10-Q 1 form10q121002.txt FIRST QUARTER FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the three months ended October 31, 2002 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission file numbers: 1-11331 333-06693 Ferrellgas Partners, L.P. Ferrellgas Partners Finance Corp. ---------------------------------------------------------- (Exact name of registrants as specified in their charters) Delaware 43-1698480 Delaware 43-1742520 --------------------------------- ------------------------------------- (States or other jurisdictions of (I.R.S. Employer Identification Nos.) incorporation or organization) One Liberty Plaza, Liberty, Missouri 64068 ------------------------------------------ (Address of principal executive offices) (Zip Code) Registrants' telephone number, including area code: (816) 792-1600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] At November 29, 2002, the registrants had units or shares outstanding as follows: Ferrellgas Partners, L.P. 36,134,828 Common Units 2,782,211 Senior Units Ferrellgas Partners Finance Corp. 1,000 Common Stock FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES FERRELLGAS PARTNERS FINANCE CORP. Table of Contents Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Ferrellgas Partners, L.P. and Subsidiaries Consolidated Balance Sheets - October 31, 2002 (unaudited) and July 31, 2002 1 Consolidated Statements of Earnings - Three months ended October 31, 2002 and 2001 (unaudited) 2 Consolidated Statement of Partners' Capital - Three months ended October 31, 2002 (unaudited) 3 Consolidated Statements of Cash Flows - Three months ended October 31, 2002 and 2001 (unaudited) 4 Notes to Consolidated Financial Statements (unaudited) 5 Ferrellgas Partners Finance Corp. Balance Sheets - October 31, 2002 (unaudited) and July 31, 2002 11 Statements of Earnings - Three months ended October 31, 2002 and 2001 (unaudited) 11 Statements of Cash Flows - Three months ended October 31, 2002 and 2001 (unaudited) 12 Notes to Financial Statements (unaudited) 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20 ITEM 4. CONTROLS AND PROCEDURES 21 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 21 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 21 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21 ITEM 5. OTHER INFORMATION 22 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) October 31, July 31, ASSETS 2002 2002 ---------------------------------------------- ----------- ----------- (unaudited) Current Assets: Cash and cash equivalents $ 14,516 $ 19,781 Accounts and notes receivable, net 48,050 74,274 Inventories 76,855 48,034 Prepaid expenses and other current assets 11,299 10,724 ----------- ----------- Total Current Assets 150,720 152,813 Property, plant and equipment, net 508,137 506,531 Goodwill 124,190 124,190 Intangible assets, net 95,231 98,170 Other assets, net 17,335 3,424 ----------- ----------- Total Assets $ 895,613 $ 885,128 =========== =========== LIABILITIES AND PARTNERS' CAPITAL ---------------------------------------------- Current Liabilities: Accounts payable $ 98,594 $ 54,316 Other current liabilities 66,406 89,061 Short-term borrowings 21,500 - ----------- ----------- Total Current Liabilities 186,500 143,377 Long-term debt 713,003 703,858 Other liabilities 17,518 14,861 Contingencies and commitments (Note H) - - Minority interest 1,485 1,871 Partners' Capital: Senior unitholder (2,782,211 units outstanding at October 31, 2002 and July 31, 2002 - liquidation preference $111,288 at October 31, 2002 and July 31, 2002) 111,288 111,288 Common unitholders (36,105,828 and 36,081,203 units outstanding at October 31, 2002 and July 31, 2002, repectively) (72,050) (28,320) General partner unitholder (392,815 and 392,556 units outstanding at October 31, 2002 and July 31, 2002, respectively) (59,507) (59,035) Accumulated other comprehensive loss (2,624) (2,772) ----------- ----------- Total Partners' Capital (22,893) 21,161 ----------- ----------- Total Liabilities and Partners' Capital $ 895,613 $ 885,128 =========== =========== See notes to consolidated financial statements.
1 FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per unit data) (unaudited) For the three months ended ----------------------------------- October 31, 2002 October 31, 2001 ---------------- ---------------- Revenues: Gas liquids and related product sales $ 194,900 $ 224,285 Other 21,414 20,958 ----------------- ---------------- Total revenues 216,314 245,243 Cost of product sold (exclusive of depreciation, shown separately below) 123,672 149,947 ----------------- ---------------- Gross profit 92,642 95,296 Operating expense 68,428 67,127 Depreciation and amortization expense 9,895 11,454 General and administrative expense 6,902 6,825 Equipment lease expense 5,992 6,545 Employee stock ownership plan compensation charge 1,395 1,309 Loss on disposal of assets and other 671 847 ----------------- ---------------- Operating income (loss) (641) 1,189 Interest expense (14,696) (15,114) Interest income 62 326 Early extinguishment of debt expense (7,052) - ----------------- ---------------- Loss before minority interest and cumulative effect of change in accounting principle (22,327) (13,599) Minority interest (115) (97) ----------------- ---------------- Loss before cumulative effect of change in accounting principle (22,212) (13,502) Cumulative effect of change in accounting principle, net of minority interest of $28 (2,754) - ----------------- ---------------- Net loss (24,966) (13,502) Distribution to senior unitholder 2,782 2,802 Net loss available to general partner (277) (163) ----------------- ---------------- Net loss available to common unitholders $ (27,471) $ (16,141) ================= ================ Basic loss per common unit: Net loss available to common unitholders before cumulative effect of change in accounting principle $ (0.69) $ (0.45) Cumulative effect of change in accounting principle (0.07) - ----------------- ---------------- Net loss available to common unitholders $ (0.76) $ (0.45) ================= ================
See notes to consolidated financial statements. 2 FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (in thousands) (unaudited) Number of units Accumulated ----------------------------- other General General compre- Total Senior Common partner Senior Common partner hensive partners' unitholder unitholders unitholder unitholder unitholders unitholder loss capital ---------- ----------- ---------- ---------- ----------- ---------- ----------- ----------- August 1, 2002 2,782.2 36,081.2 392.6 $111,288 $ (28,320) $ (59,035) $ (2,772) $21,161 Contribution in connection with ESOP compensation charge - - - - 1,368 13 - 1,381 Common unit cash distribution - - - - (18,043) (182) - (18,225) Senior unit accrued distribution - - - - (2,754) (56) - (2,810) Common unit options exercised - 24.6 0.2 - 414 4 - 418 Comprehensive loss: Net loss - - - - (24,715) (251) - (24,966) Other comprehensive income: Risk management fair value adjustment - - - - - - 148 148 ------------ Comprehensive loss (24,818) ---------- ----------- ---------- ---------- ----------- ---------- ----------- ------------ October 31, 2002 2,782.2 36,105.8 392.8 $111,288 $ (72,050) $ (59,507) $ (2,624) $ (22,893) ========== =========== ========= ========== =========== ========== =========== ============
See notes to consolidated financial statements. 3 FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) For the three months ended ----------------------------------- October 31, 2002 October 31, 2001 ----------------- ---------------- Cash Flows From Operating Activities: Loss before cumulative effect of change in accounting principle $ (22,212) $ (13,502) Adjustments to reconcile loss before cumulative effect of change in accounting principle to net cash used in operating activities: Early extinguishment of debt expense 1,854 - Depreciation and amortization expense 9,895 11,454 Employee stock ownership plan compensation charge 1,395 1,309 Minority interest (115) (97) Other 1,754 742 Changes in operating assets and liabilities, net of effects from business acquisitions: Accounts and notes receivable, net of securitization (24,485) (15,739) Inventories (28,821) (14,096) Prepaid expenses and other current assets (2,302) (6,084) Accounts payable 44,278 44,653 Accrued interest expense (10,098) (6,395) Other current liabilities (11,852) (8,824) Other liabilities (465) (150) ----------------- ---------------- Net cash used in operating activities (41,174) (6,729) ----------------- ---------------- Cash Flows From Investing Activities: Business acquisitions, net of cash acquired (249) (522) Capital expenditures - technology initiative (4,439) (2,191) Capital expenditures - other (4,942) (3,818) Net proceeds from accounts receivable securitization 40,000 3,000 Other 886 1,342 ----------------- ---------------- Net cash provided by (used in) investing activities 31,256 (2,189) ----------------- ---------------- Cash Flows From Financing Activities: Distributions (21,035) (20,967) Proceeds from issuance of debt 170,000 24,242 Principal payments on debt (161,042) (1,145) Net additions to short-term borrowings 21,500 458 Cash paid for debt issue costs (4,809) - Minority interest activity (257) (214) Proceeds from exercise of common unit options 296 525 ----------------- ---------------- Net cash provided by financing activities 4,653 2,899 ----------------- ---------------- Decrease in cash and cash equivalents $ (5,265) $ (6,019) Cash and cash equivalents - beginning of period 19,781 25,386 ----------------- ---------------- Cash and cash equivalents - end of period $14,516 $19,367 ================= ================ Cash paid for interest $24,168 $20,935 ================= ================
