Ferrellgas Partners, L.P. Reports Second Quarter Results

OVERLAND PARK, Kan., March 10 /PRNewswire-FirstCall/ -- Ferrellgas Partners, L.P. , one of the nation's largest propane distributors, today reported earnings for its fiscal second quarter ended January 31, 2006.

Net earnings from continuing operations of $58.1 million for the fiscal quarter improved by 8% while Adjusted EBITDA from continuing operations of $105.9 million improved by 4%, each as compared to the second quarter of the prior fiscal year as contributions from the partnership's new operating platform more than offset the impacts of significantly warmer than normal winter temperatures and the high wholesale energy commodity price on customer demand.

Nationwide temperatures for the fiscal quarter, as measured by the National Oceanic and Atmospheric Administration, were 13% warmer than normal and 6% warmer than the same prior year period and for the month of January 2006, nationwide temperatures were 29% warmer than normal and 25% warmer than January 2005 making it the warmest in recorded history. January typically represents the partnership's largest gallon sales month.

Gross profit for the second fiscal quarter was $220.8 million compared to $217.3 million achieved in the second quarter of fiscal 2005, as improved margins resulting from enhanced pricing controls available under the new operating platform and the continued growth in the Blue Rhino-branded tank exchange sales more than offset the impact of reduced propane gallon sales in the fiscal quarter.

Propane gallon sales for the second fiscal quarter were 283.3 million compared to 331.5 million gallons sold in the second quarter of fiscal 2005. For the first two months of the second fiscal quarter propane gallon sales were off 7% compared to the same two-month period last year. However, with the record-setting nationwide warm temperatures experienced during the month of January, gallon sales for the fiscal quarter were most notably impacted by January 2006 gallons sales that were off 27% compared to the same period last year.

"Despite the impact from January's record warm temperatures, we are proud of how our company managed through this challenging quarter," said James E. Ferrell, Chairman, President and Chief Executive Officer. "We are pleased that we continued our positive earnings momentum in the first two months of the quarter by improving our year-to-date Adjusted EBITDA by more than $24 million compared to the first five months of fiscal 2005. With the return of some cooler temperatures at the beginning of our 3rd quarter, we are again experiencing significant earnings improvement that we believe will be reflected in our Adjusted EBITDA results in the last half of fiscal 2006."

Operating expense for the fiscal quarter was $96.6 million, down from $97.4 million in the second quarter of fiscal 2005. Anticipated savings achieved from the new operating platform were offset by increased variable expenses, including vehicle fuel costs and the continued growth in tank exchange sales volumes. General and administrative expense for the second fiscal quarter was $11.8 million, which is consistent with the second quarter of fiscal 2005 and equipment lease expense was $7.2 million, which is consistent with the prior two fiscal quarters.

"This quarter's challenging environment gave us the opportunity to showcase the capabilities of our new operating model. Although we are still fine tuning the new model in an effort to better optimize our resources, the results thus far are very impressive," said Mr. Ferrell. "Most notably, we are pleased with the improved control we have in pricing our product to the various channels of our business. With quicker access to better customer information, we were able to improve margins this last quarter while continuing to grow our net customer base."

For the six-months ended January 31, 2006, propane sales volumes and gross profit were 451 million gallons and $348.4 million, respectively, and operating and general and administrative expenses were $186.3 million and $22.9 million, respectively. Interest and depreciation and amortization expenses for the six-month period were $42.1 million and $42.7 million, respectively, and equipment lease expense for the period was $14.2 million. Adjusted EBITDA from continuing operations and net earnings from continuing operations for the period were $126.2 million and $32.3 million, respectively.

Ferrellgas Partners, L.P., through its operating partnership, Ferrellgas, L.P., serves more than one million customers in all 50 states, the District of Columbia, Puerto Rico and Canada. Ferrellgas employees indirectly own more than 18 million common units of the partnership through an employee stock ownership plan.

