Edgar Filing: FERRELLGAS PARTNERS L P

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 quarterly period ended April 30, 2005

o 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: 001-11331, 333-06693, 000-50182 and 000-50183

Ferrellgas Partners, L.P.

Ferrellgas Partners Finance Corp.

Ferrellgas, L.P.

Ferrellgas Finance Corp.

(Exact name of registrants as specified in their charters)

Delaware Delaware Delaware Delaware			43-1698480 43-1742520 43-1698481 14-1866671
	(States or other jurisdictions of			(I.R.S. Employer Identification Nos.)
		incorporation or organization)

7500 College Boulevard, Suite 1000, Overland Park, KS 66210

(Address of principal executive offices) (Zip Code)

Registrants’ telephone number, including area code: (913) 661-1500

Indicate by check mark whether the registrants (1) have 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) have been subject to such filing requirements for the past 90 days.

Yes

[ X ]

[

]

Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act).

Ferrellgas Partners, L.P.

Yes

[ X ]

[

]

Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and

Ferrellgas Finance Corp.

Yes

[

]

[ X ]

At May 31, 2005, the registrants had common units or shares of common stock outstanding as follows:

Ferrellgas Partners, L.P.	54,114,205	Common Units

Ferrellgas Partners Finance Corp.	1,000	Common Stock

Ferrellgas, L.P.	n/a	n/a

Ferrellgas Finance Corp.	1,000	Common Stock

EACH OF FERRELLGAS PARTNERS FINANCE CORP. AND FERRELLGAS FINANCE CORP. MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (H)(1) (A) AND (B) OF FORM 10-Q AND ARE THEREFORE, WITH RESPECT TO EACH SUCH REGISTRANT, FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.

FERRELLGAS PARTNERS, L.P.

FERRELLGAS PARTNERS FINANCE CORP.

FERRELLGAS, L.P.

FERRELLGAS FINANCE CORP.

For the quarterly period ended April 30, 2005

FORM 10-Q QUARTERLY REPORT

Table of Contents

Page

PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS (unaudited)

	Ferrellgas Partners, L.P. and Subsidiaries

	Condensed Consolidated Balance Sheets – April 30, 2005 and July 31, 2004	1

	Condensed Consolidated Statements of Earnings – Three and nine months ended April 30, 2005 and 2004	2

	Condensed Consolidated Statement of Partners’ Capital – Nine months ended April 30, 2005	3

	Condensed Consolidated Statements of Cash Flows – Nine months ended April 30, 2005 and 2004	4

	Notes to Condensed Consolidated Financial Statements	5

	Ferrellgas Partners Finance Corp.

	Condensed Balance Sheets – April 30, 2005 and July 31, 2004	17

	Condensed Statements of Earnings – Three and nine months ended April 30, 2005 and 2004	17

	Condensed Statements of Cash Flows – Nine months ended April 30, 2005 and 2004	18

	Note to Condensed Financial Statements	18

	Ferrellgas, L.P. and Subsidiaries

	Condensed Consolidated Balance Sheets – April 30, 2005 and July 31, 2004	19

	Condensed Consolidated Statements of Earnings – Three and nine months ended April 30, 2005 and 2004	20

	Condensed Consolidated Statement of Partners’ Capital – Nine months ended April 30, 2005	21

	Condensed Consolidated Statements of Cash Flows – Nine months ended April 30, 2005 and 2004	22

	Notes to Condensed Consolidated Financial Statements	23

	Ferrellgas Finance Corp.

	Condensed Balance Sheets – April 30, 2005 and July 31, 2004	32

	Condensed Statements of Earnings – Three and nine months ended April 30, 2005 and 2004	32

	Condensed Statements of Cash Flows – Nine months ended April 30, 2005 and 2004	33

	Note to Condensed Financial Statements	33

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	47

ITEM 4.	CONTROLS AND PROCEDURES	48

	PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	48

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	49

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	49

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	49

ITEM 5.	OTHER INFORMATION	49

ITEM 6.	EXHIBITS	50

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)

(unaudited)

	April 30,			July 31,
ASSETS		2005			2004

Current assets:
Cash and cash equivalents	$	19,717		$	15,428
Accounts and notes receivable, net		163,252			114,211
Inventories		88,653			103,578
Prepaid expenses and other current assets		13,228			10,022
Total current assets		284,850			243,239

Property, plant and equipment, net		789,442			792,436
Goodwill		265,786			261,768
Intangible assets, net		262,458			265,125
Other assets, net		15,986			15,607
Total assets	$	1,618,522		$	1,578,175

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	89,597		$	104,309
Short-term borrowings		87,281			-
Other current liabilities		86,199			92,793
Total current liabilities		263,077			197,102

Long-term debt		1,059,139			1,153,652
Other liabilities		23,169			20,531
Contingencies and commitments (Note K)		-			-
Minority interest		5,539			4,791

Partners’ capital:
Senior unitholder (1,994,146 units outstanding at April 30, 2005
and July 31, 2004 - liquidation preference $79,766 at
April 30, 2005 and July 31, 2004)		79,766			79,766
Common unitholders (54,113,205 and 48,772,875 units outstanding
at April 30, 2005 and July 31, 2004, respectively)		245,434			178,994
General partner unitholder (566,741 and 512,798 units outstanding
at April 30, 2005 and July 31, 2004, respectively)		(56,777	)		(57,391	)
Accumulated other comprehensive (loss) income		(825	)		730
Total partners’ capital		267,598			202,099
Total liabilities and partners’ capital	$	1,618,522		$	1,578,175

See notes to condensed consolidated financial statements.

