Ferrellgas Partners, L.P. (FGP)

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Ferrellgas Partners, L.P. (FGP)

Q3 2017 Results Conference Call

June 09, 2017 10:00 AM ET


Al Heitmann - EVP and CFO

Jim Ferrell - Chairman, Interim President, and CEO


Mike Gyure - Janney

Mirek Zak - Citigroup

James Spicer - Wells Fargo



Good morning. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter Fiscal Year 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Al Heitmann, Executive Vice President and Chief Financial Officer, you may begin your conference.

Al Heitmann

Thank you, Megan, and good morning everyone. I am joined this morning by Jim Ferrell, Chairman of the Board and Interim President and CEO. Now before we get started, I'd like to remind all of you that some of the statements made during our call today may be considered forward-looking, and that various risk, uncertainties and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our form 10-Q and other documents filed from time to time with the SEC.

Now with that, I'd like to address some of the financial highlights for the quarter before turning the call over to Jim for his remarks.

Ferrellgas this morning announced net earnings of $6.7 million in the third quarter or $0.07 per common unit, compared to net earnings of 18.9 million in the prior year quarter or $0.19 per common unit. As detailed in our earnings release and form 10-Q both of which were filed earlier today, our third fiscal quarter adjusted EBITDA was 76.8 million compared to a 108 million in the prior year period. This reflects the effects of the termination of the Jamex contract in September of last year, which resulted in the loss of Bridger's largest customer. Temperatures during the quarter were approximately 20% warmer than normal and approximately 3% warmer than the prior year period. Although we were able to maintain our retail gallon sales on a weather adjusted basis our gross margin decreased as a result of customer mix and location. Propane sales volumes for the third quarter were 212 million gallons versus 223 million gallons sold a year ago with the majority of this decrease coming from lower margin wholesale gallons. Total gross profit for the quarter was 201 million compared to 244.2 million in the prior year's third quarter. The decrease is primarily attributable to the termination of the Jamex contract and to a lesser extent reduced margins in the propane operations segment due to the customer mix.

Operating expense for the quarter was $104.8 million, a decrease of over $10 million from the prior year period. This decrease is primarily from a combination of efficiencies in our propane operations and related equipment sales segment plus reductions in our midstream segment related to the termination of the Jamex contract.

General and administrative expense for the quarter was $10 million, a decrease of almost $2.5 million from the prior year period, reflecting our commitment to reduce expense and operate more efficiently. Interest expense was $39.9 million, up from $34.4 million in the prior year largely due to the $175 million MLP bond offering in our second quarter. Our third quarter leverage ratio was 6.45 times significantly lower than the 7.75 times limit allowed under our recently amended secured credit facility.

And finally on a personal note, as we disclosed in our 10-Q this morning, I've announced my plans to retire from Ferrellgas effective January 31, 2018. While I'm looking forward to retirement, I will miss the work and the relationships I've developed over the past 22 years here at Ferrellgas. I'm committed to doing everything possible to ensure a smooth transition with my successor.

Now with that, I would like to turn the call over to Jim for his comments.

Jim Ferrell

Thanks, Al, and good morning everyone. To say, I'm disappointed with third quarter results is an understatement. I think Al summed it up quite well. The only thing to add is that much is underway to create improved financial results in the near future. In a few short months, I would have been here for an entire year, a year full of changes and the way we do business and the termination of several top personnel. To list them all here would be to drown you in detail and not really make the point that I know our results have to improve and improve soon.

I know change is always inviting until it happens, but I believe we're doing the right things for the right reasons and soon you will be able to see proof. I wish Al all the best in his retirement. When I came back, I persuaded him to stay as long as he has, but I know he and his wife are looking forward to him getting loose from work so they can travel and enjoy their small farm. We’re actively looking for a replacement. I want to make sure that Al knows his tenure with us has been greatly appreciated. We wish him all the best.

Now, I’ll turn it back to the operator for questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Mike Gyure with Janney. Your line is open.

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