Statements in this release concerning expectations for the future are forward-looking statements. A variety of known and unknown risks, uncertainties and other factors could cause results, performance and expectations to differ materially from anticipated results, performance and expectations. These risks, uncertainties and other factors are discussed in the Form 10-K of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas Finance Corp. for the fiscal year ended July 31, 2005, as amended on Form 10K/A, and other documents filed from time to time by these entities with the Securities and Exchange Commission.

Contact: Ryan VanWinkle, Investor Relations, 913-661-1528 Scott Brockelmeyer, Media Relations, 913-661-1830 FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) (unaudited) ASSETS January 31, 2006 July 31, 2005 Current Assets: Cash and cash equivalents $30,212 $20,505 Accounts and notes receivable, net 118,705 107,778 Inventories 138,267 97,743 Prepaid expenses and other current assets 15,811 12,861 Total Current Assets 302,995 238,887 Property, plant and equipment, net 745,874 766,765 Goodwill 233,805 234,142 Intangible assets, net 254,474 255,277 Other assets, net 12,784 13,902 Total Assets $1,549,932 $1,508,973 LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Accounts payable $148,907 $108,667 Short term borrowings 22,167 19,800 Other current liabilities (a) 73,975 71,535 Total Current Liabilities 245,049 200,002 Long-term debt (a) 961,473 948,977 Other liabilities 20,120 20,165 Contingencies and commitments - - Minority interest 6,000 6,151 Partners' Capital: Common unitholders (60,478,074 and 60,134,054 units outstanding at January 2006 and July 2005, respectively) 375,133 390,422 General partner unitholder (610,890 and 607,415 units outstanding at January 2006 and July 2005, respectively) (56,285) (56,132) Accumulated other comprehensive loss (1,558) (612) Total Partners' Capital 317,290 333,678 Total Liabilities and Partners' Capital $1,549,932 $1,508,973 (a) The principal difference between the Ferrellgas Partners, L.P. balance sheet and that of Ferrellgas, L.P., is $268 million of 8 3/4% notes which are liabilities of Ferrellgas Partners, L.P. and not of Ferrellgas, L.P. FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2006 AND 2005 (in thousands, except per unit data) (unaudited) Three months ended Six months ended January 31, January 31, 2006 2005 2006 2005 Revenues: Propane and other gas liquids sales $580,381 $574,875 $933,799 $887,897 Other 72,187 47,016 104,367 77,766 Total revenues 652,568 621,891 1,038,166 965,663 Cost of product sold: Propane and other gas liquids sales 385,615 380,340 631,262 599,846 Other 46,114 24,284 58,469 36,010 Gross profit 220,839 217,267 348,435 329,807 Operating expense 96,611 97,388 186,335 185,860 Depreciation and amortization expense 21,623 21,032 42,726 40,624 General and administrative expense 11,773 11,517 22,941 21,839 Equipment lease expense 7,197 6,147 14,217 11,907 Employee stock ownership plan compensation charge 2,467 2,358 4,924 4,445 Loss on sale of assets and other 1,041 1,817 2,637 3,073 Operating income 80,127 77,008 74,655 62,059 Interest expense (21,240) (23,196) (42,115) (46,059) Interest income 531 657 908 976 Earnings before income taxes, minority interest, and discontinued operations 59,418 54,469 33,448 16,976 Income tax expense (benefit) 700 339 700 (67) Minority interest (b) 654 608 452 295 Earnings from continuing operations before discontinued operations 58,064 53,522 32,296 16,748 Earnings from discontinued operations, net of minority interest - 3,596 - 5,381 Net earnings 58,064 57,118 32,296 22,129 Distributions to senior unitholder - 1,994 - 3,988 Net earnings available to general partner 6,605 7,595 323 181 Net earnings available to common unitholders $51,459 $47,529 $31,973 $17,960 Basic earnings per common unit: Net earnings available to common unitholders before discontinued operations (c) $0.85 $0.82 $0.53 $0.25 Earnings from discontinued operations - 0.06 - 0.10 Net earnings available to common unitholders (e) $0.85 $0.88 $0.53 $0.35 Weighted average common units outstanding 60,397.4 53,706.5 60,279.7 52,032.5 Supplemental Data and Reconciliation of Non-GAAP Items: Three months ended Six months ended January 31, January 31, 2006 2005 2006 2005 Propane gallons (j) 283,292 331,461 450,699 516,160 Net earnings $58,064 $57,118 $32,296 $22,129 Income tax expense (benefit) 700 339 700 (67) Interest expense 21,240 23,196 42,115 46,059 Depreciation and amortization expense 21,623 21,032 42,726 40,624 Interest income (531) (657) (908) (976) EBITDA 101,096 101,028 116,929 107,769 Employee stock ownership plan compensation charge 2,467 2,358 4,924 4,445 Unit and stock-based compensation charge (f) 688 - 1,235 - Non-cash charges related to discontinued operations(a) - 338 - 611 Loss on disposal of assets and other 1,041 1,817 2,637 3,073 Minority interest (b) 654 608 452 295 Adjusted EBITDA (d) 105,946 106,149 126,177 116,193 Adjusted EBITDA from discontinued operations - 3,934 - 5,992 Adjusted EBITDA from continuing operations 105,946 102,215 126,177 110,201 Net cash interest expense (g) (21,847) (22,537) (42,801) (44,601) Maintenance capital expenditures (h) (3,233) (5,217) (6,059) (11,041) Distributable cash flow to equity investors (i) $80,866 $74,461 $77,317 $54,559 (a) Non-cash earnings related to the storage and distribution business sold during July 2005 that were classified as discontinued operations for the three and six months ended January 31, 2005. (b) Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P. (c) Amount calculated as 99% of the earnings (loss) before discontinued operations less distribution to senior unit holder; the result then divided by the weighted average common units outstanding. (d) Management considers Adjusted EBITDA to be a chief measurement of the partnership's overall economic performance and return on invested capital. Adjusted EBITDA is calculated as earnings before interest, income taxes, depreciation and amortization, employee stock ownership plan compensation charge, unit and stock-based compensation charge, loss on disposal of assets and other, minority interest, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership's performance in a manner similar to the method management uses, adjusted for items management believes are unusual or non-recurring, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, management believes this measure is consistent with the manner in which the partnership's lenders and investors measure its overall performance and liquidity, including its ability to pay quarterly equity distributions, service its long-term debt and other fixed obligations and to fund its capital expenditures and working capital requirements. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP. (e) Emerging Issues Task Force ("EITF") 03-6 "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share," requires the calculation of net earnings per limited partner unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings for the period had to be distributed. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of earnings to the limited partners. Due to the seasonality of the propane business, the dilution of effect of the EITF 03-6 on net earnings per limited partner unit will typically impact the three months ending January 31. The dilutive effect of EITF 03-6 on basic net earnings per common unit was $0.10 and $0.14 for the three months ended January 31, 2006 and 2005, respectively. EITF 03-6 did not result in a dilutive effect for the six months ended January 31, 2006 and 2005. (f) Statement of Financial Accounting Standards ("SFAS") No. 123( R), "Share-Based Payment" was adopted during the first quarter of fiscal 2006 and requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. Management adopted this standard using the modified prospective application method which resulted in a non-cash compensation charge of $0.1 million and $0.6 million to operating expense and general and administrative expense, respectively, for the three months ended January 31, 2006, and $0.2 million and $1.0 million to operating expense and general and administrative expense, respectively, for the six months ended January 31, 2006. (g) Net cash interest expense is the sum of interest expense less non-cash interest expense and interest income. This amount also includes interest expense related to the accounts receivable securitization facility. (h) Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment. (i) Management considers Distributable cash flow to equity investors a meaningful non-GAAP measure of the partnership's ability to declare and pay quarterly distributions to common unitholders. Distributable cash flow, as management defines it, may not be comparable to distributable cash flow or similarly titled measures used by other corporations and partnerships. (j) Propane gallons includes 2.1 million gallons and 2.8 million gallons for the three and six months ended January 31, 2005 related to the storage and distribution business sold during July 2005 that were classified as discontinued operations.