Ferrellgas Partners Reports Improved Second-Quarter Results

OVERLAND PARK, Kan., March 9 /PRNewswire-FirstCall/ -- Ferrellgas Partners, L.P. , one of the nation's largest propane distributors, today reported improved earnings for its fiscal second quarter ended January 31, 2007.

Net earnings for the quarter rose nearly 2% to $59.2 million from $58.1 million the year before, while Adjusted EBITDA increased 5.3% to $111.5 million from $105.9 million a year ago. This earnings performance reflects ongoing margin improvement, which more than offset the impact of a warmer start to the winter heating season.

Propane sales volumes decreased 3% to 276 million gallons from 283 million gallons sold in the prior year quarter. Nationwide temperatures from the start of the fiscal second quarter through the middle of January were approximately 5% warmer than a year ago and 15% warmer than normal. Sharply colder weather in the last half of January resulted in nationwide temperatures for the fiscal second quarter being 3% colder than year-ago levels but 10% warmer than normal.

"Because of a natural time lag, the impact of the late January cold weather on our propane gallon demand was felt primarily in February, when propane sales volumes climbed by approximately 20% over prior-year levels," said James E. Ferrell, Chairman and Chief Executive Officer. "Combined with our continued strong margin performance, the higher volumes contributed to an increase in Adjusted EBITDA of over $10 million for the month of February. As a result, we anticipate a record third-quarter performance and feel increasingly confident that we can still achieve our full-year Adjusted EBITDA guidance of $235 million to $245 million." In fiscal 2006, the partnership's Adjusted EBITDA reached a record $215.9 million and the Adjusted EBITDA for the most recent trailing 12-month period ended January 31, 2007, was $220.9 million.

Second-quarter revenues rose to $662.8 million from $652.6 million and gross profit totaled $227.5 million versus $220.8 million in the prior-year quarter. Operating expenses rose to $99.8 million from $97.1 million. However, general and administrative expense declined to $10.0 million from $11.3 million the year before, while equipment lease expense decreased to $6.5 million from $7.2 million.

"Our improved second-quarter performance is especially gratifying in light of the warm start to the winter heating season, which carried through most of the quarter," commented Steve Wambold, President and Chief Operating Officer. "Our performance is a testament to our employees, who have demonstrated once again their ability to produce regardless of what Mother Nature throws their way."

For the first half of fiscal 2007, Adjusted EBITDA increased to $131.2 million from $126.2 million the year before, while gross profit rose to $354.6 million from $348.4 million. Revenues were practically unchanged at $1.04 billion and propane sales volumes decreased to 437 million gallons from 451 million gallons. Operating and general and administrative expenses were $189.9 million and $21.0 million, respectively. Interest and depreciation and amortization expenses for the six-month period were $44.7 million and $43.7 million, respectively, and equipment lease expense for the same period was $13.1 million. Net earnings totaled $29.7 million compared to $32.3 million in the same period last year.

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 and Puerto Rico. Ferrellgas employees indirectly own more than 20 million common units of the partnership through an employee stock ownership plan. More information about the company can be found online at http://www.ferrellgas.com/.

