# Ferrellgas Partners L P: Form 10-Q for the period ended Oct 31, 2020

- Company: [Ferrellgas Partners L P](/companies/fgpr.md) (CIK 922358)
- Form: 10-Q
- Filed: 2020-12-15
- Accepted by EDGAR: Dec 15, 2020, 07:13 ET
- Period: 2020-10-31
- Accession: 0001558370-20-014376
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/922358/000155837020014376/fgp-20201031x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/922358/000155837020014376/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-10-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-08-01 to 2020-10-31 | $300.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2020-08-01 to 2020-10-31 | $7.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-08-01 to 2020-10-31 | $87.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-08-01 to 2020-10-31 | −$46.1m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2020-08-01 to 2020-10-31 | 97,152,700 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-08-01 to 2020-10-31 | −$11.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-08-01 to 2020-10-31 | $19.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2020-10-31 | $202.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-10-31 | $538.1m | us-gaap:AssetsCurrent |
| Total assets | at 2020-10-31 | $1.65bn | us-gaap:Assets |
| Current liabilities | at 2020-10-31 | $1.12bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2020-10-31 | $1.65bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2020-10-31 | $859.1m | us-gaap:LongTermDebtCurrent |

## Management's discussion and analysis

As filed, 71,706 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;
- “Ferrellgas Partners Notes” refers to the $357.0 million aggregate principal amount of 8.625% unsecured senior notes due June 15, 2020 co-issued by Ferrellgas Partners and Ferrellgas Partners Finance Corp.;
- “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 2020 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 and/or restructuring 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 2020. 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.

#### Transaction Support Agreement

On December 10, 2020, Ferrellgas Partners, Ferrellgas Partners Finance Corp., the operating partnership and additional Ferrellgas entities (collectively, the “Company Parties”) entered into a Transaction Support Agreement (the “TSA”) with certain holders of, or investment advisors, sub-advisors, or managers of discretionary accounts that hold, claims (collectively, the “Consenting Noteholders”) arising under, derived from or based upon the indenture governing the Ferrellgas Partners Notes due June 15, 2020. As of December 10, 2020, the Consenting Noteholders hold or represent, in the aggregate, approximately 74% of the outstanding amount of the Ferrellgas Partners Notes due June 15, 2020.

The TSA sets forth (i) a restructuring process to satisfy the obligations of Ferrellgas Partners and Ferrellgas Partners Finance Corp. under the Ferrellgas Partners Notes due June 15, 2020 (the “Ferrellgas Partners Transactions”), which will be effectuated through pre-packaged voluntary cases (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code filed by only Ferrellgas Partners and Ferrellgas Partners Finance Corp. and the confirmation of a pre-packaged plan of reorganization for Ferrellgas Partners and Ferrellgas Partners Finance Corp., and (ii) a refinancing process of the operating partnership, including but not limited to, replacement of the operating partnership’s existing unsecured notes due 2021, 2022 and 2023 (the “operating partnership Transactions” and, together with the Ferrellgas Partners Transactions, the “Transactions”), which will be consummated on the effective date (the “Effective Date”) of Ferrellgas Partners’ plan of reorganization that implements the Ferrellgas Partners Transactions (the “Plan”) and will close simultaneously with the Ferrellgas Partners Transactions effectuated under the Plan.

Generally, the TSA and the Transactions contemplate, among other things, the transactions and certain changes to the capital structure and governance of the Company Parties as described in more detail in the TSA.

Pursuant to the TSA, and subject to the terms and conditions thereof, the parties thereto have agreed to support, act in good faith and take all steps reasonably necessary and desirable to implement and consummate the Transactions until the TSA is terminated. The Consenting Noteholders have agreed, among other things, (i) to forbear from taking actions with respect to any default or event of default by the Company Parties under the indenture governing the Ferrellgas Partners Notes which arises solely as a result of the failure to make payments of the principal due on the Ferrellgas Partners Notes, and (ii) to vote in favor of any matter requiring approval to the extent necessary to implement the Transactions and the Plan.

