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**UNITED STATES********SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-K/A**

**(Amendment No. 1)**

**(Mark One)**

**x********ANNUAL REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thefiscal year ended July 31, 2009**

 

**or**

 

**o**** ****TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For thetransition periodfrom          to           **

 

**Commissionfile numbers: 001-11331, 333-06693, 000-50182 and 000-50183**

 

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

(Exact name ofregistrants as specified in their charters)

 

| **Delaware**                                                         | ** ** | **43-1698480**                         |
|----------------------------------------------------------------------|------------|----------------------------------------|
| **Delaware**                                                         | ** ** | **43-1742520**                         |
| **Delaware**                                                         | ** ** | **43-1698481**                         |
| **Delaware**                                                         | ** ** | **14-1866671**                         |
| (States or other jurisdictions of

incorporation or organization)    |       | (I.R.S. Employer

Identification Nos.) |
| ** **                                                           | ** ** | ** **                             |
| **7500  College Boulevard,  Suite 1000, Overland Park, Kansas** | ** ** | **66210**                              |
| (Address of principal executive office)                              |       | (Zip Code)                             |

 

Registrants’ telephone number, including areacode:

**(913) 661-1500**

 

Securities registered pursuant to Section 12(b) of the Act:

 
| **Title  of each class**                   | ** ** | **Name  of each exchange on which registered** |
|--------------------------------------------|------------|------------------------------------------------|
| Common Units of  Ferrellgas Partners, L.P. |       | New York Stock  Exchange                       |

 

Securities registered pursuant to section 12(g) of the Act:

 

**Limited Partner Interests ofFerrellgas, L.P.**

**Common Stock of Ferrellgas PartnersFinance Corp.**

**Common Stock of Ferrellgas FinanceCorp.**

(Title of class)

 

Indicate by checkmark if the registrants are well-known seasoned issuers, as defined in Rule 405of the Securities Act.

 

FerrellgasPartners, L.P.:  Yes o     No  x

Ferrellgas PartnersFinance Corp., Ferrellgas, L.P. and Ferrellgas FinanceCorp.:  Yes o     No  x

 

Indicate by checkmark if the registrants are not required to file reports pursuant to Section 13or Section 15(d) of the Act.  Yes o     No x

 

Indicate by checkmark whether the registrants (1) have filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrants were required to file such reports), and (2) have been subjectto such filing requirements for the past 90 days.  Yes x     No o

 

Indicate by checkmark whether the registrants have submitted electronically and posted on theircorporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrants were required to submit and post such files).  Yes o     No  x*

 

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* The registrantshave not yet been phased into the interactive data requirements.

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrants’ knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K.  x

 

Indicateby check mark whether the registrants are large accelerated filers, acceleratedfilers, non-accelerated filers, or smaller reporting companies. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

FerrellgasPartners, L.P.:

 

| Large accelerated  filer x                |   | Accelerated  filer o         |
|------------------------------------------------|--------|-----------------------------------|
| Non-accelerated  filer o                  |   | Smaller reporting  company o |
| (do not check if  a smaller reporting company) |   |                              |

 

Ferrellgas PartnersFinance Corp, Ferrellgas, L.P. and Ferrellgas Finance Corp.:

 

| Large accelerated  filer o                |   | Accelerated  filer o         |
|------------------------------------------------|--------|-----------------------------------|
| Non-accelerated  filer x                  |   | Smaller reporting  company o |
| (do not check if  a smaller reporting company) |   |                              |

 

Indicate by checkmark whether the registrants are shell companies (as defined in Rule 12b-2of the Exchange Act).

FerrellgasPartners, L.P. and Ferrellgas, L.P.  Yes o     No x

Ferrellgas PartnersFinance Corp. and Ferrellgas Finance Corp.  Yes x     No o

 

The aggregatemarket value as of January 30, 2009, of Ferrellgas Partners, L.P.’s commonunits held by nonaffiliates of Ferrellgas Partners, L.P., based on the reportedclosing price of such units on the New York Stock Exchange on such date, wasapproximately $588,374,000. There is no aggregate market value of the commonequity of Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and FerrellgasFinance Corp. as their common equity is not sold or traded.

 

At August 31,2009, the registrants had common units or shares of common stock outstanding asfollows:

 
| Ferrellgas Partners,  L.P.         |   | 68,236,755 |   | Common Units |
|------------------------------------|--------|------------|--------|--------------|
| Ferrellgas Partners  Finance Corp. |   | 1,000      |   | Common Stock |
| Ferrellgas, L.P.                   |   | n/a        |   | n/a          |
| Ferrellgas Finance Corp.           |   | 1,000      |   | Common Stock |

 

**DocumentsIncorporated by Reference:** None

 

EACH OF FERRELLGASPARTNERS FINANCE CORP. AND FERRELLGAS FINANCE CORP. MEET THE CONDITIONS SETFORTH IN GENERAL INSTRUCTION I (1)(A) AND (B) OF FORM 10-KAND ARE THEREFORE, WITH RESPECT TO EACH SUCH REGISTRANT, FILING THIS FORM 10-KWITH THE REDUCED DISCLOSURE FORMAT.

 

 

 

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**EXPLANATORY NOTE**

 

This Amendment No. 1on Form 10-K/A (the “Amendment”) to the Registrants’ Annual Report on Form 10-Kfor the fiscal year ended July 31, 2009 is being filed by the Registrantssolely to correct typographical errors in a) the Reports of IndependentRegistered Public Accounting Firm for each of Ferrellgas Partners, L.P.,Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas FinanceCorp. and in b) the Consents of Independent Registered Public Accounting Firmfor each of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp.,Ferrellgas, L.P. and Ferrellgas Finance Corp.

 

Pursuant to Reg. Section 240.12b-15,this Amendment sets forth only the complete text of Item 8 of Part II,Item 9A of Part II and Item 15 of Part IV as amended and the filingof related signature pages and certifications. The remaining text of theRegistrants’ Annual Report on Form 10-K for the fiscal year ended July 31,2009 (the “Original Form 10-K”) has not changed and is not included inthis Amendment. Please refer to the Original Form 10-K filed with theSecurities and Exchange Commission on September 28, 2009 for the remainingtext.

 

This Amendment does notreflect events occurring after the filing of the Original Form 10-K, nordoes it modify or update disclosures therein in any way other than as requiredto reflect the amendment set forth below.  Among other things,forward-looking statements made in the Original Form 10-K have not beenrevised to reflect events that occurred or facts that became known to us afterthe filing of the Original Form 10-K, and such forward-looking statementsshould be read in their historical context.

 

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**FERRELLGAS PARTNERS, L.P.**

**FERRELLGAS PARTNERS FINANCE CORP.**

**FERRELLGAS, L.P.**

**FERRELLGAS FINANCE CORP.**

 

**2009 FORM 10-K/A**

**(Amendment No. 1)**

**ANNUAL REPORT**

 

**Table of Contents**

 
| ** **       | **Page**                                     |
|------------------|----------------------------------------------|
| **PART II** |                                         |
|             |                                         |   |
| ITEM 8.          | FINANCIAL STATEMENTS AND  SUPPLEMENTARY DATA | 1 |
| ITEM 9A.         | CONTROLS AND PROCEDURES                      | 1 |
|             |                                         |   |
| **PART IV** |                                         |
|             |                                         |   |
| ITEM 15.         | EXHIBITS AND FINANCIAL  STATEMENT SCHEDULES  | 4 |

 

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**PART II**

 

**ITEM 8.****                            ****FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA.**

 

Our consolidated financial statements and theIndependent Registered Public Accounting Firm’s Reports thereon and theSupplementary Financial Information listed on the accompanying Index to FinancialStatements and Financial Statement Schedules are hereby incorporated byreference. See Note O — Quarterly data (unaudited) — to our consolidatedfinancial statements for Selected Quarterly Financial Data.

 

**ITEM 9A.****                   ****CONTROLS AND PROCEDURES.**

 

An evaluation wasperformed by the management of Ferrellgas Partners, L.P., Ferrellgas PartnersFinance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp., with theparticipation of the principal executive officer and principal financialofficer of our general partner, of the effectiveness of our disclosure controlsand procedures. Based on that evaluation, our management, including ourprincipal executive officer and principal financial officer, concluded that ourdisclosure controls and procedures, as defined in Rules 13a-15(e) or15d-15(e) under the Exchange Act, were effective.

 

The management ofFerrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P.,and Ferrellgas Finance Corp. does not expect that our disclosure controls andprocedures will prevent all errors and all fraud. The design of a controlsystem must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to their costs. Based on theinherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, ifany, within the above mentioned Partnerships and Corporations have beendetected. These inherent limitations include the realities that judgments indecision-making can be faulty and that breakdowns can occur because of simpleerrors or mistakes. Additionally, controls can be circumvented by theindividual acts of some persons, by collusion of two or more people, or bymanagement override of the controls. The design of any system of controls alsois based in part upon certain assumptions about the likelihood of futureevents. Therefore, a control system, no matter how well conceived and operated,can provide only reasonable, not absolute, assurance that the objectives of thecontrol system are met. Our disclosure controls and procedures are designed toprovide such reasonable assurances of achieving our desired control objectives,and the principal executive officer and principal financial officer of ourgeneral partner have concluded, as of July 31, 2009, that our disclosurecontrols and procedures are effective in achieving that level of reasonableassurance.

 

**Management’s Report on InternalControl Over Financial Reporting**

 

The management of Ferrellgas Partners, L.P.,Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and Ferrellgas FinanceCorp. is responsible for establishing and maintaining adequate internal controlover financial reporting, as such term is defined in Rules 13a-15(f) or15d-15(f) of the Exchange Act. Under the supervision and with theparticipation of our management, including our principal executive officer andprincipal financial officer, we conducted an evaluation of the effectiveness ofour internal control over financial reporting based on the framework in *Internal Control — Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission. Basedon our evaluation under the framework in *InternalControl — Integrated Framework*, our management concluded that ourinternal control over financial reporting was effective as of July 31,2009.

 

The effectiveness of ourinternal control over financial reporting for Ferrellgas Partners, L.P. andFerrellgas, L.P., as of July 31, 2009, has been audited by Deloitte &Touche LLP, an independent registered public accounting firm, as stated intheir reports which are included herein.

 

During the most recentfiscal quarter ended July 31, 2009, there have been no changes in ourinternal control over financial reporting (as defined in Rule 13a—15(f) orRule 15d—15(f) of the Exchange Act) that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

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**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

 

To the Partners of

Ferrellgas Partners, L.P. and Subsidiaries 

Overland Park, Kansas

 

We have auditedthe internal control over financial reporting of Ferrellgas Partners, L.P. andsubsidiaries (the “Partnership”) as of July 31, 2009, based on criteria established in *Internal Control—Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission. The Partnership’s management is responsible for maintaining effective internalcontrol over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanyingManagement’s Report on Internal Control Over Financial Reporting.  Ourresponsibility is to express an opinion on the Partnership’s internal controlover financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained inall material respects.  Our audit included obtaining an understanding of internal control overfinancial reporting, assessing the risk that a material weakness exists,testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk, and performing such other procedures as weconsidered necessary in the circumstances.  We believe that our auditprovides a reasonable basis for our opinion.

 

A company’s internal control over financial reporting is a processdesigned by, or under the supervision of, the company’s principal executive andprincipal financial officers, or persons performing similar functions, andeffected by the company’s board of directors, management, and other personnelto provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles.  A company’sinternal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of the inherent limitations of internal control over financialreporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not beprevented or detected on a timely basis.  Also, projections of anyevaluation of the effectiveness of the internal control over financialreporting to future periods are subject to the risk that the controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

In ouropinion, the Partnership maintained, in all material respects, effectiveinternal control over financial reporting as of July 31, 2009, based onthe criteria established in *Internal Control— Integrated Framework*issued by the Committee of SponsoringOrganizations of the Treadway Commission.

 

We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidated financialstatements and financial statement schedules as of and for the year ended July 31,2009 of the Partnership and our report dated September 28, 2009 expressedan unqualified opinion on those financial statements and financialstatement schedules**.**

 

/s/ DELOITTE &TOUCHE LLP

Kansas City, Missouri

September 28, 2009

 

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**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

 

To the Partners of

Ferrellgas, L.P. and Subsidiaries 

Overland Park, Kansas

 

We have auditedthe internal control over financial reporting of Ferrellgas, L.P. andsubsidiaries (“Ferrellgas”) as of July 31, 2009, based on criteria established in *InternalControl—Integrated Framework*issued by the Committee of SponsoringOrganizations of the Treadway Commission.  Ferrellgas’ management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying Management’s Report on Internal ControlOver Financial Reporting.  Our responsibility is to express anopinion on Ferrellgas’ internal control over financial reporting based on ouraudit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained in allmaterial respects.  Our audit included obtaining an understanding ofinternal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk, andperforming such other procedures as we considered necessary in thecircumstances.  We believe that our audit provides a reasonable basis forour opinions.

 

A company’s internal control over financial reporting is a processdesigned by, or under the supervision of, the company’s principal executive andprincipal financial officers, or persons performing similar functions, andeffected by the company’s board of directors, management, and other personnelto provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles.  A company’sinternal control over financial reporting includes those policies and proceduresthat (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assetsof the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.

 

Because of the inherent limitations of internal control over financialreporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not beprevented or detected on a timely basis.  Also, projections of any evaluationof the effectiveness of the internal control over financial reporting to futureperiods are subject to the risk that the controls may become inadequate becauseof changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.

 

In ouropinion, Ferrellgas maintained, in all material respects, effective internalcontrol over financial reporting as of July 31, 2009, based on thecriteria established in *Internal Control —Integrated Framework*issued by the Committee of SponsoringOrganizations of the Treadway Commission.

 

We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidated financialstatements and financial statement schedule as of and for the year ended July 31,2009 of Ferrellgas and our report dated September 28, 2009 expressed anunqualified opinion on those financial statements and financialstatement schedule.

 

/s/ DELOITTE &TOUCHE LLP

Kansas City, Missouri

September 28, 2009

 

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**PART IV**

 

**ITEM 15.       EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.**

 
| **1.** | **Financial Statements.**                                                           |
|--------|-------------------------------------------------------------------------------------|
|   | See  “Index to Financial Statements” set forth on page F-1.          |
| **2.** | **Financial Statement Schedules.**                                                  |
|   | See “Index to Financial Statement Schedules” set forth  on page S-1. |
| **3.** | **Exhibits.**                                                                       |
|   | See “Index to Exhibits”  set forth on page E-1.                      |

 

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 
|                  | Ferrellgas Partners,  L.P.         |
|-----------------------|------------------------------------|
|                  |                               |   |
| November 6, 2009 | By:                                | /s/ J. Ryan VanWinkle |
|                  | Name:                              | J. Ryan VanWinkle |
|                  | Title:                             | Senior Vice President  and Chief Financial Officer; Treasurer |
|                  |                               | (Principal Financial  and Accounting Officer) |
|                  |                               | of  Ferrellgas, Inc., the general partner |
|                  |                               |   |
|                  |                               |   |
|                  | Ferrellgas Partners  Finance Corp. |
|                  |                               |   |
| November 6, 2009 | By:                                | /s/ J. Ryan VanWinkle |
|                  | Name:                              | J. Ryan VanWinkle |
|                  | Title:                             | Chief Financial Officer  and Sole Director |
|                  |                               |   |
|                  | Ferrellgas, L.P.                   |
|                  |                               |   |
| November 6, 2009 | By:                                | /s/ J. Ryan VanWinkle |
|                  | Name:                              | J. Ryan VanWinkle |
|                  | Title:                             | Senior Vice President  and Chief Financial Officer; Treasurer |
|                  |                               | (Principal Financial  and Accounting Officer) |
|                  |                               | of  Ferrellgas, Inc., the general partner |
|                  |                               |   |
|                  |                               |   |
|                  | Ferrellgas Finance  Corp.          |
|                  |                               |   |
| November 6, 2009 | By:                                | /s/ J. Ryan VanWinkle |
|                  | Name:                              | J. Ryan VanWinkle |
|                  | Title:                             | Chief Financial Officer  and Sole Director |

 

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**INDEX TOFINANCIAL STATEMENTS**

** **
| ** **                                                                                         | **Page** |
|----------------------------------------------------------------------------------------------------|----------|
| ** **                                                                                         |     |
| **Ferrellgas  Partners, L.P. and Subsidiaries**                                                    |     |
| Report  of Independent Registered Public Accounting Firm                                           | F-2      |
| Consolidated  Balance Sheets - July 31, 2009 and 2008                                         | F-3      |
| Consolidated  Statements of Earnings - Years ended July 31, 2009, 2008 and 2007               | F-4      |
| Consolidated Statements of Partners’ Capital - Years  ended July 31, 2009, 2008 and 2007 | F-5      |
| Consolidated Statements of Cash Flows - Years ended  July 31, 2009, 2008 and 2007             | F-6      |
| Notes to Consolidated Financial Statements                                                         | F-7      |
|                                                                                               |     |
| **Ferrellgas Partners Finance Corp.**                                                              |     |
| Report of Independent Registered Public Accounting  Firm                                           | F-31     |
| Balance  Sheets - July 31, 2009 and 2008                                                      | F-32     |
| Statements  of Earnings - Years ended July 31, 2009, 2008 and 2007                            | F-33     |
| Statements of Stockholder’s Equity - Years ended  July 31, 2009, 2008 and 2007           | F-34     |
| Statements  of Cash Flows - Years ended July 31, 2009, 2008 and 2007                          | F-35     |
| Notes  to Financial Statements                                                                     | F-36     |
|                                                                                               |     |
| **Ferrellgas, L.P. and Subsidiaries**                                                              |     |
| Report of Independent Registered Public Accounting  Firm                                           | F-37     |
| Consolidated  Balance Sheets - July 31, 2009 and 2008                                         | F-38     |
| Consolidated Statements of Earnings - Years ended  July 31, 2009, 2008 and 2007               | F-39     |
| Consolidated Statements of Partners’ Capital - Years  ended July 31, 2009, 2008 and 2007 | F-40     |
| Consolidated Statements of Cash Flows - Years ended  July 31, 2009, 2008 and 2007             | F-41     |
| Notes to Consolidated Financial Statements                                                         | F-42     |
|                                                                                               |     |
| **Ferrellgas  Finance Corp.**                                                                      |     |
| Report of Independent Registered Public Accounting  Firm                                           | F-64     |
| Balance  Sheets - July 31, 2009 and 2008                                                      | F-65     |
| Statements  of Earnings — Year ended July 31, 2009, 2008 and 2007                        | F-66     |
| Statements of Stockholder’s Equity - Year ended  July 31, 2009, 2008 and 2007            | F-67     |
| Statements  of Cash Flows - Year ended July 31, 2009, 2008 and 2007                           | F-68     |
| Notes  to Financial Statements                                                                     | F-69     |

 

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**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

To the Partners of Ferrellgas Partners, L.P. and Subsidiaries**Overland Park, Kansas

 

We have audited the accompanying consolidated balance sheets ofFerrellgas Partners, L.P. and subsidiaries (“Partnership”) as of July 31, 2009and 2008, and the related consolidated statements of earnings, partners’capital, and cash flows for each of the three years in the period ended July 31,2009.  Our audits also included the financial statement schedules listedin the Index at Item 15.  These financial statements and financialstatement schedules are the responsibility of the Partnership’smanagement.  Our responsibility is to express an opinion on the financialstatements and financial statement schedules based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  Anaudit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements.  An audit also includes assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, inall material respects, the financial position of Ferrellgas Partners, L.P. andsubsidiaries as of July 31, 2009 and 2008, and the results of theiroperations and their cash flows for each of the three years in the period endedJuly 31, 2009, in conformity with accounting principles generally acceptedin the United States of America.  Also, in our opinion, such financialstatement schedules, when considered in relation to the basic consolidatedfinancial statements taken as a whole, present fairly, in all materialrespects, the information set forth therein.

 

We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the Partnership’s internalcontrol over financial reporting as of July 31, 2009, based on thecriteria established in *InternalControl—Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated September 28,2009 expressed an unqualified opinion on the Partnership’s internal controlover financial reporting.

 

/s/ DELOITTE &TOUCHE LLP

Kansas City, Missouri

September 28, 2009

 

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**FERRELLGAS PARTNERS, L.P. ANDSUBSIDIARIES**

 

**CONSOLIDATED BALANCE SHEETS**

**(inthousands, except unit data)**

 
| ** **                                                                                                                   | ** ** | **July 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                                                   | ** ** | **2009**          | ** ** | **2008** | ** ** |
| ** **                                                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| **ASSETS**                                                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| **Current assets:**                                                                                                          |       |              |       |   |   |
| Cash  and cash equivalents                                                                                                   |       | $                 | 7,066      |   | $ | 16,614 |   |
| Accounts  and notes receivable (net of allowance for doubtful accounts of $4,294 and $5,977  at 2009 and 2008, respectively) |       | 106,910           |       | 145,081 |   |
| Inventories                                                                                                                  |       | 129,808           |       | 152,301 |   |
| Price  risk management assets                                                                                                |       | 3,391             |       | 26,086 |   |
| Prepaid  expenses and other current assets                                                                                   |       | 11,640            |       | 10,924 |   |
| **Total current assets**                                                                                                     |       | 258,815           |       | 351,006 |   |
|                                                                                                                         |       |              |       |   |   |
| Property,  plant and equipment, net                                                                                          |       | 666,535           |       | 685,328 |   |
| Goodwill                                                                                                                     |       | 248,939           |       | 248,939 |   |
| Intangible  assets, net                                                                                                      |       | 212,037           |       | 225,273 |   |
| Other  assets, net                                                                                                           |       | 18,651            |       | 18,685 |   |
| **Total assets**                                                                                                             |       | $                 | 1,404,977  |   | $ | 1,529,231 |   |
| ** **                                                                                                                   |       |              |       |   |   |
| **LIABILITIES AND PARTNERS’ CAPITAL**                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| **Current liabilities:**                                                                                                     | ** ** | ** **        | ** ** | ** ** | ** ** |
| Accounts  payable                                                                                                            |       | $                 | 49,337     |   | $ | 71,348 |   |
| Short-term  borrowings                                                                                                       |       | 66,159            |       | 125,729 |   |
| Other  current liabilities                                                                                                   |       | 108,763           |       | 107,854 |   |
| **Total current liabilities**                                                                                                |       | 224,259           |       | 304,931 |   |
|                                                                                                                         |       |              |       |   |   |
| Long-term  debt                                                                                                              |       | 1,010,073         |       | 1,034,719 |   |
| Other  liabilities                                                                                                           |       | 19,300            |       | 23,237 |   |
| Contingencies  and commitments (Note L)                                                                                      |       | —            |       | — |   |
| Minority  interest                                                                                                           |       | 4,272             |       | 4,220 |   |
|                                                                                                                         |       |              |       |   |   |
| **Partners’ capital:**                                                                                                  |       |              |       |   |   |
| Common  unitholders (68,236,755 and 62,961,674 units outstanding at 2009 and 2008,  respectively)                            |       | 206,255           |       | 201,618 |   |
| General  partner unitholder (689,260 and 635,977 units outstanding at 2009 and 2008,  respectively)                          |       | (57,988           | )          | (58,036 | ) |
| Accumulated  other comprehensive income (loss)                                                                               |       | (1,194            | )          | 18,542 |   |
| **Total partners’ capital**                                                                                             |       | 147,073           |       | 162,124 |   |
| **Total liabilities and partners’ capital**                                                                             |       | $                 | 1,404,977  |   | $ | 1,529,231 |   |

 

See notes toconsolidated financial statements.

