# Ferrellgas Partners L P: Form 10-Q for the period ended Apr 30, 2020

- Company: [Ferrellgas Partners L P](/companies/fgpr.md) (CIK 922358)
- Form: 10-Q
- Filed: 2020-06-04
- Accepted by EDGAR: Jun 4, 2020, 17:18 ET
- Period: 2020-04-30
- Accession: 0001558370-20-007283
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/922358/000155837020007283/fgp-20200430x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/922358/000155837020007283/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-04-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-02-01 to 2020-04-30 | $412.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2019-08-01 to 2020-04-30 | $1.22bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2020-02-01 to 2020-04-30 | $68.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2019-08-01 to 2020-04-30 | $165.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-02-01 to 2020-04-30 | $161.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2019-08-01 to 2020-04-30 | $794.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-02-01 to 2020-04-30 | −$15.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2019-08-01 to 2020-04-30 | −$12.5m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2020-02-01 to 2020-04-30 | 97,152,700 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2019-08-01 to 2020-04-30 | 97,152,700 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2019-08-01 to 2020-04-30 | $98.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2019-08-01 to 2020-04-30 | $57.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2020-04-30 | $177.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-04-30 | $574.2m | us-gaap:AssetsCurrent |
| Total assets | at 2020-04-30 | $1.72bn | us-gaap:Assets |
| Current liabilities | at 2020-04-30 | $602.8m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2020-04-30 | $2.15bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2020-04-30 | $359.1m | us-gaap:LongTermDebtCurrent |

## Management's discussion and analysis

As filed, 90,870 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” (i) with respect to Ferrellgas Partners refers to Ferrellgas, Inc. and (ii) with respect to the operating partnership refers to (a) Ferrellgas, Inc., in the case of any economic general partner interest and (b) Ferrellgas, Inc., Ferrellgas GP II, LLC and Ferrellgas GP III, LLC, collectively, in the case of any voting general partner interest;
- “Ferrell Companies” refers to Ferrell Companies, Inc., the sole shareholder or sole member, as applicable, of our general partners;
- “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; and
- “fiscal 2021” means the fiscal year ended July 31, 2021, “fiscal 2020” means the fiscal year ended July 31, 2020, “fiscal 2019” means the fiscal year ended July 31, 2019, and “fiscal 2018” means the fiscal year ended July 31, 2018.

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 traded on the OTC Pink Market 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 23.4% of our outstanding common units. Ferrell Companies is owned 100% by an employee stock ownership trust.

We file annual, quarterly, and current reports and other 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 audited historical consolidated financial statements and accompanying Notes thereto included in our Annual Report on Form 10‑K for fiscal 2019 and in our unaudited 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 $357.0 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;
- disruptions to railroad operations on the railroads we use;
- 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;
- disruptions in the capital and credit markets;
- access to available capital to meet our operating requirements up to and including the refinancing of maturing debt instruments; and
- the impact of the inclusion in the report of our auditor of an “emphasis of matter” paragraph regarding substantial doubt as to our ability to continue as a going concern.

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 2019. 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

#### COVID-19

The coronavirus disease 2019 (COVID-19), which has been declared by the World Health Organization as a “Public Health Emergency of International Concern,” continues to spread and severely impact the economy of the United States and other countries around the world. COVID-19 poses the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from or limited in conducting business activities for an indefinite period of time. The outbreak of COVID-19 has already resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions, manufacturing restrictions, declarations of national emergency and states of emergency, business shutdowns and restrictions on the movement of people throughout the United States and the world. While some of our business operations and support systems are deemed essential in many jurisdictions, we are continuing to assess the impact that COVID-19 may have on our results of operations and financial condition and cannot at this time accurately predict what effects these conditions will have on our operations and sales due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak and the length of the travel restrictions and business closures imposed by governments in different jurisdictions. Additionally, initiatives we have implemented or may implement to slow and/or reduce the impact of COVID-19, such as using staggered start times for drivers, may increase our operating expenses and reduce the efficiency of our operations. Any of the foregoing events or other unforeseen consequences of public health epidemics may have further adverse impacts on U.S. and global economic conditions, including a general slowdown in the U.S. economy, which could decrease demand for our products and have a material adverse effect on our results of operations and financial condition.

#### Senior secured notes

On April 16, 2020, the operating partnership issued $700.0 million aggregate principal amount of 10.00% senior secured first lien notes due 2025, $575.0 million of which was issued at par and $125.0 million of which was issued at 103% of par. The operating partnership utilized a portion of the net proceeds of that offering to repay all $283.9 million of the outstanding borrowings under its Senior Secured Credit Facility, together with $3.1 million of accrued interest and a $17.5 million prepayment premium and terminated that facility. Additionally, the operating partnership used a portion of the net proceeds from that offering to cash collateralize all of the letters of credit outstanding under the Senior Secured Credit Facility and to make a cash deposit of $11.5 million with the administrative agent under the Senior Secured Credit Facility, which may be used by the administrative agent to pay contingent obligations arising under the Financing Agreement that governed the Senior Secured Credit Facility. To the extent the cash deposit is not used to pay any such contingent obligations, it will be returned to the operating partnership in certain circumstances. The operating partnership intends to use the remaining net proceeds for general corporate purposes.

#### Amendment to accounts receivable securitization facility

On April 10, 2020, the operating partnership entered into a ninth amendment to the agreement governing its accounts receivable securitization facility (as amended, the “Purchase Agreement”), which amended and restated the amortization event related to the Senior Secured Leverage Ratio (as defined in the Purchase Agreement) of the operating partnership and the definition of “Consolidated Total Secured Debt” in the Purchase Agreement to, among other matters, provide that obligations with respect to cash collateralized letters of credit are excluded from Consolidated Total Secured Debt and, therefore, from the calculation of the Senior Secured Leverage Ratio, beginning with the fiscal quarter ended January 31, 2020. The ninth amendment also amended the Purchase Agreement to (i) increase the interest rate applicable margin by 0.5% to 2.5% (or 4.5% while an amortization event under the Purchase Agreement exists) and (ii) increase the interest rate floors for the alternate base rate and LIBOR from 0.0% to 1.0%.

### Debt and interest expense reduction strategy

We continue to pursue a strategy to further reduce our debt and interest expense. Additional opportunities include the generation of additional cash flows through accretive acquisitions, continued restructuring or refinancing of existing indebtedness, selling additional assets, maintaining the suspension of Ferrellgas Partners’ common unit distributions, issuing equity or executing one or more debt exchanges. We expect to maintain our debt and interest expense reduction strategy until our consolidated leverage ratio reaches a level that we deem appropriate for our business.

Ferrellgas Partners has $357.0 million in unsecured notes due June 15, 2020 that are classified as current in its condensed consolidated financial statements. Ferrellgas Partners’ ability to restructure, refinance or otherwise satisfy these notes is directly impacted by the cash flows of Ferrellgas, L.P. The ability of Ferrellgas Partners to restructure or refinance these notes is uncertain considering the level of other outstanding indebtedness.

