Ferrellgas Partners, L.P. Announces Record Fiscal 2006 Results

OVERLAND PARK, Kan., Oct. 12 /PRNewswire-FirstCall/ -- Ferrellgas Partners, L.P. , one of the nation's largest propane distributors, today reported record Adjusted EBITDA results for the year ended July 31, 2006.

"We are proud to deliver these significantly improved financial results to our investors this fiscal year," said James E. Ferrell, Chairman and Chief Executive Officer. "Our record Adjusted EBITDA results were achieved, in large part, by enhanced capabilities afforded us through our new operating system, which helped to improve margins, reduce propane distribution expenses and greatly improve customer service."

Fiscal 2006 earnings from continuing operations of $25.0 million improved by more than $40 million and Adjusted EBITDA from continuing operations was a record $215.9 million, improving by more than 20% or $36.1 million, each as compared to the prior year results.

Gross profit for the fiscal year was a record $663.8 million, a $50.0 million increase as compared to $613.8 million achieved in fiscal 2005, reflecting improved margins resulting from enhanced pricing controls made available by the new retail operating platform. Propane sales for the fiscal year were 809 million gallons compared to 898 million gallons sold in fiscal 2005, as nationwide temperatures were 11% warmer than normal and customers continued to conserve usage with elevated wholesale propane prices that on average were up more than 25% compared to fiscal 2005.

Operating and general and administrative expenses for the fiscal year were $374.8 million and $47.7 million, respectively, compared to $366.2 million and $42.3 million, respectively, as savings achieved from the new operating platform were offset by increased variable expenses, including the continued growth in tank exchange sales volumes, added vehicle fuel costs, and higher performance-based incentive compensation. Fiscal 2006 equipment lease expense was $27.3 million, compared to $25.5 million in fiscal 2005, primarily reflecting the addition of leased equipment related to the partnership's technology initiative. Interest expense for the fiscal year was $84.2 million, down from $91.5 million in fiscal 2005.

"Our operations performed exceptionally well in fiscal 2006 despite the significant impacts that warmer weather and high commodity prices had on our industry," said Steve Wambold, President and Chief Operating Officer. "Our significant improvement in earnings and operations this year should give investors confidence that we have built a strong foundation to support our anticipated future growth."

For the fourth quarter, propane sales volumes and gross profit were 127 million gallons and $121.1 million, respectively. Operating and general and administrative expenses were $92.9 million and $12.9 million, respectively. Interest expense and equipment lease expense were $21.3 million and $6.6 million, respectively. These results produced an expected Adjusted EBITDA of $8.9 million and a seasonal net loss of $38.2 million for the fourth fiscal quarter.

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 20 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, 2006, and other documents filed from time to time by these entities with the Securities and Exchange Commission.

