As filed with the Securities and Exchange Commission on May 21, 2004
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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FERRELLGAS PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 43-1698480
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(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
One Liberty Plaza, Liberty, Missouri 64068
(816) 792-1600
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office)
Kevin T. Kelly
Senior Vice President and Chief Financial Officer
Ferrellgas, Inc.
One Liberty Plaza, Liberty, Missouri 64068
(816) 792-1600
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(Name, address, including zip code, and
telephone number, including area
code, of registrant's agent for service)
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Copies to:
David L. Ronn
Mayer, Brown, Rowe & Maw LLP
700 Louisiana Street, Suite 3600
Houston, Texas 77002
(713) 546-0525
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement, as determined
in light of market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum
Title of each class of securities Number of securities offering price per aggregate offering Amount of
to be registered to be registered security (1) price (1) registration fee
--------------------------------- -------------------- ------------------ ------------------ ----------------
Common Units 1,528,104 $21.00 $32,090,184 $4,065.83
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(1) Estimated solely to calculate the registration fee under Rule 457(c) of the
Securities Act, based on the average of the high and low prices of the
registrant's common units, as reported on the New York Stock Exchange on May 19,
2004.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED MAY 21, 2004
PROSPECTUS
Ferrellgas Partners, L.P.
1,528,104 Common Units
representing limited partner interests
This prospectus has been prepared for use in connection with the proposed
offering and sale of up to 1,528,104 common units representing limited partner
interests in Ferrellgas Partners, L.P. by or for the account of the selling
holders of common units referred to herein. We initially sold the common units
offered by this prospectus to the selling unitholders identified in the "Selling
Unitholders" section of this prospectus pursuant to several private placements.
We are registering these common units pursuant to our commitment to register the
common units. See "Selling Unitholders." The common units may be sold from time
to time by or for the account of the selling unitholders in the over-the-counter
market, on the New York Stock Exchange or otherwise, at prices and on terms then
prevailing or at prices related to the then current market price, at fixed
prices that may be changed or in negotiated transactions at negotiated prices.
We will receive no portion of the proceeds from the sale of the common
units. We will pay the costs and expenses of the registration and offering of
the common units, estimated to be approximately $24,066, other than discounts
and commissions and other expenses to be paid by the selling unitholders. The
common units may be sold by any one or more of the following methods:
o block trade, which may involve crosses, in which the broker or dealer so
engaged will attempt to sell the common units as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
o exchange distributions and/or secondary distributions in accordance with
the rules of the applicable exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
See "Plan of Distribution."
The common units are traded on the New York Stock Exchange under the symbol
"FGP." On May 19, 2004, the last reported sales price for the common units as
reported on the NYSE Composite Transactions tape was $20.85 per common unit.
Brokers or dealers participating in this offering may be deemed to be
"underwriters" and the compensation received by them may be deemed to be
underwriting commissions or discounts. We have agreed to indemnify the selling
unitholders and specific other persons, including their agents or underwriters,
against specific liabilities, including liabilities under the Securities Act and
the selling unitholders may also agree to indemnify such agents or underwriters
against such liabilities. See "Selling Unitholders" and "Plan of Distribution."
Investing in our common units involves risk. See "Risk Factors" beginning
on page 2 of this prospectus and on page 10 of our Annual Report on Form 10-K
for our fiscal year ended July 31, 2003. See "Where you can find more
information" on page 20 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May , 2004.
Table of Contents
About this Prospectus...................................................... i
Prospectus Summary......................................................... 1
Risk Factors............................................................... 2
Use of Proceeds............................................................ 4
Tax Consequences........................................................... 5
Investment in Us by Employee Benefit Plans................................. 16
Selling Unitholders........................................................ 18
Plan of Distribution....................................................... 19
Where You Can Find More Information........................................ 20
Legal Matters.............................................................. 21
Experts.................................................................... 21
Forward-Looking Statements................................................. 22
ABOUT THIS PROSPECTUS
YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND THE DOCUMENTS WE HAVE
INCORPORATED BY REFERENCE AS DESCRIBED UNDER THE SECTION ENTITLED "WHERE YOU CAN
FIND MORE INFORMATION." WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE SUCH OFFER OR SALE IS NOT PERMITTED.
Unless otherwise stated, the information in this prospectus is accurate as
of May 21, 2004. You should rely only on the information contained in this
prospectus and the information we have incorporated by reference. We have not
authorized anyone to provide you with different information. You should not
assume that the information provided by this prospectus or the information we
have incorporated by reference is accurate as of any date other than the date of
the respective document or information, as applicable. If information in any of
the documents we have incorporated by reference conflicts with information in
this prospectus, you should rely on the most recent information. If information
in an incorporated document conflicts with information in another incorporated
document, you should rely on the information in the most recent incorporated
document.
For purposes of this prospectus, unless the context otherwise indicates,
when we refer to "us," "we," "our," or "ours," we describe ourselves and our
subsidiaries, including Ferrellgas, L.P., our operating partnership. References
to our "general partner" refer to Ferrellgas, Inc.
i
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should carefully read this entire prospectus and the other
information we have incorporated by reference to understand fully the terms of
the common units being offered hereunder, as well as the tax and other
considerations that are important to you in making your investment decision. You
should pay special attention to "Risk Factors" beginning on page 3 of this
prospectus and on page 10 of our Annual Report on Form 10-K for the fiscal year
ended July 31, 2003 to determine whether an investment in the common units is
appropriate for you. See "Where you can find more information" on page 20 of
this prospectus.
Ferrellgas Partners, L.P.
We believe that we are the second largest retail marketer of propane in the
United States as measured by our retail gallons sold in fiscal 2003. As of
January 31, 2004, we had 609 retail outlets serving more than one million
residential, industrial/commercial and agricultural and other customers in 45
states. Our operations primarily include the retail distribution and sale of
propane and related equipment and supplies and extend from coast to coast with
concentrations in the Midwest, Southeast, Southwest and Northwest regions of the
United States.
Our retail propane distribution consists principally of transporting
propane purchased from third parties to our retail distribution outlets and then
to tanks on customers' premises, as well as to portable propane tanks. A
substantial majority of our gross profit is derived from the retail distribution
and sale of propane and related risk management activities. Gross profit from
our retail distribution of propane is derived primarily from three sources:
o residential customers;
o industrial/commercial customers; and
o agricultural and other customers.
Recent Events
On April 14, 2004, we announced the closing of a public offering of 7.0
million common units. We received net proceeds from this offering of
approximately $156.4 million, based on the offering price of $23.34 per common
unit and after deducting underwriting discounts and commissions.
On April 20, 2004, we announced that Ferrellgas Escrow LLC, a wholly-owned
subsidiary of our operating partnership, and Ferrellgas Finance Escrow
Corporation, a wholly-owned indirect subsidiary of our operating partnership,
closed a private placement of $250.0 million of 6 3/4% senior notes due 2014.
The two subsidiaries were co-obligors under the senior notes and received net
proceeds of approximately $243.5 million from the private placement based on an
offering price of 99.637% per note and after deducting underwriting discounts
and commissions. The senior notes were issued pursuant to an indenture dated
April 20, 2004.
On April 21, 2004, Ferrellgas Escrow LLC was merged with and into our
operating partnership and Ferrellgas Finance Escrow Corporation was merged with
and into Ferrellgas Finance Corp., thereby making our operating partnership and
Ferrellgas Finance Corp. the new co-obligors under the senior notes. Our
operating partnership and Ferrellgas Finance Corp. have agreed to effect an
exchange offer for the senior notes pursuant to a registration rights agreement
dated April 20, 2004.
On April 20, 2004, an affiliate of our general partner acquired all of the
outstanding common stock of Blue Rhino Corporation in an all cash merger, after
which it converted Blue Rhino Corporation into a limited liability company, Blue
Rhino LLC. On April 21, 2004, this affiliate contributed Blue Rhino LLC to our
operating partnership, Ferrellgas, L.P., through a series of transactions. Blue
Rhino LLC was thereafter merged with and into our operating partnership. As a
result of these transactions, we have become the leading national provider of
portable propane tank exchange services as well as a leading supplier of
complementary propane and non-propane products to consumers through many of the
nation's largest retailers. Our branded propane tank exchange service is offered
at more than 30,000 retail locations in 49 states, Puerto Rico and the U.S.
Virgin Islands, including at leading home improvement centers, mass merchants,
hardware, grocery and convenience stores and is marketed under the trade name
"Blue Rhino."
1
Additional Information
Our principal executive office is located at One Liberty Plaza, Liberty,
Missouri 64068, and the telephone number is (816) 792-1600.
2
RISK FACTORS
Before you invest in our common units, you should be aware that there are
various risks. In addition to the risk factors listed below, please see "Risk
Factors" beginning on page 10 of our Annual Report on Form 10-K for our fiscal
year ended July 31, 2003, for a discussion of particular factors you should
consider before determining whether an investment in our common units is
appropriate for you. See "Where You Can Find More Information" on page 20 of
this prospectus.
Risks Inherent to Our Business
Our substantial debt and other financial obligations could impair our financial
condition and our ability to fulfill our debt obligations.
We have substantial indebtedness and other financial obligations. As of
January 31, 2004, we had approximately:
o total indebtedness of $946.9 million;
o partners' capital of $61.1 million;
o availability under our operating partnership's bank credit facility of
$71.9 million; and
o aggregate future minimum rental commitments under non-cancelable tank
and other equipment operating leases of $77.4 million; provided,
however, if we elect to purchase the underlying assets at the end of
the lease terms, such aggregate buyout would be $24.6 million.
As of January 31, 2004, adjusted on a pro forma basis after giving effect
to:
o our issuance on April 7, 2004 of 7,000,000 common units, the net
proceeds of which were contributed to our operating partnership to
enable it to reduce borrowings under its bank credit facility;
o our operating partnership's incurrence on April 21, 2004 of $250.0
million of debt; and
o our operating partnership's borrowings on April 21, 2004 under its
bank credit facility in connection with the contribution of Blue Rhino
LLC:
o to pay a portion of the liability for the merger consideration to the
former Blue Rhino Corporation common stockholders;
o to redeem the then vested stock options and warrants of Blue Rhino
Corporation; o to pay all borrowings then outstanding under the
existing Blue Rhino LLC bank credit facility; and o to pay other
related costs and expenses; and
we had approximately:
o total indebtedness of $1,097.0 million;
o partners' capital of $259.8 million;
o availability under our operating partnership's bank credit facility of
$119.0 million; and
o aggregate future minimum rental commitments under non-cancelable tank
and other equipment operating leases of $96.6 million; provided,
however, if we elect to purchase the underlying assets at the end of
the lease terms, such aggregate buyout would be $24.6 million.
Subject to the restrictions governing our operating partnership's
indebtedness and other financial obligations and the indenture governing the
notes, we may incur significant additional indebtedness and other financial
obligations, which may be secured and/or structurally senior to the common
units.
Our substantial indebtedness and other financial obligations could have
important consequences to you. For example, it could:
o make it more difficult for us to pay distributions on the common
units;
o impair our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate
purposes or other purposes;
o result in higher interest expense in the event of increases in
interest rates since some of our debt is, and will continue to be, at
variable rates of interest;
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o have a material adverse effect on us if we fail to comply with
financial and restrictive covenants in our debt agreements and an
event of default occurs as a result of that failure that is not cured
or waived;
o require us to dedicate a substantial portion of our cash flow from the
operating partnership to payments on our indebtedness and other
financial obligations, thereby reducing the availability of our cash
flow to fund working capital, capital expenditures and other general
partnership requirements;
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and
o place us at a competitive disadvantage compared to our competitors
that have proportionately less debt.
If we or our operating partnership are unable to meet our debt service
obligations and other financial obligations, we could be forced to restructure
or refinance our indebtedness and other financial transactions, seek additional
equity capital or sell our assets. We may then be unable to obtain such
financing or capital or sell our assets on satisfactory terms, if at all.