During fiscal 2019, we engaged Moelis & Company LLC as our financial advisor and the law firm of Squire Patton Boggs LLP to assist us with our ongoing process to address our upcoming debt maturities.

### Financial covenants

The indenture governing the outstanding notes of Ferrellgas Partners and the indentures governing the operating partnership’s indebtedness contain various covenants that limit our ability to, among other things, make restricted payments and incur additional indebtedness. Our general partner believes that the most restrictive of these covenants are the restricted payments covenants discussed below.

#### Ferrellgas Partners, L.P., the master limited partnership

The indenture governing the outstanding notes of Ferrellgas Partners due June 15, 2020 contains a covenant that restricts the ability of Ferrellgas Partners to make certain restricted payments, including distributions on its common units. Under this covenant, subject to the limited exception described below, Ferrellgas Partners may not make a restricted payment unless its consolidated fixed charge coverage ratio (defined in the indenture generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, both as adjusted for certain, specified items) is at least 1.75x, on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events. As of April 30, 2020, Ferrellgas Partners’ consolidated fixed charge coverage ratio was 1.35x.

If the consolidated fixed charge coverage 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 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 have been or will be paid to common unitholders for the three months ended April 30, 2020, and the general partner expects that this covenant will continue to prohibit Ferrellgas Partners from making common unit distributions unless and until the outstanding notes of Ferrellgas Partners due 2020 are restructured, refinanced or otherwise satisfied. While there can be no assurance of success, as part of our debt and interest expense reduction strategy, we are presently considering potential solutions to address the upcoming maturity of the outstanding notes of Ferrellgas Partners due 2020. The potential solutions include, among others, restructuring, refinancing or a transaction to exchange new notes for some or all of these notes.

#### Ferrellgas, L.P., the operating partnership

Similar to the indenture governing the outstanding notes of Ferrellgas Partners, the indentures governing the outstanding notes of the operating partnership contain covenants that restrict the ability of the operating partnership to make certain restricted payments, including distributions to Ferrellgas Partners. Under these covenants in the indentures governing the operating partnership’s unsecured notes, subject to the limited exceptions described below, the operating partnership may not make a restricted payment unless its consolidated fixed charge coverage ratio (defined in the indentures generally to mean the ratio of trailing four quarters consolidated EBITDA to consolidated interest expense, both as adjusted for certain, specified items) is at least 1.75x, on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events. As of April 30, 2020, the operating partnership’s consolidated fixed charge coverage ratio was 1.67x.

Under the covenants in the indentures governing the operating partnership’s unsecured notes, if the consolidated fixed charge coverage ratio is below 1.75x, the operating partnership may still make restricted payments in limited amounts determined under the indentures governing the operating partnership’s notes. The distributions made by the operating partnership on June 15, 2019 and December 15, 2019 for payment of interest on Ferrellgas Partners’ unsecured senior notes due June 2020 were made from capacity under the limited exception to the ratio requirement under the indentures governing the operating partnership’s unsecured notes.

The indenture governing the operating partnership’s senior secured first lien notes due 2025 contains a similar but, in some respects, different restricted payments covenant. The covenant in the secured notes indenture provides for the same 1.75x consolidated fixed charge coverage ratio test as the unsecured notes indentures and a limited exception when that ratio is below 1.75x. In addition, the secured notes indenture also provides that, subject to a separate limited exception, described below, the operating partnership generally may not make a restricted payment unless the operating partnership’s consolidated leverage ratio (defined in the secured notes indenture generally to mean the ratio of consolidated total debt to trailing four quarters consolidated EBITDA, both as adjusted for certain, specified items) is no greater than 5.5x, on a pro forma basis giving effect to the restricted payment and, if applicable, certain other specified events. The consolidated leverage ratio test applies regardless of whether the operating partnership’s consolidated fixed coverage ratio is at least 1.75x or below 1.75x. As of April 30, 2020, the operating partnership’s consolidated leverage ratio was substantially in excess of 5.5x. Additionally, the secured notes indenture provides for restricted payments under its limited exception to the consolidated fixed charge coverage ratio test that is less than the capacity available under the similar exception in the unsecured notes indentures. However, the secured notes indenture contains a separate exception to both the consolidated fixed charge coverage ratio test and the consolidated leverage ratio test that can be utilized to make certain specified restricted payments in a limited amount when the operating partnership does not meet either the consolidated fixed charge coverage ratio test or the consolidated leverage ratio test. This separate exception under the secured notes indenture currently has capacity for such specified restricted payments that is substantially the same as the capacity under the most restrictive of the operating partnership’s unsecured notes indentures.

As described above, Ferrellgas Partners’ unsecured notes due 2020 mature on June 15, 2020, and the outstanding principal amount of those notes is due to be paid on that date, together with accrued interest to the maturity date. Although the operating partnership has some capacity to make distributions under the operating partnership’s unsecured and secured notes indentures, this capacity will not allow the operating partnership to make distributions to Ferrellgas Partners sufficient to pay the principal of and accrued interest on Ferrellgas Partners’ unsecured senior notes due 2020 due at the maturity of those notes. Additionally, the restrictions in these indentures currently limit the ability of the operating partnership to make distributions to Ferrellgas Partners to enable it to pay cash distributions to its unitholders.

### Distributions

As discussed above, no distributions will be paid to common unitholders in June 2020 for the three months ended April 30, 2020, and the general partner expects that Ferrellgas Partners will continue to be prohibited from making common unit distributions unless and until the outstanding notes of Ferrellgas Partners due 2020 are restructured, refinanced or otherwise satisfied.

### 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.

Based on our propane sales volumes in fiscal 2019, 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 retail 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 2020 and 2021 sales commitments and, as of April 30, 2020, we have experienced net mark-to-market losses of approximately $20.8 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 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, 2020, we estimate 81% 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:

### Executive Overview

#### For the three months ended April 30, 2020 and 2019

Weather in the more highly concentrated geographic areas we serve for the three months ended April 30, 2020 was approximately 5% warmer than normal, and 10% warmer than the prior year period. We estimate retail gallons decreased 9 million gallons due to warmer weather and due to the widespread slowdown of the economy due to COVID-19, partially offset by efforts to increase market share. Additionally, gross margin, operating income and Adjusted EBITDA were also negatively impacted by warmer weather.

During the three months ended April 30, 2020, we recognized a net loss attributable to Ferrellgas Partners, L.P. of $15.4 million, compared to net earnings attributable to Ferrellgas Partners, L.P. of $20.5 million during the three months ended April 30, 2019. This decrease reflects a $37.4 million loss on extinguishment of debt, increased operating, general and administrative expense and increased interest expense, partially offset by a $6.2 million increase in gross profit.

Distributable cash flow attributable to equity investors increased to $42.9 million in the current period from $34.7 million in the prior period, primarily due to a $6.7 million decrease in our maintenance capital expenditures. This decrease in maintenance capital expenditures primarily relates to the purchase of new propane delivery trucks in fiscal 2019.

