Segment Reporting Segment Reporting

12 Months Ended

Jul. 31, 2017

Segment reporting

Ferrellgas has two primary operations that result in two reportable operating segments: propane operations and related equipment sales and midstream operations.

The chief operating decision maker evaluates the operating segments using an Adjusted EBITDA performance measure which is based on earnings (loss) before income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, asset impairments, loss sale of assets and disposal, other income (expense), net, change in fair value of contingent consideration, severance costs, litigation accrual and related legal fees associated with a class action lawsuit, acquisition and transition expenses, unrealized (non-cash) losses (gains) on changes in fair value of derivatives not designated as hedging instruments and net earnings (loss) attributable to noncontrolling interests. This performance measure is not a GAAP measure, however the components are computed using amounts that are determined in accordance with GAAP. A reconciliation of this performance measure to net earnings attributable to Ferrellgas Partners L.P., which is its nearest comparable GAAP measure, is included in the tables below. In management's evaluation of performance, certain costs, such as compensation for administrative staff and executive management, are not allocated by segment and, accordingly, the following reportable segment results do not include such unallocated costs. The accounting policies of the operating segments are otherwise the same as those described in the summary of significant accounting policies in Note B.

Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, plant and equipment, inventories, identifiable intangible assets and goodwill. Cash, certain prepaid assets and other assets are not allocated to segments. Although Ferrellgas can and does identify long-lived assets such as property, plant and equipment and identifiable intangible assets to reportable segments, Ferrellgas does not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges.

The propane operations and related equipment sales segment primarily includes the distribution and sale of propane and related equipment and supplies with concentrations in the Midwest, Southeast, Southwest and Northwest regions of the United States. Sales from propane distribution are generated principally from transporting propane purchased from third parties to propane distribution locations and then to tanks on customers’ premises or to portable propane tanks delivered to nationwide and local retailers. Sales from portable tank exchanges, nationally branded under the name Blue Rhino, are generated through a network of independent and partnership-owned distribution outlets.

The midstream operations segment primarily includes a domestic crude oil transportation and logistics provider with an integrated portfolio of midstream assets. These assets connect crude oil production in prolific unconventional resource plays to downstream markets. Bridger’s truck, pipeline terminal, pipeline, and rail assets form a comprehensive, fee-for-service business model, and the majority of its cash flow is expected to be generated from fee-based commercial agreements. Bridger’s fee-based business model generates income by providing crude oil transportation and logistics services on behalf of producers and end users of crude oil. Water solutions generates income primarily through the operation of salt water disposal wells in the Eagle Ford shale region of south Texas. Oil and natural gas wells generate significant volumes of salt water, which are transported by truck or pipeline to salt water disposal wells where a combination of gravity and chemicals are used to separate and capture crude oil that is residual in the salt water. The crude oil is sold and the salt water is injected into underground geologic formations.

Until April 2017, Ferrellgas utilized a structure that included two reportable segments which included propane operations and related equipment sales segment and midstream operations - crude oil logistics segment. The results from midstream operations - water solutions segment, were reported within Corporate and other. As a result of a change in the way management is evaluating results and allocating resources, results of the water solutions business are now included in the Midstream operations segment for all periods presented.

Following is a summary of segment information for the years ended July 31, 2017, 2016 and 2015.



	Year Ended July 31, 2017
	Propane operations and related equipment sales		Midstream operations		Corporate			Total


Segment revenues	$	1,463,574	$	466,703	$	—		$	1,930,277
Direct costs (1)	1,198,150		458,851		43,213			1,700,214
Adjusted EBITDA	$	265,424	$	7,852	$	(43,213	)	$	230,063

	Year Ended July 31, 2016
	Propane operations and related equipment sales		Midstream operations		Corporate			Total


Segment revenues	$	1,414,129	$	625,238	$	—		$	2,039,367
Direct costs (1)	1,127,382		521,487		45,768			1,694,637
Adjusted EBITDA	$	286,747	$	103,751	$	(45,768	)	$	344,730

	Year Ended July 31, 2015
	Propane operations and related equipment sales		Midstream operations		Corporate			Total


Segment revenues	$	1,917,201	$	107,189	$	—		$	2,024,390
Direct costs (1)	1,591,404		93,070		39,732			1,724,206
Adjusted EBITDA	$	325,797	$	14,119	$	(39,732	)	$	300,184

(1) Direct costs are comprised of "cost of sales-propane and other gas liquids sales", "cost of sales-other", "cost of sales-midstream operations", "operating expense", "general and administrative expense", and "equipment lease expense" less "non-cash stock compensation charge", "asset impairments", "change in fair value of contingent consideration", "litigation accrual and related legal fees associated with a class action lawsuit", "acquisition and transition expenses" and "unrealized (non-cash) losses on changes in fair value of derivatives not designated as hedging instruments".