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 end 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 January 31, 2007 July 31, 2006 Current Assets: Cash and cash equivalents $22,916 $16,525 Accounts and notes receivable, net 136,285 116,369 Inventories 140,473 154,613 Prepaid expenses and other current assets 18,843 15,334 Total Current Assets 318,517 302,841 Property, plant and equipment, net 731,032 740,101 Goodwill 249,316 246,050 Intangible assets, net 256,892 248,546 Other assets, net 19,124 11,962 Total Assets $1,574,881 $1,549,500 LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Accounts payable $106,568 $82,212 Short term borrowings 55,771 52,647 Other current liabilities (a) 116,856 140,738 Total Current Liabilities 279,195 275,597 Long-term debt (a) 989,100 983,545 Other liabilities 20,365 19,178 Contingencies and commitments -- -- Minority interest 5,655 5,435 Partners' Capital: Common unitholders (62,950,274 and 60,885,784 units outstanding at January 2007 and July 2006, respectively) 341,041 321,194 General partner unitholder (635,861 and 615,008 units outstanding at January 2007 and July 2006, respectively) (56,628) (56,829) Accumulated other comprehensive income (loss) (3,847) 1,380 Total Partners' Capital 280,566 265,745 Total Liabilities and Partners' Capital $1,574,881 $1,549,500 (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, 2007 AND 2006 (in thousands, except per unit data) (unaudited) 3 mos ended January 31, 6 mos ended January 31, 2007 2006 2007 2006 Revenues: Propane and other gas liquids sales $581,997 $580,381 $926,916 $933,799 Other 80,776 72,187 112,270 104,367 Total revenues 662,773 652,568 1,039,186 1,038,166 Cost of product sold: Propane and other gas liquids sales 380,009 385,615 614,695 631,262 Other 55,301 46,114 69,921 58,469 Gross profit 227,463 220,839 354,570 348,435 Operating expense 99,844 97,085 189,855 186,809 Depreciation and amortization expense 22,035 21,623 43,691 42,726 General and administrative expense 9,963 11,299 21,048 22,467 Equipment lease expense 6,454 7,197 13,098 14,217 Employee stock ownership plan compensation charge 2,739 2,467 5,580 4,924 Loss on disposal of assets and other 3,492 1,041 6,495 2,637 Operating income 82,936 80,127 74,803 74,655 Interest expense (22,329) (21,240) (44,709) (42,115) Interest income 920 531 1,890 908 Earnings before income taxes and minority interest 61,527 59,418 31,984 33,448 Income tax expense 1,672 700 1,882 700 Minority interest (a) 666 654 426 452 Net earnings 59,189 58,064 29,676 32,296 Net earnings available to general partner 6,257 6,605 297 323 Net earnings available to common unitholders $52,932 $51,459 $29,379 $31,973 Earnings Per Unit Basic earnings per common unit available to common unitholders $0.84 $0.85 $0.47 $0.53 Dilutive effect of EITF 03-6 (b) 0.09 0.10 -- -- Adjusted net earnings per unit available to common unitholders $0.93 $0.95 $0.47 $0.53 Weighted average common units outstanding 62,884.2 60,397.4 62,561.4 60,279.7 Supplemental Data and Reconciliation of Non-GAAP Items: 3 mos ended 6 mos ended January 31, January 31, 2007 2006 2007 2006 Propane gallons 275,915 283,292 437,160 450,699 Net earnings $59,189 $58,064 $29,676 $32,296 Income tax expense 1,672 700 1,882 700 Interest expense 22,329 21,240 44,709 42,115 Depreciation and amortization expense 22,035 21,623 43,691 42,726 Interest income (920) (531) (1,890) (908) EBITDA 104,305 101,096 118,068 116,929 Employee stock ownership plan compensation charge 2,739 2,467 5,580 4,924 Unit and stock-based compensation charge (c) 333 688 666 1,235 Loss on disposal of assets and other 3,492 1,041 6,495 2,637 Minority interest 666 654 426 452 Adjusted EBITDA (d) 111,535 105,946 131,235 126,177 Net cash interest expense (e) (22,352) (21,847) (44,272) (42,801) Maintenance capital expenditures (f) (5,735) (3,233) (9,719) (6,059) Cash paid for taxes -- (43) (1,765) (75) Distributable cash flow to equity investors (g) $83,448 $80,823 $75,479 $77,242 (a) Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P. (b) 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 effect of EITF 03-6 on net earnings per limited partner unit will typically impact the three months ending January 31. (c) Statement of Financial Accounting Standards ("SFAS") No. 123( R), "Share-Based Payment" requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. Share-based payment transactions resulted in a non-cash compensation charge of $0.1 million and $0.1 million to operating expense, for the three months ended January 31, 2007 and 2006, respectively, and $0.2 million and $0.2 million to operating expense for the six months ended January 31, 2007 and 2006, respectively. A non-cash compensation charge of $0.2 million and $0.6 million was recorded to general and administrative expense for the three months ended January 31, 2007 and 2006, respectively, and $0.5 million and $1.0 million for the six months ended January 31, 2007 and 2006, respectively. (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, services 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) 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. (f) Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment. (g) 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