UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended July 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-11331
Ferrellgas Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware 43-1698480
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(State or other jurisdictions of (I.R.S. Employer Identification No.)
incorporation or organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 792-1600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Units New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in I of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value as of September 15, 1995, of the registrant's Common
Units held by nonaffiliates of the registrant, based on the reported closing
price of such units on the New York Stock Exchange on such date, was
approximately $288,794,795.
At September 15, 1995, the registrant had units outstanding as follows:
Ferrellgas Partners, L.P. 14,443,141 Common Units
16,593,721 Subordinated Units
Documents Incorporated by Reference: None
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FERRELLGAS PARTNERS, L.P.
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
1995 FORM 10-K ANNUAL REPORT
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Table of Contents
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Page
PART I
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ITEM 1. BUSINESS.......................................................................................1
ITEM 2. PROPERTIES.....................................................................................8
ITEM 3. LEGAL PROCEEDINGS..............................................................................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS.....................................................................9
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA..............................................10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................................................17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS...........................................18
ITEM 11. EXECUTIVE COMPENSATION........................................................................20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................................................24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K...........................................................................26
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PART I
ITEM 1. BUSINESS.
Business of Ferrellgas Partners, L.P.
Ferrellgas Partners, L.P. (the "MLP"), a publicly traded Delaware limited
partnership, was formed April 19, 1994. The MLP's activities are conducted
through its subsidiary Ferrellgas, L.P. (the "Operating Partnership"). The MLP,
with a 99% limited partner interest, is the sole limited partner of the
Operating Partnership. The MLP and the Operating Partnership are together
referred to herein as the "Partnership". The Operating Partnership accounts for
all of the MLP's consolidated assets, sales and earnings. Accordingly, a
separate discussion of the results of operations, liquidity, and capital
resources of the MLP is not presented. See ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for discussion of the
Operating Partnership's results.
Business of Ferrellgas, L.P. (and the Partnership)
The Operating Partnership, a Delaware limited partnership, was formed April
22, 1994, to acquire, own and operate the propane business and assets of
Ferrellgas, Inc. (the "Company", "Ferrellgas", and "General Partner"). The
Company has retained a 1% general partner interest in the MLP and also holds a
1.0101% general partner interest in the Operating Partnership, representing a 2%
general partner interest in the Partnership on a combined basis. As General
Partner of the Partnership, the Company performs all management functions
required for the Partnership.
General
The Partnership is engaged in the sale, distribution, marketing and trading
of propane and other natural gas liquids. The discussion that follows focuses on
the Partnership's retail operations and its other operations, which consist
primarily of propane and natural gas liquids trading operations, chemical
feedstocks marketing and wholesale propane marketing, all of which were conveyed
to the Partnership on July 5, 1994. All historical references prior to July 5,
1994 relate to the operations as conducted by the Company.
The General Partner believes the Partnership is the second largest retail
marketer of propane in the United States (as measured by gallons sold), serving
more than 700,000 residential, industrial/commercial and agricultural customers
in 45 states and the District of Columbia through approximately 467 retail
outlets with 246 satellite locations in 38 states (some outlets serve interstate
markets). For the Operating Partnership's fiscal year ended July 31, 1995, the
pro forma year ended July 31, 1994 and the Company's fiscal year ended July 31,
1993, annual retail propane sales volumes were approximately 576 million, 564
million and 553 million gallon, respectively. The retail propane business of the
Partnership consists principally of transporting propane purchased through
various suppliers to its retail distribution outlets, then to tanks located on
its customers' premises, as well as to portable propane cylinders.
The Partnership also believes it is a leading natural gas liquids trading
company. Annual propane and natural gas liquids trading, chemical feedstocks and
wholesale propane sales volumes were approximately 1.5 billion, 1.7 billion and
1.2 billion gallons during the fiscal year ended July 31, 1995, the pro forma
year ended July 31, 1994 and the Company's fiscal year ended July 31, 1993,
respectively.
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Retail Operations
Formation
Ferrell Companies, Inc. ("Ferrell"), the parent of Ferrellgas, was founded
in 1939 as a single retail propane outlet in Atchison, Kansas and was
incorporated in 1954. In 1984, a subsidiary was formed under the name
Ferrellgas, Inc. to operate the retail propane business previously conducted by
Ferrell. Ferrell is primarily owned by James E. Ferrell and his family. The
Company's initial growth was largely the result of small acquisitions in the
rural areas of eastern Kansas, northern and central Missouri, Iowa, Western
Illinois, Southern Minnesota, South Dakota and Texas. In July 1984, the Company
acquired propane operations with annual retail sales volumes of approximately 33
million gallons and in December 1986, the Company acquired propane operations
with annual retail sales volumes of approximately 395 million gallons. These
major acquisitions and many other smaller acquisitions have significantly
expanded and diversified the Company's geographic coverage. In July 1994, the
propane business and assets of the Company were contributed to the Partnership.
Business Strategy
The Partnership's business strategy is to continue Ferrellgas' historical
focus on residential and commercial retail propane operations and to expand its
operations through strategic acquisitions of smaller retail propane operations
located throughout the United States and through increased competitiveness and
efforts to acquire new customers. The propane industry is relatively fragmented,
with the ten largest retail distributors possessing less than 33% of the total
retail propane market and much of the industry consisting of over 3,000 local or
regional companies. The Partnership's retail operations account for
approximately 7% of the retail propane purchased in the United States, as
measured by gallons sold. Since 1986, and as of July 31, 1995, Ferrellgas has
acquired 81 smaller independent propane retailers which Ferrellgas believes were
not individually material, except for the acquisition of Vision Energy
Resources, Inc. ("Vision"). For the fiscal years ended July 31, 1995 to 1991,
the Partnership or its Predecessor invested approximately $70.1 million, $3.4
million, $0.9 million, $10.1 million and $25.3 million, respectively, to acquire
operations with annual retail sales of approximately 70.0 million, 2.9 million,
0.7 million, 8.6 million and 18.0 million gallons of propane, respectively.
The Partnership intends to concentrate its acquisition activities in
geographical areas in close proximity to the Company's existing operations and
to acquire propane retailers that can be efficiently combined with such existing
operations to provide an attractive return on investment after taking into
account the efficiencies which may result from such combination. However, the
Partnership will also pursue acquisitions which broaden its geographic coverage.
The Partnership's goal in any acquisition will be to improve the operations and
profitability of these smaller companies by integrating them into the
Partnership's established supply network. The General Partner regularly
evaluates a number of propane distribution companies which may be candidates for
acquisition. The General Partner believes that there are numerous local retail
propane distribution companies that are possible candidates for acquisition by
the Partnership and that the Partnership's geographic diversity of operations
helps to create many attractive acquisition opportunities. The Partnership
intends to fund acquisitions through internal cash flow, external borrowings or
the issuance of additional Common Units. The Partnership's ability to accomplish
these goals will be subject to the continued availability of acquisition
candidates at prices attractive to the Partnership. There is no assurance the
Partnership will be successful in increasing the level of acquisitions or that
any acquisitions that are made will prove beneficial to the Partnership.
Approximately 70% of the Partnership's customers lease their tanks from the
Partnership, as compared to approximately 60% of all propane customers
nationwide. The Partnership believes there is a significant growth opportunity
in marketing to the 40% of propane users that own their tank. As a result, the
Partnership has directly sought to identify locations where it can achieve rapid
growth by marketing more effectively to these potential customers.
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Marketing
Natural gas liquids are derived from petroleum products and sold in
compressed or liquefied form. Propane, the predominant type of natural gas
liquid, is typically extracted from natural gas or separated during crude oil
refining. Although propane is gaseous at normal pressures, it is compressed into
liquid form at relatively low pressures for storage and transportation. Propane
is a clean-burning energy source, recognized for its transportability and ease
of use relative to alternative forms of stand alone energy sources.
The retail propane marketing business generally involves large numbers of
small volume deliveries averaging approximately 200 gallons each. The market
areas are generally rural but also include suburban areas where natural gas
service is not available. In the residential and commercial markets, propane is
primarily used for space heating, water heating and cooking. In the agricultural
market propane is primarily used for crop drying, space heating, irrigation and
weed control. In addition, propane is used for certain industrial applications,
including use as engine fuel, which is burned in internal combustion engines
that power vehicles and forklifts and as a heating or energy source in
manufacturing and drying processes.
Profits in the retail propane business are primarily based on margins, the
cents-per-gallon difference between the purchase price and the sales price of
propane. The Partnership generally purchases propane on a short-term basis;
therefore, its supply costs fluctuate with market price fluctuations. Should
wholesale propane prices decline in the future, the Partnership's margins on its
retail propane distribution business should increase in the short-term because
retail prices tend to change less rapidly than wholesale prices. Should the
wholesale cost of propane increase, for similar reasons retail margins and
profitability would likely be reduced at least for the short-term until retail
prices can be increased. Ferrellgas historically has been able to maintain
margins on an annual basis despite propane supply cost changes. The General
Partner is unable to predict, however, how and to what extent a substantial
increase or decrease in the wholesale cost of propane would affect the
Partnership's margins and profitability.
The Partnership has a network of approximately 467 retail outlets and 246
satellite locations marketing propane under the "Ferrellgas" trade name to more
than 700,000 customers located in 45 states and the District of Columbia. It's
largest market concentrations are in the Midwest, Great Lakes and Southeast
regions of the United States. The Partnership operates in areas of strong retail
market competition, which has required it to develop and implement strict
capital expenditure and operating standards in its existing and acquired retail
propane operations in order to control operating costs.
The Partnership utilizes marketing programs targeting both new and existing
customers emphasizing its superior ability to deliver propane to customers as
well as its training and safety programs. During the fiscal year ended July 31,
1995, sales to residential customers accounted for 44% of retail propane sales
volume, sales to industrial and other commercial customers accounted for 36% of
retail propane sales volume, sales to agricultural customers accounted for 11%
of retail propane sales volume and sales to other customers accounted for 9% of
retail propane sales volume. Residential sales have a greater profit margin,
more stable customer base and tend to be less sensitive to price changes than
the other markets served by the Partnership. No single customer of the
Partnership accounts for 10% or more of the Partnership's consolidated revenues.
The retail market for propane is seasonal because it is used primarily for
heating in residential and commercial buildings. Consequently, sales and
operating profits are concentrated in the second and third fiscal quarters
(November through April). To the extent necessary the Partnership will reserve
cash inflows from the second and third quarters for distribution to holders of
Common Units in the first and fourth fiscal quarters. In addition, sales volume
traditionally fluctuates from year to year in response to variations in weather,
prices and other factors, although the Partnership believes that the broad
geographic distribution of its operations helps to minimize exposure to regional
weather or economic patterns. Long-term, historic weather data from the National
Climatic Data Center indicate that the average annual temperatures have remained
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relatively constant over the last 30 years with fluctuations occurring on a
year-to-year basis only. During times of colder-than-normal winter weather, the
Company has been able to take advantage of its large, efficient distribution
network to help avoid supply disruptions such as those experienced by some of
its competitors, thereby broadening its long-term customer base.
Supply and Distribution
The Partnership purchases propane primarily from major domestic oil
companies. Supplies of propane from these sources have traditionally been
readily available, although no assurance can be given that supplies of propane
will be readily available in the future. As a result of (i) the Partnership's
ability to buy large volumes of propane and (ii) the Partnership's large
distribution system and underground storage capacity, the Partnership believes
that it is in a position to achieve product cost savings and avoid shortages
during periods of tight supply to an extent not generally available to other
retail propane distributors. The Partnership is not dependent upon any single
supplier or group of suppliers, the loss of which would have a material adverse
effect on the Partnership. For the year ended July 31, 1995, no supplier at any
single delivery point provided more than 10% of the Partnership's total domestic
propane supply. A portion of the Partnership's propane inventory is purchased
under supply contracts which typically have a one year term and a fluctuating
price relating to spot market prices. Certain of the Partnership's contracts
specify certain minimum and maximum amounts of propane to be purchased
thereunder. The Partnership may purchase and store inventories of propane in
order to help insure uninterrupted deliverability during periods of extreme
demand. The Partnership owns three underground storage facilities with an
aggregate capacity of approximately 184 million gallons. Currently,
approximately 129 million gallons of this capacity is leased to third parties.
The remaining space is available for the Partnership's use.
Propane is generally transported from natural gas processing plants and
refineries, pipeline terminals and storage facilities to retail distribution
outlets and wholesale customers by railroad tank cars leased by the Partnership
and highway transport trucks owned or leased by the Partnership. The Partnership
operates a fleet of transport trucks to transport propane from refineries,
natural gas processing plants or pipeline terminals to it's retail distribution
outlets. Common carrier transport trucks may be used during the peak delivery
season in the winter months or to provide service in areas where economic
considerations favor common carrier use. Propane is then transported from the
Partnership's retail distribution outlets to customers by it's fleet of 1,276
bulk delivery trucks, which are fitted generally with 2,000 to 3,000 gallon
propane tanks. Propane storage tanks located on the customers' premises are then
filled from the delivery truck. Propane is also delivered to customers in
portable cylinders.
Industry and Competition
Industry
Based upon information contained in the Energy Information Administration's
Annual Energy Review 1994 magazine, propane accounts for approximately 3-4% of
household energy consumption in the United States, an average level which has
remained relatively constant for the past 18 years. It competes primarily with
natural gas, electricity and fuel oil as an energy source principally on the
basis of price, availability and portability. Propane serves as an alternative
to natural gas in rural and suburban areas where natural gas is unavailable or
portability of product is required. Propane is generally more expensive than
natural gas on an equivalent BTU basis in locations served by natural gas,
although propane is often sold in such areas as a standby fuel for use during
peak demands and during interruption in natural gas service. The expansion of
natural gas into traditional propane markets has historically been inhibited by
the capital costs required to expand distribution and pipeline systems. Although
the extension of natural gas pipelines tends to displace propane distribution in
the neighborhoods affected, the Partnership believes that new opportunities for
propane sales arise as more geographically remote neighborhoods are developed.
Propane is generally less expensive to use than electricity for space heating,
water heating and cooking and competes effectively with electricity in those
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parts of the country where propane is cheaper than electricity on an equivalent
BTU basis. Although propane is similar to fuel oil in application, market demand
and price, propane and fuel oil have generally developed their own distinct
geographic markets. Because residential furnaces and appliances that burn
propane will not operate on fuel oil, a conversion from one fuel to the other
requires the installation of new equipment. The Partnership's residential retail
propane customers, therefore, will have an incentive to switch to fuel oil only
if fuel oil becomes significantly less expensive than propane. Likewise, the
Partnership may be unable to expand its customer base in areas where fuel oil is
widely used, particularly the Northeast, unless propane becomes significantly
less expensive than fuel oil. Alternatively, many industrial customers who use
propane as a heating fuel have the capacity to switch to other fuels, such as
fuel oil, on the basis of availability or minor variations in price. Propane
generally is becoming increasingly favored over fuel oil and other alternative
sources of fuel as an environmentally preferred energy source.
Competition
In addition to competing with marketers of other fuels, the Partnership
competes with other companies engaged in the retail propane distribution
business. Competition within the propane distribution industry stems from two
types of participants: the larger multi-state marketers, and the smaller, local
independent marketers. Based upon information contained in the National Propane
Gas Association's LP-Gas Market Facts and the June 1995 issue of LP Gas
magazine, the Partnership believes that the ten largest multi-state retail
marketers of propane, including the Partnership, account for less than 33% of
the total retail sales of propane in the United States. Based upon information
contained in industry publications, the Partnership also believes no single
marketer has a greater than 10% share of the total market in the United States
and that the Partnership is the second largest retail marketer of propane in the
United States, with a market share of approximately 7% as measured by volume of
national retail propane sales.
Most of the Partnership's retail distribution outlets compete with three or
more marketers or distributors. The principal factors influencing competition
among propane marketers are price and service. The Partnership competes with
other retail marketers primarily on the basis of reliability of service and
responsiveness to customer needs, safety and price. Each retail distribution
outlet operates in its own competitive environment because retail marketers
locate in close proximity to customers to lower the cost of providing service.
The typical retail distribution outlet has an effective marketing radius of
approximately 25 miles.
Other Operations
The other operations of the Partnership consist principally of: (1)
trading, (2) chemical feedstocks marketing and (3) wholesale propane marketing.
The Partnership, through its natural gas liquids trading operations and
wholesale marketing, has become one of the largest independent traders of
propane and natural gas liquids in the United States. The Partnership owns no
properties that are material to these operations. These operations may utilize
available space in the Partnership's underground storage facilities in the
furtherance of these businesses.
Trading
The Partnership's traders are engaged in trading propane and other natural
gas liquids for the Partnership's account and for supplying the Partnership's
retail and wholesale propane operations. The Partnership primarily trades
products purchased from its over 150 suppliers, however, it also conducts
transactions on the New York Mercantile Exchange. Trading activity is conducted
primarily to generate a profit independent of the retail and wholesale
operations, but is also conducted to insure the availability of propane during
periods of short supply. Propane represents over 61% of the Partnership's total
trading volume, with the remainder consisting principally of various other
natural gas liquids. The Partnership attempts to minimize trading risk through
the enforcement of its trading policies, which include total inventory limits
and loss limits, and attempts to minimize credit risk through credit checks and
application of its credit policies. However, there can be no assurance that
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historical experience or the existence of such policies will prevent trading
losses in the future. For the Operating Partnership's fiscal year ended July 31,
1995, the pro forma fiscal year ended July 31, 1994 and the Company's fiscal
year ended July 31, 1993 net revenues of $5.8 million, $6.8 million and $6.7
million, respectively, were derived from trading activities.
Chemical Feedstocks Marketing
The Partnership is also involved in the marketing of refinery and
petrochemical feedstocks. Petroleum by-products are purchased from refineries
and sold to petrochemical plants. The Partnership leases 316 railroad tank cars
to facilitate product delivery. Revenues of $91.9 million, $43.0 million and
$54.0 million were derived from such activities for the Operating Partnership's
fiscal year ended July 31, 1995, the pro forma fiscal year ended July 31, 1994
and the Company's fiscal year ended July 31, 1993, respectively.
Wholesale Marketing
The Partnership engages in the wholesale distribution of propane to other
retail propane distributors. During the fiscal year ended July 31, 1995, the pro
forma year ended July 31, 1994 and the Company's fiscal year ended July 31, 1993
the Partnership and the Company sold 96 million, 61 million and 73 gallons,
respectively, of propane to wholesale customers and had revenues attributable to
such sales of $33.5 million, $22.5 million and $29.3 million, respectively.
Employees
The Partnership has no employees and is managed by the General Partner
pursuant to the Partnership Agreement. At July 31, 1995, the General Partner had
2,810 full-time employees and 847 temporary and part-time employees. The number
of temporary and part-time employees is generally higher by approximately
350-500 people during the winter heating season. At July 31, 1995, the General
Partner's full-time employees were employed in the following areas:
Retail Locations 2,334
Field Services 24
Transportation and Storage 193
Corporate Offices (Liberty, MO, & Houston, TX) 259
==========
Total 2,810
==========
Approximately two percent of the General Partner's employees are
represented by eight local labor unions, which are all affiliated with the
International Brotherhood of Teamsters. The General Partner has not experienced
any significant work stoppages or other labor problems.
The Partnership's supply, trading, chemical feedstocks marketing,
distribution scheduling and product accounting functions are operated primarily
out of the Partnership's offices located in Houston, by a total full-time
corporate staff of 61 people.
Governmental Regulation; Environmental and Safety Matters
From August 1971 until January 1981, the United States Department of Energy
regulated the price and allocation of propane. The Partnership is no longer
subject to any similar regulation.
Propane is not a hazardous substance within the meaning of federal and
state environmental laws. In connection with all acquisitions of retail propane
businesses that involve the purchase of real estate, the Partnership conducts a
due diligence investigation to attempt to determine whether any substance other
than propane has been sold from or stored on any such real estate prior to its
purchase. Such due diligence includes questioning the sellers, obtaining
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representations and warranties concerning the sellers' compliance with
environmental laws and visual inspections of the properties, whereby employees
of the General Partner look for evidence of hazardous substances or the
existence of underground storage tanks.
With respect to the transportation of propane by truck, the Partnership is
subject to regulations promulgated under the Federal Motor Carrier Safety Act.
These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation. National Fire
Protection Association Pamphlet No. 58, which establishes a set of rules and
procedures governing the safe handling of propane, or comparable regulations,
have been adopted as the industry standard in a majority of the states in which
the Partnership operates. There are no material environmental claims pending and
the Partnership complies in all material respects with all material governmental
regulations and industry standards applicable to environmental and safety
matters.
Service Marks and Trademarks
The Partnership markets retail propane under the "Ferrellgas" tradename and
uses the tradename "Ferrell North America" for its other operations. In
addition, the Partnership has a trademark on the name "FerrellMeter," its
patented gas leak detection device. The Company contributed all of its rights,
title and interest in such tradenames and trademark in the continental United
States to the Partnership. The General Partner will have an option to purchase
such tradenames and trademark from the Partnership for a nominal value if the
General Partner is removed as general partner of the Partnership other than for
cause. If the General Partner ceases to serve as the general partner of the
Partnership for any other reason, it will have the option to purchase such
tradenames and trademark from the Partnership for fair market value.
Business of Ferrellgas Finance Corp.
Ferrellgas Finance Corp. (the "Finance Corp."), a Delaware corporation, was
formed April 28, 1994, and is a wholly-owned subsidiary of the Operating
Partnership. The Finance Corp. has nominal assets and does not conduct any
operations, but serves as co-obligor for securities issued by the Operating
Partnership. Certain institutional investors that might otherwise be limited in
their ability to invest in securities issued by partnerships by reasons of the
legal investment laws of their states of organization or their charter
documents, may be able to invest in the Operating Partner's securities because
the Finance Corp. is a co-obligor. Accordingly, a discussion of the results of
operations, liquidity and capital resources of the Finance Corp. is not
presented. See the Finance Corp. notes to financial statements for a discussion
of the securities which the Finance Corp. is serving as co-obligor.
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ITEM 2. PROPERTIES.
At July 31, 1995, the Partnership owned or leased the following
transportation equipment which was utilized primarily in retail operations,
except for railroad tank cars, which are used primarily by chemical feedstocks
operations.
Owned Leased Total
Truck tractors....................... 79 33 112
Transport trailers................... 117 --- 117
Bulk delivery trucks................. 605 671 1,276
Pickup and service trucks............ 717 526 1,243
Railroad tank cars................... --- 316 316
The highway transport trailers have an average capacity of approximately
9,000 gallons. The bulk delivery trucks are generally fitted with 2,000 to 3,000
gallon propane tanks. Each railroad tank car has a capacity of approximately
30,000 gallons.
A typical retail distribution outlet is located on one to three acres of
land and includes a small office, a workshop, bulk storage capacity of 18,000
gallons to 60,000 gallons and a small inventory of stationary customer storage
tanks and portable propane cylinders that the Partnership provides to its retail
customers for propane storage. The Partnership owns the land and buildings of
about 50% of its retail outlets and leases the remaining facilities on terms
customary in the industry and in the applicable local markets.
Approximately 589,000 propane tanks are owned by the Partnership, most of
which are located on customer property and leased to those customers. The
Partnership also owns approximately 567,000 portable propane cylinders, most of
which are leased to industrial and commercial customers for use in manufacturing
and processing needs, including forklift operations, and to residential
customers for home heating and cooking, and to local dealers who purchase
propane from the Partnership for resale.
The Partnership owns underground storage facilities at Hutchinson, Kansas;
Adamana, Arizona; and Moab, Utah. At July 31, 1995, the capacity of these
facilities approximated 88 million gallons, 88 million gallons and 8 million
gallons, respectively (an aggregate of approximately 184 million gallons).
Currently, approximately 129 million gallons of this capacity is leased to third
parties. The remaining space is available for the Partnership's use.
The Partnership owns the land and two buildings (50,245 square feet of
office space) comprising its corporate headquarters in Liberty, Missouri, and
leases the 18,124 square feet of office space in Houston, Texas, where its
trading, chemical feedstocks marketing and wholesale marketing operations are
primarily located.
The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
currently due and payable and immaterial encumbrances, easements and
restrictions, the Company does not believe that any such burdens will materially
interfere with the continued use of such properties by the Partnership in its
business, taken as a whole. In addition, the Partnership believes that it has,
or is in the process of obtaining, all required material approvals,
authorizations, orders, licenses, permits, franchises and consents of, and has
obtained or made all required material registrations, qualifications and filings
with, the various state and local governmental and regulatory authorities which
relate to ownership of the Partnership's properties or the operations of its
business.
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ITEM 3. LEGAL PROCEEDINGS.
Litigation
Propane is a flammable, combustible gas. Serious personal injury and
property damage can occur in connection with its transportation, storage or use.
The Partnership, in the ordinary course of business, is threatened with or is
named as a defendant in various lawsuits which, among other items, seek actual
and punitive damages for products liability, personal injury and property
damage. The Partnership maintains liability insurance policies with insurers in
such amounts and with such coverages and deductibles as the General Partner
believes is reasonable and prudent. However, there can be no assurance that such
insurance will be adequate to protect the Partnership from material expenses
related to such personal injury or property damage or that such levels of
insurance will continue to be available in the future at economical prices. It
is not possible to determine the ultimate disposition of these matters discussed
above; however, management is of the opinion that there are no known claims or
known contingent claims that are likely to have a material adverse effect on the
results of operations or financial condition of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of the
Partnership during the fiscal year ended July 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S UNITS AND RELATED UNITHOLDER MATTERS.
The Common Units, representing common limited partner interests in the
Partnership, are listed and traded on the New York Stock Exchange under the
symbol FGP. The Common Units began trading on June 28, 1994, at an initial
public offering price of $21.00 per Common Unit. As of September 15, 1995, there
were 855 registered Common Unitholders of record. The following table sets forth
the high and low sales prices for the Common Units on the NYSE and the cash
distributions declared per Common Unit for the periods indicated.
<TABLE>
<CAPTION>
Common Unit Price Range Distributions
-------------------------------------------------------
High Low Declared per Unit
-------------------------- ---------------------------- ---------------------------
1994
<S> <C> <C> <C>
Fourth Quarter * $21.13 $20.75 $0.15
1995
First Quarter 22.75 20.88 0.50
Second Quarter 22.50 19.75 0.50
Third Quarter 21.25 19.75 0.50
Fourth Quarter 22.63 20.25 0.50
<FN>
* Consisted of the period from the inception of the Partnership on July 5,
1994 through July 31, 1994, a 26-day period. The $0.15 distribution reflected
a pro rata share of the Minimum Quarterly Distribution of $0.50 per Unit
which would have been payable for the full quarter, and was paid in
conjunction with the first quarter 1995 distribution.
</FN>
</TABLE>
9
<PAGE>
The Partnership also has Subordinated Units, all of which are held by the
Company or Ferrell, for which there is no established public trading market.
The Partnership makes quarterly cash distributions of its Available Cash,
as defined by the MLP's Agreement of Limited Partnership (the "Partnership
Agreement"). Available Cash is generally defined as consolidated cash receipts
less consolidated cash disbursements and changes in cash reserves established by
the General Partner for future requirements.
The Partnership is a publicly traded limited partnership that is not
subject to federal income tax. Instead, Unitholders are required to report their
allocable share of the Partnership's income, gain, loss, deduction and credit,
regardless of whether the Partnership makes distributions.
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
The following table presents selected consolidated historical and pro forma
financial data of the Partnership and Predecessor.
<TABLE>
(in thousands, except per unit amounts)
<CAPTION>
Ferrellgas Partners, L.P.
-----------------------------------------
Historical Pro Forma Historical
Year Ended Year Ended Inception
to
July 31, July 31, 1994 July 31,
1995 (1) 1994
-----------------------------------------
Income Statement Data:
<S> <C> <C> <C>
Total revenues $596,436 $526,556 $ 24,566
Depreciation and amortization 32,014 28,835 2,383
Operating income (loss) 55,927 68,631 (2,391)
Interest expense 31,993 28,130 2,662
Earnings (loss) from continuing 23,820 39,909 (5,026)
operations
Earnings from continuing operations per 0.76 1.29 -
unit (2)
Cash distributions declared per unit (3) 1.65 - -
Balance Sheet Data (at end of period):
Working capital $ 28,928 $ 34,948 $ 34,948
Total assets 578,596 477,193 477,193
Payable to (receivable from) parent and - - -
affiliates
Long-term debt 338,188 267,062 267,062
Stockholder's equity
Partners' Capital:
Common Unitholders $ 84,489 $ 84,532 $ 84,532
Subordinated Unitholders 91,824 99,483 99,483
General Partner (2) (57,676) (62,622) (62,622)
Operating Data:
Retail propane sales volumes (in gallons) 575,935 564,224 23,915
Capital expenditures (4):
Maintenance $ 8,625 $ 5,688 $ 911
Growth 11,097 4,032 983
Acquisition 70,069 3,429 878
----------- -------------- ------------
Total $ 89,791 $ 13,149 $ 2,772
Supplemental Data:
Earnings (loss) before depreciation, amortization,
interest and taxes (5) $ 87,941 $ 97,466 $(8)
</TABLE>
<TABLE>
<CAPTION>
Ferrellgas, Inc. and Subsidiaries (Predecessor)
-------------------------------------------------
Historical
Eleven Months
Ended Historical Year Ended July 31,
-------------------------------------
June 30, 1993 1992 1991
1994
----------------------- ---------- ----------
Income Statement Data:
<S> <C> <C> <C> <C>
Total revenues $501,990 $541,945 $501,129 $543,933
Depreciation and amortization 26,452 30,840 31,196 36,151
Operating income (loss) 71,522 58,553 56,408 63,045
Interest expense 53,693 60,071 61,219 60,507
Earnings (loss) from continuing 12,337 109 (1,700) (6) 1,979
operations
Earnings from continuing operations per unit (2)
Cash distributions declared per unit (3)
Balance Sheet Data (at end of period):
Working capital $ 91,912 $ 74,408 $ 67,973 $ 53,403
Total assets 592,664 573,376 598,613 580,260
Payable to (receivable from) parent and (4,050) (916) 2,236 3,763
affiliates
Long-term debt 476,441 489,589 501,614 466,585
Stockholder's equity 22,829 11,359 8,808 21,687
Partners' Capital:
Common Unitholders
Subordinated Unitholders
General Partner (2)
Operating Data:
Retail propane sales volumes (in gallons) 540,309 553,413 495,707 482,211
Capital expenditures (4):
Maintenance $ $ 10,527 $ 10,250 $
4,777 7,958
Growth 3,049 2,851 3,342 2,478
Acquisition 2,551 897 10,112 25,305
---------- ----------- ---------- ----------
Total $ 10,377 $ 14,275 $ 23,704 $ 35,741
Supplemental Data:
Earnings (loss) before depreciation, amortization,
interest and taxes (5) $ 97,974 $ 89,393 $ 87,604 $ 99,196
<FN>
(1) The pro forma year ended July 31, 1994 includes the eleven months ended
June 30, 1994 and historical financial data of the partnership for the
period from inception July 5, 1994 to July 31, 1994 (adjusted principally
for the pro forma effect on interest expense resulting from the early
retirement of debt net of additional borrowings).
