Ferrellgas Partners, L.P.

Alan Heitmann - CFO, EVP Steve Wambold - President and CEO Julio Rios - President and CEO, Bridger Logistics Tod Brown - EVP and CEO, Blue Rhino

Thank you, Michelle and good morning everyone. I am joining this morning by Steve Wambold, our President and CEO; Julio Rios, President and CEO of Bridger Logistics; Todd Soiefer, our Senior Vice President of Strategic Development and CFO of Bridger Logistics as well as Tod Brown, the Executive Vice President and CEO of Blue Rhino.

Before we get started, I would like to remind all of you that some of the statements made during this call maybe considered forward-looking and that various risks, uncertainties and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our 10-Q and other documents filed from time-to-time with the SEC.

Now with that, I would like to turn the call over to Steve Wambold for his opening remarks. Steve?

Okay. Thank you, Al.

Good morning, everyone. Today, I would like to start with a discussion of our second quarter performance and some of the trends we're seeing in the current operating environment and then I'll touch on how we're thinking about our growth objectives for the rest of this fiscal year.

After that I'll turn the call over to Julio, who'll provide an update on our mistream operations followed by a Blue Rhino update from Tod Brown and then of course, we'll have Alan take you through the second quarter numbers and be happy to take your questions. As I'm sure many of you saw for yourselves.

The second quarter delta some of the warmest temperatures on record across the country certainly the warmer side seen in my career. Which made for a challenging propane environment and as you all know, our strategy at Ferrellgas is centered on diversifying our revenues to help mitigate the pressures that this type of quarter historically created for our business.

Thanks to strong contributions from our midstream operations, that strategy worked beautifully. As we were able to deliver a year-over-year increase in adjusted EBITDA.

We see this as clear proof that our diversification strategy has positioned us to deliver more consistent financial results and drive future growth. You'll not be surprised to hear me say, that the entire industry on the propane side is feeling the impact of continued volatility and commodities markets and in the midstream business too.

Some more than others, despite macro instability for the last year or more at Ferrellgas, we have remained steady and confident throughout, a confidence founded in the operational excellence of our propane segment and our fully integrated crude oil logistics focus model at Bridger. With best-in-class capabilities and durable long-term take or pay contract with blue chip customers.

Our midstream operations are not dependent on commodity prices. We continue to navigate the lower crude pricing environment with success and expect to capitalize on opportunities created by these lower prices in the future.

Importantly, we continue to expect that Bridger will generate $100 million in adjusted EBITDA for the partnership in fiscal 2016. I do want to address also our propane segment as most of you know, propane prices largely attract crude and despite some very recent-wise in crude pricing.

The propane industry remains in a much less competitive pricing environment. We've used this stretch of low prices and relatively tepid demand, due to warmer weather as an opportunity to focus on organic growth and grab market share.

The recently completed second fiscal quarter was one of our very best in terms of net propane customer gains. While not immediately noticeable in our results due to the factors we have already discussed.

The market share gains position us to deliver superior financial results on operating conditions inevitably improved in the future. Enhancing value for unit holders has been and continues to be a top priority for us.

And as we think about growth in the second half of our fiscal year and beyond. We will continue to take a deliberate approach to both organic and external opportunities.

Our financial flexibility positions us well to prudently and opportunistically identify high quality midstream assets that fit our platform model and to explore complementary or strategically significant propane additions. We have proved that we can pursue value enhancing growth opportunities while painting out an attractive and sustainable distribution and without accessing the capital markets.

Whether organic or externally sourced as we see opportunities to drive growth, we intend to pursue that. In terms of outlook for the rest of the fiscal year today along with our results.

We did announce, that we are revising our previously stated estimates for full year adjusted EBITDA to a range of $360 million to $375 million given sustained warmer temperatures. We felt it prudent to addressed expectations as we head into our third quarter.

As for distributions, this quarter we did declare another strong quarterly cash distribution of $51.25 per unit which represents a $2.05 per unit distribution on an annualized basis. All of us in Ferrellgas recognized how important strong distributions and coverage are to our unit holders and our stakeholders.

And we're confident that through continued focus on operational excellence across the business, we will finish the year with a DCF coverage in excess of one times. With that, let me turn the call over to Bridger President and CEO, Julio Rios to give an operational update on Bridger.

Thank you, Steve. I'd like to start off by thanking our fantastic dedicated employees of Bridger.

Our team continues to impress me with the results are able to deliver, as we continue our strong start to the fiscal year, generating $28.7 million in adjusted EBITDA in the second quarter. We're also pleased that we remain on track to deliver adjusted EBITDA in line with expectations for the full fiscal year.

Like any energy business, we constantly assess the potential impact of shifts and commodity prices and other trends in our operating environment and take them into careful consideration and our internal planning for growth. While downward pressure on crude calls for a more measured approach to near term platform growth.

It presents us with opportunity to leverage our scale and competing with others in the industry and thus our long-term goals of Bridger had not changed. We plan to grow the business across the various midstream sectors with a particular focus on areas within our existing portfolio of assets.

As Steve mentioned, overtime we intend to grow the platform both organically and through selective high return strategic acquisitions. Bridger's model continues to be a key differentiator for the partnership and we're pleased with the way, we're able to operate in a involving and challenging environment.