See notes to consolidated financial statements. 4 FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2002 (Dollars in thousands, except per unit data) (unaudited) A. Organization Ferrellgas Partners, L.P. activities are primarily conducted through its subsidiary Ferrellgas, L.P. Ferrellgas Partners is the sole limited partner of Ferrellgas, L.P. with a 99% limited partner interest. Ferrellgas Partners and Ferrellgas L.P. are together referred to as Ferrellgas. The general partner of both Ferrellgas Partners and Ferrellgas, L.P. is Ferrellgas, Inc., which owns an effective 2% general partner interest in Ferrellgas on a combined basis. The consolidated financial statements of Ferrellgas Partners and Subsidiaries reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the interim periods presented. All adjustments to the consolidated financial statements were of a normal, recurring nature. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, and the consolidated financial statements and accompanying notes included in Ferrellgas' Annual Report on Form 10-K for the year ended July 31, 2002. B. Accounting estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the consolidated financial statements include accruals that have been established for product liability and other claims. C. Reclassifications Certain reclassifications have been made to the three months ended October 31, 2001 consolidated financial statements to conform to the three months ended October 31, 2002 consolidated financial statement presentation. D. Nature of operations Ferrellgas is engaged primarily in the retail distribution of propane and related equipment and supplies in the United States. The retail market is seasonal because propane is used primarily for heating in residential and commercial buildings. Therefore, the results of operations for the three months ended October 31, 2002 and 2001 are not necessarily indicative of the results to be expected for a full fiscal year. 5 E. Supplemental Balance Sheet and Statement of Earnings Information: Inventories consist of: October 31, July 31, 2002 2002 ----------- ---------- Propane gas and related products $58,983 $29,169 Appliances, parts and supplies 17,872 18,865 ----------- ---------- $76,855 $48,034 =========== ==========
In addition to inventories on hand, Ferrellgas enters into contracts to buy product for supply purposes. Nearly all of these contracts have terms of less than one year and most call for payment based on market prices at the date of delivery. All fixed price contracts have terms of less than one year. As of October 31, 2002, in addition to the inventory on hand, Ferrellgas had committed to take net delivery of approximately 19.4 million gallons of propane at a fixed price. Property, plant and equipment, net consist of: October 31, July 31, 2002 2002 ----------- ---------- Property, plant and equipment $815,663 $810,416 Less: accumulated depreciation 307,526 303,885 ----------- ---------- $508,137 $506,531 =========== ==========
Intangible assets, consist of: October 31, 2002 July 31, 2002 ----------------------------------- ------------------------------------ Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Net Amount Amortization Net ---------- ------------ --------- ---------- ------------- --------- Customer lists $208,768 $(126,962) $81,806 $208,662 $(124,860) $83,802 Non-compete agreements 62,953 (49,528) 13,425 62,893 (48,525) 14,368 ---------- ------------ --------- ---------- ------------- --------- Total $271,721 $(176,490) $95,231 $271,555 $(173,385) $98,170 ========== ============ ========= ========== ============= =========
Aggregate Amortization Expense: 2002 2001 --------- --------- For the three months ended October 31 $3,105 $4,379 Estimated Amortization Expense: For the year ended July 31, 2003 $11,656 2004 10,682 2005 10,150 2006 9,631 2007 8,991 6 Other assets, consist of: October 31, July 31, 2002 2002 ----------- ----------- Debt issue costs, net $ 6,469 $2,399 Investment in unconsolidated subsidiary 9,610 - Other assets, net 1,256 1,025 ----------- ----------- $17,335 $3,424 =========== ===========
On September 24, 2002, Ferrellgas Partners issued $170.0 million of 8.75% senior notes due 2012, the proceeds of which were used to repurchase and redeem the $160.0 million of 9.375% senior secured notes due 2006. Debt issue costs of $4.8 million related to the $170.0 million senior note issuance were capitalized. As a result of the repurchase and redemption of the $160.0 million senior secured notes, Ferrellgas expensed $1.9 million of unamortized debt issue costs. The investment in unconsolidated subsidiary represents Ferrellgas' investment in Ferrellgas Receivables, LLC and is accounted for on an equity basis. During the three months ended October 31, 2002, Ferrellgas increased its funding from the subsidiary. See discussion of the transactions between Ferrellgas and Ferrellgas Receivables in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Investing Activities." F. Long-Term Debt Long-term debt consists of: October 31, July 31, 2002 2002 ----------- ----------- Senior Notes Fixed rate, 7.16%, due 2005-2013 $350,000 $350,000 Fixed rate, 8.75%, due 2012 170,000 - Fixed rate, 9.375%, due 2006 - 160,000 Fixed rate, 8.8%, due 2006-2009 184,000 184,000 Notes payable, 7.7% and 7.6% weighted average interest rates, respectively, due 2002 to 2011 11,444 12,177 ----------- ----------- 715,444 706,177 Less: current portion 2,441 2,319 ----------- ----------- $713,003 $703,858 =========== ===========
On September 24, 2002, Ferrellgas issued $170.0 million of 8.75% senior notes due 2012, the proceeds of which were used to repurchase and redeem the $160.0 million of 9.375% senior secured notes due 2006. During the three months ended October 31, 2002, Ferrellgas recognized $7.1 million of early extinguishment of debt expense related to the $5.2 million of premium and other costs incurred to repurchase and redeem the $160.0 million senior secured notes and the write-off of $1.9 million of unamortized debt issue costs. Interest on the $170.0 million senior notes is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2002. The $170.0 million senior notes are unsecured and are not redeemable before June 15, 2007, except in specific circumstances. 7 The scheduled annual principal payments on long-term debt as of October 31, 2002 are as follows: Scheduled annual Fiscal Year principal payments ----------- ------------------ 2003 $ 2,441 2004 2,178 2005 2,345 2006 111,358 2007 58,987 Thereafter 538,135 As of October 31, 2002, Ferrellgas had borrowings of $21.5 million under its $157.0 million bank credit facility. On December 10, 2002, this bank credit facility was refinanced with an amended $307.5 million bank credit facility and $156.8 million of the funds available were used to purchase propane tanks and related assets, including accrued interest, that were previously leased. The remaining portion of the amended bank credit facility is available for working capital purposes, acquisitions, capital expenditures and general partnership purposes. This amended bank credit facility will terminate on April 28, 2006, unless extended or renewed. G. Asset Retirement Obligations Statement of Financial Accounting Standard (SFAS) No. 