The TSA contains certain milestones relating to the commencement of the solicitation of acceptances of the Plan (the “Solicitation”), the refinancing process and the Chapter 11 Cases, which include the dates by which Ferrellgas Partners is required to commence the Solicitation and, thereafter, commence the Chapter 11 Cases or obtain certain approval orders of the United States Bankruptcy Court for the District of Delaware. In addition, the milestones include the obligation of Ferrellgas Partners and Ferrellgas Partners Finance Corp. to emerge from chapter 11 protection no later than April 4, 2021, unless that deadline is extended pursuant to the terms of the TSA.

The TSA also provides that the TSA may be terminated by the Required Consenting Noteholders (as defined therein) with respect to the Consenting Noteholders or by any Company Party with respect to the Company Parties upon the occurrence of certain events set forth therein. In particular, the Company Parties may terminate the TSA in the event the governing body of any Company Party determines, after consulting with counsel, (i) that continuing to pursue any of the Transactions in the manner contemplated by the TSA would be inconsistent with the exercise of its contractual or fiduciary duties or applicable law or (ii) in the exercise of its contractual or fiduciary duties, to pursue an alternative transaction proposal.

There is no assurance that the restructuring and refinancing processes described in the TSA will be consummated.

### Financial covenants

The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit our ability 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 $357.0 million aggregate principal amount of 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. Ferrellgas Partners continues to comply with the restrictive covenants with

respect to the Ferrellgas Partners Notes due June 15, 2020 as Ferrellgas Partners continues to negotiate with the Forbearing Noteholders. 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 October 31, 2020, Ferrellgas Partners’ consolidated fixed charge coverage ratio was 1.38x.

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 October 31, 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 maturity of the outstanding notes of Ferrellgas Partners due June 15, 2020, as well as the upcoming maturity of the Ferrellgas, L.P.’s $500.0 million in unsecured notes due May 1, 2021. 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 October 31, 2020, the operating partnership’s consolidated fixed charge coverage ratio was 1.65x.

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 unsecured 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 this 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 October 31, 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 matured on June 15, 2020, and the outstanding principal amount of those notes was 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 that was 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.

### Debt and interest expense reduction strategy

We continue to pursue a strategy to reduce our debt and interest expense. 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, which Ferrellgas Partners failed to repay, 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.

### Distributions

As discussed above, no distributions will be paid to common unitholders for the three months ended October 31, 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 2020, 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 2021 sales commitments and, as of October 31, 2020, we have experienced net mark-to-market gains of approximately $5.6 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 gains are expected to be offset by decreased margins on propane sales commitments that qualify for the normal purchase normal sale exception. At October 31, 2020, we estimate 92% 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 October 31, 2020 and 2019

During the three months ended October 31, 2020, we recognized a net loss attributable to Ferrellgas Partners, L.P. of $46.1 million, compared to a net loss attributable to Ferrellgas Partners, L.P. of $45.3 million during the three months ended October 31, 2019. This slight increase reflects an $8.5 million increase in interest expense, partially offset by an $7.1 million increase in operating income. Operating income increased primarily due to a $4.1 million increase in gross margin and a $2.1 million decrease in operating, general and administrative expenses. Interest expense increased primarily due to the net additional borrowings incurred in April 2020 related to the refinancing of our terminated Senior Secured Credit Facility with the issuance of the $700.0 million of notes due 2025 and to a lesser extent, increased interest rates on the new notes.

Distributable cash flow shortage decreased slightly to $21.8 million in the current period from $22.7 million in the prior year period, primarily due to a $8.8 million increase to our Adjusted EBITDA and a $1.3 million decrease in our maintenance capital expenditures, partially offset by a $9.1 million increase in our net cash interest expense.

