Letters of credit outstanding at April 30, 2019 totaled $102.1 million and were used to secure insurance arrangements, product purchases, and commodity hedges. At April 30, 2019, we had remaining letter of credit capacity of $22.9 million.

On June 6, 2019, Ferrellgas, L.P. entered into an amendment to the agreement governing its Senior Secured Credit Facility. Among other matters, the amendment updated the calculation of the fixed charge coverage ratio for purposes of the fixed charge coverage ratio in the agreement to exclude certain maintenance capital expenditures related to the purchase of new propane delivery trucks which have historically been leased. The amendment provides that up to a specified amount of such maintenance capital expenditures will not be deducted from consolidated EBITDA for purposes of the calculation. The operating partnership was in compliance with the fixed charge coverage ratio covenant, as amended, as of April 30, 2019. A copy of the amendment has been filed as Exhibit 10.31 to this Quarterly Report on Form 10-Q.

#### Accounts receivable securitization

Ferrellgas Receivables is a consolidated subsidiary. Expenses associated with accounts receivable securitization transactions are recorded in “Interest expense” in the condensed consolidated statements of operations. Additionally, borrowings and repayments associated with these transactions are recorded in “Cash flows from financing activities” in the condensed consolidated statements of cash flows.

Cash flows from our accounts receivable securitization facility decreased $31.0 million, as we received net funding of $4.0 million from this facility during the nine months ended April 30, 2019 as compared to receiving net funding of $35.0 million from this facility during the nine months ended April 30, 2018.

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, 2019, we had received cash proceeds of $62.0 million related to the securitization of our trade accounts receivable, with $49.0 million remaining capacity to receive additional proceeds. As of April 30, 2019, the weighted average interest rate was 5.9%. 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 increase, thereby providing additional cash for working capital needs.

#### The operating partnership

The financing activities discussed above also apply to the operating partnership except for cash flows related to distributions, as discussed below.

#### Distributions

The operating partnership paid cash distributions of $25.6 million and $45.5 million during the nine months ended April 30, 2019 and 2018, respectively. The operating partnership will make a distribution of $15.4 million to Ferrellgas Partners L.P. and $0.2 million to the general partner on June 15, 2019 related to the three month period ended April 30, 2019.

### 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 agreements, 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 $212.5 million for the nine months ended April 30, 2019, 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:

*(in thousands)*

|  | Common unit ownership at April 30, 2019 | Distributions paid during the nine months ended April 30, 2019 |
| --- | ---: | ---: |
| Ferrell Companies (1) | 22,529,361 | $2,253 |
| FCI Trading Corp. (2) | 195,686 | 20 |
| Ferrell Propane, Inc. (3) | 51,204 | 5 |
| James E. Ferrell (4) | 4,763,475 | 476 |

(1) Ferrell Companies is the owner of the general partner and is an approximate 23% direct owner of Ferrellgas Partners’ common units and thus a related party. Ferrell Companies also beneficially owns 195,686 and 51,204 common units of Ferrellgas Partners held by FCI Trading Corp. ("FCI Trading") and Ferrell Propane, Inc. ("Ferrell Propane"), respectively, bringing Ferrell Companies’ beneficial ownership to 23.4% at April 30, 2019.

(2) FCI Trading is an affiliate of the general partner and thus a related party.

(3) Ferrell Propane is controlled by the general partner and thus a related party.

(4) James E. Ferrell is the Interim Chief Executive Officer and President of the general partner; and is Chairman of the Board of Directors of the general partner and thus a related party. JEF Capital Management owns 4,758,859 of these common units and is wholly-owned by the James E. Ferrell Revocable Trust Two and other family trusts, all of which James E. Ferrell and/or his family members are the trustees and beneficiaries. James E. Ferrell holds all voting common stock of JEF Capital Management. The remaining 4,616 common units are held by Ferrell Resources Holding, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary.

During the nine months ended April 30, 2019, Ferrellgas Partners and the operating partnership together paid the general partner distributions of $0.4 million.

As discussed previously, Ferrellgas Partners was not in compliance with the consolidated fixed charge coverage ratio under its note indenture, and thus was unable to make restricted payments, including distributions to unitholders after September 2018.

## Market risk

As filed, 5,715 characters.

We did not enter into any risk management trading activities during the nine months ended April 30, 2019. Our remaining market risk sensitive instruments and positions have been determined to be “other than trading.”

#### Commodity price risk management

Our risk management activities primarily attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts.

