Ferrellgas Partners, L.P. (FGP)

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Ferrellgas Partners L.P. (FGP)

Q3 2018 Earnings Conference Call

June 07, 2018, 10:00 AM ET


Jim Ferrell - Chairman, Interim CEO & President

Doran Schwartz - CFO & SVP


Mirek Zak - Citigroup

James Spicer - Wells Fargo

Tarek Hamid - JPMorgan



Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ferrellgas Partners Third Quarter 2018 Earnings Conference Call.

All lines have been placed on mute to prevent any background noise. After the presenter's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

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

Doran Schwartz

Thank you, Rob and welcome to our third quarter earnings call. Thank you for joining us. Before we get started, I'd like to remind all of you that some statements made during this call may be considered forward-looking and that various risks, uncertainties and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our Form 10-K and other documents we file from time to time with the Securities and Exchange Commission.

Throughout our call, we will refer to non-GAAP measures, reconciliations of our non-GAAP measures to the appropriate GAAP measures can be found in the press release or in our Form 10-Q filed this morning.

We're excited to report continued progress on our strategies of growing our business and our cash flows. Our internal cost reduction and customer growth initiatives coupled with favorable weather compared to last year, particularly in April had grown cash flows with our trailing 12-month EBITDA increasing by $10 million and now is at $253 million, up from the rate at the end of fiscal 2017 of $230 million.

We also successfully closed on a new $575 million working capital facility, which is comprised of a $275 million term loan and a $300 million revolver. This credit facility repaid the amounts outstanding in our previous facility and also placed significant cash on the balance sheet and provides a $300 million revolver with no current outstanding borrowings and also allows for issuance of approximate $100 million of letters of credit outstanding.

Also we've renewed and increased our accounts receivable securitization facility to $250 million up from $225 million previously. These two key facilities provide us with multiyear access to substantial liquidity and flexibility needed to operate our business effectively and efficiently as we continue to execute our business strategies and grow the number of customers that we serve.

These important steps we are taking now as we wrap up fiscal 2018 will continue to strengthen the balance sheet and provide us with a foundation of liquidity and access to working capital, allowing for focus on growing and creating shareholder value over the long-term.

Now as detailed in our Form 10-Q that was filed this morning, our third quarter adjusted EBITDA was up over 13% for the quarter at $86.9 million compared to $76.8 million for the quarter last year. Adjusted EBITDA for Q3 in our Propane segment was $95.6 million as compared to $87 million in the prior year, an increase of 10% and was positively impacted by higher volumes and an 18.9% increase in gross margin.

Adjusted EBITDA for the Midstream segment was $1 million as compared to a $500,000 negative EBITDA for the prior-year. The Q3 results reflect cessation from low-margin barge operations and the sale of Bridger Energy LLC, both of which occurred earlier this year.

The Midstream segment is positioning for growth opportunities that are expected due to higher oil development and drilling activity, driven by higher recent oil prices.

On the volume side, propane sales volumes for third quarter were $246.3 million gallons up 16% from the $212 million gallons a year ago, driven by retail and Blue Rhino tank exchange customer growth and favorable weather particularly in April.

Gross profit, total gross profit for the quarter was $221 million, that's up 10% compared to the $201 million in the prior year's third quarter. Propane gross profit was $191 million of the total for the quarter, up from $172 million last year. Gross profit benefited from higher sales volumes, particularly or sorry, partially offset by slightly lower margins per gallons sold, largely the result of the company's strategy to compete for new customers.

On the operating and G&A expense line items, operating expense for the quarter was $116.6 million, that's up from $104.8 million during the quarter last year was primarily due to the incremental expenses associated with the increase in gallons sold.

General, administrative expense for the quarter was up slightly to $11.7 million, that compares to $10 million last year. Interest expense for the quarter was $40.4 million, that's up slightly from $39.9 million a year ago, once again reflecting higher borrowing rates under the previous secured credit facility compared to the third quarter last year.

Our CapEx on maintenance CapEx side was $5.7 million for the quarter, is $19.1 million year-to-date as we continue to refresh our vehicle fleet and growth CapEx was $17.5 million for the quarter and it's $39.9 million year-to-date, primarily related to an increase in the number of cylinders and cages purchased to support increases in tank exchange sales and selling locations as well as capitalized costs associated with the set up of new retail customer locations.

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