### Consolidated Results of Operations

*(amounts in thousands)*

| ​ ​ | ​ ​ | ​ ​ Three months ended October 31, 2020 | ​ | ​ ​ 2019 | ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Total revenues | ​ | $300,894 | ​ | $293,214 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Total cost of sales | ​ | 141,294 | ​ | 137,709 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Operating expense | ​ | 109,027 | ​ | 114,543 | ​ |
| Depreciation and amortization expense | ​ | 21,390 | ​ | 19,219 | ​ |
| General and administrative expense | ​ | 13,080 | ​ | 9,695 | ​ |
| Equipment lease expense | ​ | 6,830 | ​ | 8,388 | ​ |
| Non-cash employee stock ownership plan compensation charge | ​ | 708 | ​ | 795 | ​ |
| Loss on asset sales and disposals | ​ | 813 | ​ | 2,235 | ​ |
| Operating income | ​ | 7,752 | ​ | 630 | ​ |
| Interest expense | ​ | (54,226) | ​ | (45,697) | ​ |
| Other income (expense), net | ​ | 108 | ​ | (132) | ​ |
| Loss before income taxes | ​ | (46,366) | ​ | (45,199) | ​ |
| Income tax expense | ​ | 87 | ​ | 518 | ​ |
| Net loss | ​ | (46,453) | ​ | (45,717) | ​ |
| Net loss attributable to noncontrolling interest | ​ | (391) | ​ | (373) | ​ |
| Net loss attributable to Ferrellgas Partners, L.P. | ​ | (46,062) | ​ | (45,344) | ​ |
| Less: General partner's interest in net loss | ​ | (461) | ​ | (453) | ​ |
| Common unitholders' interest in net loss | ​ | $(45,601) | ​ | $(44,891) | ​ |

### 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 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, other income (expense), net, severance costs, legal fees and settlements related to non-core businesses, lease accounting standard adjustment and net loss attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership’s performance in a manner similar to the method management uses, adjusted for items management believes 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 (Shortage)*. 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 accounts receivable securitization facility or, previously, under our terminated Senior Secured Credit 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 (shortage) to Net loss attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, for the three and months ended October 31, 2020 and 2019:

*(amounts in thousands)*

| ​ ​ | ​ ​ ​ | ​ ​ Three months ended October 31, 2020 | ​ | ​ ​ 2019 |
| --- | --- | ---: | --- | ---: |
| Net loss attributable to Ferrellgas Partners, L.P. | ​ | $(46,062) | ​ | $(45,344) |
| Income tax expense | ​ | 87 | ​ | 518 |
| Interest expense | ​ | 54,226 | ​ | 45,697 |
| Depreciation and amortization expense | ​ | 21,390 | ​ | 19,219 |
| EBITDA | ​ | 29,641 | ​ | 20,090 |
| Non-cash employee stock ownership plan compensation charge | ​ | 708 | ​ | 795 |
| Loss on asset sales and disposals | ​ | 813 | ​ | 2,235 |
| Other income (expense), net | ​ | (108) | ​ | 132 |
| Legal fees and settlements related to non-core businesses | ​ | ​ 2,508 | ​ | ​ 2,043 |
| Severance costs | ​ | ​ 684 | ​ | ​ — |
| Lease accounting standard adjustment and other | ​ | — | ​ | 170 |
| Net loss attributable to noncontrolling interest | ​ | (391) | ​ | (373) |
| Adjusted EBITDA | ​ | 33,855 | ​ | 25,092 |
| Net cash interest expense (a) | ​ | (51,716) | ​ | (42,583) |
| Maintenance capital expenditures (b) | ​ | (5,177) | ​ | (6,467) |
| Cash paid for income taxes | ​ | (35) | ​ | — |
| Proceeds from certain asset sales | ​ | 700 | ​ | 835 |
| Distributable cash flow attributable to equity investors | ​ | (22,373) | ​ | (23,123) |
| Distributable cash flow attributable to general partner and non-controlling interest | ​ | 575 | ​ | 462 |
| Distributable cash flow attributable to common unitholders | ​ | (21,798) | ​ | (22,661) |
| Less: Distributions paid to common unitholders | ​ | — | ​ | — |
| Distributable cash flow shortage | ​ | $(21,798) | ​ | $(22,661) |