Distributable cash flow excess increased to $42.0 million in the current period from $34.0 million in the prior period, primarily due to a $6.7 million decrease in our maintenance capital expenditures.

#### For the nine months ended April 30, 2020 and 2019

Weather in the more highly concentrated geographic areas we serve for the nine months ended April 30, 2019 was approximately 4% warmer than normal, and 8% warmer than the prior year period. We estimate retail gallons decreased approximately 19 million gallons due to warmer weather. Additionally, gross margin, operating income and Adjusted EBITDA were also negatively impacted by warmer weather.

During the nine months ended April 30, 2020, we generated a net loss attributable to Ferrellgas Partners, L.P. of $12.5 million, compared to net earnings attributable to Ferrellgas Partners, L.P. of $6.8 million during the nine months ended April 30, 2019. This decrease reflects a $37.4 million loss on extinguishment of debt, increased operating expense and increased interest expense, partially offset by a $27.8 million increase in gross profit and decreased general and administrative costs. These results reflect the effects of legal fees and settlements related to non-core businesses of $5.9 million and $10.6 million during the nine months ended April 31, 2020 and 2019, respectively. The nine-month period ended April 30, 2019 also includes $1.6 million of severance cost and $1.5 million of expenses associated with the multi-employer pension plan withdrawal settlement, none of which were repeated in the current period.

“Interest expense” for Ferrellgas Partners increased $6.0 million primarily due to a $3.2 million increase related to borrowings on our terminated Senior Secured Credit Facility and a $1.4 million increase related to our new senior secured notes issued in April 2020.

Distributable cash flow attributable to equity investors increased to $93.2 million in the current period from $60.1 million in the prior period, primarily due to a $26.3 million decrease in our maintenance capital expenditures and a $12.7 million increase in our Adjusted EBITDA, as discussed below in “Operating results for the nine months ended April 30, 2020 and 2019”, partially offset by a $6.0 million increase in cash interest expense. This decrease in maintenance capital expenditures primarily relates to the purchase of new propane delivery trucks in fiscal 2019.

Distributable cash flow excess increased to $91.3 million in the current period from $49.2 million in the prior period, primarily due to a $26.3 million decrease in our maintenance capital expenditures, a $9.7 million decrease in distributions to common unitholders and a $12.7 million increase in our Adjusted EBITDA, and partially offset by a $6.0 million increase in cash interest expense, each as discussed above.

### 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 for Ferrellgas Partners is calculated as net earnings (loss) attributable to Ferrellgas Partners, L.P., plus the sum of the following: income tax expense, interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, loss on asset sales and disposals, loss on extinguishment of debt, other income (expense), net, severance costs, legal fees and settlements related to non-core businesses, multi-employer pension plan withdrawal settlement, lease accounting standard adjustment and other, and net earnings attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership’s performance in a manner similar to the method management uses, adjusted for items management believes make it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA may not be comparable to Adjusted EBITDA or similarly titled measurements used by other companies. Items added into our calculation of Adjusted EBITDA that will not occur on a continuing basis may have associated cash payments. 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 certain asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to equity investors.

Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to distributable cash flow attributable to equity investors or similarly titled measurements used by other companies. 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 companies. 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 any shortage is funded from previously established reserves, cash on hand or borrowings under our Senior Secured Credit Facility or accounts receivable securitization facility. Management considers Distributable cash flow excess a meaningful measure of the partnership’s ability to effectuate those purposes. Distributable cash flow excess, as management defines it, may not be comparable to distributable cash flow excess or similarly titled measurements used by other companies. 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 flow excess should be viewed in conjunction with measurements that are computed in accordance with GAAP.

The following table reconciles 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., the most directly comparable GAAP measure, for the three and nine months ended April 30, 2020 and 2019:

*(amounts in thousands)*

|  | Three months ended April 30, 2020 | 2019 | Nine months ended April 30, 2020 | 2019 |
| --- | ---: | ---: | ---: | ---: |
| Net earnings (loss) attributable to Ferrellgas Partners, L.P. | $(15,393) | $20,461 | $(12,530) | $6,790 |
| Income tax expense | 161 | 123 | 794 | 284 |
| Interest expense | 45,703 | 44,162 | 138,948 | 132,931 |
| Depreciation and amortization expense | 20,366 | 20,617 | 59,380 | 59,214 |
| EBITDA | 50,837 | 85,363 | 186,592 | 199,219 |
| Non-cash employee stock ownership plan compensation charge | 757 | (4) | 2,182 | 4,688 |
| Loss on asset sales and disposals | 1,859 | 1,683 | 6,242 | 8,403 |
| Loss on extinguishment of debt | 37,399 | — | 37,399 | — |
| Other income (expense), net | 158 | (251) | 214 | (356) |
| Severance costs | — | — | — | 1,600 |
| Legal fees and settlements related to non-core businesses | 1,325 | 1,471 | 5,887 | 10,643 |
| Multi-employer pension plan withdrawal settlement | — | — | — | 1,524 |
| Lease accounting standard adjustment and other | 80 | — | 134 | — |
| Net earnings (loss) attributable to noncontrolling interest | (78) | 299 | 133 | 337 |
| Adjusted EBITDA | 92,337 | 88,561 | 238,783 | 226,058 |
| Net cash interest expense (a) | (43,442) | (40,747) | (129,341) | (123,325) |
| Maintenance capital expenditures (b) | (6,803) | (13,506) | (18,700) | (45,038) |
| Cash paid for taxes | (49) | (23) | (50) | (21) |
| Proceeds from certain asset sales | 851 | 456 | 2,510 | 2,416 |
| Distributable cash flow attributable to equity investors | 42,894 | 34,741 | 93,202 | 60,090 |
| Distributable cash flow attributable to general partner and non-controlling interest | (858) | (695) | (1,864) | (1,202) |
| Distributable cash flow attributable to common unitholders | 42,036 | 34,046 | 91,338 | 58,888 |
| Less: Distributions paid to common unitholders | — | — | — | (9,715) |
| Distributable cash flow excess | $42,036 | $34,046 | $91,338 | $49,173 |

(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, and may include the purchase of assets that are typically leased.