10
<PAGE>
(2) Pursuant to the MLP's Agreement of Limited Partnership (the "Partnership
Agreement"), the net loss from continuing operations of $5,026,000 was
allocated 100% to the General Partner from inception of the Partnership to
the last day of the taxable year ending July 31, 1994. An amount equal to
99% of this net loss was reallocated to the limited partners in the taxable
year ending July 31, 1995 based on their ownership percentage. In addition,
the retirement of debt assumed by the Partnership resulted in an
extraordinary loss of approximately $60,062,000 resulting from debt
prepayment premiums, consent fees and the write-off of unamortized discount
and financing costs. In accordance with the Partnership Agreement, this
extraordinary loss was allocated 100% to the General Partner and was not
reallocated to the limited partners in the next taxable year.
(3) No cash distributions were declared by the Partnership from inception to
July 31, 1994. The $0.65 distribution made at the end of the 1995 first
quarter included $0.50 for the first quarter 1995 and $0.15 for the
inception period.
(4) The Company's capital expenditures fall generally into three categories:
(i) maintenance capital expenditures, which include expenditures for repair
and replacement of property, plant and equipment; (ii) growth capital
expenditures, which include expenditures for purchases of new propane tanks
and other equipment to facilitate expansion of the Company's customer base
and operating capacity; and (iii) acquisition capital expenditures, which
include expenditures related to the acquisitions of retail propane
operations. Acquisition capital expenditures represent total cost of
acquisition less working capital acquired.
(5) EBITDA is calculated as operating income (loss) plus depreciation and
amortization. EBITDA is not intended to represent cash flow and does not
represent the measure of cash available for distribution. EBITDA is a
non-GAAP measure, but provides additional information for evaluating the
Partnership's ability to make the Minimum Quarterly Distribution. In
addition, EBITDA is not intended as an alternative to earnings (loss) from
continuing operations or net earnings (loss) .
(6) In August 1991, the Company revised the estimated useful lives of storage
tanks from 20 to 30 years in order to more closely reflect expected useful
lives of the assets. The effect of the change in accounting estimates
resulted in a favorable impact on loss from continuing operations of
approximately $3.7 million for the fiscal year ended July 31, 1992.
</FN>
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the historical and pro forma financial
condition and results of operations of the Operating Partnership and the
Company. The discussion should be read in conjunction with the historical and
pro forma consolidated financial statements and the notes thereto included
elsewhere in this Form 10-K. Since the Operating Partnership accounts for all of
the consolidated assets, sales, and earnings of the Partnership, a separate
discussion of the Partnership's results of operations is not presented.
General
The Operating Partnership is engaged in the sale, distribution, marketing
and trading of propane and other natural gas liquids. The Operating
Partnership's revenue is derived primarily from the retail propane marketing
business. The General Partner believes the Operating Partnership is the second
largest retail marketer of propane in the United States, based on gallons sold,
serving more than 700,000 residential, industrial/commercial and agricultural
customers in 45 states and the District of Columbia through approximately 467
retail outlets and 246 satellite locations. Annual retail propane sales volumes
were approximately 576 million, 564 million and 553 million gallons for the
fiscal years ended July 31, 1995, 1994 and 1993, respectively.
The retail propane business of the Operating Partnership consists
principally of transporting propane purchased in the contract and spot markets,
primarily from major oil companies, to its retail distribution outlets and then
to tanks located on the customers' premises, as well as to portable propane
cylinders. In the residential and commercial markets, propane is primarily used
for space heating, water heating and cooking. In the agricultural market,
propane is primarily used for crop drying, space heating, irrigation and weed
control. In addition, propane is used for certain industrial applications,
including use as an engine fuel which is burned in internal combustion engines
that power vehicles and forklifts and as a heating or energy source in
manufacturing and drying processes.
11
<PAGE>
The Operating Partnership is also engaged in the trading of propane and
other natural gas liquids, chemical feedstocks marketing and wholesale propane
marketing. Through its natural gas liquids trading operations and wholesale
marketing, the Operating Partnership is one of the largest independent traders
of propane and natural gas liquids in the United States. In fiscal year 1995,
the Operating Partnership's wholesale and trading sales volume was approximately
1.5 billion gallons of propane and other natural gas liquids, approximately 60%
of which was propane. For the Operating Partnership's fiscal year ended July 31,
1995, the pro forma fiscal year ended July 31, 1994 and the Company's fiscal
year ended July 31, 1993, net revenues from trading activities were $5.8
million, $6.8 million and $6.7 million, respectively.
Selected Quarterly Financial Data
(in thousands, except per unit data)
Due to the seasonality of the retail propane business, first and fourth
quarter revenues, gross profit and net earnings are consistently less than the
comparable second and third quarter results. The following presents Ferrellgas
Partners, L.P. selected quarterly financial data for the two years ended July
31, 1995.
<TABLE>
<CAPTION>
Fiscal year ended July 31, 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 119,413 $ 218,661 $ 168,013 $ 90,349
Gross profit 52,002 95,772 73,254 35,767
Net earnings (loss) (666) 30,527 11,939 (17,980)
Net earnings (loss) per
limited partner unit (0.02) 0.98 0.38 (0.58)
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended July 31, 1994
Predecessor
--------------------------------------------------
First Second Third Quarter Fourth
Quarter Quarter Quarter (1)
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 110,214 $ 193,922 $ 146,341 $ 76,079
Gross profit 49,699 98,458 72,994 36,099
Earnings (loss) before
extraordinary loss (5,537) 19,580 6,313 (13,045)
Earnings (loss) before
extraordinary loss per
limited partner unit (2) N/A N/A N/A N/A
Net earnings (loss) (5,537) 19,580 5,446 (72,500) (3)
<FN>
(1) The fourth quarter includes the sum of the historical data from
Ferrellgas, Inc. (Predecessor) for the period from May 1, 1994 through
June 30, 1994 and the historical data from Ferrellgas Partners, L.P.
from Inception to July 31, 1994.
(2) Earnings (loss) per limited partner unit is not relevant for the fiscal
year ended July 31, 1994, due to formation of the partnership in July,
1995.
(3) Reflects a $59,455 extraordinary loss on early retirement of debt.
</FN>
</TABLE>
12
<PAGE>
Results of Operations (Operating Partnership)
Fiscal Year Ended July 31, 1995 versus Pro Forma Year Ended July 31, 1994
The pro forma year ended July 31, 1994 equals the sum of the Predecessor's
eleven months ended June 30, 1994 and the Partnership's one month ended July 31,
1994, adjusted for the effects of the transactions consummated in connection
with the formation of the Partnership (principally related to the reduction in
interest expense resulting from early retirement of debt, net of additional
borrowings).
Total Revenues. Total revenues increased 13.3% to $596,436,000 as compared
to $526,556,000 for the prior year. The increase is attributable to acquisitions
of propane businesses during November 1994 and to revenues from other operations
(net trading operations, wholesale propane marketing and chemical feedstocks
marketing) increasing 82.4% to $131,948,000. The increase in revenues from other
operations is primarily due to an unusually strong demand for chemical
feedstocks driving increased prices and volumes. These increases were offset by
a decrease in revenues from existing retail operations due to warmer
temperatures as compared to normal and to the prior period that have affected
the majority of the Operating Partnership's areas of operation. Unrealized gains
and losses on options, forwards, and futures contracts were not significant in
fiscal 1995 and 1994. Fiscal 1995 winter temperatures, as reported by the
American Gas Association, were 10.3% warmer than normal and 12.4% warmer than
the prior year. The average degree days in regions served by the Company have
historically varied on an annual basis by a greater amount than the average
national degree days.
Gross Profit. Total retail gallons sold increased 2.1% to 576 million as
compared to 564 million for the prior year. This increase is due to sales
contributed by acquisitions, partially offset by warmer temperatures. Despite
the increase in sales volume, gross profit was essentially flat at $256,795,000
as compared with $257,250,000 for the prior year due primarily to the weather
impact on higher margin residential sales. Other operations is comprised of low
margin sales, therefore, the increase in revenues did not impact gross profit
significantly.
Operating Expenses. Operating expenses increased 5.6% to $153,225,000 as
compared to $145,136,000 for the prior year. The increase is primarily
attributable to acquisitions of propane businesses offset by a reduction in
expenses of the base business (primarily personnel and vehicle expenses) as
compared to the prior year.
Depreciation and Amortization. Depreciation and amortization expense
increased 11.0% to $32,014,000 as compared to $28,835,000 for the prior year due
primarily to acquisitions of propane businesses.
Net Earnings. Net earnings decreased to $24,064,000 as compared to
$40,312,000 for the prior year. This decrease is due to acquisition-driven
increases in expenses, including interest expense, combined with the warm
weather impact on gross profit.
Inception to July 31, 1994 versus Pro Forma July 31, 1993
Total Revenues. Total revenues decreased 7.4% to $24,566,000 as compared
with $26,535,000 for the prior period. The overall decrease was attributable to
revenues from other operations (net trading operations, wholesale propane
marketing and chemical feedstocks marketing) decreasing 38.5% to $4,918,000,
offset by revenues from retail operations increasing 6.0% to $19,648,000.
The decrease in revenues from other operations was primarily due to
fluctuating chemical feedstock market opportunities.
13
<PAGE>
The increase in revenues from retail operations was primarily due to (i) an
increase in sales volume and (ii) an increase in other income. The volume of
gallons sold, excluding acquisitions, increased revenues by $361,000. Fiscal
year 1994 and 1993 acquisitions increased revenues by $160,000. Other income
increased revenue by $592,000 primarily due to inventory gas gains recognized
from the emptying of an underground storage facility and storage rental income.
Gross Profit. Gross profit increased 10.9% to $11,355,000 as compared with
$10,235,000 for the prior period, due to an increase in retail operations gross
profit offset by a decrease in other operations' revenue due to normal market
fluctuations. Retail operations results improved due to increased sales volume
as discussed previously, margin increases as a result of favorable changes in
the competitive pressures of the industry and normal fluctuations in the
Operating Partnership's product mix and other income as discussed above.
Operating Expenses. Operating expenses increased 21.4% to $10,078,000 as
compared with $8,299,000, for the prior period, primarily due to an increase in
general liability and workers' compensation expense during July 31, 1994, as
compared to July 31, 1993. However, for the pro forma fiscal year ended July 31,
1994, general liability and workers' compensation expense decreased due to
improved claims administration.
Extraordinary loss. The retirement of $477,600,000 of indebtedness assumed
by the Operating Partnership resulted in an extraordinary loss of approximately
$60,062,000 resulting from debt repayment premiums, consent fees and the
write-off of unamortized discount and financing costs.
Net Loss. Net loss increased to $65,139,000 as compared to $4,322,000 for
the prior period, primarily due to the extraordinary loss described above.
<TABLE>
<CAPTION>
Eleven Months Ended June 30, 1994 versus June 30, 1993 (PREDECESSOR)
Eleven months ended Eleven months ended
June 30, 1994 June 30, 1993
---------------------- ---------------------
<S> <C> <C>
Revenues $ 501,990,000 $ 515,410,000
Gross profit 245,895,000 233,677,000
Operating expense 135,058,000 131,318,000
Depreciation and amortization 26,452,000 28,350,000
Net interest expense 50,094,000 52,080,000
Net earnings 11,470,000 3,374,000
</TABLE>
Total Revenues. Total revenues decreased 2.6% to $501,990,000 as compared
with $515,410,000 for the prior period. The overall decrease was attributable to
revenues from other operations decreasing 17.2% to $67,386,000, offset by
revenues from retail operations increasing 0.1% to $434,604,000.
The decrease in revenues from other operations was primarily due to higher
sales of chemical feedstocks in the prior period resulting from sales of
chemical feedstocks that were designated for storage but were sold due to
storage limitations. Additional decreases in revenues were the result of lower
product costs for chemical feedstocks and wholesale propane marketing resulting
in lower sales prices.
The increase in revenues from retail operations was primarily due to an
increase in sales volume due to cooler temperatures than those which existed in
the prior period offset by a decrease in selling price. The volume of gallons
sold, excluding acquisitions, increased revenues by $6,203,000. Fiscal year 1994
and 1993 acquisitions increased revenues by $1,915,000. Other income increased
14
<PAGE>
revenue $954,000 primarily due to increased storage and equipment rental and
appliance sales. These increases were offset by a $8,473,000 decrease in sales
price due to lower product costs.
Gross Profit. Gross profit increased 5.2% to $245,895,000 as compared with
$233,677,000 for the prior period, primarily due to an increase in retail
operations gross profit. Retail operations results improved due to increased
sales volume as discussed previously and to margin increases as a result of
favorable changes in the competitive pressures of the industry and to normal
fluctuations in the Company's product mix.
Operating Expenses. Operating expenses increased 2.8% to $135,058,000 as
compared with $131,318,000 for the prior period, primarily due to (i) an
increase in incentive compensation expense, and (ii) an increase in overtime,
variable labor and vehicle expenses due to increased sales volume. These
increases were partially offset by a decrease in general liability and workers'
compensation expense due to improved claims administration and decreased sales
and use tax audit assessments.
Depreciation and Amortization. Depreciation expense decreased 6.7% to
$26,452,000 as compared with $28,350,000 for the prior period due primarily to
extending the use of the Company's vehicles beyond the depreciable life and to
the reduction in the number of Company owned vehicles.
Net Interest Expense. Net interest expense decreased 3.8% to $50,094,000 as
compared with $52,080,000 for the prior period due to the reacquisition of
$11,900,000 and $10,500,000 of senior notes in the third quarter of fiscal 1994
and in the fourth quarter of fiscal 1993, respectively, offset by increased
non-cash amortization of deferred financing costs.
Net Earnings. Net earnings increased to $11,470,000 as compared with
$3,374,000 for the prior period primarily due to the increase in retail
operations sales volume and margins offset by increased operating expenses and
the fiscal 1994 extraordinary loss from early extinguishment of debt.
Liquidity and Capital Resources
The ability of the Operating Partnership to satisfy its obligations is
dependent upon future performance, which will be subject to prevailing economic,
financial, business and weather conditions and other factors, many of which are
beyond its control. For the fiscal year ending July 31, 1996, the General
Partner believes that the Operating Partnership will generate sufficient
Available Cash (see definition in Note C to the consolidated financial
statements in Item 8) constituting Cash from Operations to meet its obligations
and enable it to distribute the Minimum Quarterly Distribution ($0.50 per Unit)
on all Common Units and Subordinated Units. Future maintenance and working
capital needs of the Operating Partnership are expected to be provided by cash
generated from future operations, existing cash balances and the working capital
borrowing facility. In order to fund expansive capital projects and future
acquisitions, the Operating Partnership may borrow on existing bank lines or the
MLP may issue additional Common Units. Toward this purpose, on August 22, 1994,
the MLP filed with the Securities and Exchange Commission a shelf registration
statement on Form S-1 to register 2,400,000 Common Units representing limited
partner interests in the MLP. The Common Units may be issued from time to time
by the MLP in connection with the Operating Partnership's acquisition of other
businesses, properties or securities in business combination transactions.
Operating Activities. Cash provided by operating activities was $66,030,000
for the year ended July 31, 1995, compared to $41,057,000 in the prior year.
This increase is due to the year to year reduction in debt which resulted in the
$41,856,000 decrease in interest payments offset by lower earnings before
interest, taxes, depreciation and amortization. The decrease in interest
payments resulted from debt retirements made subsequent to the formation of the
Partnership.
Investing Activities. On November 1, 1994, the General Partner completed
the acquisition of Vision for a cash purchase price of $45 million. Following
15
<PAGE>
the closing of the acquisition, the General Partner contributed the net assets
(excluding income tax liabilities) of Vision to the Operating Partnership, in
exchange for the assumption of a $45 million loan obligation and issuance of
$3,100,000 in Common Units for the value of the income tax liabilities retained
by the General Partner. Including the Vision acquisition, the Partnership made
total acquisition capital expenditures of $73,351,000 (including working capital
acquired of $3,282,000). This amount was funded by $45,000,000 debt assumed,
$19,677,000 cash payments, $6,600,000 Common Units issued, and $2,074,000 in
other costs and consideration.
During the year ended July 31, 1995, the Partnership made growth and
maintenance capital expenditures of $19,722,000 consisting primarily of the
following: 1) additions to Partnership-owned customer tanks and cylinders, 2)
relocating and upgrading district plant facilities, and 3) development and
upgrading computer equipment and software. Capital requirements for repair and
maintenance of property, plant and equipment are relatively low since
technological change is limited and the useful lives of propane tanks and
cylinders, the Partnership's principal physical assets, are generally long. The
Partnership maintains its vehicle and transportation equipment fleet by
initially leasing light and medium duty trucks and tractors. The General Partner
believes vehicle leasing is a cost effective method for meeting the
Partnership's transportation equipment needs. The Partnership continues seeking
to expand its operations through strategic acquisitions of smaller retail
propane operations located throughout the United States. These acquisitions will
be funded through internal cash flow, external borrowings or the issuance of
additional Partnership interests. The Partnership does not have any material
commitments of funds for capital expenditures other than to support the current
level of operations.
Financing Activities. On November 14, 1994, the Partnership filed Amendment
No. 1 to Form S-1 Registration Statement with the Securities and Exchange
Commission to register 2,400,000 Common Units representing limited partner
interests in the Partnership. The registration statement was declared effective
November 15, 1994. The Common Units may be issued from time to time by the
Partnership in exchange for other businesses, properties or securities in
business combination transactions. During the year ended July 31, 1995, the
Partnership issued 298,942 Common Units in connection with the acquisition of
propane businesses.
On July 21, 1995, the Operating Partnership entered into an amendment to
its $185,000,000 Credit Facility with Bank of America National Trust & Savings
Association ("BofA"), as Agent, which increased the maximum borrowing amount to
$205,000,000, effective August 1, 1995. The amended Credit Facility permits
borrowings of up to $95,000,000 on a senior unsecured revolving line of credit
basis (the "Working Capital Facilities"), to fund working capital and general
Partnership requirements (of which up to $50,000,000 is available to support
letters of credit). At July 31, 1995, $20,000,000 of borrowings were outstanding
under the Working Capital Facility, and letters of credit outstanding, used
primarily to secure obligations under certain insurance arrangements, totaled
$24,471,000. In addition, the amended Credit Facility permits borrowings under
an Expansion Facility of up to $110,000,000 on a senior unsecured basis, of
which $85,000,000 was borrowed and outstanding at July 31, 1995, and $25,000,000
is available to finance acquisitions and for capital additions and improvements.
During the year ended July 31, 1995, the Partnership borrowed $102,000,000
under its Credit Facility. These borrowings, along with cash provided by
operations, were used to fund acquisitions of propane businesses and purchases
of property, plant and equipment, and to fund working capital needs.
During the year ended July 31, 1995, the Partnership paid cash
distributions of $1.65 per limited partner unit. These distributions covered the
period from July 5, 1994, when the Partnership began operations, to April 30,
1995, the end of the third quarter of fiscal year 1995. On August 16, 1995, the
Partnership declared its fourth-quarter cash distribution of $0.50 per limited
partner unit, which was paid September 13, 1995. The Partnership's annualized
distribution is presently $2.00 per limited partner unit.
The Senior Notes and Credit Facility contain various restrictive covenants
applicable to the Operating Partnership and its subsidiaries, the most
restrictive relating to additional indebtedness, sale and disposition of assets,
and transactions with affiliates. In addition, the Operating Partnership is
16
<PAGE>
prohibited from making cash distributions of the Minimum Quarterly Distribution
if a default or event of default exists or would exist upon making such
distribution, or if the Operating Partnership fails to meet certain coverage and
capital expenditure tests. With respect to the capital expenditure tests, the
Operating Partnership shall in the aggregate make future "Capital Investments"
(as defined in the Senior Note Indenture) of approximately $25,000,000 by July
31, 1999, and $50,000,000 by the end of fiscal year 2000. The Operating
Partnership is in compliance with all requirements, tests, limitations and
covenants related to the Senior Notes and Credit Facility.
Effects of Inflation. In the past the Partnership has been able to adjust
its sales price of product in response to market demand, cost of product,
competitive factors and other industry needs. Consequently, changing prices as a
result of inflationary pressures have not had a material adverse effect on
profitability although revenues may be affected. Inflation has not materially
impacted the results of operations and the General Partner does not believe
normal inflationary pressures will have a material adverse effect on the
profitability of the Operating Partnership in the future.
Assets Contributed to the Operating Partnership. In connection with the
formation of the Partnership, the General Partner contributed certain assets and
liabilities. The Internal Revenue Service ("IRS") has examined the General
Partner's consolidated income tax returns for the years ended July 31, 1987 and
1986, and has proposed certain adjustments which relate to these contributed
assets. The General Partner has reached a settlement agreement which
substantially resolves all issues with the IRS with the exception of minor items
which are presently being negotiated at the appellate level. Due to the
settlement of these issues, additional deferred taxes were recorded by the
General Partner. This noncash adjustment retroactively increased the basis of
the assets the General Partner contributed to the Operating Partnership by
$11,300,000 which, in turn, caused an increase to the General Partner's
contributed capital that was reallocated pro rata among all partners. In
addition, Operating Partnership goodwill also increased by $11,300,000 (to be
amortized prospectively over a period of 15 years). These adjustments are not
material to the financial position or the results of operations or liquidity,
nor have they impacted the limited partners' tax basis in the Partnership units.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Partnership's Consolidated Financial Statements and the Reports of
Certified Public Accountants thereon and the Supplementary Financial Information
listed on the accompanying Index to Financial Statements and Financial Statement
Schedules are hereby incorporated by reference. See Item 7 for Selected
Quarterly Financial Data.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
17
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
Partnership Management
The General Partner manages and operates the activities of the Partnership,
and the General Partner anticipates that its activities will be limited to such
management and operation. Unitholders do not directly or indirectly participate
in the management or operation of the Partnership. The General Partner owes a
fiduciary duty to the Unitholders.
In September 1994, the General Partner appointed two persons who are
neither officers nor employees of the General Partner or any affiliate of the
General Partner to serve on a committee of the Partnership (the "Audit
Committee") with the authority to review, at the request of the General Partner,
specific matters as to which the General Partner believes there may be a
conflict of interest in order to determine if the resolution of such conflict
proposed by the General Partner is fair and reasonable to the Partnership. The
Audit Committee will only review matters relating to conflicts of interest at
the request of the General Partner, and the General Partner has sole discretion
to determine which matters, if any, to submit to the Audit Committee. Any
matters approved by the Audit Committee will be conclusively deemed to be fair
and reasonable to the Partnership, approved by all partners of the Partnership
and not a breach by the General Partner of any duties it may owe the Partnership
or the Unitholders.
The Partnership does not directly employ any of the persons responsible for
managing or operating the Partnership. At July 31, 1995, 2,810 full-time and 847
temporary and part-time individuals were employed by the General Partner.
Directors and Executive Officers of the General Partner
The following table sets forth certain information with respect to the
directors and executive officers of the General Partner. Each of the persons
named below is elected to their respective office or offices annually. The
executive officers are not subject to employment agreements.
<TABLE>
<CAPTION>
Director
Name Age Since Position
<S> <C> <C> <C>
James E. Ferrell 55 1984 President, Chairman of the Board,
Chief Executive Officer and a Director
of the General Partner
Danley K. Sheldon 37 Senior Vice President, Chief Financial
Officer, Treasurer and Managing
Director
Shahid J. A. Malik 35 Senior Vice President, Chief Operating
Officer, Ferrell North America and
Managing Director
James M. Hake 35 Vice President, Acquisitions
Rhonda Smiley 39 Vice President, Legal Affairs and Risk
Management
Daniel M. Lambert 54 1994 Director of the General Partner
A. Andrew Levison 39 1994 Director of the General Partner
</TABLE>
18
<PAGE>
James E. Ferrell--Mr. Ferrell has been with Ferrell or its predecessors and
its affiliates in various executive capacities since 1965.
Danley K. Sheldon--Mr. Sheldon has been Chief Financial Officer of the
Company since January 1994 and has served as Treasurer since 1989. He joined the
Company in 1986.
James M. Hake--Mr. Hake has been Vice President, Acquisitions of the
Company since October, 1994. He joined the Company in 1986.
Rhonda Smiley--Ms. Smiley joined the Company in 1991 as Director of Legal
Affairs and has been a Vice President of the Company since April 1994. Prior to
joining the Company, Ms. Smiley practiced law with Shook, Hardy & Bacon for ten
years, the last five years as a partner.
Daniel M. Lambert---Dr. Lambert was elected a director of the Company in
September 1994. Dr. Lambert has been President of Baker University in Baldwin
City, Kansas, since July 1, 1987.
A. Andrew Levison---Mr. Levison was elected a director of the Company in
September 1994. Mr. Levison has been a Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation since 1989. Mr. Levison is also a director of
Rickel Home Centers, Inc., a leading full service home improvement retailer that
operates stores in the Northeastern United States and Flagstar Companies, Inc.
Compensation of the General Partner
The General Partner receives no management fee or similar compensation
in connection with its management of the Partnership and receives no
remuneration other than:
(i) distributions in respect of its 2% general partner interest,
on a combined basis, in the Partnership and the Operating Partnership;
and
(ii) reimbursement for all direct and indirect costs and expenses
incurred on behalf of the Partnership, all selling, general and
administrative expenses incurred by the General Partner for or on
behalf of the Partnership and all other expenses necessary or
appropriate to the conduct of the business of, and allocable to, the
Partnership. The selling, general and administrative expenses
reimbursed include specific employee benefit and incentive plans for
the benefit of the executive officers and employees of the General
Partner.
19
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth the compensation for the past three years of
all individuals serving as the Partnership's or its Predecessor's Chief
Executive Officer ("CEO") or acting in a similar capacity during the last
completed fiscal year, regardless of compensation level, and the Company's four
most highly compensated executive officers other than the Chief Executive
Officer ("named executive officers"), who were serving as executive officers at
the end of the 1995 fiscal year.
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------
Annual Compensation Pay-outs
------------------------ -------------
Stock Long-Term
Options/ Incentive All Other
Name and Salary Bonus SARs Payouts Compensation
Principal Position Year ($) ($) (#) ($) ($)
------- ---------- ---------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James E. Ferrell 1995 480,000 180,000 --- --- 36,977 (1)
- -------------------------------------
Chairman and 1994 480,000 --- --- --- 22,920
Chief Executive Officer 1993 480,000 13,000 --- 1,502,080 (2) 25,489
Bradley A. Cochennet (3) 1995 229,583 50,000 --- --- 300,102 (4)
- -------------------------------------
Executive Vice President, Retail 1994 225,000 50,000 2,678 --- 13,249
and Managing Director 1993 150,000 --- 2,762 --- 9,315
Danley K. Sheldon 1995 165,000 50,000 70,000 --- 15,897 (5)
- -------------------------------------
Senior Vice President, Chief 1994 120,185 125,875 --- --- 7,693
Financial Officer, Treasurer 1993 115,000 --- --- --- 6,893
and Managing Director
Shahid J. A. Malik 1995 150,000 100,000 25,000 --- 9,706 (6)
- -------------------------------------
Senior Vice President, Chief
Operating Officer, FNA
and Managing Director
James M. Hake
- -------------------------------------
Vice President, Acquisitions 1995 112,583 60,000 36,000 --- 10,424 (5)
<FN>
(1) Includes (i) contributions of $19,722 to the employee's 401(k) and profit
sharing plans and (ii) compensation of $17,255 resulting from the payment
of life insurance premiums.
(2) Early purchase of all the employee's 64,000 Equity Units under Ferrell's Long-Term Incentive Plan at a price
of $23.47.
(3) Mr. Cochennet resigned effective August 16, 1995.
(4) Includes (i) $285,000 paid in connection with the Long-Term Incentive Plan
and (ii) contributions of $15,102 to the employee's 401(k) and profit
sharing plans.
(5) Includes for Mr. Sheldon: contributions to the employee's 401(k) and profit sharing plans of $15,084 and
premiums paid for life insurance of $813. Includes for Mr. Hake: contributions to the employee's 401(k)
and profit sharing plans of $9,788 and premiums paid for life insurance of $636.
(6) Includes (i) relocation reimbursements of $7,009 and (ii) contributions of $2,697 to the employee 401(k) and
profit sharing plans and premiums paid for over $50,000 term life insurance.
</FN>
</TABLE>
20
<PAGE>
Unit and Stock Option Tables
Unit Option Plan
On October 14, 1994, the General Partner adopted the Ferrellgas, Inc. Unit
Option Plan (the "Unit Option Plan"). The purpose of the Unit Option Plan is to
encourage certain employees of the General Partner to develop a proprietary
interest in the growth and performance of the Partnership, to generate an
increased incentive to contribute to the Partnership's future success and
prosperity, thus enhancing the value of the Partnership for the benefit of its
unitholders, and to enhance the ability of the General Partner to attract and
retain key individuals who are essential to progress, growth and profitability
of the Partnership, by giving such employees the opportunity to acquire
Subordinated Units.