 

F-3

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Tableof Contents

 

**FERRELLGASPARTNERS, L.P. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF EARNINGS**

**(inthousands, except per unit data)**

 
| ** **                                                   | ** ** | **For the year ended July 31,** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                   | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                         | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenues:**                                                |       |                                 |       |   |   |   |   |
| Propane  and other gas liquids sales                         |       | $                                    | 1,829,653  |   | $ | 2,055,281 |   | $ | 1,757,423 |   |
| Other                                                        |       | 239,869                              |       | 235,408 |   | 235,017 |   |
| **Total revenues**                                           |       | 2,069,522                            |       | 2,290,689 |   | 1,992,440 |   |
| ** **                                                   |       |                                 |       |   |   |   |   |
| **Costs and expenses:**                                      |       |                                 |       |   |   |   |   |
| Cost  of product sold - propane and other gas liquids sales  |       | 1,207,368                            |       | 1,491,918 |   | 1,147,169 |   |
| Cost  of product sold - other                                |       | 152,853                              |       | 136,478 |   | 157,223 |   |
| Operating  expense                                           |       | 400,735                              |       | 372,078 |   | 380,838 |   |
| Depreciation  and amortization expense                       |       | 82,494                               |       | 85,521 |   | 87,383 |   |
| General  and administrative expense                          |       | 41,382                               |       | 45,612 |   | 44,870 |   |
| Equipment  lease expense                                     |       | 18,406                               |       | 24,478 |   | 26,142 |   |
| Employee  stock ownership plan compensation charge           |       | 6,755                                |       | 12,413 |   | 11,225 |   |
| Loss  on disposal of assets and other                        |       | 13,042                               |       | 11,250 |   | 10,822 |   |
|                                                         |       |                                 |       |   |   |   |   |
| **Operating income**                                         |       | 146,487                              |       | 110,941 |   | 126,768 |   |
|                                                         |       |                                 |       |   |   |   |   |
| Interest  expense                                            |       | (89,519                              | )          | (86,712 | ) | (87,953 | ) |
| Other  income (expense), net                                 |       | (1,321                               | )          | 1,039 |   | 3,145 |   |
|                                                         |       |                                 |       |   |   |   |   |
| **Earnings before income taxes and minority interest**       |       | 55,647                               |       | 25,268 |   | 41,960 |   |
|                                                         |       |                                 |       |   |   |   |   |
| Income  tax expense                                          |       | 2,292                                |       | 82 |   | 6,560 |   |
| Minority  interest                                           |       | 783                                  |       | 497 |   | 600 |   |
|                                                         |       |                                 |       |   |   |   |   |
| **Net earnings**                                             |       | 52,572                               |       | 24,689 |   | 34,800 |   |
|                                                         |       |                                 |       |   |   |   |   |
| Net  earnings available to general partner unitholder        |       | 526                                  |       | 247 |   | 348 |   |
| **Net earnings available to common unitholders**             |       | $                                    | 52,046     |   | $ | 24,442 |   | $ | 34,452 |   |
|                                                         |       |                                 |       |   |   |   |   |
| **Basic and diluted net earnings available per common unit** |       | $                                    | 0.79       |   | $ | 0.39 |   | $ | 0.55 |   |

 

See notes toconsolidated financial statements.

 

F-4

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Table of Contents

 

**FERRELLGASPARTNERS, L.P. AND SUBSIDIARIES**

** **

**CONSOLIDATED STATEMENTS OF PARTNERS’CAPITAL**

**(inthousands)**

 
| ** **                                                                  | ** ** | ** **           | ** ** | ** **     | ** ** | ** **      | ** ** | ** **                       | ** ** | **Accumulated  other** | ** ** | ** **      | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------|------------|----------------|------------|-----------------|------------|----------------------------------|------------|------------------------|------------|-----------------|------------|
| ** **                                                                  | ** ** | **Number  of units** | ** ** | ** **     | ** ** | ** **      | ** ** | **comprehensive  income (loss)** | ** ** | ** **             | ** ** |
| ** **                                                                  | ** ** | ** **           | ** ** | **General**    | ** ** | ** **      | ** ** | **General**                      | ** ** | ** **             | ** ** | **Currency**    | ** ** | ** ** | ** ** | **Total** | ** ** |
| ** **                                                                  | ** ** | **Common**           | ** ** | **partner**    | ** ** | **Common**      | ** ** | **partner**                      | ** ** | **Risk**               | ** ** | **translation** | ** ** | **Pension** | ** ** | **partners’** | ** ** |
| ** **                                                                  | ** ** | **unitholders**      | ** ** | **unitholder** | ** ** | **unitholders** | ** ** | **unitholder**                   | ** ** | **management**         | ** ** | **adjustments** | ** ** | **liability** | ** ** | **capital** | ** ** |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| **Balance at July 31, 2006**                                           |       | 60,885.8             |       | 615.0          |       | $               | 321,194    |                             | $          | (56,829                | )          | $               | 2,126      |   | $ | 21 |   | $ | (767 | ) | $ | 265,745 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Contribution  in connection with ESOP and stock-based compensation charges  |       | —               |       | —         |       | 11,872          |       | 120                              |       | —                 |       | —          |       | — |   | 11,992 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  unit distributions                                                  |       | —               |       | —         |       | (125,802        | )          | (1,270                           | )          | —                 |       | —          |       | — |   | (127,072 | ) |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  units issued in private offering                                    |       | 1,891.9              |       | 19.1           |       | 43,765          |       | 442                              |       | —                 |       | —          |       | — |   | 44,207 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  unit options exercised                                              |       | 55.5                 |       | 0.6            |       | 1,014           |       | 11                               |       | —                 |       | —          |       | — |   | 1,025 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  units issued in connection with acquisitions, net of issuance costs |       | 124.5                |       | 1.2            |       | 2,580           |       | 24                               |       | —                 |       | —          |       | — |   | 2,604 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Comprehensive  income:                                                      |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Net  earnings                                                               |       | —               |       | —         |       | 34,452          |       | 348                              |       | —                 |       | —          |       | — |   | 34,800 |   |
| Other  comprehensive income (loss):                                         |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Net  earnings on risk management derivatives                                |       | —               |       | —         |       | —          |       | —                           |       | 5,055                  |       | —          |       | — |   |   |   |
| Reclassification  of derivatives to earnings                                |       | —               |       | —         |       | —          |       | —                           |       | (2,126                 | )          | —          |       | — |   |   |   |
| Foreign  currency translation adjustment                                    |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | 14              |       | — |   |   |   |
| Tax  effect on foreign currency translation adjustment                      |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | (5              | )          | — |   |   |   |
| Pension  liability adjustment                                               |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | —          |       | 418 |   | 3,356 |   |
| Comprehensive  income                                                       |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   | 38,156 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| **Balance at July 31, 2007**                                           |       | 62,957.7             |       | 635.9          |       | 289,075         |       | (57,154                          | )          | 5,055                  |       | 30              |       | (349 | ) | 236,657 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Contribution  in connection with ESOP and stock-based compensation charges  |       | —               |       | —         |       | 13,945          |       | 141                              |       | —                 |       | —          |       | — |   | 14,086 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  unit distributions                                                  |       | —               |       | —         |       | (125,919        | )          | (1,271                           | )          | —                 |       | —          |       | — |   | (127,190 | ) |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  unit options exercised                                              |       | 4.0                  |       | 0.1            |       | 75              |       | 1                                |       | —                 |       | —          |       | — |   | 76 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Comprehensive  income:                                                      |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Net  earnings                                                               |       | —               |       | —         |       | 24,442          |       | 247                              |       | —                 |       | —          |       | — |   | 24,689 |   |
| Other  comprehensive income (loss):                                         |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Net  earnings on risk management derivatives                                |       | —               |       | —         |       | —          |       | —                           |       | 18,749                 |       | —          |       | — |   |   |   |
| Reclassification  of derivatives to earnings                                |       | —               |       | —         |       | —          |       | —                           |       | (5,055                 | )          | —          |       | — |   |   |   |
| Foreign  currency translation adjustment                                    |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | (10             | )          | — |   |   |   |
| Tax  effect on foreign currency translation adjustment                      |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | 6               |       | — |   |   |   |
| Pension  liability adjustment                                               |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | —          |       | 116 |   | 13,806 |   |
| Comprehensive  income                                                       |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   | 38,495 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| **Balance at July 31, 2008**                                           |       | 62,961.7             |       | 636.0          |       | 201,618         |       | (58,036                          | )          | 18,749                 |       | 26              |       | (233 | ) | 162,124 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Contribution  in connection with ESOP and stock-based compensation charges  |       | —               |       | —         |       | 8,885           |       | 90                               |       | —                 |       | —          |       | — |   | 8,975 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  unit distributions                                                  |       | —               |       | —         |       | (131,256        | )          | (1,325                           | )          | —                 |       | —          |       | — |   | (132,581 | ) |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  units issued in offering                                            |       | 4,985.6              |       | 50.4           |       | 69,447          |       | 702                              |       | —                 |       | —          |       | — |   | 70,149 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  unit options exercised                                              |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | —          |       | — |   | — |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Common  units issued in connection with acquisitions, net of issuance costs |       | 289.5                |       | 2.9            |       | 5,515           |       | 55                               |       | —                 |       | —          |       | — |   | 5,570 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Comprehensive  income:                                                      |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Net  earnings                                                               |       | —               |       | —         |       | 52,046          |       | 526                              |       | —                 |       | —          |       | — |   | 52,572 |   |
| Other  comprehensive income (loss):                                         |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| Net  loss on risk management derivatives                                    |       | —               |       | —         |       | —          |       | —                           |       | (186,449               | )          | —          |       | — |   |   |   |
| Reclassification  of derivatives to earnings                                |       | —               |       | —         |       | —          |       | —                           |       | 166,711                |       | —          |       | — |   |   |   |
| Foreign  currency translation adjustment                                    |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | (7              | )          | — |   |   |   |
| Tax  effect on foreign currency translation adjustment                      |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | 3               |       | — |   |   |   |
| Pension  liability adjustment                                               |       | —               |       | —         |       | —          |       | —                           |       | —                 |       | —          |       | 6 |   | (19,736 | ) |
| Comprehensive  income                                                       |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   | 32,836 |   |
|                                                                        |       |                 |       |           |       |            |       |                             |       |                   |       |            |       |   |   |   |   |
| **Balance at July 31, 2009**                                           |       | 68,236.8             |       | 689.3          |       | $               | 206,255    |                             | $          | (57,988                | )          | $               | (989       | ) | $ | 22 |   | $ | (227 | ) | $ | 147,073 |   |

 

See notes toconsolidated financial statements.

 

F-5

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**FERRELLGASPARTNERS, L.P. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(inthousands)**

 
| ** **                                                                                     | ** ** | **For the year ended July 31,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                     | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                                                           |       |                                 |       |   |   |   |   |
| **Cash flows from operating activities:**                                                      |       |                                 |       |   |   |   |   |
| Net  earnings                                                                                  |       | $                                    | 52,572     |   | $ | 24,689 |   | $ | 34,800 |   |
| Reconciliation  of net earnings to net cash provided by operating activities:                  |       |                                 |       |   |   |   |   |
| Depreciation  and amortization expense                                                         |       | 82,494                               |       | 85,521 |   | 87,383 |   |
| Employee  stock ownership plan compensation charge                                             |       | 6,755                                |       | 12,413 |   | 11,225 |   |
| Stock-based  compensation charge                                                               |       | 2,312                                |       | 1,816 |   | 889 |   |
| Loss  on disposal of assets                                                                    |       | 5,009                                |       | 4,820 |   | 4,232 |   |
| Loss  on transfer of accounts receivable related to the accounts receivable  securitization    |       | 12,124                               |       | 10,548 |   | 10,384 |   |
| Minority  interest                                                                             |       | 783                                  |       | 497 |   | 600 |   |
| Deferred  tax expense (benefit)                                                                |       | 388                                  |       | (1,650 | ) | 3,099 |   |
| Other                                                                                          |       | 4,714                                |       | 6,408 |   | 4,431 |   |
| Changes  in operating assets and liabilities, net of effects from business  acquisitions:      |       |                                 |       |   |   |   |   |
| Accounts  and notes receivable, net of securitization                                          |       | 65,466                               |       | (48,606 | ) | 1,105 |   |
| Inventories                                                                                    |       | 22,493                               |       | (40,920 | ) | 40,984 |   |
| Prepaid  expenses and other current assets                                                     |       | (120                                 | )          | 751 |   | 1,529 |   |
| Accounts  payable                                                                              |       | (21,054                              | )          | 8,523 |   | (21,295 | ) |
| Accrued  interest expense                                                                      |       | (156                                 | )          | (3,572 | ) | (1,353 | ) |
| Other  current liabilities                                                                     |       | 5,033                                |       | (2,497 | ) | (26,218 | ) |
| Other  liabilities                                                                             |       | (1,044                               | )          | 151 |   | 819 |   |
| Accounts  receivable securitization:                                                           |       |                                 |       |   |   |   |   |
| Proceeds  from new accounts receivable securitizations                                         |       | 109,000                              |       | 103,000 |   | 100,000 |   |
| Proceeds  from collections reinvested in revolving period accounts receivable  securitizations |       | 1,231,336                            |       | 1,365,655 |   | 1,156,214 |   |
| Remittances  of amounts collected as servicer of accounts receivable securitizations           |       | (1,376,336                           | )          | (1,456,655 | ) | (1,265,214 | ) |
| Net  cash provided by operating activities                                                     |       | 201,769                              |       | 70,892 |   | 143,614 |   |
|                                                                                           |       |                                 |       |   |   |   |   |
| **Cash flows from investing activities:**                                                      |       |                                 |       |   |   |   |   |
| Business  acquisitions, net of cash acquired                                                   |       | (2,701                               | )          | (191 | ) | (31,688 | ) |
| Capital  expenditures                                                                          |       | (54,085                              | )          | (43,823 | ) | (46,667 | ) |
| Proceeds  from sale of assets                                                                  |       | 8,199                                |       | 10,874 |   | 9,830 |   |
| Other                                                                                          |       | (4,643                               | )          | (2,991 | ) | (6,540 | ) |
| Net  cash used in investing activities                                                         |       | (53,230                              | )          | (36,131 | ) | (75,065 | ) |
|                                                                                           |       |                                 |       |   |   |   |   |
| **Cash flows from financing activities:**                                                      |       |                                 |       |   |   |   |   |
| Distributions                                                                                  |       | (132,581                             | )          | (127,190 | ) | (127,072 | ) |
| Issuance  of common units, net of issuance costs of $401, $0 and $226, respectively            |       | 69,447                               |       | — |   | 44,319 |   |
| Proceeds  from increase in long-term debt                                                      |       | 208,259                              |       | 115,249 |   | 74,568 |   |
| Reductions  in long-term debt                                                                  |       | (239,555                             | )          | (92,985 | ) | (60,942 | ) |
| Net  additions to (reductions in) short-term borrowings                                        |       | (59,570                              | )          | 67,950 |   | 5,132 |   |
| Cash  paid for financing costs                                                                 |       | (3,903                               | )          | (383 | ) | (367 | ) |
| Minority  interest activity                                                                    |       | (879                                 | )          | (1,539 | ) | (1,536 | ) |
| Proceeds  from exercise of common unit options                                                 |       | —                               |       | 76 |   | 1,025 |   |
| Cash  contribution from general partner                                                        |       | 702                                  |       | — |   | 470 |   |
| Net  cash used in financing activities                                                         |       | (158,080                             | )          | (38,822 | ) | (64,403 | ) |
|                                                                                           |       |                                 |       |   |   |   |   |
| **Effect of exchange rate changes on cash**                                                    |       | (7                                   | )          | (10 | ) | 14 |   |
|                                                                                           |       |                                 |       |   |   |   |   |
| Increase  (decrease) in cash and cash equivalents                                              |       | (9,548                               | )          | (4,071 | ) | 4,160 |   |
| Cash  and cash equivalents - beginning of year                                                 |       | 16,614                               |       | 20,685 |   | 16,525 |   |
| **Cash and cash equivalents - end of year**                                                    |       | $                                    | 7,066      |   | $ | 16,614 |   | $ | 20,685 |   |

 

See notes toconsolidated financial statements.

 

F-6

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Tableof Contents

 

**FERRELLGASPARTNERS, L.P.**

**AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Dollars in thousands, except perunit data, unless otherwise designated)**

 

**A.****       ****Partnership organization and formation**

 

FerrellgasPartners, L.P. (“Ferrellgas Partners”) was formed on April 19, 1994, andis a publicly traded limited partnership, owning an approximate 99% limitedpartner interest in Ferrellgas, L.P. (the “operating partnership”). FerrellgasPartners and the operating partnership, collectively referred to as “Ferrellgas,”are both Delaware limited partnerships and are governed by their respectivepartnership agreements. Ferrellgas Partners was formed to acquire and hold alimited partner interest in the operating partnership. The operatingpartnership was formed to acquire, own and operate the propane business andassets of Ferrellgas, Inc. (“general partner”), a wholly-owned subsidiaryof Ferrell Companies, Inc. (“Ferrell Companies”). As of July 31,2009, Ferrell Companies beneficially owns 20.3 million of Ferrellgas Partners’outstanding common units. The general partner has retained a 1% general partnerinterest in Ferrellgas Partners and also holds an approximate 1% generalpartner interest in the operating partnership, representing an effective 2%general partner interest in Ferrellgas on a combined basis. As general partner,it performs all management functions required by Ferrellgas.

 

FerrellgasPartners owns a 100% equity interest in Ferrellgas Partners Finance Corp.,whose only business activity is to act as the co-issuer and co-obligor of anydebt issued by Ferrellgas Partners.

 

Ferrell Companiesis wholly-owned by a leveraged employee stock ownership trust (“ESOT”)established pursuant to the Ferrell Companies Employee Stock Ownership Plan (“ESOP”).The purpose of the ESOP is to provide employees of the general partner anopportunity for ownership in Ferrell Companies and indirectly in Ferrellgas. Ascontributions are made by Ferrell Companies to the ESOT in the future, sharesof Ferrell Companies are allocated to the employees’ ESOP accounts.

 

FerrellgasPartners’ partnership agreement includes an agreement with Ferrell Companiesconcerning the distribution priority on common units owned by public investorsover those owned by Ferrell Companies. This provision extends to April 30,2010 and allows Ferrellgas Partners to defer distributions on the common unitsheld by Ferrell Companies up to an aggregate outstanding amount of $36.0million. There have been no deferrals to date.

 

**B.****       ****Summary of significant accounting policies**

 

**(1)****            ****Nature of operations:** Ferrellgas Partners is a holding entity that conducts no operations andhas two subsidiaries, Ferrellgas Partners Finance Corp. and the operatingpartnership. The operating partnership is the only operating subsidiary ofFerrellgas Partners.

 

The operatingpartnership is engaged primarily in the distribution of propane and relatedequipment and supplies in the United States. The propane distribution market isseasonal because propane is used primarily for heating in residential andcommercial buildings. The operating partnership serves approximately onemillion residential, industrial/commercial, portable tank exchange, agricultural,wholesale and other customers in all 50 states, the District of Columbia, andPuerto Rico.

 

**(2)****            ****Accounting estimates:** The preparation of financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America (“GAAP”) requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosures of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereported period. Actual results could differ from these estimates.

 

F-7

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Significant estimatesimpacting the consolidated financial statements include accruals that have beenestablished for contingent liabilities, pending claims and legal actionsarising in the normal course of business, useful lives of property, plant andequipment assets, residual values of tanks, capitalization of customer tankinstallation costs, amortization methods of intangible assets, valuationmethods used to value sales returns and allowances, allowance for doubtfulaccounts, financial derivative contracts and stock and unit-based compensation calculations.

 

**(3)****            ****Principles of consolidation:**The accompanying consolidated financial statementsinclude Ferrellgas Partners’ accounts and those of its wholly-owned subsidiary,Ferrellgas Partners Finance Corp., and the operating partnership, itsmajority-owned subsidiary, after elimination of all material intercompanyaccounts and transactions. The accounts of Ferrellgas Partners’ majority-ownedsubsidiary are included based on the determination that Ferrellgas Partners willabsorb a majority of the operating partnership’s expected losses, receive amajority of the operating partnership’s expected residual returns and is theoperating partnership’s primary beneficiary. The operating partnership includesthe accounts of its wholly-owned subsidiaries. The general partner’sapproximate 1% general partner interest in the operating partnership isaccounted for as a minority interest. The wholly-owned unconsolidatedsubsidiary of the operating partnership, Ferrellgas Receivables, LLC (“FerrellgasReceivables”), is a special purpose entity.

 

**(4)****            ****Cash and cash equivalents and non-cash activities:**For purposesof the consolidated statements of cash flows, Ferrellgas considers cashequivalents to include all highly liquid debt instruments purchased with anoriginal maturity of three months or less. Significant non-cash activities arepresented below:

 
| ** **                                                | ** ** | **For the year ended July 31,** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| CASH  PAID FOR:                                           |       |                                 |       |   |   |   |   |
| Interest                                                  |       | $                                    | 83,107     |   | $ | 88,380 |   | $ | 87,035 |   |
| Income  taxes                                             |       | $                                    | 1,512      |   | $ | 3,841 |   | $ |  3,742 |   |
| NON-CASH  INVESTING ACTIVITIES:                           |       |                                 |       |   |   |   |   |
| Issuance  of common units in connection with acquisitions |       | $                                    | 5,465      |   | $ | — |   | $ | 2,751 |   |
| Issuance  of liabilities in connection with acquisitions  |       | $                                    | 1,673      |   | $ | — |   | $ | 2,426 |   |
| Property,  plant and equipment additions                  |       | $                                    | 973        |   | $ | 1,970 |   | $ | 1,187 |   |

 

**(****5)****             Accountsreceivable securitization:** Ferrellgas has agreements to transfer, on anongoing basis, a portion of its trade accounts receivable through FerrellgasReceivables, an accounts receivable securitization facility that is awholly-owned unconsolidated special purpose entity. Ferrellgas retainsservicing responsibilities as well as a retained interest in the transferredreceivables. Ferrellgas also holds a note receivable from FerrellgasReceivables to the extent that expected cash proceeds from the sales ofaccounts receivable to Ferrellgas Receivables have not been received.Ferrellgas has no other continuing involvement with the transferredreceivables, other than servicing the receivables. The related receivables aretransferred from the consolidated balance sheets and a retained interest andnote receivable are recorded for the amount of receivables sold in excess ofcash received and a related loss on the transfer is recorded, which representsthe discount on the sale. The retained interest and note receivable areincluded in “Accounts and notes receivable, net” in the consolidated balancesheets.

 

Ferrellgasdetermines the fair value of its retained interest and note receivable based onthe present value of future expected cash flows using management’s bestestimates of various factors, including credit loss experience and discountrates commensurate with the risks involved. These assumptions

 

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areupdated periodically based on actual results; therefore, the estimated creditloss and discount rates utilized are materially consistent with historicalperformance. Due to the short-term nature of Ferrellgas’ trade receivables,variations in the credit and discount assumptions would not significantlyimpact the fair value of the retained interests and note receivable. Costsassociated with the sale of receivables are included in “Loss on disposal ofassets and other” in the consolidated statements of earnings. See Note F —Accounts and notes receivable, net and accounts receivable securitization — forfurther discussion of these transactions.

 

**(6)****            ****Inventories: **Inventoriesare stated at the lower of cost or market using weighted average cost andactual cost methods.