Risks Related to Our Portable Propane Tank Exchange Program
The revenues received from the recently acquired Blue Rhino assets and business
are concentrated with a limited number of retailers under non-exclusive
arrangements that may be terminated at will.
The revenues received from the recently acquired Blue Rhino assets and
business are concentrated with a limited number of retailers. If one or more of
these retailers were to materially reduce or terminate its business with us, the
results from our propane tank exchange operations may suffer. For fiscal 2003,
Wal*Mart, Home Depot, and Lowe's represented approximately 36%, 18% and 11% of
Blue Rhino's net revenues, respectively. None of our significant retail tank
exchange accounts are contractually bound to offer our tank exchange service or
products. Therefore, retailers can discontinue our tank exchange service or
sales of our propane related products at any time and offer a competitor's tank
exchange service or related propane products or none at all. Continued relations
with a retailer depend upon various factors, including price, customer service,
consumer demand and competition. In addition, most of our significant retailers
have multiple vendor policies and may seek to offer a competitor's tank exchange
program or products competitive with our propane related products at new or
existing locations of these significant retailers. If any significant retailer
materially reduces, terminates or is unwilling to expand its relationship with
us or requires price reductions or other adverse modifications in our selling
terms, our results from our tank exchange operations may suffer.
If our distributors do not perform up to our expectations, if we encounter
difficulties in managing our distributor operations or if we or our distributors
are not able to manage growth effectively, our retail relationships may be
adversely impacted and our tank exchange business may suffer.
We rely exclusively on our distributors to deliver our tank exchange
service to retailers. Accordingly, our success depends on our ability to
maintain and manage distributor relationships and operations and on the
distributors' ability to set up and adequately service accounts. Many of our
distributors are independent, and we exercise only limited influence over the
resources that these distributors devote to tank exchange. Our retailers impose
demanding service requirements on us, and we could suffer a loss of consumer or
retailer goodwill if our distributors do not adhere to our quality control and
service guidelines or fail to ensure an adequate and timely supply of portable
propane tanks at retail locations. The poor performance of a single distributor
to a national retailer could jeopardize our entire relationship with that
retailer and cause our tank exchange business to suffer. In addition, the number
of retail locations offering our tank exchange and corresponding sales have
historically grown significantly along with the creation of our distributor
network. Accordingly, our distributors must be able to adequately service an
increasing number of retail accounts. If we or our distributors fail to manage
growth effectively, our financial results from our tank exchange business may
suffer.
4
If we experience problems associated with our R4 Technical Center, our
distributors may not be able to service our retail accounts and our tank
exchange business may suffer.
R4 Technical Center--North Carolina, LLC is a joint venture in which we and
Manchester Tank & Equipment Co. North Carolina each own a 50% interest. Several
distributors owned by us as well as several independent distributors rely on R4
Technical Center for their required supplies of refilled and refurbished propane
tanks. We effectively share management of R4 Technical Center with Manchester
Tank & Equipment. If R4 Technical Center experiences problems, whether
operational, caused by management disagreements or otherwise, we may be unable
to meet production goals, achieve targeted production costs or otherwise satisfy
the needs of our distributors, in which event the ability of our distributors to
service our retail accounts may be adversely impacted and cause our tank
exchange business to suffer.
If we are unable to manage the impact of recent overfill prevention device valve
guidelines, our tank exchange business may suffer.
Guidelines published by the National Fire Protection Association in the
current form of Pamphlet 58 and adopted in many states require that all portable
propane tanks refilled after April 1, 2002 must be fitted with an overfill
prevention valve. If we or our distributors cannot satisfy the demand for
compliant propane tanks such that our retailers maintain an adequate supply, our
retailer relationships and our tank exchange business may suffer. In addition,
for some of our customers, we have fixed in advance the price per tank exchange
unit charged to our retailers. When pricing, we make assumptions with regard to
the number of tanks that will already have an overfill prevention valve when
presented for exchange, on which our margins will be greater, and the number of
tanks that will need an overfill prevention valve. If our actual experience is
inconsistent with our assumptions, our margins on sales to that retailer may be
lower than expected, which may have an adverse effect on our financial condition
and results of operations.
For our tank exchange business, we depend on our management information systems
to manage all aspects of that business effectively.
For our tank exchange business, we depend on our management information
systems to process orders, manage inventory and accounts receivable collections,
maintain distributor and customer information, maintain cost-efficient
operations and assist distributors in delivering products on a timely basis. In
addition, our staff of management information systems professionals relies
heavily on the support of several key consultants. Any disruption in the
operation of those management information systems, loss of employees
knowledgeable about such systems, termination of our relationship with one or
more of these key consultants or failure to continue to modify such systems
effectively as our business expands could negatively affect our tank exchange
business.
Potential retail partners may not be able to obtain necessary permits or may be
substantially delayed in obtaining necessary permits, which may adversely impact
our ability to grow our tank exchange retail locations.
Local ordinances, which vary from jurisdiction to jurisdiction, generally
require retailers to obtain permits to store and sell propane tanks. These
ordinances influence retailers' acceptance of tank exchange, distribution
methods, propane tank packaging and storage. The ability and time required to
obtain permits varies by jurisdiction. Delays in obtaining permits have from
time to time significantly delayed the installation of new retail locations.
Some jurisdictions have refused to issue the necessary permits, which has
prevented some installations. Some jurisdictions may also impose additional
restrictions on our ability to market and our distributors' ability to transport
propane tanks or otherwise maintain our tank exchange program.
USE OF PROCEEDS
We will not receive any portion of the proceeds from the sale of the common
units. All proceeds will be for the account of the selling unitholders, as
described below. See "Selling Unitholders."
5
TAX CONSEQUENCES
This section discusses the material tax consequences that may be relevant
to prospective unitholders who are individual citizens or residents of the
United States. It is based upon current provisions of the Internal Revenue Code,
existing regulations, proposed regulations to the extent noted, and current
administrative rulings and court decisions, all of which are subject to change.
Later changes in these authorities may cause the actual tax consequences to vary
substantially from the consequences described below. Unless the context
otherwise requires, references in this section to "us" or "we" are references to
Ferrellgas Partners, L.P. and the operating partnership.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting us or the unitholders. Moreover, this
discussion focuses on unitholders who are individual citizens or residents of
the United States and it has only limited application to corporations, estates,
trusts, non-resident aliens or other unitholders that may be subject to
specialized tax treatment, such as tax-exempt institutions, foreign persons,
individual retirement accounts, real estate investment trusts or mutual funds.
Accordingly, we recommend that each prospective unitholder consult, and depend
on, that unitholder's own tax advisor in analyzing the federal, state, local and
foreign tax consequences particular to that unitholder of the ownership or
disposition of our common units.
All statements as to matters of law and legal conclusions, but not as to
factual matters, contained in this section, unless otherwise noted, are the
opinion of Mayer, Brown, Rowe & Maw LLP, counsel to us and our general partner,
and are, to the extent noted herein, based on the accuracy of various factual
matters.
No ruling has been or will be requested from the IRS regarding any matter
affecting us or prospective unitholders, other than a ruling we received
relating to our taxable year. An opinion of counsel represents only that
counsel's best legal judgment and does not bind the IRS or the courts.
Accordingly, the opinions and statements made in this prospectus may not be
sustained by a court if contested by the IRS. Any contest of this sort with the
IRS may materially reduce the prices at which our common units trade. In
addition, the costs of any contest with the IRS will be borne directly or
indirectly by the unitholders and our general partner. Furthermore, the tax
treatment of us, or of an investment in us, may be significantly modified by
future legislative or administrative changes or court decisions. Any
modifications may or may not be retroactively applied.
For the reasons described below, Mayer, Brown, Rowe & Maw LLP has not
rendered an opinion with respect to the following specific federal income tax
issues:
o the treatment of a unitholder whose common units are loaned to a short
seller to cover a short sale of common units; see "--Tax Consequences
of Unit Ownership--Treatment of Short Sales;"
o whether our monthly convention for allocating taxable income and
losses is permitted by existing Treasury Regulations; see
"--Disposition of Common Units--Allocations Between Transferors and
Transferees;" and
o whether our method for depreciating Section 743 adjustments is
sustainable; see "--Tax Consequences of Unit Ownership--Section 754
Election."
Partnership Status
A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner of a partnership is required to take into
account that partner's allocable share of items of income, gain, loss and
deduction of the partnership in computing that partner's federal income tax
liability, regardless of whether cash distributions are made. In most cases,
distributions by a partnership to a partner are not taxable unless the amount of
any cash distributed is in excess of the partner's adjusted basis in that
partner's partnership interest.
No ruling has been or will be sought from the IRS and the IRS has made no
determination as to our status for federal income tax purposes or whether our
operations generate "qualifying income" under Section 7704 of the Internal
Revenue Code. Instead, we rely on the opinion of Mayer, Brown, Rowe & Maw LLP
that, based upon the Internal Revenue Code, its regulations, published revenue
rulings and court decisions, that we and our operating partnership will each be
classified as a partnership for federal income tax purposes so long as:
o we do not elect to be treated as a corporation; and
o for each taxable year, more than 90% of our gross income has been and
continues to be "qualifying income" within the meaning of Section
7704(d) of the Internal Revenue Code.
Qualifying income includes income and gains from the processing, refining,
transportation and marketing of crude oil, natural gas and products thereof,
including the transportation and retail and wholesale marketing of propane.
Other types of qualifying income include interest other than from a financial
business, dividends, gains from the sale of real property and gains from the
sale or other disposition of assets held for the production of income that
6
otherwise constitutes qualifying income. We believe that more than 90% of our
income has been, and will be, within one or more categories of income that are
qualifying income. The portion of our income that is qualifying income can
change from time to time.
Section 7704 of the Internal Revenue Code provides that publicly-traded
partnerships will, as a general rule, be taxed as corporations. However, an
exception, referred to as the "Qualifying Income Exception," exists with respect
to publicly-traded partnerships of which 90% or more of the gross income for
every taxable year consists of "qualifying income." Although we expect to
conduct our business so as to meet the Qualifying Income Exception, if we fail
to meet the Qualifying Income Exception, other than a failure that is determined
by the IRS to be inadvertent and that is cured within a reasonable time after
discovery, we will be treated as if we had transferred all of our assets,
subject to liabilities, to a newly formed corporation on the first day of the
year in which we fail to meet the Qualifying Income Exception in return for
stock in that corporation, and as if we had then distributed that stock to the
unitholders in liquidation of their interests in us. This contribution and
liquidation should be tax-free to us so long as we, at that time, do not have
liabilities in excess of the tax basis of our assets and should be tax-free to a
unitholder so long as that unitholder does not have liabilities allocated to
that unitholder in excess of the tax basis in that unitholder's units.
Thereafter, we would be treated as a corporation for federal income tax
purposes.
If we were treated as a corporation in any taxable year, either as a result
of a failure to meet the Qualifying Income Exception or otherwise, our items of
income, gain, loss and deduction would be reflected only on our tax return
rather than being passed through to the unitholders, and our net income would be
taxed to us at corporate rates. In addition, any distribution made to a
unitholder would be treated as either taxable dividend income (to the extent of
our current or accumulated earnings and profits) or (in the absence of earnings
and profits or any amount in excess of earnings and profits) a nontaxable return
of capital (to the extent of the tax basis in that unitholder's common units) or
taxable capital gain (after the tax basis in that unitholder's common units is
reduced to zero). Accordingly, treatment of us as a corporation would result in
a material reduction in a unitholder's cash flow and after-tax return and thus
would likely result in a substantial reduction of the value of our common units.
The discussion below assumes that we will be treated as a partnership for
federal income tax purposes.