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per unit data)

(unaudited)

	For the three months ended April 30,						For the nine months ended April 30,
	2005			2004			2005			2004
Revenues:
Propane and other gas liquids sales	$	467,664		$	368,264		$	1,400,519		$	1,057,751
Other		52,252			21,883			135,393			69,591
Total revenues		519,916			390,147			1,535,912			1,127,342

Cost of product sold (exclusive of
depreciation, shown with amortization below)		339,351			234,331			1,018,385			680,479

Gross profit		180,565			155,816			517,527			446,863

Operating expense		94,142			80,858			281,153			233,141
Depreciation and amortization expense		21,300			13,270			62,480			37,130
General and administrative expense		9,839			7,888			31,678			23,761
Equipment lease expense		6,772			5,029			18,691			14,272
Employee stock ownership plan compensation charge		4,007			2,042			8,452			5,990
Loss on disposal of assets and other		1,494			925			4,567			4,477

Operating income		43,011			45,804			110,506			128,092

Interest expense		(22,611	)		(17,998	)		(68,670	)		(52,083	)
Interest income		550			459			1,526			1,260

Earnings before income taxes and minority interest		20,950			28,265			43,362			77,269

Income tax expense		635			17			568			17
Minority interest		267			336			617			931

Net earnings		20,048			27,912			42,177			76,321

Distributions to senior unitholder		1,994			1,994			5,982			5,982
Net earnings available to general partner unitholder		181			259			362			703
Net earnings available to common unitholders	$	17,873		$	25,659		$	35,833		$	69,636

Basic earnings per common unit:

Net earnings per common unitholder	$	0.33		$	0.63		$	0.67		$	1.78

Diluted earnings per common unit:

Net earnings per common unitholder	$	0.33		$	0.63		$	0.67		$	1.77

See notes to condensed consolidated financial statements.

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(in thousands)

(unaudited)

							Accumulated other
		Number of units					comprehensive (loss) income
			General			General		Currency
	Senior	Common	partner	Senior	Common	partner	Risk	translation		Total
	unit-	unit-	unit-	unit-	unit-	unit-	manage-	adjust-	Pension	partners’
	holder	holders	holder	holder	holders	holder	ment	ments	liability	capital

August 1, 2004	1,994.1	48,772.9	512.8	$ 79,766	$ 178,994	$ (57,391)	$ 1,772	$ 16	$(1,058)	$ 202,099

Contribution in connection with
ESOP compensation charge	-	-	-	-	8,283	84	-	-	-	8,367

Common unit cash distributions	-	-	-	-	(79,815)	(806)	-	-	-	(80,621)

Senior unit cash and accrued distributions	-	-	-	-	(5,922)	(120)	-	-	-	(6,042)

Common units issued in public offering	-	2,875.0	29.0	-	54,893	554	-	-	-	55,447

Common units issued in private offering	-	2,098.6	21.2	-	39,800	404	-	-	-	40,204

Common units issued in connection
with acquistions	-	341.2	3.5	-	6,994	71	-	-	-	7,065

Common unit options exercised	-	25.5	0.2	-	452	5	-	-	-	457

Comprehensive income:
Net earnings	-	-	-	-	41,755	422	-	-	-	42,177
Other comprehensive (loss) income:
Net gains on risk management
derivatives	-	-	-	-	-	-	66	-	-	66
Reclassification of net losses on
risk management derivatives	-	-	-	-	-	-	(1,652)	-	-	(1,652)
Foreign currency translation
adjustment	-	-	-	-	-	-	-	31	-	31
Comprehensive income										40,622

April 30, 2005	1,994.1	54,113.2	566.7	$ 79,766	$ 245,434	$ (56,777)	$ 186	$ 47	$(1,058)	$ 267,598

See notes to condensed consolidated financial statements.

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the nine months ended April 30,
	2005			2004

Cash flows from operating activities:
Net earnings	$	42,177		$	76,321
Reconciliation of net earnings to net cash provided
by operating activities:
Depreciation and amortization expense		62,480			37,130
Employee stock ownership plan compensation charge		8,452			5,990
Loss on disposal of assets		2,251			3,579
Minority interest		617			931
Other		5,403			4,931
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Accounts and notes receivable, net		(90,675	)		(57,430	)
Inventories		13,371			17,806
Prepaid expenses and other current assets		(2,989	)		(1,606	)
Accounts payable		(14,565	)		7,245
Other current liabilities		(6,641	)		(8,695	)
Other liabilities		675			486
Accounts receivable securitization:
Proceeds from new accounts receivable securitizations		104,400			30,000
Proceeds from collections reinvested in revolving
period accounts receivable securitizations		802,134			568,155
Remittances of amounts collected as servicer of
accounts receivable securitizations		(868,234	)		(610,455	)
Net cash provided by operating activities		58,856			74,388