### Operating Results for the three months ended April 30, 2020 and 2019

The following table summarizes propane sales volumes and Adjusted EBITDA results for the periods indicated:

| As of April 30, | 2020 | 2019 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | ---: |
| Retail customers | 727,863 | 705,605 | 22,258 | 3% |
| Tank exchange selling locations | 58,245 | 54,308 | 3,937 | 7% |
| **(amounts in thousands)** |  |  |  |  |
| **Three months ended April 30,** |  |  |  |  |
| Propane sales volumes (gallons): |  |  |  |  |
| Retail - Sales to End Users | 186,175 | 204,441 | (18,266) | (9)% |
| Wholesale - Sales to Resellers | 60,660 | 59,641 | 1,019 | 2% |
|  | 246,835 | 264,082 | (17,247) | (7)% |
| Revenues - |  |  |  |  |
| Propane and other gas liquids sales: |  |  |  |  |
| Retail - Sales to End Users | $286,163 | $350,151 | $(63,988) | (18)% |
| Wholesale - Sales to Resellers | 103,686 | 99,311 | 4,375 | 4% |
| Other Gas Sales (a) | 1,896 | 10,094 | (8,198) | (81)% |
| Other (b) | 20,385 | 20,069 | 316 | 2% |
| Propane and related equipment revenues | $412,130 | $479,625 | $(67,495) | (14)% |
| Gross Profit - |  |  |  |  |
| Propane and other gas liquids sales gross margin: (c) |  |  |  |  |
| Retail - Sales to End Users (a) | $163,038 | $167,179 | $(4,141) | (2)% |
| Wholesale - Sales to Resellers (a) | 52,442 | 41,988 | 10,454 | 25% |
| Other (b) | 17,645 | 17,749 | (104) | (1)% |
| Propane and related equipment gross profit | $233,125 | $226,916 | $6,209 | 3% |
| Operating, general and administrative expense (d) | $134,118 | $131,507 | $2,611 | 2% |
| Operating expense - equipment lease expense | 8,075 | 8,319 | (244) | (3)% |
| Operating income | $67,950 | $64,794 | $3,156 | 5% |
| Depreciation and amortization expense | 20,366 | 20,617 | (251) | (1)% |
| Non-cash employee stock ownership plan compensation charge | 757 | (4) | 761 | NM |
| Loss on asset sales and disposals | 1,859 | 1,683 | 176 | 10% |
| Legal fees and settlements related to non-core business | 1,325 | 1,471 | (146) | (10)% |
| Lease accounting standard adjustment and other (e) | 80 | — | 80 | NM |
| Adjusted EBITDA | $92,337 | $88,561 | $3,776 | 4% |

(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 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 expense” above includes both the “Operating expense – personnel, vehicle, plant and other” and the “General and administrative expense” captions in the condensed consolidated statement of operations.

(e) Lease accounting standard adjustment reflects the additional expense recognized in excess of cash paid.

Weather in the more highly concentrated geographic areas we serve for the three months ended April 30, 2020 was approximately 5% warmer than normal, and 10% warmer than the prior year period. We estimate retail gallons decreased 9 million gallons due to warmer weather and due to the widespread slowdown of the economy due to COVID-19, partially offset by efforts to increase market share.

Propane sales volumes during the three months ended April 30, 2020 decreased 7%, or 17.2 million gallons, from the prior year period due to decreased sales volumes to retail customers. The decrease in propane sales volumes to retail customers was primarily due to warmer weather, as discussed above, and due to the widespread slowdown of the economy due to COVID-19, partially offset by the 3% increase in retail customer count. Although wholesale sales gallons overall remained flat compared to the prior year period, tank exchange gallons increased 24% due to increased residential demand in connection with quarantine orders due to COVID-19. This increase was offset by a 12% decline in volumes of bulk propane sold to our wholesale customers primarily due to the widespread slowdown of the economy due to COVID-19, and to a lesser extent the effects of warmer 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 three months ended April 30, 2020 averaged 48% less than the prior year period, while at the Conway, Kansas major supply point prices averaged 45% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.34 and $0.66 per gallon during the three months ended April 30, 2020 and 2019, respectively, while the wholesale market price at Conway, Kansas averaged $0.32 and $0.58 per gallon during the three months ended April 30, 2020 and 2019, respectively. This decrease in the wholesale cost of propane contributed to our decrease in sales price per gallon and therefore revenues, but an increase in gross margin.

#### Revenues

Retail sales decreased $64.0 million compared to the prior period. This decrease resulted from a $32.7 million decrease in sales price per gallon, as well as decreases in sales due to warmer weather of approximately $19.0 million and due to the economic slowdown, both as discussed above, partially offset by increases related to the 3% increase in customer count.

Wholesale sales increased $4.4 million compared to the prior period. The increase in sales was primarily due to the increases in tank exchange sales volumes as discussed above.

Other gas sales decreased $8.2 million compared to the prior year period due to decreased sales volumes and to a lesser extent a decrease in sales price per gallon.

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

Gross margin increased $6.3 million due to the increase in gross margin per gallon and increased tank exchange volume sales, partially offset by the decreased volumes sales due to warmer weather and the economic downturn, each as discussed above. The $10.5 million increase in wholesale gross margin primarily relates to increased tank exchange volume sales and to a lesser extent increased gross margin per gallon due to the decrease in the wholesale cost of propane, both as discussed above. The decrease in retail gross margin of $4.1 million resulted from an estimated $9.0 million decrease in gallon sales due to the effect of warmer weather and a $5.9 million decrease due to the economic slowdown, both as discussed above, partially offset by a $10.8 million increase in gross margin per gallon and to a lesser extent an increase in retail customer counts, as discussed above.

#### Operating income

Operating income increased $3.2 million primarily due to a $6.3 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above, partially offset by a $2.6 million increase in “Operating, general and administrative expense”. “Operating, general and administrative expense” increased due to a $1.6 million increase in “Operating expense – personnel, vehicle, plant and other” and a $1.0 million increase in “General and administrative expense”. “Operating expense – personnel, vehicle, plant and other” increased primarily due to a $5.2 million increase in field personnel costs, partially offset by a $2.0 million decrease in general liability and workers compensation costs and a $1.1 million decrease in vehicle fuel costs. “General and administrative expense” increased primarily due to a $1.1 million increase in personnel incentives, partially offset by a $0.5 million decrease in legal costs.

#### Adjusted EBITDA

Adjusted EBITDA increased $3.8 million primarily due to a $6.3 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above, partially offset by a $2.6 million increase in “Operating, general and administrative expense”. “Operating, general and administrative expense” increased due to a $1.6 million increase in “Operating expense – personnel, vehicle, plant and other” and a $1.0 million increase in “General and administrative expense”. “Operating expense – personnel, vehicle, plant and other” increased primarily due to a $5.2 million increase in field personnel costs, partially offset by a $2.0 million decrease in general liability and workers compensation costs and a $1.1 million decrease in vehicle fuel costs. “General and administrative expense” increased primarily due to a $1.1 million increase in personnel incentives, partially offset by a $0.3 million decrease in legal costs.