 

**(7)****            ****Property, plant andequipment: **Property, plant and equipment are statedat cost less accumulated depreciation. Expenditures for maintenance and routinerepairs are expensed as incurred. Ferrellgas capitalizes computer software,equipment replacement and betterment expenditures that upgrade, replace orcompletely rebuild major mechanical components and extend the original usefullife of the equipment. Depreciation is calculated using the straight-linemethod based on the estimated useful lives of the assets ranging from two to 30years. Ferrellgas, using its best estimates based on reasonable and supportableassumptions and projections, reviews long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount of itsassets might not be recoverable. See Note E — Supplemental financial statementinformation — for further discussion of property, plant and equipment.

 

**(8)****            ****Goodwill:** Ferrellgas records goodwill as theexcess of the cost of acquisitions over the fair value of the related netassets at the date of acquisition. Goodwill is tested for impairment annuallyon January 31, or more frequently if circumstances dictate, and ifimpaired, written off against earnings at that time. Ferrellgas has notrecognized any impairment losses as a result of these tests. For purposes ofFerrellgas’ goodwill impairment test, Ferrellgas has determined that it has onereporting unit. Ferrellgas assesses the carrying value of goodwill at itsreporting unit based on an estimate of the fair value of the reporting unit.Fair value of the reporting unit is estimated using a market value approachtaking into consideration the quoted market price of Ferrellgas’ common units.

 

**(9)****            ****Intangible assets:**Intangible assets with finite usefullives, consisting primarily of customer lists, non-compete agreements andpatented technology, are stated at cost, net of accumulated amortizationcalculated using the straight-line method over periods ranging from two to 15years. Trade names and trademarks have indefinite lives, are not amortized, andare stated at cost. Ferrellgas tests finite-lived intangible assets forimpairment when events or changes in circumstances indicate that the carryingamount of these assets might not be recoverable. Ferrellgas tests indefinite-lived intangible assets for impairment annually on January 31 or morefrequently if circumstances dictate. Ferrellgas has not recognized impairmentlosses as a result of these tests. When necessary, intangible assets’ usefullives are revised and the impact on amortization reflected on a prospectivebasis. See Note G — Goodwill and intangible assets, net — for furtherdiscussion of intangible assets.

 

**(10)****     ****Derivatives and hedging activities:** Ferrellgas’ overall objective for entering intoderivative contracts, including commodity options and swaps, is to hedge aportion of its exposure to market fluctuations in propane prices. Thesefinancial instruments are formally designated and documented as a hedge of aspecific underlying exposure, as well as the risk management objectives andstrategies for undertaking the hedge transaction. Because of the high degree ofcorrelation between the hedging instrument and the underlying exposure beinghedged, fluctuations in the value of the derivative instrument are generallyoffset by changes in the anticipated cash flows of the underlying exposurebeing hedged. The fair value of these derivatives fluctuates over the length ofthe contracts. These fair value amounts should not be viewed in isolation, butrather in relation to the anticipated cash flows of the underlying hedgedtransaction and the overall reduction in our risk relating to adversefluctuations

 

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in propane prices.Ferrellgas formally assesses, both at inception and at least quarterlythereafter, whether the financial instruments that are used in hedgingtransactions are effective at offsetting changes in the anticipated cash flowsof the related underlying exposures. Any ineffective portion of a financialinstrument’s change in fair value is recognized in “Cost of product sold -propane and other gas liquids sales” in the consolidated statements ofearnings. Ferrellgas also enters into derivative contracts that qualify for thenormal purchases and normal sales exception under Statement of FinancialAccounting Standards (“SFAS”) No. 133, “Accounting for DerivativeInstruments and Hedging Activities” (“SFAS 133”), as amended. Financialinstruments formally designated and documented as a hedge of a specificunderlying exposure are recorded gross at fair value as either “Price riskmanagement assets” or “Other current liabilities” on the consolidated balancesheets with changes in fair value reported in other comprehensive income.

 

**(11)****      Revenuerecognition:** Revenues from the distribution of propane and other gas liquids,including revenues from customer deposits and advances, are recognized byFerrellgas at the time product is delivered to its customers. Other revenues,which include revenue from the sale of propane appliances and equipment isrecognized at the time of delivery or installation. Revenues from repairs andmaintenance are recognized upon completion of the service. Ferrellgasrecognizes shipping and handling revenues and expenses for sales of propane,appliances and equipment at the time of delivery or installation. Shipping andhandling revenues are included in the price of propane charged to customers,and are classified as revenue. Revenues from annually billed, non-refundabletank rentals are recognized on a straight-line basis over one year. Cooperativeadvertising program costs are recorded as a reduction to our revenue.

 

**(12)****      Shippingand handling expenses:** Shipping and handling expenses related to deliverypersonnel, vehicle repair and maintenance and general liability expenses areclassified within “Operating expense” in the consolidated statements ofearnings. Depreciation expenses on delivery vehicles Ferrellgas owns areclassified within “Depreciation and amortization expense.” Delivery vehiclesand distribution technology leased by Ferrellgas are classified within “Equipmentlease expense.” See Note E — Supplemental financial statement information — forthe financial statement presentation of shipping and handling expenses.

 

**(13)****      Cost of product sold:** “Costof product sold — propane and other gas liquids sales” includes all costs toacquire propane and other gas liquids, the costs of storing and transportinginventory prior to delivery to Ferrellgas’ customers, the results from riskmanagement activities to hedge related price risk and the costs related to therefurbishment of Ferrellgas’ portable propane tanks. “Cost of product sold —other” primarily includes costs related to the sale of propane appliances andequipment.

 

**(14)****     ****Operating expenses:** “Operating expense” primarily includes the personnel,vehicle, delivery, handling, plant, office, selling, marketing, credit andcollections and other expenses related to the retail distribution of propaneand related equipment and supplies.

 

**(15)****     ****General and administrative expenses: “**General and administrative expense” primarily includespersonnel and incentive expense related to executives and employees and otheroverhead expense related to centralized corporate functions.

 

**(16)****     ****Unit and stock-based compensation:**

 

***FerrellgasUnit Option Plan (“UOP”)***

 

TheUOP is authorized to issue options covering up to 1.35 million common units toemployees of the general partner or its affiliates. The Compensation Committeeof the Board of Directors of the general partner administers the UOP,authorizes grants of unit options thereunder and sets the unit option price andvesting terms of unit options in accordance with the terms of the UOP. Nosingle officer or director

 

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ofthe general partner may acquire more than 314,895 common units under the UOP.In general, the options currently outstanding under the UOP vest over afive-year period, and expire on the tenth anniversary of the date of the grant.The fair value of each option award is estimated on the date of grant using abinomial option valuation model. Expected volatility is based on the historicalvolatility of Ferrellgas’ publicly-traded common units. Historical informationis used to estimate option exercise and employee termination behavior. Due tothe limited number of employees eligible to participate in the UOP, there isonly one group of employees. The expected term of options granted is derivedfrom historical exercise patterns and represents the period of time thatoptions are expected to be outstanding. The risk free rate for periods withinthe contractual life of the option is based on the U.S. Treasury yield curve ineffect at the time of grant. During the year ended July 31, 2009, theportion of the total non-cash compensation charge relating to the UOP was $15thousand and related to fiscal 2009 grants of unit options to acquire 0.3million common units. During the years ended July 31, 2008 and 2007, nocompensation charge relating to the UOP was recognized as all optionsoutstanding at that time were fully vested.

 

*FerrellCompanies, Inc. Incentive Compensation Plan (“ICP”)*

TheICP is not a Ferrellgas stock-compensation plan; however, in accordance withFerrellgas’ partnership agreements, all employee-related costs incurred byFerrell Companies are allocated to Ferrellgas. As a result, Ferrellgas incurs anon-cash compensation charge from Ferrell Companies. During the years ended July 31,2009, 2008 and 2007, the portion of the total non-cash compensation chargerelating to the ICP was $2.3 million, $1.8 million and $0.9 million,respectively.

 

Ferrell Companiesis authorized to issue options covering up to 6.25 million shares of FerrellCompanies common stock under the ICP. The ICP was established by FerrellCompanies to allow upper middle and senior level managers of the generalpartner to participate in the equity growth of Ferrell Companies. The sharesunderlying the stock options are common shares of Ferrell Companies; therefore,there is no earnings per share dilution of Ferrellgas. The ICP stock optionsvest ratably over periods ranging from zero to 12 years or 100% upon a changeof control of Ferrell Companies, or upon the death, disability or retirement atthe age of 65 of the participant. Vested options are exercisable in incrementsbased on the timing of the retirement of Ferrell Companies’ debt, but in noevent later than 20 years from the date of issuance. The fair value of eachoption award is estimated on the date of grant using a binomial optionvaluation model.

 

**(17)****     ****Income taxes:**Ferrellgas Partners is a publicly-traded master limited partnershipwith one subsidiary that is a taxable corporation. The operating partnership isa limited partnership with four subsidiaries that are taxable corporations.Partnerships are generally not subject to federal income tax, althoughpublicly-traded partnerships are treated as corporations for federal income taxpurposes and therefore subject to Federal income tax unless a qualifying incometest is satisfied. If this qualifying income test is satisfied, thepublicly-traded partnership will be treated as a partnership for Federal incometax purposes. Based on Ferrellgas’ calculations, Ferrellgas Partners satisfiesthe qualifying income test. As a result, except for the taxable corporations,Ferrellgas Partners’ earnings or losses for Federal income tax purposes areincluded in the tax returns of the individual partners, Ferrellgas Partners’unitholders. Accordingly, the accompanying consolidated financial statements ofFerrellgas Partners reflect federal income taxes related to the above mentionedtaxable corporations only. Recent legislation in certain states of operationallows for taxation of partnerships. As such, the accompanying consolidatedfinancial statements of Ferrellgas Partners also reflect state income taxesresulting from this legislation. Net earnings for financial statement purposesmay differ significantly from taxable income reportable to Ferrellgas Partnersunitholders as a result of differences between the tax basis and financialreporting basis of assets and liabilities, the taxable income allocationrequirements under Ferrellgas Partners’ partnership agreement and differencesbetween Ferrellgas Partners financial reporting year end and its calendar taxyear end.

 

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Income tax expenseconsisted of the following:

 
| ** **                  | ** ** | **For  the year ended July 31,** | ** ** |
|-----------------------------|------------|---------------------------------------|------------|
| ** **                  | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Current  expense            |       | $                                     | 1,904      |   | $ | 1,732 |   | $ | 3,461 |   |
| Deferred  expense (benefit) |       | 388                                   |       | (1,650 | ) | 3,099 |   |
| Income  tax expense         |       | $                                     | 2,292      |   | $ | 82 |   | $ | 6,560 |   |

 

Deferred taxesconsisted of the following:

 
| ** **                  | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|
| Deferred  tax assets        |       | $        | 877        |     | $          | 4,065 |   |
| Deferred  tax liabilities   |       | (1,889   | )          | (4,689   | )          |
| Net  deferred tax liability |       | $        | (1,012     | )        | $          | (624 | ) |

 

On July 12,2007, the governor of the state of Michigan signed into law a new MichiganBusiness Tax (the “MBT Act”), which provided a comprehensive restructuring ofMichigan’s principal business tax regime. The main provision of the MBT Actimposed a new two-part tax on business income and modified gross receipts thatis accounted for as an income tax in accordance with SFAS No. 109 “Accountingfor Income Taxes” (“SFAS 109”). Although the effective date of the MBT was January 1,2008, SFAS 109 required all effects of a tax law change be accounted for in theperiod of the law’s enactment. As a result, during the fourth quarter of fiscal2007 Ferrellgas recognized a one time increase in its deferred tax expense of$2.8 million. During fiscal 2008, the Governor of the State of Michigan signedinto law a one-time credit for this Michigan Business Tax law. The passing ofthis new tax law caused Ferrellgas to recognize a one time deferred tax benefitof $2.8 million during fiscal 2008.

 

**(18)****     ****Sales taxes:**Ferrellgas accounts for the collection and remittance of sales tax on anet tax basis. As a result, these amounts are not reflected in the consolidatedstatements of earnings.

 

**(19)**      **Net earnings per common unit: **Net earnings per common unit is computed by dividingnet earnings, after deducting the general partner’s 1% interest, by theweighted average number of outstanding common units and the dilutive effect, ifany, of outstanding unit options. See Note N — Earnings per common unit — forfurther discussion about these calculations.

 

**(20)**      **Segment information:** Ferrellgas is a single reportable operating segmentengaging in the distribution of propane and related equipment and supplies tocustomers primarily in the United States.

 

**(21)****     ****New accounting standards:** SFAS No. 165,“Subsequent Events” provides guidance on management’s assessment of subsequentevents and clarifies that management must evaluate, as of each reportingperiod, events or transactions that occur after the balance sheet date throughthe date that the financial statements are issued or are available to beissued. The adoption of this statement during fiscal 2009 did not have asignificant impact on Ferrellgas’ financial position or resultsof operations. See additional disclosures relating to subsequent events in NoteP — Subsequent events.

 

SFASNo. 166, “Accounting for Transfers of Financial Assets, an Amendment ofFASB Statement No. 140” amends the derecognition guidance in SFAS No. 140to improve the accounting for transfers of financial assets. This statement iseffective for financial asset transfers that occur in fiscal years beginningafter November 15, 2009. Ferrellgas is currently evaluating the potentialimpact of this statement.

 

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SFASNo. 167, “Amendments to FASB Interpretation No. 46(R)” amends theconsolidation guidance that applies to variable interest entities and willsignificantly affect the overall consolidation analysis under FASBInterpretation 46(R). This statement is effective for fiscal years beginningafter November 15, 2009. Ferrellgas is currently evaluating the potentialimpact of this statement.

 

SFASNo. 168, “The FASB Accounting Standards Codification and the Hierarchy ofGenerally Accepted Accounting Principles, a Replacement of FASB Statement No. 162”establishes the authoritative reference for nongovernmental U.S. GAAP andmodifies the previous four-level GAAP hierarchy to include only two levels.This statement is effective for interim and annual periods ending after September 15,2009. Ferrellgas does not expect the adoption of this statement in fiscal 2010to have a material impact on its financial position or results of operations.

 

SFASNo. 161, “Disclosures about Derivative Instruments and Hedging Activities,an Amendment to FASB Statement No. 133” enhances disclosure requirementsfor derivative instruments and hedging activities. The adoption of thisstatement during fiscal 2009 did not have a significant impact on Ferrellgas’financial position or results of operations. See additional disclosuresrelating to commodity derivative and financial derivative transactions in NoteJ — Derivatives.

 

SFASNo. 157, “Fair Value Measurements” defines fair value, establishes aframework for measuring fair value and expands disclosures about fair valuemeasurements. The adoption of this statement during fiscal 2009 did not have asignificant impact on Ferrellgas’ financial position or results of operations.See disclosure of Ferrellgas’ fair value measurements commodity derivative andfinancial derivative transactions in Note J — Derivatives.

 

SFASNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities,” provides entities the irrevocable option to elect to carry mostfinancial assets and liabilities at fair value with changes in fair valuerecorded in earnings. The adoption of this statement was effective August 1,2008; however, Ferrellgas has not elected the fair value option for any of itsfinancial assets or liabilities.

 

SFASNo. 141(R), “Business Combinations” (a replacement of SFAS No. 141, “BusinessCombinations”) establishes principles and requirements for how the acquirer ina business combination recognizes and measures the identifiable assetsacquired, the liabilities assumed, and any noncontrolling interest in the acquiree,how the acquirer recognizes and measures goodwill or a gain from a bargainpurchase (formerly negative goodwill) and how the acquirer determines whatinformation to disclose. This statement is effective for business combinationsfor which the acquisition date is on or after the beginning of the first annualreporting period beginning on or after December 15, 2008. Ferrellgas doesnot expect the adoption of this statement in fiscal 2010 to have a materialimpact on its financial position or results of operations.

 

SFASNo. 160, “Noncontrolling Interests in Consolidated Financial Statements”establishes accounting and reporting standards for the noncontrolling interest(formerly minority interest) in a subsidiary and for the deconsolidation of asubsidiary and it clarifies that a noncontrolling interest in a subsidiary isan ownership interest in the consolidated entity that should be reported asequity. This statement is effective for fiscal years, and interim periodswithin those fiscal years, beginning on or after December 15, 2008.Ferrellgas does not expect the adoption of this statement in fiscal 2010 tohave a material impact on its financial position or results of operations.

 

FASB Staff Position (“FSP”)SFAS 140-4 and FASB Interpretation No. 46R-8 “Disclosures by PublicEntities (Enterprises) about Transfers of Financial Assets and Interests inVariable Interest Entities” improves the transparency of transfers of financialassets and an enterprise’s involvement with variable interest entities, includingqualifying special-purpose entities. The adoption of this FSP during fiscal2009 did not have a significant impact on Ferrellgas’ financial position orresults of operations.

 

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** **

EITFNo. 07-4, “Application of the Two-Class Method under FASB Statement No. 128,Earnings per Share, to Master Limited Partnerships” addresses the computationof incentive distribution rights and the appropriate allocation of these rightsto current period earnings in the computation of earnings per share. Thisstatement is effective for financial statements issued for fiscal yearsbeginning on or after December 15, 2008 and interim periods within thosefiscal years. Ferrellgas does not expect the adoption of this statement infiscal 2010 to have a material impact on its financial position or results ofoperations.

 

**C.****     ****Business combinations**

 

Business combinations areaccounted for under the purchase method and the assets acquired and liabilitiesassumed are recorded at their estimated fair market values as of theacquisition dates. The results of operations are included in the consolidatedstatements of earnings from the date of acquisition. The pro forma effect ofthese transactions was not material to Ferrellgas’ results of operations.

 

During fiscal 2009,Ferrellgas acquired propane distribution assets with an aggregate value of$10.0 million in the following four transactions:

 

·                  Lorensen Propane Gas, Inc., based in California,acquired September 2008;

·                  HBH Gas Systems, LLC — Austin’s Colony Phase 5, basedin Texas, acquired September 2008;

·                  Ottawa Cooperative, based in Kansas, acquired May 2009;and

·                  Town & Country Propane, Inc, based inMissouri, acquired July 2009.

 

These acquisitions werefunded by $2.7 million in cash payments, the issuances of $1.8 million ofliabilities and other costs and considerations, and $5.5 million of commonunits, net of issuance costs.

 

The aggregate fair valuesof these four transactions were allocated as follows:

 
| Customer tanks,  buildings, land and other |   | $     | 3,031  |   |
|--------------------------------------------|--------|-------|--------|--------|
| Non-compete  agreements                    |   | 1,438 |   |
| Customer lists                             |   | 5,475 |   |
| Working capital                            |   | 6     |   |
|                                       |   | $     | 9,950  |   |

 

Theestimated fair values and useful lives of assets acquired are based on apreliminary internal valuation and are subject to final valuation adjustments.Ferrellgas intends to continue its analysis of the net assets of thesetransactions to determine the final allocation of the total purchase price tothe various assets and liabilities acquired.

 

During fiscal 2008,Ferrellgas had no acquisitions of propane distribution assets.

 

During fiscal 2007,Ferrellgas acquired propane distribution assets with an aggregate value of$36.2 million in the following nine transactions:

 

·                  Pacer-Valley Propane, LLC, based in California,acquired August 2006;

·                  Lake Propane, based in California, acquired August 2006;

·                  Pacific Propane Service, Inc., based inCalifornia, acquired August 2006;

·                  Twin Ports Energy, Inc., based in Wisconsin,acquired October 2006;

·                  Getman’s Gas Company, Inc., based in New York,acquired October 2006;

·                  Yankee Gas, LLC, based in Massachusetts, acquired October 2006;

·                  Great Dane Propane, Inc., based in Florida,acquired October 2006;

 

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·                  Puget Sound Propane, based in Washington, acquired December 2006;and

·                  Reliance Bottle Gas, Inc., based in Ohio,acquired June 2007.

 

These acquisitions werefunded by $31.7 million in cash payments, the issuances of $2.5 million ofliabilities and other costs and considerations, and $2.0 million of commonunits, net of issuance costs.

 

The aggregate fair valuesof these nine transactions were allocated as follows:

 
| Customer tanks,  buildings, land and other |   | $      | 11,567 |   |
|--------------------------------------------|--------|--------|--------|--------|
| Non-compete  agreements                    |   | 2,072  |   |
| Customer lists                             |   | 18,178 |   |
| Goodwill                                   |   | 3,649  |   |
| Working capital                            |   | 712    |   |
|                                       |   | $      | 36,178 |   |

 

The fair values and useful lives of assets acquired are based on aninternal valuation and included only minor final valuation adjustments duringthe 12 month period after the date of acquisition.

 

**D.****     ****Quarterly distributions of available cash**

 

FerrellgasPartners makes quarterly cash distributions of all of its “available cash.”Available cash is defined in the partnership agreement of Ferrellgas Partnersas, generally, the sum of its consolidated cash receipts less consolidated cashdisbursements and net changes in reserves established by the general partnerfor future requirements. Reserves are retained in order to provide for theproper conduct of Ferrellgas Partners’ business, or to provide funds fordistributions with respect to any one or more of the next four fiscal quarters.Distributions are made within 45 days after the end of each fiscal quarterending October, January, April and July to holders of record on theapplicable record date.

 

Distributionsby Ferrellgas Partners in an amount equal to 100% of its available cash, asdefined in its partnership agreement, will be made to the common unitholdersand the general partner. Additionally, the payment of incentive distributionsto the holders of incentive distribution rights will be made to the extent thatcertain target levels of cash distributions are achieved.

 

Thepublicly held common units have certain distribution preference rights over thecommon units held by Ferrell Companies. Ferrell Companies has grantedFerrellgas Partners the ability to defer future distributions on the commonunits held by it up to an aggregate outstanding amount of $36.0 million. Thisdistribution deferral agreement, which has not been utilized, expires April 30,2010. The ability to defer distributions to Ferrell Companies providesFerrellgas Partners’ public common unitholders distribution support. This distribution support is available ifFerrellgas Partners’ available cash for any fiscal quarter is insufficient topay all of the common unitholders their quarterly distribution. FerrellgasPartners would first pay a distribution to the publicly-held common units. Anyremaining available cash would then be used to pay a distribution on the commonunits held by Ferrell Companies. Any quarterly distribution paid per unit tothe publicly-held common units that is not able to be paid on the FerrellCompanies-owned common units would be deferred, within certain limits, and paidto Ferrell Companies in future quarters when available cash is sufficient. Ifinsufficient available cash should exist for a particular quarter, or anyprevious deferred distributions to Ferrell Companies remain outstanding, thedistribution declared per common unit may not be more than the highestquarterly distribution paid on the common units for any of the immediatelypreceding four fiscal quarters. If the cumulative amount of deferred quarterlydistributions to Ferrell Companies were to reach $36.0 million, the commonunits held by Ferrell Companies would then be paid in the same priority as thepublicly-held common units. After payment of all required distributions for anysubsequent period, Ferrellgas Partners would use any remaining available cashto reduce any amount previously deferred on the

 

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common units held by Ferrell Companies. Reductions inamounts previously deferred, if any, would then again be available for futuredeferrals to Ferrell Companies through April 30, 2010.

 

**E.****       ****Supplemental financial statement information**

 

Inventoriesconsist of the following:

 
| ** **                        | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
| Propane gas and  related products |       | $        | 109,606    |     | $          | 128,776 |   |
| Appliances,  parts and supplies   |       | 20,202   |       | 23,525   |       |
| Inventories                       |       | $        | 129,808    |     | $          | 152,301 |   |

 

In addition toinventories on hand, Ferrellgas enters into contracts primarily to buy propanefor supply procurement purposes. Most of these contracts have terms of lessthan one year and call for payment based on market prices at the date ofdelivery. All supply procurement fixed price contracts have terms of fewer than24 months. As of July 31, 2009, Ferrellgas had committed, for supplyprocurement purposes, to take net delivery of approximately 87.9 milliongallons of propane at fixed prices.