Cash flows from investing activities:
Cash paid for assumed merger and related obligations		-			(343,414	)
Business acquisitions, net of cash acquired		(22,874	)		(37,443	)
Cash paid for acquisition transaction fees		-			(1,269	)
Capital expenditures - technology initiative		(8,268	)		(4,782	)
Capital expenditures - other		(32,738	)		(20,422	)
Proceeds from the sale of assets		11,418			4,520
Other		(2,681	)		(3,982	)
Net cash used in investing activities		(55,143	)		(406,792	)

Cash flows from financing activities:
Distributions		(86,663	)		(65,236	)
Issuance of common units, net of issuance costs of $304
and $48 during 2005 and 2004, respectively		94,757			236,479
Net additions (reductions) to short-term borrowings		87,281			(43,719	)
Proceeds from issuance of debt		-			262,423
Repayments of debt		(94,999	)		(46,400	)
Cash paid for financing costs		(1,345	)		(5,613	)
Proceeds from exercise of common unit options		452			4,141
Cash contribution from general partner		1,034			565
Minority interest activity		46			(363	)
Other		44			-
Net cash provided by financing activities		607			342,277

Effect of exchange rate changes on cash		(31	)		-

Increase in cash and cash equivalents		4,289			9,873
Cash and cash equivalents - beginning of period		15,428			11,154
Cash and cash equivalents - end of period	$	19,717		$	21,027

Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	67,143	$	55,496
Income taxes	$	415	$	-

See notes to condensed consolidated financial statements.

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2005

(Dollars in thousands, except per unit data, unless otherwise designated)

(unaudited)

A.	Organization

Ferrellgas Partners, L.P. (“Ferrellgas Partners”) is a publicly traded limited partnership, owning an approximate 99% limited partner interest in Ferrellgas, L.P. (the “operating partnership”). Ferrellgas Partners and the operating partnership are collectively referred to as “Ferrellgas.” Ferrellgas, Inc. (the “general partner”), a wholly-owned subsidiary of Ferrell Companies, Inc. (“Ferrell Companies”), has retained a 1% general partner interest in Ferrellgas Partners and also holds a 1.0101% general partner interest in the operating partnership, representing an effective 2% general partner interest in Ferrellgas on a combined basis. As general partner, it performs all management functions required by Ferrellgas. Ferrell Companies beneficially owns 18.1 million of the outstanding Ferrellgas Partners common units. JEF Capital Management, Inc. (“JEF Capital”) is beneficially owned by James E. Ferrell (“Mr. Ferrell”), Chairman, Chief Executive Officer and President of the general partner, and thus is an affiliate. JEF Capital directly owns 100% of Ferrellgas’ senior units.

The condensed consolidated financial statements of Ferrellgas reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All adjustments to the condensed 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 (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and (ii) the consolidated financial statements and accompanying notes as set forth in Ferrellgas’ Annual Report on Form 10-K for the fiscal year ended July 31, 2004.

B.	Unit and stock-based compensation

Ferrellgas accounts for the Ferrellgas Unit Option Plan (the “Unit Option Plan”) and the Ferrell Companies, Inc. Incentive Compensation Plan (the “ICP”) using the intrinsic value method under the provisions of Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees,” for all periods presented and makes the fair value method pro forma disclosures required under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” Accordingly, no compensation cost has been recognized for the Unit Option Plan or for the ICP in the condensed consolidated statements of earnings. Had compensation cost for these plans been determined based upon the fair value at the grant date for awards under these plans, consistent with the methodology recommended under SFAS No. 123, Ferrellgas’ net earnings and net earnings per unit would have been adjusted as noted in the table below:

	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004
Net earnings available to common unitholders, as reported	$17,873	$25,659	$35,833	$69,636
Deduct: Total stock based employee compensation expense determined under fair value based method for all awards	(156)	(240)	(467)	(716)
Pro forma net earnings available to common unitholders	$17,717	$25,419	$35,366	$68,920
Basic earnings per common unit:
Basic net earnings available to common unitholders, as reported	$0.33	$0.63	$0.67	$1.78
Basic net earnings available to common unitholders, pro forma	0.33	0.63	0.67	1.76
Diluted earnings per common unit:
Diluted earnings available to common unitholders, as reported	$0.33	$0.63	$0.67	$1.77
Diluted earnings available to common unitholders, pro forma	0.33	0.62	0.67	1.76

C.	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 condensed consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, amortization methods of intangible assets and valuation methods of derivative commodity contracts.

D.	Reclassifications

Certain reclassifications have been made to the condensed consolidated statement of cash flows for the nine months ended April 30, 2004 to conform to the nine months ended April 30, 2005 condensed consolidated statement of cash flows presentation. “Proceeds from the sale of assets” is disclosed separately in net cash used in investing activities in the condensed consolidated statements of cash flows. This amount was previously classified as “Other” in net cash used in investing activities for the nine months ended April 30, 2004.

