SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Earliest Event Reported: April 26, 1996
Date of Report: May 6, 1996
Ferrellgas Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
1-11331 43-1698480
(Commission File Number) (I.R.S. Employer Identification No.)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive office, including zip code)
(816) 792-1600
(Registrants' telephone number, including area code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The consolidated financial statements of Skelgas Propane,
Inc. as of December 31, 1995 and 1994 and for the years ended December 31, 1995
and 1994, together with the reports of Deloitte & Touche, Chartered Accountants
(Markham, Canada) and Deloitte & Touche LLP (Kansas City, Missouri) with respect
thereto, and as of April 30, 1996 and for the four months ended April 30, 1996
and 1995 (unaudited) are filed as Exhibit 99.3 to this Current Report.
(b) Pro forma financial information.
The unaudited pro forma combined financial statements of
Ferrellgas Partners, L.P. and Skelgas Propane, Inc. as of April 30, 1996, for
the nine months ended April 30, 1996 and for the fiscal year ended July 31,
1995, are filed as Exhibit 99.4 to this Current Report.
(c) Exhibits.
The Exhibits listed in the Index to Exhibits are filed as
part of this Current Report on Form 8-K.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By: FERRELLGAS, INC. (General Partner)
By: /s/ Danley K. Sheldon
------------------------------------
Danley K. Sheldon
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
Date: July 12, 1996
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.1 Amended and Restated Agreement of Limited Partnership
of Ferrellgas, L.P. dated as of April 23, 1996
(Incorporated by reference the same numbered Exhibit
to the Registrant's Quarterly Report on Form 10-Q
filed June 12, 1996.)
99.3 Consolidated financial statements of Skelgas Propane,
Inc as of December 31, 1995 and 1994 and for the
years ended December 31, 1995 and 1994, together with
the reports of Deloitte & Touche, Chartered Accountants
(Markham, Canada) and Deloitte & Touche LLP
(Kansas City, Missouri) with respect thereto, and as
of April 30, 1996 and for the four months ended
April 30, 1996 and 1995 (unaudited).
99.4 Pro forma combined financial statements of Ferrellgas
Partners, L.P. and Skelgas Propane, Inc. as of April 30,
1996, for the nine months ended April 30, 1996 and for the
fiscal year ended July 31, 1995.
4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Skelgas Propane, Inc.:
We have audited the consolidated balance sheets of Skelgas Propane, Inc. as
at December 31, 1995 and 1994 and the consolidated statements of income (loss)
and accumulated deficit and cash flows for the year ended December 31, 1995.
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at December 31,
1995 and 1994 the results of its operations and its cash flows for the year
ended December 31, 1995 in accordance with the accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE
Chartered Accountants
Markham, Canada
April 15, 1996
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the General Partner of
Ferrellgas Partners, L.P.
Liberty, Missouri
We have audited the accompanying consolidated statements of income (loss)
and accumulated deficit and cash flows of Skelgas Propane, Inc. and subsidiaries
for the year ended December 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Skelgas
Propane, Inc. for the year ended December 31, 1994, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
June 7, 1996
6
<PAGE>
SKELGAS PROPANE, INC.
CONSOLIDATED BALANCE SHEET
April 30, 1996 (Unaudited)
December 31, 1995 and 1994
(U.S. dollars)
<TABLE>
<CAPTION>
April 30, December 31,
1996 1995 1994
ASSETS -------------- -------- ---------
(unaudited)
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 9,335,000 $ 3,490,359 $ 3,132,411
Trade accounts receivable (net of allowance for doubtful
accounts at December 31,1995--$285,760;
1994--$267,800)........................................... 7,494,000 7,516,865 5,867,971
Other receivables........................................... -- 437,564 1,025,172
Current environmental costs recoverable (note 2)............ 319,000 319,138 181,669
Receivable from related companies (note 3).................. 1,679,000 1,559,619 3,497,933
Inventories (note 4)........................................ 4,648,000 8,630,846 6,937,849
Prepaid expenses............................................ 208,000 1,134,563 1,604,979
----------- ------------ ------------
Total Current Assets................................... 23,683,000 23,088,954 22,247,984
----------- ------------ ------------
Environmental costs recoverable (note 2)......................... 686,000 686,243 135,603
Appliances on rental, at cost less accumulated depreciation...... 546,000 574,128 623,834
Property, plant and equipment (note 5)........................... 49,645,000 51,816,208 53,419,549
Other assets (note 6)............................................ 9,201,000 9,733,804 61,689,733
----------- ------------ ------------
Total Assets........................................... $83,761,000 $85,899,337 $138,116,703
----------- ------------ ------------
----------- ------------ ------------
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current Liabilities:
Accounts payable............................................ $ 1,330,000 $ 3,001,730 $ 3,621,461
Accrued liabilities......................................... 3,818,000 6,638,518 4,556,075
Accrued environmental liability (note 2).................... 452,000 561,022 330,015
Income and other taxes payable.............................. 559,000 424,913 399,097
Current portion of long-term debt (note 7).................. 42,000 52,938 52,350
----------- ------------ ------------
Total Current Liabilities.............................. 6,201,000 10,679,121 8,958,998
----------- ------------ ------------
Long-term debt (note 7).......................................... 9,000 18,377 70,771
----------- ------------ ------------
Stockholder's Equity:
Preferred stock, $1 par value; 100,000 shares authorized,
none issued or outstanding............................... -- -- --
Common stock, $1,000 par value; 200,000 shares
authorized, 155,000 shares issued and outstanding 155,000,000 155,000,000 155,000,000