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets, including the requirement that a liability be recognized if there is a legal or financial obligation associated with the retirement of the assets. Ferrellgas adopted SFAS No. 143 beginning in the year ending July 31, 2003. This cumulative effect of a change in accounting principle resulted in a one-time charge to earnings of $2.8 million during the three months ended October 31, 2002, together with the recognition of a $3.1 million long-term liability and a $0.3 million long-term asset. Ferrellgas believes the implementation will not have a material ongoing effect on its financial position, results of operations and cash flows. These obligations relate primarily to the estimated future expenditures required to retire Ferrellgas' underground storage facilities. These facilities will require closure and remediation expenditures in approximately 50 years. The following table presents a reconciliation of the beginning and ending carrying amounts of the asset retirement obligation: Three months ended October 31, 2002 ------------ Asset retirement obligation as of August 1, 2002 $3,073 Add: Accretion expense 49 ------------ Asset retirement obligation as of October 31, 2002 $3,122 ============ The related asset carried for the purpose of settling the asset retirement obligation is $0.3 million as of October 31, 2002, and is not a legally restricted asset. Assuming retroactive application of the change in accounting principle as of August 1, 2001, there would be no material change in the pro forma net loss for the three months ended October 31, 2001. Other liabilities, assuming retroactive application of the change in accounting principle as of August 1, 2001 and July 31, 2002, would have increased $2.9 million and $3.1 million, respectively. 8 H. Contingencies Ferrellgas is threatened with or named as a defendant in various lawsuits that, among other items, claim damages for product liability. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that will have a material adverse effect on the financial condition, results of operations and cash flows of Ferrellgas. Currently, Ferrellgas is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. I. Distributions On September 13, 2002, Ferrellgas paid cash distributions of $1.00 and $0.50 per senior and common unit, respectively, for the three months ended July 31, 2002. On December 13, 2002, Ferrellgas will pay cash distributions of $1.00 and $0.50 per senior and common unit, respectively, for the three months ended October 31, 2002. J. Loss Per Common Unit Below is a calculation of the basic loss per common unit in the consolidated statements of earnings for the periods indicated. As there are losses from continuing operations for the three months ended October 31, 2002 and 2001, a calculation for diluted earnings per common unit for each period was not performed, since the impact would be antidilutive. The senior units are considered contingently issuable common units for which all necessary conditions for their issuance have not been satisfied as of the end of the reporting period. In order to compute the basic loss per common unit, the distributions on senior units are added to the net loss to compute the net loss available to common unitholders. Three months ended ---------------------------------- October 31 October 31 2002 2001 --------------- --------------- Net loss available to common unitholders before cumulative effect of change in accounting principle $(24,717) $(16,141) Cumulative effect of change in accounting principle, net of minority interest of $28 (2,754) - Net loss available to common unitholders $(27,471) $(16,141) --------------- --------------- Weighted average common units outstanding 36,088 35,919 --------------- --------------- Basic loss per common unit: Net loss available to common unitholders before cumulative effect of change in accounting principle $ (0.69) $ (0.45) Cumulative effect of change in accounting principle - (0.07) --------------- --------------- Net loss available to common unitholders $ (0.76) $ (0.45) =============== ===============
9 K. Adoption of New Accounting Standards The Financial Accounting Standards Board recently issued SFAS No. 143 "Accounting for Asset Retirement Obligations", SFAS No. 144 "Accounting for the Impairment or Disposal of Long-lived Assets", SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" and FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." SFAS No. 143 required the recognition of a liability if a company has a legal or contractual financial obligation in connection with the retirement of a tangible long-lived asset. Ferrellgas implemented SFAS No. 143 beginning in the year ending July 31, 2003. This cumulative effect of a change in accounting principle resulted in a one-time charge to earnings of $2.8 million during the three months ended October 31, 2002, together with the recognition of a $3.1 million long-term liability and a $0.3 million long-term asset. See Note G for further discussion of these obligations. Ferrellgas believes the implementation will not have a material ongoing effect on its financial position, results of operations and cash flows. SFAS No. 144 modified the financial accounting and reporting for long-lived assets to be disposed of by sale and it broadens the presentation of discontinued operations to include more disposal transactions. Ferrellgas implemented SFAS No. 144 beginning in the year ending July 31, 2003, with no material effect on its financial position, results of operations and cash flows. SFAS No. 145 eliminated the requirement that material gains and losses resulting from the early extinguishment of debt be classified as an extraordinary item in the consolidated statements of earnings. Instead, companies must evaluate whether the transaction meets both the criteria of being unusual in nature and infrequent in occurrence. Other aspects of SFAS No. 145 relating to accounting for intangible assets of motor carriers and accounting for certain lease modifications do not currently apply to Ferrellgas. Ferrellgas implemented SFAS No. 145 beginning in the year ending July 31, 2003, and began reporting expenses associated with early extinguishments of debt in income from continuing operations. For the three months ended October 31, 2002, Ferrellgas recognized $7.1 million of expenses associated with the early extinguishment of the $160.0 million senior secured notes. Prior to the adoption of SFAS No. 145, Ferrellgas would have classified this type of expense as an extraordinary item. SFAS No. 146 modified the financial accounting and reporting for costs associated with exit or disposal activities. This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Additionally, the statement requires the liability to be recognized and measured initially at fair value. Under previous rules, liabilities for exit costs were recognized at the date of the entity's commitment to an exit plan. Ferrellgas has adopted and implemented SFAS No. 146 for all exit or disposal activities initiated after July 31, 2002. Ferrellgas believes the implementation will not have a material effect on its financial position, results of operations and cash flows. FASB Interpretation No. 45 expands the existing disclosure requirements for guarantees and requires that companies recognize a liability for such items at the time the guarantees are issued. Ferrellgas will implement the Interpretation beginning in the three months ending January 31, 2003, and is currently assessing the effect on its financial position, results of operations and cash flows. 10 FERRELLGAS PARTNERS FINANCE CORP. (a wholly owned subsidiary of Ferrellgas Partners, L.P.) BALANCE SHEETS (Amounts in dollars) October 31, July 31, ASSETS 2002 2002 -------------------------------------------------- ----------- ---------- (unaudited) Cash $1,000 $1,000 ----------- ---------- Total Assets $1,000 $1,000 =========== ========== STOCKHOLDER'S EQUITY -------------------------------------------------- Common stock, $1.00 par value; 2,000 shares authorized; 1,000 shares issued and outstanding $1,000 $1,000 Additional paid in capital 2,061 2,061 Accumulated deficit (2,061) (2,061) ----------- ---------- Total Stockholder's Equity $1,000 $1,000 =========== ========== See notes to financial statements.
STATEMENTS OF EARNINGS (unaudited) (Amounts in dollars) For the three months ended ------------------------------------- October 31, October 31, 2002 2001 ------------------ ------------------ General and administrative expense $ - $ 45 ------------------ ------------------ Net loss $ - $(45) ================== ================== See notes to financial statements.
