FerrellgasPartners LP's (FGP) reported earnings per unit of 32 cents for the third quarter of fiscal 2011 fell short of Zacks Consensus Estimate of 54 cents by 22 Cents. The quarter's results also deteriorated from 41 cents per unit earned in the prior-year quarter.
The GAAP earnings during the quarter was 4 cents versus 41 cents in the prior year quarter. The difference between the GAAP and operating earnings during the quarter was due to the impact of non-recurring charge for the extinguishment of debt and the litigation reserve.
Total Revenue
Ferrellgas Partners' total revenue of $732.4 million in the quarter was 19.0% higher than $615.3 million reported in the comparable year-ago period. On a segmental basis, propane and other gas liquids sales increased 20.8% to $647.7 million and other revenue increased 6.7% to $84.7 million.
The results of the partnership were also higher than the Zacks Consensus estimates of $698 million.
Operating Highlights
Ferrellgas Partners' gross profit during the quarter declined 9.4% from the comparable quarter last year to $189.2 million. The 33.6% increase in input costs to $543.2 million was primarily responsible for the decline in gross margin.
Operating expense in the quarter decreased 2.3% year over year to $103.8 million. While the Equipment lease expense increased to $3.7 million from $3.3 million in the prior-year quarter.
The partnership incurred $24.9 million as interest expense during the third quarter versus $25.9 million in the year-earlier quarter. The decrease in interest expenses was seen on repayment of debts that resulted in the reduction of debt level.
Adjusted net income during the reported quarter was $73.9 million versus $88.2 million in the year ago quarter.
Financial Highlights
Cash and cash equivalents of the partnership were up marginally from the year-ago level. Cash and cash equivalents as of April 30, 2011 were $13.3 million versus $10.6 million as of April 30, 2010.
The partnership's long-term debt as of April 30, 2011 was $1.03 billion compared to $1.1 billion as of April 30, 2010.
During the quarter, Ferrellgas Partners issued 5.1 million common units and utilized the proceeds to redeem $98.0 million of its $280.0 million 8.625% fixed rate senior notes due 2020.
Peer Comparison
Suburban Propane Partners L.P (SPH) competes directly with Ferrellgas Partners. Suburban announced operating earnings of $2.81 per common units for the second quarter fiscal 2011, versus $2.76 in the year-ago quarter.
The continued weakness in the economy along with the inflation stricken energy sector impacted the results of Suburban's in the second quarter. However the partnership’s ability to mange its cost base and drive efficiencies helped it to offset the negative impact significantly.
Our View
It appears that the partnership adopts a restructuring plan for its balance sheet and aims to lower the debt levels. In the reported quarter the partnership issued common units to redeem its outstanding debts, while in the second quarter the partnership issued a low interest bearing debt and used the proceeds to redeem its high interest bearing debts.
Ferrellgas Partners currently retains a Zacks #5 Rank (short-term Strong Sell rating).
Overland Park, Kansas-based Ferrellgas Partners L.P. is a leading distributor of propane and related equipment in the U.S. The partnership provides propane services to Residential, Industrial, Portable Tank Exchange, Agricultural and Wholesale customers.
FERRELLGAS -LP (FGP): Free Stock Analysis Report
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