Tax Treatment of Unitholders
Limited Partner Status
Unitholders who have become our limited partners will be treated as our
partners for federal income tax purposes. Also:
o assignees who have executed and delivered transfer applications, and
are awaiting admission as limited partners; and
o unitholders whose common units are held in street name or by a nominee
and who have the right to direct the nominee in the exercise of all
substantive rights attendant to the ownership of their common units;
will be treated as our partners for federal income tax purposes. Assignees of
common units who are entitled to execute and deliver transfer applications and
become entitled to direct the exercise of attendant rights, but who fail to
execute and deliver transfer applications, may not be treated as one of our
partners for federal income tax purposes. Furthermore, a purchaser or other
transferee of common units who does not execute and deliver a transfer
application may not receive particular federal income tax information or reports
furnished to record holders of common units unless our common units are held in
a nominee or street name account and the nominee or broker has executed and
delivered a transfer application for those common units.
A beneficial owner of common units whose common units have been transferred
to a short seller to complete a short sale would appear to lose its status as
one of our partners with respect to those common units for federal income tax
purposes. See "--Tax Consequences of Unit Ownership--Treatment of Short Sales."
No portion of our income, gains, deductions or losses is reportable by a
unitholder who is not one of our partners for federal income tax purposes, and
any cash distributions received by a unitholder who is not one of our partners
for federal income tax purposes would therefore appear to be fully taxable as
ordinary income. These holders are urged to consult their own tax advisors with
respect to the consequences of holding common units for federal income tax
purposes.
The following discussion assumes that a unitholder is treated as one of our
partners.
Tax Consequences of Unit Ownership
Flow-through of Taxable Income
Each unitholder will be required to report on that unitholder's income tax
return its allocable share of our income, gains, losses and deductions without
regard to whether corresponding cash distributions are received by that
unitholder. Consequently, we may allocate income to a unitholder even if that
unitholder has not received a cash distribution. Each unitholder will be
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required to include in income that unitholder's allocable share of our income,
gain, loss and deduction for our taxable year. Our taxable year is the calendar
year.
Treatment of Partnership Distributions
Except as described below, our distributions to a unitholder will not be
taxable to that unitholder for federal income tax purposes to the extent of the
tax basis in that unitholder's common units immediately before the distribution.
Except as described below, our cash distributions in excess of a unitholder's
tax basis will be considered to be gain from the sale or exchange of our common
units, taxable in accordance with the rules described under "--Disposition of
Common Units" below. Any reduction in a unitholder's share of our liabilities
for which no partner, including our general partner, bears the economic risk of
loss, which are known as "nonrecourse liabilities," will be treated as a
distribution of cash to that unitholder. To the extent that our distributions
cause a unitholder's "at risk" amount to be less than zero at the end of any
taxable year, that unitholder must recapture any losses deducted in previous
years. See "--Tax Consequences of Unit Ownership--Limitations on Deductibility
of Partnership Losses."
A decrease in a unitholder's percentage interest in us because of our
issuance of additional common units will decrease that unitholder's share of our
nonrecourse liabilities and result in a corresponding deemed distribution of
cash. A non-pro rata distribution of money or property may result in ordinary
income to a unitholder, regardless of the tax basis in that unitholder's common
units, if the distribution reduces the unitholder's share of our "unrealized
receivables," including depreciation recapture, and substantially appreciated
"inventory items," both as defined in Section 751 of the Internal Revenue Code
and collectively referred to as "Section 751 Assets." To that extent, the
unitholder will be treated as having been distributed that unitholder's
proportionate share of the Section 751 Assets and having exchanged those assets
with us in return for the non-pro rata portion of the actual distribution made
to that unitholder. This latter deemed exchange will result in the unitholder's
realization of ordinary income which will equal the excess of:
o the non-pro rata portion of that distribution; over
o the unitholder's tax basis for the share of Section 751 Assets deemed
relinquished in the exchange.
Ratio of Taxable Income to Cash Distributions
We estimate that a person who:
o acquires the common units offered pursuant to this prospectus; and
o owns those common units through the period ending on the record date
for the cash distribution payable for the fiscal quarter ended July
31, 2006,
will be allocated, on a cumulative basis, an amount of federal taxable income
that will be less than 10% of the cumulative cash distributed to such person for
that period. The taxable income allocable to a unitholder for subsequent periods
may constitute an increasing percentage of distributable cash. These estimates
are based upon many assumptions regarding our business and operations, including
assumptions about weather conditions in our area of operations, capital
expenditures, cash flows and anticipated cash distributions. These estimates and
our assumptions are subject to numerous business, economic, regulatory,
competitive and political uncertainties beyond our control. Further, these
estimates are based on current tax law and tax reporting positions with which
the IRS could disagree. Accordingly, we cannot assure you that these estimates
will be correct. The actual percentage of distributions that will constitute
taxable income could be higher or lower and any differences could materially
affect the value of our common units.
Basis of Common Units
A unitholder will have an initial tax basis for its common units equal to
the amount that unitholder paid for our common units plus that unitholder's
share of our nonrecourse liabilities. That basis will be increased by that
unitholder's share of our income and by any increases in that unitholder's share
of our nonrecourse liabilities. That basis will be decreased, but not below
zero, by distributions that that unitholder receives from us, by that
unitholder's share of our losses, by any decreases in that unitholder's share of
our nonrecourse liabilities and by that unitholder's share of our expenditures
that are not deductible in computing our taxable income and are not required to
be capitalized. A unitholder will have no share of our debt which is recourse to
our general partner, but will have a share, primarily based on that unitholder's
share of profits, of our nonrecourse liabilities. See "--Disposition of Common
Units--Recognition of Gain or Loss."
Limitations on Deductibility of Partnership Losses
The deduction by a unitholder of that unitholder's share of our losses will
be limited to the unitholder's tax basis in its common units and, in the case of
an individual unitholder or a corporate unitholder (if more than 50% of the
value of the corporate unitholder's stock is owned directly or indirectly by
five or fewer individuals or particular tax-exempt organizations), to the amount
for which the unitholder is considered to be "at risk" with respect to our
activities, if that is less than the unitholder's tax basis. A unitholder must
8
recapture losses deducted in previous years to the extent that our distributions
cause that unitholder's at risk amount to be less than zero at the end of any
taxable year. Losses disallowed to a unitholder or recaptured as a result of
these limitations will carry forward and will be allowable to the extent that
the unitholder's tax basis or at risk amount, whichever is the limiting factor,
subsequently increases. Upon the taxable disposition of a common unit, any gain
recognized by a unitholder can be offset by losses that were previously
suspended by the at risk limitation but may not be offset by losses suspended by
the basis limitation. Any excess loss, above such gain, previously suspended by
the at risk or basis limitations would no longer be utilizable.
Subject to each unitholder's specific tax situation, a unitholder will be
at risk to the extent of the tax basis in that unitholder's common units,
excluding any portion of that basis attributable to that unitholder's share of
our nonrecourse liabilities, reduced by any amount of money the unitholder
borrows to acquire or hold that unitholder's common units if the lender of such
borrowed funds owns an interest in us, is related to the unitholder or can look
only to the common units for repayment. A unitholder's at risk amount will
increase or decrease as the tax basis of the unitholder's common units increases
or decreases, other than tax basis increases or decreases attributable to
increases or decreases in that unitholder's share of our nonrecourse
liabilities.
The passive loss limitations provide that individuals, estates, trusts and
specific closely held corporations and personal service corporations can deduct
losses from passive activities (which for the most part consist of activities in
which the taxpayer does not materially participate) only to the extent of the
taxpayer's income from those passive activities. The passive loss limitations
are applied separately with respect to each publicly-traded partnership.
Consequently, any passive losses generated by us will only be available to
offset our passive income generated in the future and will not be available to
offset income from other passive activities or investments (including other
publicly-traded partnerships) or salary or active business income. Passive
losses which are not deductible because they exceed a unitholder's share of our
income may be deducted in full when that unitholder disposes of its entire
investment in us in a fully taxable transaction with an unrelated party. The
passive activity loss rules are applied after other applicable limitations on
deductions such as the at risk rules and the basis limitation.
A unitholder's share of our net income may be offset by any suspended
passive losses from us, but it may not be offset by any other current or
carryover losses from other passive activities, including those attributable to
other publicly-traded partnerships. The IRS has announced that Treasury
Regulations will be issued which characterize net passive income from a
publicly-traded partnership as investment income for purposes of the limitations
on the deductibility of investment interest.
Limitations on Interest Deductions
The deductibility of a non-corporate taxpayer's "investment interest
expense" is limited to the amount of such taxpayer's "net investment income." As
noted, a unitholder's net passive income from us will be treated as investment
income for this purpose. In addition, the unitholder's share of our portfolio
income will be treated as investment income. Investment interest expense
includes:
o interest on indebtedness properly allocable to property held for
investment;
o our interest expense attributed to portfolio income; and
o the portion of interest expense incurred to purchase or carry an
interest in a passive activity to the extent attributable to portfolio
income.
The computation of a unitholder's investment interest expense will take
into account interest on any margin account borrowing or other loan incurred to
purchase or carry a common unit. Net investment income includes gross income
from property held for investment and amounts treated as portfolio income
pursuant to the passive loss rules less deductible expenses, other than
interest, directly connected with the production of investment income, but in
most cases does not include gains attributable to the disposition of property
held for investment.
Allocation of Partnership Income, Gain, Loss and Deduction
If we have a net profit, our items of income, gain, loss and deduction,
after taking into account any special allocations required under our partnership
agreement, will be allocated among our general partner and the unitholders in
accordance with their respective percentage interests in us. At any time that
cash distributions are made to the holders of our senior units and our incentive
distribution rights or a disproportionate distribution is made to a holder of
our common units, gross income will be allocated to the recipients to the extent
of such distributions. If we have a net loss, our items of income, gain, loss
and deduction, after taking into account any special allocations required under
our partnership agreement, will be allocated first, to the general partner and
the unitholders in accordance with their respective percentage interests in us
to the extent of their positive capital accounts, as maintained under our
partnership agreements, and, second, to our general partner.
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Various items of our income, gain, loss and deduction will be allocated to
account for the difference between the tax basis and fair market value of
property contributed to us by our general partner or any other person
contributing property to us, and to account for the difference between the fair
market value of our assets and their carrying value on our books at the time
that we initially issued the common units offered pursuant to this prospectus.
In addition, items of recapture income will be allocated to the extent possible
to the partner allocated the deduction or curative allocation giving rise to the
treatment of such gain as recapture income to minimize the recognition of
ordinary income by some unitholders. Finally, although we do not expect that our
operations will result in the creation of negative capital accounts, if negative
capital accounts nevertheless result, items of our income and gain will be
allocated in an amount and manner sufficient to eliminate the negative balance
as quickly as possible.
Mayer, Brown, Rowe & Maw LLP is of the opinion that, with the exception of
the issues described in "--Tax Consequences of Unit Ownership--Section 754
Election" and "--Disposition of Common Units--Allocations Between Transferors
and Transferees," the allocations in the partnership agreement of Ferrellgas
Partners will be given effect for federal income tax purposes in determining how
our income, gain, loss or deduction will be allocated among the holders of its
outstanding equity.
Entity-Level Collections
If we are required or elect under applicable law to pay any federal, state
or local income tax on behalf of any unitholder or the general partner or any
former unitholder, we are authorized to pay those taxes from our funds. Such
payment, if made, will be treated as a distribution of cash to the unitholder on
whose behalf the payment was made. If the payment is made on behalf of a person
whose identity cannot be determined, we are authorized to treat the payment as a
distribution to current unitholders. We are authorized to amend the partnership
agreement of Ferrellgas Partners in the manner necessary to maintain uniformity
of intrinsic tax characteristics of common units and to adjust subsequent
distributions, so that after giving effect to such distributions, the priority
and characterization of distributions otherwise applicable under that
partnership agreement is maintained as nearly as is practicable. Payments by us
as described above could give rise to an overpayment of tax on behalf of a
unitholder in which event the unitholder could file a claim for credit or
refund.