Accumulated deficit......................................... (77,449,000) (79,798,161) (25,913,066)
----------- ------------ ------------
Total Stockholder's Equity............................. 77,551,000 75,201,839 129,086,934
----------- ------------ ------------
Total Liabilities and Stockholder's Equity............. $83,761,000 $85,899,337 $138,116,703
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
SKELGAS PROPANE, INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS) AND
ACCUMULATED DEFICIT Four Months Ended April,
1996 and 1995 (unaudited)
Year Ended December 31, 1995 and 1994
(U.S. dollars)
<TABLE>
<CAPTION>
Four Months Ended Year Ended
April 30, December 31,
1996 1995 1995 1994
-------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES.......................................... $ 44,451,000 $ 33,795,000 $ 75,230,313 $ 81,480,332
Cost of products sold (including depreciation
of $162,516 and $151,594 for the years
ended December 31, 1995 and 1994,
respectively) ................................. 26,911,000 17,111,000 39,897,582 41,856,645
------------- ------------- ------------- -------------
Gross Profit...................................... 17,540,000 16,684,000 35,332,731 39,623,687
EXPENSES:
Operating and overhead....................... 11,342,839 8,919,934 26,288,549 23,350,927
Selling...................................... 600,000 804,000 2,056,836 3,284,963
General and administrative................... 1,170,000 1,090,000 3,090,539 4,328,746
Restructuring charges........................ -- -- -- 475,367
Interest and foreign exchange adjustments.... 51,000 17,000 18,033 245,262
Depreciation and amortization (note 9)....... 1,937,000 3,405,000 57,472,523 8,844,137
------------- ------------- ------------- -------------
15,100,839 14,235,934 88,926,480 40,529,402
------------- ------------- ------------- -------------
Income (loss) before income taxes................. 2,439,161 2,448,066 (53,593,749) (905,715)
Income taxes (note 10)............................ 90,000 20,000 291,346 63,513
------------- ------------- ------------- -------------
Net income (loss)................................. 2,349,161 2,428,066 (53,885,095) (969,228)
Accumulated deficit, at beginning of period....... (79,798,161) (25,913,066) (25,913,066) (24,943,838)
------------- ------------- ------------- -------------
Accumulated deficit, at end of period............. $(77,449,000) $(23,485,000) $(79,798,161) $(25,913,066)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
SKELGAS PROPANE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS Four
Months Ended April 30, 1996 and 1995 (Unaudited)
Year Ended December 31, 1995 and 1994
(U.S. dollars)
<TABLE>
<CAPTION>
Four Months Ended Year Ended
April 30, December 31,
1996 1995 1995 1994
------- ------- -------- --------
(unaudited)
CASH PROVIDED BY (USED FOR):
OPERATIONS:
<S> <C> <C> <C> <C>
Net income (loss)...................................... $2,349,161 $2,428,066 $(53,885,095) $ ( 969,228)
Items not involving cash:
Depreciation and amortization..................... 1,964,000 3,442,000 57,635,039 8,995,641
Change in non-cash operating working capital...... 782,480 (3,651,477) 685,873 (6,320,069)
----------- ----------- ------------ ------------
Net cash provided by operating activities.............. 5,095,641 2,218,589 4,435,817 1,706,344
----------- ----------- ------------ ------------
FINANCING:
Repayment of long-term debt............................ (19,000) (18,000) (51,806) (51,806)
----------- ----------- ------------ ------------
Net Cash used for financing activities................. (19,000) (18,000) (51,806) (51,806)
INVESTMENTS: ----------- ----------- ------------ ------------
Proceeds from disposal of property, plant and
equipment........................................... 768,000 -- 384,615 277,618
Purchases of property, plant and equipment............. -- (1,639,000) (4,297,868) (2,599,507)
Purchases of appliance on rental.......................
-- -- (112,810) (247,587)
----------- ----------- ------------ ------------
Net cash provided by (used for) investing activities... 768,000 (1,639,000) (4,026,063) (2,569,476)
----------- ----------- ------------ ------------
Increase (decrease) in cash position................... 5,844,641 561,589 357,948 (914,938)
Cash at beginning of period............................ 3,490,359 3,132,411 3,132,411 4,047,349
----------- ----------- ------------ ------------
Cash at end of period ................................. $9,335,000 $3,694,000 $ 3,490,359 $3,132,411
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Supplemental disclosure of cash flow information:
Income taxes paid................................. $ 40,000 $ 56,000 $ 277,795 $ 100,265
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Interest paid..................................... $ 2,000 $ 6,600 $ 6,311 $ 262,407
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
SKELGAS PROPANE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Four Months Ended April 30, 1996 and 1995
(Unaudited)
Years Ended December 31, 1995 and 1994
Skelgas Propane, Inc. (the "Company"), incorporated under the laws of Delaware,
has as its principal business activity the marketing of propane. The Company
is a wholly-owned subsidiary of Superior Propane Inc., (the "Parent")
incorporated under the laws of Canada.
1. Summary of significant accounting policies:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The Company's significant accounting policies are as follows:
Basis of consolidation:
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Inventories:
Inventories of propane are valued at the lower of cost and market
determined on the basis of net realizable value. Inventories of appliances,
materials and supplies are stated at the lower of cost and market value
determined on the basis of replacement cost or net realizable value. Cost
is determined on the first-in, first-out (FIFO) method.
Appliances on rental:
Appliances on rental are stated at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis, generally over a period
of six years.
Property, plant and equipment:
Properties, plant and equipment are recorded at cost and depreciated over
the estimated useful life using the straight line method except for loaned
dispensers which use the declining balance method at a rate of 10%.