E.	Nature of operations

Ferrellgas Partners is a holding entity that conducts no operations and has two subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners owns a 100% equity interest in Ferrellgas Partners Finance Corp., whose only purpose is to act as the co-issuer and co-obligor of any debt issued by Ferrellgas Partners. The operating partnership is the only operating subsidiary of Ferrellgas Partners.

The operating partnership is engaged primarily in the distribution of propane and related equipment and supplies in the United States. The propane distribution market is seasonal because propane is used primarily for heating in residential and commercial buildings. Therefore, the results of operations for the nine months ended April 30, 2005 and 2004 are not necessarily indicative of the results to be expected for a full fiscal year. The operating partnership serves more than one million residential, industrial/commercial, portable tank exchange, agricultural and other customers in all 50 states, Puerto Rico, the U.S. Virgin Islands and Canada.

F.	Business combinations

During fiscal 2004, Ferrellgas completed a material business combination. The business combination was accounted for under the purchase method and the assets acquired and liabilities assumed were recorded at their estimated fair market values as of the acquisition date. We completed our valuation and allocation of the purchase price related to the Blue Rhino contribution in the third quarter of fiscal 2005. In the current fiscal year, the purchase price increased by $3.2 million due to the final valuation of property, plant and equipment received in the acquisition. The results of operations from this business combination are included in Ferrellgas’ condensed consolidated financial statements from the date of the business combination.

Allocation of purchase price

Business

combinations

Purchase price

Working capital

Property, plant & equipment

Intangible

Assets

Goodwill

Other

Blue Rhino

(April 2004)

$418,377

$21,334

$96,160

$163,100

$136,408

$1,375

Blue Rhino contribution

On April 20, 2004, FCI Trading Corp. (“FCI Trading”), an affiliate of the general partner, acquired all of the outstanding common stock of Blue Rhino Corporation in an all-cash merger. Pursuant to an Agreement and Plan of Merger dated February 8, 2004, a subsidiary of FCI Trading merged with and into Blue Rhino Corporation whereby the then current stockholders of Blue Rhino Corporation were granted the right to receive a payment from FCI Trading of $17.00 in cash for each share of Blue Rhino Corporation common stock outstanding on April 20, 2004. FCI Trading thereafter became the sole stockholder of Blue Rhino Corporation and immediately after the merger, FCI Trading converted Blue Rhino Corporation into a limited liability company, Blue Rhino LLC.

In a non-cash contribution, pursuant to a Contribution Agreement dated February 8, 2004, FCI Trading contributed on April 21, 2004 all of the membership interests in Blue Rhino LLC to the operating

partnership through a series of transactions and the operating partnership assumed FCI Trading’s obligation under the Agreement and Plan Of Merger to pay the $17.00 per share to the former stockholders of Blue Rhino Corporation together with other specific obligations, as detailed in the following table:


Assumption of obligations under the contribution agreement		$343,414
Common units and general partner interest issued		11,850
Assumption of Blue Rhino’s bank credit facility outstanding balance		43,719
Assumption of other liabilities and acquisition costs		19,394
		$418,377

Also on April 21, 2004, subsequent to the contribution described above, Blue Rhino LLC merged with and into the operating partnership. The former operations of Blue Rhino LLC will hereafter be referred to as “Blue Rhino.”

Ferrellgas’ valuation of the tangible and intangible assets of the Blue Rhino contribution resulted in the recognition of goodwill of $136.4 million. This valuation of goodwill was based on Ferrellgas’ belief that the contributions of Blue Rhino will be beneficial to Ferrellgas’ and Blue Rhino’s operations as Blue Rhino’s counter-seasonal business activities and anticipated future growth is expected to provide Ferrellgas with the ability to better utilize its seasonal resources to complement Ferrellgas’ retail distribution locations with Blue Rhino’s existing distributor network.

The results of operations of Blue Rhino for the period from August 1, 2004 through April 30, 2005 for the three months and nine months ended April 30, 2005 and April 21, 2004 through April 30, 2004 for the three months and nine months ended April 30, 2004 are included in the condensed consolidated statement of earnings of the combined entity.

Pro forma results of operations

The following summarized unaudited pro forma results of operations for the three and nine months ended April 30, 2005 and 2004, assumes that the Blue Rhino contribution had occurred as of the beginning of the periods presented. These unaudited pro forma financial results have been prepared for comparative purposes only and may not be indicative of (i) the results that would have occurred if Ferrellgas had completed the Blue Rhino contribution as of the beginning of the periods presented or (ii) the results that will be attained in the future.

	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004
Propane and other gas liquids sales	$519,916	$443,778	$1,535,912	$1,289,485
Net earnings available to common unitholders	17,873	21,319	35,833	59,456
Basic and diluted net earnings per common unitholder	$ 0.33	$ 0.52	$ 0.67	$ 1.66

G.	Cash and cash equivalents and non-cash activities

For purposes of the condensed consolidated statements of cash flows, Ferrellgas considers cash equivalents to include all highly liquid debt instruments purchased with an original maturity of three months or less. Significant non-cash operating, investing and financing activities are primarily related to business combinations, accounts receivable securitization, and transactions with related parties and are disclosed in Note F – Business combinations, Note H – Accounts receivable securitization, Note L – Partners’ capital and Note P – Transactions with related parties, respectively.