The Unit Options have the following characteristics: 1) exercise prices
which are an estimate of the fair market value of the Subordinated Units at the
time of grant, 2) vest immediately or over a one to five year period depending
on the employee, 3) exercisable beginning after July 31, 1999, assuming the
subordination period has elapsed, and 4) expire on the tenth anniversary of the
date of grant. Upon conversion of the Subordinated Units held by the General
Partner and its affiliates, the Unit Options granted will convert to Common Unit
Options.
The following table shows unit options granted during the 1995 fiscal
year to the CEO and named executive officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grant
-----------------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration Grant date
Name Granted (1) Fiscal Year ($/Unit) Date present value $ (2)
- ---------------------- -------------- ------------------- ------------ ------------ -----------------------
<S> <C> <C> <C> <C> <C>
J.E. Ferrell - - - - -
B.A. Cochennet - - - - -
D.K. Sheldon (3) 70,000 9.03% 16.80 10-14-04 175,000
S.J.A. Malik 25,000 3.23% 16.80 10-14-04 63,000
J.M. Hake 36,000 4.65% 16.80 10-14-04 90,000
<FN>
(1) Unit options generally vest over five years.
(2) Based on a Black-Sholes option valuation model. The key input variables
used in valuing the options were the following: risk-free interest rate -
6.32%; dividend amount - $0.50 per quarter; Common Unit price volatility -
7.71% is an estimate of Subordinated Unit volatility; option exercised on
October 14, 1999, because this is most advantageous to the option holder
based on current economic conditions. Additionally, it was assumed that the
Partnership will make its Minimum Quarterly Distribution each quarter and
that the Subordination Period will end in 1999. The New York Stock Exchange
"Monthly Market Statistics Report" was used and the volatility variable
reflected 30 weeks of historical Unit price trading data. No adjustments
for non-transferability or risk of forfeiture were made. The actual value,
if any, a grantee may realize will depend on the excess of the Unit price
over the exercise price on the date the option is exercised, so that there
is no assurance the value realized will be at or near the value estimated
by the Black-Sholes model.
(3) Mr. Sheldon received unit options with the following vesting schedules: a) 20,000 - immediately b) 15,000
over two years and c) 35,000 over five years.
</FN>
</TABLE>
21
<PAGE>
The following table lists information on the CEO and named executive
officers' exercised/unexercised unit options for the fiscal year ended July 31,
1995.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FY AND FY-END OPTION SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-The-Money Options/SARs
FY-End (#) at FY-End ($)
------------------------- -----------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------ --------------- -------------- ------------------------- ------------------------------
<S> <C> <C> <C> <C>
J.E. Ferrell - - - -
B.A. Cochennet - - - -
D.K. Sheldon 0 0 0/70,000 0/355,250
S.J.A. Malik 0 0 0/25,000 0/126,875
J.M. Hake 0 0 0/36,000 0/182,700
</TABLE>
Stock Option Plan
The Board of Directors of Ferrell adopted the 1992 Key Employee Stock
Option Plan (the "Option Plan") on June 26, 1992. The Option Plan reserves
100,000 shares of Class M Common Stock of Ferrell for the purpose of allowing
Ferrell to offer options on the Class M Common Stock to officers and key
employees of Ferrell and the Company. The value of each share of Class M Common
Stock is determined by the Board of Directors of Ferrell and shall not be less
than fair market value of such stock on the date the option is granted. There
were no option grants for the fiscal year ended July 31, 1995, as the plan
ceased to grant options after the inception of the Unit Option Plan. The last
outstanding options were exercised on December 7, 1994.
The following table lists information on the CEO and named executive
officers' aggregated option exercises related to Class M Common Stock Options
for the fiscal year ended July 31, 1995.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FY AND FY-END OPTION SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-The-Money Options/SARs
Shares at FY-End (#) at FY-End ($)
Acquired on Value
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------- -------------- -------------- ---------------------------- ---------------------------------
<S> <C> <C> <C> <C>
J.E. Ferrell - - - -
B.A. Cochennet 5,440 530,575 - -
D.K. Sheldon - - - -
S.J.A. Malik - - - -
J.M. Hake - - - -
</TABLE>
Long-Term Incentive Plan Awards
The goal of Ferrell's Long-Term Incentive Plan (the "Plan") was to attract
and retain officers and key executives needed for the continued growth and
success of Ferrell and its affiliates through long-term incentives in the form
of units ("Equity Units"). The Equity Units awarded under the Plan, which are
100% vested, are subject to purchase by Ferrell at a cash price related to the
increased value of Ferrell's common stock from 1986, as determined pursuant to
(i) an appraisal conducted by a nationally recognized investment banking firm,
(ii) the mean of the closing bid and asked price of a class of Ferrell's common
stock if a class of Ferrell's common stock is publicly traded, or (iii) in
certain limited circumstances, including if the appraisal referred to in (i) is
more than 90 days old or if there is no public market as referred to in (ii),
the Committee shall determine the value of the Equity Units. Unless purchased
earlier, Ferrell will purchase all of the issued and outstanding Equity Units as
of July 31, 1997. The value of the Equity Units as of July 31, 1997 will be the
22
<PAGE>
value of Ferrell's common stock as of such date, determined in accordance with
the valuation methods described above, less the "deemed" value of Ferrell's
common equity as of August 1, 1986.
As of July 31, 1995, a total of 30,000 Equity Units, awarded in previous
years, were outstanding to Bradley A. Cochennet, as named in the Summary
Compensation Table. No additional Equity Units were awarded under the Plan in
fiscal 1995, therefore, no long-term incentive plan awards table is presented.
The total compensation expense of $492,000, $720,000 and $80,000 was
recognized for the fiscal years ended July 31, 1995, 1994 and 1993,
respectively. During fiscal 1995, approximately $300,000 of the Plan
compensation expense was attributable to the Partnership and was recognized as
compensation expense. As of July 31, 1995, the total plan liability of
$3,010,000 was recorded in the financial statements of Ferrell. The portion of
that liability attributable to the Partnership ($300,000) was recognized in the
financial statements of the Partnership. Pursuant to the Plan, a total of
$2,360,000 was paid to Mr. Cochennet upon his resignation in August 1995. Such
amount was funded by the Partnership to the extent of amounts accrued for the
portion of the Plan being paid out.
Profit Sharing Plan
The Ferrell Profit Sharing and 401(k) Investment Plan is a qualified
defined contribution plan (the "Profit Sharing Plan"). All full-time employees
of Ferrell or any of its direct or indirect wholly owned subsidiaries with at
least one year of service are eligible to participate in the Profit Sharing
Plan. In regards to the profit sharing portion, the Board of Directors of
Ferrell determines the amount of the annual contribution to the Profit Sharing
Plan, which is purely discretionary. This decision is based on the operating
results of Ferrell for the previous fiscal year and anticipated future cash
needs of the General Partner and Ferrell. The contributions are allocated to the
Profit Sharing Plan participant's based on each participant's wages or salary as
compared to the total of all participants' wages and salaries.
Historically, the annual contribution to the Profit Sharing Plan has been
2% to 7% of each participant's annual wage or salary. The Profit Sharing Plan
also has a cash-or-deferred, or 401(k), feature allowing all full time employees
to specify a portion of their pre-tax and/or after-tax compensation to be
contributed to the Profit Sharing Plan.
Supplemental Savings Plan
The Ferrell Supplemental Savings Plan was established October 1, 1994 in
order to provide certain management or highly compensated employees with
supplemental retirement income which is approximately equal in amount to the
retirement income that would have been provided to members of the select group
of employees under the terms of the 401(k) feature of the Profit Sharing Plan
based on such members' deferral elections thereunder, but which could not be
provided under the 401(k) feature of the Profit Sharing Plan due to application
of certain IRS rules and regulations.
Compensation of Directors
The General Partner does not pay any additional remuneration to its
employees (or employees of, or legal counsel to, a direct or indirect
wholly-owned subsidiary) for serving as directors. Directors who are not
employees of the General Partner, a direct or indirect wholly-owned subsidiary,
or counsel to any of the foregoing, receive a fee per meeting of $500, plus
reimbursement for out-of-pocket expenses.
Termination of Employment Arrangement
In January 1994, Geoffrey H. Ramsden resigned as Vice President and Chief
Financial Officer of the Company. In connection with Mr. Ramsden's resignation,
Ferrell and Mr. Ramsden entered into a severance agreement dated March 23, 1994.
Pursuant to the terms of the agreement, Mr. Ramsden received approximately
23
<PAGE>
$500,000 in exchange for the repurchase of his Class M Stock and Equity Units
and the termination of all rights under Ferrell's bonus and performance plans.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of July 31, 1995,
regarding the beneficial ownership of the Common and Subordinated Units of the
MLP by certain beneficial owners and all directors of the General Partner and
the Partnership, each of the named executive officers and all directors and
executive officers as a group. The General Partner knows of no other person
beneficially owning more than 5% of the Common Units.
<TABLE>
Ferrellgas Partners, L.P.
<CAPTION>
Units Percent
Title of Name and Address Beneficially of
Class of Beneficial Owner Owned (1) Class
- -------------------------------- ------------------------- ---------------- ------------
<S> <C> <C> <C>
Common Units James E. Ferrell 1,146,392 (2) 8.0%
Goldman, Sachs & Co. 1,144,950 (3) 8.0%
The Goldman Sachs Group 1,144,950 (3) 8.0%
Bradley A. Cochennet 500 *
Danley K. Sheldon 1,000 *
Shahid J. A. Malik 1,200 *
James M. Hake 400 *
A. Andrew Levison 15,000 *
Daniel M. Lambert 200 *
All Directors and
Officers as a Group 1,165,219 8.1%
Subordinated Units James E. Ferrell 16,593,721 (2) 100%
<FN>
* Less than 1%.
(1) Beneficial ownership for the purposes of the foregoing table is defined by
Rule 13d-3 under the Securities Exchange Act of 1934. Under that rule, a
person is generally considered to be the beneficial owner of a security if
he has or shares the power to vote or direct the voting thereof ("Voting
Power") or to dispose or direct the disposition thereof ("Investment
Power") or has the right to acquire either of those powers within sixty
(60) days.
(2) The address for James E. Ferrell is c/o Ferrellgas, Inc., P.O. Box 4644, Houston, TX, 77210.
James E. Ferrell is deemed to have beneficial ownership with respect to
1,000,000 Common Units owned by Ferrell Companies, Inc. through his direct
ownership of that company. He is deemed to have beneficial ownership with
respect to 138,392 Common Units owned by Ferrellgas, Inc. which is owned
100% by Ferrell Companies, Inc. He shares Voting and Investment Power with
respect to 4,000 Common Units held by Mrs. Ferrell as Trustee of the Sarah
A. Ferrell Trust. He shares Voting and Investment Power with respect to
4,000 Common Units held by Mrs. Ferrell as Trustee of the Kathryn E.
Ferrell Trust.
James E. Ferrell is deemed to have beneficial ownership with respect to
1,650,000 Subordinated Units owned by Ferrell Companies, Inc. through his
direct ownership of that company. He is deemed to have beneficial ownership
with respect to 14,943,721 Subordinated Units owned by Ferrellgas, Inc.
which is owned 100% by Ferrell Companies, Inc.
On August 1, 1995, Ferrell Companies, Inc. contributed to Ferrellgas, Inc. 1,000,000 Common Units and
1,650,000 Subordinated Units. This contribution of the Common Units and Subordinated Units represent 6.9%
and 9.9% of each Class, respectively.
(3) The address for both Goldman Sachs Group, L.P. and Goldman, Sachs & Co. is 85 Broad Street, New York, New
York, 10004.
Goldman, Sachs & Co., a broker/dealer, and its parent Goldman Sachs Group,
L.P. are deemed to have shared voting power and shared dispositive power
over 1,144,950 Common Units owned by their customers.
</FN>
</TABLE>
24
<PAGE>
Compliance With Section 16(a) of the Securities and Exchange Act
Section 16(a) of the Securities and Exchange Act of 1934 requires the
General Partner's officers and directors, and persons who own more than 10% of a
registered class of the Partnership's equity securities, to file reports of
beneficial ownership and changes in beneficial ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors and greater than 10 percent
unitholders are required by SEC regulation to furnish the General Partner with
copies of all Section 16(a) forms.
Based solely on its review of the copies of such forms received by the
General Partner, or written representations from certain reporting persons that
no Form 5's were required for those persons, the General Partner believes that
during fiscal year 1995 all filing requirements applicable to its officers,
directors, and greater than 10 percent beneficial owners were met in a timely
manner with the exception of the late filing by the CEO of three Form 4's.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Set forth below is a discussion of certain relationships and related
transactions among affiliates of the Partnership.
In connection with the formation of the Partnership, substantially all of
the assets and liabilities of the Company were conveyed at historical cost to
the Operating Partnership, as described in the Ferrellgas Partners, L.P. notes
to consolidated financial statements.
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General Partner is
entitled to reimbursement for all direct and indirect expenses incurred or
payments it makes on behalf of the Partnership, and all other necessary or
appropriate expenses allocable to the Partnership or otherwise reasonably
incurred by the General Partner in connection with operating the Partnership's
business. These costs, which totaled $100,750,000 for the year ended July 31,
1995 and $7,561,000 from inception to July 31, 1994, include compensation and
benefits paid to officers and employees of the General Partner, and general and
administrative costs. In addition, the conveyance of the net assets of the
Company to the Partnership included the assumption of specific liabilities
related to employee benefit and incentive plans for the benefit of the officers
and employees of the General Partner. The conveyance of the net assets of the
Company to the Partnership is described in Note A of the Ferrellgas Partners,
L.P. notes to the consolidated financial statements.
A. Andrew Levison, a director of the General Partner is a Managing Director
of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). DLJ acted as an
underwriter with regard to the public offering of Common Units and Senior Notes
as described in Note A of the Ferrellgas Partners, L.P.'s notes to the
consolidated financial statements and was paid total fees of $5,100,000 during
1994. No fees were paid in 1995.
The law firm of Bryan Cave, LLP (formerly Smith, Gill, Fisher & Butts, a
Professional Corporation), is general counsel to the Partnership, General
Partner, Ferrell Companies, Inc. and their respective subsidiaries and
affiliates. David S. Mouber, a director of Ferrell at July 31, 1994, is a member
of such law firm. The Partnership, Ferrell and their respective subsidiaries
paid such firm fees of $151,000 from inception to July 31, 1994. The
Predecessor, its parent and their respective subsidiaries paid such firm fees of
$1,243,000 for the eleven months ended June 30, 1994 and $1,381,000 for the year
ended July 31, 1993.
25
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements.
See "Index to Financial Statements" set forth on page F-1.
2. Financial Statement Schedules.
See "Index to Financial Statement Schedules" set forth on page
S-1.
3. Exhibits.
See "Index to Exhibits" set forth on page E-1.
(b) Reports on Form 8-K.
The Partnership did not file a Form 8-K during the quarter ended July
31, 1995.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
By /s/ James E. Ferrell
James E. Ferrell
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ James E. Ferrell Chairman of the Board, 10/13/95
James E. Ferrell Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Daniel M. Lambert Director 10/13/95
Daniel M. Lambert
/s/ A. Andrew Levison Director 10/13/95
A. Andrew Levison
/s/ Danley K. Sheldon Senior Vice President and Chief 10/13/95
Danley K. Sheldon Financial Officer (Principal
Financial and Accounting Officer)
</TABLE>
<PAGE>
INDEX TO EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed as part
of this report. Exhibits required by Item 601 of Regulation S-K which are not
listed are not applicable.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
*** 2.1 Stock Purchase Agreement dated September 30, 1994, between Ferrellgas, Inc. and Bell
Atlantic Enterprises International, Inc.
*** 3.1 Agreement of Limited Partnership of Ferrellgas Partners, L.P.
* 3.2 Agreement of Limited Partnership of Ferrellgas, L.P. dated as of July 5, 1994.
* 10.1 Credit Agreement dated as of July 5, 1994, among Ferrellgas, L.P., Stratton Insurance
Company, Inc., Ferrellgas, Inc., Bank of America National Trust and Savings
Association, as agent, and the other financial institutions party thereto.
* 10.2 Indenture dated as of July 5, 1994, among Ferrellgas, L.P., Ferrellgas Finance Corp.
and Norwest Bank Minnesota, National Association, as Trustee, relating to $200,000,000
10% Series A Fixed Rate Senior Notes due 2001 and $50,000,000 Series B Floating Rate
Senior Notes due 2001.
10.3 First Amendment to Credit Agreement dated July 21,
1995 among Ferrellgas, L.P., Stratton Insurance
Company, Inc., Ferrellgas, Inc., Bank of America
National Trust and Savings Association, as agent, and
the other financial institutions party thereto.
+ 10.4 Agreement dated as of April 1, 1994, between BP Exploration & Oil, Inc. and
Ferrellgas, L.P. dba Ferrell North America
** # 10.5 Ferrell Long-Term Incentive Plan, dated June 23, 1987, between Ferrell and the
participants in the Plan.
** # 10.6 Ferrell 1992 Key Employee Stock Option Plan.
# 10.7 Ferrell Companies, Inc. Supplemental Savings Plan.
*** 10.8 Ferrellgas, Inc. Unit Option Plan.
*** 10.9 Contribution, Conveyance and Assumption Agreement
dated as of November 1, 1994 among the Partnership,
the Operating Partnership and Ferrellgas, Inc.
++ 10.10 First Amendment to Contribution, Conveyance and Assumption Agreement between
Ferrellgas, the Partnership and the Operating Partnership.
10.11 Second Amendment to Contribution, Conveyance and Assumption Agreement between
Ferrellgas, the Partnership and the Operating Partnership.
** 21.1 List of subsidiaries.
27.1 Financial Data Schedules - Filed only with the EDGAR version.
E-1
<FN>
* Incorporated by reference to the same numbered Exhibit to the
Registrant's Current Report on Form 8-K filed August 15, 1994.
** Incorporated by reference to the same numbered Exhibit to Registrant's Registration Statement on
Form S-1 (Registration No. 33-53383).
*** Incorporated by reference to the same numbered Exhibit to Registrant's Registration Statement on
Form S-1 (Registration No. 33-55185).
+ Incorporated by reference to the same numbered Exhibit to
Registrant's Annual Report on Form 10-K filed on October 20,
1994.
++ Incorporated by reference to Exhibit 10.8 to Registrant's Annual
Report on Form 10-K filed on October 20, 1994.
# Management contracts or compensatory plans.
E-2
</FN>
</TABLE>
<PAGE>
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
Page
<S> <C> <C>
Ferrellgas Partners, L.P. and Subsidiary
Independent Auditors' Report..........................................................................F-2
Consolidated Balance Sheets - July 31, 1995 and 1994..................................................F-3
Consolidated Statements of Earnings- Year ended July 31, 1995, One
month ended July 31, 1994, Eleven months ended June 30, 1994
(Predecessor)
and Year ended July 31, 1993 (Predecessor).......................................................F-4
Consolidated Statements of Stockholder's Equity/Partners' Capital -
Year ended July 31, 1995, One month ended July 31, 1994, Eleven
months ended
June 30, 1994 (Predecessor) and Year ended July 31, 1993 (Predecessor)...........................F-5
Consolidated Statements of Cash Flows - Year ended July 31, 1995,
One month ended July 31, 1994, Eleven months ended June 30, 1994
(Predecessor)
and Year ended July 31, 1993 (Predecessor).......................................................F-6
Notes to Consolidated Financial Statements............................................................F-7
Ferrellgas, L.P. and Subsidiaries
Independent Auditors' Report.........................................................................F-20
Consolidated Balance Sheets - July 31, 1995 and 1994.................................................F-21
Consolidated Statements of Earnings - Year ended July 31, 1995, One
month ended July 31, 1994, Eleven months ended June 30, 1994
(Predecessor) and Year ended July 31, 1993 (Predecessor).......................................F-22
Consolidated Statements of Stockholder's Equity/Partners' Capital -
Year ended July 31, 1995, One month ended July 31, 1994, Eleven
months ended
June 30, 1994 (Predecessor) and Year ended July 31, 1993 (Predecessor)..........................F-23
Consolidated Statements of Cash Flows - Year ended July 31, 1995,
One month ended July 31, 1994, Eleven months ended June 30, 1994
(Predecessor)
and Year ended July 31, 1993 (Predecessor)......................................................F-24
Notes to Consolidated Financial Statements...........................................................F-25
Ferrellgas Finance Corp.
Independent Auditors' Report.........................................................................F-36
Balance Sheets - July 31, 1995 and 1994..............................................................F-37
Statements of Earnings - Year ended July 31, 1995 and the Period from Inception to
July 31, 1994...................................................................................F-38
Statements of Stockholder's Equity - Year ended July 31, 1995 and
the Period from Inception to July 31, 1994.....................................................F-39
Statements of Cash Flows - Year ended July 31, 1995 and the Period from Inception to
July 31,1994....................................................................................F-40
Notes to Financial Statements........................................................................F-41
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas Partners, L.P.
Liberty, Missouri
We have audited the accompanying consolidated balance sheets of Ferrellgas
Partners, L.P. (formerly Ferrellgas, Inc.) and subsidiary as of July 31, 1995
and 1994 (Successor), and the related consolidated statements of earnings,
partners' capital and cash flows for the year ended July 31, 1995 and for the
one month ended July 31, 1994 (Successor), the eleven months ended June 30, 1994
and the year ended July 31, 1993 (Predecessor). These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ferrellgas Partners, L.P. and
subsidiary as of July 31, 1995 and 1994 (Successor), and the results of their
operations and their cash flows for the year ended July 31, 1995 and for the one
month ended July 31, 1994 (Successor), the eleven months ended June 30, 1994 and
the year ended July 31, 1993 (Predecessor) in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 12, 1995
F-2
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
July 31, July 31,
ASSETS 1995 1994
- ---------------------------------------------------------- ---------------- -----------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 29,877 $ 14,535
Accounts and notes receivable (net of
allowance for doubtful accounts of $874 and
$798 in 1995 and 1994, respectively) 58,239 50,780
Inventories 44,090 43,562
Prepaid expenses and other current assets 5,884 2,042
---------------- -----------------
Total Current Assets 138,090 110,919
Property, plant and equipment, net 345,642 294,765
Intangible assets, net 86,886 63,291
Other assets, net 7,978 8,218
================ =================
Total Assets $578,596 $477,193
================ =================
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------------
Current Liabilities:
Accounts payable $ 57,729 $ 46,368
Other current liabilities 31,433 26,603
Short-term borrowings 20,000 3,000
---------------- -----------------
Total Current Liabilities 109,162 75,971
Long-term debt 338,188 267,062
Other liabilities 11,398 11,528
Contingencies and commitments
Minority interest 1,211 1,239
Partners' Capital:
Common unitholders (14,398,942 and 14,100,000
units outstanding in 1995 and 1994, respectively) 84,489 84,532
Subordinated unitholders (16,593,721 units outstanding
in 1995 and 1994) 91,824 99,483
General partner (57,676) (62,622)
---------------- -----------------
Total Partners' Capital 118,637 121,393
---------------- -----------------
Total Liabilities and Partners' Capital $578,596 $477,193
================ =================
</TABLE>
See note to consolidated financial statements.
F-3
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except unit data)
<TABLE>
<CAPTION>
For the year ended July 31, 1994
For the year One month Eleven months For the year
ended ended ended ended
July 31, 1995 July 31, 1994 June 30, 1994 July 31, 1993
--------------- ---------------- --------------- ---------------
(Predecessor) (Predecessor)
Revenues:
<S> <C> <C> <C> <C>
Gas liquids and related product sales $565,607 $22,411 $477,285 $516,891
Other 30,829 2,155 24,705 25,054
--------------- ---------------- --------------- ---------------
Total revenues 596,436 24,566 501,990 541,945
Cost of product sold (exclusive of
depreciation, shown separately below) 339,641 13,211 256,095 298,033
--------------- ---------------- --------------- ---------------
Gross profit 256,795 11,355 245,895 243,912
Operating expense 153,226 10,078 135,058 139,617
Depreciation and amortization expense 32,014 2,383 26,452 30,840
General and administrative expense 11,357 935 8,923 10,079
Vehicle leases expense 4,271 350 3,940 4,823
--------------- ---------------- --------------- ---------------
Operating income (loss) 55,927 (2,391) 71,522 58,553
Interest expense (31,993) (2,662) (53,693) (60,071)
Interest income (including related parties of
$1,108 and $725 in eleven months ended
June 30, 1994 and year ended July 31, 1993,
respectively) 1,268 73 3,599 3,266
Loss on disposal of assets (1,139) (97) (1,215) (1,153)
--------------- ---------------- --------------- ---------------
Earnings (loss) before income taxes,
minority interest and extraordinary loss 24,063 (5,077) 20,213 595
Income tax provision - - 7,876 486
Minority interest 243 (51) - -
--------------- ---------------- --------------- ---------------
Earnings (loss) before extraordinary loss 23,820 (5,026) 12,337 109
Extraordinary loss on early extinguishment
of debt, net of minority interest of
$607 in one month ended July 31, 1994
and tax benefit of $531 and $543 in
eleven months ended June 30, 1994 and
year ended July 31, 1993, respectively - 59,455 867 886
--------------- --------------- --------------- ---------------
Net earnings (loss) 23,820 (64,481) $ 11,470 $ (777)
=============== ===============
General partner's interest in net earnings 238 (64,481)
(loss)
=============== ================
Limited partners' interest in net earnings (loss) $ 23,582 $ 0
=============== ================
Net earnings (loss) per limited partner unit:
Earnings (loss) before extraordinary loss $ 0.76 $ -
Extraordinary loss -
=============== ================
Net earnings (loss) per limited partner unit $ 0.76 $ -
=============== ================
Weighted average number of units outstanding 30,908.1 30,693.7
=============== ================
</TABLE>
See note to consolidated financial statements.
F-4
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY/PARTNERS' CAPITAL
(in thousands)
<TABLE>
<CAPTION>
Number of Additional Total
common Common paid-in Accumulated stockholder's
shares stock capital deficit equity
-------------- ---------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
August 1, 1992 (Predecessor) 1.0 $1 $29,535 $(20,728) $ 8,808
Capital contribution
from Ferrell Companies, - - 3,277 - 3,277
Inc.
Capital transaction - Ferrell
Companies, Inc. long-term
incentive plan - - 51 - 51
Net loss - - - (777) (777)
-------------- ---------- --------------- ----------- --------------
July 31, 1993 (Predecessor) 1.0 1 32,863 (21,505) 11,359
Net earnings - - - 11,470 11,470
-------------- ---------- --------------- ----------- --------------
June 30, 1994 (Predecessor) 1.0 $1 $32,863 $(10,035) $22,829
============== ========== =============== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Number of units
----------------------------
Total
General partners'
Common Subordinated Common Subordinated partner capital
------------ -------------- ---------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 19, 1994 - - $ - $ - $ - $ -
Contributions in connection
with formation of the
Partnership 14,100.0 16,593.7 84,532 99,483 1,859 185,874
Net loss - - - - (64,481) (64,481)
------------ -------------- ---------- --------------- ----------- --------------
July 31, 1994 14,100.0 16,593.7 84,532 99,483 (62,622) 121,393
Special allocation of
prior year operating
loss - - (2,312) (2,664) 4,976 -
Assets contributed in
connection with - - 3,324 3,830 72 7,226
acquisitions
Common units issued in
connection with
acquisitions 298.9 - 6,600 - 66 6,666
Quarterly distributions - - (23,756) (27,380) (518) (51,654)
Adjustments to capital
related to resolution of
income tax contingencies - - 5,145 5,929 112 11,186
Net earnings - - 10,956 12,626 238 23,820
============ ============== ========== =============== =========== ==============
July 31, 1995 14,398.9 16,593.7 $84,489 $91,824 $(57,676) $118,637
============ ============== ========== =============== =========== ==============
</TABLE>
See note to consolidated financial statements.
F-5
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the year ended July 31, 1994
For the year One month Eleven months For the year
ended ended ended ended
July 31, 1995 July 31, 1994 June 30, 1994 July 31, 1993
------------- ------------- ------------- -------------
(Predecessor) (Predecessor)
Cash Flows From Operating Activities:
<S> <C> <C> <C> <C>
Net earnings (loss) $23,820 $(64,481) $11,470 $ (777)
Reconciliation of net earnings (loss) to
net cash from operating activities:
Depreciation and amortization 32,014 2,383 26,452 30,840
Extraordinary loss - 59,455 867 886
Minority interest 243 658 - -
Other 3,191 22 5,130 5,236
Changes in operating assets and liabilities
net of effects from business acquisitions:
Accounts and notes receivable (906) 196 (816) (252)
Inventories 7,388 (5,631) (14,279) 10,229
Prepaid expenses and other current assets (3,497) 618 (763) 977
Accounts payable 5,246 (2,809) 16,231 (11,918)
Accrued interest expense 10,680 (3,448) (4,765) (233)
Other current liabilities (11,703) 1,715 7,001 1,962
Other liabilities (446) (35) (1,072) 131
Deferred income taxes - - 7,667 (120)
------------- ------------- ------------- -------------
Net cash provided (used) by operating 66,030 (11,357) 53,123 36,961
activities
------------- ------------- ------------- -------------
Cash Flows From Investing Activities:
Business acquisitions (19,677) (874) (2,451) (810)
Capital expenditures (19,722) (1,894) (7,826) (13,378)
Other 173 31 26 27
------------- ------------- ------------- -------------
Net cash used by investing activities (39,226) (2,737) (10,251) (14,161)
------------- ------------- ------------- -------------
Cash Flows From Financing Activities:
Net additions to short-term borrowings 17,000 3,000 - -
Additions to long-term debt 85,000 265,000 - 81
Reductions of long-term debt (61,400) (477,903) (13,640) (12,796)
Distributions (51,654) - - -
Minority interest activity (459) (1,202) - -
Additional payments to retire debt - (48,364) (1,190) (1,195)
Additions to financing costs - (6,575) (51) (627)
Reacquisition of Class B redeemable common
stock - - - (3,218)
Net issuance of Common Units - 255,006 - - -
Cash transfer from predecessor company - 39,791 - - -
Other 51 (124) (6,330) (298)
------------- ------------- ------------- -------------
Net cash provided (used) by financing
activities (11,462) 28,629 (21,211) (18,053)
------------- ------------- ------------- -------------
Increase in cash and cash equivalents 15,342 14,535 21,661 4,747
Cash and cash equivalents - beginning of period 14,535 - 32,706 27,959
------------- ------------- ------------- -------------
Cash and cash equivalents - end of period $29,877 $14,535 $54,367 $32,706
============= ============= ============= =============
Cash paid for interest $19,918 $ 6,093 $55,681 $57,563
============= ============= ============= =============
</TABLE>
See note to consolidated financial statements.