Property, plant and equipment are evaluated periodically, and if conditions
warrant, an impairment is recorded. The estimated useful life of major
asset classes are:
Buildings......................................... 20 years
Propane marketing equipment....................... 7-20 years
Goodwill:
Goodwill and non-compete agreements are recorded at cost less accumulated
amortization. Non-compete agreements are amortized on a straight line basis
over 10 years. Effective January 1, 1993, the Company revised the
amortization period for goodwill from 40 years to 20 years prospectively.
Management periodically evaluates the Company's intangible assets,
including goodwill, for impairment by calculating the anticipated cash flow
attributable to the underlying operations over their expected remaining
lives. Such expected cash flows, on an undiscounted basis, are compared to
the carrying value of the tangible and intangible assets, and if impairment
is indicated, the carrying value of the intangible assets are adjusted.
10
<PAGE>
Income taxes:
The Company follows Statement of Financial Accounting Standards (SFAS) No.
109--"Accounting for Income Taxes". This Statement requires the liability
method of accounting for income taxes. The Company has established
valuation reserves on the deferred tax asset related to the net operating
loss carryforwards.
Environmental Remediation:
The Company accrues environmental remediation costs for work at identified
sites where an assessment has indicated that cleanup costs are probable and
reasonably estimable. Such accruals are based on currently available facts,
estimated timing of remedial actions, existing technology and presently
enacted laws and regulations. The accruals are routinely reviewed as events
and developments warrant.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting of only normal recurring accruals, necessary for fair
representation of the balance sheet and results of operations and cash
flows as of April 30, 1996 and for the four months ended April 30, 1996 and
1995, as presented in the accompanying unaudited financial statements.
2. Accrued environmental liability and costs recoverable:
The Company is subject to federal, state and local laws regulating
environmental remediation. These laws result in loss contingencies for
remediation at some of the Company's current locations as well as third
party or formerly owned facilities. The estimated costs for restoration and
remediation of these locations was accrued separately in the amount of
$452,000 (unaudited) as of April 30, 1996, and $561,022 as of December 31,
1995 (1994--$330,015). Realization of claims from governmental authorities
for recovery of costs incurred in respect of environmental liabilities
totalling $1,005,000 (unaudited) as of April 30, 1996 and $1,005,381 as of
December 31, 1995 (1994--$317,272) will be recovered between 1996 and 1999.
3. Related party transactions:
The Company buys propane from an affiliate. During the year, such purchases
amounted to $7,696,773 (1994--$6,640,322).
The Company received administrative services which are provided by an
affiliate for which it pays a fee. The charge for these services is based
on a reasonable estimation of time and effort spent by the Parent's various
corporate office groups to provide services to the Company. For the year
ended December 31, 1995 the fees were $2,170,072 (1994--$2,356,725).
In addition, certain other transactions are entered into with affiliated
companies. The receivable from the affiliate was $1,559,619 as of December
31, 1995 (1994--$3,497,933).
4. Inventories:
December 31,
-----------------------
1995 1994
----------- -----------
Propane................................... $ 5,790,211 $4,215,443
Appliances................................ 1,777,809 1,842,690
Materials and supplies.................... 1,062,826 879,716
----------- ----------
$ 8,630,846 $6,937,849
----------- ----------
----------- ----------
11
<PAGE>
5. Property, plant and equipment
<TABLE>
<CAPTION>
December 31,1995 December 31, 1994
------------------------------------------------- ---------------------
Accumulated
Depreciation
and Net Book
Cost Amortization Value Net Book Value
------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
Land............................. $ 3,605,798 $ -- $ 3,605,798 $ 3,611,415
Buildings........................ 6,958,062 2,715,773 4,242,289 4,322,885
Propane marketing equipment...... 84,154,952 40,186,831 43,968,121 45,485,249
------------- --------------- ------------ -----------------
$94,718,812 $ 42,902,604 $ 51,816,208 $ 53,419,549
------------- --------------- ------------ -----------------
------------- --------------- ------------ -----------------
</TABLE>
Accumulated depreciation at December 31, 1994 was $37,827,206.
6. Other assets:
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
------- -------
<S> <C> <C>
Goodwill (net of accumulated amortization of $59,835,876; 1994--
$9,289,725)............................................................ $2,354,026 $52,900,177
Noncompete agreements (net of accumulated amortization of $8,834,052;
1994--$6,749,883)...................................................... 7,379,778 8,789,556
----------- ------------
$9,733,804 $61,689,733
----------- ------------
----------- ------------
</TABLE>
In the last quarter of the year ended December 31, 1995, the Company
evaluated the carrying value of its intangible assets, including goodwill
considering the effects of the Parent's decision to divest its interest in
the Company. This necessitated a write down of the goodwill in the amount
of $47,612,072, which is included as part of the amortization of goodwill
in 1995 as set out in note 9.
7. Long-term debt:
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
------- -------
<S> <C> <C>
Notes payable for noncompete agreement................................... $71,315 $123,121
Less: Current portion of long-term debt.................................. 52,938 52,350
------- ---------
$18,377 $ 70,771
------- ---------
------- ---------
</TABLE>
12
<PAGE>
8. Restructuring Charges
During the year ended December 31, 1994 the Company reorganized its field
operations which resulted in the consolidation and closure of certain field
offices and severance of employees. The costs attributable to such
reorganization aggregated $475,367 which has been reflected as
restructuring charges in the accompanying Statement of Income (Loss) for
the year ended December 31, 1994.
