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Ferrellgas Partners, L.P. (FGP)

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Ferrellgas Partners L.P. (FGP)

Q2 2019 Results Earnings Conference Call

March 08, 2019, 10:00 AM ET

Company Participants

William Ruisinger - Interim CFO

James Ferrell - Chairman, Interim CEO, and President

Conference Call Participants

Tarek Hamid - JPMorgan

Ben Brownlow - Raymond James

Presentation

Operator

Good morning. My name is Sepania [ph] and I will be your conference operator today.

At this time, I would like to welcome everyone to the Second Quarter Fiscal 2019 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]

I would now like to turn the call over to Mr. Bill Ruisinger, Interim Chief Financial Officer. Sir, you may begin your conference.

William Ruisinger

Thank you, and welcome to our second quarter 2019 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-Q and other documents filed from time-to-time with the Securities and Exchange Commission.

As detailed in our earnings release and Form 10-Q that were filed this morning, second quarter consolidated adjusted EBITDA was $119.7 million compared to last year's $120.6 million. Exclusive of results from the non-strategic asset sales completed during fiscal 2018, last year's adjusted EBITDA was $116.7 million, an increase of $3.0 million.

Trailing 12 months adjusted EBITDA for the go-forward business now stands at $229.5 million, up from $226.5 million reported last quarter. Highlights for the quarter included over 25,000 new customers added since last year in over 5000 new Blue Rhino selling locations. We eclipsed the 700,000 retail customer mark for the first time since 2015. We also added two accretive acquisitions this quarter with a third announced just last week.

For the quarter, total gallon sales of 309.7 million were consistent with the 310 million gallons a year ago. Retail gallons however were 4.0 million or approximately 2% higher despite weather that was only 0.7% colder than the prior year.

This increase in retail gallons sold was a result of the nearly 4% customer growth previously noted. This growth was offset by a reduction in wholesale sales of approximately 4 million gallons.

Propane margins were higher than prior year by three point one cents per gallon despite competitive pressures negatively affecting the reseller business. Total gross margin for second quarter 2019 was $258.4 million compared to $249.2 million in the prior year, exclusive of the effects of gross profit related to assets sold in fiscal 2018.

Operating expenses for the second quarter were $121.2 million up from $113.9 million in the prior year exclusive of the effects of operating expenses related to assets sold in fiscal 2018. This increase was primarily due to additional expenses associated with the increase in trucks, drivers and customer service resources to service 25,000 new customers as well as to continue to expand our operating capacity to provide a platform for future growth.

For second quarter 2019, general and administrative expense was $16.3 million compared to $13.8 million in the prior year, exclusive of the effects of general administrative expenses related to assets sold in fiscal 2018. The increase is primarily associated with increased legal fees.

Interest expense for the quarter was $44.9 million compared to $42.7 million in the prior year. The increase is due primarily to higher rates associated with our new working capital facility. This includes the effects of the recent upward trend in LIBOR rates.

At January 31, 2019 we held $40.6 million of cash and had $196.2 million of available borrowing capacity under our revolving credit facility, which provides total liquidity at January 31, 2019 of $236.8 million.

Our maintenance capital expenditures were $26.1 million for the second quarter compared to $4.6 million in the prior year. This increase was primarily attributed to a decision to utilize excess cash to purchase new propane delivery vehicles that would historically have been leased.

Growth capital expenditures were $6.9 million for the quarter compared to $9 million in the prior year. As we look at February, we continued the momentum built at the end of January. Moving into the third quarter, we saw the first month of that quarter generate sales of over 90 million gallons of propane. That's over 18% more than last year's February.

The momentum built in February carried into the first two weeks of March with a significant backlog setting the stage for what could be continued strong performance into the third quarter.

At this time, I'll turn the call over to Jim for his comments.

James Ferrell

Good morning. We continue to build momentum at Ferrellgas as sustained focus on the core propane business has not only yielded results, but strengthened our foundation for long term success.

We're adding customers and setting tanks at levels not seen in years. We're growing market share, entering new markets and adding density in our strongholds. Most importantly, however, we are accomplishing all of this while investing in the business as part of our long term strategy to position this company and its employee owners for the future.

We are also seeing record volumes in the tank exchange business as we grew the number of selling locations yet again this quarter. The new protection plants in California and Alabama and five recent acquisitions of independent distributors would allow us to maximize the return on this business.

Read the rest of this transcript on seekingalpha.com