(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 October 31, 2020 and 2019

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

| ​ ​ As of October 31, | ​ ​ ​ | ​ ​ 2020 ​ ​ | ​ ​ ​ | ​ ​ 2019 ​ ​ | ​ ​ ​ | ​ ​ Increase (Decrease) ​ ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | ---: | --- | ---: |
| Retail customers | ​ | ​ 706,718 | ​ | ​ 696,592 | ​ | ​ 10,126 |  | 1% |
| Tank exchange selling locations | ​ | ​ 62,226 | ​ | ​ 55,952 | ​ | ​ 6,274 |  | 11% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **(amounts in thousands)** | ​ | ​ ​ | ​ | ​ ​ | **​** | **​** **​** | **​** | **​** |
| **Three months ended October 31,** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ **​** |
| Propane sales volumes (gallons): |  | ​ |  | ​ |  | ​ |  | ​ |
| Retail - Sales to End Users |  | ​ 118,018 |  | ​ 129,901 |  | ​ (11,883) |  | (9)% |
| Wholesale - Sales to Resellers |  | ​ 49,590 |  | ​ 50,039 |  | ​ (449) |  | (1)% |
| ​ |  | ​ 167,608 |  | ​ 179,940 |  | ​ (12,332) |  | (7)% |
| Revenues - |  | ​ |  | ​ |  | ​ |  | ​ |
| Propane and other gas liquids sales: |  | ​ |  | ​ |  | ​ |  | ​ |
| Retail - Sales to End Users | ​ | $174,645 |  | $180,417 | ​ | $(5,772) |  | (3)% |
| Wholesale - Sales to Resellers | ​ | 102,612 |  | ​ 82,704 | ​ | 19,908 |  | 24% |
| Other Gas Sales (a) | ​ | 3,792 |  | ​ 10,264 | ​ | (6,472) |  | (63)% |
| Other (b) | ​ | 19,845 |  | ​ 19,829 | ​ | 16 |  | 0% |
| Propane and related equipment revenues | ​ | $300,894 | ​ | $293,214 | ​ | $7,680 |  | 3% |
| ​ | ​ |  | ​ |  | ​ |  |  | ​ |
| Gross Margin - | ​ |  | ​ |  | ​ |  |  | ​ |
| Propane and other gas liquids sales gross margin: (c) | ​ |  | ​ |  | ​ |  |  | ​ |
| Retail - Sales to End Users (a) | ​ | $90,734 | ​ | $97,936 | ​ | $(7,202) |  | (7)% |
| Wholesale - Sales to Resellers (a) | ​ | 52,688 | ​ | 41,421 | ​ | 11,267 |  | 27% |
| Other (b) | ​ | 16,178 | ​ | 16,148 | ​ | 30 |  | 0% |
| Propane and related equipment gross profit | ​ | $159,600 | ​ | $155,505 | ​ | $4,095 |  | 3% |
| ​ | ​ |  | ​ |  | ​ |  |  | ​ |
| Operating, general and administrative expense (d) | ​ | $122,107 | ​ | $124,238 | ​ | $(2,131) |  | (2)% |
| Operating expense - equipment lease expense | ​ | 6,830 | ​ | 8,388 | ​ | (1,558) |  | (19)% |
| ​ | ​ |  | ​ |  | ​ |  |  | ​ |
| Operating income | ​ | $7,752 | ​ | $630 | ​ | $7,122 |  | NM ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Depreciation and amortization expense | ​ | 21,390 | ​ | 19,219 | ​ | 2,171 |  | 11% |
| Non-cash employee stock ownership plan compensation charge | ​ | 708 | ​ | 795 | ​ | (87) |  | (11)% |
| Loss on asset sales and disposals | ​ | 813 | ​ | 2,235 | ​ | (1,422) |  | (64)% |
| Legal fees and settlements related to non-core businesses | ​ | 2,508 | ​ | 2,043 | ​ | 465 |  | 23% |
| Severance costs | ​ | 684 | ​ | — | ​ | 684 |  | NM ​ |
| Lease accounting standard adjustment and other (e) | ​ | ​ — | ​ | ​ 170 | ​ | ​ (170) | ​ | NM ​ |
| Adjusted EBITDA | ​ | $33,855 | ​ | $25,092 | ​ | $8,763 |  | 35% |

NM – Not meaningful

(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 various customer fee income and to a lesser extent appliance and material sales.