9. Depreciation and amortization expense:
<TABLE>
<CAPTION>
Year Ended
-----------------
December 31,
-----------------
1995 1994
------- -------
<S> <C> <C>
Depreciation............................................................... $ 5,690,165 $4,741,112
Amortization of goodwill................................................... 50,546,151 2,752,680
Amortization of noncompete agreements...................................... 1,409,778 1,368,456
Gain on disposal of property, plant and equipment.......................... (173,571) (18,111)
------------- -----------
$57,472,523 $8,844,137
------------- -----------
------------- -----------
</TABLE>
10. Income taxes:
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
Year Ended
-----------------
December 31,
-----------------
1995 1994
------- -------
<S> <C> <C>
Federal.................................................................. $ -- $ --
State.................................................................... 291,346 63,513
---------- -----------
Total current taxes................................................. 291,346 63,513
Deferred taxes................................................................ -- --
---------- -----------
Total income taxes.................................................. $ 291,346 $ 63,513
---------- -----------
---------- -----------
</TABLE>
The provision for income taxes differs from applying the federal statutory
income tax rate of 34 percent to the loss before income taxes as follows:
<TABLE>
<CAPTION>
Year Ended
------------
December 31,
--------------
1995 1994
-------- ---------
<S> <C> <C>
Statutory federal rate........................................................ (34.0)% (34.0)%
Goodwill...................................................................... 33.0% 34.0%
Other......................................................................... 1.5% 0.7%
-------- ---------
Effective income tax rate..................................................... 0.5% 0.7%
-------- ---------
-------- ---------
</TABLE>
13
<PAGE>
The types and tax effects of the temporary differences that cause
significant portions of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
Year Ended
------------
December 31,
--------------
1995 1994
-------- ---------
Deferred tax assets:
<S> <C> <C>
Net operating loss carryforwards........................................ $23,966,000 $23,812,000
Self insurance reserve.................................................. 670,000 --
Investment tax credits.................................................. 250,000 250,000
Inventory costs capitalized for tax purposes............................ 155,000 155,000
Non deductible allowance for doubtful accounts.......................... 114,000 107,000
Restructuring charge.................................................... -- 190,000
----------- ------------
Total deferred tax assets.......................................... 25,155,000 24,514,000
Deferred tax liabilities:
Fixed asset basis differences/depreciation.............................. 14,033,000 14,427,000
----------- ------------
Subtotal 11,122,000 10,087,000
Total valuation allowance.................................................... 11,122,000 10,087,000
----------- ------------
Net deferred tax asset $ -- $ --
----------- ------------
----------- ------------
</TABLE>
As at December 31, 1995, the Company had net operating loss carryforwards
of approximately $60,000,000. These carryforwards expire between 1999 and
2008. Restrictions on the utilization of the net operating loss
carryforwards apply as a result of the change in the control that occurred
upon acquisition of the Company in 1990.
As of December 31, 1995, the Company has investment tax credit
carryforwards of $250,000. These carryforwards expire between 1999 and
2000.
11. Employee retirement plans:
Many of the Company's employees are eligible to participate in 401(k)
Savings Plans, some of which provide for company matching under various
formulas. The Company's matching expense for the plans was $235,051 for the
year ended December 31, 1995 (1994--$250,904).
12. Financial instruments:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Company's customer
base.
Financial instruments comprise cash, accounts receivable, accounts payable,
accrued liabilities, and long-term debt. The fair value of these financial
instruments approximates their carrying value.
14
<PAGE>
13. Operating lease commitments:
The Company leases buildings and propane marketing equipment under
operating leases which expire in various years through 2000.
Future minimum lease payments by year under operating leases with initial
terms or remaining terms of one year or more consisted of the following at
December 31, 1995:
1996........................................................ $253,869
1997........................................................ 188,438
1998........................................................ 185,836
1999........................................................ 184,686
2000........................................................ 122,059
14. Contingencies:
At December 31, 1995 and April 30, 1996 (unaudited), there are a number of
lawsuits and claims pending against the Company, the ultimate results of
which have been estimated and included in accrued liabilities. Management
is of the opinion that these claims are adequately reflected in the
consolidated balance sheet of the Company as at December 31, 1995 and April
30, 1996 (unaudited), and that any additional amounts assessed against the
Company would not have a material adverse effect upon the consolidated
financial position of the Company or the results of its operations.
15. Subsequent event:
On March 23, 1996, an agreement to sell the shares of the Company was
signed with a prospective acquiror. The transaction was completed on April
30, 1996 pending closing adjustments as required by the Sales Agreement.
15
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following sets forth the Partnership's Unaudited Pro Forma Combined
Statement of Earnings and Other Data by giving effect to the issuance of the
$160,000,000 of 9 3/8% Senior Secured Notes due 2006 (the "Senior Notes") and
the Skelgas Propane, Inc. Acquisition (the "Skelgas Acquisition" or "Skelgas")
transactions described in Note 1 of the Notes to the Unaudited Pro Forma
Combined Financial Statements as if such transactions had been consummated at
August 1, 1994. Additionally, the Partnership's Unaudited Pro Forma Combined
Balance Sheet gives effect to the Skelgas Acquisition described in Note 1 of the
Notes to the Unaudited Pro Forma Combined Financial Statements as if such
transaction had been consummated on April 30, 1996. The Unaudited Pro Forma
Combined Financial Statements of the Partnership do not purport to present the
financial position or results of operations of the Partnership had the
transactions assumed herein occurred on the dates indicated, nor are they
necessarily indicative of the results of operations which may be expected to
occur in the future.