Treatment of Short Sales
A unitholder whose common units are loaned to a "short seller" to cover a
short sale of common units may be considered as having disposed of ownership of
those common units. If so, that unitholder would no longer be a partner with
respect to those common units during the period of the loan and may recognize
gain or loss from the disposition. As a result, during this period:
o any of our income, gain, loss or deduction with respect to those
common units would not be reportable by the unitholder;
o any cash distributions received by the unitholder with respect to
those common units would be fully taxable; and
o all of such distributions would appear to be treated as ordinary
income.
Mayer, Brown, Rowe & Maw LLP has not rendered an opinion regarding the
treatment of a unitholder whose common units are loaned to a short seller;
therefore, unitholders desiring to assure their status as partners and avoid the
risk of gain recognition should modify any applicable brokerage account
agreements to prohibit their brokers from borrowing their common units. The IRS
has announced that it is actively studying issues relating to the tax treatment
of short sales of partnership interests. See "--Disposition of Common
Units--Recognition of Gain or Loss."
Alternative Minimum Tax
Each unitholder will be required to take into account that unitholder's
distributive share of any of our items of income, gain, loss or deduction for
purposes of the alternative minimum tax. A portion of our depreciation
deductions may be treated as an adjustment item for this purpose. A unitholder's
alternative minimum taxable income derived from us may be higher than that
unitholder's share of our net income because we may use accelerated methods of
depreciation for purposes of computing federal taxable income or loss. The
minimum tax rate for non-corporate taxpayers is 26% on the first $175,000 of
alternative minimum taxable income in excess of the exemption amount and 28% on
any additional alternative minimum taxable income. Prospective unitholders
should consult with their tax advisors as to the impact of an investment in
common units on their liability for the alternative minimum tax.
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Tax Rates
The highest effective United States federal income tax rate for individuals
for 2004 is 35% and the maximum United States federal income tax rate for net
capital gains of an individual that are recognized prior to January 1, 2009 is
15%, if the asset disposed of was held for more than 12 months at the time of
disposition.
Section 754 Election
We have made the election permitted by Section 754 of the Internal Revenue
Code. The election is irrevocable without the consent of the IRS. The election
permits us to adjust a common unit purchaser's tax basis in our assets under
Section 743(b) of the Internal Revenue Code to reflect that unitholder's
purchase price when common units are purchased from a holder thereof. The
Section 743(b) adjustment applies only to a person who purchases common units
from a holder of common units (including a person who purchases the common units
offered pursuant to this prospectus) and not pursuant to an initial offering by
us. The effect of the Section 743(b) adjustment to a person buying the common
units offered pursuant to this prospectus will be essentially the same as if the
tax basis of our assets were equal to their fair market value at the time of
purchase.
The calculations that are required to determine a Section 743(b) adjustment
are made additionally complex because common units held by the public have been
issued pursuant to multiple offerings. For example, particular regulations
require that the portion of the Section 743(b) adjustment that eliminates the
effect of any unamortized difference in "book" and tax basis of recovery
property to the holder of such a common unit be depreciated over the remaining
recovery period of that property, but Treasury Regulation Section
1.167(c)-1(a)(6) may require that any such difference in "book" and tax basis of
other property be depreciated over a different period. In addition, the holder
of a common unit, other than a holder who purchased such common unit pursuant to
an initial offering by us, may be entitled by reason of a Section 743(b)
adjustment to amortization deductions in respect of property to which the
traditional method of eliminating differences in "book" and tax basis applies
but to which the holder of a common unit that is sold in an initial offering
will not be entitled.
Because we cannot match transferors and transferees of common units,
uniformity of the economic and tax characteristics of our common units to a
purchaser of such common units must be maintained. In the absence of uniformity,
compliance with a number of federal income tax requirements, both statutory and
regulatory, could be substantially diminished. Under the partnership agreement
of Ferrellgas Partners, our general partner is authorized to take a position to
preserve our ability to determine the tax attributes of a common unit from its
date of purchase and the amount that is paid therefor even if that position is
not consistent with the Treasury Regulations.
We intend to depreciate the portion of a Section 743(b) adjustment
attributable to any unamortized difference between the "book" and tax basis of
an asset in respect of which we use the remedial method in a manner that is
consistent with the regulations under Section 743 of the Internal Revenue Code
as to recovery property in respect of which the remedial allocation method is
adopted. Such method is arguably inconsistent with Treasury Regulation Section
1.167(c)-1(a)(6), which is not expected to directly apply to a material portion
of our assets. If we determine that this position cannot reasonably be taken, we
may take a depreciation or amortization position which may result in lower
annual depreciation or amortization deductions than would otherwise be allowable
to some unitholders. In addition, if common units held by the public other than
those that are sold in an initial offering by us are entitled to different
treatment in respect of property as to which we are using the traditional method
of eliminating differences in "book" and tax basis, we may also take a position
that results in lower annual deductions to some or all of our unitholders than
might otherwise be available. Mayer, Brown, Rowe & Maw LLP is unable to opine as
to the validity of any position that is described in this paragraph because
there is no clear applicable authority.
A Section 754 election is advantageous if the tax basis in a transferee's
common units is higher than such common units' share of the aggregate tax basis
of our assets immediately prior to the transfer. In such a case, as a result of
the election, the transferee would have a higher tax basis in its share of our
assets for purposes of calculating, among other items, the transferee's
depreciation and amortization deductions and the transferee's share of any gain
or loss on a sale of our assets. Conversely, a Section 754 election is
disadvantageous if the transferee's tax basis in such common units is lower than
such common unit's share of the aggregate tax basis of our assets immediately
prior to the transfer. Thus, the fair market value of our common units may be
affected either favorably or adversely by the election.
The calculations involved in the Section 754 election are complex and will
be made by us on the basis of assumptions as to the value of our assets and
other matters. For example, the allocation of the Section 743(b) adjustment
among our assets must be made in accordance with the Internal Revenue Code. The
IRS could seek to reallocate some or all of any Section 743(b) adjustment
allocated by us to our tangible assets to goodwill instead. Goodwill, as an
intangible asset, is amortizable over a longer period of time or under a less
accelerated method than most of our tangible assets. The determinations we make
may be successfully challenged by the IRS and the deductions resulting from them
may be reduced or disallowed altogether. Should the IRS require a different
basis adjustment to be made, and should, in our opinion, the expense of
compliance exceed the benefit of the election, we may seek permission from the
IRS to revoke our Section 754 election. If such permission is granted, a
subsequent purchaser of common units may be allocated more income than that
purchaser would have been allocated had the election not been revoked.
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Tax Treatment of Operations
Accounting Method and Taxable Year
We use the year ending December 31 as our taxable year and the accrual
method of accounting for federal income tax purposes. Each unitholder will be
required to include in income that unitholder's share of our income, gain, loss
and deduction for our taxable year ending within or with that unitholder's
taxable year. In addition, a unitholder who has a taxable year ending on a date
other than December 31 and who disposes of all of its units following the close
of our taxable year but before the close of its taxable year must include that
unitholder's share of our income, gain, loss and deduction in income for its
taxable year, with the result that that unitholder will be required to include
in income for its taxable year that unitholder's share of more than one year of
our income, gain, loss and deduction. See "--Disposition of Common
Units--Allocations Between Transferors and Transferees."
Initial Tax Basis, Depreciation and Amortization
We will use the tax basis of our various assets for purposes of computing
depreciation and cost recovery deductions and, ultimately, gain or loss on the
disposition of such assets. Assets that we acquired from our general partner in
connection with our formation initially had an aggregate tax basis equal to the
tax basis of the assets in the possession of the general partner immediately
prior to our formation. The majority of the assets that we acquired after our
formation had an initial tax basis equal to their cost, however some of our
assets were contributed to us and had an initial tax basis equal to the
contributor's tax basis in those assets immediately prior to such contribution.
The federal income tax burden associated with the difference between the fair
market value of our property and its tax basis immediately prior to an initial
offering by us will be borne by unitholders holding interests in us prior to
that offering. See "--Tax Consequences of Unit Ownership--Allocation of
Partnership Income, Gain, Loss and Deduction."
We may elect to use permitted depreciation and cost recovery methods that
will result in the largest deductions being taken in the early years after
assets are placed in service. Property we acquire or construct in the future may
be depreciated using accelerated methods permitted by the Internal Revenue Code.
If we dispose of depreciable property by sale, foreclosure, or otherwise,
all or a portion of any gain, determined by reference to the amount of
depreciation previously deducted and the nature of the property, may be subject
to the recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a unitholder who has taken cost recovery or depreciation deductions
with respect to property owned by us may be required to recapture such
deductions as ordinary income upon a sale of that unitholder's interest in us.
See "--Tax Consequences of Unit Ownership--Allocation of Partnership Income,
Gain, Loss and Deduction" and "--Disposition of Common Units--Recognition of
Gain or Loss."
The costs that we incurred in our organization have previously been
amortized over a period of 60 months. The costs incurred in selling our common
units, i.e. syndication expenses, must be capitalized and cannot be deducted
currently, ratably or upon our termination. Uncertainties exist regarding the
classification of costs as organization expenses, which have previously been
amortized by us over a period of 60 months, and as syndication expenses, which
may not be amortized by us. The underwriting discounts and commissions we incur
will be treated as syndication expenses.
Valuation and Tax Basis of our Properties
The federal income tax consequences of the ownership and disposition of
common units will depend in part on our estimates of the fair market values, and
determinations of the tax bases, of our assets. Although we may from time to
time consult with professional appraisers regarding valuation matters, we will
make many of the fair market value estimates ourselves. These estimates of value
and determinations of basis are subject to challenge and will not be binding on
the IRS or the courts. If the estimates and determinations of fair market value
or basis are later found to be incorrect, the character and amount of items of
income, gain, loss or deduction previously reported by unitholders might change,
and unitholders might be required to adjust their tax liability for prior years
and incur interest and penalties with respect to those adjustments.
Disposition of Common Units
Recognition of Gain or Loss
Gain or loss will be recognized on a sale of common units equal to the
difference between the amount realized and the unitholder's tax basis for the
common units sold. A unitholder's amount realized will be measured by the sum of
the cash or the fair market value of other property received plus that
unitholder's share of our nonrecourse liabilities. Because the amount realized
includes a unitholder's share of our nonrecourse liabilities, the gain
recognized on the sale of common units could result in a tax liability in excess
of any cash received from such sale. Prior distributions from us in excess of
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cumulative net taxable income in respect of a common unit which decreased a
unitholder's tax basis in such common unit will, in effect, become taxable
income if our common unit is sold at a price greater than the unitholder's tax
basis in such common unit, even if the price is less than that unitholder's
original cost.
Should the IRS successfully contest our convention to amortize only a
portion of the Section 743(b) adjustment attributable to an amortizable
intangible asset described in Section 197 of the Internal Revenue Code after a
sale of common units, a unitholder could realize additional gain from the sale
of common units than had such convention been respected. See "--Tax Consequences
of Unit Ownership--Section 754 Election." In that case, the unitholder may have
been entitled to additional deductions against income in prior years but may be
unable to claim them, with the result to that unitholder of greater overall
taxable income than appropriate. Counsel is unable to opine as to the validity
of the convention but believes such a contest by the IRS to be unlikely because
a successful contest could result in substantial additional deductions to other
unitholders.
Except as noted below, gain or loss recognized by a unitholder, other than
a "dealer" in common units, on the sale or exchange of a common unit will be
taxable as capital gain or loss. Capital gain recognized on the sale of common
units held for more than 12 months will be taxed at a maximum rate of 15% for
sales occurring prior to January 1, 2009. A portion of this gain or loss, which
will likely be substantial, however, will be separately computed and taxed as
ordinary income or loss under Section 751 of the Internal Revenue Code to the
extent attributable to assets giving rise to depreciation recapture or other
"unrealized receivables" or to "inventory items" owned by us. The term
"unrealized receivables" includes potential recapture items, including
depreciation recapture. Ordinary income attributable to unrealized receivables,
inventory items and depreciation recapture may exceed net taxable gain realized
upon the sale of our common unit and may be recognized even if there is a net
taxable loss realized on the sale of our common unit. Thus, a unitholder may
recognize both ordinary income and a capital loss upon a disposition of common
units. Net capital loss may offset no more than $3,000 of ordinary income in the
case of individuals and may only be used to offset capital gain in the case of
corporations.