 

Property, plantand equipment, net consist of the following:

 
| ** **                               | ** ** | **Estimated**    | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------------|------------|------------|------------|------------|------------|
| ** **                               | ** ** | **useful lives** | ** ** | **2009**   | ** ** | **2008**   | ** ** |
| Land                                     |       | Indefinite       |       | $          | 30,414     |       | $          | 30,840 |   |
| Land  improvements                       |       | 2-20             |       | 10,858     |       | 10,585     |       |
| Buildings and  improvements              |       | 20               |       | 64,392     |       | 63,777     |       |
| Vehicles,  including transport trailers  |       | 8-20             |       | 92,914     |       | 96,351     |       |
| Bulk equipment  and district facilities  |       | 5-30             |       | 100,123    |       | 97,489     |       |
| Tanks, cylinders  and customer equipment |       | 2-30             |       | 767,682    |       | 761,065    |       |
| Computer and  office equipment           |       | 2-5              |       | 115,343    |       | 116,873    |       |
| Construction in  progress                |       | n/a              |       | 5,853      |       | 9,575      |       |
|                                     |       |             |       | 1,187,579  |       | 1,186,555  |       |
| Less:  accumulated depreciation          |       |             |       | 521,044    |       | 501,227    |       |
| Property, plant  and equipment, net      |       |             |       | $          | 666,535    |       | $          | 685,328 |   |

 

Depreciation expensetotaled $62.3 million, $64.6 million, and $64.8 million for fiscal 2009, 2008and 2007, respectively.

 

Other currentliabilities consist of the following:

 
| ** **                      | ** ** | **2009** | ** ** | **2008** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|
| Accrued interest                |       | $        | 19,719     |     | $          | 19,875 |   |
| Accrued payroll                 |       | 23,395   |       | 12,621   |       |
| Customer  deposits and advances |       | 23,115   |       | 25,065   |       |
| Other                           |       | 42,534   |       | 50,293   |       |
| Other current  liabilities      |       | $        | 108,763    |     | $          | 107,854 |   |

 

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Loss on disposal ofassets and other consist of the following:

 
| ** **                                                                                 | ** ** | **For  the year ended July 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                 | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Loss on disposal  of assets                                                                |       | $                                     | 5,009      |   | $ | 4,820 |   | $ | 4,232 |   |
| Loss on transfer  of accounts receivable related to the accounts receivable securitization |       | 12,124                                |       | 10,548 |   | 10,384 |   |
| Service income related to the accounts receivable securitization                           |       | (4,091                                | )          | (4,118 | ) | (3,794 | ) |
| Loss on disposal  of assets and other                                                      |       | $                                     | 13,042     |   | $ | 11,250 |   | $ | 10,822 |   |

 

Shipping andhandling expenses are classified in the following consolidated statements ofearnings line items:

 
| ** **                             | ** ** | **For  the year ended July 31,** | ** ** |
|----------------------------------------|------------|---------------------------------------|------------|
| ** **                             | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Operating  expense                     |       | $                                     | 178,218    |   | $ | 171,938 |   | $ | 163,193 |   |
| Depreciation and  amortization expense |       | 4,915                                 |       | 5,096 |   | 5,308 |   |
| Equipment lease  expense               |       | 17,541                                |       | 22,703 |   | 23,465 |   |
|                                   |       | $                                     | 200,674    |   | $ | 199,737 |   | $ | 191,966 |   |

 

**F.****       ****Accounts and notes receivable, net and accountsreceivable securitization**

 

Accounts and notesreceivable, net consist of the following:

 
| ** **                                   | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|
| Accounts  receivable                         |       | $        | 33,903     |     | $          | 127,975 |   |
| Note receivable  from Ferrellgas Receivables |       | 52,038   |       | —   |       |
| Retained  interest                           |       | 24,979   |       | 22,753   |       |
| Other                                        |       | 284      |       | 330      |       |
| Less: allowance  for doubtful accounts       |       | (4,294   | )          | (5,977   | )          |
| Accounts and  notes receivable, net          |       | $        | 106,910    |     | $          | 145,081 |   |

 

DuringApril 2009, Ferrellgas renewed its accounts receivable securitizationfacility with JPMorgan Chase Bank, N.A., JS Siloed Trust and Fifth Third Bankfor an additional 364-day commitment. As part of this renewed facility, theoperating partnership transfers a portion of its trade accounts receivable toFerrellgas Receivables, which finances its acquisition of the trade receivableassets by issuing beneficial interests in (securitizing) the receivables to acommercial paper conduit for proceeds of up to $145.0 million. The operatingpartnership does not provide any guarantee or similar support to thecollectability of these receivables. The operating partnership structured thefacility using a wholly-owned, unconsolidated special purpose entity in orderto facilitate the transaction while complying with Ferrellgas’ various debtcovenants. If the covenants are compromised, funding from the facility could berestricted or suspended, or its costs could increase. As a servicer, theoperating partnership remits daily to this special purpose entity fundscollected on the trade receivables held by Ferrellgas Receivables.

 

The operatingpartnership transfers a portion of its trade accounts receivable to FerrellgasReceivables and retains an interest and a note receivable related to thesetransferred receivables. As these transferred receivables are subsequentlycollected, the funding from the accounts receivable securitization facility isreduced. Ferrellgas Receivables recorded the following on its balance sheet:

 

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| ** **                                                            | ** ** | **2009** | ** ** | **2008** | ** ** |
|-----------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Trade accounts  receivable transferred from the operating partnership |       | $        | 118,982    |     | $          | 97,333 |   |
|                                                                  |       |     |       |     |       |
| Note payable to  the operating partnership                            |       | $        | 52,038     |     | $          | — |   |

 

The operatingpartnership’s consolidated balance sheets do not include trade accountsreceivables transferred, but do include a note receivable from FerrellgasReceivables which represents expected cash proceeds from the sale of accountsreceivable to Ferrellgas Receivables that have not yet been received. As of July 31,2009, the operating partnership had received proceeds from trade accountsreceivable sales of $37.0 million with the ability to receive proceeds of anadditional $4.0 million.

 

Other accountsreceivable securitization activity consists of the following:

 
| ** **             | ** ** | **For the year ended July 31,** | ** ** |
|------------------------|------------|--------------------------------------|------------|
| ** **             | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net non-cash  activity |       | $                                    | 8,033      |   | $ | 6,430 |   | $ | 2,964 |   |
| Bad debt expense       |       | $                                    | 600        |   | $ | — |   | $ | 202 |   |

 

The net non-cash activityreported in “Loss on disposal of assets and other” in the consolidated statementsof earnings approximates the financing cost of issuing commercial paper backedby these accounts receivable transferred to Ferrellgas Receivables. See detailsof the net non-cash activity disclosed in Note E — Supplemental financialstatement information — “Loss on transfer of accounts receivable related to theaccounts receivable securitization” and “Service income related to the accountsreceivable securitization.” The weighted average discount rate used to valuethe retained interest in the transferred receivables was 3.6% and 4.65% as of July 31,2009 and 2008, respectively.

 

**G.****     ****Goodwill and intangibleassets, net**

 

Goodwill and intangible assets, net consist of:

 
| ** **                                          | ** ** | **July 31, 2009**      | ** ** | **July 31, 2008**        | ** ** |
|-----------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                                          | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** |
| Goodwill, net                                       |       | $                           | 248,939    |                          | $          | — |   | $ | 248,939 |   | $ | 248,939 |   | $ | — |   | $ | 248,939 |   |
|                                                |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Intangible  Assets, net Amortized intangible assets |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Customer lists                                      |       | $                           | 368,716    |                          | $          | (225,038 | ) | $ | 143,678 |   | $ | 363,242 |   | $ | (207,107 | ) | $ | 156,135 |   |
| Non-compete  agreements                             |       | 44,481                      |       | (36,957                       | )          | 7,524 |   | 43,042 |   | (35,081 | ) | 7,961 |   |
| Other                                               |       | 3,584                       |       | (1,860                        | )          | 1,724 |   | 3,572 |   | (1,502 | ) | 2,070 |   |
|                                                |       | 416,781                     |       | (263,855                      | )          | 152,926 |   | 409,856 |   | (243,690 | ) | 166,166 |   |
|                                                |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Unamortized  intangible assets                      |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Trade  names & trademarks                  |       | 59,111                      |       | —                        |       | 59,111 |   | 59,107 |   | — |   | 59,107 |   |
| Total intangible  assets, net                       |       | $                           | 475,892    |                          | $          | (263,855 | ) | $ | 212,037 |   | $ | 468,963 |   | $ | (243,690 | ) | $ | 225,273 |   |

 

Customer listshave estimated lives of 15 years, while non-compete agreements and otherintangible assets have estimated lives ranging from two to ten years.Ferrellgas intends to utilize all acquired trademarks and trade names and doesnot believe there are any legal, regulatory, contractual,

 

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competitive,economical or other factors that would limit their useful lives. Therefore,trademarks and trade names have indefinite useful lives.

 

Aggregateamortization expense:

 

For the year endedJuly 31,

 
| 2009 |   | $      | 20,166 |   |
|------|--------|--------|--------|--------|
| 2008 |   | 20,970 |   |
| 2007 |   | 22,553 |   |

 

Estimatedamortization expense:

 

For the year endedJuly 31,

 
| 2010 |   | $      | 19,298 |   |
|------|--------|--------|--------|--------|
| 2011 |   | 19,141 |   |
| 2012 |   | 18,693 |   |
| 2013 |   | 18,142 |   |
| 2014 |   | 14,874 |   |

 

**H.****     ****Debt**

 

***Short-termborrowings***

 

Ferrellgasclassified a portion of its unsecured credit facility due April 2010borrowings as short-term because it was used to fund working capital needs thatmanagement had intended to pay down within the 12 month period following eachbalance sheet date. As of July 31, 2009 and 2008, $66.2 million and $125.7million, respectively, were classified as short-term borrowings. For furtherdiscussion see the unsecured credit facility section below.

 

***Long-termdebt***

 

Long-term debtconsisted of the following:

 
| ** **                                                                                                                                                                                                        | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Senior notes**                                                                                                                                                                                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Fixed  rate, Series D-E, ranging from 7.24% to 7.42% due 2010-2013 (1)                                                                                                                                       |       | $          | 152,000    |       | $          | 204,000 |   |
| Fixed  rate, 8.75%, due 2012, net of unamortized premium of $1,091 and $1,471 at  July 31, 2009 and 2008, respectively (2)                                                                                   |       | 269,091    |       | 269,471    |       |
| Fixed  rate, Series C, 8.87%, due 2009 (3)                                                                                                                                                                   |       | 73,000     |       | 73,000     |       |
| Fixed  rate, 6.75% due 2014, net of unamortized discount of $26,458 and $518 at  July 31, 2009 and 2008, respectively (4)                                                                                    |       | 423,542    |       | 249,482    |       |
| ** **                                                                                                                                                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Credit facility**, variable interest rate, expiring 2010 (net of  $66.2 million and $125.7 million classified as short-term borrowings at  July 31, 2009 and 2008, respectively)                           |       | 88,541     |       | 235,270    |       |
| ** **                                                                                                                                                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Notes payable**, 8.4% and 7.9% weighted average interest rate in  2009 and 2008, respectively, due 2009 to 2016, net of unamortized discount of  $1,301 and $1,160 at July 31, 2009 and 2008, respectively |       | 5,321      |       | 5,864      |       |
| ** **                                                                                                                                                                                                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Capital lease obligations**                                                                                                                                                                                     |       | —     |       | 29         |       |
|                                                                                                                                                                                                              |       | 1,011,495  |       | 1,037,116  |       |
| Less:  current portion, included in other current liabilities on the consolidated  balance sheets                                                                                                                 |       | 1,422      |       | 2,397      |       |
| **Long-term debt**                                                                                                                                                                                                |       | $          | 1,010,073  |       | $          | 1,034,719 |   |

 

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----

| (1)    | The operating  partnership’s fixed rate senior notes issued in August 1998 are general  unsecured obligations of the operating partnership and rank on an equal basis  in right of payment with all senior indebtedness of the operating partnership  and are senior to all subordinated indebtedness of the operating partnership.  The outstanding principal amount of the series D and E notes are due on  August 1, 2010 and 2013, respectively. In general, the operating partnership  does not have the option to prepay the notes prior to maturity without  incurring prepayment penalties.                                                                                                                                                                                                                                                                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (2)    | On September 24,  2002, Ferrellgas Partners issued $170.0 million of its fixed rate senior  notes. On December 18, 2002, Ferrellgas Partners issued $48.0 million of  its fixed rate senior notes with a debt premium of $1.7 million that will be  amortized to interest expense through 2012. On June 10, 2004 Ferrellgas  Partners issued $50.0 million of its fixed rate senior notes with a debt  premium of $1.6 million that will be amortized to interest expense through  2012. The senior notes bear interest from the date of issuance, payable  semi-annually in arrears on June 15 and December 15 of each year.                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (3)    | The operating  partnership’s fixed rate senior notes issued in February 2000 are  general unsecured obligations of the operating partnership and rank on an  equal basis in right of payment with all senior indebtedness of the operating  partnership and are senior to all subordinated indebtedness of the operating  partnership. The outstanding principal amount of the series C notes is  due on August 1, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (4)    | On April 20, 2004,  the operating partnership issued $250.0 million of its fixed rate senior  notes with a debt discount of $0.9 million that will be amortized to interest  expense through 2014. On August 4, 2008, the operating partnership  issued $200.0 million of its fixed rate senior notes with a debt discount of  $30.0 million that will be amortized to interest expense through 2014. These  notes are general unsecured obligations of the operating partnership and rank  on an equal basis in right of payment with all senior indebtedness of the  operating partnership and are senior to all subordinated indebtedness of the  operating partnership. The outstanding principal amount is due on May 1,  2014. In general, the operating partnership does not have the option to  prepay the notes prior to maturity without incurring prepayment penalties. |

 

*Senior notes*

 

During August 2007,Ferrellgas made a scheduled principal payment of $90.0 million of the 8.78% Series Bsenior notes using proceeds from borrowings on the unsecured credit facilitydue April 2010.

 

During August 2008,Ferrellgas made scheduled principal payments of $52.0 million on the 7.12% Series Csenior notes using proceeds from borrowings on the unsecured credit facilitydue April 2010.

 

During August 2008,Ferrellgas issued $200.0 million in aggregate principal amount of its 6.75%senior notes due 2014 at an offering price equal to 85% of par. The proceedsfrom this transaction were used to reduce outstanding indebtedness under the unsecuredcredit facility due April 2010.

 

See Note P — Subsequentevents for a discussion on senior note principal payments and new long termdebt issuances.

 

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*Unsecured credit facility*

 

Ferrellgas’$448.0 million unsecured credit facility matures April 22, 2010.Borrowings under this facility are available for working capital, acquisition,capital expenditure, long-term debt repayment, and general partnershippurposes. The credit facility has a letter of credit sub-facility withavailability of up to $150.0 million.

 

Asof July 31, 2009 and 2008, Ferrellgas had total borrowings outstandingunder this unsecured credit facility due April 2010 of $154.7 million and$361.0 million, respectively, of which $88.5 million and $235.3 million,respectively, were classified as long-term debt. See footnote P — Subsequentevents for a discussion of the classification of this portion of the unsecuredcredit facility as long term.

 

Borrowingsunder the unsecured credit facility due April 2010 had a weighed averageinterest rate of 2.19% and 4.72% at July 31, 2009 and 2008, respectively. Theseborrowings bear interest, at Ferrellgas’ option, at a rate equal to either:

 

·                  the baserate, which is defined as the higher of the federal funds rate plus 0.50% orBank of America’s prime rate (as of July 31, 2009, the federal funds rateand Bank of America’s prime rate were 0.18% and 3.25%, respectively); or

·                  theEurodollar Rate plus a margin varying from 1.50% to 2.50% (as of July 31,2009, the one-month and three-month Eurodollar Rates were 0.45% and 0.75%,respectively).

 

Inaddition, an annual commitment fee is payable on the daily unused portion ofthe unsecured credit facility due April 2010 at a per annum rate varyingfrom 0.375% to 0.500% (as of July 31, 2009, the commitment fee per annumrate was 0.375%).

 

Lettersof credit outstanding at July 31, 2009 totaled $44.4 million and were usedprimarily to secure insurance arrangements and to a lesser extent, productpurchases. Letters of credit outstanding at July 31, 2008 totaled $42.3million and were used primarily for insurance arrangements. At July 31,2009, Ferrellgas had available letter of credit remaining capacity of $105.6million. Ferrellgas incurred commitment fees of $0.9 million, $0.4 million and$0.6 million in fiscal 2009, 2008 and 2007, respectively.

 

During May 2007,the operating partnership entered into a new unsecured credit facility withadditional borrowing capacity of up to $150.0 million, which was scheduled tomature on August 1, 2009. During April 2009, Ferrellgas terminatedthis facility and paid down its total borrowings outstanding of $95.0 millionusing borrowing capacity available under the unsecured credit facility due April 2010.

 

During April 2008,Ferrellgas amended its unsecured credit facility due April 2010,increasing its borrowing capacity by $73.0 million and bringing its totalborrowing capacity to $448.0 million.

 

During October 2008,Ferrellgas amended its unsecured credit facility due April 2010 increasingthe letter of credit sublimit from $90.0 million to $200.0 million through February 28,2009 and to $150.0 million thereafter. The letter of credit sublimit is partof, and not in addition to, the aggregate credit facility commitment. Theamendment also requires Ferrellgas to cash collateralize any outstanding letterof credit obligations in an amount equal to the pro rata share of anydefaulting lender.

 

See Note P —Subsequent events for further discussion about the unsecured credit facilitydue April 2010 and its replacement with a new secured credit facility.

 

*Covenants*

 

Thesenior notes and the unsecured credit facility due April 2010 agreementcontain various restrictive covenants applicable to Ferrellgas and itssubsidiaries, the most restrictive relating to additional indebtedness. Inaddition, Ferrellgas Partners is prohibited from making cash distributions ofthe 

 

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minimumquarterly distribution if a default or event of default exists or would existupon making such distribution, or if Ferrellgas fails to meet certain coveragetests. As of July 31, 2009, Ferrellgas is in compliance with allrequirements, tests, limitations and covenants related to these debtagreements.

 

Thescheduled annual principal payments on long-term debt are as follows:

 
| **For the year ended July 31,** | ** ** | **Scheduled  annual principal  payments** | ** ** |
|--------------------------------------|------------|-------------------------------------------|------------|
| 2010                                 |       | $                                         | 1,422      |   |
| 2011                                 |       | 1,271                                     |       |
| 2012                                 |       | 269,191                                   |       |
| 2013                                 |       | 25,131                                    |       |
| 2014                                 |       | 450,621                                   |       |
| Thereafter                           |       | 290,527                                   |       |
| Total                                |       | $                                         | 1,038,163  |   |

 

See Note P —Subsequent events for discussion about the classification of long-term debtmaturities.

 

The carryingamount of short-term financial instruments approximates fair value because ofthe short maturity of these instruments. The estimated fair value of Ferrellgas’long-term debt was $1,045.9 million and $1,098.4 million as of July 31,2009 and 2008, respectively. The fair value is estimated based on quoted marketprices.

 

**I.****          ****Partners’ capital**

 

As of July 31, 2009and 2008, limited partner units were beneficially owned by the following:

* *
| ** **                     | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|--------------------------------|------------|------------|------------|------------|------------|
| Third parties (1)              |       | 43,555,614 |       | 38,300,533 |       |
| Ferrell Companies (2)          |       | 20,080,776 |       | 20,080,776 |       |
| FCI Trading Corp. (3)          |       | 195,686    |       | 195,686    |       |
| Ferrell Propane, Inc. (4) |       | 51,204     |       | 51,204     |       |
| James E. Ferrell (5)           |       | 4,353,475  |       | 4,333,475  |       |

 

----

(1)        Thesecommon units are listed on the New York Stock Exchange under the symbol “FGP.”

(2)        FerrellCompanies is the owner of the general partner and a 29% owner of Ferrellgas’common units and thus a related party.

(3)        FCITrading Corp. (“FCI Trading”) is an affiliate of the general partner and thus arelated party.

(4)        FerrellPropane, Inc. (“Ferrell Propane”) is controlled by the general partner andthus a related party.

(5)        JamesE. Ferrell (“Mr. Ferrell”) is the Chairman and Chief Executive Officer ofthe general partner and thus a related party.

 

Together these limitedpartner units represent Ferrellgas Partner’s limited partners’ interest and aneffective 98% economic interest in Ferrellgas Partners, exclusive of thegeneral partners’ incentive distribution rights. The general partner has aneffective 2% interest in Ferrellgas Partners, excluding incentive distributionrights. Since ongoing distributions have not yet reached the levels required tocommence payment of incentive distribution rights to the general partner,distributions to the partners from operations or interim capital transactionswill generally be made in accordance with the above percentages. Inliquidation, allocations and distributions will be made in accordance with eachcommon unitholder’s positive capital account.

 

The common units ofFerrellgas Partners represent limited partner interests in Ferrellgas Partners,which give the holders thereof the right to participate in distributions madeby Ferrellgas Partners and to

 

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exercise the otherrights or privileges available to such holders under the Fourth Amended andRestated Agreement of Limited Partnership of Ferrellgas Partners, L.P. dated February 18,2003 (the “Partnership Agreement”). Under the terms of the PartnershipAgreement, holders of common units have limited voting rights on mattersaffecting the business of Ferrellgas Partners. Generally, persons owning 20% ormore of Ferrellgas Partners’ outstanding common units cannot vote; however,this limitation does not apply to those common units owned by the generalpartner or its “affiliates,” as such term is defined in the PartnershipAgreement.

 

Ferrellgasmaintains shelf registration statements for the issuance of common units, andother securities that may include deferred participation units, warrants anddebt securities. The Partnership Agreement allows the general partner to issuean unlimited number of additional Ferrellgas general and limited partnerinterests and other equity securities of Ferrellgas Partners for suchconsideration and on such terms and conditions as shall be established by thegeneral partner without the approval of any unitholders.

 

*Commonunit and general partner distributions*

 

FerrellgasPartners has paid the following distributions:

 
| ** **         | ** ** | **For the year ended July 31,** | ** ** |
|--------------------|------------|--------------------------------------|------------|
| ** **         | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Third parties      |       | $                                    | 81,922     |   | $ | 76,646 |   | $ | 76,562 |   |
| Ferrell  Companies |       | 40,160                               |       | 40,160 |   | 40,162 |   |
| FCI Trading        |       | 392                                  |       | 392 |   | 391 |   |
| Ferrell Propane    |       | 104                                  |       | 104 |   | 102 |   |
| Mr. Ferrell   |       | 8,678                                |       | 8,616 |   | 8,584 |   |
| General partner    |       | 1,325                                |       | 1,272 |   | 1,271 |   |
|               |       | $                                    | 132,581    |   | $ | 127,190 |   | $ | 127,072 |   |

 

On August 28, 2009,Ferrellgas declared a cash distribution of $0.50 per common unit for the threemonths ended July 31, 2009, which was paid on September 14, 2009.Included in this cash distribution were the following amounts paid to relatedparties:

 
| Ferrell  Companies |   | $     | 10,040 |   |   |   |   |   |
|--------------------|--------|-------|--------|--------|--------|--------|--------|--------|
| FCI Trading        |   | 98    |   |   |   |   |   |
| Ferrell Propane    |   | 26    |   |   |   |   |   |
| Mr. Ferrell   |   | 2,177 |   |   |   |   |   |
| General partner    |   | 345   |   |   |   |   |   |

 

See additional discussions about transactions withrelated parties in Note K — Transactions with related parties.