H.	Accounts receivable securitization

The operating partnership transfers certain of its trade accounts receivable to Ferrellgas Receivables, LLC (“Ferrellgas Receivables”), a wholly-owned unconsolidated, special purpose entity, and retains an interest in a portion of these transferred receivables. As these transferred receivables are subsequently collected and the funding from the accounts receivable securitization facility is reduced, the operating partnership’s retained interest in these receivables is reduced. As of April 30, 2005, the balance of the retained interest was $14.2 million and was classified as accounts receivable on the condensed consolidated balance sheet. At April 30, 2005, $75.0 million of accounts receivable had been transferred to Ferrellgas Receivables. At April 30, 2005, the operating partnership did not have any remaining capacity to transfer additional trade accounts receivable. The net non-cash activity relating to this retained interest was $0.7 million and $0.2 million during the three months ended April 30, 2005 and 2004, respectively, and $1.2 million and $0.6 million during the nine months ended April 30, 2005 and 2004 respectively. These amounts reported in the condensed consolidated statements of earnings approximate the financing cost of issuing commercial paper backed by these accounts receivable plus an allowance for doubtful accounts associated with the outstanding receivables transferred to Ferrellgas Receivables. The weighted average discount rate used to value the retained interest in the transferred receivables was 3.5% and 2.0% during the nine months ended April 30, 2005 and 2004, respectively. Ferrellgas renewed the facility for an additional 364-day commitment on September 21, 2004. On June 7, 2005, Ferrellgas renewed the facility for an additional 364-day commitment.

I.	Supplemental financial statement information

Inventories consist of:

		April 30,	July 31,
		2005	2004
	Propane gas and related products	$56,007	$ 69,570
	Appliances, parts and supplies	32,646	34,008
		$88,653	$103,578
In addition to inventories on hand, Ferrellgas enters into contracts primarily to buy propane for supply procurement 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 18 months. As of April 30, 2005, Ferrellgas had committed, for supply procurement purposes, to take net delivery of approximately 32.6 million gallons of propane at a fixed price.

Intangible assets, net consist of:

	April 30, 2005				July 31, 2004
	Gross carrying amount	Accum-ulated amortization	Net	Gross carrying amount		Accum-ulated amortization	Net
Amortized intangible assets
Customer lists	$338,469	$(152,636)	$185,833	$326,352		$(140,766)	$185,586
Non-compete agreements	34,504	(20,617)	13,887	71,697		(56,468)	15,229
Other	5,467	(1,785)	3,682	6,289		(979)	5,310
	378,440	(175,038)	203,402	404,338		(198,213)	206,125
Unamortized intangible assets
Tradenames & trademarks	59,056	-	59,056	59,000		-	59,000
	$437,496	$(175,038)	$262,458	$463,338		$(198,213)	$265,125

	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004
Aggregate amortization expense	$5,825	$3,521	$17,126	$9,564

Estimated amortization expense:

For the years ended July 31,
Amortization remaining in 2005	$ 5,607
2006	21,780
2007	20,279
2008	18,333
2009	17,273

Loss on disposal of assets and other consist of:	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004
Loss on disposal of assets	$824	$755	$2,251	$3,579
Loss on transfer of accounts receivable related to the accounts receivable securitization	1,902	594	4,472	2,141
Service income related to the accounts receivable securitization	(1,232)	(424)	(2,156)	(1,243)
	$1,494	$925	$4,567	$4,477

Shipping and handling expenses are classified in the following condensed consolidated statements of earnings line items:

	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004
Operating expense	$38,161	$34,089	$111,753	$105,209
Depreciation and amortization expense	1,543	1,500	4,853	5,682
Equipment lease expense	5,151	4,966	16,593	10,590
	$44,855	$40,555	$133,199	$121,481

Other current liabilities consist of:

	April 30,	July 31,
	2005	2004
Accrued interest	$27,747	$28,990
Accrued payroll	16,513	16,989
Accrued insurance	8,738	6,942
Note payable	-	1,546
Other	33,201	38,326
	$86,199	$92,793

J.	Short-term borrowings

On April 22, 2005, the operating partnership entered into a $330.0 million bank credit facility. This new bank credit facility replaces the $307.5 million bank credit facility that was to expire on April 28, 2006. The $330.0 million bank credit facility is available for working capital, acquisitions, capital expenditures, long-term debt repayments, and general partnership purposes and will terminate on April 22, 2010, unless extended or renewed. The new bank credit facility has a letter of credit sub-facility with availability of $90.0 million. As of April 30, 2005, Ferrellgas had borrowings of $87.3 million outstanding on the $330.0 million bank credit facility

The borrowings under the $330.0 million bank credit facility bear interest, at Ferrellgas’ option, at a rate equal to either:

• a base rate, which is defined as the higher of the federal funds rate plus 0.50% or Bank of America’s prime rate (as of April 30, 2005, the federal funds rate and Bank of America’s prime rate were 2.97% and 5.75%, respectively); or

• the Eurodollar Rate plus a margin varying from 1.50% to 2.50% (as of April 30, 2005, the one-month Eurodollar Rate was 3.02%).