11 FERRELLGAS PARTNERS FINANCE CORP. (A wholly owned subsidiary of Ferrellgas Partners, L.P.) STATEMENTS OF CASH FLOWS (unaudited) (Amounts in dollars) For the three months ended -------------------------------------------- October 31, October 31, 2002 2001 ------------------ ------------------- Cash Flows From Operating Activities: Net loss $ - $ (45) ------------------ ------------------- Cash used in operating activities - (45) ------------------ ------------------- Cash Flows From Financing Activities: Capital contribution - 45 ------------------ ------------------- Cash provided by financing activities - 45 ------------------ ------------------- Change in cash - - Cash - beginning of period 1,000 1,000 ------------------ ------------------- Cash - end of period $1,000 $1,000 ================== =================== See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2002 (unaudited) A. Ferrellgas Partners Finance Corp., a Delaware corporation, was formed on March 28, 1996, and is a wholly-owned subsidiary of Ferrellgas Partners, L.P. B. The financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the interim periods presented. All adjustments to the financial statements were of a normal, recurring nature. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Ferrellgas Partners, L.P. is a Delaware limited partnership. Our common units are listed on the New York Stock Exchange and our activities are primarily conducted through our subsidiary Ferrellgas, L.P., a Delaware limited partnership. We are the sole limited partner of Ferrellgas, L.P. with a 99% limited partner interest. In this report, unless the context indicates otherwise, the terms "our", "we" and "its" are used sometimes as abbreviated references to Ferrellgas Partners, L.P. itself or Ferrellgas Partners, L.P. and its consolidated subsidiaries, including Ferrellgas, L.P. The following is a discussion of our historical financial condition and results of operations and should be read in conjunction with our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Forward-looking statements Statements included in this report include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as "anticipate," "believe," "intend," "plan," "projection," "forecast," "strategy," "position," "continue," "estimate," "expect," "may," "will," or the negative of those terms or other variations of them or comparable terminology. In particular, statements, express or implied, concerning future operating results, or the ability to generate sales, income or cash flow are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. These statements include, but are not limited to, the following: o whether Ferrellgas, L.P. will have sufficient funds (1) to meet its obligations and to enable it to distribute to us sufficient funds to permit us to meet our obligations with respect to our $170.0 million senior notes due 2012 and (2) assuming all quarterly financial tests required by various financing instruments are met, to pay the required distribution on our senior units and the minimum quarterly distribution of $0.50 per common unit; o whether or not we will continue to meet all of the quarterly financial tests required by the agreements governing our indebtedness; and o the expectation that future periods may not have the same percentage decrease in retail volumes, revenues and expenses as was experienced in fiscal 2002. You should not put undue reliance on any forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. The risks and uncertainties and their effect on our operations include, but are not limited to, the following risks, which are more fully described in our Securities Act and Exchange Act filings: o the retail propane industry is a mature one; o the effect of weather conditions on demand for propane; o increases in propane prices may cause higher levels of conservation by our customers; o price, availability and inventory risk of propane supplies, including risk management activities; o the timing of collections of our accounts receivable and increases in product costs and demand may decrease our working capital availability; o the availability of capacity to transport propane to market areas; o competition from other energy sources and within the propane industry; o operating risks incidental to transporting, storing, and distributing propane, including the litigation risks which may not be covered by insurance; 13 o we may not be successful in making acquisitions; o changes in interest rates, including the refinancing of long-term financing at favorable interest rates; o governmental legislation and regulations; o energy efficiency and technology trends may affect demand for propane; o the condition of the capital markets in the United States; o the political and economic stability of the oil producing nations; o we may sell additional limited partner interests, thus diluting existing interests of our unitholders; o the distribution priority to our common units owned by the public terminates no later than December 31, 2005; o the holder of our senior units may have the right in the future to convert the senior units into common units; o the holder of our senior units may be able to sell the senior units or convert into common units with special indemnification rights available to the holder from us; o a redemption of the senior units may be dilutive to our common unitholders; o the terms of the senior units limit our use of proceeds from sales of equity and the rights of our common unitholders; o the current holder of the senior units has a special voting exemption if the senior units convert into common units; and o the expectation that the remaining senior units will be redeemed in the future with proceeds from an offering of equity at a price satisfactory to us. Results of Operations Due to the seasonality of the retail distribution of propane, results of our operations for the three months ended October 31, 2002 and 2001 are not necessarily indicative of the results to be expected for a full year. Other factors affecting the results of our operations include competitive conditions, demand for product, timing of acquisitions, general economic conditions in the United States, variations in the weather and fluctuations in commodity prices. As we have grown through acquisitions, fixed costs such as personnel costs, equipment leases, depreciation and interest expense have increased. Historically, due to the seasonality of our business, these fixed costs have caused net losses in the first and fourth fiscal quarters. Three Months Ended October 31, 2002 vs. October 31, 2001 Gas liquid and related product sales. Total gas liquids and related product sales decreased $22.4 million due to a decrease in retail propane sales volume and an additional $7.0 million due to a decrease in the average propane sales price per gallon. Retail sales volumes decreased 18.0 million gallons compared to the three months ended October 31, 2001 due to soft economic conditions and reduced early fall demand resulting from increased propane deliveries during the 2002 spring and summer season. In addition, the average propane sales price per gallon decreased due to the effect of the decrease in our weighted average cost of propane inventory. Cost of product sold. Cost of product sold decreased $12.8 million primarily due to the effect of a decline in our retail sales volume compared to the three months ended October 31, 2001 and an additional $6.5 million decrease primarily due to a decrease in our weighted average cost of propane inventory. Other factors causing a decrease in our cost of product sold compared to the three months ended October 31, 2001 include $7.0 million of improved results from risk management trading activities. Gross profit. Gross profit decreased 2.8% primarily due to the effect of the decrease in our retail propane volumes and to a lesser extent decreased retail margins. This decrease was partially offset by improved results from our risk management trading activities. See additional discussion regarding risk management trading activities in Item 3 "Quantitative and Qualitative Disclosures about Market Risk." 14 Depreciation and amortization expense. Depreciation and amortization expense decreased 13.6% primarily due to the effect of an intangible asset completing its amortizable life in December 2001. Equipment lease expense. Equipment lease expense decreased 8.4% due to lower interest rates on variable rate operating leases. See further discussion about these leases in "Liquidity and Capital Resources - Investing Activities" and "Financing Activities." Other expenses. Operating expense, general & administrative expense and interest expense variances between the three months ended October 31, 2002 and 2001 were not significant. Net loss. In addition to the factors discussed above, net loss increased primarily due to the $7.1 million of early extinguishment of debt expense related to the repurchase and redemption of our $160.0 million senior secured notes and the $2.8 million cumulative effect of a change in accounting principle related to the adoption of SFAS No. 143. Forward looking statements. Our gross profit, operating income and net earnings each declined between 6% and 7% from fiscal 2001 to 2002. In fiscal 2002, we also recognized decreases in gas liquids and related product sales, cost of product sold, operating expenses, equipment lease expense, and depreciation and amortization expense. These decreases