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Ferrellgas Partners, L.P. (FGP)

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Ferrellgas Partners L.P. (FGP)

Q1 2018 Earnings Conference Call

December 07, 2017 10:00 PM ET

Executives

Doran Schwartz - CFO and SVP

Jim Ferrell - Chairman, Interim CEO and President

Analysts

Ben Brownlow - Raymond James

Mike Gyure - Janney Montgomery Scott LLC

Presentation

Operator

Good morning. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2018 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.

Doran Schwartz, Chief Financial Officer, you may begin your conference.

Doran Schwartz

Thank you, and welcome to our earnings call. Thank you for joining us and welcome from a cold morning here in Liberty, Missouri with temperatures is currently 17 degrees, great, profane weather. I’d like to remind you that some of the statements made during the call may be considered forward-looking, and that the various risks, uncertainties and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our 10-Q file this morning and in other documents filed from time to time with the Securities and Exchange Commission.

I appreciate the opportunity to initiate our first earnings conference call. I’ve enjoyed my first seven weeks with Ferrellgas getting to know the business and its employees. I look forward to working with all of you as well. A bit about my philosophies; first, cost of capital and returns are important, when thinking about investing capital. Capital is precious and it’s finite and needs to be invested carefully. I look for at least a 10% return on projects or acquisitions, with return expectations scaled up or down against that minimum threshold depending on risk profile.

Second, a stronger balance sheet provides lower capital cost and flexibility to take advantage of more opportunities as they arise. Our balance sheet carries high levels of debt and I, we are committed to de-levering over a reasonable period of time. Third, all costs are to be scrutinized and reduced where possible. Fourth, we are only as good as the team members around us; we need to continue to develop our people. And fifth, I would say that my approach would be based on an optimistic view of our business and its future, with a balance basis of realism.

We’ve done good work here recently and we have more work to do, and you’ll hear about some of that as we go forward. From my perspective, we continue to transition here with me moving in to the role. I’m working well with Al. Al is still here, I appreciate having him here to help me learn the business and transition relationships critical to the position.

I’m also getting to know the team. I would say that since Mr. Ferrell has come back just over a year ago, my view on the employee base here is, it’s filled with talented employees, morale high, we’ve have a very strong team here, and that our team appreciates being led by again Mr. Ferrell coming back as the interim CEO.

Format for the call today, I’ll give some initial remarks as it relates to the economics and financials of first quarter and then you’ll hear from Jim Ferrell and comments that he’ll have. And I think what you’ll hear is some thoughts around initiatives that we are working on. And I think one of the key messages there is that we as the company are not just sitting back and waiting for weather. We are actively looking to improve the business profile without waiting for weather. And then also, we will give you a preliminary view in to not just the first quarter, but also November.

I would just highlight that we’re not going to make a habit out of giving November information. November is not the second quarter; we are not trying to give you an expectation on what the second quarter is going to look like. But, we did feel like it was important today, because again as we go in to second quarter, where we have 50% of our degree heating days versus first quarter whether it’s in a normal year only 9% of degree heating days, that it might be a good opportunity for us to give you a flavor for at where we are starting going in to the second quarter.

So as it relates to our Form 10-Q that we filed this morning in our financial performance for the quarter, our adjusted EBITDA was 26.2 million and that compares to 29 million for the quarter last year. Our adjusted EBITDA for the propane segment was 30.6 million that was positively impacted by higher volumes, propane sales up 6%. This partially offset the effects from lower gross margins partially caused by a rising recent cost of commodity price environment for propane and increased operating expenses we continue to focus on increasing or market share.

So let’s take a more detailed look in to our Q1 fiscal year ’18 numbers. Again as I mentioned, propane sales volumes for the first quarter were just under 173 million gallons that’s up 6% from the 163 million gallons a year ago. When you look at the gross profit line, total gross profit for the quarter was a 153 million and that is basically unchanged from where we are at in the prior year comparable quarter.

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