The Partnership's operating data for the twelve-month period ended July 31,
1995, was derived from the Partnership's Statement of Earnings for the twelve
months ended July 31, 1995. The Partnership's operating data for the nine-month
period ended April 30, 1996 was derived from the Partnership's unaudited
Statement of Earnings for the nine months ended April 30, 1996. Skelgas'
operating data for the twelve-month period ended July 31, 1995 was derived from
Skelgas' unaudited Statements of Income (Loss) for the twelve months ended July
31, 1995. Skelgas' operating data for the nine-month period ended April 30, 1996
was derived from Skelgas' unaudited Statement of Income (Loss) for the nine
months ended April 30, 1996.
The propane industry is seasonal in nature because propane is used
primarily for heating in residential and commercial buildings. Therefore, the
Pro Forma Combined Statement of Earnings and Other Data for the nine months
ended April 30, 1996 are not necessarily indicative of the results to be
expected for a full year.
The Skelgas Acquisition has been accounted for as a purchase whereby the
basis for accounting for Skelgas' assets and liabilities has been based upon
their estimated fair market values. Pro forma adjustments, including the
preliminary purchase price allocation and estimated cost savings resulting from
the Skelgas Acquisition as described in Notes 1, 3 and 9 of the Notes to the
Unaudited Pro Forma Combined Financial Statements, represent the Partnership's
preliminary determination of these adjustments and are based upon preliminary
information, assumptions and operating decisions which the Partnership considers
reasonable under the circumstances. Final amounts may differ from those set
forth herein.
The Operating Partnership is a potential guarantor of Senior Notes that
were issued by the Partnership, its Parent, in a Private Placement under
Regulation 144A on April 26, 1996. Such potential guarantee will only become
effective if and when the Operating Partnership meets certain financial
requirements in the future. There can be no assurance that these financial
requirements will be met and the guarantee will become effective.
The proceeds of the Senior Notes were contributed by the Partnership to the
Operating Partnership as a capital contribution. Pro Forma Combined Financial
Statements of the Operating Partnership are not presented herein as the
Operating Partnership is consolidated with and included in the Unaudited Pro
Forma Combined Financial Statements of the Partnership which are herein
presented. In addition, the only substantial difference between such Pro Forma
Combined Financial Statements would be interest expense on the Senior Notes.
16
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS AND OTHER DATA
Nine Months Ended April 30, 1996 (In
thousands, except per unit data and ratios)
<TABLE>
<CAPTION>
Ferrellgas Skelgas Pro Forma Pro Forma
Partners, L.P Propane, Inc. Adjustments Combined
------------- ------------- ----------- --------
Revenues:
<S> <C> <C> <C> <C> <C>
Gas liquids and related product sales.............. $522,446 $ 79,595 $ (3,810) (2) $ 598,231
Other.............................................. 31,266 -- 627 (2) 31,893
---------- ----------- ---------- ----------
Total revenues.................................. 553,712 79,595 (3,183) 630,124
Cost of product sold (exclusive of depreciation,
shown separately below)............................. 300,844 46,457 (3,183) (2) 344,118
---------- ----------- ---------- ----------
Gross profit............................................. 252,868 33,138 -- 286,006
Operating expense........................................ 134,363 26,011 (4,088) (3) 156,286
Depreciation and amortization expense.................... 25,839 54,338 (49,054) (4) 31,123
General and administrative expense....................... 9,535 2,626 (1,781) (3) 10,380
Vehicle leases expense................................... 3,621 -- -- 3,621
---------- ----------- ---------- ----------
Operating income (loss).................................. 79,510 (49,837) 54,923 84,596
Interest expense......................................... (26,775) (57) (7,676) (5) (34,508)
Interest income.......................................... 1,068 -- -- 1,068
Loss on disposal of assets............................... (1,084) -- -- (1,084)
---------- ----------- ---------- ----------
Earnings (loss) before income taxes and
minority interest................................... 52,719 (49,894) 47,247 50,072
Income taxes............................................. -- 381 (381) (6) --
Minority interest........................................ 534 -- (28) 506
---------- ----------- ---------- ----------
Net earnings (loss)...................................... 52,185 $(50,275) 47,656 49,566
General partner's interest in net earnings............... 522 ----------- (26) 496
---------- ----------- ---------- ----------
Limited partners' interest in net earnings............... $ 51,663 $ (2,593) $ 49,070
---------- ---------- ----------
---------- ---------- ----------
Net earnings per limited partner unit.................... $ 1.66 $ (0.08) $ 1.58
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of units outstanding............. 31,103 41 31,144
---------- ---------- ----------
Other Data: ---------- ---------- ----------
Retail propane sales volume (in gallons)........... 557,897 86,776 -- 644,673
Capital expenditures............................... $ 38,078 $ 2,857 $ -- $ 40,935
EBITDA(7).......................................... 105,349 4,501 5,869 115,719
Ratio of earnings to fixed charges(8).............. 2.8x -- -- 2.4x
Ratio of EBITDA to interest expense(7)............. 3.9x -- -- 3.4x
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS AND OTHER DATA
Twelve Months Ended July 31, 1995 (In
thousands, except per unit data and ratios)
<TABLE>
<CAPTION>
Ferrellgas Skelgas Pro Forma Pro Forma
Partners,L.P. Propane, Inc. Adjustments Combined
-------------- -------------- ------------ ------------
Revenues:
<S> <C> <C> <C> <C> <C>
Gas liquids and related product sales............ $ 565,607 $ 74,844 $ (4,433) (2) $ 636,018