Our risk management strategy involves taking positions in the forward or financial markets that are equal and opposite to our positions in the physical products market in order to minimize the risk of financial loss from an adverse price change. This risk management strategy is successful when our gains or losses in the physical product markets are offset by our losses or gains in the forward or financial markets. Propane related financial derivatives are designated as cash flow hedges.

Our risk management activities include the use of financial derivative instruments including, but not limited to, price swaps, options, futures and basis swaps to seek protection from adverse price movements and to minimize potential losses. We enter into these financial derivative instruments directly with third parties in the over-the-counter market and with brokers who are clearing members with the Intercontinental Exchange or the Chicago Mercantile Exchange. We also enter into forward propane purchase and sales contracts with counterparties. These forward contracts qualify for the normal purchase normal sales exception within GAAP guidance and are therefore not recorded on our financial statements until settled.

#### Transportation Fuel Price Risk

From time to time, our risk management activities also attempt to mitigate price risks related to the purchase of gasoline and diesel fuel for use in the transport of propane from retail fueling stations. When employed, we attempt to mitigate these price risks through the use of financial derivative instruments.

When employed, our risk management strategy involves taking positions in the financial markets that are not more than the forecasted purchases of fuel for our internal use in the retail and supply propane delivery fleet in order to minimize the risk of decreased earnings from an adverse price change. This risk management strategy locks in our purchase price and is successful when our gains or losses in the physical product markets are offset by our losses or gains in the financial markets. Our transport fuel financial derivatives are not designated as cash flow hedges.

#### Risk Policy and Sensitivity Analysis

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.

We have prepared a sensitivity analysis to estimate the exposure to market risk of our energy commodity positions. Forward contracts, futures, swaps and options outstanding as of April 30, 2019 and July 31, 2018, that were used in our risk management 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 from these positions due to a 10% adverse movement in market prices of the underlying energy commodities was estimated at $9.2 million and $13.7 million as of April 30, 2019 and July 31, 2018, respectively. The preceding hypothetical analysis is limited because changes in prices may or may not equal 10%, thus actual results may differ. Our sensitivity analysis does not include the anticipated transactions associated with these transactions, which we anticipate will be 100% effective.

#### Credit risk

We maintain credit policies with regard to our counterparties that we believe significantly minimize overall credit risk. These policies include an evaluation of counterparties’ financial condition (including credit ratings), and entering into agreements with counterparties that govern credit guidelines.

Our other counterparties consist of major energy companies who are suppliers, marketers, wholesalers, retailers, end users and financial institutions. The overall impact due to certain changes in economic, regulatory and other events may impact our overall exposure to credit risk, either positively or negatively in that counterparties may be similarly impacted. Based on our policies, exposures, credit and other reserves, management does not anticipate a material adverse effect on financial position or results of operations as a result of counterparty performance.

#### Interest rate risk

At April 30, 2019, we had a total of $337.0 million in variable rate secured credit facility and collateralized note payable borrowings. Thus, assuming a one percent increase in our variable interest rate, our interest rate risk related to these borrowings would result in a reduction to future earnings of $3.4 million for the twelve months ending April 30, 2019. The preceding hypothetical analysis is limited because changes in interest rates may or may not equal one percent, thus actual results may differ. Our results of operations, cash flows and financial condition could be materially adversely affected by significant increases in interest rates.

## Controls and procedures

As filed, 2,557 characters.

An evaluation was performed by the management of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp., with the participation of the principal executive officer and principal financial officer of our general partner, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures, as defined in Rules 13a‑15(e) or 15d‑15(e) under the Exchange Act, were effective.

The management of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. does not expect that our disclosure controls and procedures will prevent all errors and all fraud. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Based on the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the above mentioned partnerships and corporations have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events. Therefore, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our disclosure controls and procedures are designed to provide such reasonable assurances of achieving our desired control objectives, and the principal executive officer and principal financial officer of our general partner have concluded, as of April 30, 2019, that our disclosure controls and procedures are effective in achieving that level of reasonable assurance.

During the most recent fiscal quarter ended April 30, 2019, there have been no changes in our internal control over financial reporting (as defined in Rule 13a‑15(f) or Rule 15d‑15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 156 characters.

There have been no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10‑K for fiscal 2018.

Filed Jun 10, 2019.
Source: SEC EDGAR, the filing index for accession 0001558370-19-005571. Last ingested by Listed: Nov 2, 2026, 06:31 ET. No prices; not investment advice.