### Operating Results for the nine months ended April 30, 2020 and 2019

The following table summarizes propane sales volumes and Adjusted EBITDA results for the periods indicated:

| As of April 30, | 2020 | 2019 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | ---: |
| Retail customers | 727,863 | 705,605 | 22,258 | 3% |
| Tank exchange selling locations | 58,245 | 54,308 | 3,937 | 7% |
| **(amounts in thousands)** |  |  |  |  |
| **Nine months ended April 30,** |  |  |  |  |
| Propane sales volumes (gallons): |  |  |  |  |
| Retail - Sales to End Users | 552,340 | 573,152 | (20,812) | (4)% |
| Wholesale - Sales to Resellers | 179,695 | 179,256 | 439 | 0% |
|  | 732,035 | 752,408 | (20,373) | (3)% |
| Revenues - |  |  |  |  |
| Propane and other gas liquids sales: |  |  |  |  |
| Retail - Sales to End Users | $840,649 | $983,742 | $(143,093) | (15)% |
| Wholesale - Sales to Resellers | 291,445 | 308,647 | (17,202) | (6)% |
| Other Gas Sales (a) | 18,283 | 52,245 | (33,962) | (65)% |
| Other (b) | 65,800 | 60,677 | 5,123 | 8% |
| Propane and related equipment revenues | $1,216,177 | $1,405,311 | $(189,134) | (13)% |
| Gross Profit - |  |  |  |  |
| Propane and other gas liquids sales gross margin: (c) |  |  |  |  |
| Retail - Sales to End Users (a) | $459,198 | $450,401 | $8,797 | 2% |
| Wholesale - Sales to Resellers (a) | 143,043 | 128,177 | 14,866 | 12% |
| Other (b) | 56,026 | 51,888 | 4,138 | 8% |
| Propane and related equipment gross profit | $658,267 | $630,466 | $27,801 | 4% |
| Operating, general and administrative expense (d) | $400,781 | $393,578 | $7,203 | 2% |
| Operating expense - equipment lease expense | 24,724 | 24,597 | 127 | 1% |
| Operating income | $164,958 | $139,986 | $24,972 | 18% |
| Depreciation and amortization expense | 59,380 | 59,214 | 166 | 0% |
| Non-cash employee stock ownership plan compensation charge | 2,182 | 4,688 | (2,506) | (53)% |
| Loss on asset sales and disposals | 6,242 | 8,403 | (2,161) | (26)% |
| Multi-employer pension plan withdrawal settlement | — | 1,524 | (1,524) | NM |
| Legal fees and settlements related to non-core businesses | 5,887 | 10,643 | (4,756) | (45)% |
| Severance costs | — | 1,600 | (1,600) | NM |
| Lease accounting standard adjustment and other (e) | 134 | — | 134 | NM |
| Adjusted EBITDA | $238,783 | $226,058 | $12,725 | 6% |

79

(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 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 expense” above includes both the “Operating expense – personnel, vehicle, plant and other” and the “General and administrative expense” captions in the condensed consolidated statement of operations.

(e) Lease accounting standard adjustment reflects the additional expense recognized in excess of cash paid.

Weather in the more highly concentrated geographic areas we serve for the nine months ended April 30, 2019 was approximately 4% warmer than normal, and 8% warmer than the prior year period. Retail gallons decreased approximately 19 million gallons due to warmer weather, partially offset by efforts to increase market share.

Propane sales volumes during the nine months ended April 30, 2020 decreased 3%, or 20.4 million gallons, from the prior year period due to decreased sales volumes to retail customers. The decrease in propane sales volumes to retail customers was due to the warmer weather and due to the widespread slowdown of the economy due to COVID-19, both as discussed above, partially offset by the 3% increase in retail customer count. Although wholesale sales gallons overall remained flat compared to the prior year period, tank exchange gallons increased 9% due to increased residential demand in connection with quarantine orders due to COVID-19. This increase was offset by a 5% decline in volumes of bulk propane sold to our wholesale customers primarily due to the widespread slowdown of the economy due to COVID-19, and to a lesser extent the effects of warmer 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, 2020 averaged 47% less than the prior year period, while at the Conway, Kansas major supply point prices averaged 42% less than the prior period. The wholesale market price at Mt. Belvieu, Texas averaged $0.42 and $0.79 per gallon during the nine months ended April 30, 2020 and 2019, respectively, while the wholesale market price at Conway, Kansas averaged $0.38 and $0.66 per gallon during the nine months ended April 30, 2020 and 2019, respectively. This decrease in the wholesale cost of propane contributed to our decrease in sales price per gallon and therefore revenues, but an increase in gross margin per gallon.

#### Revenues

Retail sales decreased $143.1 million compared to the prior period. This decrease resulted from a $107.4 million decrease in sales price per gallon, as discussed above, as well as decreases in sales due to warmer weather of approximately $30.0 million and due to the economic slowdown, both as discussed above, partially offset by increases related to the 3% increase in customer count.

Wholesale sales decreased $17.2 million compared to the prior period. This decrease primarily resulted from a $31.5 million decrease in sales price per gallon, as discussed above, and the adverse impact to fixed price contracts due to increased competitive pressures, some of which are long term. This is a trend that continues from the prior year period. This decrease was partially offset by increases in sales due to the increases in tank exchange sales volumes as discussed above.

Other gas sales decreased $34.0 million compared to the prior year period primarily due to decreased sales price per gallon.

Other revenues increased $5.1 million compared to the prior year period primarily due to a $2.5 million one-time federal refund of fuel excise tax and increased fees from service labor related to the 3% increase in retail customer count as discussed above.

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

Gross margin increased $23.7 million due to increases in both retail and wholesale gross margin. The $14.9 million increase in wholesale gross margin primarily relates to increased tank exchange volume sales and to a lesser extent increased gross margin per gallon, both as discussed above. The increase in retail gross margin of $8.8 million resulted from a $25.2 million increase in gross margin per gallon and to a lesser extent an increase in retail customer counts, partially offset by an estimated $14.0 million decrease in gallon sales related to the effects of warmer weather, both as discussed above.

#### Gross margin - other

Gross margin increased $4.1 million compared to the prior year period primarily due to a $2.5 million one-time federal refund of fuel excise tax and increased fees from service labor related to the 3% increase in retail customer count as discussed above.

#### Operating income

Operating income increased $25.0 million primarily due to a $23.7 million increase in "Gross margin - Propane and other gas liquid sales" and a $4.1 million increase in “Gross margin - other”, both as discussed above, and a $2.5 million decrease in “Non-cash employee stock ownership plan compensation charge”, partially offset by a $7.2 million increase in “Operating, general and administrative expense”. “Operating, general and administrative expense” increased due to a $12.8 million increase in “Operating expense – personnel, vehicle, plant and other”, partially offset by a $5.6 million decrease in “General and administrative expense”. “Operating expense – personnel, vehicle, plant and other” increased primarily due to a $12.0 million increase in field personnel costs, a $1.5 million increase related to acquisitions made in the last twelve months, a $1.5 million increase in plant and office costs, a $1.1 million increase in selling expenses and a $1.1 million increase in personnel incentives, partially offset by a previous $1.5 million pension settlement charge associated with the withdrawal from a multi-employer pension plan that was not repeated in the current period and a $1.4 million decrease in vehicle fuel costs. “General and administrative expense” decreased primarily due to an $8.0 million decrease in legal costs and a decrease of $0.9 million in severance cost incurred in the prior year period that was not repeated in the current period, partially offset by a $2.3 million increase in personnel incentives and a $0.9 million increase in other corporate costs.