Other........................................... 30,829 -- 1,702 (2) 32,531
----------- ----------- ---------- -----------
Total revenues................................ 596,436 74,844 (2,731) 668,549
Cost of product sold (exclusive of depreciation,
shown separately below)........................... 339,641 38,983 (2,731) (2) 375,893
----------- ----------- ---------- -----------
Gross profit........................................... 256,795 35,861 -- 292,656
Operating expense...................................... 153,226 24,943 (5,450) (9) 172,719
Depreciation and amortization expense.................. 32,014 9,576 (3,408)(10) 38,182
General and administrative expense..................... 11,357 4,053 (2,375) (9) 13,035
Vehicle leases expense................................. 4,271 -- -- 4,271
----------- ----------- ---------- -----------
Operating income (loss)................................ 55,927 (2,711) 11,233 64,449
Interest expense....................................... (31,993) (261) (10,280) (11) (42,534)
Interest income........................................ 1,268 -- -- 1,268
Loss on disposal of assets............................. (1,139) -- -- (1,139)
----------- ----------- ---------- -----------
Earnings (loss) before income taxes and
minority interest................................. 24,063 (2,972) 953 22,044
Income taxes........................................... -- 64 (64) (6) --
Minority interest...................................... 243 -- (20) 223
----------- ----------- ---------- -----------
Net earnings (loss).................................... 23,820 $ (3,036) 1,037 21,821
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
General partner's interest in net earnings............. 238 (20) 218
----------- ---------- -----------
Limited partners' interest in net earnings............. $ 23,582 $(1,979) $ 21,603
----------- ---------- -----------
----------- ---------- -----------
Net earnings per limited partner unit.................. $ 0.76 $ (0.06) $ 0.70
----------- ---------- -----------
----------- ---------- -----------
Weighted average number of units outstanding........... 30,908 41 30,949
----------- ---------- -----------
----------- ---------- -----------
Other Data:
Retail propane sales volume (in gallons)........ 575,935 94,885 -- 670,820
Capital expenditures............................ $ 89,791 $ 3,536 $ -- $93,327
EBITDA(7)....................................... 87,941 6,865 7,825 102,631
Ratio of earnings to fixed charges(12).......... 1.7x -- -- 1.5x
Ratio of EBITDA to interest expense(7).......... 2.8x -- -- 2.4x
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
18
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
April 30, 1996
(In thousands)
<TABLE>
<CAPTION>
Ferrellgas Skelgas Pro Forma Pro Forma
Partners, L.P. Propane, Inc Adjustments Combined
-------------- ------------ ----------- ----------
A S S E T S
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents....................... $ 87,809 $ 9,335 $(89,250)(1) $ 7,894
Accounts and notes receivable................... 80,639 7,494 -- 88,133
Inventories..................................... 24,316 4,648 -- 28,964
Prepaid expenses and other current assets....... 5,619 2,206 -- 7,825
---------- --------- -------- ---------
Total Current Assets......................... 198,383 23,683 (89,250) 132,816
Property, plant and equipment, net.................... 342,593 49,645 10,655 (13) 402,893
Intangible assets, net................................ 98,697 9,201 1,160 (14) 109,058
Other assets, net..................................... 11,455 1,232 -- 12,687
---------- --------- -------- ---------
Total Assets................................. $ 651,128 $ 83,761 $(77,435) $657,454
---------- --------- -------- ---------
---------- --------- -------- ---------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:..................................
Accounts payable................................ $44,912 $1,330 $ -- $ 46,242
Other current liabilities....................... 30,446 4,871 (1,600)(15) 33,717
---------- --------- -------- ---------
Total Current Liabilities................... 75,358 6,201 (1,600) 79,959
Long-term debt........................................ 432,307 9 791 (16) 433,107
Other liabilities..................................... 12,288 -- -- 12,288
Contingencies and commitments
Minority interest..................................... 2,902 -- -- 2,902
Stockholder's Equity:
Capital Stock................................... -- 155,000 (155,000)(17) --
Accumulated Deficit............................. -- (77,449) 77,449 (17) --
---------- --------- -------- ---------
Total Stockholder's Equity................... -- 77,551 (77,551) --
---------- --------- -------- ---------
Partners' Capital:
Common units.................................... 91,073 -- 925 (1) 91,998
Subordinated units.............................. 94,780 -- -- 94,780
General partner................................. (57,580) -- -- (57,580)
---------- --------- -------- ---------
Total Partners' Capital...................... 128,273 -- 925 129,198
---------- --------- -------- ---------
Total Liabilities and Partners' Capital...... $651,128 $83,761 $(77,435) $657,454
---------- --------- -------- ---------
---------- --------- -------- ---------
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Presentation:
The Partnership's Unaudited Pro Forma Combined Financial Statements assume:
(1) transactions a.and b.occurred at August 1, 1994 for purposes of the
Unaudited Pro Forma Combined Statements of Earnings and Other Data and
(2) transaction a. occurred on April 30, 1996 for purposes of the Unaudited
Pro Forma Combined Balance Sheet:
a. The Skelgas Acquisition--On April 30, 1996, Ferrellgas, Inc.
("Ferrellgas") as the general partner of the Partnership purchased all
of the outstanding capital stock of Skelgas for a cash purchase price
of $89.3 million and a $1.2 million noncompete agreement payable in
three equal annual installments commencing on the closing date. The
purchase price will be adjusted upward or downward based on a final
determination of working capital balances acquired.
