Overview

Ferrellgas Partners is a holding entity that conducts no operations and has two direct subsidiaries, the operating partnership and Partners Finance Corp. The operating partnership is responsible for the majority of the company’s activities and financial performance.

Recent Developments

In response to a legal judgment, the operating partnership guaranteed the issuance of $124.5 million in letters of credit under its Credit Facility to secure an appeal bond on behalf of Ferrellgas Partners.

How We Evaluate Our Operations

Ferrellgas primarily uses Adjusted EBITDA, a non-GAAP metric, to evaluate its overall business performance. Adjusted EBITDA excludes certain non-cash and non-recurring items to focus on cash flow generation. The company’s operations are heavily influenced by weather conditions, as propane demand for heating purposes is directly affected by winter temperatures.

Summary Discussion of Results of Operations

For fiscal 2024, Ferrellgas reported net earnings of $110.2 million, down from $136.9 million in fiscal 2023. The decrease was driven by:

• $24.1 million lower gross margin due to a 5% decrease in gallons sold from warmer weather and lower wholesale prices
• $24.1 million increase in operating expenses, including higher personnel, vehicle, and plant costs
• $5.1 million increase in depreciation and amortization

These were partially offset by a $20.4 million decrease in general and administrative expenses.

Distributable cash flow attributable to equity investors decreased to $212.3 million in fiscal 2024 from $254.4 million in fiscal 2023, primarily due to the $42.8 million decrease in Adjusted EBITDA. Distributable cash flow excess declined to $43.2 million from $135.0 million, mainly due to higher distributions to Class B unitholders.

Consolidated Results of Operations

The table below summarizes Ferrellgas’ consolidated financial performance for fiscal 2024 and 2023:

(amounts in thousands)	2024	2023
Total revenues	$1,837,116	$2,026,465
Total cost of sales	$853,971	$1,019,270
Operating income	$205,095	$233,689
Net earnings attributable to Ferrellgas Partners, L.P.	$110,216	$136,881

Non-GAAP Financial Measures

Ferrellgas presents several non-GAAP financial measures, including Adjusted EBITDA, Distributable cash flow attributable to equity investors, Distributable cash flow attributable to Class A and B Unitholders, and Distributable cash flow excess. These metrics are reconciled to the most directly comparable GAAP measure, net earnings attributable to Ferrellgas Partners, L.P., in the report.

Operating Results

Propane sales volumes decreased 5% in fiscal 2024 compared to fiscal 2023, primarily due to 4% warmer weather and lower wholesale prices. Retail and wholesale sales revenues declined accordingly. Gross margin decreased $24.1 million, partially offset by lower general and administrative expenses. Operating income declined 12% to $205.1 million.

Adjusted EBITDA decreased 12% to $317.4 million, driven by the lower operating income. Distributable cash flow attributable to equity investors declined $42.1 million to $212.3 million, and distributable cash flow excess decreased $91.8 million to $43.2 million.

Liquidity and Capital Resources

As of July 31, 2024, Ferrellgas had total liquidity of $231.0 million, consisting of $113.5 million in unrestricted cash and $117.5 million of availability under its Credit Facility. The company’s ability to satisfy its obligations is dependent on future performance, which could be impacted by weather, economic conditions, and other factors.

Distributable cash flow attributable to equity investors decreased due to lower Adjusted EBITDA, while distributions to Class B unitholders increased. Ferrellgas did not pay any distributions to Class A unitholders during fiscal 2024 or 2023.

The company has significant future cash requirements related to long-term debt, interest, leases, and product purchase commitments. Ferrellgas is evaluating options to refinance or extend the maturity of its Credit Facility, which is set to mature in 2024, to address substantial doubt about its ability to continue as a going concern.

Critical Accounting Estimates

Ferrellgas’ critical accounting estimates include depreciation of property, plant and equipment, valuation and amortization of intangible assets, accounting for risk management and derivative instruments, litigation accruals, and goodwill impairment testing. Changes in these estimates and assumptions could have a material impact on the company’s financial statements.