The IRS has ruled that a partner who acquires interests in a partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis for all those interests. Upon a sale or other disposition of
less than all of such interests, a portion of that tax basis must be allocated
to the interests sold using an "equitable apportionment" method. Treasury
Regulations under Section 1223 of the Internal Revenue Code allow a selling
unitholder who can identify common units transferred with an ascertainable
holding period to elect to use the actual holding period of the common units
transferred. Thus, according to the ruling, a holder of common units will be
unable to select high or low basis common units to sell, but, under the
regulations, may designate specific common units sold for purposes of
determining the holding period of the common units sold. A unitholder electing
to use the actual holding period of common units transferred must consistently
use that identification method for all subsequent sales or exchanges of our
common units. A unitholder considering the purchase of additional common units
or a sale of common units purchased in separate transactions should consult that
unitholder's tax advisor as to the possible consequences of this ruling and
application of the regulations.
The Internal Revenue Code treats a taxpayer as having sold a partnership
interest, such as our units, in which gain would be recognized if it were
actually sold at its fair market value, if the taxpayer or related persons
enters into:
o a short sale;
o an offsetting notional principal contract; or
o a futures or forward contract with respect to the partnership interest
or substantially identical property.
Moreover, if a taxpayer has previously entered into a short sale, an
offsetting notional principal contract or a futures or forward contract with
respect to the partnership interest, the taxpayer will be treated as having sold
that position if the taxpayer or a related person then acquires the partnership
interest or substantially identical property.
Allocations Between Transferors and Transferees
In most cases, our taxable income and losses will be determined annually,
will be prorated on a monthly basis and will be subsequently apportioned among
the unitholders in proportion to the number of common units owned by each of
them as of the opening of the New York Stock Exchange on the first business day
of the month. However, gain or loss realized on a sale or other disposition of
our assets other than in the ordinary course of business will be allocated among
the unitholders as of the opening of the New York Stock Exchange on the first
business day of the month in which that gain or loss is recognized. As a result,
a unitholder transferring common units in the open market may be allocated
income, gain, loss and deduction accrued after the date of transfer.
The use of this method may not be permitted under existing Treasury
Regulations. Accordingly, Mayer, Brown, Rowe & Maw LLP is unable to opine on the
validity of this method of allocating income and deductions between transferors
and transferees of common units. If this method is not allowed under the
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Treasury Regulations, or only applies to transfers of less than all of the
unitholder's interest, our taxable income or losses might be reallocated among
the unitholders. We are authorized to revise our method of allocation between
transferors and transferees, as well as among unitholders whose interests
otherwise vary during a taxable period, to conform to a method permitted under
future Treasury Regulations.
A unitholder who owns common units at any time during a quarter and who
disposes of such common units prior to the record date set for a cash
distribution with respect to such quarter will be allocated items of our income,
gain, loss and deduction attributable to such quarter but will not be entitled
to receive that cash distribution.
Notification Requirements
A unitholder who sells or exchanges common units is required to notify us
in writing of that sale or exchange within 30 days after the sale or exchange
and in any event by no later than January 15 of the year following the calendar
year in which the sale or exchange occurred. We are required to notify the IRS
of that transaction and to furnish specific information to the transferor and
transferee. However, these reporting requirements do not apply with respect to a
sale by an individual who is a citizen of the United States and who effects the
sale or exchange through a broker. Additionally, a transferor and a transferee
of a common unit will be required to furnish statements to the IRS, filed with
their income tax returns for the taxable year in which the sale or exchange
occurred, that sets forth the amount of the consideration paid for the common
unit. Failure to satisfy these reporting obligations may lead to the imposition
of substantial penalties.
Constructive Termination
We will be considered to have been terminated for tax purposes if there is
a sale or exchange of 50% or more of the total interests in our capital and
profits within a 12-month period. A termination of us will result in the closing
of our taxable year for all unitholders. In the case of a unitholder reporting
on a taxable year other than a year ending December 31, the closing of our
taxable year may result in more than 12 months of our taxable income or loss
being includable in that unitholder's taxable income for the year of our
termination. New tax elections required to be made by us, including a new
election under Section 754 of the Internal Revenue Code, must be made subsequent
to a termination, and a termination could result in a deferral of our deductions
for depreciation. A termination could also result in penalties if we were unable
to determine that the termination had occurred. Moreover, a termination might
either accelerate the application of, or subject us to, any tax legislation
enacted prior to the termination.
Tax-Exempt Organizations and Various Other Investors
Ownership of common units by employee benefit plans, other tax-exempt
organizations, nonresident aliens, foreign corporations, other foreign persons
and regulated investment companies raises issues unique to such persons and, as
described below, may substantially increase the tax liability and requirements
imposed on such persons.
Employee benefit plans and most other organizations exempt from federal
income tax, including individual retirement accounts and other retirement plans,
are subject to federal income tax on unrelated business taxable income.
Virtually all of the taxable income derived by such an organization from the
ownership of a common unit will be unrelated business taxable income and thus
will be taxable to such a unitholder.
A regulated investment company or "mutual fund" is required to derive 90%
or more of its gross income from interest, dividends, gains from the sale of
stocks or securities or foreign currency or related sources. It is not
anticipated that any significant amount of our gross income will include that
type of income.
Non-resident aliens and foreign corporations, trusts or estates which hold
common units will be considered to be engaged in business in the United States
on account of ownership of common units. As a consequence, they will be required
to file federal tax returns in respect of their share of our income, gain, loss
or deduction and pay federal income tax at regular rates on any net income or
gain. Moreover, under rules applicable to publicly-traded partnerships, we will
withhold at the highest effective tax rate applicable to individuals, currently,
35%, from cash distributions made quarterly to foreign unitholders. Each foreign
unitholder must obtain a taxpayer identification number from the IRS and submit
that number to our transfer agent on a Form W-8 BEN or applicable substitute
form in order to obtain credit for the taxes withheld. A change in applicable
law may require us to change these procedures.
In addition, because a foreign corporation which owns common units will be
treated as engaged in a United States trade or business, that corporation may be
subject to United States branch profits tax at a rate of 30%, in addition to
regular federal income tax, on its allocable share of our income and gain (as
adjusted for changes in the foreign corporation's "U.S. net equity") which are
effectively connected with the conduct of a United States trade or business.
That tax may be reduced or eliminated by an income tax treaty between the United
States and the country with respect to which the foreign corporate unitholder is
a "qualified resident." In addition, such a unitholder is subject to special
information reporting requirements under Section 6038C of the Internal Revenue
Code.
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Under a ruling of the IRS, a foreign unitholder who sells or otherwise
disposes of a common unit will be subject to federal income tax on gain realized
on the disposition of such common unit to the extent that such gain is
effectively connected with a United States trade or business of the foreign
unitholder. Apart from the ruling, a foreign unitholder will not be taxed upon
the disposition of a common unit if that foreign unitholder has held less than
5% in value of our common units during the five-year period ending on the date
of the disposition and if our common units are regularly traded on an
established securities market at the time of the disposition.
Administrative Matters
Information Returns and Audit Procedures
We intend to furnish to each unitholder, within 90 days after the close of
each calendar year, specific tax information, including a Schedule K-1, which
sets forth each unitholder's share of our income, gain, loss and deduction for
our preceding taxable year. In preparing this information, which in most cases
will not be reviewed by counsel, we will use various accounting and reporting
conventions, some of which have been mentioned in the previous discussion, to
determine the unitholder's share of income, gain, loss and deduction. There is
no assurance that any of those conventions will yield a result which conforms to
the requirements of the Internal Revenue Code, regulations or administrative
interpretations of the IRS. We cannot assure prospective unitholders that the
IRS will not successfully contend in court that such accounting and reporting
conventions are impermissible. Any such challenge by the IRS could negatively
affect the value of our common units.
The IRS may audit our federal income tax information returns. Adjustments
resulting from any such audit may require each unitholder to adjust a prior
year's tax liability, and possibly may result in an audit of the unitholder's
own return. Any audit of a unitholder's return could result in adjustments not
related to our returns as well as those related to our returns.
In most respects, partnerships are treated as separate entities for
purposes of federal tax audits, judicial review of administrative adjustments by
the IRS and tax settlement proceedings. The tax treatment of partnership items
of income, gain, loss and deduction are determined in a partnership proceeding
rather than in separate proceedings with the partners. The Internal Revenue Code
requires that one partner be designated as the "Tax Matters Partner" for these
purposes. Our partnership agreements appoint our general partner as our Tax
Matters Partner.
The Tax Matters Partner will make various elections on our behalf and on
behalf of the unitholders. In addition, the Tax Matters Partner can extend the
statute of limitations for assessment of tax deficiencies against unitholders
for items in our returns. The Tax Matters Partner may bind a unitholder with
less than a 1% profits interest in us to a settlement with the IRS unless that
unitholder elects, by filing a statement with the IRS, not to give such
authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial
review (by which all the unitholders are bound) of a final partnership
administrative adjustment and, if the Tax Matters Partner fails to seek judicial
review, such review may be sought by any unitholder having at least a 1%
interest in our profits and by the unitholders having in the aggregate at least
a 5% profits interest. However, only one action for judicial review will go
forward, and each unitholder with an interest in the outcome may participate.
A unitholder must file a statement with the IRS identifying the treatment
of any item on that unitholder's federal income tax return that is not
consistent with the treatment of the item on our return. Intentional or
negligent disregard of the consistency requirement may subject a unitholder to
substantial penalties.
Nominee Reporting
Persons who hold an interest in us as a nominee for another person are
required to furnish to us:
o the name, address and taxpayer identification number of the beneficial
owner and the nominee;
o whether the beneficial owner is:
o a person that is not a United States person;
o a foreign government, an international organization or any
wholly-owned agency or instrumentality of either of the foregoing; or
o a tax-exempt entity;
o the amount and description of common units held, acquired or
transferred for the beneficial owner; and
o particular information including the dates of acquisitions and
transfers, means of acquisitions and transfers, and acquisition cost
for purchases, as well as the amount of net proceeds from sales.
Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and specific
information on common units they acquire, hold or transfer for their own
account. A penalty of $50 per failure, up to a maximum of $100,000 per calendar
year, is imposed by the Internal Revenue Code for failure to report this
15
information to us. The nominee is required to supply the beneficial owner of our
common units with the information furnished to us.
Registration as a Tax Shelter
The Internal Revenue Code requires that tax shelters be registered with the
Secretary of the Treasury. The temporary Treasury Regulations interpreting the
tax shelter registration provisions of the Internal Revenue Code are extremely
broad. Although we may not be a tax shelter for such purposes, we have
registered as a tax shelter with the Secretary of the Treasury in light of the
substantial penalties which might be imposed if registration is required and not
undertaken. The IRS has issued us the following tax shelter registration number:
94201000010. ISSUANCE OF THE REGISTRATION NUMBER DOES NOT INDICATE THAT AN
INVESTMENT IN US OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR
APPROVED BY THE IRS. We must furnish the registration number to the unitholders,
and a unitholder who sells or otherwise transfers a common unit in a subsequent
transaction must furnish the registration number to the transferee. The penalty
for failure of the transferor of a common unit to furnish the registration
number to the transferee is $100 for each such failure. A unitholder must
disclose our tax shelter registration number on Form 8271 to be attached to that
unitholder's tax return on which any deduction, loss or other benefit we
generate is claimed or on which any of our income is included. A unitholder who
fails to disclose the tax shelter registration number on Form 8271 attached to
its return, without reasonable cause for that failure, will be subject to a $250
penalty for each failure. Any penalties discussed herein are not deductible for
federal income tax purposes. Registration as a tax shelter may increase the risk
of an audit.