 

*Commonunit issuances*

 

In February 2009,Ferrellgas completed a registered public offering of 5.0 million common unitsrepresenting limited partner interests. This transaction was comprised of bothan original offering of 4.5 million common units and an over allotment offeringof 0.5 million common units. The net proceeds received from this offering of$69.4 million were used to reduce long term borrowings under Ferrellgas’unsecured credit facility.

 

During fiscal 2009, Ferrellgas issued 0.3 million common units valued at $5.5 million inconnection with acquisitions.

 

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* *

*Other comprehensive income (“OCI”)*

 

See Note J — Derivatives — for details regarding changes in fair valueon risk management financial derivatives recorded within OCI for the year endedJuly 31, 2009.

 

**J.****       ****Derivatives**

 

*CommodityPrice Risk Management*

 

Ferrellgas’ riskmanagement activities primarily attempt to mitigate price risks related to thepurchase, storage, transport and sale of propane generally in the contract andspot markets from major domestic energy companies on a short-term basis.Ferrellgas attempts to mitigate these price risks through the use of financialderivative instruments and forward propane purchase and sales contracts.

 

Ferrellgas’ riskmanagement strategy involves taking positions in the forward or financialmarkets that are equal and opposite to Ferrellgas’ positions in the physicalproducts market in order to minimize the risk of financial loss from an adverseprice change. This risk management strategy is successful when Ferrellgas’gains or losses in the physical product markets are offset by its losses orgains in the forward or financial markets. These financial derivatives aredesignated as cash flow hedges.

 

Ferrellgas’ riskmanagement activities include the use of financial derivative instrumentsincluding, but not limited to, price swaps, options, futures and basis swaps toseek protection from adverse price movements and to minimize potential losses.Ferrellgas enters into these financial derivative instruments directly withthird parties in the over-the-counter market and with brokers who are clearingmembers with the New York Mercantile Exchange. Ferrellgas also enters intoforward propane purchase and sales contracts with counterparties. These forwardcontracts qualify for the normal purchase normal sales exception within SFAS133 and are therefore not recorded by Ferrellgas prior to settlement.

 

*Cash FlowHedging Activity*

 

Ferrellgas uses financialderivative instruments for risk management purposes to hedge a portion of itsexposure to market fluctuations in propane prices. These financial derivativeinstruments are designated as cash flow hedging instruments, thus the effectiveportions of changes in the fair value of the financial derivatives are recordedin OCI prior to settlement and are subsequently recognized in the consolidatedstatements of earnings in “Cost of goods sold — propane and other gas liquidssales” when the forward or forecasted propane sales transaction impactsearnings. The effectiveness of cash flow hedges is evaluated at inception andon an on-going basis. Changes in the fair value of cash flow hedges due tohedge ineffectiveness, if any, are recognized in “Cost of product sold —propane and other gas liquids sales.” During the years ended July 31,2009, 2008 and 2007, Ferrellgas did not recognize any gain or loss in earningsrelated to hedge ineffectiveness and did not exclude any component of thefinancial derivative contract gain or loss from the assessment of hedgeeffectiveness related to these cash flow hedges.

 

The fair value offinancial derivative instruments are classified gross on the consolidatedbalance sheets as “Price risk management assets” and “Other current liabilities”as follows:

 

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| ** **                                            | ** ** | **2009** | ** ** | **2008** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|
| Derivatives —  Price risk management assets      |       | $        | 3,391      |     | $          | 26,086 |   |
| Derivatives —  Price risk management liabilities |       | $        | 4,380      |     | $          | 7,337 |   |

 

Ferrellgas had thefollowing cash flow hedge activity included in OCI in the consolidatedstatements of partners’ capital:

 
| ** **                                                                                                                       | ** ** | **For the year  ended July 31,****2009** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| Fair value loss  adjustment classified as OCI with offset in Price risk management assets and  Price risk management liabilities |       | $                                             | (186,449   | ) |
|                                                                                                                             |       |                                          |       |
| Reclassification  of net losses originally recorded within OCI to Cost of product sold —  propane and other gas liquids     |       | $                                             | (166,711   | ) |

 

Thefair value losses reported above relate to the significant decrease inwholesale propane prices that occurred during fiscal 2009. Assuming a minimalchange in future market prices, Ferrellgas expects to reclassify net losses ofapproximately $1.0 million to earnings during the next year. These net lossesare expected to be offset by margins on propane sales commitments Ferrellgashas with its customers that qualify for the normal purchase normal salesexception under SFAS 133.

 

Duringthe years ended July 31, 2009, 2008 and 2007, Ferrellgas had noreclassifications to earnings resulting from discontinuance of any cash flowhedges arising from the probability of the original forecasted transactions notoccurring within the originally specified period of time defined within thehedging relationship.

 

Asof July 31, 2009, Ferrellgas had financial derivative contracts covering0.7 million barrels of propane that were entered into as cash flow hedges offorward and forecasted purchases of propane.

 

Duringthe year ended July 31, 2009, four counterparties represented 85% of netsettled cash flow hedging positions reported in “Cost of goods sold — propaneand other gas liquids sales.” During the year ended July 31, 2009,Ferrellgas neither held nor entered into financial derivative contracts thatcontained credit risk related contingency features.

 

Inaccordance with SFAS 157, Ferrellgas determines the fair value of its assetsand liabilities subject to fair value measurement by using the highest possible“Level” as defined within SFAS 157. The three levels defined by theSFAS 157 hierarchy are as follows:

 

·                  Level 1 —Quoted prices available in active markets for identical assets or liabilities.

·                  Level 2 —Pricing inputs not quoted in active markets but either directly or indirectlyobservable.

·                  Level 3 —Significant inputs to pricing that have little or no transparency with inputsrequiring significant management judgment or estimation.

 

Ferrellgasconsiders over-the-counter derivative instruments entered into directly withthird parties as Level 2 valuation since the values of these derivatives arequoted by third party brokers and are on an exchange for similar transactions.The market prices used to value Ferrellgas’ derivatives have been determinedusing independent third party prices, readily available market information,broker quotes, and appropriate valuation techniques.

 

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AtJuly 31, 2009 and 2008, all derivative assets and liabilities qualifiedfor classification as Level 2 - other observable inputs as defined within SFAS157. All financial derivatives assets and liabilities were non-tradingpositions.

 

**K.****     ****Transactions with relatedparties**

 

Ferrellgas has noemployees and is managed and controlled by its general partner. Pursuant toFerrellgas’ partnership agreements, the general partner is entitled toreimbursement for all direct and indirect expenses incurred or payments itmakes on behalf of Ferrellgas and all other necessary or appropriate expensesallocable to Ferrellgas or otherwise reasonably incurred by its general partnerin connection with operating Ferrellgas’ business. These costs primarilyinclude compensation and benefits paid to employees of the general partner whoperform services on Ferrellgas’ behalf and are reported in the consolidatedstatements of earnings as follows:

 
| ** **                          | ** ** | **For the year ended July 31,** | ** ** |
|-------------------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                |       |                                 |       |   |   |   |   |
| Operating  expense                  |       | $                                    | 217,374    |   | $ | 185,576 |   | $ | 202,824 |   |
|                                |       |                                 |       |   |   |   |   |
| General and  administrative expense |       | $                                    | 23,801     |   | $ | 27,203 |   | $ | 26,542 |   |

 

Ferrellgashas a subleasing and a shared services agreement with Samson Dental PracticeManagement, LLC (“Samson”), a company wholly-owned by Mr. Ferrell. During the year ended July 31, 2009,Ferrellgas received payments totaling $0.3 million for services provided to andsublease revenue receipts from Samson. No payments were received from Samsonduring the years ended July 31, 2008 and 2007.

 

Duringfiscal 2009, Ferrellgas paid Fleishman-Hillard Inc. $0.2 million for marketingand communications services. Elizabeth Solberg, a member of the general partner’sboard of directors, serves as the General Manager of Fleishman-Hillard Inc.

 

Seeadditional discussions about transactions with related parties in Note I —Partners’ capital.

 

**L.****      ****Contingencies andcommitments**

 

*Litigation*

 

Ferrellgas’operations are subject to all operating hazards and risks normally incidentalto handling, storing, transporting and otherwise providing for use by consumersof combustible liquids such as propane. As a result, at any given time,Ferrellgas is threatened with or named as a defendant in various lawsuitsarising in the ordinary course of business. Currently, Ferrellgas is not aparty to any legal proceedings other than various claims and lawsuits arisingin the ordinary course of business. It is not possible to determine the ultimatedisposition of these matters; however, management is of the opinion that thereare no known claims or contingent claims that are reasonably expected to have amaterial adverse effect on the consolidated financial condition, results ofoperations and cash flows of Ferrellgas.

 

Ferrellgas has been namedas a defendant in lawsuits filed in multiple federal and state courts that seekto certify nationwide or statewide classes. The plaintiffs in each casegenerally allege that Ferrellgas failed to inform consumers of the amount ofpropane contained in propane tanks they purchased related to its Blue Rhinobranded propane tank exchange activities. The cases have generally been stayeduntil motions are heard regarding coordination for multidistrict treatment in asingle court prior to trial. Based on Ferrellgas’ business and consumernotification practices in its Blue 

 

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Rhino tank exchangeoperations, Ferrellgas believes that all of these claims are without merit andintends to defend the claims vigorously.

 

*Long-term debt-related commitments*

 

Ferrellgas has long andshort-term payment obligations under agreements such as senior notes and itsunsecured credit facility. See Note H — Debt — for a description of these debtobligations and a schedule of future maturities.

 

*Operatinglease commitments and buyouts*

 

Ferrellgas leasescertain property, plant and equipment under non-cancelable and cancelableoperating leases. Amounts shown in the table below represent minimum leasepayment obligations under Ferrellgas’ third-party leases with terms in excessof one year for the periods indicated. These arrangements include the leasingof transportation equipment, property, computer equipment and propane tanks.

 

Ferrellgas is requiredto recognize a liability for the fair value of guarantees issued after December 31,2002. The only material guarantees Ferrellgas has are associated with residualvalue guarantees of operating leases. Most of the operating leases involvingFerrellgas’ transportation equipment contain residual value guarantees. Thesetransportation equipment lease arrangements are scheduled to expire over thenext seven fiscal years. Most of these arrangements provide that the fair valueof the equipment will equal or exceed a guaranteed amount, or Ferrellgas willbe required to pay the lessor the difference. The fair value of these residualvalue guarantees entered into after December 31, 2002 was $0.7 million asof July 31, 2009. Although the fair values of the underlying equipment atthe end of the lease terms have historically exceeded these guaranteed amounts,the maximum potential amount of aggregate future payments Ferrellgas could berequired to make under these leasing arrangements, assuming the equipment isworthless at the end of the lease term, was $10.0 million as of July 31,2009. Ferrellgas does not know of any event, demand, commitment, trend oruncertainty that would result in a material change to these arrangements.

 

Operatinglease buyouts represent the maximum amount Ferrellgas would pay if it were toexercise its right to buyout the assets at the end of their lease term.

 

Thefollowing table summarizes Ferrellgas’ contractual operating lease commitmentsand buyout obligations as of July 31, 2009:

 
| ** **                   | ** ** | **Future minimum rental and buyout amounts by fiscal year** | ** ** |
|------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                   | ** ** | **2010**                                                    | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** |
|                         |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Operating lease  obligations |       | $                                                           | 22,246     |   | $ | 15,475 |   | $ | 8,431 |   | $ | 5,590 |   | $ | 4,734 |   | $ | 11,137 |   |
| Operating lease  buyouts     | ** ** | $                                                           | 8,641      |   | $ | 5,323 |   | $ | 2,827 |   | $ | 357 |   | $ | 784 |   | $ | 1,418 |   |

 

Certainproperty and equipment is leased under non-cancelable operating leases, whichrequire fixed monthly rental payments and which expire at various dates through2024. Rental expense under these leases totaled $38.6 million, $44.3 million,and $45.3 million for fiscal 2009, 2008 and 2007, respectively.

 

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**M.****   ****Employee benefits**

 

Ferrellgas has noemployees and is managed and controlled by its general partner. Ferrellgasassumes all liabilities, which include specific liabilities related to thefollowing employee benefit plans for the benefit of the officers and employeesof the general partner.

 

FerrellCompanies makes contributions to the ESOT, which causes a portion of the sharesof Ferrell Companies owned by the ESOT to be allocated to employees’ accountsover time. The allocation of Ferrell Companies’ shares to employee accountscauses a non-cash compensation charge to be incurred by Ferrellgas, equivalentto the fair value of such shares allocated. This non-cash compensation chargeis reported separately in Ferrellgas’ consolidated statements of earnings andthus excluded from operating and general and administrative expenses. Thenon-cash compensation charges were $6.8 million, $12.4 million and $11.2million during fiscal 2009, 2008 and 2007, respectively. Ferrellgas is notobligated to fund or make contributions to the ESOT.

 

Thegeneral partner and its parent, Ferrell Companies, have a defined contributionprofit-sharing plan which includes both profit sharing and matchingcontributions. The plan covers substantially all full time employees. With theestablishment of the ESOP in July 1998, Ferrellgas suspended futurecontributions to the profit sharing plan beginning with fiscal 1998. The plan,which qualifies under section 401(k) of the Internal Revenue Code, alsoprovides for matching contributions under a cash or deferred arrangement basedupon participant salaries and employee contributions to the plan. Matchingcontributions for fiscal 2009, 2008 and 2007 were $2.7 million, $2.6 million,and $3.0 million, respectively.

 

Thegeneral partner has a defined benefit plan that provides participants who werecovered under a previously terminated plan with a guaranteed retirement benefitat least equal to the benefit they would have received under the terminatedplan. Until July 31, 1999, benefits under the terminated plan weredetermined by years of credited service and salary levels. As of July 31,1999, years of credited service and salary levels were frozen. The generalpartner’s funding policy for this plan is to contribute amounts deductible forFederal income tax purposes and invest the plan assets primarily in corporatestocks and bonds, U.S. Treasury bonds and short-term cash investments. Duringfiscal 2009, 2008 and 2007 other comprehensive income and other liabilitieswere adjusted by $(6.0) thousand $(0.1) million and $(0.4) million,respectively.

 

**N**.      **Earnings per common unit**

 

Below is a calculation of the basic and diluted netearnings available per common unit in the consolidated statements of earningsfor the periods indicated. In accordance with EITF 03-6, “ParticipatingSecurities and the Two-Class Method under FASB Statement No. 128, *Earnings per Share*” (“EITF 03-6”), Ferrellgas calculates netearnings per limited partner unit for each period presented according todistributions declared and participation rights in undistributed earnings, asif all of the earnings for the period had been distributed. In periods withundistributed earnings above certain levels, the calculation according to thetwo-class method results in an increased allocation of undistributed earningsto the general partner and a dilution of the earnings to the limited partners.Due to the seasonality of the propane business, the dilution effect of EITF03-6 typically impacts only the three months ending January 31. There wasnot a dilutive effect from EITF 03-6 on basic net earnings per common unit fortotal earnings for fiscal 2009, 2008 and 2007.

 

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| ** **                                                          | ** ** | **For the year ended July 31,** | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                          | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net earnings  available to common unitholders                       |       | $                                    | 52,046     |   | $ | 24,442 |   | $ | 34,452 |   |
|                                                                |       |                                 |       |   |   |   |   |
| Weighted average  common units outstanding (in thousands)           |       | 65,540.7                             |       | 62,959.5 |   | 62,755.8 |   |
|                                                                |       |                                 |       |   |   |   |   |
| Dilutive  securities                                                |       | 72.7                                 |       | 11.0 |   | 18.0 |   |
|                                                                |       |                                 |       |   |   |   |   |
| Weighted average  common units outstanding plus dilutive securities |       | 65,613.4                             |       | 62,970.5 |   | 62,773.8 |   |
|                                                                |       |                                 |       |   |   |   |   |
| Basic and  diluted net earnings available per common unit           |       | $                                    | 0.79       |   | $ | 0.39 |   | $ | 0.55 |   |

 

**O**.     **Quarterly data (unaudited)**

 

Thefollowing summarized unaudited quarterly data includes all adjustments(consisting only of normal recurring adjustments), which Ferrellgas considersnecessary for a fair presentation. Due to the seasonality of the propanedistribution industry, first and fourth quarter revenues, gross margin frompropane and other gas liquids sales and net earnings are consistently less thanthe second and third quarter results. Other factors affecting the results ofoperations include competitive conditions, demand for product, timing ofacquisitions, variations in the weather and fluctuations in propane prices. Thesum of net earnings (loss) available to common unitholders by quarter do notequal the total net earnings available to common unitholders for the year dueto the effect of EITF 03-6 on quarterly computations of earnings available tocommon unitholders in the second quarter of fiscal 2009 and 2008. See Note N —Earnings per common unit — for further discussion of this calculation. The sumof net earnings (loss) per common unit by quarter may not equal the netearnings (loss) per common unit for the year due to variations in the weightedaverage units outstanding used in computing such amounts.

 

**For theyear ended July 31, 2009**

 
| ** **                                                                         | ** ** | **First  quarter** | ** ** | **Second  quarter** | ** ** | **Third  quarter** | ** ** | **Fourth  quarter** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|
| Revenues                                                                           |       | $                  | 480,074    |                | $          | 715,625            |       | $                   | 561,133    |   | $ | 312,690 |   |
| Gross margin  from propane and other gas liquids sales (a)                         |       | 119,143            |       | 219,009             |       | 165,969            |       | 118,164             |       |
| Net earnings  (loss)                                                               |       | (14,887            | )          | 69,652              |       | 32,864             |       | (35,057             | )          |
| Net earnings  (loss) available to common unitholders                               |       | (14,738            | )          | 58,019              |       | 32,535             |       | (34,707             | )          |
|                                                                               |       |               |       |                |       |               |       |                |       |
| Basic and  diluted earnings (loss) per common unit available to common unitholders |       | $                  | (0.23      | )                   | $          | 0.92               |       | $                   | 0.48       |   | $ | (0.51 | ) |

 

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**For theyear ended July 31, 2008**

 
| ** **                                                                         | ** ** | **First  quarter** | ** ** | **Second  quarter** | ** ** | **Third  quarter** | ** ** | **Fourth  quarter** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|
| Revenues                                                                           |       | $                  | 394,916    |                | $          | 763,968            |       | $                   | 712,090    |   | $ | 419,715 |   |
| Gross margin  from propane and other gas liquids sales (a)                         |       | 106,416            |       | 179,932             |       | 165,968            |       | 111,047             |       |
| Net earnings  (loss)                                                               |       | (22,900            | )          | 51,198              |       | 35,171             |       | (38,780             | )          |
| Net earnings  (loss) available to common unitholders                               |       | (22,671            | )          | 47,541              |       | 34,819             |       | (38,392             | )          |
|                                                                               |       |               |       |                |       |               |       |                |       |
| Basic and  diluted earnings (loss) per common unit available to common unitholders |       | $                  | (0.36      | )                   | $          | 0.76               |       | $                   | 0.55       |   | $ | (0.61 | ) |

 

----

(a) Gross margin from “Propane andother gas liquids sales” represents “Propane and other gas liquids sales” less “Costof product sold — propane and other gas liquids sales.”

 

**P**.       **Subsequent events**

 

During August 2009,Ferrellgas made scheduled principal payments of $73.0 million on the 8.87% Series Csenior notes using availability under its unsecured credit facility due April 2010.

 

DuringSeptember 2009, Ferrellgas issued $300.0 million in aggregate principalamount of new 9.125% senior notes due 2017 at an offering price equal to 98.6%of par. Ferrellgas then gave early redemption notice to the holders of its$82.0 million 7.24% series D notes due August 1, 2010 and its $70.0million 7.42% series E notes due August 1, 2013. The principal amount ofthese senior notes and the related prepayment penalties are expected to befunded with the proceeds from the new senior notes offering with remainingproceeds used to reduce borrowings on Ferrellgas’ unsecured credit facility dueApril 2010.

 

During September 2009,Ferrellgas and several banks and other financial institutions executed intoescrow a Credit Agreement (“Credit Agreement”) which will be released fromescrow pending certain closing conditions. The Credit Agreement is intended toreplace Ferrellgas’ existing unsecured credit facility. The Credit Agreement,at closing, will provide for a $400.0 million revolving credit facility withthe entire amount available for loans and with a sublimit of $200.0 million forletters of credit. The obligations under such credit facility will be securedby substantially all assets of the operating partnership, the general partnerand certain subsidiaries of the operating partnership but specificallyexcluding (a) assets that are subject to the operating partnership’sreceivables securitization facility, (b) the general partner’s equityinterest in Ferrellgas Partners and (c) equity interest in certainunrestricted subsidiaries. Such obligations will also be guaranteed by thegeneral partner and certain subsidiaries of the operating partnership. Thesecured revolving credit facility will mature on the third anniversary ofthe closing date for such facility.

 

During September 2009,Ferrellgas acquired Vanson, LLC, based in Michigan. The propane distributionassets acquired have an aggregate value of $45.1 million. This acquisition wasfunded by $36.6 million in cash payments, the issuance of $5.4 million ofliabilities and other costs and considerations, and $3.1 million of commonunits, net of issuance costs.

 

Ferrellgashas evaluated events and transactions for subsequent events disclosuresoccurring after the balance sheet date through its Form 10-K filing on September 28,2009 with the Securities and Exchange Commission.

 

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

To theBoard of Directors of

FerrellgasPartners Finance Corp.

Overland Park, Kansas

 

Wehave audited the accompanying balance sheets of Ferrellgas Partners FinanceCorp. (a wholly-owned subsidiary of Ferrellgas Partners, L.P., referred toherein as the “Company”) as of July 31, 2009 and 2008, and the relatedstatements of earnings, stockholder’s equity, and cash flows for each of thethree years in the period ended July 31, 2009.  These financialstatements are the responsibility of the Company’s management.  Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

We conductedour audits in accordance with the standards of the Public Company AccountingOversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement.  The Company is not requiredto have, nor were we engaged to perform, an audit of its internal control overfinancial reporting.  Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting.  Accordingly, we express no such opinion*.*  An audit also includes examining,on a test basis, evidence supporting the amounts and disclosures in thefinancial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation.  We believe that our audits provide a reasonablebasis for our opinion.

 

In our opinion, such financial statements presentfairly, in all material respects, the financial position of Ferrellgas PartnersFinance Corp. as of July 31, 2009 and 2008, and the results of itsoperations and its cash flows for each of the three years in the period ended July 31,2009, in conformity with accounting principles generally accepted in the UnitedStates of America.

 

/s/**DELOITTE &TOUCHE LLP

 

Kansas City, Missouri

September 28,2009

 

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**FERRELLGAS PARTNERS FINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas Partners, L.P.)**

** **

**BALANCE SHEETS**

 
| ** **                                                                                | ** ** | **July 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                | ** ** | **2009**          | ** ** | **2008** | ** ** |
| **ASSETS**                                                                                | ** ** | ** **        | ** ** | ** ** | ** ** |
|                                                                                      |       |              |       |   |   |
| Cash                                                                                      |       | $                 | 1,000      |   | $ | 1,000 |   |
| **Total assets**                                                                          |       | $                 | 1,000      |   | $ | 1,000 |   |
|                                                                                      |       |              |       |   |   |
| **STOCKHOLDER’S EQUITY**                                                             |       |              |       |   |   |
|                                                                                      |       |              |       |   |   |
| Common  stock, $1 par value; 2,000 shares authorized; 1,000 shares issued and outstanding |       | $                 | 1,000      |   | $ | 1,000 |   |
|                                                                                      |       |              |       |   |   |
| Additional  paid in capital                                                               |       | 5,594             |       | 5,149 |   |
|                                                                                      |       |              |       |   |   |
| Accumulated  deficit                                                                      |       | (5,594            | )          | (5,149 | ) |
| **Total stockholder’s equity**                                                       |       | $                 | 1,000      |   | $ | 1,000 |   |

 

See notes tofinancial statements.