Ferrellgas financed the Skelgas Acquisition with the proceeds of a
short-term acquisition loan. As of May 1, 1996 Skelgas and its
operating subsidiaries were merged into Ferrellgas and all of the
Skelgas Assets were contributed by Ferrellgas to the Operating
Partnership as a capital contribution. In connection with these
transactions, the Operating Partnership assumed the obligation to
repay the short-term acquisition loan and issued a limited partner
interest in the Operating Partnership to Ferrellgas. Following the
contribution of the Skelgas Assets to the Partnership, Ferrellgas
contributed the limited partner interest in the Operating Partnership
to the Partnership in exchange for Common Units of the Partnership
with a value of approximately $925,000, which represents consideration
for certain tax liabilities retained by Ferrellgas. The Operating
Partnership utilized an existing credit facility with a bank syndicate
(the "Credit Facility") to discharge its assumed obligations under the
short-term acquisition loan.
The preliminary purchase price allocation is as follows (In thousands):
Pro forma purchase price--
Cash......................................................... $ 89,250
Noncompete agreement--$400 paid at closing; $800 over two
years........................................................ 1,200
Common units issued for income tax liabilities incurred by
Ferrellgas.................................................. 925
Transaction costs........................................... 2,000
Receivable from Seller due to working capital adjustment.... (4,000)
---------
Total pro forma purchase price............................. $ 89,375
---------
---------
Allocation of purchase price--
Working capital............................................. 17,482
Property, plant and equipment............................... 60,300
Goodwill.................................................... 2,273
Noncompete agreement with Seller........................... 1,200
Existing noncompete agreement of Skelgas.................... 6,888
Other assets................................................ 1,232
---------
Total pro forma allocation of purchase price.............. $ 89,375
---------
---------
The foregoing preliminary purchase price allocation is based on available
information and certain assumptions the Partnership considers reasonable.
The final purchase price allocation will be based upon a final
determination of the fair market value of the net assets acquired at the
date of the Skelgas Acquisition as determined by valuations and other
studies which are not yet complete. The final purchase price allocation may
differ from the preliminary allocation.
20
<PAGE>
b. The issuance of the $160,000,000 of 9 3/8% Senior Secured notes due 2006.
The Partnership's unaudited Pro Forma Combined Financial Statements of
Earnings and Other Data assume that issuance of the Senior Notes occurred
on August 1, 1994. No pro forma adjustments related to the Senior Notes
were required in the pro forma balance sheet as of April 30, 1996, because
the issuance of the Senior Notes and the subsequent repayment of $70.7
million of existing indebtedness occurred prior to April 30, 1996.
2. The pro forma adjustments to reclassify Skelgas' revenue and cost of
product sold presentation to conform with the Partnership's presentation.
3. The pro forma adjustments to operating expense and general and
administrative expense for the nine months ended April 30, 1996:
Because the Skelgas Acquisition has recently been consummated, the
Partnership has begun, but not completed, its strategic and operating plans
for the integration of Skelgas' operations into those of the Partnership.
Based on preliminary information, assumptions and operating decisions, the
Partnership estimates that it can eliminate duplicative costs through the
combination of the two entities as described below. However, the actual
cost savings may differ from the preliminary estimates.
The pro forma adjustments to reflect estimated cost savings resulting from
the Skelgas Acquisition assumes the following preliminary estimates of
expected cost savings (In thousands):
<TABLE>
<CAPTION>
General and
Operating Adminstrative
Expense Expense
----------- --------------
<S> <C> <C>
Consolidation of field service functions......................................... $ 1,632 $ --
Elimination of duplicative field service management costs........................ 2,456 --
Elimination of corporate general and administrative costs........................ -- 1,781
--------- ---------
Pro forma adjustments....................................................... $ 4,088 $ 1,781
--------- ---------
--------- ---------
</TABLE>
In addition to the cost savings initiatives and estimated cost savings
described above, the Partnership estimates that it can eliminate additional
annual duplicative costs through the combination of the two entities.
However, such amounts cannot be quantified at this time and have not been
reflected in the pro forma adjustments.
4. The pro forma adjustment to depreciation and amortization expense for
the nine months ended April 30, 1996 (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Elimination of historical depreciation and amortization expense of Skelgas...................... $(53,681)
Additional depreciation and amortization expense reflecting the preliminary
allocation of purchase price:
Record depreciation of amount allocated to buildings and equipment......................... 3,106
Record amortization of amount allocated to goodwill ....................................... 114
Record amortization of amount allocated to noncompete agreement with
Seller.................................................................................. 300
Record amortization of amount allocated to existing noncompete
agreement of Skelgas.................................................................... 1,107
----------
Pro forma adjustment.................................................................. $(49,054)
----------
----------
</TABLE>
This historical depreciation and amortization expense of Skelgas includes a
nonrecurring writedown of goodwill in the amount of $47.6 million.
21
<PAGE>
5. The pro forma adjustment to interest expense for the nine months ended
April 30, 1996 (In thousands):
<TABLE>
<CAPTION>
Elimination of interest related to repayment of a portion of the Operating
<S> <C>
Partnership's Credit Facility................................................................ $ 3,921
Additional interest expense related to--
Issuance of Senior Notes at a 9.375% interest rate......................................... (11,250)
Amortization of deferred issuance costs related to the Senior Notes........................ (347)
----------
Pro forma adjustment.................................................................. $ (7,676)
----------
----------
</TABLE>
The elimination of interest expense related to the Operating Partnership's
Credit Facility was determined based on (i) repayment of $70.7 million of
existing indebtedness from proceeds of the Offering and (ii) an average
interest rate of 7.395%.
6. The pro forma adjustment to the provision for income taxes recognizes that
the Partnership is not subject to income tax.