Substantially all of our EBITDA is fee-based and supported by long-term take or pay agreements and our customer base comprises top tier high quality counter parties. The long-term nature of our agreements be stable in consistent revenue generated by our take or pay contracts and quality of our key customers make Bridger uniquely durable and valuable.

Again let me thank the Bridger team for their continued hard work in the quarter and always and with that, I'll turn over the call to Tod Brown to discuss the highlights from Blue Rhino.

Thank you, Julio. As many of you know, the second quarter marks the middle of our off season at Blue Rhino.

That said, volumes for fiscal year to-date were up just under 1% year-over-year. We continue to see our location count above 46,000 with the strong pipeline of locations being set now going forward into the spring, which will result new volume for the summer selling season.

Our comp store sales growth during 2Q fluctuate depending on the class of trade. We saw a flat to less than 2% comp store sales in the mass and home center segments.

But very solid growth well above 2% in the drug and grocery class of trades. As I discussed on previously quarterly calls, we also have a products business which includes grills, patio heaters, outdoor fire pits, grilling tools and accessories among other items.

This business continues to offer strategic benefits in working with some of our largest partners due to synergies cost the businesses. As we prepare for the upcoming products selling window, we've been sharpening our focus from lower margin category such as non-branded grills to more profitable areas within the product segment.

As well as looking for new adjacent categories that we can expand into. This will allow us to generate more consistent EBITDA across the entire product portfolio resulting in a stronger position in these competitive categories.

Further, I would like to highlight that our Blue Rhino brand is very stable and consistent throughout the year and not as dramatically impacted by weather in the same way as our [indiscernible] delivery business. Our busy season is summer time.

Providing balance and diversification to the results of the propane division. With that, I would like to now turn the call over to Al, who will provide more detail in the partnerships financial performance for the quarter.

Thanks, Tod. As you heard our results for the second quarter fiscal 2016 reflected a difficult operating environment, but at the same time also demonstrated the positive effects of our diversified portfolio of business.

The partnership generated $138.3 million of adjusted EBITDA in the second quarter, an increase from $136.9 million in the prior year period. This includes $28.7 million from our midstream crude oil logistic segment and $122.1 million from a propane and related equipment sales segment.

Results for our propane and related equipment sales segment reflect our continued focus on containing retail expenses and maintaining strong margins. By committing ourselves once again to operational excellence.

We were able to offset some of the impact of warmer temperatures, which were 19% warmer than normal and 16% warmer than the second quarter of the prior year, quarter. Strong performance from our midstream crude oil logistics segment again exceeded our expectations.

Our results reflect the strength of Bridger's customer relationships amid sustained volatility and commodity pricing and our ability to carefully control expenses and drive efficiencies. From a liquidity perspective, we head into the third quarter and a position of strength with ample financial flexibility.

During the second quarter, we increased our secured credit facility from $600 million to $700 million, a testament to the continued strong support of our bank group. This increase provides us ample borrowing capacity.

This coupled with the fact that we have no debt maturities until 2020 provides us sufficient capacity to fund our working capital and growth capital needs without accessing the capital markets. Digging a little deeper into our second quarter numbers.

Propane sales volumes for the second quarter were $250.2 million down 15.8% from the 297.3 million for the same quarter a year ago. This decrease was largely due to the warm weather as previously mentioned.

Total gross profit for the quarter was $270.2 million which includes gross profit from our propane and related equipment sales segment of $230.3 million and gross margin generated from our midstream crude oil logistic segment of $38.1 million. Operating expense for the quarter was $116.5 million, an increase from the prior year quarter which was primarily due to the incremental expenses from the Bridger acquisition as well as certain non-cash items related to changes in fair value of fuel derivatives and contingent consideration in the current year and prior year respectively.

Interest expense was $34.7 million up from $24.4 million a year ago. Primarily due to the notes issued in connection with the Bridger acquisition in June of last year.

Finally, our net earnings for the quarter were $57.8 million or $0.58 per common unit down from the net earnings of $86.4 million in the prior year quarter. The decrease is due impart to the weather as previously discussed.

The increase in interest expense as well as depreciation and amortization expenses primarily related to the Bridger transaction. I'll briefly touch on guidance before I turn the call back over to Steve.

As Steve mentioned earlier, we announced a revised range for a full year adjusted EBITDA of $360 million to $375 million, we've made this revision to reflect the sustained warmer temperatures. Now with that, I'll turn the call back over to Steve for closing remarks.

Before we open the line-up for Q&A.

Okay, thank you, Al. You know obviously, the world we operate in today continues to change rapidly.

But I know at least one thing remains the same and that is our solid commitment to building future of FGP. Our diversification strategy has already borne fruit as evidence by our year-over-year adjusted EBITDA growth and the increased distribution authorized by our Board of Directors.

As our team moves forward, we will continue to use our best-in-class assets and unique capabilities to transform our business for the benefit of all of our stakeholders. Okay, with that Michelle I would like to turn the call over for questions, please.

Okay, thank you everyone for joining our call today. We look forward to updating you following our third quarter results.