F-6
<PAGE>
FERRELLGAS PARTNERS, L.P.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1995
A. Partnership Organization and Formation
Ferrellgas Partners, L.P. was formed April 19, 1994, and is a publicly
traded limited partnership, owning a 99% limited partner interest in
Ferrellgas, L.P. (the "Operating Partnership"), both Delaware limited
partnerships, and collectively known as the Partnership. Ferrellgas
Partners, L.P., was formed to acquire and hold a limited partner interest in
the Operating Partnership. The Operating Partnership was formed to acquire,
own and operate the propane business and assets of Ferrellgas, Inc. (the
"Company" or "General Partner"), a wholly-owned subsidiary of Ferrell
Companies, Inc. The Company has retained a 1% general partner interest in
Ferrellgas Partners, L.P. and also holds a 1.0101% general partner interest
in the Operating Partnership, representing a 2% general partner interest in
the Partnership on a combined basis. As General Partner of the Partnership,
the Company performs all management functions required for the Partnership.
On July 5, 1994, the Partnership completed an initial public offering of
13,100,000 Common Units representing limited partner interests (the "Common
Units") at $21 per Common Unit. As of the date of the offering, the
13,100,000 Common Units represented a 41.8% limited partner interest in the
Partnership. Concurrent with the closing of the offering, the Company
contributed all of its propane business and assets to the Partnership
(excluding approximately $39,000,000 in cash, payables to or receivables
from its parent and affiliates and an investment in the Class B Stock of
Ferrell Companies, Inc.) in exchange for 1,000,000 Common Units, 16,593,721
Subordinated Units and Incentive Distribution Rights, representing a 56.2%
limited partner interest in the Partnership, as of the date of the offering,
in addition to the 2% general partner interest in the Partnership.
In connection with the contribution of the propane business and assets by
the Company, the Operating Partnership assumed all of the liabilities,
whether known or unknown, associated with such assets (other than income tax
liabilities). The net book value contributed to the Partnership, adjusted
for the settlement of a tax contingency (see Note H), is reported below:
(In thousands)
Total assets conveyed $509,535
Total liabilities assumed 565,471
--------------
Net liabilities $ (55,936)
==============
Supplementary Pro Forma Consolidated Statements of Earnings (Unaudited): The
following pro forma consolidated statement of earnings for the fiscal year
ended July 31, 1994, was derived from the historical statement of earnings
of the Company for the eleven months ended June 30, 1994, and the statement
of earnings of the Partnership from inception to July 31, 1994. The pro
forma statement of earnings for the fiscal year ended July 31, 1993, was
derived from the historical statement of earnings of the Company. The pro
forma consolidated statements of earnings of the Partnership should be read
in conjunction with the consolidated financial statements of the Partnership
and the Company and the notes thereto. The objective of this data is to show
the effects on the historical financial information as if the Partnership
formation had occurred on August 1, 1992.
F-7
<PAGE>
The following supplementary pro forma consolidated statements of earnings are
for comparative purposes and are not indicative of the results of future
operations of the Partnership:
<TABLE>
<CAPTION>
(in thousands, except unit amounts)
Audited Pro Forma Pro Forma
July 31, 1995 July 31, 1994 July 31, 1993
--------------------- ------------------ ------------------
Revenues:
<S> <C> <C> <C>
Gas liquids and related product sales $565,607 $499,696 $516,891
Other 30,829 26,860 25,054
--------------------- ------------------ ------------------
Total revenues 596,436 526,556 541,945
Cost of product sold (exclusive of
depreciation, shown separately below) 339,641 269,306 298,033
--------------------- ------------------ ------------------
Gross profit 256,795 257,250 243,912
Operating expense 153,226 145,136 139,617
Depreciation and amortization expense 32,014 28,835 30,840
General and administrative expense 11,357 10,358 (1) 10,579 (1)
Vehicle leases expense 4,271 4,290 4,823
--------------------- ------------------ ------------------
Operating income 55,927 68,631 58,053
Interest expense (31,993) (28,130) (2) (29,220) (2)
Interest income 1,268 1,123 (3) 898 (3)
Loss on disposal of assets (1,139) (1,312) (1,153)
--------------------- ------------------ ------------------
Earnings before minority interest and
extraordinary loss 24,063 40,312 28,578
Minority interest 243 403 (4) 286 (4)
--------------------- ------------------ ------------------
Earnings before extraordinary loss $ 23,820 $ 39,909 $ 28,292
===================== ================== ==================
Earnings before extraordinary loss per
limited partner unit $ 0.76 $ 1.29 $ 0.91
===================== ================== ==================
Weighted average limited partner units 30,908.1 30,693.7 30,693.7
===================== ================== ==================
<FN>
(1) Reflects estimated general and administrative costs associated with the Partnership.
(2) Reflects the adjustment to interest expense resulting from the early retirement of debt, net of
additional borrowings.
(3) Reflects the reduction of interest income to the Partnership as a
result of lower cash balances available for short-term investment
opportunities.
(4) Reflects that portion of earnings from continuing operations
allocated to the General Partner for its ownership in the Operating
Partnership.
</FN>
</TABLE>
F-8
<PAGE>
B. Summary of Significant Accounting Policies
(1) Nature of operations: The partnership is engaged primarily in the sale,
distribution, marketing and trading of propane and other natural gas liquids
throughout the United States. The retail market is seasonal because propane
is used primarily for heating in residential and commercial buildings. The
Partnership serves more than 700,000 residential, industrial/commercial and
agricultural customers.
(2) Principles of consolidation: The accompanying consolidated financial
statements present the consolidated financial position, results of
operations and cash flows of the Partnership. The Company's 1.0101%
General Partner interest in Ferrellgas, L.P. is accounted for as a minority
interest. All material intercompany profits, transactions and balances
have been eliminated.
(3) Cash and cash equivalents: For purposes of the Consolidated Statements
of Cash Flows, the Partnership considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
(4) Inventories: Inventories are stated at the lower of cost or market
using average cost and actual cost methods.
(5) Property, plant and equipment and intangible assets: Property, plant and
equipment is stated at cost less accumulated depreciation. Expenditures for
maintenance and routine repairs are expensed as incurred. Depreciation is
calculated using the straight-line method based on estimated useful lives of
the assets ranging from two to thirty years. Intangible assets, consisting
primarily of customer location values and goodwill, are stated at cost, net
of amortization calculated using the straight-line method over periods
ranging from 15 to 40 years. Accumulated amortization of intangible assets
totaled $81,995,000 and $68,489,000 as of July 31, 1995 and 1994,
respectively.
On July 31, 1995, the Partnership adopted the provisions of FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present, and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Adoption of FASB Statement No. 121 had no impact on the financial
statements.
(6) Forward, futures and option contracts: The Partnership also enters into
forward and futures purchase/sale agreements and options involving propane
and related products which are for trading and overall risk management
purposes. To the extent such contracts are entered into at fixed prices and
thereby subject the Partnership to market risk, the contracts are accounted
for on a mark-to-market basis.
(7) Income taxes: The Partnership is a limited partnership. As a result, the
Partnership's earnings or loss for Federal income tax purposes is included
in the tax returns of the individual partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial statements of
the Partnership. Net earnings for financial statement purposes may differ
significantly from taxable income reportable to unitholders as a result of
differences between the tax basis and financial reporting basis of assets
and liabilities and the taxable income allocation requirements under the
Partnership agreement.
The Predecessor filed a consolidated Federal income tax return with its
parent and affiliates. Income taxes were computed as though each company
filed its own income tax return in accordance with the tax sharing
agreement. Deferred income taxes were provided as a result of temporary
differences between financial and tax reporting as described in Note M,
using the asset/liability method. Deferred income taxes were recognized for
F-9
<PAGE>
the tax consequences of temporary differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
(8) Net earnings (loss) per limited partner unit: Net earnings (loss) per
limited partner unit is computed by dividing net earnings, after deducting
the General Partner's 1% interest, by the weighted average number of
outstanding Common Units, Subordinated Units and the dilutive effect of
subordinated unit options. As described in Note F, the 1994 net loss before
extraordinary loss of approximately $5,026,000, and the 1994 extraordinary
loss from early extinguishment of debt of approximately $59,455,000, net of
607,000 minority interest, were allocated 100% to the General Partner.
Accordingly, there was no net earnings per limited partner unit calculation
attributable to the limited partners from inception to July 31, 1994.
In accordance with the terms of the Partnership Agreement, the Partnership
reallocated 99% of the initial year's net loss before extraordinary loss
($4,976,000) based on ownership percentages to the limited partners in 1995.
The fiscal 1995 special allocation of the prior year operating loss to the
limited partners resulted in a reduction in equity of $0.16 per limited
partner unit.
C. Quarterly Distributions of Available Cash
The Partnership makes quarterly cash distributions of all of its "Available
Cash", generally defined as consolidated cash receipts less consolidated
cash disbursements and net changes in reserves established by the General
Partner for future requirements. These reserves are retained to provide for
the proper conduct of the Partnership business, or to provide funds for
distributions with respect to any one or more of the next four fiscal
quarters.
Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders
(the "Unitholders") and 2% to the General Partner, subject to the payment of
incentive distributions to the holders of Incentive Distribution Rights to
the extent that certain target levels of cash distributions are achieved. To
the extent there is sufficient Available Cash, the holders of Common Units
have the right to receive the "Minimum Quarterly Distribution" ($0.50 per
Unit), plus any "arrearages", prior to any distribution of Available Cash to
the holders of Subordinated Units. Common Units will not accrue arrearages
for any quarter after the "Subordination Period" (as defined below) and
Subordinated Units will not accrue any arrearages with respect to
distributions for any quarter.
In general, the Subordination Period will continue indefinitely until the
first day of any quarter beginning on or after August 1, 1999, in which (i)
distributions of Available Cash equal or exceed the Minimum Quarterly
Distribution on the Common Units and the Subordinated Units for each of the
three consecutive four quarter periods immediately preceding such date and
(ii) the Partnership has invested at least $50 million in acquisitions and
capital additions or improvements to increase the operating capacity of the
Partnership. Prior to the end of the Subordination Period (but not prior to
August 1, 1997), 5,531,240 Subordinated Units held by the Company will
convert into Common Units if (i) distributions of Available Cash on the
Common Units and Subordinated Units equaled or exceeded the Minimum
Quarterly Distribution for each of the two consecutive four-quarter period
preceding August 1, 1997, and (ii) the operating cash generated by the
Partnership in each of such four-quarter periods equaled or exceeded 125% of
the Minimum Quarterly Distribution on all Common Units and all Subordinated
Units. Upon expiration of the Subordination Period, all remaining
Subordinated Units will convert to Common Units.
F-10
<PAGE>
The Partnership makes distributions of all of its Available Cash within 45
days after the end of each fiscal quarter ending January, April, July and
October to holders of record on the applicable record date.
D. Supplemental Balance Sheet Information
<TABLE>
<CAPTION>
Inventories consist of:
(in thousands) 1995 1994
-------------- --------------
<S> <C> <C>
Liquefied propane gas and related products $37,550 $38,890
Appliances, parts and supplies 6,540 4,672
============== ==============
$44,090 $43,562
============== ==============
In addition to inventories on hand, the Partnership enters into
contracts to buy product for supply purposes. All such contracts have
terms of less than one year and call for payment based on market prices
at date of delivery.
Property, plant and equipment consist of:
(in thousands) 1995 1994
------------- --------------
Land and improvements $ 21,380 $ 18,589
Buildings and improvements 29,117 23,005
Vehicles 46,199 37,283
Furniture and fixtures 23,336 17,776
Bulk equipment and district facilities 37,086 33,091
Tanks and customer equipment 357,167 317,631
Other 6,825 5,097
------------- --------------
521,110 452,472
Less: accumulated depreciation 175,468 157,707
------------- --------------
$345,642 $294,765
============= ==============
Depreciation expense totaled $21,649,000, $1,602,000, $17,659,000, and
$20,449,000 for the year ended July 31, 1995, the one month ended July
31, 1994, the eleven months ended June 30, 1994 and the year ended July
31, 1993.
Other current liabilities consist of:
(in thousands) 1995 1994
--------------- --------------
Accrued insurance $ 6,045 $ 6,624
Accrued interest 12,972 2,161
Accrued payroll 4,036 9,394
Other 8,380 8,424
--------------- --------------
$31,433 $26,603
=============== ==============
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
E. Long-Term Debt
Long-term debt consists of:
(in thousands) 1995 1994
------------- ------------
<S> <C> <C>
Senior Notes
Fixed rate, 10%, due 2001 $200,000 $200,000
Floating rate, 9.3125% and 7.375%, respectively, due 2001 (1) 50,000 50,000
Credit Agreement
Term loan, 7.3125 and 7.375%, respectively, due 1997 (2) 15,000 15,000
Revolving credit loans, 7.125% to 9.125%, due 1997 (2) 70,000 -
Notes payable, 5.6% and 4.3% weighted average interest rates,
respectively, due 1995 to 2004 (3) 3,983 3,373
------------- ------------
338,983 268,373
Less: current portion 795 1,311
============= ============
$338,188 $267,062
============= ============
<FN>
(1) The floating rate senior notes bear interest at the London
Interbank Offered Rate ("LIBOR") plus 3.125% and have mandatory
sinking fund payments of $5,000,000 in 1999 and 2000. To offset the
variable rate characteristic of the notes, the Partnership entered
into interest rate collar agreements with two major banks limiting
interest rates to between 8.135% and 9.625%.
(2) The Operating Partnership has a Credit Agreement with a major bank,
as Agent, consisting of a $15,000,000 term loan facility and
$170,000,000 revolving credit facilities, of which $50,000,000 is
available to support letters of credit. Borrowings under the
agreement generally bear interest at Prime plus 0.25% or LIBOR plus
1.25%. On July 21, 1995, the Operating Partnership entered into an
amended Credit Agreement which, effective August 1, 1995, increased
the revolving credit facilities to $190,000,000 and decreased the
applicable interest rate ranges to Prime plus 0% to .25% or LIBOR
plus .052% to 1.25%.
At the Partnership's option, amounts borrowed under the term loan
and non-working capital borrowings under the revolving credit loans
may be converted to borrowings which mature in twelve quarterly
installments beginning September 1997.
(3) The notes payable are secured by approximately $1,413,000 and
$2,056,000 of property and equipment at July 31, 1995 and 1994,
respectively.
</FN>
</TABLE>
At July 31, 1995 and 1994, $20,000,000 and $3,000,000, respectively, of
short-term borrowings were outstanding under the revolving line of credit
and letters of credit outstanding, used primarily to secure obligations
under certain insurance arrangements, totaled $24,471,000.
The Senior Note Indenture and Credit Agreement contain various restrictive
covenants applicable to the Operating Partnership and its subsidiaries, the
most restrictive relating to additional indebtedness, sale and disposition
of assets, and transactions with affiliates. In addition, the Operating
Partnership is prohibited from making cash distributions of the Minimum
Quarterly Distribution if a default or event of default exists or would
exist upon making such distribution, or if the Operating Partnership fails
to meet certain coverage and capital expenditure tests. With respect to the
capital expenditure tests, the Operating Partnership shall in the aggregate
F-12
<PAGE>
make future "Capital Investments" (as defined in the Senior Note Indenture)
of approximately $25,000,000 by July 31, 1999, and $50,000,000 by the end
of fiscal year 2000. The Partnership is in compliance with all
requirements, tests, limitations and covenants related to the Senior Note
Indenture and Credit Agreement.
Annual principal payments on long-term debt for each of the next five
fiscal years are $795,000 in 1996, $438,000 in 1997, $5,252,000 in 1998,
$28,569,000 in 1999 and $33,600,000 in 2000.
During the one month ended July 31, 1994, the Partnership recognized an
extraordinary loss from the debt premium and write off of financing costs
of $59,455,000, net of minority interest of $607,000, resulting from the
early extinguishment of $477,600,000 of indebtedness of the Company assumed
by the Operating Partnership. During the eleven months ended June 30, 1994,
the Predecessor recognized an extraordinary loss from debt premium and
write-off of financing costs of approximately $867,000, net of income tax
benefit of $531,000, resulting from the early extinguishment of $11,900,000
of its fixed rate senior notes. During fiscal year 1993, the Predecessor
recognized an extraordinary loss from debt premium and write-off of
financing costs of approximately $886,000, net of income tax benefit of
$543,000, resulting from the early extinguishment of $10,500,000 of its
fixed rate senior notes.
F. Partners' Capital
Partners' capital consists of 14,398,942 Common Units representing a 46%
limited partner interest, 16,593,721 Subordinated Units representing a 53%
limited partner interest, and a 1% General Partner interest.
The Agreement of Limited Partnership of Ferrellgas Partners, L.P. (the
"Partnership Agreement") contains specific provisions for the allocation of
net earnings and loss to each of the partners for purposes of maintaining
the partner capital accounts. In addition, the Partnership Agreement
contains special provisions for the allocation of the extraordinary loss
from the retirement of indebtedness, and the net loss from operations of
the Partnership from the closing date on July 5, 1994, to July 31, 1994. In
accordance with these special provisions of the Partnership Agreement, the
extraordinary loss of $59,455,000, net of $607,000 minority interest, was
allocated 100% to the General Partner and will not be reallocated to the
limited partners. The net loss from operations of approximately $5,026,000
was allocated 100% to the General Partner from inception of the Partnership
to the last day of the taxable year ending July 31, 1994. An amount equal
to 99% of this net loss was reallocated to the limited partners in the
taxable year ending July 31, 1995 based on their ownership percentages.
(See Note B.)
During the Subordination Period, the Partnership may issue up to 7,000,000
Common Units (excluding Common Units issued in connection with conversion
of Subordinated Units into Common Units) or an equivalent number of
securities ranking on a parity with the Common Units and an unlimited
number of partnership interests junior to the Common Units without a
Unitholder vote. The Partnership may also issue additional Common Units
during the Subordination Period in connection with acquisitions if certain
cash flow criteria are met. After the Subordination Period, the Partnership
Agreement authorizes the General Partner to cause the Partnership to issue
an unlimited number of additional general and limited partner interests and
other equity securities of the Partnership for such consideration and on
such terms and conditions as shall be established by the General Partner
without the approval of any Unitholders.
On November 14, 1994, the Partnership filed Amendment No. 1 to the
Registration Statement on Form S-1 with the Securities and Exchange
Commission a shelf registration statement on Form S-1 to register 2,400,000
Common Units representing limited partner interests in the Partnership. The
F-13
<PAGE>
registration statement was declared effective November 15, 1994. The Common
Units may be issued from time to time by the Partnership in connection with
the Partnership's acquisition of other businesses, properties or securities
in business combination transactions.
G. Transactions with Related Parties
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General Partner
is entitled to reimbursement for all direct and indirect expenses incurred
or payments it makes on behalf of the Partnership, and all other necessary
or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business. These costs, which totaled $100,750,000 for the
year ended July 31, 1995 and $7,561,000 from inception to July 31, 1994,
include compensation and benefits paid to officers and employees of the
General Partner, and general and administrative costs. In addition, the
conveyance of the net assets of the Company to the Partnership described in
Note A included the assumption of specific liabilities related to employee
benefit and incentive plans for the benefit of the officers and employees
of the General Partner.
A. Andrew Levison, a director of the General Partner is a Managing Director
of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). DLJ acted
as an underwriter with regard to the public offering of Common Units and
Senior Notes, and was paid total fees of $5,100,000 during 1994. No fees
were paid in 1995.
The law firm of Bryan Cave, LLP (formerly Smith, Gill, Fisher & Butts, a
Professional Corporation), is general counsel to the Partnership, General
Partner, Ferrell Companies, Inc. ("Ferrell") and their respective
subsidiaries and affiliates. David S. Mouber, a director of Ferrell at July
31, 1994, is a member of such law firm. The Partnership, Ferrell and their
respective subsidiaries paid such firm fees of $151,000 from inception to
July 31, 1994. The Predecessor, its parent and their respective
subsidiaries paid such firm fees of $1,243,000 for the eleven months ended
June 30, 1994 and $1,381,000 for the year ended July 31, 1993.
In 1993, the Company received capital contributions from its parent
consisting of i) the forgiveness of a $3,015,000 long-term note payable to
affiliate, including interest, and ii) a $262,000 note receivable from
affiliate.
H. Contingencies and Commitments
The Partnership is threatened with or named as a defendant in various
lawsuits which, among other items, claim damages for product liability. It
is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
known contingent claims that are likely to have a material adverse effect
on the results of operations or financial condition of the Partnership.
In connection with the formation of the Partnership, the General Partner
contributed certain assets and liabilities. The Internal Revenue Service
("IRS") has examined the General Partner's consolidated income tax returns
for the years ended July 31, 1987 and 1986, and has proposed certain
adjustments which relate to these contributed assets. The General Partner
has reached a settlement agreement which substantially resolves all issues
with the IRS with the exception of minor items which are presently being
negotiated at the appellate level. Due to the settlement of these issues,
additional deferred taxes were recorded by the General Partner. This
noncash adjustment retroactively increased the basis of the assets the
General Partner contributed to the Operating Partnership by $11,300,000
which, in turn, caused an increase to the General Partner's contributed
F-14
<PAGE>
capital that which was allocated pro rata among all partners. In addition,
Operating Partnership goodwill also increased by $11,300,000 (to be
amortized prospectively over a period of 15 years). These adjustments were
not material to the financial position or the results of operations or
liquidity, nor have they impacted the limited partners' tax basis in the
Partnership units.
Certain property and equipment is leased under noncancellable operating
leases which require fixed monthly rental payments and which expire at
various dates through 2016. Rental expense under these leases totaled
$11,233,000, $725,000, $9,556,000, and $10,903,000 for the year ended July
31, 1995, the one month ended July 31, 1994, the eleven months ended June
30, 1994, and the year ended July 31, 1993, respectively. Future minimum
lease commitments for such leases are $8,414,000 in 1996, $6,195,000 in
1997, $3,874,000 in 1998, $2,227,000 in 1999, $1,005,000 in 2000 and
$3,985,000 thereafter.
I. Employee Benefits
The Partnership has no employees and is managed and controlled by the
General Partner. The Partnership assumed all liabilities, which included
specific liabilities related to the following employee benefit plans for
the benefit of the officers and employees of the General Partner.
The General Partner and its parent have a defined contribution
profit-sharing plan which covers substantially all employees with more than
one year of service. Contributions are made to the plan at the discretion
of the parent's Board of Directors. This plan, which qualifies under
section 401(k) of the Internal Revenue Code, also provides for matching
contributions under a cash or deferred arrangement based upon participant
salaries and employee contributions to the plan. Contributions for the year
ended July 31, 1995, under the profit sharing provision and the 401(k)
provision were $1,300,000 and $1,407,000 respectively. There were no
contributions under the profit sharing provision or 401(k) provision of the
plan from inception to July 31, 1994. Contributions during the eleven
months ended June 30, 1994 and the year ended July 31, 1993 were $1,200,000
and $1,000,000 under the profit sharing provision, and $1,445,000 and
$1,541,000 under the 401(k) provision.
J. Unit Options
On October 14, 1994, the General Partner adopted the Ferrellgas, Inc. Unit
Option Plan (the "Unit Option Plan"), which currently authorizes the
issuance of options (the "Unit Options") covering up to 850,000
Subordinated Units to certain officers and employees of the General
Partner, of which 775,000 options were granted, while 73,500 options were
terminated and cancelled; thus 701,500 options were issued and outstanding
at July 31, 1995 having an aggregate exercise price of $11,868,000. The
Unit Options have the following characteristics: 1) exercise prices ranging
from $16.80 to $18.54 per unit, which is an estimate of the fair market
value of the Subordinated Units at the time of grant, 2) vest immediately
or over a one to five year period, 3) exercisable beginning after July 31,
1999, assuming the subordination period has elapsed, and 4) expire on the
tenth anniversary of the date of grant. Upon conversion of the Subordinated
Units held by the General Partner and its affiliates, the Unit Options
granted will convert to Common Unit Options.
F-15
<PAGE>
K. Disclosures About Off Balance Sheet Risk and Fair Value of Financial
Instruments
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of the instruments. Short-term borrowings
approximates fair value as of July 31, 1995 and 1994. The estimated fair
value of the Partnership's long-term debt was $347,485,000 and $269,547,000
as of July 31, 1995 and 1994, respectively. The fair value is estimated
based on quoted market prices adjusted for discounted cash flows.
Interest Rate Collar Agreements. On June 5, 1995, the Partnership entered
into three-year interest rate collar agreements involving the exchange of
fixed and floating interest payment obligations without the exchange of the
underlying principal amounts. At July 31, 1995, the total notional
principal amount of these agreements was $50,000,000. The counterparties to
these agreements are large financial institutions. The interest rate collar
agreements subject the company to financial risk that will vary during the
life of these agreements in relation to market interest rates.
Option Contracts. The Partnership is a party to certain option contracts,
involving various liquefied petroleum products, for overall risk management
purposes in connection with its trading activities. Contracts are executed
with private counterparties and to a lesser extent on national mercantile
exchanges. Open contract positions are summarized below.
Forward and Futures Contracts. The Partnership is a party to certain
forward and futures contracts for trading purposes. Net gains from trading
activities were $5,818,000, $331,000, $6,458,000 and $6,739,000 for the
year ended July 31, 1995, the one month ended July 31, 1994, the eleven
months ended June 30, 1994 and the year ended July 31, 1993, respectively.
Such contracts permit settlement by delivery of the commodity. Open
contract positions are summarized below.
<TABLE>
<CAPTION>
As of July 31
(In thousands, except price per gallon data)
Derivative Financial Instruments Held for Financial Instruments Held for
Purposes Other than Trading Trading Purposes
(Options) (Forward and Futures)
------------------------------------------- ----------------------------------------------------
1995 1994 1995 1994
-------------------- ------------------- ----------- ----------- ----------- ------------
Asset Liab. Asset Liab. Asset Liab. Asset Liab.
-------- ----------- -------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Volume
(gallons) 1,071 (9,765) 8,358 (6,174) 170,057 (129,198) 194,800 (146,562)
Price (cents/gal) 16-36 16-36 30-31 29-55 13-45 14-52 19-38 30-39
Maturity 8/95-1/96 8/95-1/96 11/94-1/95 9/94-10/94 8/95-1/96 8/95-1/96 8/94-12/94 8/94-1/95
Dates
Contract
Amounts ($) 380 (3,572) 2,522 (1,935) 57,419 (43,605) 62,237 (51,031)
Fair Value ($) 340 (3,758) 2,603 (2,000) 57,463 (43,504) 63,147 (50,680)
Unrealized
gain(loss) ($) (40) (186) 81 (65) 44 101 910 351
</TABLE>
F-16
<PAGE>
Risks related to these contracts arise from the possible inability of
counterparties to meet the terms of their contracts and changes in
underlying product prices. The Partnership attempts to minimize market risk
through the enforcement of its trading policies, which include total
inventory limits and loss limits, and attempts to minimize credit risk
through application of its credit policies.
L. Acquisitions
On November 1, 1994, the General Partner purchased all of the capital stock
of Vision Energy Resources, Inc. ("Vision") for a cash purchase price of $45
million. Immediately following the closing of the purchase of Vision, the
General Partner (i) caused Vision and each of its subsidiaries to be merged
into the General Partner (except for a trucking subsidiary which dividended
substantially all of its assets to the General Partner). As a result of the
contribution, the Operating Partnership assumed substantially all of the
liabilities, whether known or unknown, associated with Vision and its
subsidiaries (excluding income tax liabilities), including obligation of the
General Partner under a $45,000,000 loan agreement under which the General
Partner borrowed funds to pay the purchase price for Vision. The Operating
Partnership repaid the loan immediately after the transfer of assets with
funds borrowed under its Credit Facility. In consideration of the retention
by the General Partner of certain income tax liabilities, the Partnership
issued 138,392 Common Units to the General Partner. The Operating
Partnership received a contribution of $7,300,000 from the General Partner,
representing the excess of the value of the assets over the liabilities
conveyed and the units issued to the General Partner. This contribution is
allocated to each partner based on their relative ownership percentages
following the closing of the Vision acquisition. The total assets
contributed to the Operating Partnership of approximately $57,100,000 (the
General Partner's cost basis) has been preliminarily allocated as follows
(i) working capital of $2,443,000, (ii) property, plant and equipment of
$36,919,000 and (iii) intangible assets of $17,738,000. The total
liabilities assumed by the Operating Partnership were approximately
$45,000,000. The transaction has been accounted for similar to purchase
accounting and, accordingly, the results of operations of Vision have been
included in the consolidated financial statements from the date of
contribution.