7. EBITDA is calculated as operating income (loss) plus depreciation and
amortization. EBITDA is not intended to represent cash flow and does not
represent a measure of cash available for distribution. EBITDA is a
non-GAAP measure, but provides additional information for evaluating the
Partnership's ability to service its debt. In addition, EBITDA is not
intended as an alternative to earnings (loss) from continuing operations or
net earnings (loss).
8. For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings (loss) from continuing operations before
income taxes, plus fixed charges. Fixed charges consist of interest expense
on all indebtedness (including amortization of deferred debt issuance cost)
and the portion of operating lease rental expense that is representative of
the interest factors. Earnings from continuing operations for the period
presented were reduced by certain noncash expenses, consisting principally
of depreciation and amortization. Such non-cash charges total $29.8 million
for the pro forma combined nine months ended April 30, 1996.
9. The pro forma adjustments to operating expense and general administrative
expense for the twelve months ended July 31, 1995:
Because the Skelgas Acquisition has recently been consummated, the
Partnership has begun, but not completed, its strategic and operating plans
for the integration of Skelgas' operations into those of the Partnership.
Based on preliminary information, assumptions and operating decisions, the
Partnership estimates that it can eliminate duplicative costs through the
combination of the two entities as described below. However, the actual
cost savings may differ from the preliminary estimates.
The pro forma adjustments to reflect estimated cost savings resulting from
the Skelgas Acquisition assumes the following preliminary estimates of
expected cost savings (In thousands):
<TABLE>
<CAPTION>
General and
Operating Administrative
Expenses Expenses
----------- ---------------
<S> <C> <C>
Consolidation of field service functions......................................... $ 2,175 $ --
Elimination of duplicative field service management costs........................ 3,275 --
Elimination of corporate general and administrative costs........................ -- 2,375
-------- ---------
Pro forma adjustment................................................... $ 5,450 $ 2,375
-------- ---------
-------- ---------
22
<PAGE>
</TABLE>
In addition to the cost savings initiatives and estimated cost savings
described above, the Partnership estimates the it can eliminate additional
annual duplicative costs through the combination of the two entities.
However, such amounts cannot be quantified at this time and have not been
reflected in the pro forma adjustment
10. The pro forma adjustment to depreciation and amortization expense for the
twelve months ended July 31, 1995 (In thousands):
<TABLE>
<CAPTION>
Elimination of historical depreciation and amortization expense of Skelgas....................... $(9,576)
Additional depreciation and amortization expense reflecting the preliminary allocation of
purchase price:
<S> <C>
Record depreciation of amount allocated to buildings and equipment....................... 4,140
Record amortization of amount allocated to goodwill ..................................... 152
Record amortization of amount allocated to noncompete agreement with Seller.............. 400
Record amortization of amount allocated to existing noncompete agreement of Skelgas...... 1,476
--------
Pro forma adjustment........................................................................ $(3,408)
--------
--------
</TABLE>
11. The pro forma adjustment to interest expense for the twelve months ended
July 31, 1995 (In thousands):
<TABLE>
<CAPTION>
Elimination of interest related to repayment of a portion of the Operating Partnership's Credit
<S> <C>
Facility $ 5,182
Additional interest expense related to --
Issuance of Senior Notes at a 9.375% interest rate.......................................... (15,000)
Amortization of deferred issuance costs related to the Senior Notes......................... (462)
---------
Pro forma adjustment................................................................... $(10,280)
---------
---------
</TABLE>
The elimination of interest expense related to the Operating Partnership's
Credit Facility was determined based on (i) repayment of $70.7 million of
existing indebtedness from proceeds of the Offering and (ii) an average
interest rate of 7.33%.
12. For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings (loss) from continuing operations before
income taxes, plus fixed charges. Fixed charges consist of interest expense
on all indebtedness (including amortization of deferred debt issuance cost)
and the portion of operating lease rental expense that is representative of
the interest factor. Earnings from continuing operations for the period
presented were reduced by certain noncash expenses, consisting principally
of depreciation and amortization. Such non-cash charges totaled $37.3
million for the pro forma combined twelve months ended July 31, 1995.
13. The pro forma adjustment to property, plant and equipment (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Elimination of historical property, plant and equipment of Skelgas.............................. $(49,645)
Record allocation of purchase price to property, plant and equipment............................ 60,300
----------
Pro forma adjustment....................................................................... $ 10,655
----------
----------
</TABLE>
23
<PAGE>
14. The pro forma adjustment to intangible assets (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Record goodwill associated with purchase of Skelgas............................................. $2,273
Record allocation of purchase price to noncompete agreement with Seller......................... 1,200
Eliminate historical goodwill of Skelgas........................................................ (2,313)
-------
Pro forma adjustment....................................................................... $1,160
-------
-------
</TABLE>
15. The pro forma adjustments to other current liabilities (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Record accrued liabilities for transaction costs of Skelgas Acquisition.......................... $ 2,000
Record working capital adjustments pursuant to the Skelgas Acquisition Agreement................. (4,000)
Record current portion of the amounts to be paid pursuant to the noncompete agreement with
Seller........................................................................................ 400
--------
Pro forma adjustments....................................................................... $(1,600)
--------
--------
</TABLE>
16. The pro forma adjustment to long-term debt (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Record long-term amounts to be paid pursuant to the noncompete agreement with Seller........ $800
Eliminate existing long-term debt of Skelgas................................................ (9)
--------
Pro forma adjustment................................................................... $791
--------
--------
</TABLE>
17. The pro forma adjustment to eliminate historical stockholder's equity of
Skelgas.
24