Following is a reconciliation of Ferrellgas' total segment performance measure to consolidated net earnings:



	Year Ended July 31,
	2017			2016			2015
Net earnings (loss) attributable to Ferrellgas Partners, L.P.	$	(54,207	)	$	(665,415	)	$	29,620
Income tax benefit	(1,143		)	(36		)	(315		)
Interest expense	152,485			137,937			100,396
Depreciation and amortization expense	103,351			150,513			98,579
EBITDA	200,486			(377,001		)	228,280
Non-cash employee stock ownership plan compensation charge	15,088			27,595			24,713
Non-cash stock-based compensation charge	3,298			9,324			25,982
Asset impairments	—			658,118			—
Loss on asset sales and disposals	14,457			30,835			7,099
Other (income) expense, net	(1,474		)	(110		)	350
Change in fair value of contingent consideration	—			(100		)	(6,300		)
Severance costs	1,959			1,453			—
Litigation accrual and related legal fees associated with a class action lawsuit	—			—			806
Acquisition and transition expenses	—			99			16,373
Unrealized (non-cash) loss (gains) on changes in fair value of derivatives	(3,457		)	1,137			2,412
Net earnings (loss) attributable to noncontrolling interest	(294		)	(6,620		)	469
Adjusted EBITDA	$	230,063		$	344,730		$	300,184

Following are total assets by segment:



	July 31,		July 31,
	2017		2016
Assets
Propane operations and related equipment sales	$	1,194,905	$	1,202,214
Midstream operations	399,356		444,126
Corporate	15,708		36,966
Total consolidated assets	$	1,609,969	$	1,683,306

Following are capital expenditures by segment (unaudited):



	Year Ended July 31, 2017
	Propane operations and related equipment sales		Midstream operations		Corporate		Total


Capital expenditures:
Maintenance	$	13,330	$	734	$	3,074	$	17,138
Growth	28,912		315		—		29,227
Total	$	42,242	$	1,049	$	3,074	$	46,365


	Year Ended July 31, 2016
	Propane operations and related equipment sales		Midstream operations		Corporate		Total


Capital expenditures:
Maintenance	$	13,487	$	621	$	2,769	$	16,877
Growth	32,906		63,152		—		96,058
Total	$	46,393	$	63,773	$	2,769	$	112,935

	Year Ended July 31, 2015
	Propane operations and related equipment sales		Midstream operations		Corporate		Total


Capital expenditures:
Maintenance	$	16,020	$	1,072	$	2,357	$	19,449
Growth	36,958		13,430		—		50,388
Total	$	52,978	$	14,502	$	2,357	$	69,837

Ferrellgas, L.P. [Member]

Segment Reporting Disclosure

Segment reporting

Ferrellgas, L.P. has two primary operations that result in two reportable operating segments: propane operations and related equipment sales and midstream operations.

The chief operating decision maker evaluates the operating segments using an Adjusted EBITDA performance measure which is based on earnings (loss) before income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, asset impairments, loss on asset sales and disposal, other income (expense), net, change in fair value of contingent consideration, severance costs, litigation accrual and related legal fees associated with a class action lawsuit, acquisition and transition expenses and unrealized (non-cash) losses (gains) on changes in fair value of derivatives not designated as hedging instruments. This performance measure is not a GAAP measure, however, the components are computed using amounts that are determined in accordance with GAAP. A reconciliation of this performance measure to net earnings, which is its nearest comparable GAAP measure, is included in the tables below. In management's evaluation of performance, certain costs, such as compensation for administrative staff and executive management, are not allocated by segment and, accordingly, the following reportable segment results do not include such unallocated costs. The accounting policies of the operating segments are otherwise the same as those described in the summary of significant accounting policies in Note B.

Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, plant and equipment, inventories, identifiable intangible assets and goodwill. Cash, certain prepaid assets and other assets are not allocated to segments. Although Ferrellgas, L.P. can and does identify long-lived assets such as property, plant and equipment and identifiable intangible assets to reportable segments, Ferrellgas, L.P. does not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges.

Until April 2017, Ferrellgas , L.P. utilized a structure that included two reportable segments which included propane operations and related equipment sales segment and the midstream operations - crude oil logistics segment. The results from midstream operations - water solutions segment, were reported within Corporate and other. As a result of a change in the way management is evaluating results and allocating resources, results of the water solutions business are now included in the Midstream operations segment for all periods presented.

Following is a summary of segment information for the years ended July 31, 2017, 2016 and 2015.



	Year Ended July 31, 2017
	Propane operations and related equipment sales		Midstream operations		Corporate			Total



Segment revenues	$	1,463,574	$	466,703	$	—		$	1,930,277
Direct costs (1)	1,198,150		458,851		43,074			1,700,075
Adjusted EBITDA	$	265,424	$	7,852	$	(43,074	)	$	230,202

	Year Ended July 31, 2016
	Propane operations and related equipment sales		Midstream operations		Corporate			Total



Segment revenues	$	1,414,129	$	625,238	$	—		$	2,039,367
Direct costs (1)	1,127,382		521,487		45,248			1,694,117
Adjusted EBITDA	$	286,747	$	103,751	$	(45,248	)	$	345,250

	Year Ended July 31, 2015
	Propane operations and related equipment sales		Midstream operations		Corporate			Total



Segment revenues	$	1,917,201	$	107,189	$	—		$	2,024,390
Direct costs (1)	1,591,300		93,070		39,732			1,724,102
Adjusted EBITDA	$	325,901	$	14,119	$	(39,732	)	$	300,288

Following is a reconciliation of Ferrellgas, L.P.'s total segment performance measure to consolidated net earnings:



	Year Ended July 31
	2017			2016			2015

Net earnings (loss)	$	(29,059	)	$	(655,391	)	$	46,427
Income tax benefit	(1,149		)	(41		)	(384		)
Interest expense	127,188			121,818			84,227
Depreciation and amortization expense	103,351			150,513			98,579
EBITDA	200,331			(383,101		)	228,849
Non-cash employee stock ownership plan compensation charge	15,088			27,595			24,713
Non-cash stock-based compensation charge	3,298			9,324			25,982
Asset impairments	—			658,118			—
Loss on asset sales and disposal	14,457			30,835			7,099
Other (income) expense, net	(1,474		)	(110		)	354
Change in fair value of contingent consideration	—			(100		)	(6,300		)
Severance costs	1,959			1,453			—
Litigation accrual and related legal fees associated with a class action lawsuit	—			—			806
Acquisition and transition expenses	—			99			16,373
Unrealized (non-cash) loss (gains) on changes in fair value of derivatives	(3,457		)	1,137			2,412
Adjusted EBITDA	$	230,202		$	345,250		$	300,288

Following are total assets by segment:



	July 31,		July 31,
	2017		2016
Assets
Propane operations and related equipment sales	$	1,194,905	$	1,202,214
Midstream operations	399,356		444,126
Corporate	15,687		36,873
Total consolidated assets	$	1,609,948	$	1,683,213

Following are capital expenditures by segment (unaudited):



	Year Ended July 31, 2017
		Propane operations and related equipment sales		Midstream operations		Corporate		Total



Capital expenditures:
Maintenance		$	13,330	$	734	$	3,074	$	17,138
Growth		28,912		315		—		29,227
Total		$	42,242	$	1,049	$	3,074	$	46,365

	Year Ended July 31, 2016
		Propane operations and related equipment sales		Midstream operations		Corporate		Total



Capital expenditures:
Maintenance		$	13,487	$	621	$	2,769	$	16,877
Growth		32,906		63,152		—		96,058
Total		$	46,393	$	63,773	$	2,769	$	112,935

	Year Ended July 31, 2015
		Propane operations and related equipment sales		Midstream operations		Corporate		Total



Capital expenditures:
Maintenance		$	16,020	$	1,072	$	2,357	$	19,449
Growth		36,958		13,430		—		50,388
Total		$	52,978	$	14,502	$	2,357	$	69,837