The following pro forma financial information assumes the Vision transaction
occurred at the beginning of each of the periods presented and also includes
the pro forma effects of the Partnership formation as of August 1, 1993 (as
described in Note A):
<TABLE>
<CAPTION>
(in thousands, except per unit amounts)
-------------------------------------------------------------
(unaudited) Pro Forma Year Pro Forma Year
Ended Ended July 31,
July 31, 1995 1994
----------------- -----------------
<S> <C> <C>
Total revenues $612,227 $594,792
Net earnings 24,386 43,735
Net earnings per limited partner unit $ 0.78 $ 1.40
</TABLE>
During the year ended July 31, 1995, the Partnership made acquisitions and
received contributions of businesses valued at $80,651,000 (including
working capital acquired of $3,282,000). This total consists of $19,677,000
cash payments and the following noncash transactions: $45,000,000 debt
assumed, $7,300,000 contributed capital, $6,600,000 issuance of Partnership
units, and $2,074,000 other costs and consideration.
F-17
<PAGE>
M. Income Taxes (Predecessor)
As stated in Note B, the Partnership's earnings or loss for Federal income
tax purposes is included in the tax returns of the individual partners.
Accordingly, no recognition has been given to income taxes in the
accompanying financial statements of the Partnership. The information
presented below pertains to the Predecessor.
<TABLE>
<CAPTION>
Income tax expense (benefit) consists of:
Eleven Fiscal Year
Months Ended Ended
(in thousands) June 30, 1994 July 31, 1993
------------------ ----------------
<S> <C> <C>
Current $ 209 $ 606
Deferred 7,136 (663)
------------------ ----------------
$ 7,345 $ (57)
================== ================
Allocated to:
Operating activities $ 7,876 $486
Extraordinary loss (531) (543)
------------------ ----------------
$ 7,345 $ (57)
================== ================
</TABLE>
<TABLE>
Deferred taxes result from temporary differences in the recognition of
income and expense for tax and financial statement purposes. The significant
temporary differences and related deferred tax provision (benefit) are as
follows:
<CAPTION>
Eleven Fiscal Year
Months Ended Ended
(in thousands) June 30, 1994 July 31,1993
------------------ ----------------
<S> <C> <C>
Depreciation expense $ 104 $ 1,568
Net operating loss carryforwards 9,258 (1,975)
Net cash, accrual and other differences (2,696) (752)
Amortization 470 496
================== ================
$ 7,136 $ (663)
================== ================
</TABLE>
For Federal income tax purposes, the Company had net operating loss
carryforwards of approximately $201,000,000 at June 30, 1994 available to
offset future taxable income. These net operating loss carryforwards expire
at various dates through 2009.
F-18
<PAGE>
<TABLE>
A reconciliation between the effective tax rate and the statutory Federal
rate follows:
<CAPTION>
Eleven Months Fiscal Year
Ended Ended
(in thousands) June 30, 1994 July 31, 1993
----------------------- ----------------------
Amount % Amount %
---------- --------- ------------ --------
<S> <C> <C> <C> <C>
Income tax expense (benefit)
at statutory rate $6,585 35.0 $(284) (34.0)
Statutory surtax (188) (1.0) - --
State income taxes, net of
Federal benefit 827 4.4 182 21.8
Nondeductible meal and
entertainment expense 54 0.3 36 4.3
Other 67 0.3 9 1.1
---------- --------- ------------ --------
$7,345 39.0 $ (57) (6.8)
========== ========= ============ ========
</TABLE>
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas, L.P.
Liberty, Missouri
We have audited the accompanying consolidated balance sheets of Ferrellgas, L.P.
(formerly Ferrellgas, Inc.) and subsidiaries as of July 31, 1995 and 1994
(Successor), and the related consolidated statements of earnings, partners'
capital and cash flows for the year ended July 31, 1995 and for the one month
ended July 31, 1994 (Successor), the eleven months ended June 30, 1994 and the
year ended July 31, 1993 (Predecessor). These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ferrellgas, L.P. and subsidiaries
as of July 31, 1995 and 1994 (Successor), and the results of their operations
and their cash flows for the year ended July 31, 1995 and for the one month
ended July 31, 1994 (Successor), the eleven months ended June 30, 1994 and the
year ended July 31, 1993 (Predecessor) in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 12, 1995
F-20
<PAGE>
FERRELLGAS L.P. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS July 31, 1995 July 31, 1994
- ---------------------------------------------------- ---------------- --------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 29,877 $ 14,535
Accounts and notes receivable (net of
allowance for doubtful accounts of $874 and
$798 in 1995 and 1994, respectively) 58,239 50,780
Inventories 44,090 43,562
Prepaid expenses and other current assets 5,884 2,042
-------------- --------------
Total Current Assets 138,090 110,919
Property, plant and equipment, net 345,642 294,765
Intangible assets, net 86,886 63,291
Other assets, net 7,978 8,218
============== ==============
Total Assets $578,596 $477,193
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------
Current Liabilities:
Accounts payable $ 57,729 $ 46,368
Other current liabilities 31,432 26,603
Short-term borrowings 20,000 3,000
-------------- --------------
Total Current Liabilities 109,161 75,971
Long-term debt 338,188 267,062
Other liabilities 11,398 11,528
Contingencies and commitments
Partners' Capital
Limited partner 118,638 121,393
General partner 1,211 1,239
-------------- --------------
Total Partners' Capital 119,849 122,632
-------------- --------------
Total Liabilities and Partners' Capital $578,596 $477,193
============== ==============
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE>
FERRELLGAS L.P. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands)
<TABLE>
<CAPTION>
For the year ended July 31, 1994
For the year One month Eleven months For the year
ended ended ended ended
July 31, 1995 July 31, 1994 June 30, 1994 July 31, 1993
---------------- ---------------- ------------------------------------
(Predecessor) (Predecessor)
Revenues:
<S> <C> <C> <C> <C>
Gas liquids and related product sales $565,607 $ 22,411 $477,285 $516,891
Other 30,829 2,155 24,705 25,054
---------------- ---------------- --------------- ----------------
Total revenues 596,436 24,566 501,990 541,945
Cost of product sold (exclusive of
depreciation, shown separately below) 339,641 13,211 256,095 298,033
---------------- ---------------- --------------- ----------------
Gross profit 256,795 11,355 245,895 243,912
Operating expense 153,225 10,078 135,058 139,617
Depreciation and amortization expense 32,014 2,383 26,452 30,840
General and administrative expense 11,357 935 8,923 10,079
Vehicle leases expense 4,271 350 3,940 4,823
---------------- ---------------- --------------- ----------------
Operating income (loss) 55,928 (2,391) 71,522 58,553
Interest expense (31,993) (2,662) (53,693) (60,071)
Interest income (including related parties of $1,018
and $725 in eleven months ended June 30, 1994
and year ended July 31, 1993, respectively) 1,268 73 3,599 3,266
Loss on disposal of assets (1,139) (97) (1,215) (1,153)
---------------- ---------------- --------------- ----------------
Earnings (loss) before income taxes
and extraordinary loss 24,064 (5,077) 20,213 595
Income tax provision - - 7,876 486
---------------- ---------------- --------------- ----------------
Earnings (loss) before extraordinary loss 24,064 (5,077) 12,337 109
Extraordinary loss on early extinguishment
of debt, net of tax benefit of $531
and $543 in eleven months ended June 30, 1994
and year ended July 31, 1993, respectively - 60,062 867 886
---------------- ---------------- --------------- ----------------
Net earnings (loss) $ 24,064 $(65,139) $ 11,470 $ (777)
================ ================ =============== ================
</TABLE>
See notes to consolidated financial statements.
F-22
<PAGE>
FERRELLGAS L.P. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY/PARTNERS' CAPITAL
(in thousands)
<TABLE>
<CAPTION>
Number of Additional Total
Common Common paid-in Accumulated stockholder's
Shares stock capital deficit equity
------------ ---------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
August 1, 1992 (Predecessor) 1.0 $1 $29,535 $(20,728) $ 8,808
Capital contribution
from Ferrell Companies, Inc. - - 3,277 - 3,277
Capital transaction - Ferrell
Companies, Inc. long-term
incentive plan - - 51 - 51
Net loss - - - (777) (777)
------------ ---------- ------------ ------------ ----------------
July 31, 1993 (Predecessor) 1.0 1 32,863 (21,505) 11,359
Net earnings - - - 11,470 11,470
------------ ---------- ------------ ------------ ----------------
June 30, 1994 (Predecessor) 1.0 $1 $32,863 $(10,035) $22,829
============ ========== ============ ============ ================
</TABLE>
<TABLE>
<CAPTION>
Total
Limited General partners'
partner partner capital
------------ ------------ ----------------
<S> <C> <C> <C>
April 22, 1994 $ - $ - $ -
Contributions in connection with
formation of the Partnership 185,874 1,897 187,771
Net loss (64,481) (658) (65,139)
------------ ------------ ----------------
July 31, 1994 121,393 1,239 122,632
Assets contributed in connection
with acquisitions 7,226 74 7,300
Additions to capital in connection
with acquisitions 6,666 69 6,735
Quarterly distributions (51,654) (528) (52,182)
Adjustments to capital related
to resolution of income tax
contingencies 11,186 114 11,300
Net earnings 23,821 243 24,064
------------ ------------ ----------------
July 31, 1995 $118,638 $1,211 $119,849
============ ============ ================
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
FERRELLGAS L.P. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the year ended July 31, 1994
For the year One month Eleven months For the year
ended ended ended ended
July 31, 1995 July 31, 1994 June 30, 1994 July 31, 1993
-------------- -------------- -------------------------------
(Predecessor) (Predecessor)
Cash Flows From Operating Activities:
<S> <C> <C> <C> <C>
Net earnings (loss) $24,064 $(65,139) $11,470 $ (777)
Reconciliation of net earnings (loss)
to net cash from operating activities:
Depreciation and amortization 32,014 2,383 26,452 30,840
Extraordinary loss - 60,062 867 886
Other 3,191 22 5,130 5,236
Changes in operating assets and liabilities
net of effects from business acquisitions:
Accounts and notes receivable (906) 196 (816) (252)
Inventories 7,388 (5,631) (14,279) 10,229
Prepaid expenses and other current assets (3,497) 618 (763) 977
Accounts payable 5,246 (2,809) 16,231 (11,918)
Accrued interest expense 10,680 (3,448) (4,765) (233)
Other current liabilities (11,704) 1,715 7,001 1,962
Other liabilities (446) (35) (1,072) 131
Deferred income taxes - - 7,667 (120)
-------------- -------------- -------------- ---------------
Net cash provided (used) by operating activities 66,030 (12,066) 53,123 36,961
-------------- -------------- -------------- ---------------
Cash Flows From Investing Activities:
Business acquisitions (19,677) (874) (2,451) (810)
Capital expenditures (19,722) (1,894) (7,826) (13,378)
Other 173 31 26 27
-------------- -------------- -------------- ---------------
Net cash used by investing activities (39,226) (2,737) (10,251) (14,161)
-------------- -------------- -------------- ---------------
Cash Flows From Financing Activities:
Net additions to short-term borrowings 17,000 3,000 - -
Additions to long-term debt 85,000 265,000 - 81
Reductions of long-term debt (61,400) (477,903) (13,640) (12,796)
Distributions (52,182) - - -
Additional payments to retire debt - (48,857) (1,190) (1,195)
Additions to financing costs - (6,575) (51) (627)
Net issuance of Common Units - 255,006 - -
Reacquisition of Class B redeemable common stock - - - (3,218)
Cash transfer from predecessor company - 39,791 - -
Other 120 (124) (6,330) (298)
-------------- -------------- -------------- ---------------
Net cash provided (used) by financing activities (11,462) 29,338 (21,211) (18,053)
-------------- -------------- -------------- ---------------
Increase in cash and cash equivalents 15,342 14,535 21,661 4,747
Cash and cash equivalents - beginning of period 14,535 - 32,706 27,959
============== ============== ============== ===============
Cash and cash equivalents - end of period $29,877 $ 14,535 $54,367 $32,706
============== ============== ============== ===============
Cash paid for interest $19,918 $ 6,093 $55,681 $57,563
============== ============== ============== ===============
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
FERRELLGAS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1995
A. Partnership Organization and Formation
Ferrellgas, L.P. (the "Partnership" or "Operating Partnership") was
formed April 22, 1994, as a Delaware limited partnership to acquire, own
and operate the propane business and substantially all of the assets of
Ferrellgas, Inc. (the "Company" or "General Partner"). Ferrellgas Partners,
L.P. (the "Master Partnership") is a Delaware limited partnership and holds
a 99% interest in the Partnership as the sole limited partner. The Company
holds a 1.0101% interest in the Partnership as the General Partner and
performs all management functions required for the Partnership.
On July 5, 1994, the Master Partnership completed an initial public offering
of 13,100,000 Common Units representing limited partner interests (the
"Common Units") at $21 per Common Unit. As of the date of the offering, the
13,100,000 Common Units represented a 41.8% limited partner interest in the
Partnership. Concurrent with the closing of the offering, the Company
contributed all of its propane business and assets to the Partnership
(excluding approximately $39,000,000 in cash, payables to or receivables
from its parent and affiliates and an investment in the Class B Stock of
Ferrell Companies, Inc.) in exchange for 1,000,000 Common Units, 16,593,721
Subordinated Units and Incentive Distribution Rights, representing
additional limited partner interests in the Master Partnership, as of the
date of the offering, as well as a 2% general partner interest in the Master
Partnership and the Partnership, on a combined basis.
In connection with the contribution of the propane business and assets by
the Company, the Operating Partnership assumed all of the liabilities,
whether known or unknown, associated with such assets (other than income tax
liabilities). The net book value contributed to the Partnership, adjusted
for the settlement of tax contingency (see Note H), is reported below:
(In thousands)
Total assets conveyed $509,535
Total liabilities assumed 565,471
--------------
Net liabilities $(55,936)
==============
Supplementary Pro Forma Consolidated Statements of Earnings (Unaudited): The
following pro forma consolidated statement of earnings for the fiscal year
ended July 31, 1994, was derived from the historical statement of earnings
of the Company for the eleven months ended June 30, 1994, and the statement
of earnings of the Partnership from inception to July 31, 1994. The pro
forma statement of earnings for the fiscal year ended July 31, 1993, was
derived from the historical statement of earnings of the Company. The pro
forma consolidated statements of earnings of the Partnership should be read
in conjunction with the consolidated financial statements of the Partnership
and the Company and the notes thereto. The objective of this data is to show
the effects on the historical financial information as if the Partnership
formation had occurred on August 1, 1992.
F-25
<PAGE>
The following supplementary pro forma consolidated statements of earnings
are for comparative purposes and are not indicative of the results of future
operations of the Partnership:
<TABLE>
<CAPTION>
(in thousands, except unit amounts)
Audited Pro Forma Pro Forma
July 31, 1995 July 31, 1994 July 31, 1993
--------------------- ------------------ ------------------
Revenues:
<S> <C> <C> <C>
Gas liquids and related product sales $565,607 $499,696 $516,891
Other 30,829 26,860 25,054
--------------------- ------------------ ------------------
Total revenues 596,436 526,556 541,945
Cost of product sold (exclusive of
depreciation, shown separately below) 339,641 269,306 298,033
--------------------- ------------------ ------------------
Gross profit 256,795 257,250 243,912
Operating expense 153,225 145,136 139,617
Depreciation and amortization expense 32,014 28,835 30,840
General and administrative expense 11,357 10,358 (1) 10,579 (1)
Vehicle leases expenses 4,271 4,290 4,823
--------------------- ------------------ ------------------
Operating income 55,928 68,631 58,053
Interest expense (31,993) (28,130) (2) (29,220) (2)
Interest income 1,268 1,123 (3) 898 (3)
Loss on disposal of assets (1,139) (1,312) (1,153)
--------------------- ------------------ -----------------
Earnings before extraordinary loss $ 24,064 $ 40,312 $ 28,578
===================== ================== ==================
<FN>
(1) Reflects estimated general and administrative costs associated with the Partnership.
(2) Reflects the adjustment to interest expense resulting from the early retirement of debt, net of
additional borrowings.
(3) Reflects the reduction of interest income to the Partnership as a
result of lower cash balances available for short-term investment
opportunities.
</FN>
</TABLE>
B. Summary of Significant Accounting Policies
(1) Nature of operations: The partnership is engaged primarily in the sale,
distribution, marketing and trading of propane and other natural gas liquids
throughout the United States. The retail market is seasonal because propane
is used primarily for heating in residential and commercial buildings. The
Partnership serves more than 700,000 residential, industrial/commercial and
agricultural customers.
(2) Principles of consolidation: The accompanying consolidated financial
statements present the consolidated financial position, results of
operations and cash flows of the Partnership and its wholly owned
subsidiaries, Ferrellgas Finance Corp., and Stratton Insurance Company. All
material intercompany profits, transactions and balances have been
eliminated.
F-26
<PAGE>
(3) Cash and cash equivalents: For purposes of the Consolidated Statements
of Cash Flows, the Partnership considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
(4) Inventories: Inventories are stated at the lower of cost or market
using average cost and actual cost methods.
(5) Property, plant and equipment and intangible assets: Property, plant and
equipment is stated at cost less accumulated depreciation. Expenditures for
maintenance and routine repairs are expensed as incurred. Depreciation is
calculated using the straight-line method based on estimated useful lives of
the assets ranging from two to thirty years. Intangible assets, consisting
primarily of customer location values and goodwill, are stated at cost, net
of amortization calculated using the straight-line method over periods
ranging from 15 to 40 years. Accumulated amortization of intangible assets
totaled $81,995,000 and $68,489,000 as of July 31, 1995 and 1994,
respectively.
On July 31, 1995, the Partnership adopted the provisions of FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Adoption of FASB Statement No. 121 had no impact on the financial
statements.
(6) Forward, futures and options contracts: The Partnership also enters into
forward and futures purchase/sale agreements and options involving propane
and related products which are for trading and overall risk management
purposes. To the extent such contracts are entered into at fixed prices and
thereby subject the Partnership to market risk, the contracts are accounted
for on a mark-to-market basis.
(7) Income taxes: The Partnership is a limited partnership. As a result, the
Partnership's earnings or loss for Federal income tax purposes is included
in the tax returns of the individual partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial statements of
the Partnership. Net earnings for financial statement purposes may differ
significantly from taxable income reportable to unitholders as a result of
differences between the tax basis and financial reporting basis of assets
and liabilities and the taxable income allocation requirements under the
Partnership agreement.
The Predecessor filed a consolidated Federal income tax return with its
parent and affiliates. Income taxes were computed as though each company
filed its own income tax return in accordance with the tax sharing
agreement. Deferred income taxes were provided as a result of temporary
differences between financial and tax reporting as described in Note L,
using the asset/liability method. Deferred income taxes were recognized for
the tax consequences of temporary differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
C. Quarterly Distributions of Available Cash
The Partnership makes quarterly cash distributions of all of its "Available
Cash", generally defined as consolidated cash receipts less consolidated
cash disbursements and net changes in reserves established by the General
Partner for future requirements. These reserves are retained to provide for
the proper conduct of the Partnership business, or to provide funds for
distributions with respect to any one or more of the next four fiscal
quarters.
F-27
<PAGE>
Distributions by the Partnership in an amount equal to 100% of its Available
Cash will be made 98.9899% to the Master Partnership and 1.0101% to the
General Partner. The Partnership makes distributions of all of its Available
Cash within 45 days after the end of each fiscal quarter ending January,
April, July and October to holders of record on the applicable record date.
D. Supplemental Balance Sheet Information
Inventories consist of:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
-------------- --------------
<S> <C> <C>
Liquefied propane gas and related products $37,550 $38,890
Appliances, parts and supplies 6,540 4,672
============== ==============
$44,090 $43,562
============== ==============
In addition to inventories on hand, the Partnership enters into
contracts to buy product for supply purposes. All such contracts have
terms of less than one year and call for payment based on market prices
at date of delivery.
Property, plant and equipment consist of:
(in thousands) 1995 1994
-------------- -------------
Land and improvements $ 21,380 $ 18,589
Buildings and improvements 29,117 23,005
Vehicles 46,199 37,283
Furniture and fixtures 23,336 17,776
Bulk equipment and district market facilities 37,086 33,091
Tanks and customer equipment 357,167 317,631
Other 6,825 5,097
-------------- -------------
521,110 452,472
Less: accumulated depreciation 175,468 157,707
============== =============
$345,642 $294,765
============== =============
Depreciation expense totaled $21,649,000, $1,602,000, $17,659,000, and
$20,449,000 for the year ended July 31, 1995, the one month ended July
31, 1994, the eleven months ended June 30, 1994 and the year ended July
31, 1993.
Other current liabilities consist of:
(in thousands) 1995 1994
------------- --------------
Accrued insurance $ 6,045 $ 6,624
Accrued interest 12,972 2,161
Accrued payroll 4,036 9,394
Other 8,379 8,424
------------- --------------
$31,432 $26,603
============= ==============
</TABLE>
F-28
<PAGE>
E. Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of:
(in thousands) 1995 1994
------------- ------------
<S> <C> <C>
Senior Notes
Fixed rate, 10%, due 2001 $200,000 $200,000
Floating rate, 9.3125% and 7.875%, respectively, due 2001 (1) 50,000 50,000
Credit Agreement
Term loan, 7.3125% and 7.375%, respectively, due 1997 (2) 15,000 15,000
Revolving credit loans, 7.125% to 9.125%, due 1997 (2) 70,000 -
Notes payable, 5.6% and 4.3% weighted average interest rates,
respectively, due 1995 to 2004 (3) 3,983 3,373
------------- ------------
338,983 268,373
Less: current portion 795 1,311
============= ============
$338,188 $267,062
============= ============
<FN>
(1) The floating rate senior notes bear interest at the London
Interbank Offered Rate ("LIBOR") plus 3.125% and have mandatory
sinking fund payments of $5,000,000 in 1999 and 2000. To offset the
variable rate characteristic of the notes, the Partnership entered
into interest rate collar agreements with two major banks limiting
interest rates to between 8.135% and 9.625%.
(2) The Partnership has a Credit Agreement with a major bank, as Agent,
consisting of a $15,000,000 term loan facility and $170,000,000
revolving credit facilities, of which $50,000,000 is available to
support letters of credit. Borrowings under the agreement generally
bear interest at Prime plus 0.25% or LIBOR plus 1.25%. On July 21,
1995, the Partnership entered into an amended Credit Agreement
which, effective August 1, 1995, increased the revolving credit
facilities to $190,000,000 and decreased the applicable interest
rate ranges to Prime plus 0% to .25% or LIBOR plus .052% to 1.25%.
At the Partnership's option, amounts borrowed under the term loan
and non-working capital borrowings under the revolving credit loans
may be converted to borrowing which mature in twelve quarterly
installments beginning September 1997.
(3) The notes payable are secured by approximately $1,413,000 and
$2,056,000 of property and equipment at July 31, 1995 and 1994,
respectively.
</FN>
</TABLE>
At July 31, 1995 and 1994, $20,000,000 and $3,000,000, respectively, of
short-term borrowings were outstanding under the revolving line of credit
and letters of credit outstanding, used primarily to secure obligations
under certain insurance arrangements, totaled $24,471,000.
The Senior Note Indenture and Credit Agreement contain various restrictive
covenants applicable to the Partnership and its subsidiaries, the most
restrictive relating to additional indebtedness, sale and disposition of
assets, and transactions with affiliates. In addition, the Partnership is
prohibited from making cash distributions of the Minimum Quarterly
Distribution if a default or event of default exists or would exist upon
making such distribution, or if the Partnership fails to meet certain
coverage and capital expenditure tests. With respect to the capital
expenditure tests, the Partnership shall in the aggregate make future
"Capital Investments" (as defined in the Senior Note Indenture) of
approximately $25,000,000 by July 31, 1999, and $50,000,000 by the end of
fiscal year 2000. The Partnership is in compliance with all requirements,
tests, limitations and covenants related to the Senior Note Indenture and
Credit Agreement.
F-29
<PAGE>
Annual principal payments on long-term debt for each of the next five
fiscal years are $795,000 in 1996, $438,000 in 1997, $5,252,000 in 1998,
$28,569,000 in 1999 and $33,600,000 in 2000.
During the one month ended July 31, 1994, the Partnership recognized an
extraordinary loss from the debt premium and write off of financing costs
of $59,455,000, net of minority interest of $607,000 resulting from the
early extinguishment of $477,600,000 of indebtedness of the Company assumed
by the Operating Partnership. During the eleven months ended June 30, 1994,
the Predecessor recognized an extraordinary loss from debt premium and
write-off of financing costs of approximately $867,000, net of income tax
benefit of $531,000, resulting from the early extinguishment of $11,900,000
of its fixed rate senior notes. During fiscal year 1993, the Predecessor
recognized an extraordinary loss from debt premium and write-off of
financing costs of approximately $886,000, net of income tax benefit of
$543,000, resulting from the early extinguishment of $10,500,000 of its
fixed rate senior notes.
F. Transactions with Related Parties
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General Partner
is entitled to reimbursement for all direct and indirect expenses incurred
or payments it makes on behalf of the Partnership, and all other necessary
or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business. These costs, which totaled $100,750,000 for the
year ended July 31, 1995 and $7,561,000 from inception to July 31, 1994,
include compensation and benefits paid to officers and employees of the
General Partner, and general and administrative costs. In addition, the
conveyance of the net assets of the Company to the Partnership described in
Note A included the assumption of specific liabilities related to employee
benefit and incentive plans for the benefit of the officers and employees
of the General Partner.
A. Andrew Levison, a director of the General Partner is a Managing Director
of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). DLJ acted
as an underwriter with regard to the public offering of Common Units and
Senior Notes, and was paid total fees of $5,100,000 during 1994. No fees
were paid in 1995.
The law firm of Bryan Cave, LLP (formerly Smith, Gill, Fisher & Butts, a
Professional Corporation), is general counsel to the Partnership, General
Partner, Ferrell Companies, Inc. ("Ferrell") and their respective
subsidiaries and affiliates. David S. Mouber, a director of Ferrell at July
31, 1994, is a member of such law firm. The Partnership, Ferrell and their
respective subsidiaries paid such firm fees of $151,000 from inception to
July 31, 1994. The Predecessor, its parent and their respective
subsidiaries paid such firm fees of $1,243,000 for the eleven months ended
June 30, 1994 and $1,381,000 for the year ended July 31, 1993.
In 1993, the Company received capital contributions from its parent
consisting of i) the forgiveness of a $3,015,000 long-term note payable to
affiliate, including interest, and ii) a $262,000 note receivable from
affiliate.
F-30
<PAGE>
G. Contingencies and Commitments
The Partnership is threatened with or named as a defendant in various
lawsuits which, among other items, claim damages for product liability. It
is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
known contingent claims that are likely to have a material adverse effect
on the results of operations or financial condition of the Partnership.
In connection with the formation of the Partnership, the General Partner
contributed certain assets and liabilities. The Internal Revenue Service
("IRS") has examined the General Partner's consolidated income tax returns
for the years ended July 31, 1987 and 1986, and has proposed certain
adjustments which relate to these contributed assets. The General Partner
has reached a settlement agreement which substantially resolves all issues
with the IRS with the exception of minor items which are presently being
negotiated at the appellate level. Due to the settlement of these issues,
additional deferred taxes were recorded by the General Partner. This
noncash adjustment retroactively increased the basis of the assets the
General Partner contributed to the Partnership by $11,300,000 which, in
turn, caused an increase to the General Partner's contributed capital that
was allocated pro rata among all partners. In addition, Partnership
goodwill also increased by $11,300,000 (to be amortized prospectively over
a period of 15 years). These adjustments were not material to the financial
position or the results of operations or liquidity.
Certain property and equipment is leased under noncancellable operating
leases which require fixed monthly rental payments and which expire at
various dates through 2016. Rental expense under these leases totaled
$11,233,000, $725,000, $9,556,000, and $10,903,000 for the year ended July
31, 1995, the one month ended July 31, 1994, the eleven months ended June
30, 1994, and the year ended July 31, 1993, respectively. Future minimum
lease commitments for such leases are $8,414,000 in 1996, $6,195,000 in
1997, $3,874,000 in 1998, $2,227,000 in 1999, $1,005,000 in 2000 and
$3,985,000 thereafter.
H. Employee Benefits
The Partnership has no employees and is managed and controlled by the
General Partner. The Partnership assumed all liabilities, which included
specific liabilities related to the following employee benefit plans for
the benefit of the officers and employees of the General Partner.
The General Partner and its parent have a defined contribution
profit-sharing plan which covers substantially all employees with more than
one year of service. Contributions are made to the plan at the discretion
of the parent's Board of Directors. This plan, which qualifies under
section 401(k) of the Internal Revenue Code, also provides for matching
contributions under a cash or deferred arrangement based upon participant
salaries and employee contributions to the plan. Contributions for the year
ended July 31, 1995, under the profit sharing provision and the 401(k)
provision were $1,300,000 and $1,407,000 respectively. There were no
contributions under the profit sharing provision or 401(k) provision of the
plan from inception to July 31, 1994. Contributions during the eleven
months ended June 30, 1994 and the year ended July 31, 1993 were $1,200,000
and $1,000,000 under the profit sharing provision, and $1,445,000 and
$1,541,000 under the 401(k) provision.
F-31
<PAGE>
I. Unit Options
On October 14, 1994, the General Partner adopted the Ferrellgas, Inc. Unit
Option Plan (the "Unit Option Plan"), which currently authorizes the
issuance of options (the "Unit Options") covering up to 850,000 of the
Master Limited Partnership's Subordinated Units to certain officers and
employees of the General Partner, of which 775,000 options were granted,
while 73,500 options were terminated and cancelled; thus 701,500 options
were issued and outstanding at July 31, 1995 having an aggregate exercise
price of $11,868,000. The Unit Options have the following characteristics:
1) exercise prices ranging from $16.80 to $18.54 per unit, which is an
estimate of the fair market value of the Subordinated Units at the time of
grant, 2) vest immediately or over a one to five year period, 3)
exercisable beginning after July 31, 1999, assuming the subordination
period has elapsed, and 4) expire on the tenth anniversary of the date of
grant. Upon conversion of the Subordinated Units held by the General
Partner and its affiliates, the Unit Options granted will convert to Common
Unit Options.