(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 and other reflects the additional expense recognized in excess of cash paid.

Propane sales volumes during the three months ended October 31, 2020 decreased 7%, or 12.3 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 the implementation of strategic initiatives that resulted in significant operating expense savings, but also resulted in fewer gallons delivered in the current period. These initiatives focus on more efficient deliveries that increase average gallons per stop but are not intended to impact gallons over time. Tank exchange gallons (which are classified as a “wholesale – sales to reseller” transaction) increased 27% due to increased residential demand for tank exchanges in connection with the change in customer usage, as well as increased sales of spare cylinder tanks, both influenced by the COVID-19 environment. This increase was offset by a 29% decline in volumes of bulk propane sold to our wholesale customers primarily due to the widespread slowdown of the economy due to COVID-19.

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 October 31, 2020 averaged 16% more than the prior year period, while at the Conway, Kansas major supply point prices averaged 26% more than the prior year period. The wholesale market price at Mt. Belvieu, Texas averaged $0.51 and $0.44 per gallon during the three months ended October 31, 2020 and 2019, respectively, while the wholesale market price at Conway, Kansas averaged $0.48 and $0.38 per gallon during the three months ended October 31, 2020 and 2019, respectively. This increase in the wholesale cost of propane contributed to our increase in sales price per gallon and therefore revenues.

#### Revenues

Retail sales decreased $5.8 million compared to the prior year period. This decrease resulted from a $16.5 million decrease in sales volumes, partially offset by a $10.7 million increase in sales price per gallon, both as discussed above.

Wholesale sales increased $19.9 million compared to the prior year period. The increase in sales was primarily due to the increases in tank exchange sales volumes as discussed above.

Other gas sales decreased $6.5 million compared to the prior year period primarily due to decreased gallon sales for inventory management purposes.

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

Gross margin increased $4.1 million primarily due to the increase in increased tank exchange sales volumes and to a lesser extent increased gross margin per gallon, partially offset by the decreased volumes sales, each as discussed above. The $11.3 million increase in wholesale gross margin primarily relates to increased tank exchange sales volumes, as discussed above and to a lesser extent increased gross margin per gallon due to the change in sales mix due to increased spare cylinder sales. The decrease in retail gross margin of $7.2 million resulted primarily from a $9.0 million decrease in sales volumes, as discussed above, partially offset by a $1.8 million increase in gross margin per gallon.

#### Operating income

Operating income increased $7.1 million primarily due to a $4.1 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above, and a $2.1 million decrease in “Operating, general and administrative expense”. “Operating, general and administrative expense” decreased due to a $5.5 million decrease in “Operating expense – personnel, vehicle, plant and other”, partially offset by a $3.4 million increase in “General and administrative expense”. “Operating expense – personnel, vehicle, plant and other” decreased primarily due to a $3.6 million decrease in vehicle fuel and other vehicle costs, $3.1 million decrease in field personnel costs and $1.8 million in decreased plant and office costs, partially offset by a $2.9 million increase in general liability and workers compensation costs. “General and administrative expense” increased primarily due to a $3.2 million increase in legal costs.

#### Adjusted EBITDA

Adjusted EBITDA increased $8.8 million primarily due to a $4.1 million increase in "Gross margin - Propane and other gas liquid sales", as discussed above, and a $3.3 million decrease in “Operating, general and administrative expense”. “Operating, general and administrative expense” decreased due to a $6.1 million decrease in “Operating expense – personnel, vehicle, plant and other”, partially offset by a $2.8 million increase in “General and administrative expense”. “Operating expense – personnel, vehicle, plant and other” decreased primarily due to a $3.6 million decrease in field personnel costs, a $3.6 million decrease in vehicle fuel and other vehicle costs and $1.8 million in decreased plant and office costs, partially offset by a $2.9 million increase in general liability and workers compensation costs. “General and administrative expense” increased primarily due to a $2.7 million increase in legal 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 October 31, 2020, our total liquidity was $228.6 million, which is comprised of $202.6 million in unrestricted cash and $26.0 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 October 31, 2020, letters of credit outstanding totaled $127.1 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 October 31, 2020, we had $96.9 million of restricted cash, which includes $79.4 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.