In addition, an annual commitment fee is payable on the daily unused portion of our $330.0 million bank credit facility at a per annum rate varying from 0.375% to 0.500% (as of April 30, 2005, the commitment fee per annum rate was 0.375%).

K. Contingencies

Ferrellgas’ operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane. As a result, at any given time, Ferrellgas is threatened with or named as a defendant in various lawsuits arising in the ordinary course of business. Currently, Ferrellgas is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of business. 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 are reasonably expected to have a material adverse effect on the condensed consolidated financial condition, results of operations and cash flows of Ferrellgas.

L. Partners’ capital

As of April 30, 2005 and July 31, 2004, partners’ capital consisted of the following limited partner units:

	April 30,	July 31,
	2005	2004
Senior units	1,994,146	1,994,146
Common units	54,113,205	48,772,875

As of April 30, 2005, total common units outstanding consisted of (i) 36.0 million held by third parties and listed on the New York Stock Exchange under the symbol “FGP,” (ii) 17.8 million held by Ferrell Companies, (iii) 0.2 million held by FCI Trading, a subsidiary of Ferrell Companies, and (iv) 0.1 million held by Ferrell Propane, Inc. (“Ferrell Propane”) which is controlled by the general partner. As of July 31, 2004, total common units outstanding consisted of (i) 30.7 million held by third parties, (ii) 17.8 million held by Ferrell Companies, (iii) 0.2 million held by FCI Trading and (iv) 0.1 million held by Ferrell Propane.

During August 2004, Ferrellgas Partners issued, in a public offering, 2.9 million of its common units at a price of $20.00 per unit, less commissions and underwriting expenses. After commissions and underwriting expenses, Ferrellgas Partners received net proceeds of $54.9 million for the issuance of these common units. In connection with this transaction, the general partner contributed $1.1 million in cash to maintain its effective 2% general partner interest in Ferrellgas. Ferrellgas Partners contributed the proceeds to the operating partnership to reduce borrowings outstanding under its bank credit facility.

On November 12, 2004, Ferrellgas Partners received net proceeds of $39.8 million pursuant to the issuance of 2.1 million common units in a private offering to a single, unaffiliated purchaser. In connection with this transaction, the general partner contributed $0.8 million to maintain its effective 2% general partner interest in Ferrellgas. Ferrellgas Partners contributed the proceeds to the operating partnership to reduce borrowings outstanding under its bank credit facility. In January 2005, the Securities and Exchange Commission (“SEC”) declared effective a registration statement filed by Ferrellgas registering the resale of these units.

Ferrellgas Partners’ partnership agreement generally provides that it must use the cash proceeds of any offering of common units to redeem a portion of its outstanding senior units, otherwise a “Material Event” would be deemed to have occurred and JEF Capital as the holder of the senior units, would thereafter have specified rights, such as the right to convert the senior units into common units or the right to register the senior units. Ferrellgas Partners obtained a waiver from JEF Capital related to the offerings completed in August and November 2004. This waiver allowed Ferrellgas Partners to use the proceeds from the offerings to reduce borrowings outstanding under the bank credit facility of the operating partnership. The number of common units issuable upon conversion of a senior unit is equal to the senior unit liquidation preference, currently $40 plus any accrued and unpaid distributions, divided by the then current market price of a common unit. Other “Material Events” include (i) a change in control, (ii) Ferrellgas’ treatment as an association taxable as a corporation for federal income tax purposes or (iii) the failure to pay the senior unit distribution in full for any fiscal quarter. The conversion of these senior units into common units upon the occurrence of a Material Event may be dilutive to Ferrellgas Partners’ existing common unitholders.

On March 7, 2005, Ferrellgas Partners amended its partnership agreement to reflect the extension of the existing agreement with Ferrell Companies involving the priority of quarterly distribution payments on common units held publicly. The existing provision in the partnership agreement, originally scheduled to expire December 31, 2005, was extended to April 30, 2010. This provision allows Ferrellgas Partners to defer distributions on the common units held by Ferrell Companies up to an aggregate outstanding amount of $36.0 million.

M. Earnings per common unit

Below is a calculation of the basic and diluted earnings per common unit in the condensed consolidated statements of earnings for the periods indicated. For diluted earnings per common unit purposes, the senior units were excluded as they 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. Distributions to the senior unitholder decrease the net earnings available to common unitholders.

Ferrellgas implemented Emerging Issues Task Force (“EITF”) 03-6 “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share” in the quarter ended January 31, 2005, which was the first quarter affected by this consensus. EITF 03-6 requires the calculation of net earnings per limited partner unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings for the period had been distributed. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners. Due to the seasonality of the propane business, the dilution effect of EITF 03-6 on net earnings per limited partner unit will typically impact the three months and six months ending January 31. There was not a dilutive effect of EITF 03-6 on basic net earnings per common unit for the three months ended April 30, 2005 and 2004, or for the nine months ended April 30, 2005 and 2004.