J. Disclosures About Off Balance Sheet Risk and Fair Value of Financial
Instruments
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of the instruments. Short-term borrowings
approximates fair value as of July 31, 1995 and 1994. The estimated fair
value of the Partnership's long-term debt was $347,485,000 and $269,547,000
as of July 31, 1995 and 1994, respectively. The fair value is estimated
based on quoted market prices adjusted for discounted cash flows.
Interest Rate Collar Agreements. On June 5, 1995, the Partnership entered
into three-year interest rate collar agreements involving the exchange of
fixed and floating interest payment obligations without the exchange of the
underlying principal amounts. At July 31, 1995, the total notional
principal amount of these agreements was $50,000,000. The counterparties to
these agreements are large financial institutions. The interest rate collar
agreements subject the company to financial risk that will vary during the
life of these agreements in relation to market interest rates.
Option Contracts. The Partnership is a party to certain option contracts,
involving various liquefied petroleum products, for overall risk management
purposes in connection with its trading activities. Contracts are executed
with private counterparties and to a lesser extent on national mercantile
exchanges. Open contract positions are summarized below.
Forward and Futures Contracts. The Partnership is a party to certain
forward and futures contracts for trading purposes. Net gains from trading
activities were $5,818,000, $331,000, $6,458,000 and $6,739,000 for the
year ended July 31, 1995, the one month ended July 31, 1994, the eleven
months ended June 30, 1994 and the year ended July 31, 1993, respectively.
Such contracts permit settlement by delivery of the commodity. Open
contract positions are summarized below.
F-32
<PAGE>
<TABLE>
<CAPTION>
As of July 31
(In thousands, except price per gallon data)
Derivative Financial Instruments Held for Financial Instruments Held for
Purposes Other than Trading Trading Purposes
(Options) (Forward and Futures)
------------------------------------------- ----------------------------------------------------
1995 1994 1995 1994
-------------------- ------------------- ----------- ----------- ----------- ------------
Asset Liab. Asset Liab. Asset Liab. Asset Liab.
-------- ----------- -------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Volume
(gallons) 1,071 (9,765) 8,358 (6,174) 170,057 (129,198) 194,800 (146,562)
Price (cents/gal) 16-36 16-36 30-31 29-55 13-45 14-52 19-38 30-39
Maturity 8/95-1/96 8/95-1/96 11/94-1/95 9/94-10/94 8/95-1/96 8/95-1/96 8/94-12/94 8/94-1/95
Dates
Contract
Amounts ($) 380 (3,572) 2,522 (1,935) 57,419 (43,605) 62,237 (51,031)
Fair Value ($) 340 (3,758) 2,603 (2,000) 57,463 (43,504) 63,147 (50,680)
Unrealized
gain(loss) ($) (40) (186) 81 (65) 44 101 910 351
</TABLE>
Risks related to these contracts arise from the possible inability of
counterparties to meet the terms of their contracts and changes in
underlying product prices. The Partnership attempts to minimize market risk
through the enforcement of its trading policies, which include total
inventory limits and loss limits, and attempts to minimize credit risk
through application of its credit policies.
K. Acquisitions
On November 1, 1994, the General Partner purchased all of the capital stock
of Vision Energy Resources, Inc. ("Vision") for a cash purchase price of $45
million. Immediately following the closing of the purchase of Vision, the
General Partner (i) caused Vision and each of its subsidiaries to be merged
into the General Partner (except for a trucking subsidiary which dividended
substantially all of its assets to the General Partner). As a result of the
contribution, the Partnership assumed substantially all of the liabilities,
whether known or unknown, associated with Vision and its subsidiaries
(excluding income tax liabilities), including obligation of the General
Partner under a $45,000,000 loan agreement under which the General Partner
borrowed funds to pay the purchase price for Vision. The Partnership repaid
the loan immediately after the transfer of assets with funds borrowed under
its Credit Facility. In consideration of the retention by the General
Partner of certain income tax liabilities, the Master Partnership issued
138,392 Common Units to the General Partner. The Partnership received a
contribution of $7,300,000 from the General Partner, representing the excess
of the value of the assets over the liabilities conveyed and the units
issued to the General Partner. This contribution is allocated to each
partner based on their relative ownership percentages following the closing
of the Vision acquisition. The total assets contributed to the Partnership
of approximately $57,100,000 (the General Partner's cost basis) has been
preliminarily allocated as follows: (i) working capital of $2,443,000, (ii)
property, plant and equipment of $36,919,000, and (iii) intangible assets of
F-33
<PAGE>
$17,738,000. The total liabilities assumed by the Partnership were
approximately $45,000,000. The transaction has been accounted for similar to
purchase accounting and, accordingly, the results of operations of Vision
have been included in the consolidated financial statements from the date of
contribution.
The following pro forma financial information assumes the Vision transaction
occurred at the beginning of each of the periods presented and also includes
the pro forma effects of the Partnership formation as of August 1, 1993 (as
described in Note A):
<TABLE>
<CAPTION>
(in thousands, except per unit amounts) Pro Forma Year Pro Forma Year
Ended Ended July 31,
(unaudited) July 31, 1995 1994
----------------- -----------------
<S> <C> <C>
Total revenues $612,227 $594,792
Net earnings 24,386 43,735
Net earnings per limited partner unit $ 0.78 $ 1.40
</TABLE>
During the year ended July 31, 1995, the Partnership made acquisitions and
received contributions of businesses valued at $80,651,000 (including
working capital acquired of $3,282,000). This total consists of $19,677,000
cash payments and the following noncash transactions: $45,000,000 debt
assumed, $7,300,000 contributed capital, $6,600,000 issuance of Master
Partnership units, and $2,074,000 other costs and consideration.
L. Income Taxes (Predecessor)
As stated in Note B, the Partnership's earnings or loss for Federal income
tax purposes is included in the tax returns of the individual partners.
Accordingly, no recognition has been given to income taxes in the
accompanying financial statements of the Partnership. The information
presented below pertains to the Predecessor.
<TABLE>
Income tax expense (benefit) consists of :
<CAPTION>
Eleven Fiscal Year
Months Ended Ended
(in thousands) June 30, 1994 July 31, 1993
------------------ ----------------
<S> <C> <C>
Current $ 209 $ 606
Deferred 7,136 (663)
------------------ ----------------
$ 7,345 $ (57)
================== ================
Allocated to:
Operating activities $ 7,876 $486
Extraordinary loss (531) (543)
------------------ ----------------
$ 7,345 $ (57)
================== ================
</TABLE>
F-34
<PAGE>
<TABLE>
Deferred taxes result from temporary differences in the recognition of
income and expense for tax and financial statement purposes. The significant
temporary differences and related deferred tax provision (benefit) are as
follows :
<CAPTION>
Eleven Fiscal Year
Months Ended Ended
(in thousands) June 30, 1994 July 31,1993
------------------ ----------------
<S> <C> <C>
Depreciation expense $ 104 $ 1,568
Net operating loss carryforwards 9,258 (1,975)
Net cash, accrual and other differences (2,696) (752)
Amortization 470 496
================== ================
$ 7,136 $ (663)
================== ================
</TABLE>
For Federal income tax purposes, the Company had net operating loss
carryforwards of approximately $201,000,000 at June 30, 1994 available to
offset future taxable income. These net operating loss carryforwards expire
at various dates through 2009.
<TABLE>
A reconciliation between the effective tax rate and the statutory Federal
rate follows (amounts):
<CAPTION>
Eleven Months Fiscal Year
Ended Ended
(in thousands) June 30, 1994 July 31, 1993
----------------------- ----------------------
Amount % Amount %
---------- --------- ------------ --------
<S> <C> <C> <C> <C>
Income tax expense (benefit)
at statutory rate $6,585 35.0 $(284) (34.0)
Statutory surtax (188) (1.0) - -
State income taxes, net of
Federal benefit 827 4.4 182 21.8
Nondeductible meal and
entertainment expense 54 0.3 36 4.3
Other 67 0.3 9 1.1
---------- --------- ------------ --------
$7,345 39.0 $ (57) (6.8)
========== ========= ============ ========
</TABLE>
F-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas Finance Corp.
Liberty, Missouri
We have audited the accompanying balance sheets of Ferrellgas Finance Corp. (a
wholly owned subsidiary of Ferrellgas L.P.), as of July 31, 1995 and 1994, and
the related statements of earnings, stockholder's equity and cash flows for the
year ended July 31, 1995 and the period from inception (April 28, 1994) to July
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ferrellgas Finance Corp. as of July 31, 1995
and 1994, and the results of its operations and its cash flows for the year
ended July 31, 1995 and the period from inception (April 28, 1994) to July 31,
1994 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 12, 1995
F-36
<PAGE>
FERRELLGAS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, July 31,
1995 1994
------------- ------------
ASSETS
- ------------------------------------------------------------
<S> <C> <C>
Cash $697 $1,000
------------- ------------
Total Assets $697 $1,000
============= ============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------
Payable to affiliate $ 153 $ -
Common stock, $1.00 par value; 2,000 shares
authorized; 1,000 shares issued and outstanding 1,000 1,000
Accumulated deficit (456) -
------------- ------------
Total Stockholder's Equity 544 1,000
------------- ------------
Total Liabilities and Stockholder's Equity $697 $1,000
============= ============
</TABLE>
See notes to financial statements.
F-37
<PAGE>
FERRELLGAS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas, L.P.)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the From
Year Ended Inception to
July 31, 1995 July 31, 1994
--------------- ----------------
<S> <C> <C>
Revenues $ - $ -
General and administrative expense 456 -
--------------- ----------------
Net loss $(456) $ -
=============== ================
</TABLE>
See notes to financial statements.
F-38
<PAGE>
FERRELLGAS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas, L.P.)
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common stock Total
------------------------------- Accumulated stockholder's
Shares Dollars deficit equity
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
April 28, 1994 - $ - $ - $ -
Common stock issued 1,000 1,000 - 1,000
-------------- -------------- -------------- --------------
July 31, 1994 1,000 1,000 - 1,000
Net loss - - (456) (456)
-------------- -------------- -------------- --------------
July 31, 1995 1,000 $1,000 $(456) $544
============== ============== ============== ==============
</TABLE>
See notes to financial statements.
F-39
<PAGE>
FERRELLGAS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas, L.P.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year From
ended Inception to
July 31, 1995 July 31, 1994
--------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(456) $ -
--------------- ---------------
Cash used by operating activities (456) -
--------------- ---------------
Cash Flows From Investing Activities:
--------------- ---------------
Cash provided by investing activities - -
--------------- ---------------
Cash Flows From Financing Activities:
Issuance of common stock - 1,000
Net advance from affiliate 153 -
--------------- ---------------
Cash provided by financing activities 153 1,000
--------------- ---------------
Increase (decrease) in cash (303) 1,000
Cash - beginning of period 1,000 -
--------------- ---------------
Cash - end of period $ 697 $1,000
=============== ===============
</TABLE>
See notes to financial statements.
F-40
<PAGE>
FERRELLGAS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas, L.P.)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
A. Formation
Ferrellgas Finance Corp. (the "Company"), a Delaware corporation, was
formed on April 28, 1994, and is a wholly-owned subsidiary of Ferrellgas,
L.P. (the "Partnership"). Ferrellgas, L.P. was formed April 22, 1994, as a
Delaware limited partnership. The Partnership was formed to acquire, own
and operate substantially all of the assets of Ferrellgas, Inc.
("Ferrellgas"). Ferrellgas conveyed substantially all of its assets to the
Partnership (excluding cash, receivables from parent and affiliates and an
investment in the Class B Stock of Parent) and all of the liabilities,
whether known or unknown, associated with such assets (other than income
tax liabilities). The Partnership contributed $1,000 to the Company on May
20, 1994, in return for common stock. There were no other transactions
involving the Company during the period ended July 31, 1994.
B. Commitment
In July, 1994, the Partnership issued 10% Fixed Rate Senior Notes (the
"Fixed Notes") due 2001 in the aggregate principal amount of $200,000,000
and Floating Rate Senior Notes (the "Floating Notes" and together with the
Fixed Notes the "Senior Notes") due 2001 in the aggregate principal amount
of $50,000,000. The $200,000,000 Fixed Rate Senior Notes are not redeemable
prior to August 1, 1999. Thereafter, the Partnership has the option to
redeem the notes, in whole or part, at a premium. The $50,000,000 aggregate
principal amount of Floating Notes are redeemable at the option of the
Partnership on or after August 1, 1996, in whole or part, at a redemption
price equal to 100% of the principal amount, plus accrued and unpaid
interest at the redemption date. The Floating Notes have mandatory sinking
fund payments of $5,000,000 on August 1, 2000 and 2001, to retire an
aggregate 20% of the Floating Notes prior to maturity. The Company is
acting as co-obligor for the Senior Notes.
C. Income Taxes
Income taxes have been computed as though the Company files its own income
tax return. Deferred income taxes are provided as a result of temporary
between financial and tax reporting using the asset/liability method.
Deferred income taxes are recognized for the tax consequences of temporary
differences between the financial statement carrying amounts and tax basis
of existing assets and liabilities.
Due to the inability of the Company to utilize the deferred tax benefit of
$178 associated with the current year net operating loss carryforward of
$456 expiring July 31, 2010, a valuation allowance has been provided on the
full amount of the deferred tax asset. Accordingly, there is no net
deferred tax benefit for the period ended July 31, 1995 and there is no net
deferred tax asset as of July 31, 1995.
F-41
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Ferrellgas Partners, L.P. and Subsidiary
Independent Auditors' Report on Schedules......................................................................S-2
Schedule I Parent Company Only Balance Sheets as of July 31, 1995 and 1994, and
Statements of Earnings and Cash Flows for the Year ended July 31, 1995
and the One month ended July 31, 1994........................................................S-3
Schedule II Valuation and Qualifying Accounts for the Year ended July
31, 1995, the One month ended July 31, 1994 and the Eleven
months ended June 30, 1994...................................................................S-6
Ferrellgas, L.P. and Subsidiaries
Independent Auditors' Report on Schedules......................................................................S-7
Schedule II Valuation and Qualifying Accounts for the Year ended July
31, 1995, the One month ended July 31, 1994 and the Eleven
months ended June 30, 1994 June 30, 1994.....................................................S-8
</TABLE>
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas Partners, L.P.
Liberty, Missouri
We have audited the consolidated financial statements of Ferrellgas Partners,
L.P. (formerly Ferrellgas, Inc.), and subsidiary as of July 31, 1995 and 1994,
(Successor), and for the year ended July 31,1995, and for the one month ended
July 31, 1994 (Successor), and for the eleven months ended June 30, 1994 and for
the year ended July 31, 1993 (Predecessor) and have issued our report thereon
dated September 12, 1995. Our audit also included the financial statement
schedules listed at Item 14(a)2. These financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion based on our audit. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information therein set forth.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 12, 1995
S-2
<PAGE>
FERRELLGAS PARTNERS, L.P. SCHEDULE I
PARENT ONLY
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS July 31, 1995 July 31, 1994
- ---------------------------------------------------- ------------------- --------------------
<S> <C> <C>
Investment in Ferrellgas, L.P. $118,638 $121,393
=================== ====================
Total Assets $118,638 $121,393
=================== ====================
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------
Other current liabilities $ 1 $ -
Partners' Capital
Common unitholders 84,489 84,532
Subordinated unitholders 91,824 99,483
General partner (57,676) (62,622)
------------------- --------------------
Total Partners' Capital 118,637 121,393
------------------- --------------------
Total Liabilities and Partners' Capital $118,638 $121,393
=================== ====================
</TABLE>
S-3
<PAGE>
FERRELLGAS PARTNERS, L.P. SCHEDULE I
PARENT ONLY
STATEMENTS OF EARNINGS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended Inception to
July 31, 1995 July 31, 1994
------------------ -------------------
<S> <C> <C>
Equity in earnings (loss) of Ferrellgas, L.P. $23,821 $(64,481)
Operating expense 1 -
================== ===================
Net earnings (loss) $23,820 $(64,481)
================== ===================
</TABLE>
S-4
<PAGE>
FERRELLGAS PARTNERS, L.P. SCHEDULE I
PARENT ONLY
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended Inception to
July 31, 1995 July 31, 1994
---------------- ----------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net earnings $23,820 $(64,481)
(loss)
Reconciliation of net earnings (loss) to net cash from operating activities:
Equity in (earnings) loss of Ferrellgas, L.P. (23,821) 64,481
Distributions received from Ferrellgas, L.P. 51,654 -
Increase in other current liabilities 1 -
---------------- ----------------
Net cash provided by operating activities 51,654 -
---------------- ----------------
Cash Flows From Investing Activities:
Investment in Ferrellgas, L.P. - (255,006)
---------------- ----------------
Net cash used by investing activities - (255,006)
---------------- ----------------
Cash Flows From Financing Activities:
Distributions to partners (51,654) -
Net issuance of Common Units - 255,006
---------------- ----------------
Net cash provided (used) by financing activities (51,654) 255,006
---------------- ----------------
Increase in cash and cash equivalents - -
Cash and cash equivalents - beginning of period - -
================ ================
Cash and cash equivalents - end of period $ - $ -
================ ================
<FN>
Supplemental disclosure of noncash financing activity:
Effective July 5, 1994, substantially all of the propane assets and liabilities
of Ferrellgas, Inc. were conveyed at historical cost to Ferrellgas, L.P. in
return for 1,000,000 Common Units, 16,593,721 Subordinated Units and the
Incentive Distribution Rights of Ferrellgas Partners, L.P., as well as a 2%
general partner interest in Ferrellgas Partners, L.P. and Ferrellgas, L.P., on a
combined basis. Net liabilities assumed by Ferrellgas, L.P., adjusted for the
settlement of a tax contingency, are as follows:
July 5, 1994
----------------
Cash $ 39,791
Accounts receivable 50,747
Inventories 37,931
Prepaid expenses and other current assets 2,660
Property, plant and equipment, net 293,729
Intangible assets, net 75,350
Other assets 9,327
----------------
Total assets conveyed 509,535
----------------
Accounts payable 49,177
Other current liabilities 30,296
Long-term debt, net 476,441
Other non-current liabilities 9,557
----------------
Total liabilities assumed 565,471
----------------
Net liabilities assumed by Ferrellgas, L.P. $(55,936)
================
</FN>
</TABLE>
S-5
<PAGE>
FERRELLGAS PARTNERS, L.P. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning cost/ Other (amounts at end
Description of period expenses Additions (A) charged-off) of period
- ------------------------------- -------------- ------------ ------------- ----------- ---------
Year ended July 31, 1995
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 798 $1,191 $ 400 $1,515 $ 874
Accumulated amortization:
Intangible assets $68,489 $9,997 $3,509 $ - $81,995
Other assets $ 1,860 $ 368 $1,109 $ - $ 3,337
One month ended July 31, 1994
Allowance for doubtful accounts $ 906 $ 119 $ - $ 227 $ 798
Accumulated amortization:
Intangible assets $67,730 $ 759 $ - $ - $68,489
Other assets $ 9,845 $ 23 $ - $8,008 $ 1,860
Eleven months ended June 30, 1994
Allowance for doubtful accounts $ 607 $1,569 $ - $1,270 $ 906
Accumulated amortization:
Intangible assets $59,181 $8,549 $ - $ - $67,730
Other assets $ 7,592 $2,626 $ - $ 373 $ 9,845
<FN>
(A) On November 1, 1994, the General Partner purchased all of the capital stock
of Vision Energy Resources, Inc. Immediately following the close of the
purchase, the General Partner contributed the assets and substantially all of
the liabilities associated with Vision Energy Resources, Inc. to the Operating
Partnership. The amounts reflected as "Other Additions" represent valuation and
qualifying accounts assumed by the Operating Partnership in connection with the
contribution by the General Partner.
(B) On July 5, 1994, substantially all of the propane assets and liabilities of
Ferrellgas, Inc. were conveyed at historical cost to Ferrellgas, L.P. Total
allowance for uncollectible receivables, accumulated amortization of intangible
assets and accumulated amortization of other assets transferred to Ferrellgas,
L.P. was $906, $67,730 and $9,845, respectively.
</FN>
</TABLE>
S-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas, L.P.
Liberty, Missouri
We have audited the consolidated financial statements of Ferrellgas, L.P.,
(formerly Ferrellgas, Inc.) and subsidiaries as of July 31, 1995 and 1994,
(Successor), and for the year ended July 31,1995, and for the one month ended
July 31, 1994 (Successor), the eleven months ended June 30, 1994 and for the
year ended July 31, 1993 (Predecessor) and have issued our report thereon dated
September 12, 1995. Our audit also included the financial statement schedules
listed at Item 14(a)2. These financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion based on our audit. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information therein set forth.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 12, 1995
S-7
<PAGE>
FERRELLGAS, L.P.and SUBSIDIARIES SCHEDULE II
PARENT ONLY
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning cost/ Other (amounts at end
Description of period expenses Additions (A) charged-off) of period
- --------------------------------- ------------ ------------ ---------------------------------------------
Year ended July 31, 1995
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 798 $1,191 $ 400 $1,515 $ 874
Accumulated amortization:
Intangible assets $68,489 $9,997 $3,509 $ - $81,995
Other assets $ 1,860 $ 368 $1,109 $ - $ 3,337
One month ended July 31, 1994
Allowance for doubtful accounts $ 906 $ 119 $ - $ 227 $ 798
Accumulated amortization:
Intangible assets $67,730 $ 759 $ - $ - $68,489
Other assets $ 9,845 $ 23 $ - $8,008 $ 1,860
Eleven months ended June 30, 1994
Allowance for doubtful accounts $ 607 $1,569 $ - $1,270 $ 906
Accumulated amortization:
Intangible assets $59,181 $8,549 $ - $ - $67,730
Other assets $ 7,592 $2,626 $ - $ 373 $ 9,845
</TABLE>
On November 1, 1994, the General Partner purchased all of the capital stock of
Vision Energy Resources, Inc. Immediately following the close of the purchase,
the General Partner contributed the assets and substantially all of the
liabilities associated with Vision Energy Resources, Inc. to the Operating
Partnership. The amounts reflected as "Other Additions" represent valuation and
qualifying accounts assumed by the Operating Partnership in connection with the
contribution by the General Partner.
On July 5, 1994, substantially all of the propane assets and liabilities of
Ferrellgas, Inc. were conveyed at historical cost to Ferrellgas, L.P. Total
allowance for uncollectible receivables, accumulated amortization of intangible
assets and accumulated amortization of other assets transferred to Ferrellgas,
L.P. was $906, $67,730 and $9,845, respectively.
S-8
Exhibit 10.3
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"),
dated as of July 21, 1995, is entered into by and among FERRELLGAS, L.P., a
Delaware limited partnership (the "Borrower"), STRATTON INSURANCE COMPANY, Inc.,
a Vermont corporation and Wholly-Owned Subsidiary of the Borrower ("Stratton"),
FERRELLGAS, INC., a Delaware corporation and sole general partner of the
Borrower (the "General Partner"), each of the lenders that is a signatory to
this Amendment (collectively, the "Banks"; and each, a "Bank"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as agent for the Banks (in such
capacity, the "Agent") and THE FIRST NATIONAL BANK OF BOSTON and NATIONSBANK OF
TEXAS, N.A. as co-agents (the "Co-Agents"), and amends that certain Credit
Agreement dated as of July 5, 1994 between the Borrower, Stratton, the General
Partner, the several financial institutions from time to time parties to the
Credit Agreement (as defined below), the Agent and the Co-Agents (as
supplemented by the Consent and Agreement dated as of October 28, 1994 entered
into by and among the parties hereto, the "Existing Credit Agreement", and as
amended hereby, the "Credit Agreement"). Capitalized terms used and not
otherwise defined in this Amendment shall have the same meanings in this
Amendment as set forth in the Existing Credit Agreement, and the rules of
interpretation set forth in Section 1.02 of the Existing Credit Agreement shall
be applicable to this Amendment.
RECITALS
A. The Borrower has determined that it is in the best interests of the
Borrower to increase the amount of funds available to it for working capital,
acquisition and other general purposes.
B. In that connection, the Borrower is proposing that the
Banks (a) make available additional revolving indebtedness in the form of a new
facility exclusively for working capital purposes in an aggregate amount equal
to $20,000,000 which will have a 30 day clean-up period, (b) reallocate
$25,000,000 from the Facility A Commitment to the Facility B Commitment and (c)
make certain other amendments to the Existing Credit Agreement, and the Banks
are willing to agree to the foregoing all on the terms and subject to the
conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree and amend the Existing Credit Agreement as follows:
SECTION 1. Amendments. On the terms of this Amendment and subject
to the satisfaction of the conditions precedent set forth below in
Section 2, the Existing Credit Agreement shall be amended as
follows: (a) The following definitions as set forth in Section 1.01 of
the Existing Credit Agreement are amended to read in their entirety as
follows:
i. "`Applicable Margin' means, for each Type of Loan, effective
as of the first day of each fiscal quarter, the percentage per annum
(expressed in basis points) set forth below opposite the Level of the
Leverage Ratio applicable to such fiscal quarter as set forth herein.
Leverage Ratio Base Rate Loans Eurodollar Loans
Level 1 0 b.p. 52.5 b.p.
Level 2 0 b.p. 70 b.p.
Level 3 0 b.p. 87.5 b.p.
Level 4 0 b.p. 105 b.p.
Level 5 25 b.p. 125 b.p."
ii. "`Class' means, with respect to any Loan, whether such Loan
is a Facility A Revolving Loan, Swingline Loan, Facility B Term Loan,
Facility B Revolving Loan, Facility B Takeout Loan or Facility C
Revolving Loan."
iii. "`Commitment Fee Rate' means, as of any date and based upon
the Level of the Leverage Ratio on such date, the percent per annum
(expressed in basis points) set forth below opposite such Level:
Leverage Ratio Commitment Fee Rate
Level 1 20 b.p.
Level 2 25 b.p.
Level 3 27.5 b.p.
Level 4 32.5 b.p.
Level 5 37.5 b.p."
iv. "`Commitments' means, as to each Bank, collectively, its
Facility A Commitment, its Facility B Commitment and its Facility C
Commitment."
v. "`Compliance Certificate' means a certificate signed
by a Responsible Officer of the Borrower substantially in the form of
Exhibit C, demonstrating compliance with the covenants contained
herein, including Sections 7.12, 7.13, 7.16 and 8.12 and the 30 day
clean-up period contained in subsections 2.01(a)(ii) and 2.01(c)(ii)."
vi. "`Facility A Commitment', as to each Bank, means the amount
set forth opposite such Bank's name on Schedule 2.01 hereof under the
caption "Facility A Commitment", as the same may be reduced under
Section 2.05 or 2.07 or as a result of one or more assignments under
Section 11.08; provided, that the maximum aggregate Facility A
Commitment of all Banks shall not exceed $75,000,000 at any time."
vii. "`Facility B Commitment', as to each Bank, means the amount
set forth opposite such Bank's name on Schedule 2.01 hereof under the
caption "Facility B Commitment", as such amount may be reduced under
Section 2.05 or 2.07 or as a result of one or more assignments under
Section 11.08; provided, that the maximum aggregate Facility B
Commitment of all Banks shall not exceed $110,000,000 at any time."
viii. "`Interest Period' means, as to any Eurodollar Rate Loan,
the period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as a Eurodollar Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period;
(iii) no Interest Period for any Facility A
Revolving Loan or Facility C Revolving Loan shall extend
beyond June 30, 1998;
(iv) no Interest Period for any Facility B Term
Loan or Facility B Revolving Loan shall extend beyond June 30,
1997; and
(v) no Interest Period applicable to a Facility B
Takeout Loan or portion thereof shall extend beyond any date
upon which is due any scheduled principal payment in respect
thereof unless the aggregate principal amount of Facility B
Takeout Loans represented by Base Rate Loans, or by Eurodollar
Rate Loans having Interest Periods that will expire on or
before such date, equals or exceeds the amount of such
principal payment."
ix. "`Level' means, at any time, Level 1, Level 2, Level 3, Level
4 or Level 5, based on the amount of the Leverage Ratio at such time.
For purposes of this Agreement, the following "Levels" of Leverage
Ratio (LR) shall apply:
Level Leverage Ratio
Level 1 LR (less than) 1.75
Level 2 1.75 (less than) LR (less than) 2.75
Level 3 2.75 (less than) LR (less than) 3.25
Level 4 3.25 (less than) LR (less than) 3.75
Level 5 LR (less than) 3.75
The level of the Leverage Ratio for the period from the Closing Date to
the end of the fiscal quarter of the Borrower during which the Closing
Date occurs shall be equal to Level 3. Any change in the Level of the
Leverage Ratio shall be determined by the Agent based upon the
financial information required to be contained in the Compliance
Certificates delivered by the Borrower to the Agent with respect to
each fiscal quarter of the Borrower and shall become effective as of
the first day of the fiscal quarter following the fiscal quarter for
which such Compliance Certificate was delivered. Upon any failure of
the Borrower to deliver a Compliance Certificate for any fiscal quarter
prior to 10 days after the date on which such Compliance Certificate is
required to be delivered to the Agent, and without limiting the other
rights and remedies of the Agent and the Banks hereunder, the Leverage
Ratio shall be deemed to be Level 5 as of the first day of the fiscal
quarter beginning after the fiscal quarter for which such Compliance
Certificate was due."
x. "`Loan' means an extension of credit by a Bank to the Borrower
under Article II or Article III in the form of a Facility A Revolving
Loan, L/C Advance, Facility B Term Loan, Facility B Revolving Loan,
Facility B Takeout Loan, Facility C Revolving Loan or (in the case of
BofA) Swingline Loan."
xi. "`Note' means a promissory note executed by the Borrower in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit F-1, F-2, F-3, F-4 or F-5."
xii. "`Revolving Commitment' means, as to each Bank,
collectively, its Facility A Commitment, its Facility B Revolving Loan
Commitment and its Facility C Commitment."