We believe that the liquidity available from cash flows from operating activities, unrestricted cash, the accounts receivable securitization facility and proceeds from sales of debt and equity securities, 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, which Ferrellgas Partners failed to repay, that are classified as current in its condensed consolidated financial statements. Additionally, the operating partnership has $500.0 million in unsecured notes due May 1, 2021, that are also classified as current in the 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 in our ongoing process to reduce existing debt and address our 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 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 for the three months ended October 31, 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 October 31, 2020 to the twelve months ended July 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) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three months ended October 31, 2020 | ​ | $(22,373) | ​ | $(22,373) | ​ | $— | ​ | ​ |
| Fiscal 2020 | ​ | ​ 63,702 | ​ | ​ 63,544 | ​ | ​ 158 | ​ | ​ |
| Less: Three months ended October 31, 2019 | ​ | ​ (23,123) | ​ | ​ (23,124) | ​ | ​ 1 | ​ | ​ |
| Twelve months ended October 31, 2020 | ​ | $64,452 | ​ | $64,295 | ​ | $157 | ​ | NM |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ |
| Twelve months ended July 31, 2020 | ​ | ​ 63,702 | ​ | ​ 63,544 | ​ | ​ 158 | ​ | NM |
| Change | ​ | $750 | ​ | $751 | ​ | $(1) |  | 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 October 31, 2020, distributable cash flow attributable to equity investors increased $0.8 million compared to the twelve months ended July 31, 2020. No cash distributions have been paid to our common unitholders since the three months ended October 31, 2018. Thus, cash reserves, which we utilize to meet future anticipated expenditures, increased by $64.3 million during the twelve months ended October 31, 2020, compared to an increase of $63.5 million in the twelve months ended July 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 used in operating activities was $11.5 million for the three months ended October 31, 2020, compared to net cash provided by operating activities of $7.1 million for the three months ended October 31, 2019. This decrease in cash provided by operating activities was primarily due to a $20.7 million increase in working capital requirements and a $1.7 million decrease in cash flow from operations, partially offset by a $3.8 million inflow associated with other assets and other liabilities.

The increase in working capital requirements for the three months ended October 31, 2020 compared to the three months ended October 31, 2019 was primarily due to a $19.3 million decrease in accrued interest expense, a $4.3 million increase in requirements for accounts and notes receivable due to rising propane prices in the current quarter partially offset by decreases in the volume of propane sold, a $1.8 million increase in requirements for inventory partially due to rising propane prices in the current period, and a $2.1 million increase in requirements for other current liabilities, partially offset by a $7.7 million decrease in prepaid expenses and other current assets.

The decrease in cash flow from operations was primarily due to an $8.5 million increase in "Interest expense," as well as a $3.4 million increase in "General and administrative expense", partially offset by a net decrease in "Operating expense – personnel, vehicle, plant and other" and "Operating expense – equipment lease expense" of $7.1 million and a $4.1 million increase in gross profit.

#### The operating partnership

Net cash used in operating activities was $11.5 million for the three months ended October 31, 2020, compared to net cash provided by operating activities of $7.1 million for the three months ended October 31, 2019. This decrease in cash provided by operating activities was primarily due to a $20.7 million increase in working capital requirements and a $1.2 million decrease in cash flow from operations, partially offset by a $3.8 million inflow associated with other assets and other liabilities.

The increase in working capital requirements for the three months ended October 31, 2020 compared to the three months ended October 31, 2019 was primarily due to a $19.3 million decrease in accrued interest expense, a $4.3 million increase in requirements for accounts and notes receivable due to rising propane prices in the current quarter partially offset by decreases in the volume of propane sold, a $1.8 million increase in requirements for inventory partially due to rising propane prices in the current period, and a $2.1 million increase in requirements for other current liabilities, partially offset by a $7.6 million decrease in prepaid expenses and other current assets.