#### Adjusted EBITDA

Adjusted EBITDA increased $12.7 million primarily due to a $23.7 million increase in "Gross margin - Propane and other gas liquid sales" and a $4.1 million increase in “Gross margin – other”, both as discussed above, partially offset by a $15.0 million increase in “Operating, general and administrative expense”. “Operating, general and administrative expense” increased due to a $15.0 million increase in “Operating expense – personnel, vehicle, plant and other,” while “General and administrative expense,” remained flat overall. “Operating expense – personnel, vehicle, plant and other” increased primarily due to a $12.7 million increase in field personnel costs, a $1.5 million increase related to acquisitions made in the last twelve months, a $1.5 million increase in plant and office costs, a $1.1 million increase in selling expenses and a $1.1 million increase in personnel incentives, partially offset by a $1.4 million decrease in vehicle fuel costs. “General and administrative expense” remained unchanged, primarily due to a $3.2 million decrease in legal costs offset by a $2.3 million increase in personnel incentives and a $0.9 million increase in other corporate costs.

### Liquidity and Capital Resources

### General

Our primary sources of liquidity and capital resources are cash flows from operating activities, our accounts receivable securitization facility and funds received from sales of debt and equity securities. As of April 30, 2020, our total liquidity was $268.5 million, which is comprised of $177.5 million in unrestricted cash and $91.0 million of availability under our accounts receivable securitization facility. These sources of liquidity and short term capital resources are intended to fund our working capital requirements, acquisitions and capital expenditures, and may be used to repay or redeem outstanding indebtedness to the extent permitted by the covenants under the indentures governing our outstanding senior notes, including the covenants described under the “Financial Covenants” subheading above. As of April 30, 2020, letters of credit outstanding totaled $120.2 million. 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.

As of April 30, 2020, we had $141.3 million of restricted cash, which includes $123.8 million of pledged cash collateral for letters of credit outstanding, an $11.5 million cash deposit made with the administrative agent under the terminated Senior Secured Credit Facility, and $6.0 million of additional pledged collateral.

On April 16, 2020, the operating partnership issued $700.0 million aggregate principal amount of 10.00% senior secured first lien notes due 2025, $575.0 million of which was issued at par and $125.0 million of which was issued at 103% of par. The operating partnership utilized a portion of the net proceeds of that offering to repay all $283.9 million of the outstanding borrowings under its Senior Secured Credit Facility, together with $3.1 million of accrued interest and a $17.5 million prepayment premium and terminated that facility. Additionally, the operating partnership used a portion of the net proceeds from that offering to cash collateralize all of the letters of credit outstanding under the Senior Secured Credit Facility and to make a cash deposit of $11.5 million with the administrative agent under the Senior Secured Credit Facility, which may be used by the administrative agent to pay contingent obligations arising under the Financing Agreement that governed the Senior Secured Credit Facility. To the extent the cash deposit is not used to pay any such contingent obligations, it will be returned to the operating partnership in certain circumstances. The operating partnership intends to use the remaining net proceeds for general corporate purposes.

As a result of the termination of the Senior Secured Credit Facility and the letter of credit sub-facility thereunder, we no longer have in place a credit facility providing for the issuance of letters of credit. We may not be able to obtain, or may be restricted under the indentures in our ability to obtain, a new letter of credit facility that does not require cash collateralization of letters of credit or that otherwise provides acceptable terms. Accordingly, we expect that we will continue to be required to cash collateralize all of our existing and future letters of credit for the foreseeable future. Our inability to access and employ the restricted cash that collateralizes our existing and future letters of credit and the contingent obligations cash deposit with the administrative agent under the terminated Senior Secured Credit Facility may adversely affect our liquidity.

We believe that the liquidity available from cash flows from operating activities, proceeds from sales of debt and equity securities, including the remaining proceeds from the issuance of our 10.00% senior secured first lien notes due 2025 and the accounts receivable securitization facility, combined with our debt and interest expense reduction initiatives, will be sufficient to meet our capital expenditure, working capital and letter of credit requirements. However, as discussed above, Ferrellgas Partners has $357.0 million in unsecured notes due June 15, 2020 that are classified as current in its condensed consolidated financial statements. Ferrellgas Partners’ ability to restructure, refinance or otherwise satisfy these notes is uncertain considering the level of other outstanding indebtedness. We have engaged Moelis & Company LLC as our financial advisor and the law firm of Squire Patton Boggs LLP to assist us in our ongoing process to address our upcoming debt maturities.

### Financial Covenants

As more fully described in this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 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 2020 for the three months ended April 30, 2020, and the general partner expects that Ferrellgas Partners will continue to be prohibited from making common unit distributions unless and until the outstanding notes of Ferrellgas Partners due 2020 are restructured, refinanced or otherwise satisfied. Unless the indenture governing the outstanding notes due 2020 is amended or replaced, or 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 this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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, 2020 to the twelve months ended January 31, 2020 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 (a) (b) |
| --- | ---: | ---: | ---: | --- |
| Nine months ended April 30, 2020 | $93,202 | $93,044 | $158 |  |
| Fiscal 2019 | 22,567 | 12,338 | 10,229 |  |
| Less: Nine months ended April 30, 2019 | 60,090 | 50,018 | 10,072 |  |
| Twelve months ended April 30, 2020 | $55,679 | $55,364 | $315 | NM |
| Twelve months ended January 31, 2020 | 47,526 | 47,211 | 315 | NM |
| Change | $8,153 | $8,153 | $— | NM |

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

(b) NM – Not Meaningful.

For the twelve months ended April 30, 2020, distributable cash flow attributable to equity investors increased $8.2 million compared to the twelve months ended January 31, 2020, primarily due to decreases in our maintenance capital expenditures. Thus, cash reserves, which we utilize to meet future anticipated expenditures, increased by $55.4 million during the twelve months ended April 30, 2020 compared to an increase of $47.2 million in the twelve months ended January 31, 2020.

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 $98.3 million for the nine months ended April 30, 2020, compared to net cash provided by operating activities of $70.8 million for the nine months ended April 30, 2019. This increase in cash provided by operating activities was primarily due to a $33.1 million decrease in working capital requirements, partially offset by a $3.5 million decrease in cash flow from operations and a $2.1 million outflow associated with other assets and other liabilities.

The decrease in working capital requirements for the nine months ended April 30, 2020 compared to the nine months ended April 30, 2019 was primarily due to a $10.0 million decrease in requirements for inventory due to declining propane prices in the current period compared to the prior period, a $9.9 million decrease in requirements for accounts payable, a $6.2 million decrease in requirements for accounts and notes receivable, partially due to decreases in volume of propane sold, and a $5.6 million decrease in requirements for other current liabilities during the current period compared to the prior period.

The decrease in cash flow from operations was primarily due to a $17.5 million prepayment premium made in connection with the extinguishment of our Senior Secured Credit Facility, as well as a net increase in "Operating expense – personnel, vehicle, plant and other", "General and administrative expense" and "Operating expense – equipment lease expense" of $7.3 million and a $6.0 million increase in "Interest expense," primarily due to increased indebtedness resulting from increased borrowings on the Revolving Facility portion of our Senior Secured Credit Facility during fiscal 2020 as compared to fiscal 2019, partially offset by a $27.8 million increase in gross profit.