 

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**FERRELLGASPARTNERS FINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas Partners, L.P.)**

 

**STATEMENTS OF EARNINGS**

 
| ** **                          | ** ** | **For the year ended July 31,** | ** ** |
|-------------------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                |       |                                 |       |   |   |   |   |
| General  and administrative expense |       | $                                    | 445        |   | $ | 992 |   | $ | 444 |   |
|                                |       |                                 |       |   |   |   |   |
| **Net loss**                        |       | $                                    | (445       | ) | $ | (992 | ) | $ | (444 | ) |

 

See notes tofinancial statements.

 

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**FERRELLGASPARTNERS FINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas Partners, L.P.)**

 

**STATEMENTS OF STOCKHOLDER’S EQUITY**

 
| ** **             | ** ** | ** **       | ** ** | **Additional** | ** ** | ** **      | ** ** | **Total**              | ** ** |
|------------------------|------------|------------------|------------|----------------|------------|-----------------|------------|------------------------|------------|
| ** **             | ** ** | **Common stock** | ** ** | **paid in**    | ** ** | **Accumulated** | ** ** | **stockholder’s** | ** ** |
| ** **             | ** ** | **Shares**       | ** ** | **Dollars**    | ** ** | **capital**     | ** ** | **deficit**            | ** ** | **equity** | ** ** |
|                   | ** ** | ** **       | ** ** | ** **     | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **July 31, 2006** |       | 1,000            |       | $              | 1,000      |            | $          | 3,713                  |       | $ | (3,713 | ) | $ | 1,000 |   |
| Capital  contribution  |       | —           |       | —         |       | 444             |       | —                 |       | 444 |   |
| Net  loss              |       | —           |       | —         |       | —          |       | (444                   | )          | (444 | ) |
| **July 31, 2007** |       | 1,000            |       | 1,000          |       | 4,157           |       | (4,157                 | )          | 1,000 |   |
| Capital  contribution  |       | —           |       | —         |       | 992             |       | —                 |       | 992 |   |
| Net  loss              |       | —           |       | —         |       | —          |       | (992                   | )          | (992 | ) |
| **July 31, 2008** |       | 1,000            |       | 1,000          |       | 5,149           |       | (5,149                 | )          | 1,000 |   |
| Capital  contribution  |       | —           |       | —         |       | 445             |       | —                 |       | 445 |   |
| Net  loss              |       | —           |       | —         |       | —          |       | (445                   | )          | (445 | ) |
| **July 31, 2009** |       | 1,000            |       | $              | 1,000      |            | $          | 5,594                  |       | $ | (5,594 | ) | $ | 1,000 |   |

 

See notes tofinancial statements.

 

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**FERRELLGASPARTNERS FINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas Partners, L.P.)**

 

**STATEMENTS OF CASH FLOWS**

 
| ** **                                | ** ** | **For the year ended July 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------|------------|
| ** **                                | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Cash flows from operating activities:** |       |                                 |       |   |   |   |   |
| Net  loss                                 |       | $                                    | (445       | ) | $ | (992 | ) | $ | (444 | ) |
| Cash  used in operating activities        |       | (445                                 | )          | (992 | ) | (444 | ) |
|                                      |       |                                 |       |   |   |   |   |
|                                      |       |                                 |       |   |   |   |   |
| **Cash flows from financing activities:** |       |                                 |       |   |   |   |   |
| Capital  contribution                     |       | 445                                  |       | 992 |   | 444 |   |
| Cash  provided by financing activities    |       | 445                                  |       | 992 |   | 444 |   |
|                                      |       |                                 |       |   |   |   |   |
| Change  in cash                           |       | —                               |       | — |   | — |   |
| Cash  - beginning of year                 |       | 1,000                                |       | 1,000 |   | 1,000 |   |
| **Cash - end of year**                    |       | $                                    | 1,000      |   | $ | 1,000 |   | $ | 1,000 |   |

 

See notes tofinancial statements.

 

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**FERRELLGASPARTNERS FINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas Partners, L.P.)**

 

**NOTES TO FINANCIAL STATEMENTS**

 

**A.****           ****Formation**

 

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

 

The Partnershipcontributed $1,000 to the Finance Corp. on April 8, 1996 in exchange for1,000 shares of common stock.

 

**B.****           ****Commitment**

 

On September 24,2002, the Partnership issued $170.0 million of 8 3/4% senior notes due 2012. OnDecember 18, 2002, the Partnership issued an additional $48.0 million of 83/4% senior notes due 2012.  On June 10,2004, the Partnership issued an additional $50.0 million of 8 3/4% senior notesdue 2012. The Partnership may redeem some or all of the aggregate principleamount of the notes at any time on or after June 15, 2007.

 

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

 

**C.**            **Income taxes**

 

Income taxes have been computedseparately as the Finance Corp. files its own income tax return. Deferredincome taxes are provided as a result of temporary differences betweenfinancial and tax reporting using the asset/liability method. Deferred incometaxes are recognized for the tax consequences of temporary differences betweenthe financial statement carrying amounts and tax basis of existing assets andliabilities.

 

Due to the inability ofthe Finance Corp. to utilize the deferred tax benefit of $2,194 associated withthe net operating loss carryforward of $5,641, which expire at various datesthrough July 31, 2029, a valuation allowance has been provided on the fullamount of the deferred tax asset. Accordingly, there is no net deferred taxbenefit for fiscal 2009, 2008 or 2007, and there is no net deferred tax assetas of July 31, 2009 and 2008.

 

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**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

To the Partners of 

Ferrellgas, L.P. and Subsidiaries

Overland Park, Kansas

 

We have audited the accompanying consolidated balance sheets ofFerrellgas, L.P. and subsidiaries (“Ferrellgas”) as of July 31, 2009 and2008, and the related consolidated statements of earnings, partners’ capital,and cash flows for each of the three years in the period ended July 31,2009.  Our audits also included the financial statement schedule listed inthe Index at Item 15.  These financial statements and financial statementschedule are the responsibility of Ferrellgas’ management.  Our responsibilityis to express an opinion on the financial statements and financial statementschedule based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  Anaudit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements.  An audit also includes assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, inall material respects, the financial position of Ferrellgas, L.P. andsubsidiaries as of July 31, 2009 and 2008, and the results of theiroperations and their cash flows for each of the three years in the period endedJuly 31, 2009, in conformity with accounting principles generally acceptedin the United States of America.  Also, in our opinion, such financialstatement schedule, when considered in relation to the basic consolidatedfinancial statements taken as a whole, presents fairly, in all materialrespects, the information set forth therein.

 

We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), Ferrellgas’ internalcontrol over financial reporting as of July 31, 2009, based on thecriteria established in *InternalControl—Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report dated September 28,2009 expressed an unqualified opinion on Ferrellgas’ internal control overfinancial reporting.

 

/s/ DELOITTE & TOUCHE LLP

 

Kansas City, Missouri

September 28, 2009

 

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**FERRELLGAS, L.P. AND SUBSIDIARIES**

 

**CONSOLIDATED BALANCE SHEETS**

**(inthousands)**

 
| ** **                                                                                                                   | ** ** | **July 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                                                   | ** ** | **2009**          | ** ** | **2008** | ** ** |
| **ASSETS**                                                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| **Current assets:**                                                                                                          | ** ** | ** **        | ** ** | ** ** | ** ** |
| Cash  and cash equivalents                                                                                                   |       | $                 | 7,050      |   | $ | 16,545 |   |
| Accounts  and notes receivable (net of allowance for doubtful accounts of $4,294 and $5,977  at 2009 and 2008, respectively) |       | 106,910           |       | 145,081 |   |
| Inventories                                                                                                                  |       | 129,808           |       | 152,301 |   |
| Price  risk management assets                                                                                                |       | 3,391             |       | 26,086 |   |
| Prepaid  expenses and other current assets                                                                                   |       | 10,965            |       | 10,251 |   |
| **Total current assets**                                                                                                     |       | 258,124           |       | 350,264 |   |
|                                                                                                                         |       |              |       |   |   |
| Property,  plant and equipment, net                                                                                          |       | 666,535           |       | 685,328 |   |
| Goodwill                                                                                                                     |       | 248,939           |       | 248,939 |   |
| Intangible  assets, net                                                                                                      |       | 212,037           |       | 225,273 |   |
| Other  assets, net                                                                                                           |       | 17,414            |       | 16,817 |   |
| **Total assets**                                                                                                             |       | $                 | 1,403,049  |   | $ | 1,526,621 |   |
|                                                                                                                         |       |              |       |   |   |
| **LIABILITIES AND PARTNERS’ CAPITAL**                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                                                                                   | ** ** | ** **        | ** ** | ** ** | ** ** |
| **Current liabilities:**                                                                                                     | ** ** | ** **        | ** ** | ** ** | ** ** |
| Accounts  payable                                                                                                            |       | $                 | 49,337     |   | $ | 71,348 |   |
| Short-term  borrowings                                                                                                       |       | 66,159            |       | 125,729 |   |
| Other  current liabilities                                                                                                   |       | 105,661           |       | 104,790 |   |
| **Total current liabilities**                                                                                                |       | 221,157           |       | 301,867 |   |
|                                                                                                                         |       |              |       |   |   |
| Long-term  debt                                                                                                              |       | 740,982           |       | 765,248 |   |
| Other  liabilities                                                                                                           |       | 19,300            |       | 23,237 |   |
| Contingencies  and commitments (Note L)                                                                                      |       | —            |       | — |   |
|                                                                                                                         |       |              |       |   |   |
| **Partners’ capital:**                                                                                                  |       |              |       |   |   |
| Limited  partner                                                                                                             |       | 418,532           |       | 413,507 |   |
| General  partner                                                                                                             |       | 4,272             |       | 4,220 |   |
| Accumulated  other comprehensive income (loss)                                                                               |       | (1,194            | )          | 18,542 |   |
| **Total partners’ capital**                                                                                             |       | 421,610           |       | 436,269 |   |
| **Total liabilities and partners’ capital**                                                                             |       | $                 | 1,403,049  |   | $ | 1,526,621 |   |

 

See notes toconsolidated financial statements.

 

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**FERRELLGAS,L.P. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF EARNINGS**

**(inthousands)**

 
| ** **                                                  | ** ** | **For the year ended July 31,** | ** ** |
|-------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                  | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                        | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenues:**                                               |       |                                 |       |   |   |   |   |
| Propane  and other gas liquids sales                        |       | $                                    | 1,829,653  |   | $ | 2,055,281 |   | $ | 1,757,423 |   |
| Other                                                       |       | 239,869                              |       | 235,408 |   | 235,017 |   |
| **Total revenues**                                          |       | 2,069,522                            |       | 2,290,689 |   | 1,992,440 |   |
|                                                        |       |                                 |       |   |   |   |   |
| **Costs and expenses:**                                     |       |                                 |       |   |   |   |   |
| Cost  of product sold - propane and other gas liquids sales |       | 1,207,368                            |       | 1,491,918 |   | 1,147,169 |   |
| Cost  of product sold - other                               |       | 152,853                              |       | 136,478 |   | 157,223 |   |
| Operating  expense                                          |       | 400,407                              |       | 371,819 |   | 380,563 |   |
| Depreciation  and amortization expense                      |       | 82,494                               |       | 85,521 |   | 87,383 |   |
| General  and administrative expense                         |       | 41,382                               |       | 45,612 |   | 44,870 |   |
| Equipment  lease expense                                    |       | 18,406                               |       | 24,478 |   | 26,142 |   |
| Employee  stock ownership plan compensation charge          |       | 6,755                                |       | 12,413 |   | 11,225 |   |
| Loss  on disposal of assets and other                       |       | 13,042                               |       | 11,250 |   | 10,822 |   |
|                                                        |       |                                 |       |   |   |   |   |
| **Operating income**                                        |       | 146,815                              |       | 111,200 |   | 127,043 |   |
|                                                        |       |                                 |       |   |   |   |   |
| Interest  expense                                           |       | (65,785                              | )          | (63,001 | ) | (64,201 | ) |
| Other  income (expense), net                                |       | (1,321                               | )          | 1,039 |   | 3,145 |   |
|                                                        |       |                                 |       |   |   |   |   |
| **Earnings before income taxes**                            |       | 79,709                               |       | 49,238 |   | 65,987 |   |
|                                                        |       |                                 |       |   |   |   |   |
| Income  tax expense                                         |       | 2,208                                |       | 6 |   | 6,560 |   |
|                                                        |       |                                 |       |   |   |   |   |
| **Net earnings**                                            |       | $                                    | 77,501     |   | $ | 49,232 |   | $ | 59,427 |   |

 

See notes toconsolidated financial statements.

 

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**FERRELLGAS,L.P. AND SUBSIDIARIES**

** **

**CONSOLIDATED STATEMENTS OF PARTNERS’CAPITAL**

**(inthousands)**

 
| ** **                                                                                                                  | ** ** | ** **  | ** ** | ** **  | ** ** | **Accumulated other**           | ** ** | ** **      | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|---------------------------------|------------|-----------------|------------|
| ** **                                                                                                                  | ** ** | ** **  | ** ** | ** **  | ** ** | **comprehensive income (loss)** | ** ** | ** **      | ** ** |
| ** **                                                                                                                  | ** ** | ** **  | ** ** | ** **  | ** ** | ** **                      | ** ** | **Currency**    | ** ** | ** ** | ** ** | **Total** | ** ** |
| ** **                                                                                                                  | ** ** | **Limited** | ** ** | **General** | ** ** | **Risk**                        | ** ** | **translation** | ** ** | **Pension** | ** ** | **partners’** | ** ** |
| ** **                                                                                                                  | ** ** | **partner** | ** ** | **partner** | ** ** | **management**                  | ** ** | **adjustments** | ** ** | **liability** | ** ** | **capital** | ** ** |
| ** **                                                                                                                  | ** ** | ** **  | ** ** | ** **  | ** ** | ** **                      | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Balance at July 31, 2006**                                                                                           |       | $           | 533,095    |        | $          | 5,435                           |       | $               | 2,126      |   | $ | 21 |   | $ | (767 | ) | $ | 539,910 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Contributions  in connection with ESOP and stock-based compensation charges                                                 |       | 11,992      |       | 122         |       | —                          |       | —          |       | — |   | 12,114 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Quarterly  distributions                                                                                                    |       | (150,522    | )          | (1,536      | )          | —                          |       | —          |       | — |   | (152,058 | ) |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Cash  contributed by Ferrellgas Partners and the general partner                                                            |       | 46,100      |       | 470         |       | —                          |       | —          |       | — |   | 46,570 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  assets contributed by Ferrellgas Partners and cash contributed by the general  partner in connection with acquisitions |       | 2,009       |       | 28          |       | —                          |       | —          |       | — |   | 2,037 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Comprehensive  income:                                                                                                      |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  earnings                                                                                                               |       | 58,827      |       | 600         |       | —                          |       | —          |       | — |   | 59,427 |   |
| Other  comprehensive income (loss):                                                                                         |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  earnings on risk management derivatives                                                                                |       | —      |       | —      |       | 5,055                           |       | —          |       | — |   |   |   |
| Reclassification  of derivatives to earnings                                                                                |       | —      |       | —      |       | (2,126                          | )          | —          |       | — |   |   |   |
| Foreign  currency translation adjustment                                                                                    |       | —      |       | —      |       | —                          |       | 14              |       | — |   |   |   |
| Tax  effect on foreign currency translation adjustment                                                                      |       | —      |       | —      |       | —                          |       | (5              | )          | — |   |   |   |
| Pension  liability adjustment                                                                                               |       | —      |       | —      |       | —                          |       | —          |       | 418 |   | 3,356 |   |
| Comprehensive  income                                                                                                       |       |        |       |        |       |                            |       |            |       |   |   | 62,783 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| **Balance at July 31, 2007**                                                                                           |       | 501,501     |       | 5,119       |       | 5,055                           |       | 30              |       | (349 | ) | 511,356 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Contributions  in connection with ESOP and stock-based compensation charges                                                 |       | 14,086      |       | 143         |       | —                          |       | —          |       | — |   | 14,229 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Quarterly  distributions                                                                                                    |       | (150,815    | )          | (1,539      | )          | —                          |       | —          |       | — |   | (152,354 | ) |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Comprehensive  income:                                                                                                      |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  earnings                                                                                                               |       | 48,735      |       | 497         |       | —                          |       | —          |       | — |   | 49,232 |   |
| Other  comprehensive income (loss):                                                                                         |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  earnings on risk management derivatives                                                                                |       | —      |       | —      |       | 18,749                          |       | —          |       | — |   |   |   |
| Reclassification  of derivatives to earnings                                                                                |       | —      |       | —      |       | (5,055                          | )          | —          |       | — |   |   |   |
| Foreign  currency translation adjustment                                                                                    |       | —      |       | —      |       | —                          |       | (10             | )          | — |   |   |   |
| Tax  effect on foreign currency translation adjustment                                                                      |       | —      |       | —      |       | —                          |       | 6               |       | — |   |   |   |
| Pension  liability adjustment                                                                                               |       | —      |       | —      |       | —                          |       | —          |       | 116 |   | 13,806 |   |
| Comprehensive  income                                                                                                       |       |        |       |        |       |                            |       |            |       |   |   | 63,038 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| **Balance at July 31, 2008**                                                                                           |       | 413,507     |       | 4,220       |       | 18,749                          |       | 26              |       | (233 | ) | 436,269 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Contributions  in connection with ESOP and stock-based compensation charges                                                 |       | 8,975       |       | 92          |       | —                          |       | —          |       | — |   | 9,067 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Quarterly  distributions                                                                                                    |       | (156,031    | )          | (1,592      | )          | —                          |       | —          |       | — |   | (157,623 | ) |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Cash  contributed by Ferrellgas Partners and the general partner                                                            |       | 69,848      |       | 713         |       | —                          |       | —          |       | — |   | 70,561 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  assets contributed by Ferrellgas Partners and cash contributed by the general  partner in connection with acquisitions |       | 5,515       |       | 56          |       | —                          |       | —          |       | — |   | 5,571 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Comprehensive  income:                                                                                                      |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  earnings                                                                                                               |       | 76,718      |       | 783         |       | —                          |       | —          |       | — |   | 77,501 |   |
| Other  comprehensive income (loss):                                                                                         |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| Net  loss on risk management derivatives                                                                                    |       | —      |       | —      |       | (186,449                        | )          | —          |       | — |   |   |   |
| Reclassification  of derivatives to earnings                                                                                |       | —      |       | —      |       | 166,711                         |       | —          |       | — |   |   |   |
| Foreign  currency translation adjustment                                                                                    |       | —      |       | —      |       | —                          |       | (7              | )          | — |   |   |   |
| Tax  effect on foreign currency translation adjustment                                                                      |       | —      |       | —      |       | —                          |       | 3               |       | — |   |   |   |
| Pension  liability adjustment                                                                                               |       | —      |       | —      |       | —                          |       | —          |       | 6 |   | (19,736 | ) |
| Comprehensive  income                                                                                                       |       |        |       |        |       |                            |       |            |       |   |   | 57,765 |   |
|                                                                                                                        |       |        |       |        |       |                            |       |            |       |   |   |   |   |
| **Balance at July 31, 2009**                                                                                           |       | $           | 418,532    |        | $          | 4,272                           |       | $               | (989       | ) | $ | 22 |   | $ | (227 | ) | $ | 421,610 |   |

 

See notes toconsolidated financial statements.

 

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**FERRELLGAS,L.P. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(inthousands)**

 
| ** **                                                                                    | ** ** | **For the year ended July 31,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                    | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                                                          |       |                                 |       |   |   |   |   |
| **Cash flows from operating activities:**                                                     |       |                                 |       |   |   |   |   |
| Net  earnings                                                                                 |       | $                                    | 77,501     |   | $ | 49,232 |   | $ | 59,427 |   |
| Reconciliation  of net earnings to net cash provided by operating activities:                 |       |                                 |       |   |   |   |   |
| Depreciation  and amortization expense                                                        |       | 82,494                               |       | 85,521 |   | 87,383 |   |
| Employee  stock ownership plan compensation charge                                            |       | 6,755                                |       | 12,413 |   | 11,225 |   |
| Stock-based  compensation charge                                                              |       | 2,312                                |       | 1,816 |   | 889 |   |
| Loss  on disposal of assets                                                                   |       | 5,009                                |       | 4,820 |   | 4,232 |   |
| Loss  on transfer of accounts receivable related to the accounts receivable  securitization   |       | 12,124                               |       | 10,548 |   | 10,384 |   |
| Deferred  tax expense (benefit)                                                               |       | 388                                  |       | (1,650 | ) | 3,099 |   |
| Other                                                                                         |       | 4,463                                |       | 6,151 |   | 4,185 |   |
| Changes  in operating assets and liabilities, net of effects from business  acquisitions:     |       |                                 |       |   |   |   |   |
| Accounts  and notes receivable, net of securitization                                         |       | 65,466                               |       | (48,606 | ) | 1,105 |   |
| Inventories                                                                                   |       | 22,493                               |       | (40,920 | ) | 40,984 |   |
| Prepaid  expenses and other current assets                                                    |       | (118                                 | )          | 755 |   | 1,528 |   |
| Accounts  payable                                                                             |       | (21,054                              | )          | 8,523 |   | (21,295 | ) |
| Accrued  interest expense                                                                     |       | (156                                 | )          | (3,572 | ) | (1,353 | ) |
| Other  current liabilities                                                                    |       | 4,995                                |       | (2,380 | ) | (26,186 | ) |
| Other  liabilities                                                                            |       | (1,044                               | )          | 151 |   | 819 |   |
| Accounts  receivable securitization:                                                          |       |                                 |       |   |   |   |   |
| Proceeds  from new accounts receivable securitizations                                        |       | 109,000                              |       | 103,000 |   | 100,000 |   |
| Proceeds  from collections reinvested in revolving period accounts receivable securitizations |       | 1,231,336                            |       | 1,365,655 |   | 1,156,214 |   |
| Remittances  of amounts collected as servicer of accounts receivable securitizations          |       | (1,376,336                           | )          | (1,456,655 | ) | (1,265,214 | ) |
| Net  cash provided by operating activities                                                    |       | 225,628                              |       | 94,802 |   | 167,426 |   |
|                                                                                          |       |                                 |       |   |   |   |   |
| **Cash flows from investing activities:**                                                     |       |                                 |       |   |   |   |   |
| Business  acquisitions, net of cash acquired                                                  |       | (2,706                               | )          | (191 | ) | (31,715 | ) |
| Capital  expenditures                                                                         |       | (54,085                              | )          | (43,823 | ) | (46,667 | ) |
| Proceeds  from sale of assets                                                                 |       | 8,199                                |       | 10,874 |   | 9,830 |   |
| Other                                                                                         |       | (4,643                               | )          | (2,991 | ) | (6,540 | ) |
| Net  cash used in investing activities                                                        |       | (53,235                              | )          | (36,131 | ) | (75,092 | ) |
|                                                                                          |       |                                 |       |   |   |   |   |
| **Cash flows from financing activities:**                                                     |       |                                 |       |   |   |   |   |
| Distributions                                                                                 |       | (157,623                             | )          | (152,354 | ) | (152,058 | ) |
| Contributions  from partners                                                                  |       | 70,561                               |       | — |   | 46,570 |   |
| Proceeds  from increase in long-term debt                                                     |       | 208,259                              |       | 115,249 |   | 74,568 |   |
| Reductions  in long-term debt                                                                 |       | (239,555                             | )          | (92,985 | ) | (60,942 | ) |
| Net  additions to (reductions in) short-term borrowings                                       |       | (59,570                              | )          | 67,950 |   | 5,132 |   |
| Cash  paid for financing costs                                                                |       | (3,953                               | )          | (383 | ) | (86 | ) |
| Net  cash used in financing activities                                                        |       | (181,881                             | )          | (62,523 | ) | (86,816 | ) |
|                                                                                          |       |                                 |       |   |   |   |   |
| **Effect of exchange rate changes on cash**                                                   |       | (7                                   | )          | (10 | ) | 14 |   |
|                                                                                          |       |                                 |       |   |   |   |   |
| Increase  (decrease) in cash and cash equivalents                                             |       | (9,495                               | )          | (3,862 | ) | 5,532 |   |
| Cash  and cash equivalents - beginning of year                                                |       | 16,545                               |       | 20,407 |   | 14,875 |   |
| **Cash and cash equivalents - end of year**                                                   |       | $                                    | 7,050      |   | $ | 16,545 |   | $ | 20,407 |   |

 

See notes to consolidatedfinancial statements.