Tax Shelter Reporting Rules
Recently issued Treasury Regulations require taxpayers to report particular
information on Form 8886 if they participate in a "reportable transaction."
Unitholders may be required to file this form with the IRS if we participate in
a "reportable transaction." A transaction may be a reportable transaction based
upon any of several factors. Unitholders are urged to consult with their own tax
advisor concerning the application of any of these factors to their investment
in our common units. Congress is considering legislative proposals that, if
enacted, would impose significant penalties for failure to comply with these
disclosure requirements. The Treasury Regulations also impose obligations on
"material advisors" that organize, manage or sell interests in registered "tax
shelters." As previously stated, we have registered as a tax shelter, and, thus,
one of our material advisors will be required to maintain a list with specific
information, including unitholder names and tax identification numbers, and to
furnish this information to the IRS upon request. Unitholders are urged to
consult with their own tax advisor concerning any possible disclosure obligation
with respect to their investment and should be aware that we and our material
advisors intend to comply with the list and disclosure requirements.
Accuracy-Related Penalties
An additional tax equal to 20% of the amount of any portion of an
underpayment of tax which is attributable to one or more of particular listed
causes, including negligence or disregard of rules or regulations, substantial
understatements of income tax and substantial valuation misstatements, is
imposed by the Internal Revenue Code. No penalty will be imposed, however, with
respect to any portion of an underpayment if it is shown that there was a
reasonable cause for that portion and that the taxpayer acted in good faith with
respect to that portion.
A substantial understatement of income tax in any taxable year exists if
the amount of the understatement exceeds the greater of 10% of the tax required
to be shown on the return for the taxable year or $5,000 ($10,000 for most
corporations). The amount of any understatement subject to penalty is reduced if
any portion is attributable to a position adopted on the return:
o with respect to which there is, or was, "substantial authority;" or
o as to which there is a reasonable basis and the pertinent facts of
such position are disclosed on the return.
More stringent rules apply to "tax shelters," a term that in this context does
not appear to include us. If any item of our income, gain, loss or deduction
included in the distributive shares of unitholders might result in such an
"understatement" of income for which no "substantial authority" exists, we must
disclose the pertinent facts on our return. In addition, we will make a
reasonable effort to furnish sufficient information for unitholders to make
adequate disclosure on their returns to avoid liability for this penalty.
A substantial valuation misstatement exists if the value of any property,
or the adjusted basis of any property, claimed on a tax return is 200% or more
of the amount determined to be the correct amount of such valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment attributable
to a substantial valuation misstatement exceeds $5,000, $10,000 for most
corporations. If the valuation claimed on a return is 400% or more than the
correct valuation, the penalty imposed increases to 40%.
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State, Local and Other Tax Consequences
In addition to federal income taxes, unitholders will be subject to other
taxes, such as state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which we do business or own property. Although an analysis of
those various taxes is not presented here, each prospective unitholder should
consider their potential impact on that unitholder's investment in us. We
currently conduct business in 45 states. A unitholder will be required to file
state income tax returns and to pay state income taxes in some or all of the
states in which we do business or own property and may be subject to penalties
for failure to comply with those requirements. In some states, tax losses may
not produce a tax benefit in the year incurred (if, for example, we have no
income from sources within that state) and also may not be available to offset
income in subsequent taxable years. Some of the states may require that we, or
we may elect to, withhold a percentage of income from amounts to be distributed
to a unitholder who is not a resident of the state. Withholding, the amount of
which may be greater or less than a particular unitholder's income tax liability
to the state, does not relieve the non-resident unitholder from the obligation
to file an income tax return. Amounts withheld may be treated as if distributed
to unitholders for purposes of determining the amounts distributed by us. See
"--Tax Consequences of Unit Ownership--Entity-Level Collections." Based on
current law and our estimate of future operations, we anticipate that any
amounts required to be withheld will not be material.
It is the responsibility of each unitholder to investigate the legal and
tax consequences under the laws of pertinent states and localities of that
unitholder's investment in us. Accordingly, each prospective unitholder should
consult, and must depend upon, that unitholder's own tax counsel or other
advisor with regard to those matters. Further, it is the responsibility of each
unitholder to file all state and local, as well as U.S. federal, tax returns
that may be required of such unitholder. Mayer, Brown, Rowe & Maw LLP has not
rendered an opinion on the state or local tax consequences of an investment in
us.
INVESTMENT IN US BY EMPLOYEE BENEFIT PLANS
An investment in us by an employee benefit plan is subject to additional
considerations because the investments of these plans are subject to:
o the fiduciary responsibility and prohibited transaction provisions of
the Employee Retirement Income Security Act of 1974, often referred to
as ERISA; and
o restrictions imposed by Section 4975 of the Internal Revenue Code.
For these purposes, the term "employee benefit plan" may include:
o qualified pension, profit-sharing and stock bonus plans;
o simplified employee pension plans; and
o tax deferred annuities or individual retirement accounts established
or maintained by an employer or employee organization.
Prior to making an investment in us, consideration should be given to,
among other things:
o whether the investment is permitted under the terms of the employee
benefit plan;
o whether the investment is prudent under Section 404(a)(1)(B) of ERISA;
o whether in making the investment, the employee benefit plan will
satisfy the diversification requirements of Section 404(a)(1)(C) of
ERISA;
o whether the investment will result in recognition of unrelated
business taxable income by the employee benefit plan and, if so, the
potential after-tax investment return; and
o whether, as a result of the investment, the employee benefit plan will
be required to file an exempt organization business income tax return
with the IRS.
See "Tax Consequences--Disposition of Common Units--Tax-Exempt Organizations and
Various Other Investors."
The person with investment discretion with respect to the assets of an
employee benefit plan, often called a fiduciary, should determine whether an
investment in us is authorized by the appropriate governing instrument and is a
proper investment for the employee benefit plan. A fiduciary should also
consider whether the employee benefit plan will, by investing in us, be deemed
to own an undivided interest in our assets. If so, our general partner would
also be a fiduciary of the employee benefit plan, and we would be subject to the
regulatory restrictions of ERISA, including its prohibited transaction rules, as
well as the prohibited transaction rules of the Internal Revenue Code.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit
employee benefit plans, and also individual retirement accounts that are not
considered part of an employee benefit plan, from engaging in specified
17
transactions involving "plan assets" with parties that are "parties in interest"
under ERISA or "disqualified persons" under the Internal Revenue Code with
respect to the employee benefit plan. The Department of Labor regulations
provide guidance with respect to whether the assets of an entity in which
employee benefit plans acquire equity interests would be deemed "plan assets"
under some circumstances. Under these regulations, an entity's assets would not
be considered to be "plan assets" if, among other things:
o the equity interests acquired by employee benefit plans are
publicly-offered securities; meaning the equity interests are:
o widely held by 100 or more investors independent of us and each other;
o freely transferable; and
o registered under some provisions of the federal securities laws;
o the entity is an "operating company;" meaning that it is primarily
engaged in the production or sale of a product or service, other than
the investment of capital, either directly or through a majority owned
subsidiary or subsidiaries; or
o there is no significant investment by employee benefit plan investors;
meaning that less than 25% of the value of each class of equity
interest, disregarding particular interests held by our general
partner, its affiliates, and particular other persons, is held by:
o the employee benefit plans referred to above;
o individual retirement accounts; and
o other employee benefit plans not subject to ERISA, including
governmental plans.
Our assets should not be considered "plan assets" under these regulations
because it is expected that an investment in us will satisfy the requirements of
the first bullet point immediately above.
Plan fiduciaries contemplating an investment in us should consult with
their own counsel regarding the potential consequences of such an investment
under ERISA and the Internal Revenue Code in light of the serious penalties
imposed on persons who engage in prohibited transactions or otherwise violate
any applicable statutory provisions.
18
SELLING UNITHOLDERS
We originally issued the 1,528,104 common units to the selling unitholders
on April 21, 2004 in several private placements exempt from the registration
requirements of the Securities Act. In connection with the sale of those common
units, we agreed to file a registration statement with the SEC to register those
common units.
The following table sets forth information with respect to the selling
unitholders and their beneficial ownership of the common units as of May 18,
2004. The 1,528,104 common units that may be offered and sold pursuant to this
prospectus constitute approximately 3% of our outstanding common units as of
that date. We prepared the table based on the information supplied to us by the
selling unitholders named in the table. The selling unitholders may, however,
have sold, transferred or otherwise disposed of all or a portion of their common
units since the date on which they provided such information. We do not know
when or in what amounts a selling unitholder may offer common units for sale.
The selling unitholders may choose not to sell any of the common units offered
by this prospectus. Because the selling unitholders may offer all, some, or none
of their common units pursuant to this offering, we cannot estimate the number
of common units that the selling unitholders will hold after completion of the
offering. For purposes of the following table, we have assumed that the selling
unitholders will sell all of the common units covered by this prospectus, and
that, therefore, there will be no common units beneficially owned by the selling
unitholders after the offering.
Number of
Common Units Number of Common Units Number of Common Units Percentage of Outstanding
Owned to be Offered Beneficially Common Units Beneficially
Unitholder Before Offering for Unitholder's Account Owned After Offering Owned After Offering
---------- --------------- ------------------------ ---------------------- -------------------------
Billy D. Prim 812,155 812,155 0 *
Andrew J. Filipowski 671,202 671,202 0 *
Malcolm McQuilkin 44,747 44,747 0 *
Living Trust, Malcolm
McQuilkin and Sheri
McQuilkin, Co-Trustees,
dated November 1, 1999
-------------
* indicates less than 1%
Mr. Prim is a director of our general partner and serves as an officer of
our general partner as an Executive Vice President and Chief Executive Officer
of the Blue Rhino division. Mr. Filipowski is the brother-in-law of Mr. Prim.
Other than as indicated in the prior sentence, none of the selling unitholders
has held any position or office or had any other material relationship with
Ferrellgas Partners or any predecessor, other than as a unitholder, during the
past three years. However, the selling unitholders have held positions and
offices and have had relationships with Blue Rhino Corporation, all of the
assets of which were acquired by our operating partnership. See "Prospectus
Summary-Recent Events." These relationships with Blue Rhino Corporation are
described below.
Prior to the merger of Blue Rhino Corporation, Mr. Prim was the Chairman
and Chief Executive Officer, Mr. Filipowski was the Vice Chairman, and Messrs.
Prim and Filipowski served as directors, of Blue Rhino Corporation. Mr.
McQuilkin was the Chief Executive Officer of a subsidiary of Blue Rhino
Corporation.
Blue Rhino Corporation had leased its offices in Winston-Salem, North
Carolina from Rhino Real Estate, L.L.C. since March 1994. Messrs. Prim and
Filipowski each own a 50.0% interest in Rhino Real Estate. Pursuant to the terms
of the applicable leases, Blue Rhino Corporation paid annual rent of $347,760
plus its allocable share of all taxes, utilities and maintenance. Blue Rhino
Corporation also leased additional office space in Winston-Salem from Rhino Real
Estate. Under the terms of this lease, Blue Rhino Corporation paid annual rent
of $61,002 plus its allocable share of all taxes, utilities and maintenance.
Blue Rhino Corporation also leased a warehouse facility in Winston-Salem from
Rhino Real Estate. Under the terms of this lease, Blue Rhino Corporation paid
annual rent of $101,000 plus its allocable share of all taxes, utilities and
maintenance. Effective December 23, 2003 and March 18, 2004, Rhino Real Estate
sold the warehouse space and office space, respectively, underlying these leases
to an independent third party, and as a result is no longer the lessor under
these leases.
19
In April 2000, in conjunction with its acquisition of Uniflame, Inc., Blue
Rhino Corporation assumed Uniflame's lease of an office/warehouse facility
located in Zion, Illinois from H & M Enterprises, L.L.C. Mr. McQuilkin is a
member of H & M Enterprises and holds a 73.6% membership interest in that
entity. Pursuant to the terms of the lease, Blue Rhino Corporation paid annual
rent during fiscal 2001, 2002 and 2003 of approximately $323,688 plus its
allocable share of all taxes, utilities and maintenance.