#### The operating partnership

Net cash provided by operating activities was $113.8 million for the nine months ended April 30, 2020, compared to net cash provided by operating activities of $86.2 million for the nine months ended April 30, 2019. This increase in cash provided by operating activities was primarily due to a $33.0 million decrease in working capital requirements, partially offset by a $3.8 million decrease in cash flow from operations and a $2.1 million outflow associated with other assets and other liabilities.

The decrease in working capital requirements for the nine months ended April 30, 2020 compared to the nine months ended April 30, 2019 was primarily due to an $10.0 million decrease in requirements for inventory due to declining propane prices in the current period compared to the prior period, a $9.9 million decrease in requirements for accounts payable, a $6.2 million decrease in requirements for accounts and notes receivable, partially due to decreases in volume of propane sold, and a $5.6 million decrease in requirements for other current liabilities during the current period compared to the prior period.

The decrease in cash flow from operations was primarily due to a $17.5 million prepayment premium made in connection with the extinguishment of our Senior Secured Credit Facility, as well as a net increase in "Operating expense – personnel, vehicle, plant and other", "General and administrative expense" and "Operating expense – equipment lease expense" of $7.2 million, and a $6.8 million increase in "Interest expense," primarily due to increased borrowings resulting from increased borrowings on the Revolving Facility portion of our Senior Secured Credit Facility during fiscal 2020 as compared to fiscal 2019, partially offset by a $27.8 million increase in gross profit.

### 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, and from time to time may include the purchase of assets that are typically leased, 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 $76.2 million for the nine months ended April 30, 2020, compared to net cash used in investing activities of $103.6 million for the nine months ended April 30, 2019. This decrease in net cash used in investing activities was primarily due to a $37.4 million decrease in “Capital expenditures”, a $22.0 million increase in “Cash receipts in connection with leased vehicles”, and a $5.0 million decrease in “Business acquisitions, net of cash acquired”, partially offset by a $37.0 million increase in “Cash payments to construct assets in connection with future lease transactions”.

The decrease in "Capital expenditures" was primarily due to a decrease in maintenance capital expenditures, and to a lesser extent a decrease in growth capital expenditures, during the nine months ended April 30, 2020. The decrease in maintenance capital expenditures was primarily related to the purchase of new propane delivery trucks funded through cash on hand during the nine months ended April 30, 2019 compared to the nine months ended April 30, 2020. The decrease in growth capital expenditures was primarily due to decreases related to the purchase of new propane delivery trucks, as well as in the number of cylinders purchased for industrial and commercial forklift sales, during the nine months ended April 30, 2020 compared to the nine months ended April 30, 2019, and to a lesser extent, decreases in growth capital expenditures related to the number of cylinders and cages purchased.

Due to the mature nature of our operations 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.

#### The operating partnership

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

### Financing Activities

#### Ferrellgas Partners

Net cash provided by financing activities was $285.7 million for the nine months ended April 30, 2020, compared to net cash used in financing activities of $41.1 million for the nine months ended April 30, 2019. This increase in cash flow provided by financing activities was primarily due to $703.8 million of gross proceeds from the offering of senior secured first lien notes due 2025, as discussed below, as well as a $9.8 million reduction in distributions. These increases were partially offset by a $283.9 million reduction in long-term debt resulting from the termination of our Senior Secured Credit Facility, as discussed below, as well as a $76.2 million net decrease in short-term borrowings and a $26.1 million increase in cash paid for financing costs.

#### Senior secured notes due 2025 and senior secured credit facility

On April 16, 2020, the operating partnership issued $700.0 million aggregate principal amount of 10.00% senior secured first lien notes due 2025, $575.0 million of which was issued at par and $125.0 million of which was issued at 103% of par. The operating partnership utilized a portion of the net proceeds of that offering to repay all $283.9 million of the outstanding borrowings under its Senior Secured Credit Facility, together with $3.1 million of accrued interest and a $17.5 million prepayment premium and terminated that facility. Additionally, the operating partnership used a portion of the net proceeds from that offering to cash collateralize all of the letters of credit outstanding under the Senior Secured Credit Facility and to make a cash deposit of $11.5 million with the administrative agent under the Senior Secured Credit Facility, which may be used by the administrative agent to pay contingent obligations arising under the Financing Agreement that governed the Senior Secured Credit Facility. To the extent the cash deposit is not used to pay any such contingent obligations, it will be returned to the operating partnership in certain circumstances. The operating partnership intends to use the remaining net proceeds for general corporate purposes.

As of April 30, 2020, as discussed above, the operating partnership had previously terminated its Senior Secured Credit Facility. As of July 31, 2019, the operating partnership had outstanding borrowings under its Senior Secured Credit Facility of $275.0 million under the term loan (the “Term Loan”) at an interest rate of 8.16%, which was then classified as current, and $43.0 million under the revolving line of credit (the “Revolving Facility”) at an interest rate of 9.47%, which was classified as short-term borrowings. As of July 31, 2019, the operating partnership had available borrowing capacity under the Revolving Facility of $155.1 million.

Letters of credit outstanding at April 30, 2020 and July 31, 2019 totaled $120.2 million and $101.9 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At April 30, 2020, due to the termination of the Senior Secured Credit Facility, Ferrellgas did not have in place a credit facility providing for the issuance of letters of credit and had $123.8 million of restricted cash pledged as cash collateral for letters of credit outstanding. At July 31, 2019, Ferrellgas had remaining available letter of credit capacity under the Senior Secured Credit Facility of $23.1 million.

#### Accounts receivable securitization facility

We utilize an accounts receivable securitization facility for the purpose of providing additional short-term working capital funding, especially during the winter heating months. As part of this facility, we transfer an interest in a pool of our trade accounts receivable to Ferrellgas Receivables, LLC, a consolidated and wholly-owned, qualifying special purpose subsidiary, which in turn sells this interest to certain financial institutions. We remit daily to Ferrellgas Receivables, LLC funds collected on its pool of trade accounts receivables. Expenses associated with these 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 $66.0 million, as we reduced our net funding by $62.0 million from this facility during the nine months ended April 30, 2020 as compared to receiving net funding of $4.0 million from this facility during the nine months ended April 30, 2019.

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 agreement governing our accounts receivable securitization facility (the “Purchase Agreement”). As our trade accounts receivable increase during the winter heating season, the facility permits us to receive greater proceeds as eligible trade accounts receivable increase, thereby providing additional cash for working capital needs. Specifically, the aggregate amount of proceeds we are able to receive under the facility is equal to the lesser of (1) the balance of our eligible trade accounts receivable (reduced in certain circumstances based on the concentration of customers owing such accounts receivable) less specified reserve amounts and (2) the seasonally adjusted total commitments of the purchasers under the facility. The total commitments of the purchasers are $250.0 million during the months of December through March, $200.0 million during the months of November, April and May, and $150.0 million during the months of June through October.