were primarily due to the effects of the warm winter weather, a significant decrease in interest rates, the elimination of goodwill amortization during fiscal 2002 and the effect of the intangible asset completing its amortizable life. Assuming that the weather in fiscal 2003 remains the same as in fiscal 2002 or becomes colder and that interest rates remain relatively stable, we do not anticipate similar decreases in revenue, gross profit, operating expenses and operating income in fiscal 2003 as was recognized in fiscal 2002. Liquidity and Capital Resources Our ability to satisfy our obligations is dependent upon future performance, which will be subject to prevailing economic, financial, business, and weather conditions and other factors, many of which are beyond our control. During fiscal 2002, the United States experienced unusually mild temperatures that were approximately 12% warmer than normal during the winter heating season (November through March) and 14% warmer than normal during the peak winter heating season (December through February). These temperatures rank as the third and fifth warmest, respectively, in the National Oceanic and Atmospheric Administration's 108-year history. Moreover, the weather has been significantly warmer than normal in four of the last five winter heating seasons. Despite these challenges, we will pay the minimum quarterly distribution of $0.50 on all common units on December 13, 2002, which represents the thirty-third consecutive minimum quarterly distribution paid to our common unitholders dating back to October 1994. Due to the seasonality of the retail propane distribution business, a significant portion of our cash flow from operations is generated during the winter heating season, which occurs during our second and third fiscal quarters. We generate significantly lower cash flows from operations in our first and fourth fiscal quarters as compared to the second and third quarters because our fixed costs generally exceed gross profit during the non-peak heating season. Subject to meeting the financial tests discussed below, our general partner believes that Ferrellgas, L.P. will have sufficient funds available to meet its obligations, and to distribute to Ferrellgas Partners sufficient funds to permit Ferrellgas Partners to meet its obligations with respect to the $170.0 million senior notes. In addition, our general partner believes that Ferrellgas, L.P. will have sufficient funds available to distribute to Ferrellgas Partners sufficient cash to pay the required quarterly distribution on the senior units and the minimum quarterly distribution on all common units during the year ending July 31, 2003. 15 Our bank credit facility, public debt, private debt and accounts receivable securitization facility contain several financial tests and covenants restricting our ability to pay distributions, incur debt and engage in certain other business transactions. In general, these tests are based on our debt to cash flow ratio and cash flow to interest expense ratio. Our general partner believes that the most restrictive of these tests currently are debt incurrence limitations within the bank credit facility and accounts receivable securitization facility and limitations on the payment of distributions within Ferrellgas Partners' senior notes. The bank credit facility and accounts receivable securitization facility generally limit Ferrellgas, L.P.'s ability to incur debt if it exceeds prescribed ratios of either debt to cash flow or cash flow to interest expense. Ferrellgas Partners' senior notes restrict payments if a minimum ratio of cash flow to interest expense is not met, assuming certain exceptions to this ratio limit have previously been exhausted. This restriction places limitations on our ability to make restricted payments such as the payment of cash distributions to unitholders. The cash flow used to determine these financial tests generally is based upon our most recent cash flow performance giving pro forma effect for acquisitions and divestitures made during the test period. It should be noted that our bank credit facility, public debt, private debt and accounts receivable securitization facility do not contain repayment provisions related to a decline in our credit rating. As of October 31, 2002, our general partner believes that we met all the required quarterly financial tests and covenants. Based upon current estimates of our cash flow, our general partner believes that we will be able to continue to meet all of the required quarterly financial tests and covenants for the remainder of the year ending July 31, 2003. However, if we were to encounter unexpected downturns in business operations in the future, such as significantly warmer than normal weather, a volatile energy commodity cost environment or continued economic downturn, we may not meet the applicable financial tests in future quarters. This could have a materially adverse effect on our operating capacity and cash flows and could restrict our ability to incur debt or to make cash distributions to our unitholders, even if sufficient funds were available. Depending on the circumstances, we may consider alternatives to permit the incurrence of debt or the continued payment of the quarterly cash distribution to our unitholders. No assurances can be given, however, that such alternatives can or will be implemented with respect to any given quarter. Our future capital expenditures and working capital needs are expected to be provided by cash generated from future operations, existing cash balances, the bank credit facility or the accounts receivable securitization facility. To fund expansive capital projects and future acquisitions, we may obtain funds from our facilities, we may issue additional debt to the extent permitted under existing financing arrangements or we may issue additional equity securities, including, among others, common units. Toward this purpose, on February 5, 1999, we filed a shelf registration statement with the Securities and Exchange Commission for the periodic sale of equity and/or debt securities. The registered securities are available to us for sale in the future to fund acquisitions, to reduce indebtedness or to provide funds for general corporate purposes. On June 8, 2001, we issued $89.6 million worth of equity common units and on September 24, 2002, we issued $170.0 million worth of senior notes, both pursuant to this registration statement. We currently have approximately $40.0 million remaining available under this registration statement for the sale of registered securities in the future. See further discussion about debt issuance in "Liquidity and Capital Resources - Financing Activities." We also maintain a shelf registration statement with the Securities and Exchange Commission for approximately 2.0 million common units. We may issue these common units in connection with our acquisition of other businesses, properties or securities in business combination transactions. 16 Operating Activities. Cash used in operating activities was $41.2 million for the three months ended October 31, 2002, compared to cash used in operating activities of $6.7 million for the three months ended October 31, 2001. This increase in cash used is primarily due to the effect of timing of collections of accounts receivable and the timing of purchases of inventory and payments for interest expense. Investing Activities. During the three months ended October 31, 2002, we made cash capital expenditures of $4.4 million related to our technology initiative and $5.2 million primarily for the following: o upgrading district plant facilities; o vehicle lease buyouts; and o additional propane storage tanks and cylinders. Our capital requirements for repair and maintenance of property, plant and equipment are expected to remain relatively low. We lease property, computer equipment, propane tanks, light and medium duty trucks, tractors and trailers. We believe leasing is a cost-effective method for meeting our equipment needs. We purchased $0.6 million of equipment whose lease terms expired during the three months ended October 31, 2002. At October 31, 2002, $40.0 million had been funded from our accounts receivable securitization facility. This funding resulted from our increased liquidity needs caused primarily by the seasonal increase in accounts receivable outstanding and in propane inventory levels. We renewed this facility effective September 24, 2002, for a 364-day commitment with Banc One, N.A. In accordance with SFAS No. 140, this transaction is reflected on our consolidated financial statements as a sale of accounts receivable and an investment in an unconsolidated subsidiary. See Note E to the consolidated financial statements for further discussion about this facility. Financing Activities. On September 24, 2002, we issued $170.0 million of publicly-held senior notes at a fixed rate of 8.75% due 2012. Interest is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2002. These senior notes are unsecured and not redeemable before June 15, 2007, except under specific circumstances. We used the proceeds from the $170.0 million senior note issuance to repurchase and redeem our $160.0 million senior secured notes due 2006 and fund related premiums, fees, accrued and unpaid interest and tender consent payments. During the three months ended October 31, 2002, we declared and paid the required quarterly distribution on our senior units and the minimum quarterly distribution on all common units for the three months ended July 31, 2002. The required quarterly distribution on the senior units and the minimum quarterly distribution on all common units for the three months ended October 31, 2002 will be paid on December 13, 2002 to holders of record on November 29, 2002. At October 31, 2002, $21.5 million of borrowings and $50.6 million of letters of credit were outstanding under the $157.0 million bank credit facility. Letters of credit are currently used to cover obligations primarily relating to requirements for our insurance coverage and, and to a lesser extent, our risk management activities. At October 31, 2002, we had $84.9 million available for general corporate, acquisition and working capital purposes under the bank credit facility. On December 10, 2002, our $157.0 million bank credit facility was refinanced with a $307.5 million amended bank credit facility. This amended bank credit facility will terminate on April 28, 2006, unless extended or renewed. This $307.5 million amended bank credit facility consists of the following: o $151.5 million revolving working capital facility, general corporate and acquisition facility, including a $80.0 million letter of credit sub-facility; and o $156.0 million revolving facility, which was used on December 10, 2002, to purchase propane tanks and related assets that were previously leased. 