During fiscal 2003, Blue Rhino Corporation paid fees for software
development and Internet hosting services provided by divine, inc. Mr.
Filipowski was the chairman and chief executive officer of divine, inc. prior to
February 2003. During fiscal 2003, Blue Rhino Corporation paid $376,000 in fees
to divine, inc. for such services.
PLAN OF DISTRIBUTION
We have been advised that the common units may be sold from time to time by
or for the account of the selling unitholders in the over-the-counter market, on
the NYSE or otherwise, at prices and on terms then prevailing or at prices
related to the then current market price, at fixed prices that may be changed or
in negotiated transactions at negotiated prices. The common units may be sold by
any one or more of the following methods:
o a block trade, which may involve crosses, in which the broker or
dealer so engaged will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate
the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
o exchange distributions and/or secondary distributions in accordance
with the rules of the applicable exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o through the settlement of short sales; and
o privately negotiated transactions.
In effecting sales, brokers or dealers engaged by the selling unitholders may
arrange for other brokers or dealers to participate in the sales. In addition,
any common units covered by this prospectus which qualify for sale pursuant to
Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus.
In connection with the distribution of the common units, the selling
unitholders may enter into hedging transactions with brokers or dealers. In
connection with such transactions, brokers or dealers may engage in short sales
of the common units in the course of hedging the positions they assume with the
selling unitholders. The selling unitholders may also enter into option or other
transactions with brokers or dealers which require the delivery to the broker or
dealer of the common units, which the broker or dealer may resell or otherwise
transfer pursuant to this prospectus. The selling unitholders may also loan or
pledge the common units to a broker or dealer, and the broker or dealer may sell
the common units so loaned or, upon a default, effect sales of the common units
so pledged, pursuant to this prospectus.
The selling unitholders may effect such transactions by selling common
units through brokers or dealers, and such brokers or dealers may receive
compensation in the form of commissions, discounts or concessions from the
selling unitholders, which may or may not exceed those customary in the types of
transactions involved. The selling unitholders and any brokers or dealers that
participate in the distribution of the common units may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any profit on the sale of common units by it and any commissions,
discounts or concessions received by any such broker or dealer may be deemed to
be underwriting discounts and commission under the Securities Act.
The selling unitholders or their successors in interest may from time to
time pledge or grant a security interest in some or all of the common units and,
if the selling unitholders default in the performance of their secured
obligation, the pledgees or secured parties may offer and sell such common units
from time to time under this prospectus. If the common units are to be sold by
pledgees or secured parties, we must amend the list of selling unitholders to
include the pledgee or secured party as a selling unitholder by amending the
registration statement, of which this prospectus is a part, or supplementing
this prospectus, as required by law.
We have agreed to indemnify the selling unitholders, controlling persons,
and agents, and any person acting as an underwriter in connection with the
offering and sale of the common units, against specific liabilities, including
liabilities arising under the Securities Act, and the selling unitholders have
agreed to indemnify us Partnership and our officers, directors, controlling
persons and agents and any underwriter against some of those liabilities. We
will pay the costs and expenses of the registration and offering of the common
units, other than discounts and commissions, fees and disbursements of counsel
and accountants for the selling unitholders and other expenses that the selling
unitholders have agreed to pay.
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WHERE YOU CAN FIND MORE INFORMATION
Where Documents are Filed; Copies of Documents
We file annual, quarterly and other reports and other information with the
SEC. You may read and download our SEC filings over the Internet from several
commercial document retrieval services as well as at the SEC's website at
http://www.sec.gov. You may also read and copy our SEC filings at the SEC's
public reference room located at Judiciary Plaza, 450 5th Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information concerning the public reference room and any applicable copy
charges.
Because our common units are traded on the New York Stock Exchange, we also
provide our SEC filings and particular other information to the New York Stock
Exchange. You may obtain copies of these filings and this other information at
the offices of the New York Stock Exchange located at 11 Wall Street, New York,
New York 10005.
In addition, you may also access further information about us by visiting
our website at http://www.ferrellgas.com. Please note that the information and
materials found on our website, except for our SEC filings expressly described
below, are not part of this prospectus and are not incorporated by reference
into this prospectus.
Incorporation of Documents by Reference
We filed with the SEC a registration statement on Form S-3 with respect to
the securities offered by this prospectus. This prospectus is a part of that
registration statement. As allowed by the SEC, this prospectus does not contain
all of the information you can find in the registration statement or the
exhibits to the registration statement. Instead, the SEC allows us to
incorporate by reference information into this prospectus. Incorporation by
reference means that we can disclose particular important information to you
without actually including such information in this prospectus by simply
referring you to another document that we filed separately with the SEC.
The information we incorporate by reference is an important part of this
prospectus and should be carefully read in conjunction with this prospectus and
any prospectus supplement. Information that we file with the SEC after the date
of this prospectus will automatically update and may supersede some of the
information in this prospectus as well as information we previously filed with
the SEC and that was incorporated by reference into this prospectus.
The following documents are incorporated by reference into this prospectus:
o the description of our common units in our registration statement on
Form 8-A/A as filed with the SEC on February 18, 2003, and any
amendments or reports filed to update the description;
o the Annual Report on Form 10-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp. for the fiscal year ended July 31, 2003, as filed with
the SEC on October 21, 2003;
o the Quarterly Report on Form 10-Q of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Partners Finance Corp. for the quarterly period ended October 31,
2003, as filed with the SEC on December 11, 2003;
o the Quarterly Report on Form 10-Q of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp. for the quarterly period ended January 31, 2004, as
filed with the SEC on March 10, 2004;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on November 21, 2003;
o the Current Report on Form 8-K of Ferrellgas Partners, Ferrellgas
Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas Finance Corp.
containing Items 5 and 7, as filed with the SEC on November 24, 2003;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P. and
Ferrellgas, L.P., as filed with the SEC on December 1, 2003;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on February 5, 2004;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on February 13, 2004;
o the Current Report on Form 8-K/A of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on April 2, 2004; and
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on April 12, 2004;
21
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on April 15, 2004;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on April 22, 2004;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on April 30, 2004;
o the Current Report on Form 8-K of Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas
Finance Corp., as filed with the SEC on May 5, 2004; and
o all documents that we file under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and until the
earlier of the termination of the registration statement to which this
prospectus relates or until we sell all of the securities offered by
this prospectus.
If information in any of these incorporated documents conflicts with
information in this prospectus you should rely on the most recent information.
If information in an incorporated document conflicts with information in another
incorporated document, you should rely on the information in the most recent
incorporated document.
You may request from us a copy of any document we incorporate by reference
at no cost, excluding all exhibits to such incorporated documents unless we have
specifically incorporated by reference such exhibits either in this prospectus
or in the incorporated document, by making such a request in writing or by
telephone to the following address:
Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Investor Relations
(816) 792-0203
Except as provided above, no other information (including information on
our website) is incorporated by reference into this prospectus.
LEGAL MATTERS
Particular legal matters related to the securities described in this
prospectus have been and/or will be passed upon for us by Mayer, Brown, Rowe &
Maw LLP, including the validity of the common units described in this
prospectus.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus supplement by reference from Ferrellgas
Partners, L.P.'s, and Ferrellgas Partners Finance Corp.'s Annual Report on Form
10-K for the fiscal year ended July 31, 2003, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports dated September 29,
2003 (which report relating to Ferrellgas Partners, L.P. expresses an
unqualified opinion and includes an explanatory paragraph relating to changes in
accounting principles), which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus supplement by reference from
Ferrellgas, L.P.'s Annual Report on Form 10-K for the fiscal year ended July 31,
2003, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report dated September 29, 2003 (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to changes in
accounting principles), which is incorporated herein by reference, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements incorporated in this prospectus supplement by
reference from Ferrellgas Finance Corp.'s Annual Report on Form 10-K for the
period ended July 31, 2003, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report dated September 29, 2003, which
is incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The consolidated balance sheets of Ferrellgas, Inc. and Subsidiaries as of
July 31, 2003 and 2002, filed as Exhibit 99.15 to the Current Report on Form 8-K
of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas,
L.P. and Ferrellgas Finance Corp. dated November 21, 2003, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report relating
to Ferrellgas, Inc. and Subsidiaries dated September 29, 2003 (which report
22
expresses an unqualified opinion and includes an explanatory paragraph relating
to changes in accounting principles), which is incorporated herein by reference,
and has been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Blue Rhino Corporation and
subsidiaries for the year ended July 31, 2003 appearing in the Ferrellgas
Partners L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and
Ferrellgas Finance Corp. Current Report on Form 8-K dated April 22, 2004, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have incorporated by reference include
forward-looking statements. These forward-looking statements are identified as
any statement that does not relate strictly to historical or current facts. They
often use or are preceded by 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. These statements often discuss
plans, strategies, events or developments that we expect or anticipate will or
may occur in the future and are based upon the beliefs and assumptions of our
management and on the information currently available to them. In particular,
statements, express or implied, concerning our future operating results or our
ability to generate sales, income or cash flow are forward-looking statements.
Forward-looking statements are not guarantees of future performance. You
should not put undue reliance on any forward-looking statements. All
forward-looking statements are subject to risks, uncertainties and assumptions
that could cause our actual results to differ materially from those expressed in
or implied by these forward-looking statements. Many of the factors that will
affect our future results are beyond our ability to control or predict.
Some of our forward-looking statements include the following:
o whether we will continue to meet all of the quarterly financial tests
required by the agreements governing our indebtedness;
o our expectation that retail gallons sold, gross profit and interest
expense in future periods will approximate those in prior periods; and
o our expectation that future periods will have increased depreciation
expense over the amount recognized during fiscal 2003.
For a more detailed description of these particular forward-looking
statements and for other factors that may affect any forward-looking statements,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 38 of our Annual Report on Form 10-K for the
fiscal year ended July 31, 2003 and on page 28 of our Quarterly Report on Form
10-Q for the quarterly period ended January 31, 2004, both of which are
incorporated by reference in this prospectus.
When considering any forward-looking statement, you should also keep in
mind the risk factors described under the section entitled "Risk Factors" in
this prospectus and in our Annual Report on Form 10-K for the fiscal year ended
July 31, 2003, which is incorporated by reference in this prospectus. See "Where
You Can Find More Information." Any of these risks could impair our business,
financial condition or results of operation. Any such impairment may affect our
ability to make distributions or pay interest on the principal of any of our
debt securities. Except for ongoing obligations to disclose material information
as required by federal securities laws, we do no undertake any obligation to
update any forward-looking statements after distribution of this prospectus.
In addition, our classification as a partnership for federal income tax
purposes means that we do not generally pay federal income taxes. We do,
however, pay taxes on the income of our subsidiaries that are corporations. We
rely on legal opinion from our counsel, and not a ruling from the Internal
Revenue Service, as to our proper classification for federal income tax
purposes. See "Risk Factors" beginning on page 10 of our Annual Report on Form
10-K for the fiscal year ended July 31, 2003, which is incorporated by reference
in this prospectus.
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
We will incur and pay all of the following expected costs in connection
with the common units being registered hereby. All amounts, other than the SEC
registration fee, are estimated. We do not expect to incur any additional fees
in connection with the issuance and distribution of the securities registered
hereby.
SEC registration fee $ 4,066
Legal fees and expenses 10,000
Accounting fees and expenses 10,000
Printing expenses -
Miscellaneous -
___________________
Total $24,066
Item 15. Indemnification of Directors and Officers
Neither Ferrellgas Partners, L.P. nor Ferrellgas, L.P. has any employees,
officers or directors. Each is managed and operated by the employees, officers
and directors of its general partner, Ferrellgas, Inc.