In periods with year-to-date net losses the allocation of the net losses to the limited partners and the general partner will be determined based on the same allocation basis specified in the Ferrellgas Partners’ partnership agreement that would apply to periods in which there were no undistributed earnings. Ferrellgas typically incurs net losses in the three month period ended October 31.

	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004

Net earnings available to common unitholders	$17,873	$25,659	$35,833	$69,636

(in thousands) Weighted average common units outstanding	54,110.3	40,664.1	53,097.8	39,128.4

Dilutive securities	48.7	118.3	45.7	110.2

Weighted average common units outstanding plus dilutive securities	54,159.0	40,782.4	53,143.5	39,238.6


Basic earnings per common unit:

Basic earnings available to common unitholders	$ 0.33	$ 0.63	$ 0.67	$ 1.78


Diluted earnings per common unit:

Diluted earnings available to common unitholders	$ 0.33	$ 0.63	$ 0.67	$ 1.77

N. Distributions

On March 15, 2005, December 15, 2004 and September 14, 2004, Ferrellgas paid cash distributions of $1.00 and $0.50 per senior and common unit, respectively, for the three months ended January 31, 2005, October 31, 2004 and July 31, 2004. On May 23, 2005, Ferrellgas declared cash distributions of $1.00 and $0.50 per senior and common unit, respectively, for the three months ended April 30, 2005, that are expected to be paid on June 14, 2005.

O. Adoption of new accounting standards

The Financial Accounting Standards Board (“FASB”) recently issued SFAS No. 123 (revised 2004), “Share-Based Payment” SFAS No. 151, “Inventory Costs – an amendment of ARB No. 43, Chapter 4 (issued 11/04)” SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” EITF No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share” EITF No. 04-1, “Accounting for Preexisting Relationships between the Parties to a Business Combination”and FASB Financial Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations”.

SFAS No. 123 (revised 2004) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value, as of the grant date, of the equity or liability instruments issued. This statement is effective for interim or annual reporting periods that begin after June 15, 2005. Consequently, Ferrellgas will implement SFAS No. 123 (revised 2004) during the quarter ended October 31, 2005. Currently, Ferrellgas accounts for the Unit Option Plan and the ICP using the intrinsic value method under the provisions of Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees,” for all periods presented and makes the fair value method pro forma disclosures required under the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” Accordingly, no compensation cost has been recognized for the Unit Option Plan or for the ICP in the condensed consolidated statements of earnings. See Note B – Unit and stock-based compensation, for current disclosures. Ferrellgas has not yet determined if SFAS No. 123 (revised 2004) will have a material effect on its financial position, results of operations and cash flows.

SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing”, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges. This statement is effective for inventory cost incurred during fiscal years beginning after June 15, 2005. Consequently, Ferrellgas will implement SFAS No. 151 during the quarter ended October 31, 2005. Ferrellgas has studied SFAS No. 151 and believes it will not have a material effect on its financial position, results of operations and cash flows.

SFAS No. 153 amends APB Opinion No. 29 which required that exchanges of nonmonetary assets be measured based on the fair value of the assets exchanged. This Statement amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. This statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Consequently, Ferrellgas will implement SFAS No. 153 during the quarter ended October 31, 2005. Ferrellgas has studied SFAS No. 153 and believes it will not have a material effect on its financial position, results of operations and cash flows.

EITF 03-6 requires the calculation of net earnings per limited partner unit for each period presented according to distributions declared and participation rights in undistributed earnings, as if all of the earnings for the period had been distributed. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners.

Due to the seasonality of the propane business, the dilution effect of EITF 03-6 on net earnings per limited partner unit will typically impact the three months and six months ending January 31. This consensus is effective for fiscal periods beginning after March 31, 2004. Ferrellgas implemented EITF 03-6 in the quarter ended January 31, 2005, which was the first quarter affected by this consensus. See Note M – Earnings per common unit - for further discussion about EITF 03-6.

EITF 04-1 requires that pre-existing contractual relationships between two parties involved in a business combination be evaluated to determine if a settlement of the pre-existing contracts is required separately from the accounting for the business combination. This consensus is effective for business combinations consummated and goodwill impairment tests performed in reporting periods beginning after October 13, 2004. Consequently, Ferrellgas implemented EITF 04-1 during the quarter ended January 31, 2005, without a material effect on its financial position, results of operations and cash flows.

FASB Financial Interpretation No. 47 clarifies the term conditional asset retirement obligation as used in SFAS No. 143, “Accounting for Asset Retirement Obligations”, implemented by Ferrellgas in fiscal year 2003. A conditional asset obligation is a legal obligation to retire an asset when the timing and (or) method of settlement are conditional on a future event, that may or may not be within the control of the entity. The interpretation also requires an entity to recognize a liability for the fair value of the asset retirement obligation when incurred if fair value can be reasonably estimated. The measurement of the liability may factor in any uncertainty about timing and(or) method. The Interpretation is effective for fiscal years ending after December 15, 2005. Ferrellgas is currently studying this interpretation and whether it will have a material effect on its financial position, results of operations and cash flows.