17 On December 10, 2002, $173.0 million of borrowings and $50.6 million of letters of credit were outstanding under the amended bank credit facility, leaving $83.9 million available for general corporate, acquisition and working capital purposes. All borrowings under the amended bank credit facility bear interest, at the our option, at a rate equal to either: o the base rate, which is defined as the higher of the federal funds rate plus 0.50% or the bank's reference rate (as of October 31, 2002, the bank's reference rate was 4.75%); or o the London Interbank Offered Rate (LIBOR) plus a margin varying from 1.75% to 2.75% (as of October 31, 2002, LIBOR was 1.80%). We believe that the liquidity available from the amended bank credit facility and the accounts receivable securitization facility (see Investing Activities above) will be sufficient to meet our future working capital needs for the year ending July 31, 2003. However, if we were to experience an unexpected significant increase in working capital requirements, this need could exceed our immediately available resources. Events that could cause increases in working capital borrowings or letter of credit requirements include, but are not limited to the following: o a significant increase in the cost of propane; o a significant delay in the collections of accounts receivable; o increased volatility in energy commodity prices related to risk management activities; o increased liquidity requirements imposed by insurance providers; o a significant downgrade in our credit rating; or o decreased trade credit. If one or more of these events caused a significant use of available funding, we would consider alternatives to provide increased working capital funding. No assurances can be given, however, that such alternatives could be implemented. The following table summarizes our long-term debt obligations as of October 31, 2002, adjusted on a pro forma basis after giving effect to the $156.8 million of borrowings on December 10, 2002 on the amended bank credit facility, the proceeds of which were used to purchase propane tanks and related assets, including accrued interest, that were previously leased: Principal Payments due by Pay Period ------------------------------------------------------------------------ Less than After Total 1 year 1-3 years 4-5 years 5 years ------------ ------------- ------------ ---------------- --------------- Long-term debt, including current portion of long-term debt $872,251 $2,441 $4,523 $327,152 $538,135
In addition, we lease property, computer equipment, propane tanks, light and medium duty trucks, tractors and trailers. We account for these arrangements as operating leases. See further discussion about these leases in "Investing Activities." The following table summarizes our future minimum rental payments as of October 31, 2002, adjusted on a pro forma basis after giving effect to the $156.8 million purchase, on December 10, 2002, of propane tanks and related assets, including accrued interest, that were previously leased: Future Minimum Rental and Buyout Amounts ------------------------------------------------------------------- Less than After Total 1 year 1-3 years 4-5 years 5 years ------------- ------------ ------------- ------------ ------------- Operating leases rental payments $66,550 $22,578 $26,309 $13,314 $4,349 Operating leases buyouts 30,317 8,034 10,760 9,402 2,121
18 Historically, we have been successful in renewing several of our leases that are subject to buyouts. However, there is no assurance that we will be successful in the future. As of October 31, 2002, in addition to the inventory on hand, we had committed to take net delivery of approximately 19.4 million gallons of propane at a fixed price. Disclosures about Risk Management Activities Accounted for at Fair Value The following table summarizes the change in the unrealized fair value of contracts from our risk management trading activities for the three months ended October 31, 2002. This table summarizes the contracts where settlement has not yet occurred: Three months ended October 31, 2002 ------------------ Unrealized (losses) in fair value of contracts outstanding at July 31, 2002 $ (4,569) Other unrealized gains and (losses) recognized 2,862 Less: realized gains and (losses) recognized 2,109 ------------------ Unrealized (losses) in fair value of contracts outstanding at October 31, 2002 $ (3,816) ================== The following table summarizes the maturity of these contracts for the valuation methodologies we utilize as of October 31, 2002. This table summarizes the contracts from our risk management trading activities where settlement has not yet occurred: Fair Value of Contracts at Period-End ----------------------------------------- Maturity greater than 1 year and Maturity less than less than 18 Source of Fair Value 1 year months ------------------------------------------------ --------------------- ---------------- Prices actively quoted $ (222) $ - Prices provided by other external sources (3,583) (11) Prices based on models and other valuation methods - - --------------------- ---------------- Unrealized (losses) in fair value of contracts outstanding at October 31, 2002 $(3,805) $ (11) ===================== ================
See additional discussion about market, counterparty credit and liquidity risks related to our risk management trading activities and other risk management activities in Item 3 "Quantitative and Qualitative Disclosures about Market Risk." Disclosures about Effects of Transactions with Related Parties We have no employees and are managed and controlled by our general partner. Pursuant to our partnership agreement, our general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on our behalf, and all other necessary or appropriate expenses allocable to us or otherwise reasonably incurred by our general partner in connection with operating our business. These costs, which totaled $45.2 million for the three months ended October 31, 2002, include compensation and benefits paid to officers and employees of our general partner who perform services on our behalf as well as general and administrative costs. 19 We paid a senior unit distribution of $2.8 million to JEF Capital Management on September 13, 2002. On October 31, 2002, in a noncash transaction, we accrued a senior unit distribution of $2.8 million that we will pay to JEF Capital Management on December 13, 2002. JEF Capital Management is beneficially owned by James E. Ferrell and thus is an affiliate. Ferrell International Limited is beneficially owned by James E. Ferrell and thus is an affiliate. We enter into transactions with Ferrell International Limited in connection with our risk management activities and do so at market prices in accordance with our affiliate trading policy approved by our general partner's Board of Directors. These transactions include forward, option and swap contracts and are all reviewed for compliance with the policy. During the three months ended October 31, 2002, we recognized net receipts from purchases, sales and commodity derivative transactions of $0.6 million. These net purchases, sales and commodity derivative transactions with Ferrell International Limited are classified as cost of product sold. Amounts due from and (due to) Ferrell International Limited at October 31, 2002 were $0.1 million and $(0.1) million, respectively. We believe these related party transactions were conducted in the ordinary course of business and under terms that were no less favorable to us than those available with third parties. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices. Our risk management trading activities utilize various types of energy commodity forward contracts, options, swaps traded on the over-the-counter financial markets and futures and options traded on the New York Mercantile Exchange to manage and hedge our exposure to the volatility of floating commodity prices and to protect our inventory positions. We include the results from our risk management trading activities in our discussion and analysis of cost of product sold. Our other risk management activities, specifically our supply procurement activities, also utilize over-the-counter energy commodity forward contracts to limit overall price risk and options to hedge our exposure to inventory price movements. We include the results from these other risk management activities in cost of product sold and in our discussion and analysis of retail margin per gallon. Market risks associated with energy commodities are monitored daily by senior management for compliance with our commodity risk management policy. This policy includes an aggregrate dollar loss limit and limits on the term of various contracts. We also utilize volume limits for various energy commodities and review our positions daily where we remain exposed to market risk, so as to manage exposures to changing market prices. Market, Credit and Liquidity Risk. New York Mercantile Exchange traded futures are guaranteed by the New York Mercantile Exchange and have nominal credit risk. We are exposed to credit risk associated with forwards, swaps and option transactions in the event of nonperformance by counterparties. For each counterparty, we analyze its financial condition prior to entering into an agreement, establish a credit limit and monitor the appropriateness of the limit. The change in market value of Exchange-traded futures contracts requires daily cash settlement in margin accounts with brokers. Forwards and most other over-the-counter instruments are generally settled at the expiration of the contract term. In order to minimize the liquidity risk of cash, margin or collateral requirements of counterparties for over-the-counter instruments, we attempt to balance maturities and positions with individual counterparties. Historically, our risk management activities have not experienced significant credit related losses in any year or with any individual counterparty. Our risk management contracts do not contain material repayment provisions related to a decline in our credit rating. Sensitivity Analysis. We have prepared a sensitivity analysis to estimate the exposure to market risk of our energy commodity positions. Forward contracts, futures, swaps and options used in our risk management trading activities were analyzed assuming a hypothetical 10% adverse change in prices for the delivery month for all energy commodities. The potential loss in future earnings regarding these positions from a 10% adverse movement in market prices of the underlying energy commodities is estimated at $3.4 million for risk management trading activities and $0.3 million for other risk management activities as of October 31, 2002. The preceding hypothetical analysis is limited because changes in prices may or may not equal 10%, thus actual results may differ. 20 Additionally, we seek to mitigate our variable rate interest rate risk exposure on operating leases by entering into interest rate cap agreements. At October 31, 2002, we had $155.6 million outstanding in variable rate operating leases and an equal amount of interest rate cap agreements outstanding to hedge the related variable rate exposure. We also had $21.5 million in variable rate bank credit facility borrowings and $40.0 million in funding from our variable rate accounts receivable securitization facility. Thus, assuming a one percent increase in our variable interest rate, our interest rate risk related to the operating leases and the associated interest rate cap agreements, the borrowings on the variable rate bank credit facility and the funding from the variable rate accounts receivable securitization facility would be a loss in future earnings of $2.2 million in the twelve months ending October 31, 2003. ITEM 4. CONTROLS AND PROCEDURES Within 90 days prior to the filing of this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, of the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rule 13a-14(c) and 15d-14(c) of the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, concluded that our disclosure controls and procedures were adequate and effective as of the date of evaluation to ensure that material information relating to us was made known to our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, by others within our company, particularly during the period to which this report relates and the period in which it was prepared. There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the evaluation referenced above, including no corrective actions with respect to significant deficiencies and material weaknesses in our internal controls. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 21 ITEM 5. OTHER INFORMATION Ferrellgas, Inc., the General Partner of Ferrellgas Partners, L.P., balance sheets as of July 31, 2002 and 2001, have been audited by an independent auditor. See exhibit 99.15 for the audited financial statements. These audited balance sheets and independent auditor's opinion will be incorporated by reference to the Post-Effective Amendment No. 1 to Registration Statement No. 33-55185 of Ferrellgas Partners, L.P. on Form S-4 to Form S-1 and in Amendment No. 1 to Registration Statement No. 333-71111 of Ferrellgas Partners, L.P. and Ferrellgas Partners Finance Corp. on Form S-3. See exhibit 23.1 for independent auditor's consent. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q. Exhibits required by Item 601 of Regulation S-K of the Securities Act, which are not listed, are not applicable. Exhibit Number Description ------ ----------- 3.1 Third Amended and Restated Agreement of Limited Partnership of Ferrellgas Partners, L.P., dated as of April 6, 2001. Incorporated by reference to the same numbered Exhibit to our Current Report on Form 8-K filed April 6, 2001. 3.2 Articles of Incorporation for Ferrellgas Partners Finance Corp. Incorporated by reference to the same numbered Exhibit to our Quarterly Report on Form 10-Q filed June 13, 1997. 3.3 Bylaws of Ferrellgas Partners Finance Corp. Incorporated by reference to the same numbered Exhibit to our Quarterly Report on Form 10-Q filed June 13, 1997. 4.1 Indenture, dated as of September 24, 2002, with Form of Note attached, by and among Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., and U.S. Bank National Association, as trustee, relating to $170,000,000 aggregate principal amount of our 8 3/4% Senior Notes due 2012. Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed September 24, 2002. 4.2 Ferrellgas, L.P., Note Purchase Agreement, dated as of July 1, 1998, relating to: $109,000,000 6.99% Senior Notes, Series A, due August 1, 2005, $37,000,000 7.08% Senior Notes, Series B, due August 1, 2006, $52,000,000 7.12% Senior Notes, Series C, due August 1, 2008, $82,000,000 7.24% Senior Notes, Series D, due August 1, 2010, and $70,000,000 7.42% Senior Notes, Series E, due August 1, 2013. Incorporated by reference to Exhibit 4.4 to our Annual Report on Form 10-K filed October 29, 1998. 4.3 Ferrellgas, L.P., Note Purchase Agreement, dated as of February 28, 2000, relating to: $21,000,000 8.68% Senior Notes, Series A, due August 1, 2006, $70,000,000 8.78% Senior Notes, Series B, due August 1, 2007, and $93,000,000 8.87% Senior Notes, Series C, due August 1, 2009. Incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q filed March 16, 2000. 22 Exhibit Number Description ------ ----------- 4.4 Registration Rights Agreement, dated as of December 17, 1999, by and between Ferrellgas Partners, L.P. and Williams Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed December 29, 2000. 4.5 First Amendment to the Registration Rights Agreement, dated as of March 14, 2000, by and between Ferrellgas Partners, L.P. and Williams Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q filed March 16, 2000. 4.6 Second Amendment to the Registration Rights Agreement, dated as of April 6, 2001, by and between Ferrellgas Partners, L.P. and The Williams Companies, Inc. Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed April 6, 2001. 4.7 Representations Agreement, dated as of December 17, 1999, by and among Ferrellgas Partners, L.P., Ferrellgas, Inc., Ferrellgas, L.P. and Williams Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 2.3 to our Current Report on Form 8-K filed December 29, 1999. 4.8 First Amendment to Representations Agreement, dated as of April 6, 2001, by and among Ferrellgas Partners, L.P., Ferrellgas, Inc., Ferrellgas, L.P. and The Williams Companies, Inc. Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed April 6, 2001. 10.1 Second Amended and Restated Agreement of Limited Partnership of Ferrellgas, L.P., dated as of October 14, 1998. Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed March 17, 1999. 10.2 First Amendment to the Second Amended and Restated Agreement of Limited Partnership of Ferrellgas, L.P. Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed June 14, 2000. *10.3 Fourth Amended and Restated Credit Agreement, dated as of December 10 , 2002, by and among Ferrellgas, L.P., Ferrellgas, Inc., Bank of America National Trust and Savings Association, as agent, and the other financial institutions party. 10.4 Receivable Interest Sale Agreement, dated as of September 26, 2000, by and between Ferrellgas, L.P., as originator, and Ferrellgas Receivables, L.L.C., as buyer. Incorporated by reference to Exhibit 10.17 to our Annual Report on Form 10-K filed October 26, 2000. 10.5 First Amendment to the Receivable Interest Sale Agreement dated as of January 17, 2001, by and between Ferrellgas, L.P., as originator, and Ferrellgas Receivables, L.L.C., as buyer. Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed March 14, 2001. 23 Exhibit Number Description ------ ----------- 10.6 Receivables Purchase Agreement, dated as of September 26, 2000, by and among Ferrellgas Receivables, L.L.C., as seller, Ferrellgas, L.P., as servicer, Jupiter Securitization Corporation, the financial institutions from time to time party hereto, and Bank One, NA, main office Chicago, as agent. Incorporated by reference to Exhibit 10.18 to our Annual Report on Form 10-K filed October 26, 2000. 10.7 First Amendment to the Receivables Purchase Agreement, dated as of January 17, 2001, by and among Ferrellgas Receivables, L.L.C., as seller, Ferrellgas, L.P., as servicer, Jupiter Securitization Corporation, the financial institutions from time to time party hereto, and Bank One, N.A., main office Chicago, as agent. Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed March 14, 2001. 10.8 Second Amendment to the Receivables Purchase Agreement dated as of September 25, 2001, by and among Ferrellgas Receivables, L.L.C., as seller, Ferrellgas, L.P., as servicer, Jupiter Securitization Corporation, the financial institutions from time to time party hereto, and Bank One, N.A., main office Chicago, as agent. Incorporated by reference to Exhibit 10.29 to our Annual Report on Form 10-K filed October 25, 2001. 10.9 Third Amendment to the Receivables Purchase Agreement, dated as of September 24, 2002, by and among Ferrellgas Receivables, L.L.C., as seller, Ferrellgas, L.P., as servicer, Jupiter Secruritization Corporation, the financial institutions from time to time party hereto, and Bank One, NA, main office Chicago, as agent. 10.10 Purchase Agreement, dated as of November 7, 1999, by and among Ferrellgas Partners, L.P., Ferrellgas, L.P and Williams Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed November 12, 1999. 10.11 First Amendment to Purchase Agreement, dated as of December 17, 1999, by and among Ferrellgas Partners, L.P., Ferrellgas, L.P., and Williams Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K filed December 29, 1999. 10.12 Second Amendment to Purchase Agreement, dated as of March 14, 2000, by and among Ferrellgas Partners, L.P., Ferrellgas L.P., and Williams Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 2.1 to our Quarterly Report on Form 10-Q filed March 16, 2000. 10.13 Third Amendment to Purchase Agreement dated as of April 6, 2001, by and among Ferrellgas Partners, L.P., Ferrellgas L.P. and The Williams Companies, Inc. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed April 6, 2001. #10.14 Ferrell Companies, Inc. Supplemental Savings Plan. Incorporated by reference to Exhibit 10.7 to our Annual Report on Form 10-K filed October 17, 1995. 24 Exhibit Number Description ------ ----------- #10.15 Second Amended and Restated Ferrellgas Unit Option Plan. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed June 5, 2001. #10.16 Ferrell Companies, Inc. 1998 Incentive Compensation Plan - Incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K filed October 29, 1998. #10.17 Employment agreement between James E. Ferrell and Ferrellgas, Inc., dated July 31, 1998. Incorporated by reference to Exhibit 10.13 to our Annual Report on Form 10-K filed October 29, 1998. #10.18 Employment agreement between Patrick Chesterman and Ferrellgas, Inc. dated July 31, 2000. Incorporated by reference to Exhibit 10.19 to our Annual Report on Form 10-K filed October 26, 2000. #10.19 Employment agreement between Kevin Kelly and Ferrellgas, Inc. dated July 31, 2000. Incorporated by reference to Exhibit 10.22 to our Annual Report on Form 10-K filed October 26, 2000. *23.1 Consent of Deloitte & Touche LLP, Independent Auditors. *99.15 Consolidated balance sheets of Ferrellgas, Inc. as of July 31, 2002 and 2001, together with the report of Deloitte & Touche LLP with respect thereto. --------------- * Filed herewith # Management contracts or compensatory plans. (b) Reports on Form 8-K The Partnership filed one Form 8-K during the three months ended October 31, 2002. Items Date of Report Reported Financial Statements Filed ------------------------- -------- -------------------------- Filed September 24, 2002 5 None The Partnership furnished one Form 8-K during the three months ended October 31, 2002. Items Date of Report Reported Financial Statements Furnished ----------------------------- -------- ------------------------------ Furnished September 13, 2002 9 None 25 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FERRELLGAS PARTNERS, L.P. By Ferrellgas, Inc. (General Partner) Date: December 10, 2002 By /s/ Kevin T. Kelly ----------------------------------- Kevin T. Kelly Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) FERRELLGAS PARTNERS FINANCE CORP. Date: December 10, 2002 By /s/ Kevin T. Kelly ----------------------------------- Kevin T. Kelly Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 26 CERTIFICATIONS FERRELLGAS PARTNERS, L.P. I, James E. Ferrell, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas Partners, L.P.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financials information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons forming the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 10, 2002 /s/ James E. Ferrell ----------------------------------- James E. Ferrell Chairman, President and Chief Executive Officer of Ferrellgas, Inc., the Partnership's general partner 27 CERTIFICATIONS FERRELLGAS PARTNERS, L.P. I, Kevin T. Kelly, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas Partners, L.P.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financials information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons forming the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 10, 2002 /s/ Kevin T. Kelly ------------------------------------------ Kevin T. Kelly Senior Vice President and Chief Financial Officer of Ferrellgas, Inc., the Partnership's general partner 28 CERTIFICATIONS FERRELLGAS PARTNERS FINANCE CORP. I, James E. Ferrell, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas Partners Finance Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financials information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons forming the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 10, 2002 /s/ James E. Ferrell --------------------------------------- James E. Ferrell President and Chief Executive Officer 29 CERTIFICATIONS FERRELLGAS PARTNERS FINANCE CORP. I, Kevin T. Kelly, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ferrellgas Partners Finance Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financials information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons forming the equivalent function): d. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and e. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 10, 2002 /s/ Kevin T. Kelly ---------------------------- Kevin T. Kelly Senior Vice President and Chief Financial Officer 30 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report on Form 10-Q of Ferrellgas Partners, L.P. (the "Partnership") for the three months ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership at the dates and for the periods indicated. The foregoing certification is made solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is subject to the "knowledge" and "willfulness" qualifications contained in 18 U.S.C. Section 1350(c). Dated: December 10, 2002 /s/ James E. Ferrell --------------------------------------------------- James E. Ferrell Chairman, President and Chief Executive Officer of Ferrellgas, Inc., the Partnership's general partner CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report on Form 10-Q of Ferrellgas Partners, L.P. (the "Partnership") for the three months ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership at the dates and for the periods indicated. The foregoing certification is made solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is subject to the "knowledge" and "willfulness" qualifications contained in 18 U.S.C. Section 1350(c). Dated: December 10, 2002 /s/ Kevin T. Kelly ------------------------------ Kevin T. Kelly Senior Vice President and Chief Financial Officer of Ferrellgas, Inc., the Partnership's general partner CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report on Form 10-Q of Ferrellgas Partners Finance Corp. for the three months ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership at the dates and for the periods indicated. The foregoing certification is made solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is subject to the "knowledge" and "willfulness" qualifications contained in 18 U.S.C. Section 1350(c). Dated: December 10, 2002 /s/ James E. Ferrell ------------------------------------- James E. Ferrell President and Chief Executive Officer 2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report on Form 10-Q of Ferrellgas Partners Finance Corp. for the three months ended October 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership at the dates and for the periods indicated. The foregoing certification is made solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is subject to the "knowledge" and "willfulness" qualifications contained in 18 U.S.C. Section 1350(c). Dated: December 10, 2002 /s/ Kevin T. Kelly ------------------------------------------------- Kevin T. Kelly Senior Vice President and Chief Financial Officer