The decrease in cash flow from operations was primarily due to a $9.7 million increase in "Interest expense," as well as a $3.4 million increase in "General and administrative expense", partially offset by a net decrease in "Operating expense – personnel, vehicle, plant and other" and "Operating expense – equipment lease expense" of $7.1 million and a $4.1 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 $18.0 million for the three months ended October 31, 2020, compared to net cash used in investing activities of $34.7 million for the three months ended October 31, 2019. This decrease in net cash used in investing activities was primarily due to a $16.9 million decrease in “Cash payments to construct assets in connection with future lease transactions” and a $6.4 million decrease in “Business acquisitions, net of cash acquired”, partially offset by a $5.9 million decrease in “Cash receipts in connection with leased vehicles” and a $1.3 million increase in “Capital expenditures”.

The increase in "Capital expenditures" was primarily due to a slight increase in maintenance capital expenditures, as growth capital expenditures remained flat during the three months ended October 31, 2020. The slight increase in maintenance capital expenditures was primarily related to the purchase of tank exchange plant equipment during the three months ended October 31, 2020.

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 used in financing activities was $4.7 million for the three months ended October 31, 2020, compared to net cash provided by financing activities of $46.3 million for the three months ended October 31, 2019. This decrease in cash flow provided by financing activities was primarily due to a $48.0 million net decrease in short-term borrowings, a $1.7 million increase in cash payments for the principal portion of finance lease liabilities and a $1.2 million increase in cash paid for financing costs.

Letters of credit outstanding at October 31, 2020 and July 31, 2020 totaled $127.1 million and $126.0 million, respectively, and were used to secure insurance arrangements, product purchases and commodity hedges. At October 31, 2020 and July 31, 2020 we had $79.4 million and $78.2 million of restricted cash pledged as cash collateral for letters of credit outstanding, respectively. Additionally, at both October 31, 2020 and July 31, 2020, we also issued letters of credit of $50.0 million by utilizing our liquidity available on the accounts receivable securitization facility.

#### 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 $11.0 million, as we reduced our net funding to zero from this facility during the three months ended October 31, 2020 as compared to receiving net funding of $11.0 million from this facility during the three months ended October 31, 2019. As noted above, during the fourth quarter of fiscal 2020, we issued letters of credit of $50.0 million by utilizing our liquidity available on the accounts receivable securitization facility. These letters of credit remain outstanding.

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. 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.

As of October 31, 2020, we had no cash proceeds from our trade accounts receivables securitized, with $26.0 million remaining capacity to receive additional proceeds or issue letters of credit.

#### Distributions

No distribution will be made for the three months ended October 31, 2020.

The general partner expects that Ferrellgas Partners will continue to 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 did not pay cash distributions during the three months ended October 31, 2020. The operating partnership paid cash distributions of $0.1 million during the three months ended October 31, 2019.

As described above, 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 June 15, 2020 that was 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.

### 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 $67.7 million for the three months ended October 31, 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 three months ended October 31, 2020, Ferrellgas Partners and the operating partnership did not pay distributions.

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

## Market risk

As filed, 5,359 characters.

We did not enter into any risk management trading activities during the three months ended October 31, 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 October 31, 2020 and July 31, 2020, 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 $7.8 million and $8.0 million as of October 31, 2020 and July 31, 2020, 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 October 31, 2020, we had no variable rate or collateralized note payable borrowings, as we do not have a credit facility in place and had no outstanding collateralized notes payable on our accounts receivable securitization facility.

## Controls and procedures

As filed, 2,978 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 October 31, 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 October 31, 2020, that our disclosure controls and procedures are effective in achieving that level of reasonable assurance.

During the most recent fiscal quarter ended October 31, 2020, progress continued on a plan that calls for modifications and enhancements to our internal controls over financial reporting in relation to our implementation of Salesforce.com applications and the impacts on our revenue cycle. Specifically, we implemented/modified internal controls surrounding revenue recognition.

Except as disclosed above, 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) during the fiscal quarter ended October 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 156 characters.

There have been no material changes from the risk factors set forth under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for fiscal 2020.

Filed Dec 15, 2020.
Source: SEC EDGAR, the filing index for accession 0001558370-20-014376. Last ingested by Listed: Nov 2, 2026, 06:31 ET. No prices; not investment advice.