The partnership agreement of Ferrellgas Partners, L.P. provides that
Ferrellgas Partners, L.P., subject to any limitations expressly provided in its
partnership agreement, shall indemnify and hold harmless to the fullest extent
permitted by current applicable law or as such law may hereafter be amended
(but, in the case of any such amendment, only to the extent that the amendment
permits either partnership to provide broader indemnification rights) particular
persons (each, an "Indemnitee") from and against any and all losses, claims,
damages, liabilities (joint or several), expenses (including, without
limitation, legal fees and expenses), judgments, fines, penalties, interest,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
in which any Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, by reason of their status as:
o the general partner, a former general partner, or any of their
affiliates;
o an officer, director, employee, partner, agent or trustee of either
partnership, the general partner, any former general partner, or any
of their affiliates; or
o a person or entity serving at the request of either partnership in
another entity in a similar capacity.
This indemnification is available only if the Indemnitee acted in good
faith, in a manner in which the Indemnitee believed to be in, or not opposed to,
the best interests of the applicable partnership and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not of itself create a presumption that the Indemnitee acted in a manner
contrary to that specified in the immediately preceding sentence. Any
indemnification shall be made only out of the assets of the applicable
partnership; our general partner shall not be personally liable for any
indemnification and shall have no obligation to contribute or loan any money or
property to the applicable partnership to enable it to effect any
indemnification. In no event may an Indemnitee subject the limited partners of
the applicable partnership to personal liability by reason of being entitled to
indemnification.
To the fullest extent permitted by current applicable law or as such law
may hereafter be amended (but, in the case of such amendment, only to the extent
that the amendment permits either partnership to provide broader indemnification
rights), expenses (including, without limitation, legal fees and expenses)
incurred by an Indemnitee in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the applicable partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the applicable partnership of an undertaking by or on behalf of
the Indemnitee to repay such amount if it is ultimately determined by a court of
competent jurisdiction that the Indemnitee is not entitled to indemnification.
We have, to the extent commercially reasonable, purchased and currently
maintain (or reimburse our general partner or its affiliates for the cost of)
insurance, on behalf of our general partner and such other persons or entities
as our general partner has determined, including particular other Indemnitees,
against any liability that may be asserted against or expenses that may be
incurred by such person or entity in connection with either partnership's
activities or in connection with such person's or entity's activities related to
either partnership in such person's or entity's professional capacity,
regardless of whether Ferrellgas Partners, L.P. would have the power to
indemnify such person or entity against such liability under the provisions of
either partnership's partnership agreement.
II-1
An Indemnitee shall not be denied indemnification by the applicable
partnership, in whole or in part, because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies, so long as the
transaction was otherwise permitted by the terms of the applicable partnership
agreement. Notwithstanding anything to the contrary set forth in the applicable
partnership agreement, no Indemnitee shall be liable for monetary damages to the
applicable partnership, the limited partners, their assignees or any other
persons or entities who have acquired partnership interests in Ferrellgas
Partners, L.P., for losses sustained or liabilities incurred as a result of any
act or omission if such Indemnitee acted in good faith. Also, our general
partner shall not be responsible for any misconduct or negligence on the part of
any agent appointed by our general partner in good faith to exercise any of the
powers granted to our general partner or to perform any of the duties imposed
upon it pursuant to the applicable partnership agreement.
Ferrellgas, Inc.
The Certificate of Incorporation, as amended, and bylaws of Ferrellgas,
Inc. also provide for similar indemnification rights and benefits for its
officers and directors from and against any and all losses, claims, damages,
liabilities (joint or several), expenses (including, without limitation, legal
fees and expenses), judgments, fines, penalties, interest, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which any officer
or director of Ferrellgas, Inc. may be involved, or is threatened to be
involved, as a party or otherwise; provided, however, the officers or directors
must have acted in good faith, in a manner in which such person or entity
believed to be in, or not opposed to, the best interests of Ferrellgas, Inc.
and, with respect to any criminal proceeding, had no reasonable cause to believe
its conduct was unlawful. Ferrellgas, Inc. is also under similar obligations to
advance expenses to its officers and directors relating to indemnified claims
and Ferrellgas, Inc. has, to the extent commercially reasonable, purchased and
currently maintains insurance on behalf of its officers and directors.
Furthermore, the directors of Ferrellgas, Inc. are not personally liable to
Ferrellgas, Inc. or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability:
o for any breach of the director's duty of loyalty to Ferrellgas, Inc.
or its stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o for unlawful payments of dividends or unlawful stock repurchases or
redemptions under Section 174 of the General Corporation Law of the
State of Delaware; or
o for any transaction from which the director derived an improper
personal benefit.
Ferrellgas, Inc. has also entered into employment agreements with some of
its directors and officers. Pursuant to these employment agreements, Ferrellgas,
Inc. has contractually agreed to indemnify these officers and directors
generally in accordance with the indemnification terms and provisions set forth
above. Some of these employment agreements also provide that Ferrellgas, Inc.
shall indemnify such director or officer when they were or are a party or are
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of Ferrellgas, Inc. to procure a judgment in its favor
by reason of the fact that such director or officer is or was a director or
officer of Ferrellgas, Inc., or is or was serving at the request of Ferrellgas,
Inc. as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such director or
officer in connection with the defense or settlement of such action or suit if
such director or officer acted in good faith and in a manner that such director
or officer reasonably believed to be in or not opposed to the best interests of
Ferrellgas, Inc. and except that no indemnification pursuant to the employment
agreements shall be made in respect of any claim, issue or matter as to which
such director or officer shall have been adjudged to be liable to Ferrellgas,
Inc. unless and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such directors or officers are fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Generally, any indemnification under these employment agreements (unless
ordered by a court) shall be made by Ferrellgas, Inc. only as authorized in each
specific case upon a determination, in accordance with the procedures set forth
in the applicable employment agreement, that indemnification of such director or
officer is proper in the circumstances because such director or officer has met
the applicable standard of conduct set forth in their particular employment
agreement. Such determination shall be made:
o by a majority vote of the board of directors of Ferrellgas, Inc. who
are not parties to such action, suit or proceeding, even though less
than a quorum;
II-2
o if there are no such directors or, if such directors so direct, by
independent legal counsel in a written opinion; or
o by the stockholders of Ferrellgas, Inc.
Also, if such director or officer institutes any legal action to enforce such
director's or officer's rights under their employment agreement, or to recover
damages for breach of their employment agreement, such director or officer, if
such director or officer prevails in whole or in part, shall be entitled to
recover from Ferrellgas, Inc. all fees and expenses (including attorneys' fees)
incurred by such director or officer in connection therewith.
None of the indemnification rights described herein are exclusive of any
other rights to which an Indemnitee, or other applicable person, may be entitled
under any bylaw, agreement, vote of stockholders, unitholders or disinterested
directors, as a matter of law or otherwise, both as to action in the
Indemnitee's, or other applicable person's, official capacity with either
partnership or Ferrellgas, Inc. and as to action in another capacity while
holding such office, and shall continue after the Indemnitee, or other
applicable person, has ceased to be an officer or director of either partnership
or Ferrellgas, Inc., and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee, or other applicable person.
Item 16. Exhibits
Exhibit Number Description
-------------- -----------
3.1 Fourth Amended and Restated Agreement of Limited Partnership
of Ferrellgas Partners, L.P. dated as of February 18, 2003.
Incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K of Ferrellgas Partners, L.P. filed
February 18, 2003.
4.1 Specimen Certificate evidencing Common Units representing
Limited Partner Interests (contained in Exhibit 3.1 as
Exhibit A thereto).
*4.2 Registration Rights Agreement dated as of February 8, 2004,
between Ferrellgas Partners, L.P. and Billy D. Prim.
*4.3 Registration Rights Agreement dated as of February 8, 2004,
between Ferrellgas Partners, L.P. and Andrew J. Filipowski.
*4.4 Registration Rights Agreement dated as of February 8, 2004,
between Ferrellgas Partners, L.P. and Malcom R. McQuilkin.
*4.5 Unit Purchase Agreement dated as of February 8, 2004, between
Ferrellgas Partners, L.P. and Billy D. Prim.
*4.6 Unit Purchase Agreement dated as of February 8, 2004, between
Ferrellgas Partners, L.P. and Andrew J. Filipowski.
*4.7 Unit Purchase Agreement dated as of February 8, 2004, between
Ferrellgas Partners, L.P. and Malcom R. McQuilkin.
*5.1 Opinion of Mayer, Brown, Rowe & Maw LLP as to the legality of
the common units registered hereby.
*8.1 Opinion of Mayer, Brown, Rowe & Maw LLP as to tax matters.
* 23.1 Consent of Deloitte & Touche LLP.
* 23.2 Consent of Ernst & Young LLP.
* 23.3 Consent of Mayer, Brown, Rowe & Maw LLP (contained in
Exhibits 5.1 and 8.1 herewith).
-------------
* Filed herewith.
II-3
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii)to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
registration statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Liberty, State of Missouri, on May 21, 2004.
FERRELLGAS PARTNERS, L.P.
By: FERRELLGAS, INC., its general partner
By: /s/ James E. Ferrell
-----------------------------------------------
James E. Ferrell
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ James E. Ferrell Chairman, President and Chief Executive Officer May 21, 2004
------------------------------- of Ferrellgas, Inc. (Principal Executive Officer)
James E. Ferrell
/s/ William K. Hoskins Director of Ferrellgas, Inc. May 21, 2004
-------------------------------
William K. Hoskins
/s/ A. Andrew Levison Director of Ferrellgas, Inc. May 21, 2004
-------------------------------
A. Andrew Levison
/s/ John R. Lowden Director of Ferrellgas, Inc. May 21, 2004
-------------------------------
John R. Lowden
/s/ Michael F. Morrissey Director of Ferrellgas, Inc. May 21, 2004
-------------------------------
Michael F. Morrissey
/s/ Billy D. Prim Director of Ferrellgas, Inc. May 21, 2004
-------------------------------
Billy D. Prim
/s/ Elizabeth T. Solberg Director of Ferrellgas, Inc. May 21, 2004
-------------------------------
Elizabeth T. Solberg
/s/ Kevin T. Kelly Senior Vice President and Chief Financial Officer May 21, 2004
------------------------------- of Ferrellgas, Inc. (Principal Financial and
Kevin T. Kelly Accounting Officer)
S-1
Exhibit Index
Exhibit Number Description
-------------- -----------
3.1 Fourth Amended and Restated Agreement of Limited Partnership
of Ferrellgas Partners, L.P. dated as of February 18, 2003.
Incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K of Ferrellgas Partners, L.P. filed
February 18, 2003.
4.1 Specimen Certificate evidencing Common Units representing
Limited Partner Interests (contained in Exhibit 3.1 as
Exhibit A thereto).
*4.2 Registration Rights Agreement dated as of February 8, 2004,
between Ferrellgas Partners, L.P. and Billy D. Prim.
*4.3 Registration Rights Agreement dated as of February 8, 2004,
between Ferrellgas Partners, L.P. and Andrew J. Filipowski.
*4.4 Registration Rights Agreement dated as of February 8, 2004,
between Ferrellgas Partners, L.P. and Malcom R. McQuilkin.
*4.5 Unit Purchase Agreement dated as of February 8, 2004, between
Ferrellgas Partners, L.P. and Billy D. Prim.
*4.6 Unit Purchase Agreement dated as of February 8, 2004, between
Ferrellgas Partners, L.P. and Andrew J. Filipowski.
*4.7 Unit Purchase Agreement dated as of February 8, 2004, between
Ferrellgas Partners, L.P. and Malcom R. McQuilkin.
*5.1 Opinion of Mayer, Brown, Rowe & Maw LLP as to the legality of
the common units registered hereby.
*8.1 Opinion of Mayer, Brown, Rowe & Maw LLP as to tax matters.
* 23.1 Consent of Deloitte & Touche LLP.
* 23.2 Consent of Ernst & Young LLP.
* 23.3 Consent of Mayer, Brown, Rowe & Maw LLP (contained in
Exhibits 5.1 and 8.1 herewith).
-------------
* Filed herewith.