 

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**FERRELLGAS, L.P.**

**AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Dollars in thousands, unless otherwise designated)**

 

**A.****      ****Partnershiporganization and formation**

 

Ferrellgas, L.P. was formed on April 22, 1994, and is a Delawarelimited partnership. Ferrellgas, L.P. owns and operates propane distributionand related assets. Ferrellgas Partners, L.P. (“Ferrellgas Partners”), apublicly traded limited partnership, holds an approximate 99% limited partnerinterest in, and consolidates, Ferrellgas, L.P. Ferrellgas, Inc. (the “generalpartner”), a wholly-owned subsidiary of Ferrell Companies, Inc. (“FerrellCompanies”), holds an approximate 1% general partner interest in Ferrellgas,L.P. and performs all management functions required by Ferrellgas, L.P.Ferrellgas Partners and Ferrellgas, L.P. are governed by their respectivepartnership agreements. These agreements contain specific provisions for theallocation of net earnings and loss to each of the partners for purposes ofmaintaining the partner capital accounts.

 

Ferrellgas, L.P. owns a 100% equity interest in Ferrellgas FinanceCorp., whose only business activity is to act as the co-issuer and co-obligorof any debt issued by Ferrellgas, L.P.

 

Ferrell Companies is wholly-owned by a leveraged employee stockownership trust (“ESOT”) established pursuant to the Ferrell Companies EmployeeStock Ownership Plan (“ESOP”). The purpose of the ESOP is to provide employeesof the general partner an opportunity for ownership in Ferrell Companies andindirectly in Ferrellgas, L.P. As contributions are made by Ferrell Companiesto the ESOT in the future, shares of Ferrell Companies are allocated to theemployees’ ESOP accounts.

 

**B.****      ****Summary of significant accountingpolicies**

 

**(1)    Nature of operations:** Ferrellgas,L.P. is engaged primarily in the distribution of propane and related equipmentand supplies in the United States. The propane distribution market is seasonalbecause propane is used primarily for heating in residential and commercialbuildings. Ferrellgas, L.P. serves approximately one million residential,industrial/commercial, portable tank exchange, agricultural, wholesale andother customers in all 50 states, the District of Columbia, and Puerto Rico.

 

**(2)    Accounting estimates:** Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America (“GAAP”) requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosures of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenues andexpenses during the reported period. Actual results could differ from theseestimates. Significant estimates impacting the consolidated financialstatements include accruals that have been established for contingentliabilities, pending claims and legal actions arising in the normal course ofbusiness, useful lives of property, plant and equipment assets, residual valuesof tanks, capitalization of customer tank installation costs, amortizationmethods of intangible assets, valuation methods used to value sales returns andallowances, allowance for doubtful accounts, financial derivative contracts andstock and unit-based compensation calculations.

 

**(3)    Principles ofconsolidation:** Theaccompanying consolidated financial statements present the consolidatedfinancial position, results of operations and cash flows of Ferrellgas, L.P.and its subsidiaries after elimination of all material intercompany accountsand transactions. Ferrellgas, L.P.

 

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consolidates the following wholly-owned taxable corporations: BlueRhino Global Sourcing, Inc. and Blue Rhino Canada, Inc. FerrellgasReceivables, LLC (“Ferrellgas Receivables”), a wholly-owned unconsolidatedsubsidiary, is a special purpose entity.

 

**(4)    Cash and cash equivalentsand non-cash activities:**For purposes of the consolidated statementsof cash flows, Ferrellgas, L.P. considers cash equivalents to include allhighly liquid debt instruments purchased with an original maturity of threemonths or less. Significant non-cash activities are presented below**:**

 
| ** **                                                                   | ** ** | **For the year ended  July 31,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                   | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| CASH PAID FOR:                                                               |       |                                  |       |   |   |   |   |
| Interest                                                                     |       | $                                     | 59,626     |   | $ | 64,922 |   | $ | 63,584 |   |
| Income taxes                                                                 |       | $                                     | 1,374      |   | $ | 3,766 |   | $ | 3,742 |   |
| NON-CASH INVESTING  ACTIVITIES:                                              |       |                                  |       |   |   |   |   |
| Assets contributed from  Ferrellgas Partners in connection with acquisitions |       | $                                     | 5,515      |   | $ | — |   | $ | 2,009 |   |
| Issuance of liabilities in  connection with acquisitions                     |       | $                                     | 1,673      |   | $ | — |   | $ | 2,426 |   |
| Property, plant and  equipment additions                                     |       | $                                     | 973        |   | $ | 1,970 |   | $ | 1,187 |   |

 

**(****5)    Accounts receivable securitization:**Ferrellgas, L.P. has agreements to transfer, on an ongoing basis, a portion ofits trade accounts receivable through Ferrellgas Receivables, an accountsreceivable securitization facility. Ferrellgas, L.P. retains servicingresponsibilities as well as a retained interest in the transferred receivables.Ferrellgas, L.P. also holds a note receivable from Ferrellgas Receivables tothe extent that expected cash proceeds from the sales of accounts receivable toFerrellgas Receivables have not been received. Ferrellgas, L.P. has no othercontinuing involvement with the transferred receivables, other than servicingthe receivables. The related receivables are transferred from the consolidatedbalance sheets and a retained interest and note receivable are recorded for theamount of receivables sold in excess of cash received and a related loss on thetransfer is recorded, which represents the discount on the sale. The retainedinterest and note receivable are included in “Accounts and notes receivable,net” in the consolidated balance sheets.

 

Ferrellgas, L.P.determines the fair value of its retained interest and note receivable based onthe present value of future expected cash flows using management’s bestestimates of various factors, including credit loss experience and discountrates commensurate with the risks involved. These assumptions are updatedperiodically based on actual results; therefore, the estimated credit loss anddiscount rates utilized are materially consistent with historical performance.Due to the short-term nature of Ferrellgas, L.P.’s trade receivables,variations in the credit and discount assumptions would not significantlyimpact the fair value of the retained interests and note receivable. Costsassociated with the sale of receivables are included in “Loss on disposal ofassets and other” in the consolidated statements of earnings. See Note F —Accounts and notes receivable, net and accounts receivable securitization — forfurther discussion of these transactions.

 

**(6)    Inventories: ** Inventories are stated at the lower of cost or market using weightedaverage cost and actual cost methods.

 

**(7)    Property, plant andequipment: **Property, plantand equipment are stated at cost less accumulated depreciation. Expendituresfor maintenance and routine repairs are expensed as incurred. Ferrellgas, L.P.capitalizes computer software, equipment replacement and betterment expendituresthat upgrade, replace or completely rebuild major mechanical components andextend

 

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the original useful life of the equipment. Depreciation is calculatedusing the straight-line method based on the estimated useful lives of theassets ranging from two to 30 years. Ferrellgas L.P., using its best estimatesbased on reasonable and supportable assumptions and projections, reviewslong-lived assets for impairment whenever events or changes in circumstancesindicate that the carrying amount of its assets might not be recoverable. SeeNote E — Supplemental financial statement information — for further discussionof property, plant and equipment.

 

**(8)    Goodwill:** Ferrellgas,L.P. records goodwill as the excess of the cost of acquisitions over the fairvalue of the related net assets at the date of acquisition. Goodwill is testedfor impairment annually on January 31, or more frequently if circumstancesdictate, and if impaired, written off against earnings at that time.Ferrellgas, L.P. has not recognized any impairment losses as a result of thesetests. For purposes of Ferrellgas, L.P.’s goodwill impairment test, Ferrellgas,L.P. has determined that it has one reporting unit. Ferrellgas, L.P. assessesthe carrying value of goodwill at its reporting unit based on an estimate ofthe fair value of the reporting unit. Fair value of the reporting unit isestimated using a market value approach taking into consideration the quotedmarket price of Ferrellgas Partners’ common units.

 

**(9)    Intangible assets:**Intangibleassets with finite useful lives, consisting primarily of customer lists,non-compete agreements and patented technology, are stated at cost, net ofaccumulated amortization calculated using the straight-line method over periodsranging from two to 15 years. Trade names and trademarks have indefinite lives,are not amortized, and are stated at cost. Ferrellgas, L.P. tests finite-livedintangible assets for impairment when events or changes in circumstancesindicate that the carrying amount of these assets might not be recoverable.Ferrellgas, L.P. tests indefinite-lived intangible assets for impairmentannually on January 31 or more frequently if circumstances dictate.Ferrellgas, L.P. has not recognized impairment losses as a result of thesetests. When necessary, intangible assets’ useful lives are revised and theimpact on amortization reflected on a prospective basis. See Note G — Goodwilland intangible assets, net — for further discussion of intangible assets.

 

**(10)  Derivatives and hedgingactivities:** Ferrellgas, L.P.’s overall objective for enteringinto derivative contracts, including commodity options and swaps, is to hedge aportion of its exposure to market fluctuations in propane prices. Thesefinancial instruments are formally designated and documented as a hedge of aspecific underlying exposure, as well as the risk management objectives andstrategies for undertaking the hedge transaction. Because of the high degree ofcorrelation between the hedging instrument and the underlying exposure beinghedged, fluctuations in the value of the derivative instrument are generallyoffset by changes in the anticipated cash flows of the underlying exposurebeing hedged. The fair value of these derivatives fluctuates over the length ofthe contracts. These fair value amounts should not be viewed in isolation, butrather in relation to the anticipated cash flows of the underlying hedgedtransaction and the overall reduction in our risk relating to adversefluctuations in propane prices. Ferrellgas, L.P. formally assesses, both atinception and at least quarterly thereafter, whether the financial instrumentsthat are used in hedging transactions are effective at offsetting changes inthe anticipated cash flows of the related underlying exposures. Any ineffectiveportion of a financial instrument’s change in fair value is recognized in “Costof product sold - propane and other gas liquids sales” in the consolidatedstatements of earnings. Ferrellgas, L.P. also enters into derivative contractsthat qualify for the normal purchases and normal sales exception underStatement of Financial Accounting Standards (“SFAS”) No. 133, “Accountingfor Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended.Financial instruments formally designated and documented as a hedge of aspecific underlying exposure are recorded gross at fair value as either “Pricerisk management assets” or “Other current liabilities” on the consolidatedbalance sheets with changes in fair value reported in other comprehensiveincome.

 

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**(11)  Revenue recognition:** Revenues from the distribution ofpropane and other gas liquids, including revenues from customer deposits andadvances, are recognized by Ferrellgas, L.P. at the time product is deliveredto its customers. Other revenues, which include revenue from the sale of propaneappliances and equipment is recognized at the time of delivery or installation.Revenues from repairs and maintenance are recognized upon completion of theservice. Ferrellgas, L.P. recognizes shipping and handling revenues andexpenses for sales of propane, appliances and equipment at the time of deliveryor installation. Shipping and handling revenues are included in the price ofpropane charged to customers, and are classified as revenue. Revenues fromannually billed, non-refundable tank rentals are recognized on a straight-linebasis over one year. Cooperative advertising program costs are recorded as areduction to our revenue.

 

**(12)  Shippingand handling expenses:**Shipping and handling expenses relatedto delivery personnel, vehicle repair and maintenance and general liabilityexpenses are classified within “Operating expense” in the consolidatedstatements of earnings. Depreciation expenses on delivery vehicles Ferrellgas,L.P. owns are classified within “Depreciation and amortization expense.” Deliveryvehicles and distribution technology leased by Ferrellgas, L.P. are classifiedwithin “Equipment lease expense.” See Note E — Supplemental financial statementinformation - for the financial statement presentation of shipping and handlingexpenses.

 

**(13)  Cost ofproduct sold:** “Cost of product sold — propane and other gasliquids sales” includes all costs to acquire propane and other gas liquids, thecosts of storing and transporting inventory prior to delivery to Ferrellgas,L.P.’s customers, the results from risk management activities to hedge relatedprice risk and the costs related to the refurbishment of Ferrellgas, L.P.’sportable propane tanks. “Cost of product sold — other” primarily includes costsrelated to the sale of propane appliances and equipment.

 

**(14)  Operatingexpenses:** “Operating expense” primarily includes thepersonnel, vehicle, delivery, handling, plant, office, selling, marketing,credit and collections and other expenses related to the retail distribution ofpropane and related equipment and supplies.

 

**(15)  Generaland administrative expenses: “**General and administrativeexpense” primarily includes personnel and incentive expense related toexecutives and employees and other overhead expense related to centralizedcorporate functions.

 

**(16) ****Unit and stock-based compensation:**

 

***Ferrellgas Unit Option Plan (“UOP”)***

 

TheUOP is authorized to issue options covering up to 1.35 million common units toemployees of the general partner or its affiliates. The Compensation Committeeof the Board of Directors of the general partner administers the UOP,authorizes grants of unit options thereunder and sets the unit option price andvesting terms of unit options in accordance with the terms of the UOP. Nosingle officer or director of the general partner may acquire more than 314,895common units under the UOP. In general, the options currently outstanding underthe UOP vest over a five-year period, and expire on the tenth anniversary ofthe date of the grant. The fair value of each option award is estimated on thedate of grant using a binomial option valuation model. Expected volatility isbased on the historical volatility of Ferrellgas Partners’ publicly-tradedcommon units. Historical information is used to estimate option exercise andemployee termination behavior. Due to the limited number of employees eligibleto participate in the UOP, there is only one group of employees. The expectedterm of options granted is derived from historical exercise patterns andrepresents the period of time that options are expected to be outstanding. Therisk free rate for periods within the contractual life of the option is basedon the U.S. Treasury yield curve in effect at the time of grant. During theyear ended July 31, 2009, the portion of the total non-cash compensationcharge relating to the UOP was

 

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$15thousand and related to fiscal 2009 grants of unit options to acquire 0.3million common units. During the years ended July 31, 2008 and 2007, nocompensation charge relating to the UOP was recognized as all optionsoutstanding at that time were fully vested.

 

*Ferrell Companies, Inc. Incentive CompensationPlan (“ICP”)*

The ICP is not a Ferrellgas, L.P. stock-compensationplan; however, in accordance with Ferrellgas L.P.’s partnership agreements, allemployee-related costs incurred by Ferrell Companies are allocated toFerrellgas, L.P. As a result, Ferrellgas, L.P. incurs a non-cash compensationcharge from Ferrell Companies. During the years ended July 31, 2009, 2008and 2007, the portion of the total non-cash compensation charge relating to theICP was $2.3 million, $1.8 million and $0.9 million, respectively.

 

Ferrell Companies is authorized to issue optionscovering up to 6.25 million shares of Ferrell Companies common stock under theICP. The ICP was established by Ferrell Companies to allow upper middle andsenior level managers of the general partner to participate in the equitygrowth of Ferrell Companies. The shares underlying the stock options are commonshares of Ferrell Companies; therefore, there is no earnings per share dilutionof Ferrellgas, L.P. The ICP stock options vest ratably over periods rangingfrom zero to 12 years or 100% upon a change of control of Ferrell Companies, orupon the death, disability or retirement at the age of 65 of the participant.Vested options are exercisable in increments based on the timing of theretirement of Ferrell Companies’ debt, but in no event later than 20 years fromthe date of issuance. The fair value of each option award is estimated on thedate of grant using a binomial option valuation model.

 

**(17)  Income taxes: ** Ferrellgas, L.P. is a limited partnership and owns four subsidiariesthat are taxable corporations. As a result, except for the taxablecorporations, Ferrellgas, L.P.’s earnings or losses for federal income taxpurposes are included in the tax returns of the individual partners.Accordingly, the accompanying consolidated financial statements of Ferrellgas,L.P. reflect federal income taxes related to the above mentioned taxablecorporations. Recent legislation in certain states of operation allows fortaxation of partnerships. As such, the accompanying consolidated financialstatements of Ferrellgas, L.P. also reflect state income taxes resulting fromthis legislation. Net earnings for financial statement purposes may differsignificantly from taxable income reportable to partners as a result of differencesbetween the tax basis and financial reporting basis of assets and liabilities,the taxable income allocation requirements under Ferrellgas, L.P.’s partnershipagreement and differences between Ferrellgas, L.P.’s financial reporting yearend and limited partners tax year end.

 

Income tax expense consisted of the following:

 
| ** **                 | ** ** | **For the year ended July 31,** | ** ** |
|----------------------------|------------|--------------------------------------|------------|
| ** **                 | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Current expense            |       | $                                    | 1,820      |   | $ | 1,656 |   | $ | 3,461 |   |
| Deferred expense (benefit) |       | 388                                  |       | (1,650 | ) | 3,099 |   |
| Income tax expense         |       | $                                    | 2,208      |   | $ | 6 |   | $ | 6,560 |   |

 

Deferred taxes consisted of the following:

 
| ** **                 | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| Deferred tax assets        |       | $        | 877        |     | $          | 4,065 |   |
| Deferred tax liabilities   |       | (1,889   | )          | (4,689   | )          |
| Net deferred tax liability |       | $        | (1,012     | )        | $          | (624 | ) |

 

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On July 12, 2007, the governor of the state of Michigan signedinto law a new Michigan Business Tax (the “MBT Act”), which provided acomprehensive restructuring of Michigan’s principal business tax regime. Themain provision of the MBT Act imposed a new two-part tax on business income andmodified gross receipts that is accounted for as an income tax in accordancewith SFAS No. 109 “Accounting for Income Taxes” (“SFAS 109”). Although theeffective date of the MBT was January 1, 2008, SFAS 109 required alleffects of a tax law change be accounted for in the period of the law’senactment. As a result, during the fourth quarter of fiscal 2007 Ferrellgas,L.P. recognized a one time increase in its deferred tax expense of $2.8million. During fiscal 2008, the Governor of the State of Michigan signed intolaw a one time credit for this Michigan Business Tax law. The passing of thisnew tax law caused Ferrellgas, L.P. to recognize a one time deferred taxbenefit of $2.8 million during fiscal 2008.

 

**(18)  Sales taxes:**Ferrellgas, L.P. accounts for the collectionand remittance of sales tax on a net tax basis. As a result, these amounts arenot reflected in the consolidated statements of earnings.

 

**(19)  Segment information:** Ferrellgas, L.P. is asingle reportable operating segment engaging in the distribution of propane andrelated equipment and supplies to customers primarily in the United States.

 

**(20)  New accountingstandards:** SFAS No. 165,“Subsequent Events” provides guidance on management’s assessment of subsequentevents and clarifies that management must evaluate, as of each reportingperiod, events or transactions that occur after the balance sheet date throughthe date that the financial statements are issued or are available to beissued. The adoption of this statement during fiscal 2009 did not have asignificant impact on Ferrellgas, L.P.’s financial position orresults of operations. See additional disclosures relating to subsequent eventsin Note O — Subsequent events.

 

SFASNo. 166, “Accounting for Transfers of Financial Assets, an Amendment ofFASB Statement No. 140” amends the derecognition guidance in SFAS No. 140to improve the accounting for transfers of financial assets. This statement iseffective for financial asset transfers that occur in fiscal years beginningafter November 15, 2009. Ferrellgas, L.P. is currently evaluating thepotential impact of this statement.

 

SFASNo. 167, “Amendments to FASB Interpretation No. 46(R)” amends theconsolidation guidance that applies to variable interest entities and willsignificantly affect the overall consolidation analysis under FASBInterpretation 46(R). This statement is effective for fiscal years beginningafter November 15, 2009. Ferrellgas, L.P. is currently evaluating thepotential impact of this statement.

 

SFASNo. 168, “The FASB Accounting Standards Codification and the Hierarchy ofGenerally Accepted Accounting Principles, a Replacement of FASB Statement No. 162”establishes the authoritative reference for nongovernmental U.S. GAAP andmodifies the previous four-level GAAP hierarchy to include only two levels.This statement is effective for interim and annual periods ending after September 15,2009. Ferrellgas, L.P. does not expect the adoption of this statement in fiscal2010 to have a material impact on its financial position or results ofoperations.

 

SFASNo. 161, “Disclosures about Derivative Instruments and Hedging Activities,an Amendment to FASB Statement No. 133” enhances disclosure requirementsfor derivative instruments and hedging activities. The adoption of thisstatement during fiscal 2009 did not have a significant impact on Ferrellgas,L.P.’s financial position or results of operations. See additional disclosuresrelating to commodity derivative and financial derivative transactions in NoteJ — Derivatives.

 

SFASNo. 157, “Fair Value Measurements” defines fair value, establishes aframework for measuring fair value and expands disclosures about fair valuemeasurements. The adoption of this

 

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statementduring fiscal 2009 did not have a significant impact on Ferrellgas, L.P.’sfinancial position or results of operations. See disclosure of Ferrellgas, L.P.’sfair value measurements commodity derivative and financial derivativetransactions in Note J — Derivatives.

 

SFASNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities,” provides entities the irrevocable option to elect to carry mostfinancial assets and liabilities at fair value with changes in fair valuerecorded in earnings. The adoption of this statement was effective August 1,2008; however, Ferrellgas, L.P. has not elected the fair value option for anyof its financial assets or liabilities.

 

SFASNo. 141(R) “Business Combinations” (a replacement of SFAS No. 141,“Business Combinations”) establishes principles and requirements for how theacquirer in a business combination recognizes and measures the identifiableassets acquired, the liabilities assumed, and any noncontrolling interest inthe acquiree, how the acquirer recognizes and measures goodwill or a gain froma bargain purchase (formerly negative goodwill) and how the acquirer determineswhat information to disclose. This statement is effective for businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15, 2008.Ferrellgas, L.P. does not expect the adoption of this statement in fiscal 2010to have a material impact on its financial position or results of operations.

 

FASB Staff Position (“FSP”)SFAS 140-4 and FASB Interpretation No. 46R-8 “Disclosures by PublicEntities (Enterprises) about Transfers of Financial Assets and Interests inVariable Interest Entities” improves the transparency of transfers of financialassets and an enterprise’s involvement with variable interest entities,including qualifying special-purpose entities. The adoption of this FSP duringfiscal 2009 did not have a significant impact on Ferrellgas, L.P.’s financialposition or results of operations.

 

**C**.       **Businesscombinations**

 

Business combinations areaccounted for under the purchase method and the assets acquired and liabilitiesassumed are recorded at their estimated fair market values as of theacquisition dates. The results of operations are included in the consolidatedstatements of earnings from the date of acquisition. The pro forma effect ofthese transactions was not material to Ferrellgas, L.P.’s results ofoperations.