P. Transactions with related parties

General and administrative

Ferrellgas has no employees and is managed and controlled by its general partner. Pursuant to Ferrellgas’ partnership agreements, the general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of Ferrellgas, and all other necessary or appropriate expenses allocable to Ferrellgas or otherwise reasonably incurred by its general partner in connection with operating Ferrellgas’ business. These costs, which include compensation and benefits paid to employees of the general partner who perform services on Ferrellgas’ behalf, as well as related general and administrative costs, are as follows:

For the three months ended April 30,

For the nine months ended April 30,

2005

2004

2005

2004

Reimbursable costs

$71,496

$52,768

$178,741

$156,812

Partnership distributions

Ferrellgas Partners paid senior unit distributions of $6.0 million to JEF Capital during each of the nine months ended April 30, 2005 and 2004. On April 30, 2005, Ferrellgas Partners accrued a senior unit distribution of $2.0 million that Ferrellgas Partners expects to pay to JEF Capital on June 14, 2005.

Ferrellgas Partners has paid the following common unit distributions to related parties:

	For the three months ended April 30,		For the nine months ended April 30,
	2005	2004	2005	2004
Ferrell Companies	$8,902	$8,902	$26,706	$26,706
FCI Trading	98	-	294	-
Ferrell Propane	26	26	77	77
The general partner	293	221	867	652

On May 23, 2005, Ferrellgas Partners declared distributions to Ferrell Companies, FCI Trading, Ferrell Propane and the general partner of $8.9 million, $0.1 million, $26 thousand and $0.3 million, respectively, that are expected to be paid on June 14, 2005. See Note L – Partners’ capital – for disclosure of related party transactions between Ferrellgas and the general partner related to the issuance of common units during August and November 2004.

Operations

Ferrell International Limited (“Ferrell International”) is beneficially owned by Mr. Ferrell and thus is an affiliate. Ferrellgas enters into transactions with Ferrell International in connection with Ferrellgas’ risk management activities and does so at market prices in accordance with Ferrellgas’ affiliate trading policy approved by the general partner’s Board of Directors. These transactions include forward, option and swap contracts and are all reviewed for compliance with the policy. Ferrellgas also provides limited accounting services for Ferrell International. Ferrellgas recognized the following net receipts (disbursements) from purchases, sales and commodity derivative transactions and from providing accounting services for Ferrell International:

For the three months

ended April 30,

For the nine months

ended April 30,

2005

2004

2005

2004

Net receipts (disbursements)

Receipts from providing accounting services

$ -

$328

$(2,699)

$328

These net purchases, sales and commodity derivative transactions with Ferrell International are classified as cost of product sold on the condensed consolidated statements of earnings.

FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)
CONDENSED BALANCE SHEETS
(in dollars)
(unaudited)

			April 30,			July 31,
ASSETS			2005			2004


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			2,971			2,866

Accumulated deficit			(2,971)			(2,866)
Total stockholder’s equity			$1,000			$1,000


CONDENSED STATEMENTS OF EARNINGS
(unaudited)

	For the three months ended April 30,			For the nine months ended April 30,
	2005	2004			2005		2004

General and administrative expense	$ 60	$ -			$ 105		$ 45

Net loss	$(60)	$ -			$(105)		$(45)
See note to condensed financial statements.

FERRELLGAS PARTNERS FINANCE CORP.
(A wholly-owned subsidiary of Ferrellgas Partners, L.P.)

CONDENSED STATEMENTS OF CASH FLOWS
(in dollars)
(unaudited)
	For the nine months ended April 30,
	2005	2004

Cash flows from operating activities:
Net loss	$(105)	$ (45)
Cash used in operating activities	(105)	(45)

Cash flows from financing activities:
Capital contribution	105	45
Cash provided by financing activities	105	45

Change in cash	-	-
Cash – beginning of period	1,000	1,000
Cash – end of period	$1,000	$1,000

See note to condensed financial statements.

NOTE TO CONDENSED FINANCIAL STATEMENTS

APRIL 30, 2005

(unaudited)

A.	Organization

Ferrellgas Partners Finance Corp. (“the Finance Corp.”), a Delaware corporation, was formed on March 28, 1996, and is a wholly-owned subsidiary of Ferrellgas Partners, L.P (“the Partnership”).

The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the interim periods presented. All adjustments to the condensed financial statements were of a normal, recurring nature.

The Finance Corp. has nominal assets, does not conduct any operations, has no employees and serves as co-obligor for debt securities of the Partnership.

FERRELLGAS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

	April 30,		July 31,
ASSETS		2005		2004

Current assets:
Cash and cash equivalents	$	18,816	$	13,751
Accounts and notes receivable, net		163,252		114,211
Inventories		88,653		103,578
Prepaid expenses and other current assets		12,352		9,285
Total current assets		283,073		240,825

Property, plant and equipment, net		789,442		792,436
Goodwill		265,786		261,768
Intangible assets, net		262,458		265,125
Other assets, net		12,171		10,836
Total assets	$	1,612,930	$	1,570,990


LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	89,597	$	104,162
Short-term borrowings		87,281		-
Other current liabilities		76,308		88,070
Total current liabilities		253,186		192,232

Long-term debt		788,434		882,662
Other liabilities		23,166		20,529