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) (unaudited) ASSETS July 31, 2006 July 31, 2005 Current Assets: Cash and cash equivalents $16,525 $20,505 Accounts and notes receivable, net 116,369 107,778 Inventories 154,613 97,743 Prepaid expenses and other current assets 15,334 12,861 Total Current Assets 302,841 238,887 Property, plant and equipment, net 740,101 766,765 Goodwill 246,050 234,142 Intangible assets, net 248,546 255,277 Other assets, net 11,962 13,902 Total Assets $1,549,500 $1,508,973 LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Accounts payable $128,049 $108,667 Short term borrowings 52,647 19,800 Other current liabilities (a) 94,901 71,535 Total Current Liabilities 275,597 200,002 Long-term debt (a) 983,545 948,977 Other liabilities 19,178 20,165 Contingencies and commitments - - Minority interest 5,435 6,151 Partners' Capital: Common unitholders (60,885,784 and 60,134,054 units outstanding at 2006 and 2005, respectively) 321,194 390,422 General partner unitholder (615,008 and 607,415 units outstanding at 2006 and 2005, respectively) (56,829) (56,132) Accumulated other comprehensive income (loss) 1,380 (612) Total Partners' Capital 265,745 333,678 Total Liabilities and Partners' Capital $1,549,500 $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 and related accrued interest 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 TWELVE MONTHS ENDED JULY 31, 2006 AND 2005 (in thousands, except per unit data) (unaudited) Three months ended Twelve months ended July 31, July 31, 2006 2005 2006 2005 Revenues: Propane and other gas liquids sales $297,309 $261,908 $1,697,940 $1,592,325 Other 33,969 34,442 197,530 161,789 Total revenues 331,278 296,350 1,895,470 1,754,114 Cost of product sold: Propane and other gas liquids sales 189,551 170,314 1,109,177 1,052,005 Other 20,662 19,777 122,450 88,293 Gross profit 121,065 106,259 663,843 613,816 Operating expense 92,949 86,864 374,843 366,192 Depreciation and amortization expense 21,089 21,509 84,953 83,060 General and administrative expense 12,896 10,664 47,689 42,342 Equipment lease expense 6,597 6,821 27,320 25,495 Employee stock ownership plan compensation charge 2,756 3,814 10,277 12,266 Loss on disposal of assets and other 2,021 4,070 7,539 8,673 Operating income (loss) (17,243) (27,483) 111,222 75,788 Interest expense (21,342) (22,848) (84,235) (91,518) Interest income 581 368 2,046 1,894 Earnings (loss) before income taxes, minority interest, and discontinued operations (38,004) (49,963) 29,033 (13,836) Income tax expense 553 879 3,524 1,447 Minority interest (a) (329) (452) 500 92 Earnings (loss) from continuing operations before discontinued operations (38,228) (50,390) 25,009 (15,375) Earnings from discontinued operations, net of minority interest - 97,027 - 104,189 Net earnings (loss) (38,228) 46,637 25,009 88,814 Distributions to senior unitholder - 1,323 - 7,305 Net earnings (loss) available to general partner (382) 3,146 250 815 Net earnings (loss) available to common unitholders $(37,846) $42,168 $24,759 $80,694 Basic earnings per common unit: Earnings (loss) from continuing operations available to common unitholders before discontinued operations (b) $(0.62) $(0.91) $0.41 $(0.41) Earnings from discontinued operations - 1.66 - 1.91 Net earnings (loss) available to common unitholders (c) $(0.62) $0.75 $0.41 $1.50 Weighted average common units outstanding 60,795.4 56,460.5 60,459.5 53,945.4 Supplemental Data and Reconciliation of Non-GAAP Items: Three months ended Twelve months ended July 31, July 31, 2006 2005 2006 2005 Propane gallons (d) 127,005 130,053 808,890 897,606 Net earnings (loss) $(38,228) $46,637 $25,009 $88,814 Income tax expense 553 879 3,524 1,447 Interest expense 21,342 22,848 84,235 91,518 Depreciation and amortization expense 21,089 21,509 84,953 83,060 Interest income (581) (368) (2,046) (1,894) EBITDA 4,175 91,505 195,675 262,945 Employee stock ownership plan compensation charge 2,756 3,814 10,277 12,266 Unit and stock-based compensation charge (e) 282 - 1,863 - Loss on disposal of assets and other 2,021 4,070 7,539 8,673 Minority interest (a) (329) (452) 500 92 Non-cash charges related to discontinued operations(f) - 270 - 1,236 Gain on sale of discontinued operations, net of minority interest - (96,021) - (96,021) Adjusted EBITDA (g) 8,905 3,186 215,854 189,191 Adjusted EBITDA from discontinued operations - (1,276) - (9,404) Adjusted EBITDA from continuing operations 8,905 1,910 215,854 179,787 Net cash interest expense (h) (21,432) (22,628) (85,769) (89,543) Maintenance capital expenditures (i) (3,545) (2,591) (13,003) (17,326) Distributable cash flow to equity investors (j) $(16,072) $(23,309) $117,082 $72,918 (a) Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P. (b) 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. (c) 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. However, the dilutive effect of EITF 03-6 on basic net earnings per common unit was $0.04 for the three months ended July 31, 2005 due to the gain on the sale of the storage and distribution business during July 2005. (d) Propane gallons includes 0.4 million gallons and 3.8 million gallons for the three and twelve months ended July 31, 2005 related to the storage and distribution business sold during July 2005 that were classified as discontinued operations. (e) 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 $0.2 million to operating expense and general and administrative expense, respectively, for the three months ended July 31, 2006, and $0.5 million and $1.4 million to operating expense and general and administrative expense, respectively,for the twelve months ended July 31, 2006. (f) Non-cash earnings related to the storage and distribution business sold during July 2005 that were classified as discontinued operations for the three and twelve months ended July 31, 2005. (g) 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. (h) 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. (i) Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment. (j) 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. Contact: Ryan VanWinkle, Investor Relations, 913-661-1528 Scott Brockelmeyer, Media Relations, 913-661-1830