(
b) The second sentence of the definition of "Fixed Charge
Coverage Ratio" as set forth in Section 1.01 of the Existing Credit
Agreement is amended to read in its entirety as follows:
"In the event that the referent Person or any of its Subsidiaries incurs,
assumes, guarantees, redeems or repays any Indebtedness (other than
revolving credit borrowings including, with respect to the Borrower,
Swingline Loans, Facility A Revolving Loans, Facility B Revolving Loans
and Facility C Revolving Loans) subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated
but prior to the date of the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee, redemption or repayment of
Indebtedness, as if the same had occurred at the beginning of the
applicable reference period."
(c) Section 1.01 of the Existing Credit Agreement is amended by
substituting the following definitions for the definition of
"Revolving Termination Date" in that section:
i. "`Facility A Revolving Termination Date' means the earlier to occur
of:
(a) June 30, 1998; and
(b) the date on which the Facility A Commitment terminates in
accordance with the provisions of this Agreement."
ii. "`Facility B Revolving Termination Date' means the earlier to occur
of:
(a) June 30, 1997; and
(b) the date on which the Facility B Revolving Loan Commitment
terminates in accordance with the provisions of this Agreement."
iii. "`Facility C Revolving Termination Date' means the earlier to occur
of:
(a) June 30, 1998; and
(b) the date on which the Facility C Commitment terminates in
accordance with the provisions of this Agreement."
(d) Section 1.01 of the Existing Credit Agreement is amended by
substituting the following definitions for the definition of "Risk
Participation Percentage" in that section.
"`Commercial Letter of Credit Risk Participation Percentage'
means, as of any date and based upon the Level of the Leverage Ratio
on such date, the percent per annum (expressed in basis points) set
forth below opposite such Level:
Leverage Ratio Commercial Letter of Credit
Risk Participation Percentage
Level 1 20 b.p.
Level 2 25 b.p.
Level 3 27.5 b.p.
Level 4 30 b.p.
Level 5 35 b.p."
"`Standby Letter of Credit Risk Participation Percentage' means,
as of any date and based upon the Level of the Leverage Ratio on such
date, the percent per annum (expressed in basis points) set forth
below opposite such Level:
Leverage Ratio Standby Letter of Credit Risk
Participation Percentage
Level 1 40 b.p.
Level 2 57.5 b.p.
Level 3 75 b.p.
Level 4 92.5 b.p.
Level 5 112.5 b.p."
(e) Section 1.01 of the Existing Credit Agreement is amended to
add the following definitions to read in their entirety as follows:
i. "`Facility C Commitment', as to each Bank, means the amount
set forth opposite such Bank's name on Schedule 2.01 hereof under the
caption "Facility C Commitment", as the same may be reduced under
Section 2.05 or 2.07 or as a result of one or more assignments under
Section 11.08; provided, that the maximum aggregate Facility C
Commitment of all Banks shall not exceed $20,000,000 at any time."
ii. "`Facility C Revolving Loan' has the meaning specified in
subsection 2.01(c), and may be a Base Rate Loan or a Eurodollar Rate
Loan."
(f) Subsection 2.01(a)(i) of the Existing Credit Agreement is
amended by substituting the term "Facility A Revolving Termination
Date" for the term "Revolving Termination Date" in that subsection.
(g) Subsection 2.01(b)(ii) of the Existing Credit Agreement is
amended by substituting the term "Facility B Revolving Termination
Date" for the term "Revolving Termination Date" in that subsection.
(h) Subsection 2.01(b)(iii) of the Existing Credit Agreement is
amended by substituting the term "Facility B Revolving Termination
Date" for the term "Revolving Termination Date" in that subsection.
(i) Section 2.01 of the Credit Agreement is amended to add a new
subsection (c) to read in its entirety as follows:
"(c) Facility C Revolving Loans.
(i) Each Bank severally agrees, on the terms and
subject to the conditions set forth herein, to make loans to the
Borrower (each such loan, a "Facility C Revolving Loan") from time to
time on any Business Day during the period from the Amendment Effective
Date to the Facility C Revolving Termination Date, in an aggregate
principal amount not to exceed at any time outstanding such Bank's
Facility C Commitment as in effect from time to time; provided,
however, that, after giving effect to any Borrowing of Facility C
Revolving Loans, the sum of the Effective Amount of all outstanding
Facility C Revolving Loans shall not at any time exceed the combined
Facility C Commitments, and the Effective Amount of the Facility C
Revolving Loans of any Bank shall not at any time exceed such Bank's
Facility C Commitment.
(ii) Within the limits of each Bank's Facility C
Commitment and on the other terms and subject to the other conditions
hereof, the Borrower may borrow under this subsection 2.01(c), prepay
under Section 2.06 and reborrow under this subsection 2.01(c);
provided, that, concurrently with the requirement contained in the
proviso in subsection 2.01(a)(ii) above, the Borrower shall cause the
aggregate outstanding principal amount of Facility C Revolving Loans
not to exceed zero Dollars for at least one period of 30 consecutive
days during each fiscal year of Borrower, commencing with its fiscal
year beginning August 1, 1995."
(j) Subsection 2.05(c) of the Existing Credit Agreement is
amended to read in its entirety as follows:
"(c) The Borrower may, not later than 11:00 a.m. San Francisco
time at least three Business Days prior to its effective date by
notice to the Agent, terminate or permanently reduce the Facility C
Commitments by an aggregate minimum amount of $5,000,000 or any
multiple of $5,000,000 in excess thereof; unless, after giving effect
thereto and to any prepayments of Loans made on the effective date
thereof, the Effective Amount of all Facility C Revolving Loans would
exceed the amount of the combined Facility C Commitments then in
effect."
(k) Section 2.05 of the Existing Credit Agreement is amended to
add a subsection (d) to read in its entirety as follows:
"(d) Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Facility A
Commitments, the Facility B Commitments or the Facility C
Commitments shall be applied to each Bank according to its Pro
Rata Share."
(l) Subsections 2.06(b) and 2.06(c) of the Existing Credit
Agreement are amended to read in their entirety as follows:
"(b) Any such notice of prepayment shall specify the date
and amount of such prepayment and the Type(s) and, on or prior to
the later of (i) the Facility A Termination Date and (ii) the
Facility C Termination Date, the Class(es), of Loans to be
prepaid. Prepayments of Base Rate Loans of any Class may be made
hereunder on any Business Day. Prepayments of Eurodollar Rate
Loans of any Class may be made hereunder only on the last day of
any applicable Interest Period; provided, that prepayments of
Eurodollar Rate Loans may be made on a day other than the last
day of the applicable Interest Period only with payment by the
Borrower of the aggregate amount of any associated funding losses
of any affected Banks pursuant to Section 4.04. The Agent will
promptly notify each Bank of its receipt of any such notice, and
of such Bank's Pro Rata Share of such prepayment.
(c) If any such notice is given by the Borrower, the
Borrower shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date
specified therein, together, in the case of a Eurodollar Rate
Loan, with accrued interest to each such date on the amount
prepaid and any amounts required pursuant to Section 4.04.
Optional prepayments applicable to the Facility B Takeout Loan
shall be applied in inverse order of maturity."
(m) Subsection 2.07(b) of the Existing Credit Agreement is
amended by substituting the term "Facility B Revolving
Termination Date" for the term "Revolving Termination Date" each
place such term appears in that subsection.
(n) Subsections 2.07(c) and 2.07(d) of the Existing Credit
Agreement are amended to read in their entirety as follows:
"(c) If on any date, (x) the sum of (i) aggregate Net
Proceeds from MLP New Unit Sales from the Closing Date through
such date plus (ii) aggregate Net Proceeds of Asset Sales during
the period from the Closing Date through the date that is 270
days prior to such date, exceeds (y) the aggregate Cash Costs of
Permitted Acquisitions during the period from the Closing Date
through such date plus aggregate Growth-Related Capital
Expenditures of the Borrower and its Subsidiaries during such
period (any such excess being referred to herein as a "Downsize
Amount"), then (A) if such date is on or prior to the Facility B
Revolving Termination Date and after giving effect to any
mandatory Cash Collateralization or prepayment of outstanding
Facility B Revolving Loans under subsection 2.07(b) above, the
Borrower shall immediately, and without notice or demand, prepay
the Obligations in an aggregate amount equal to the Downsize
Amount as follows: first, Facility B Term Loans, second,
Swingline Loans, third, Facility A Revolving Loans and Facility C
Revolving Loans on a pro rata basis, and fourth, L/C Obligations;
and (B) if such date is after the Facility B Revolving
Termination Date, the Borrower shall immediately, and without
notice or demand, prepay payments due under the Facility B
Takeout Loan in an aggregate amount equal to the Downsize Amount,
in the inverse order of maturity.
(d) In the event that, prior to the later of (i) the
Facility A Revolving Termination Date and (ii) the Facility C
Revolving Termination Date, any portion of the Downsize Amount
remains after the Facility B Maximum Amount has been reduced to
zero, the Facility A Commitment and the Facility C Commitment, if
any, shall be automatically reduced on a pro rata basis by an
aggregate amount equal to such remaining portion of the Downsize
Amount."
(o) Subsection 2.07(f) of the Existing Credit Agreement is
amended to read in its entirety as follows:
"(f) If and to the extent that the Facility A Commitment, the Facility B
Revolving Commitment and the Facility C Commitment are not equal to
zero on the Facility A Revolving Termination Date, the Facility B
Revolving Termination Date and the Facility C Revolving Termination
Date, respectively, each such amount shall be automatically reduced to
zero on the such respective date."
(p) Subsection 2.08(a) of the Existing Credit Agreement is
amended by substituting the term "Facility A Revolving
Termination Date" for the term "Revolving Termination Date" in
each place such term appears in that subsection.
(q) Subsection 2.08(b) of the Existing Credit Agreement is
amended by substituting the term "Facility B Revolving
Termination Date" for the term "Revolving Termination Date" in
that subsection.
(r) Section 2.08 of the Existing Credit Agreement is amended
to add a subsection (d) to read in its entirety as follows:
"(d) Facility C Revolving Loans. The Borrower shall repay to
the Banks in full on the Facility C Revolving Termination Date
the aggregate principal amount of Facility C Revolving Loans
outstanding on such date together with all accrued and unpaid
interest thereon."
(s) Subsection 2.10(b) of the Existing Credit Agreement is
amended to read in its entirety as follows:
"(b) Commitment Fees. The Borrower shall pay to the Agent
for the account of each Bank a commitment fee with respect to
such Bank's Facility A Commitment equal to the Commitment Fee
Rate per annum times the daily average amount by which such
Bank's Facility A Commitment exceeded the sum of the aggregate
Effective Amount of its Facility A Revolving Loans plus its Pro
Rata Share of the Effective Amount of L/C Obligations (other than
with respect to Commercial Letters of Credit). The Borrower shall
pay to the Agent for the account of each Bank a commitment fee
with respect to such Bank's Facility B Commitment, equal to the
Commitment Fee rate per annum times the daily average amount by
which such Bank's Facility B Revolving Commitment exceeded the
aggregate Effective Amount of its Facility B Revolving Loans. The
Borrower shall pay to the Agent for the account of each Bank a
commitment fee with respect to such Bank's Facility C Commitment,
equal to the Commitment Fee rate per annum times the daily
average amount by which such Bank's Facility C Commitment
exceeded the aggregate Effective Amount of its Facility C
Revolving Loans. Such commitment fees shall accrue from the date
of this Agreement (or, with respect to Facility C, August 1,
1995) to (i) the Facility A Revolving Termination Date, with
respect to the Facility A Commitment, (ii) the Facility B
Revolving Termination Date, with respect to the Facility B
Revolving Loan Commitment and (iii) the Facility C Revolving
Termination Date with respect to the Facility C Commitment and
shall be due and payable quarterly in arrears on the first
Business Day of each fiscal quarter following the quarter for
which payment is to be made, commencing on August 1, 1994 (or,
with respect to Facility C, commencing on the Amendment Effective
Date) through the Facility A Revolving Termination Date, the
Facility B Revolving Termination Date, and the Facility C
Revolving Termination Date, as the case may be, with the final
payment to be made on the date of such termination, as
applicable; provided that, in connection with the full
termination of Commitments under Section 2.05 or Section 2.07,
the accrued commitment fees calculated for the period ending on
such date shall also be paid on the date of such termination. The
commitment fees provided in this subsection shall accrue at all
times after the above-mentioned commencement date, including at
any time during which one or more conditions in Article V are not
met."
(t) Article III of the Existing Credit Agreement is amended
by substituting the term "Facility A Revolving Termination Date"
for the term "Revolving Termination Date" in each place such term
appears in that Article.
(u) Subsections 3.08(a) and 3.08(b) of the Existing Credit
Agreement are amended to read in their entirety as follows:
"3.08 Letter of Credit Fees. (a) The Borrower agrees and, in the case of
Standby Letters of Credit issued for the account of Stratton, the
Borrower and Stratton jointly and severally agree, to pay to the Agent
for the account of each of the Banks based on their respective Pro Rata
Shares a letter of credit fee (i) with respect to the Standby Letters
of Credit, equal to the Standby Letter of Credit Risk Participation
Percentage of the average daily maximum amount available to be drawn of
the outstanding Standby Letters of Credit and (ii) with respect to the
Commercial Letters of Credit, equal to the Commercial Letter of Credit
Risk Participation Percentage of the average daily maximum amount
available to be drawn of the outstanding Commercial Letters of Credit,
in each case computed on a quarterly basis in arrears on the last
Business Day of each fiscal quarter based upon Standby Letters of
Credit or Commercial Letters of Credit, as the case may be, outstanding
for that quarter as calculated by the Agent. Such letter of credit fees
shall be due and payable quarterly in arrears on the first Business Day
following each fiscal quarter during which Standby Letters of Credit or
Commercial Letters of Credit, as the case may be, are outstanding,
commencing on the first such quarterly date to occur after the Closing
Date, through the Facility A Revolving Termination Date, with the final
payment to be made on the Facility A Revolving Termination Date.
(b) The Borrower agrees and, in the case of Standby
Letters of Credit issued for the account of Stratton, the Borrower and
Stratton jointly and severally agree, to pay to the applicable Issuing
Bank for its sole account a letter of credit fronting fee (i) for each
Standby Letter of Credit Issued by such Issuing Bank, equal to 0.15%
per annum of the face amount (or increased face amount, as the case may
be) of such Standby Letter of Credit and (ii) for each Commercial
Letter of Credit Issued by such Issuing Bank, equal to 0.10% per annum
of the face amount (or increased face amount, as the case may be) of
such Commercial Letter of Credit. Such Letter of Credit fronting fee
shall be due and payable quarterly in arrears on the first Business Day
following each fiscal quarter during which such Letter of Credit is
outstanding, commencing on the first such quarterly date to occur after
the Closing Date."
(v) Subsection 7.01(g) of the Existing Credit Agreement is
amended to read in its entirety as follows:
"(g) as soon as available, but not later than 45 days after
the end of each of the first three fiscal quarters of each fiscal
year and, with respect to the final fiscal quarter, concurrently
with the financial statements referred to in subsection 7.01(a),
a trading position report as of the last day of each fiscal
quarter, certified by a Responsible Officer."
(w) Section 7.11 of the Existing Credit Agreement is amended
to read in its entirety as follows:
"7.11 Use of Proceeds. The Borrower (and Stratton, with
respect to Letters of Credit) shall use the proceeds of (a) the
Facility A Revolving Loans and the Facility B Revolving Loans for
working capital and other general partnership purposes and (b)
the Facility C Loans for working capital purposes only, in each
case not in contravention of any Requirement of Law or of any
Loan Document; the Borrower shall use the proceeds of the
Facility B Term Loan for the purpose of repaying up to
$25,000,000 in outstanding amount of Existing Debt on the Closing
Date; and the Borrower shall use the proceeds of all Facility B
Takeout Loans to repay up to all of the aggregate outstanding
principal amount of the Facility B Loans on the Facility B
Revolving Termination Date."
(x) Subsection 9.01(c) of the Existing Credit Agreement is
amended to read in its entirety as follow:
"(c) Specific Defaults. The Borrower fails to perform or
observe any term, covenant or agreement contained in any of
Sections 2.01(a)(ii), 2.01(c)(ii), 7.01, 7.02, 7.03, 7.04, 7.06,
7.09, 7.12, 7.13, 7.16 or in any Section in Article VIII; or"
(y) Subsection 11.08(a) of the Existing Credit Agreement is
amended to read in its entirety as follows:
"(a) Any Bank may, with the written consent of the Borrower (at all times
other than during the existence of an Event of Default), the Agent and
the applicable Issuing Bank(s), which consents shall not be
unreasonably withheld, at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the Borrower,
the Agent or an Issuing Bank shall be required in connection with any
assignment and delegation by a Bank to an Eligible Assignee that is an
Affiliate of such Bank) (each an "Assignee") all, or any ratable part
of all, of the Loans, the Commitments, the L/C Obligations and the
other rights and obligations of such Bank hereunder in an aggregate
minimum amount of $10,000,000, pro-rated among the Facility A
Commitment, the Facility B Commitment and the Facility C Commitment;
provided that such Bank shall retain an aggregate amount of not less
than $10,000,000 in respect thereof, unless such Bank assigns and
delegates all of its rights and obligations hereunder to one or more
Eligible Assignees on the time and subject to the conditions set forth
herein; and provided, further, however, that the Borrower and the Agent
may continue to deal solely and directly with such Bank in connection
with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given
to the Borrower and the Agent by such Bank and the Assignee; (ii) such
Bank and its Assignee shall have delivered to the Borrower and the
Agent an Assignment and Acceptance in the form of Exhibit E
("Assignment and Acceptance"), together with any Note or Notes subject
to such assignment; and (iii) the assignor Bank or Assignee has paid to
the Agent a processing fee in the amount of $3,500."
(z) Schedule 2.01 of the Existing Credit Agreement is amended to read in its
entirety as set forth on Schedule 2.01 (Revised as of August 1, 1995) hereto.
(aa) Exhibit A to the Existing Credit Agreement is amended
to read in its entirety as set forth on Exhibit A (Revised as of
August 1, 1995) hereto.
(bb) Exhibit B to the Existing Credit Agreement is amended
to read in its entirety as set forth on Exhibit B (Revised as of
August 1, 1995) hereto.
(cc) Exhibit C to the Existing Credit Agreement is amended
to read in its entirety as set forth on Exhibit C (Revised as of
August 1, 1995) hereto.
(dd) Exhibits F-1, F-2, and F-3 to the Existing Credit
Agreement are amended to read in their entirety as set forth on
Exhibits F-1 (Revised as of August 1, 1995), F-2 (Revised as of
August 1, 1995), F-3 (Revised as of August 1, 1995) and F-4
(Revised as of August 1, 1995), respectively, hereto.
(ee) The Existing Credit Agreement is amended to add an
Exhibit F-5 as set forth on Exhibit F-5 hereto.
SECTION 2. Conditions to Effectiveness. The amendments set
forth in Section 1 of this Amendment shall become effective on August 1, 1995
only upon the satisfaction of all of the following conditions precedent on or
prior to such date (such date being referred to as the "Amendment Effective
Date"):
(a) On or before the Amendment Effective Date, each of the
Borrower, Stratton and the General Partner shall deliver to the
Agent, on behalf of the Banks, the following described documents
(each of which shall be reasonably satisfactory in form and
substance to the Agent and its counsel):
(i) This Amendment duly executed by each party thereto;
(ii) Promissory notes, duly executed by the Borrower, in
substantially the form of Exhibits F-1 (Revised as of August 1,
1995), F-2 (Revised as of August 1, 1995), F-3 (Revised as of
August 1, 1995) and F-5 hereto (the "New Notes") in favor of each
Bank requesting delivery of such notes properly completed, and
the existing Notes held by such Bank shall, on the Amendment
Effective Date, be deemed to have been replaced and superseded by
the respective New Notes delivered to it on the Amendment
Effective Date (each such Bank agreeing to promptly return to the
Borrower its replaced and superseded Notes);
(iii) Copies of partnership authorizations for the Borrower
and resolutions of the board of directors of the General Partner
and Stratton authorizing the transactions contemplated by this
Amendment, certified as of the Amendment Effective Date by the
Secretary or an Assistant Secretary of the General Partner and
Stratton;
(iv) A certificate of the Secretary or Assistant Secretary
of the General Partner certifying the names and true signatures
of the officers of the General Partner authorized to execute,
deliver and perform, as applicable, on behalf of the Borrower and
the General Partner, this Amendment and the Note;
(v) A certificate of the Secretary or Assistant Secretary of
Stratton certifying the names and true signatures of the officers
of Stratton authorized to execute, deliver and perform, as
applicable, on behalf of Stratton, this Amendment;
(vi) the articles or certificate of incorporation and the
bylaws of the General Partner and Stratton and the Certificate of
Limited Partnership and the Limited Partnership Agreement of the
Borrower, in each case as in effect on the Amendment Effective
Date, certified by the Secretary or Assistant Secretary of the
General Partner or Stratton, as applicable, as of the Amendment
Effective Date;
(vii) a good standing and tax good standing certificate for
the General Partner, Stratton and the Borrower from the Secretary
of State (or similar, applicable Governmental Authority) of its
state of incorporation or organization, as applicable, and each
state where the General Partner, Stratton or the Borrower
conducts significant business as of a recent date, together with
bringdown certificates by facsimile, dated the Amendment
Effective Date for Delaware and the Business Day preceding the
Amendment Effective Date for other jurisdictions;
(viii) opinion of Bryan Cave, counsel to the Borrower, the
General Partner and Stratton, or of such other counsel as are
acceptable to the Agent and the Banks, addressed to the Agent and
the Banks, substantially in the form of Exhibit G;
(ix) a favorable opinion of Orrick, Herrington & Sutcliffe,
special counsel to the Agent;
(x) Such other documents, instruments, approvals or opinions
as the Agent, any Bank or special counsel to the Agent may
reasonably request.
(b) On or before the Amendment Effective Date, the Borrower
shall have paid to the Agent for the account of each Bank, pro
rata based on each Bank's Commitment, an amendment fee equal to
.075% of the aggregate Commitments of the Banks.
(c) On or before the Amendment Effective Date, the Borrower
shall have paid an agency fee to the Agent for the Agent's own
account, as required by the letter agreement between the Borrower
and the Agent dated July 21, 1995.
(d) On or before the Amendment Effective Date, all corporate
and other proceedings taken or to be taken in connection with the
transactions contemplated by this Amendment and all documents
incidental to such transactions, shall be reasonably satisfactory
in form and substance to the Agent and its counsel, and the Agent
and such counsel shall have received all such counterpart
originals or certified copies of such documents, opinions,
certificates and evidence as they may reasonably request.
(e) All governmental actions or filings necessary for the
execution, delivery and performance of this Amendment shall have
been made, taken or obtained, and no order, statutory rule,
regulation, executive order, decree, judgment or injunction shall
have been enacted, entered, issued, promulgated or enforced by
any court or other governmental entity which prohibits or
restricts the transactions contemplated by this Amendment, nor
shall any action have been commenced or threatened seeking any
injunction or any restraining or other order to prohibit,
restrain, invalidate or set aside the transactions contemplated
by this Amendment.
(f) The representations and warranties set forth in this
Amendment shall be true and correct as of the Amendment Effective
Date.
SECTION 3. Representations and Warranties . In order to induce
the Banks to enter into this Amendment and to give the consent and to amend the
Existing Credit Agreement in the manner provided in this Amendment, each of the
Borrower, Stratton and the General Partner represents and warrants to each Bank
as of the Amendment Effective Date as follows:
(a) Corporate or Partnership Existence and Power. The
General Partner, Stratton, the MLP, the Borrower and each of its
Subsidiaries:
(i) is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its formation;
(ii) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its
assets and carry on its business and to execute, deliver, and
perform its obligations under this Amendment and to carry out the
transactions contemplated by, and perform its obligations under
the Credit Agreement;
(iii) is duly qualified as a foreign corporation or
partnership and is licensed and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such
qualification or license or where the failure so to qualify would
not have a Material Adverse Effect; and
(iv) is in compliance with all material Requirements of Law.
(b) Corporate or Partnership Authorization; No Contravention. The execution,
delivery and performance by the Borrower, the General Partner and Stratton of
this Amendment and the performance of the Credit Agreement by each of them have
been duly authorized by all necessary partnership action on behalf of the
Borrower and all necessary corporate action on behalf of the General Partner and
any Subsidiary, and do not and will not:
(i) contravene the terms of any of the General Partner's, the MLP's, the
Borrower's or any Subsidiary's Organization Documents;
(ii) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual
*** Obligation to which the General Partner, the MLP, the Borrower or
any
Subsidiary is a party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is subject
where such conflict, breach, contravention or Lien could reasonably be
expected to have a Material Adverse Effect; or
(iii) violate any material Requirement of Law
(c) Governmental Authorization. No approval, consent, exemption, authorization
or other action by, or notice to, or filing with, any Governmental Authority is
necessary or required in connection with (i) the execution, delivery or
performance by, or enforcement against, the General Partner, the Borrower or any
Subsidiary of this Amendment, or (ii) the continued operation of Borrower's
business as contemplated to be conducted after the date hereof by the Loan
Documents, except in each case such approvals, consents, exemptions,
authorizations or other actions, notices or filings (A) as have been obtained,
(B) as may be required under state securities or Blue Sky laws, (C) as are of a
routine or administrative nature and are either (x) not customarily obtained or
made prior to the consummation of transactions such as the transactions
described in clauses (i) or (ii) or (y) expected in the judgment of the Borrower
to be obtained in the ordinary course of business subsequent to the consummation
of the transactions described in clauses (i) or (ii), or (D) that, if not
obtained, could reasonably be expected to have a Material Adverse Effect.
(d) Binding Effect. The Credit Agreement and the Notes constitute the legal,
valid and binding obligations of each of the Borrower, Stratton and the General
Partner, as applicable, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
(e) Litigation. There are no actions, suits, proceedings, claims or disputes
pending, or to the best knowledge of the Borrower, threatened or contemplated,
at law, in equity, in arbitration or before any Governmental Authority, against
the General Partner, the MLP, the Borrower or any of its Subsidiaries or any of
their respective properties which:
(i) purport to affect or pertain to this Amendment or the Credit
Agreement or any of the transactions contemplated hereby or thereby; or
(ii) if determined adversely to the Borrower or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance
of this Amendment or the Credit Agreement, or directing that the
transactions provided for herein or therein not be consummated as
herein or therein provided.
(f) No Default. No Default or Event of Default exists or would result from the
incurring, continuing or converting of any Obligations by the Borrower. As of
the Amendment Effective Date, neither the Borrower nor any Affiliate of the
Borrower is in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Amendment Effective Date, create an Event of
Default under subsection 9.01(e) of the Credit Agreement other than a default
under Section 4.09 of the Indenture relating to the Existing Senior Notes.
(g)Representations and Warranties in the Credit Agreement.
Each of the Borrower, Stratton and the General Partner confirms
that as of the Amendment Effective Date the representations and
warranties contained in Article VI of the Credit Agreement are
(before and after giving effect to this Amendment) true and
correct in all material respects (except to the extent any such
representation and warranty is expressly stated to have been made
as of a specific date, in which case it shall be true and correct
as of such specific date).
SECTION 4. Miscellaneous.
(a) Reference to and Effect on the Existing Credit Agreement
and the Other Loan Documents.
(i) Except as specifically amended by this Amendment, and
the documents executed and delivered in connection therewith, the
Existing Credit Agreement and the other Loan Documents, including
but not limited to, the Guaranty of Finance Corp., shall remain
in full force and effect and are hereby ratified and confirmed.
(ii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a waiver
of any right, power or remedy of the Banks under, the Existing
Credit Agreement or any of the other Loan Documents.
(iii) Upon the conditions precedent set forth herein being
satisfied, this Amendment shall be construed as one with the
Existing Credit Agreement, and the Existing Credit Agreement
shall, where the context requires, be read and construed
throughout so as to incorporate this Amendment.
(b) Fees and Expenses. Each of the Borrower, Stratton and
the General Partner acknowledges that all costs, fees and
expenses incurred in connection with this Amendment will be paid
in accordance with Section 11.04 of the Existing Credit
Agreement.
(e) Headings. Section and subsection headings in this
Amendment are included for convenience of reference only and
shall not constitute a part of this Amendment for any other
purpose or be given any substantive effect.
(f) Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
(g) Governing Law. This Amendment shall be governed by and
construed according to the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
FERRELLGAS, L.P.
By: Ferrellgas, Inc.,
General Partner
By: _
Name: Danley K. Sheldon
Title: Senior Vice President and
Chief Financial
Officer/Treasurer
FERRELLGAS, INC.
By: _
Name: Danley K. Sheldon
Title: Senior Vice President and
Chief Financial Officer/Treasurer
STRATTON INSURANCE COMPANY, INC.
By: _
Name: Danley K. Sheldon
Title: Senior Vice President and
Chief Financial Officer/Treasurer
Address for Notices for each
of the Borrower, the General
Partner and Stratton:
One Liberty Plaza
Liberty, Missouri 64068
Attention: Danley K. Sheldon
Telephone: (816) 792-6828
Facsimile: (816) 792-6979
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: _
Name: Leandro Balidoy
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: _
Name: Vanessa Sheh Meyer
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON, as a Bank
By: _
Name:
Title:
NATIONSBANK, N.A.,
as a Bank
By: _
Name:
Title:
THE BANK OF NOVA SCOTIA,
as a Bank
By: _
Name:
Title:
WELLS FARGO BANK, N.A.,
as a Bank
By: _
Name:
Title:
<PAGE>
CAISSE NATIONALE DE CREDIT
AGRICOLE, as a Bank
By: _
Name:
Title:
BANQUE PARIBAS, as a Bank
By: _
Name:
Title:
The undersigned hereby acknowledges and agrees to the
foregoing Amendment and confirms that its Continuing Guaranty dated July 5, 1994
shall remain in full force and effect notwithstanding the execution of such
Amendment and consummation of the transactions described or otherwise
contemplated therein.