As of April 30, 2020, we had no cash proceeds from our trade accounts receivables securitized, with $91.0 million remaining capacity to receive additional proceeds or issue letters of credit. 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 Purchase Agreement requires us to maintain a fixed charge coverage ratio of not less than 1.00x and a senior secured leverage ratio of not greater than 3.00x. We were in compliance with these financial ratio requirements as of April 30, 2020. However, if at any time we are not in compliance with these financial ratio requirements, we will be unable to access the facility for working capital or other cash requirements and the facility may be terminated. On April 10, 2020, the operating partnership entered into a ninth amendment to the Purchase Agreement, which amended and restated the amortization event related to the senior secured leverage ratio of the operating partnership and the definition of “Consolidated Total Secured Debt” in the Purchase Agreement to, among other matters, provide that obligations with respect to cash collateralized letters of credit are excluded from Consolidated Total Secured Debt and, therefore, from the calculation of the senior secured leverage ratio, beginning with the fiscal quarter ended January 31, 2020. The ninth amendment also amended the Purchase Agreement to (i) increase the interest rate applicable margin by 0.5% to 2.5% (or 4.5% while an amortization event under the Purchase Agreement exists) and (ii) increase the interest rate floors for the alternate base rate and LIBOR from 0.0% to 1.0%. This facility matures in May 2021 and includes an option, at our request and consent, for the purchasers in their sole discretion to extend the facility for up to an additional three years.

#### 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 distributions on common units were made after that date and no distribution will be made in June 2020 for the three months ended April 30, 2020.

Total distributions paid to common unitholders during fiscal 2019, including the related general partner distributions, was $9.8 million. As discussed above, no distribution on common units was made in December 2018, March 2019, June 2019, September 2019, December 2019, March 2020 or will be made in June 2020 for the three months ended April 30, 2020, and the general partner expects that Ferrellgas Partners will be prohibited from making common unit distributions for any future quarterly period unless and until the outstanding notes of Ferrellgas Partners due 2020 are restructured, refinanced or otherwise satisfied.

#### The operating partnership

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

#### Cash distributions paid

The operating partnership paid cash distributions of $15.7 million and $25.6 million during the nine months ended April 30, 2020 and 2019, respectively. Ferrellgas Partners’ unsecured notes due 2020 mature on June 15, 2020, and the outstanding principal amount of those notes is due to be paid on that date, together with accrued interest to the maturity date.

Although the operating partnership has some remaining capacity to make distributions under the limited exception to the ratio requirement under the operating partnership’s indentures, this capacity will not allow the operating partnership to make distributions to Ferrellgas Partners sufficient to pay the principal of and accrued interest on Ferrellgas Partners’ unsecured senior notes due 2020 due at the maturity of those notes. Additionally, the restrictions in these indentures limit the ability of the operating partnership to make distributions to Ferrellgas Partners to enable it to pay cash distributions to its unitholders.

### 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 $225.5 million for the nine months ended April 30, 2020, 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.

During the nine months ended April 30, 2020, Ferrellgas Partners and the operating partnership together paid the general partner distributions of $0.2 million.

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

### Contractual Obligations

In the performance of our operations, we are bound by certain contractual obligations.

The following table summarizes our long-term debt, including current portion, and fixed rate interest obligations at April 30, 2020. These obligations reflect the issuance of $700.0 million in aggregate principal amount of 10.00% senior secured first lien notes due 2025, with a portion of the proceeds used to repay and terminate our Senior Secured Credit Facility, as discussed previously.

*(in thousands)*

|  | Payment or settlement due by fiscal year 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Long-term debt, including current portion (1) | $357,425 | $501,975 | $476,315 | $500,879 | $209 | $700,232 | $2,537,035 |
| Fixed rate interest obligations (2) | 64,552 | 168,313 | 119,781 | 103,750 | 70,000 | 70,000 | 596,396 |

(1) We have long and short-term payment obligations under agreements such as the indentures governing our secured and unsecured senior notes. Amounts shown in the table represent our scheduled future maturities of long-term debt (including current maturities thereof) for the periods indicated. For additional information regarding our debt obligations, see “Liquidity and Capital Resources – Financing Activities.”

(2) Fixed rate interest obligations represent the amount of interest due on fixed rate long-term debt.

#### The operating partnership

*(in thousands)*

|  | Payment or settlement due by fiscal year 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Long-term debt, including current portion (1) | $425 | $501,975 | $476,315 | $500,879 | $209 | $700,232 | $2,180,035 |
| Fixed rate interest obligations (2) | $49,156 | $168,313 | $119,781 | $103,750 | $70,000 | $70,000 | $581,000 |

(1) The operating partnership has long and short-term payment obligations under agreements such as the indentures governing its secured and unsecured senior notes. Amounts shown in the table represent the operating partnership’s scheduled future maturities of long-term debt (including current maturities thereof) for the periods indicated. For additional information regarding the operating partnership’s debt obligations, see “Liquidity and Capital Resources – Financing Activities.”

(2) Fixed rate interest obligations represent the amount of interest due on fixed rate long-term debt.

## Market risk

As filed, 5,664 characters.

We did not enter into any risk management trading activities during the nine months ended April 30, 2020. 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 futures, swaps, options and basis swaps to seek protection from adverse price movements and to minimize potential losses. We enter into these financial derivative instruments with brokers who are clearing members with the Intercontinental Exchange or the Chicago Mercantile Exchange and, to a lesser extent, directly with third parties in the over-the-counter market. We also enter into forward propane purchase and sales contracts with counterparties. These forward contracts qualify for the normal purchase normal sale 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, 2020 and July 31, 2019, 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 $3.7 million and $8.0 million as of April 30, 2020 and July 31, 2019, 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 reduce overall credit risk. These policies include evaluating and monitoring of counterparties’ financial condition (including credit ratings), and entering into agreements with counterparties that govern credit guidelines.

Our other counterparties principally consist of major energy companies that are suppliers, marketers, wholesalers, retailers and end users; and major U.S. 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, 2020, we had no variable rate or collateralized note payable borrowings, as we terminated our Senior Secured Credit Facility during the quarter and had no outstanding collateralized notes payable on our accounts receivable securitization facility, as discussed previously. Our results of operations, cash flows and financial condition could be materially adversely affected by significant increases in interest rates in the future to the extent that we have collateralized notes payable or other variable rate indebtedness outstanding.

## Controls and procedures

As filed, 2,945 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 as of April 30, 2020.

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, 2020, that our disclosure controls and procedures are effective in achieving that level of reasonable assurance.

During the most recent fiscal quarter ended April 30, 2020, 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. We implemented internal controls to ensure we adequately evaluated our lease contracts and properly assessed the impact of the new accounting standard related to leases on our financial statements to facilitate its adoption on August 1, 2019. There were no significant changes to our internal control over financial reporting due to the adoption of the new standard.

## Risk factors

As filed, 275 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 2019 or Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2020.

Filed Jun 4, 2020.
Source: SEC EDGAR, the filing index for accession 0001558370-20-007283. Last ingested by Listed: Nov 2, 2026, 06:31 ET. No prices; not investment advice.