FERRELLGAS FINANCE CORP.,
as Guarantor
By: ______________________________
Name:
Title:
Date:
<PAGE>
NY1-98178.2
1033-63-ADG-09/25/95
NY1-98178.2
1033-63-ADG-09/25/95
SCHEDULE 2.01 (Revised as of August 1, 1995)
<TABLE>
<CAPTION>
Facility B Commitment
-------------------------------------------------
Facility A Commitment Facility B Tranche I Facility B Tranche II Facility C
$75,000,000 Term Loan Expansive Capital Commitment
$15,000,000 $95,000,000 $20,000,000
<S> <C> <C> <C> <C>
Bank of America NT&SA $16,216,216.23 $3,243,243.24 $20,540,540.56 $4,324,324.33
The Bank of Nova Scotia $ 9,729,729.73 $1,945,945.95 $12,324,324.32 $2,594,594.59
Banque Paribas $ 5,878,378.37 $1,175,675.67 $ 7,445,945.94 $1,567,567.57
Caisse National de Credit $ 5,878,378.37 $1,175,675.67 $ 7,445,945.94 $1,567,567.57
Agricole
The First National Bank of $13,783,783.79 $2,756,756.76 $17,459,459.46 $3,675,675.68
Boston
NationsBank of Texas, N.A. $13,783,783.79 $2,756,756.76 $17,459,459.46 $3,675,675.68
Wells Fargo Bank, N.A. $ 9,729,729.73 $1,945,945.95 $12,324,324.32 $2,594,594.59
====================== ======================== ======================== ===============
$75,000,000.00 $15,000,000.00 $95,000,000.00 $20,000,000.00
Facility B Commitment
-------------------------------------------------
Total Pro Rata Share
<S> <C> <C>
Bank of America NT&SA 44,324,324.36 21.621621630%
The Bank of Nova Scotia 26,594,594.59 12.972972970%
Banque Paribas 16,067,567.55 7.837837830%
Caisse National de Credit 16,067,567.55 7.837837830%
Agricole
The First National Bank of 37,675,675.68 18.378378380%
Boston
NationsBank of Texas, N.A 37,675,675.68 18.378378380%
Wells Fargo Bank, N.A. 26,594,594.59 12.972972970%
==================== ====================
$205,000,000.00 100%
</TABLE>
(Revised as of August 1, 1995)
NOTICE OF BORROWING
TO: Bank of America National Trust
and Savings Association, Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Global Agency #5596
Re: Ferrellgas, L.P.
Pursuant to Section 2.03(a) of that certain Credit Agreement
dated as of July 5, 1994 (as from time to time amended, extended, restated,
modified or supplemented, the "Credit Agreement", among Ferrellgas, L.P., a
Delaware limited partnership (the "Borrower"), Stratton Insurance Company, Inc.,
a Vermont corporation and a Wholly-Owned Subsidiary of Borrower, Ferrellgas,
Inc., a Delaware corporation and the sole general partner of Borrower, the
financial institutions from time to time party thereto (the "Banks") and Bank of
America National Trust and Savings Association, as agent for the Banks (in such
capacity, the "Agent") and as Issuing Bank, this represents the Borrower's
request for a Borrowing from the Banks as follows:
1. The amount of the Borrowing shall be $__________.
2. The Borrowing Date shall be _______________.
3. The Loan shall be a [Base Rate] [Eurodollar Rate
Loan. [The initial Interest Period for such
Eurodollar Rate Loan shall be
[one] [two] [three] [six] months.]
4. The Loan shall be a [Facility A Revolving Loan]
[Swingline Loan] [Facility B Term Loan] [Facility B
Revolving Loan] [Facility B Takeout Loan] [Facility C
Revolving Loan].
The proceeds of such Loan are to be deposited in the Borrower's account at the
Agent.
The undersigned Responsible Officer hereby certifies that:
a. The representations and warranties in Article VI of
the Credit Agreement are true and correct on and as
of the date hereof (except to the extent such
representations and warranties expressly refer to an
earlier date, in which case they were true and
correct as of such earlier date); and
(b) No Default or Event of Default has occurred and is
continuing under the Credit Agreement or will result
from the proposed Borrowing.
Capitalized terms used but not defined herein shall have the meanings assigned
to them in the Credit Agreement.
DATED: ______________________
FERRELLGAS, L.P.
By: FERRELLGAS, INC., General
Partner
By: _
Name:
Title:
<PAGE>
EXHIBIT B
(Revised as of August 1, 1995)
NOTICE OF CONVERSION/CONTINUATION
TO: Bank of America National Trust
and Savings Association
Global Agency #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Re: Ferrellgas, L.P.
Pursuant to Section 2.04(b) of that certain Credit Agreement
dated as of July 5, 1994 (as from time to time amended, extended, restated,
modified or supplemented, the "Credit Agreement"), among Ferrellgas, L.P., a
Delaware limited partnership (the "Borrower"), Stratton Insurance Company, Inc.,
a Vermont corporation and a Wholly-Owned Subsidiary of Borrower, Ferrellgas,
Inc., a Delaware corporation and the sole general partner of Borrower, the
financial institutions from time to time party thereto (the "Banks") and Bank of
America National Trust and Savings Association, as agent for the Banks (in such
capacity, the "Agent"), this represents Borrower's request to [Convert]
[Continue] certain [Base Rate Loans] [Eurodollar Rate Loans] as follows:
(A) The date of [Conversion] [Continuation] shall be ________,
199_, (which day is, in the case of Conversion of Base Rate Loans, a
Business Day, or, in the case of Conversion or Continuation of
Eurodollar Rate Loans, the last day of the applicable Interest
Period).
(B) An aggregate amount of $______________ of [Facility A
Revolving Loans] [Facility B Revolving Loans] [Facility B Term Loans]
[Facility C Revolving Loans] are to be [Converted] [Continued] as of
the date set forth in paragraph (A) above (which amount is $3,000,000,
or is an integral multiple of $1,000,000 in excess thereof).
(C) The Type of Loans resulting from the [Conversion]
[Continuation] shall be [Base Rate Loans] [Eurodollar Rate Loans].
[(D) If the resulting Loan is a Eurodollar Rate Loan, the
Interest Period of such Loan shall be [one][two][three][six] month(s).]
[Borrower represents and warrants, in the case of Conversion
or Continuation of Eurodollar Rate Loans, that no Default or Event of Default
exists on the date hereof and on the date set forth in paragraph (A) above.]
[Notwithstanding that a Default or Event of Default exists, Borrower requests
the consent of the Majority Banks to Convert/Continue the Eurodollar Rate Loan
as set forth above.] Borrower represents that, taking into consideration the
[Conversion] [Continuation] of Loans requested hereby, there are not more than
ten (10) Interest Periods in effect.
Capitalized terms used herein shall have the meanings assigned
to them in the Credit Agreement.
DATED: ______________ FERRELLGAS, L.P.
By: FERRELLGAS, INC., General
Partner
By: _
Name:
Title:
<PAGE>
EXHIBIT C
(Revised as of August 1, 1995)
COMPLIANCE CERTIFICATE
This compliance certificate is provided pursuant to Section
7.02(b) of the Credit Agreement dated as of July 5, 1994 (as the same may be
amended from time to time, the "Credit Agreement"), by and among Ferrellgas,
L.P., a Delaware limited partnership ("Borrower"), Stratton Insurance Company,
Inc., a Vermont corporation and a wholly-owned subsidiary of Borrower,
Ferrellgas, Inc., a Delaware corporation and the sole general partner of
Borrower, Bank of America National Trust and Savings Association, as agent (in
such capacity, "Agent"), and the financial institutions ("Banks") from time to
time party to the Credit Agreement. Unless otherwise defined herein, capitalized
terms used herein are used with the defined meanings given in the Credit
Agreement.
I, _____________________________, the ____________________ of
Ferrellgas, Inc., a Delaware corporation and the sole general partner of
Borrower, do hereby certify that I am familiar with the Credit Agreement and
with the assets, business, financial condition and operations of Borrower and
its Subsidiaries and that during the fiscal quarter ending
______________________, 19__:
Borrower has performed all of its obligations under and is in
compliance with all covenants and agreements contained in the Credit Agreement
and under (i) any instrument or agreement required thereunder, (ii) any other
instrument or agreement to which Borrower is a party or under which Borrower is
obligated, and (iii) any judgment, decree or order of any court or governmental
authority binding on Borrower. Without limiting the generality of the foregoing:
1. As required by Section 7.12 of the Credit Agreement:
(i) Borrower has maintained a Leverage Ratio for the
applicable fiscal period of not greater than 4.0:1. The current Leverage
Ratio is:------------.
Funded Debt
($---------)
---------------------- = Leverage Ratio
Consolidated Cash Flow
($---------)
Attached as Exhibit A is a calculation of
Consolidated Cash Flow, including such calculation on a pro
forma basis for any Acquisitions consummated during the fiscal
period.
(ii) Borrower has a minimum Partners' Equity of not less than
$50,000,0000. The current Partners' Equity is $________________.
2. As required by Section 7.13 of the Credit Agreement,
Borrower and its Affiliates are in compliance, and have at all times during the
relevant fiscal period been in compliance, with Borrower's trading position
policy and supply inventory position policy guidelines as in effect on the
Closing Date[, provided that the stop loss limit in the trading position policy
has been increased from __________ at the beginning of the three quarters
preceding the fiscal quarter that is the subject of this certificate (the
"Initial Date") to __________ at the end of the fiscal quarter that is the
subject of this certificate (the "Final Date"), an aggregate increase of ____%]
[the stop loss limit in the supply inventory position has increased from
__________ on the Initial Date to __________ on the Final Date, an aggregate
increase of ____%] [the volume limit for [describe product] in the trading
position policy has been increased from __________ on the Initial Date to
__________ on the Final Date, an aggregate increase of ____%] [the volume limit
for [describe product] in the supply inventory position policy has been
increased from __________ on the Initial Date to __________ on the Final Date,
an aggregate increase of ____%].
3. As required by Section 7.16, Borrower hereby notifies Agent
that [no judgments, orders, decrees or arbitration awards have been entered
against Borrower or any Subsidiary involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage other than through a standard reservation of
rights letter) as to any single or related series of transactions, incidents or
conditions, of more than $10,000,000] [the following judgments, orders, decrees
and/or arbitration awards have been entered against Borrower or its
Subsidiaries: __________________________. The foregoing involve an aggregate
liability (to the extent not covered by independent third-party insurance as to
which the insurer does not dispute coverage other than through a standard
reservation of rights letter) of $______________________. Borrower has reserved
for such amount in excess of $10,000,000, on a quarterly basis, with each
quarterly reserve being at least equal to one-twelfth of such amount in excess
of $10,000,000. The amount of each quarterly reserve is $____________________].
4. As required by Section 8.12 of the Credit Agreement, during
the applicable fiscal period, Borrower and its Subsidiaries made [no Restricted
Payments] [Restricted Payments in an amount equal to $___________________ and,
at the time of and after giving effect to such Restricted Payments, each of the
following statements was true:
(a) no Default or Event of Default had occurred or was
continuing at the time of such Restricted Payment or occurred as a
consequence thereof and each of the representations and warranties of
the Borrower set forth in the Credit Agreement was true on and as of
the date of such Restricted Payment both before and after giving
effect thereto; and
(b) the Fixed Charge Coverage Ratio of the Borrower for the
Borrower's most recently ended four full fiscal quarters for which
internal financial statements were available immediately preceding the
date on which such Restricted Payment was made, calculated on a pro
forma basis as if such Restricted Payment had been made at the
beginning of such four-quarter period, was ____________, which ratio
is greater than 2.25 to 1.
Consolidated Cash Flow
($---------)
---------------------- = Fixed Charge Coverage Ratio
Fixed Charges
($---------)
and
(c) (i) the amount of such Restricted Payment, if made other
than in cash, was determined by the Board of Directors and evidenced
by a resolution in an officer's certificate signed by a Responsible
Officer and delivered to the Agent, and (ii) except as otherwise
provided in the Credit Agreement, such Restricted Payment, together
with the aggregate of all other Restricted Payments made by the
Borrower and its Subsidiaries in the fiscal quarter during which such
Restricted Payment was made, did not exceed the amount of Available
Cash of the Borrower for the immediately preceding fiscal quarter (or,
with respect to the first fiscal quarter during which Restricted
Payments are made, the amount of Available Cash of the Borrower for
the period commencing on the date of the Credit Agreement and ending
on the last day of the immediately preceding fiscal quarter).
Attached as Exhibit B is a calculation of Fixed Charges,
including such calculation on a pro forma basis for any Acquisitions
consummated during the fiscal period.
5. As required by subsection 2.01(a)(ii) of the Credit
Agreement, the aggregate outstanding principal amount of Facility A Revolving
Loans and Swingline Loans did not exceed $25,000,000 for the consecutive thirty
(30) day period from ____________ to _______________.
6. As required by subsection 2.01(c)(ii) of the Credit
Agreement, the aggregate outstanding principal amount of Facility C Revolving
Loans did not exceed zero Dollars for the same consecutive thirty (30) day
period specified in paragraph 5 above.
IN WITNESS WHEREOF, this Certificate has been executed on
behalf of Borrower as of the ____ day of ________________, 19__.
FERRELLGAS, L.P., a Delaware limited partnership
By: FERRELLGAS, INC., General Partner
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT F-1
(Revised as of August 1, 1995)
FACILITY A REVOLVING NOTE
$____________________ ___________, 199_
FOR VALUE RECEIVED, the undersigned FERRELLGAS, L.P., a
Delaware limited partnership, and STRATTON INSURANCE COMPANY, INC., a Vermont
corporation (together, "Borrower"), HEREBY PROMISE TO PAY to the order of
_______________________ ("Bank") the principal sum of ______________________
($_________) or, if less, the aggregate principal amount of Facility A Revolving
Loans outstanding on the Facility A Revolving Termination Date, made to Borrower
by Bank pursuant to Section 2.01(a) of that certain Credit Agreement dated as of
July 5, 1994 (as the same may be amended from time to time, the "Credit
Agreement"), among Borrower, Stratton Insurance Company, Inc., a Vermont
corporation and a Wholly-Owned Subsidiary of Borrower, Ferrellgas, Inc., a
Delaware corporation and the sole general partner of Borrower, the financial
institutions from time to time party thereto, and Bank of America National Trust
and Savings Association, as agent for said financial institutions (in such
capacity, "Agent") payable in full on the Facility A Revolving Termination Date
together with interest on the unpaid principal balance hereof from time to time
outstanding from the date hereof until paid in full at the rate or rates and in
the manner and at the times specified in the Credit Agreement.
Both the principal hereof and the interest hereon are payable
in lawful money of the United States of America at Bancontrol Account Number
12334-14282 located at Bank of America National Trust and Savings Association,
1850 Gateway Boulevard, Fourth Floor, Concord, California 94520 (or at such
other Lending Office as may be designated from time to time by Agent), for the
account of Bank, in immediately available funds.
The holder of this Facility A Revolving Note is authorized to
record the date and amount of Facility A Revolving Loans made by the Bank, the
amount of interest accruing from time to time and the date and amount of each
payment or prepayment of principal thereof on the schedule annexed to and
constituting a part hereof, or on a continuation thereof which shall be attached
hereto and a part hereof and any such recordation shall constitute prima facie
evidence of the accuracy of the information so recorded.
Borrower agrees to pay all costs of collection and enforcement
of this Facility A Revolving Note, whether or not suit is filed, including,
without limitation, reasonable attorneys' fees, as more particularly provided in
Section 11.04 of the Credit Agreement.
This Facility A Revolving Note is one of the "Notes" referred
to in, and is entitled to the benefits of, the Credit Agreement which, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and for prepayment of amounts from time
to time outstanding under this Facility A Revolving Note upon certain terms and
conditions. Unless otherwise defined herein, capitalized terms used herein are
used with the defined meanings given in the Credit Agreement.
THIS FACILITY A REVOLVING NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
FERRELLGAS, L.P., a Delaware limited partnership
By: FERRELLGAS, INC., General Partner
By:___________________________
Name:
Title:
STRATTON INSURANCE COMPANY, INC.
By:___________________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE TO FACILITY A REVOLVING NOTE
Date Amount of Facility A Amount of Unpaid Principal Notation Made By
Revolving Loans Principal Paid or Balance of Facility
Prepaid A Revolving Loans
<S> <C> <C> <C> <C>
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
</TABLE>
<PAGE>
EXHIBIT F-2
(Revised as of August 1, 1995)
FACILITY B TERM NOTE
$______________________ ________________, 199_
FOR VALUE RECEIVED, the undersigned FERRELLGAS, L.P., a
Delaware limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order
of ______________________ ("Bank") the principal sum of
________________________________ ($____________), payable in full on the
Facility B Revolving Termination Date together with interest on the unpaid
principal balance hereof from time to time outstanding from the date hereof
until paid in full at the rate or rates and in the manner and at the times
specified in that certain Credit Agreement dated as of July 5, 1994 (as the same
may be amended from time to time, the "Credit Agreement"), among Borrower,
Stratton Insurance Company, Inc., a Vermont corporation and a Wholly-Owned
Subsidiary of Borrower, Ferrellgas, Inc., a Delaware corporation and the sole
general partner of Borrower, the financial institutions from time to time party
thereto, and Bank of America National Trust and Savings Association, as agent
for said financial institutions (in such capacity, "Agent").
Both the principal hereof and the interest hereon are payable
in lawful money of the United States of America at Bancontrol Account Number
12334-14282 located at Bank of America National Trust and Savings Association,
1850 Gateway Boulevard, Fourth Floor, Concord, California 94520 (or at such
other Lending Office as may be designated from time to time by Agent), for the
account of Bank, in immediately available funds.
The holder of this Facility B Term Note is authorized to
record the date and amount of each payment or prepayment of principal thereof on
the schedule annexed to and constituting a part hereof, or on a continuation
thereof which shall be attached hereto and a part hereof and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded.
Borrower agrees to pay all costs of collection and enforcement
of this Facility B Term Note, whether or not suit is filed, including, without
limitation, reasonable attorneys' fees, as more particularly provided in Section
11.04 of the Credit Agreement.
<PAGE>
This Facility B Term Note is one of the "Notes" referred to
in, and is entitled to the benefits of, the Credit Agreement which, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and for prepayment of amounts from time to
time outstanding under this Facility B Term Note upon certain terms and
conditions. Unless otherwise defined herein, capitalized terms used herein are
used with the defined meanings given in the Credit Agreement.
THIS FACILITY B TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
FERRELLGAS, L.P., a Delaware limited partnership
By: FERRELLGAS, INC., General Partner
By:___________________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE TO FACILITY B TERM NOTE
Date Amount of Facility B Amount of Unpaid Principal Notation Made By
Term Loans Principal Paid or Balance of Facility
Prepaid B Term Loans
<S> <C> <C> <C> <C>
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
- ---------- ------------------------ -------------------- --------------------- -----------------
</TABLE>
<PAGE>
EXHIBIT F-3
(Revised as of August 1, 1995)
FACILITY B REVOLVING NOTE
$______________________ ________________, 199_
FOR VALUE RECEIVED, the undersigned FERRELLGAS, L.P., a
Delaware limited partnership ("Borrower"), HEREBY PROMISES TO PAY to the order
of ______________________ ("Bank") the principal sum of
________________________________ ($____________) or, if less, the aggregate
principal amount of Facility B Revolving Loans outstanding on the Facility B
Revolving Termination Date, made to Borrower by Bank pursuant to Section 2.01(b)
of that certain Credit Agreement dated as of July 5, 1994 (as the same may be
amended from time to time, the "Credit Agreement"), among Borrower, Stratton
Insurance Company, Inc., a Vermont corporation and a Wholly-Owned Subsidiary of
Borrower, Ferrellgas, Inc., a Delaware corporation and the sole general partner
of Borrower, the financial institutions from time to time party thereto, and
Bank of America National Trust and Savings Association, as agent for said
financial institutions (in such capacity, "Agent") payable in full on the
Facility B Revolving Termination Date together with interest on the unpaid
principal balance hereof from time to time outstanding from the date hereof
until paid in full at the rate or rates and in the manner and at the times
specified in the Credit Agreement.
Both the principal hereof and the interest hereon are payable
in lawful money of the United States of America at Bancontrol Account Number
12334-14282 located at Bank of America National Trust and Savings Association,
1850 Gateway Boulevard, Fourth Floor, Concord, California 94520 (or at such
other Lending Office as may be designated from time to time by Agent), for the
account of Bank, in immediately available funds.
The holder of this Facility B Revolving Note is authorized to
record the date and amount of Facility B Revolving Loans made by the Bank, the
amount of interest accruing from time to time and the date and amount of each
payment or prepayment of principal thereof on the schedule annexed to and
constituting a part hereof, or on a continuation thereof which shall be attached
hereto and a part hereof and any such recordation shall constitute prima facie
evidence of the accuracy of the information so recorded.
Borrower agrees to pay all costs of collection and enforcement
of this Facility B Revolving Note, whether or not suit is filed, including,
without limitation, reasonable attorneys' fees, as more particularly provided in
Section 11.04 of the Credit Agreement.
This Facility B Revolving Note is one of the "Notes" referred
to in, and is entitled to the benefits of, the Credit Agreement which, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and for prepayment of amounts from time
to time outstanding under this Facility B Revolving Note upon certain terms and
conditions. Unless otherwise defined herein, capitalized terms used herein are
used with the defined meanings given in the Credit Agreement.
THIS FACILITY B REVOLVING NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
FERRELLGAS, L.P., a Delaware limited partnership
By: FERRELLGAS, INC., General Partner
By:___________________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE TO FACILITY B REVOLVING NOTE
Date Amount of Facility B Amount of Unpaid Principal Notation Made By
Revolving Loans Principal Paid or Balance of Facility
Prepaid B Revolving Loans
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
EXHIBIT F-5
FACILITY C REVOLVING NOTE
$_________________ ___________, 199_
FOR VALUE RECEIVED, the undersigned FERRELLGAS, L.P., a
Delaware limited partnership ("Borrower"), HEREBY PROMISE TO PAY to the order of
_______________________ ("Bank") the principal sum of ______________________
($_________) or, if less, the aggregate principal amount of Facility C Revolving
Loans outstanding on the Facility C Revolving Termination Date, made to Borrower
by Bank pursuant to Section 2.01(c) of that certain Credit Agreement dated as of
July 5, 1994 (as the same may be amended from time to time, the "Credit
Agreement"), among Borrower, Stratton Insurance Company, Inc., a Vermont
corporation and a Wholly-Owned Subsidiary of Borrower, Ferrellgas, Inc., a
Delaware corporation and the sole general partner of Borrower, the financial
institutions from time to time party thereto, and Bank of America National Trust
and Savings Association, as agent for said financial institutions (in such
capacity, "Agent") payable in full on the Facility C Revolving Termination Date
together with interest on the unpaid principal balance hereof from time to time
outstanding from the date hereof until paid in full at the rate or rates and in
the manner and at the times specified in the Credit Agreement.
Both the principal hereof and the interest hereon are payable
in lawful money of the United States of America at Bancontrol Account Number
12334-14282 located at Bank of America National Trust and Savings Association,
1850 Gateway Boulevard, Fourth Floor, Concord, California 94520 (or at such
other Lending Office as may be designated from time to time by Agent), for the
account of Bank, in immediately available funds.
The holder of this Facility C Revolving Note is authorized to
record the date and amount of Facility C Revolving Loans made by the Bank, the
amount of interest accruing from time to time and the date and amount of each
payment or prepayment of principal thereof on the schedule annexed to and
constituting a part hereof, or on a continuation thereof which shall be attached
hereto and a part hereof and any such recordation shall constitute prima facie
evidence of the accuracy of the information so recorded.
Borrower agrees to pay all costs of collection and enforcement
of this Facility C Revolving Note, whether or not suit is filed, including,
without limitation, reasonable attorneys' fees, as more particularly provided in
Section 11.04 of the Credit Agreement.
This Facility C Revolving Note is one of the "Notes" referred
to in, and is entitled to the benefits of, the Credit Agreement which, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and for prepayment of amounts from time
to time outstanding under this Facility C Revolving Note upon certain terms and
conditions. Unless otherwise defined herein, capitalized terms used herein are
used with the defined meanings given in the Credit Agreement.
THIS FACILITY C REVOLVING NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
FERRELLGAS, L.P., a Delaware limited partnership
By: FERRELLGAS, INC., General
Partner
By:___________________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE TO FACILITY C REVOLVING NOTE
Date Amount of Facility C Amount of Unpaid Principal Notation Made By
Revolving Loans Principal Paid or Balance of Facility
Prepaid C Revolving Loans
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
EXHIBIT G
FORM OF OPINION OF BRYAN CAVE
See Tab 12
Exhibit 10.11
SECOND AMENDMENT TO CONTRIBUTION, CONVEYANCE
AND ASSUMPTION AGREEMENT
This Amendment (the "Amendment Agreement") to the Contribution, Conveyance and
Assumption Agreement, dated as of July 5, 1994, is made and entered into on
March 1, 1995 by and among Ferrellgas Partners, L.P., a Delaware limited
partnership (the "Master Partnership"), Ferrellgas, L.P., a Delaware limited
partnership (the "Operating Partnership"), and Ferrellgas, Inc. a Delaware
corporation (the "Company").
RECITALS
WHEREAS, on July 1, 1994 the Company, the Master Partnership and the
Operating Partnership, entered into a ceratin Contribution, Conveyance and
Assumption Agreement (the "Contribution Agreement") and a certain Conveyance
Assignment and Bill of Sale (the "Bill of Sale") both dated effective as of July
5, 1994; and
WHEREAS, the Company, the Master Partnership and the Operating
Partnership have entered into a certain First Amendment to Contribution,
Conveyance and Assumption Agreement dated July 5, 1994; and
WHEREAS, the Company, the Master Partnership and the Operating
Partnership desire to execute this Amendment Agreement in order to revise the
schedule entitled "Schedule 1 - Excluded Assets" to include the common stock of
Ferrell Propane Gas Company of Missouri, which was erroneously omitted from such
schedule.
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the Company, the Master Partnership and the Operating
Partnership agree as follows:
1. Modification of Schedule 1 - EXCLUDED ASSETS.
Schedule 1 of the Contribution Agreement, entitled "EXCLUDED ASSETS, " Is hereby
deleted in its entirety and the following schedule 1 is inserted in its place:
"Schedule 1
EXCLUDED ASSETS
Ferrellgas, Inc. will not contribute to Ferrellgas, L.P. the following
Assets (the "Excluded Assets"):
(1) Thirty Nine Million Dollars ($39,000,000.00) in cash
(2) Seventeen Million Dollars ($17,000,000.00) in receivables
from affiliates of its parent, Ferrell Companies, Inc.
(3) Class B redeemable common stock of Ferrell Companies, Inc
with a book value of approximately Thirty Six Million Dollars ($36,000,000.00)
(4) All of the outstanding shares of Common Stock of Ferrell
Propane Gas Company of Missouri."
2. No Other Amendment of Modification. Except as explicitly amended
pursuant to paragraph 1 of this Amendment Agreement, no amendment, modification
or other change is made pursuant to the Amendment Agreement to the Contribution
Agreement. This Amendment Agreement shall hereafter be referred to as the Second
Amendment to the Contribution Conveyance and Assumption Agreement dated
effective July 5, 1994.
IN WITNESS WHEREOF, this Amendment Agreement has been duly executed by
the parties hereto as of the date first above written.
FERRELLGAS, INC.
By: _______________________
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer
FERRELLGAS, L.P.
By: Ferrellgas, Inc., as
General Partner
By: __________________________
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer
FERRELLGAS PARTNERS, L.P.
By: Ferrellgas, Inc. as
General Partner
By: ___________________________
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY BALANCE
SHEET ON JULY 31, 1995, AND THE STATEMENT OF EARNINGS ENDING
JULY 31, 1995 AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS)
</LEGEND>
<CIK>0000922358
<NAME> Ferrellgas Partners, L.P.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> JUL-31-1995
<EXCHANGE-RATE> 1
<CASH> 29,877
<SECURITIES> 0
<RECEIVABLES> 59,113
<ALLOWANCES> 874
<INVENTORY> 44,090
<CURRENT-ASSETS> 138,090
<PP&E> 521,110
<DEPRECIATION> 175,468
<TOTAL-ASSETS> 578,596
<CURRENT-LIABILITIES> 109,162
<BONDS> 338,188
<COMMON> 176,313
0
0
<OTHER-SE> (57,676)
<TOTAL-LIABILITY-AND-EQUITY> 578,596
<SALES> 82,317
<TOTAL-REVENUES> 90,349
<CGS> 54,582
<TOTAL-COSTS> 96,676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,191
<INTEREST-EXPENSE> 8,457
<INCOME-PRETAX> (18,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,980)
<EPS-PRIMARY> (0.58)
<EPS-DILUTED> (0.58)
<FN>
1. For the Ferrellgas Partners L.P.("MLP"), the Common and Sunordinated are
considered to possess the characteristics of Common Stock. Note that both are
included in the determination of the EPS providing support for such a
classification.
2. For the Ferrellgas L.P. ("OLP"), ownership is maintained by the MLP and
Ferrellgas Inc., ("GP") Thus, there is no market and no relevant
characteristics of either Common or Perferred Stock. Classification is
reasonable.
3. Ferrell Finance has no income statement items other than totals as their
only costs are G&A, and such costs are not required in the Financial Data
Schedule.
4. Beginning in the Third Quarter, a determination was made that Deprec. &
Amort. and Vehicle leases are more appropriately reflected as costs and
expense related to sales and revenues. Therefore, there will be no amounts
reported for item 5-03(b)3 "other costs/expenses".
</FN>
</TABLE>