 

During fiscal 2009,Ferrellgas, L.P. acquiredpropane distribution assets with an aggregate value of $10.0 million in thefollowing four transactions:

 

·       Lorensen Propane Gas, Inc., based inCalifornia, acquired September 2008;

·       HBH Gas Systems, LLC — Austin’s ColonyPhase 5, based in Texas, acquired September 2008;

·       Ottawa Cooperative, based in Kansas,acquired May 2009; and

·       Town & Country Propane, Inc,based in Missouri, acquired July 2009.

 

These acquisitions werefunded by $2.7 million in cash payments, the issuances of $1.8 million ofliabilities and other costs and considerations, and the contribution of netassets of $5.5 million from Ferrellgas Partners.

 

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The aggregate fair values ofthese four transactions were allocated as follows:

 
| Customer tanks, buildings,  land and other |   | $     | 3,031  |   |
|--------------------------------------------|--------|-------|--------|--------|
| Non-compete agreements                     |   | 1,438 |   |
| Customer lists                             |   | 5,475 |   |
| Working capital                            |   | 6     |   |
|                                       |   | $     | 9,950  |   |

 

The estimated fair values and useful lives ofassets acquired are based on a preliminary internal valuation and are subjectto final valuation adjustments. Ferrellgas, L.P. intends to continue itsanalysis of the net assets of these transactions to determine the finalallocation of the total purchase price to the various assets and liabilitiesacquired.

 

During fiscal 2008,Ferrellgas, L.P. had no acquisitions of propane distribution assets.

 

During fiscal 2007,Ferrellgas, L.P. acquired propane distribution assets with an aggregate valueof $36.2 million in the following nine transactions:

 

·                  Pacer-Valley Propane, LLC,based in California, acquired August 2006;

·                  Lake Propane, based inCalifornia, acquired August 2006;

·                  Pacific Propane Service, Inc.,based in California, acquired August 2006;

·                  Twin Ports Energy, Inc.,based in Wisconsin, acquired October 2006;

·                  Getman’s Gas Company, Inc., based in NewYork, acquired October 2006;

·                  Yankee Gas, LLC, based in Massachusetts,acquired October 2006;

·                  Great Dane Propane, Inc., based inFlorida, acquired October 2006;

·                  Puget Sound Propane, based in Washington,acquired December 2006; and

·                  Reliance Bottle Gas, Inc., based inOhio, acquired June 2007.

 

These acquisitions were funded by $31.7 million in cash payments, theissuances of $2.5 million of liabilities and other costs and considerations, andthe contribution of net assets of $2.0 million from Ferrellgas Partners.

 

The aggregate fair values ofthese nine transactions were allocated as follows:

 
| Customer  tanks, buildings, land and other |   | $      | 11,567 |   |
|--------------------------------------------|--------|--------|--------|--------|
| Non-compete  agreements                    |   | 2,072  |   |
| Customer  lists                            |   | 18,178 |   |
| Goodwill                                   |   | 3,649  |   |
| Working  capital                           |   | 712    |   |
|                                       |   | $      | 36,178 |   |

 

The fair valuesand useful lives of assets acquired are based on an internal valuation andincluded only minor final valuation adjustments during the 12 month periodafter the date of acquisition.

 

**D.****      ****Quarterly distributions of available cash**

 

Ferrellgas, L.P. makes quarterly cash distributions of all of its “availablecash.”  Available cash is defined in thepartnership agreement of Ferrellgas, L.P. as, generally, the sum of itsconsolidated cash receipts less consolidated cash disbursements and net changesin reserves established by the general partner for future requirements.Reserves are retained in order to provide for the proper conduct of Ferrellgas,L.P.’s business, or to provide funds for distributions with respect to any oneor

 

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more of the next four fiscal quarters. Distributions are made within 45days after the end of each fiscal quarter ending October, January, April, andJuly.

 

Distributions by Ferrellgas, L.P. in an amount equal to 100% of itsavailable cash, as defined in its partnership agreement, will be madeapproximately 99% to Ferrellgas Partners and approximately 1% to the generalpartner.

 

**E.****        ****Supplementalfinancial statement information**

 

Inventories consist of the following:

 
| ** **                       | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------------|------------|----------|------------|----------|------------|
| Propane gas and related products |       | $        | 109,606    |     | $          | 128,776 |   |
| Appliances, parts and supplies   |       | 20,202   |       | 23,525   |       |
| Inventories                      |       | $        | 129,808    |     | $          | 152,301 |   |

 

In addition to inventorieson hand, Ferrellgas, L.P. enters into contracts primarily to buy propane forsupply procurement purposes. Most of these contracts have terms of less thanone year and call for payment based on market prices at the date of delivery.All supply procurement fixed price contracts have terms of fewer than 24months. As of July 31, 2009, Ferrellgas, L.P. had committed, for supplyprocurement purposes, to take net delivery of approximately 87.9 milliongallons of propane at fixed prices.

 

Property, plantand equipment, net consist of the following:

 
| ** **                               | ** ** | **Estimated**    | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------------|------------|------------|------------|------------|------------|
| ** **                               | ** ** | **useful lives** | ** ** | **2009**   | ** ** | **2008**   | ** ** |
| Land                                     |       | Indefinite       |       | $          | 30,414     |       | $          | 30,840 |   |
| Land  improvements                       |       | 2-20             |       | 10,858     |       | 10,585     |       |
| Buildings  and improvements              |       | 20               |       | 64,392     |       | 63,777     |       |
| Vehicles,  including transport trailers  |       | 8-20             |       | 92,914     |       | 96,351     |       |
| Bulk  equipment and district facilities  |       | 5-30             |       | 100,123    |       | 97,489     |       |
| Tanks,  cylinders and customer equipment |       | 2-30             |       | 767,682    |       | 761,065    |       |
| Computer  and office equipment           |       | 2-5              |       | 115,343    |       | 116,873    |       |
| Construction  in progress                |       | n/a              |       | 5,853      |       | 9,575      |       |
|                                     |       |             |       | 1,187,579  |       | 1,186,555  |       |
| Less:  accumulated depreciation          |       |             |       | 521,044    |       | 501,227    |       |
| Property,  plant and equipment, net      |       |             |       | $          | 666,535    |       | $          | 685,328 |   |

 

Depreciationexpense totaled $62.3 million, $64.6 million and $64.8 million for fiscal 2009,2008 and 2007, respectively.

 

Other current liabilities consist of the following:

 
| ** **                     | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
| Accrued interest               |       | $        | 16,723     |     | $          | 16,879 |   |
| Accrued payroll                |       | 23,395   |       | 12,621   |       |
| Customer deposits and advances |       | 23,115   |       | 25,065   |       |
| Other                          |       | 42,428   |       | 50,225   |       |
| Other current liabilities      |       | $        | 105,661    |     | $          | 104,790 |   |

 

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Loss on disposal of assets and other consist of thefollowing:

 
| ** **                                                                                 | ** ** | **For the year ended July 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                 | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Loss on disposal of assets                                                                 |       | $                                    | 5,009      |   | $ | 4,820 |   | $ | 4,232 |   |
| Loss on transfer of  accounts receivable related to the accounts receivable securitization |       | 12,124                               |       | 10,548 |   | 10,384 |   |
| Service income related to the accounts receivable  securitization                          |       | (4,091                               | )          | (4,118 | ) | (3,794 | ) |
| Loss on disposal of assets  and other                                                      |       | $                                    | 13,042     |   | $ | 11,250 |   | $ | 10,822 |   |

 

Shipping and handlingexpenses are classified in the following consolidated statements of earningsline items:

 
| ** **                            | ** ** | **For the year ended  July 31,** | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|
| ** **                            | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Operating expense                     |       | $                                     | 178,218    |   | $ | 171,938 |   | $ | 163,193 |   |
| Depreciation and amortization expense |       | 4,915                                 |       | 5,096 |   | 5,308 |   |
| Equipment lease expense               |       | 17,541                                |       | 22,703 |   | 23,465 |   |
|                                  |       | $                                     | 200,674    |   | $ | 199,737 |   | $ | 191,966 |   |

 

**F.     Accounts and notes receivable, net and accounts receivablesecuritization**

 

Accountsand notes receivable, net consist of the following:

 
| ** **                                  | ** ** | **2009** | ** ** | **2008** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|
| Accounts receivable                         |       | $        | 33,903     |     | $          | 127,975 |   |
| Note receivable from Ferrellgas Receivables |       | 52,038   |       | —   |       |
| Retained interest                           |       | 24,979   |       | 22,753   |       |
| Other                                       |       | 284      |       | 330      |       |
| Less: allowance for doubtful accounts       |       | (4,294   | )          | (5,977   | )          |
| Accounts and notes receivable, net          |       | $        | 106,910    |     | $          | 145,081 |   |

 

DuringApril 2009, Ferrellgas, L.P. renewed its accounts receivablesecuritization facility with JPMorgan Chase Bank, N.A., JS Siloed Trust andFifth Third Bank for an additional 364-day commitment. As part of this renewedfacility, Ferrellgas, L.P. transfers a portion of its trade accounts receivableto Ferrellgas Receivables, which finances its acquisition of the tradereceivable assets by issuing beneficial interests in (securitizing) thereceivables to a commercial paper conduit for proceeds of up to $145.0 million.Ferrellgas, L.P. does not provide any guarantee or similar support to thecollectability of these receivables. Ferrellgas, L.P. structured the facilityusing a wholly-owned, unconsolidated special purpose entity in order tofacilitate the transaction while complying with Ferrellgas, L.P.’s various debtcovenants. If the covenants are compromised, funding from the facility could berestricted or suspended, or its costs could increase. As a servicer,Ferrellgas, L.P. remits daily to this special purpose entity funds collected onthe trade receivables held by Ferrellgas Receivables.

 

Ferrellgas, L.P. transfers a portion of its trade accounts receivableto Ferrellgas Receivables and retains an interest and a note receivable relatedto these transferred receivables. As these transferred receivables aresubsequently collected, the funding from the accounts receivable securitizationfacility is reduced. Ferrellgas Receivables recorded the following on itsbalance sheet:

 

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| *** ***                                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|
| Trade accounts receivable transferred from Ferrellgas,  L.P. |       | $        | 118,982    |     | $          | 97,333 |   |
|                                                         |       |     |       |     |       |   |   |
| Note payable to Ferrellgas, L.P.                             |       | $        | 52,038     |     | $          | — |   |

 

Ferrellgas, L.P.’s consolidated balance sheets do not include tradeaccounts receivables transferred, but do include a note receivable fromFerrellgas Receivables which represents expected cash proceeds from the sale ofaccounts receivable to Ferrellgas Receivables that have not yet been received.As of July 31, 2009, the operating partnership had received proceeds fromtrade accounts receivable sales of $37.0 million with the ability to receiveproceeds of an additional $4.0 million.

 

Other accounts receivable securitization activity consists of thefollowing:

 
| ** **            | ** ** | **For the year ended July 31,** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
| ** **            | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net non-cash activity |       | $                                    | 8,033      |   | $ | 6,430 |   | $ | 2,964 |   |
| Bad debt expense      |       | $                                    | 600        |   | $ | — |   | $ | 202 |   |

 

The net non-cash activity reported in “Loss on disposal of assets andother” in the consolidated statements of earnings approximates the financingcost of issuing commercial paper backed by these accounts receivabletransferred to Ferrellgas Receivables. See details of the net non-cash activitydisclosed in Note E — Supplemental financial statement information — “Loss ontransfer of accounts receivable related to the accounts receivablesecuritization” and “Service income related to the accounts receivablesecuritization.” The weighted average discount rate used to value the retained interestin the transferred receivables was 3.6% and 4.65% as of July 31, 2009 and2008, respectively.

 

**G.    Goodwill and intangibleassets, net**

 

Goodwill and intangible assets, net consist of:

 
| ** **                                         | ** ** | **July 31, 2009**      | ** ** | **July 31, 2008**        | ** ** |
|----------------------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                                         | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** | **Gross  carrying  amount** | ** ** | **Accumulated  amortization** | ** ** | **Net** | ** ** |
| Goodwill, net                                      |       | $                           | 248,939    |                          | $          | — |   | $ | 248,939 |   | $ | 248,939 |   | $ | — |   | $ | 248,939 |   |
| Intangible assets, netAmortized  intangible assets |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Customer lists                                     |       | $                           | 368,716    |                          | $          | (225,038 | ) | $ | 143,678 |   | $ | 363,242 |   | $ | (207,107 | ) | $ | 156,135 |   |
| Non-compete agreements                             |       | 44,481                      |       | (36,957                       | )          | 7,524 |   | 43,042 |   | (35,081 | ) | 7,961 |   |
| Other                                              |       | 3,584                       |       | (1,860                        | )          | 1,724 |   | 3,572 |   | (1,502 | ) | 2,070 |   |
|                                               |       | 416,781                     |       | (263,855                      | )          | 152,926 |   | 409,856 |   | (243,690 | ) | 166,166 |   |
|                                               |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Unamortized intangible assets                      |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Trade names & trademarks                  |       | 59,111                      |       | —                        |       | 59,111 |   | 59,107 |   | — |   | 59,107 |   |
| Total intangible assets, net                       |       | $                           | 475,892    |                          | $          | (263,855 | ) | $ | 212,037 |   | $ | 468,963 |   | $ | (243,690 | ) | $ | 225,273 |   |

 

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Customer lists have estimated lives of 15 years, while non-competeagreements and other intangible assets have estimated lives ranging from two toten years. Ferrellgas, L.P. intends to utilize all acquired trademarks andtrade names and does not believe there are any legal, regulatory, contractual,competitive, economical or other factors that would limit their useful lives.Therefore, trademarks and trade names have indefinite useful lives.

 

Aggregate amortization expense:

 
| For the year ended July 31, |   |
|----------------------------------|--------|
| 2009                             |   | $ | 20,166 |   |
| 2008                             |   | 20,970 |   |
| 2007                             |   | 22,553 |   |
|                                  |        |  |  |  |  |

 

Estimated amortization expense:

 
| For the year ended July 31, |   |
|----------------------------------|--------|
| 2010                             |   | $ | 19,298 |   |
| 2011                             |   | 19,141 |   |
| 2012                             |   | 18,693 |   |
| 2013                             |   | 18,142 |   |
| 2014                             |   | 14,874 |   |
|                                  |        |  |  |  |

 

**H.    Debt**

 

***Short-term borrowings***

 

The operating partnership classified a portion of its unsecured creditfacility due April 2010 borrowings as short-term because it was used tofund working capital needs that management had intended to pay down within the12 month period following each balance sheet date. As of July 31, 2009 and2008, $66.2 million and $125.7 million, respectively, were classified asshort-term borrowings. For further discussion see the unsecured credit facilitysection below.

 

***Long-term debt***

 

Long-term debt consisted of the following:

 
| ** **                                                                                                                                                                                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **Senior notes**                                                                                                                                                                                                   |       |     |       |     |       |
| Fixed rate,  Series D-E, ranging from 7.24% to 7.42%, due 2010-2013 (1)                                                                                                                                       |       | $        | 152,000    |     | $          | 204,000 |   |
| Fixed rate, Series C, 8.87%, due 2009 (2)                                                                                                                                                                     |       | 73,000   |       | 73,000   |       |
| Fixed rate, 6.75% due 2014, net of unamortized  discount of $26,458 and $518 at July 31, 2009 and 2008, respectively (3)                                                                                      |       | 423,542  |       | 249,482  |       |
| ** **                                                                                                                                                                                                         |       |     |       |     |       |
| **Credit facility**, variable  interest rate, expiring 2010 (net of $66.2 million and $125.7 million classified  as short-term borrowings at July 31, 2009 and 2008, respectively)                            |       | 88,541   |       | 235,270  |       |
| ** **                                                                                                                                                                                                         |       |     |       |     |       |
| **Notes payable**, 8.4% and  7.9% weighted average interest rate in 2009 and 2008, respectively, due 2009  to 2016, net of unamortized discount of $1,301 and $1,160 at July 31,  2009 and 2008, respectively |       | 5,321    |       | 5,864    |       |
|                                                                                                                                                                                                               |       |     |       |     |       |
| **Capital lease obligations**                                                                                                                                                                                      |       | —   |       | 29       |       |
|                                                                                                                                                                                                               |       | 742,404  |       | 767,645  |       |
| Less:   current portion, included in other current liabilities on the  consolidated balance sheets                                                                                                            |       | 1,422    |       | 2,397    |       |
| **Long-term debt**                                                                                                                                                                                                 |       | $        | 740,982    |     | $          | 765,248 |   |

 

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| (1)    |   | Ferrellgas,  L.P.’s fixed rate senior notes issued in August 1998 are general unsecured  obligations of Ferrellgas, L.P. and rank on an equal basis in right of  payment with all senior indebtedness of Ferrellgas, L.P. and are senior to  all subordinated indebtedness of Ferrellgas, L.P. The outstanding principal  amount of the series D and E notes are due on August 1, 2010 and  2013, respectively. In general, Ferrellgas, L.P. does not have the option to  prepay the notes prior to maturity without incurring prepayment penalties.                                                                                                                                                                                                                                                                             |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (2)    |   | Ferrellgas,  L.P.’s fixed rate senior notes issued in February 2000 are general  unsecured obligations of Ferrellgas, L.P. and rank on an equal basis in right  of payment with all senior indebtedness of Ferrellgas, L.P. and are senior to  all subordinated indebtedness of Ferrellgas, L.P. The outstanding principal  amount of the series C notes is due on August 1, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3)    |   | On  April 20, 2004, Ferrellgas, L.P. issued $250.0 million of its fixed rate  senior notes with a debt discount of $0.9 million that will be amortized to  interest expense through 2014. On August 4, 2008, the Ferrellgas, L.P.  issued $200.0 million of its fixed rate senior notes with a debt discount of  $30.0 million that will be amortized to interest expense through 2014. These  notes are general unsecured obligations of Ferrellgas, L.P. and rank on an equal  basis in right of payment with all senior indebtedness of  Ferrellgas, L.P. and are senior to all  subordinated indebtedness of Ferrellgas, L.P. The outstanding principal  amount is due on May 1, 2014. In general, Ferrellgas, L.P. does not have  the option to prepay the notes prior to maturity without incurring prepayment  penalties. |

 

*Senior Notes*

 

During August 2007,Ferrellgas, L.P. made a scheduled principal payment of $90.0 million of the8.78% Series B senior notes using proceeds from borrowings on theunsecured credit facility due April 2010.

 

DuringAugust 2008, Ferrellgas, L.P. made scheduled principal payments of $52.0million on the 7.12% Series C senior notes using proceeds from borrowingson the unsecured credit facility due April 2010.

 

DuringAugust 2008 Ferrellgas, L.P. issued $200.0 million in aggregate principalamount of its 6.75% senior notes due 2014 at an offering price equal to 85% ofpar. The net proceeds of these two transactions of $114.5 million, net ofunderwriting discounts and commissions, proceeds from this transaction wereused to reduce outstanding indebtedness under the unsecured credit facility dueApril 2010.

 

SeeNote O — Subsequent events for a discussion on senior note principal paymentsand new long term debt issuances.

 

*Unsecured credit facility*

 

FerrellgasL.P.’s $448.0 million unsecured credit facility matures April 22, 2010.Borrowings under this facility are available for working capital, acquisition,capital expenditure, long-term debt repayment, and general partnershippurposes. The credit facility has a letter of credit sub-facility withavailability of up to $150.0 million.

 

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Asof July 31, 2009 and 2008 Ferrellgas, L.P. had total borrowingsoutstanding under this unsecured credit facility due April 2010 of $154.7million and $361.0 million, respectively, of which $88.5 million and $235.3million, respectively were classified as long-term debt. See footnote O —Subsequent events for a discussion of the classification of this portion of theunsecured credit facility due April 2010 as long term.

 

Borrowingsunder the unsecured credit facility due April 2010 had weighted averageinterest rates of 2.19% and 4.72%, at July 31, 2009 and 2008,respectively. These borrowings bear interest, at Ferrellgas, L.P.’s option, ata rate equal to either:

 

·                  the baserate, which is defined as the higher of the federal funds rate plus 0.50% orBank of America’s prime rate (as of July 31, 2009, the federal funds rateand Bank of America’s prime rate were 0.18% and 3.25%, respectively); or

·                  theEurodollar Rate plus a margin varying from 1.50% to 2.50% (as of July 31,2009, the one-month and three-month Eurodollar Rates were 0.45% and 0.75%,respectively).

 

Inaddition, an annual commitment fee is payable on the daily unused portion ofthe unsecured credit facility due April 2010 at a per annum rate varyingfrom 0.375% to 0.500% (as of July 31, 2009, the commitment fee per annumrate was 0.375%).

 

Lettersof credit outstanding at July 31, 2009 totaled $44.4 million and were usedprimarily to secure insurance arrangements and to a lesser extent, productpurchases. Letters of credit outstanding at July 31, 2008 totaled $42.3million and were used primarily for insurance arrangements. At July 31,2009, Ferrellgas, L.P. had available letter of credit remaining capacity of$105.6 million. Ferrellgas, L.P. incurred commitment fees of $0.9 million, $0.4million and $0.6 million in fiscal 2009, 2008 and 2007, respectively.

 

During May 2007, Ferrellgas, L.P. entered into a new unsecuredcredit facility with additional borrowing capacity of up to $150.0 million,which was scheduled to mature on August 1, 2009. During April 2009,Ferrellgas, L.P. terminated this facility and paid down its total borrowingsoutstanding of $95.0 million using borrowing capacity available under theunsecured credit facility due April 2010.

 

DuringApril 2008, Ferrellgas, L.P. amended its unsecured credit facility due April 2010,increasing its borrowing capacity by $73.0 million and bringing its totalborrowing capacity to $448.0 million.

 

DuringOctober 2008, Ferrellgas, L.P. amended its unsecured credit facility due April 2010increasing the letter of credit sublimit from $90.0 million to $200.0 millionthrough February 28, 2009 and to $150.0 million thereafter. The letter ofcredit sublimit is part of, and not in addition to, the aggregate creditfacility commitment. The amendment also requires Ferrellgas, L.P. to cashcollateralize any outstanding letter of credit obligations in an amount equalto the pro rata share of any defaulting lender.

 

SeeNote O — Subsequent events for further discussion about the unsecured creditfacility due April 2010 and its replacement with a new secured creditfacility.

 

*Covenants*

 

Thesenior notes and the credit facility agreement contain various restrictivecovenants applicable to Ferrellgas, L.P. and its subsidiaries, the mostrestrictive relating to additional indebtedness. In addition, Ferrellgas, L.P.is prohibited from making cash distributions if a default or event of defaultexists or would exist upon making such distribution, or if Ferrellgas, L.P.fails to meet certain 

 

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coveragetests. As of July 31, 2009, Ferrellgas, L.P. is in compliance with allrequirements, tests, limitations and covenants related to these debtagreements.

 

The scheduled annual principal payments on long-term debt are asfollows:

** **
| **For the year ended  July 31,** | ** ** | **Scheduled  annual  principal  payments** | ** ** |
|---------------------------------------|------------|--------------------------------------------|------------|
| 2010                                  |       | $                                          | 1,422      |   |
| 2011                                  |       | 1,271                                      |       |
| 2012                                  |       | 1,191                                      |       |
| 2013                                  |       | 25,131                                     |       |
| 2014                                  |       | 450,621                                    |       |
| Thereafter                            |       | 290,527                                    |       |
| Total                                 |       | $                                          | 770,163    |   |

 

See Note O — Subsequent events for discussion about the classificationof long-term debt maturities.

 

The carrying amount of short-term financial instruments approximatesfair value because of the short maturity of the instruments. The estimated fairvalue of Ferrellgas, L.P.’s long-term debt instruments was $791.3 million and$843.8 million as of July 31, 2009 and 2008, respectively. The fair valueis estimated based on quoted market prices.

 

**I.      Partner’s capital**

 

*Partnership distributions paid*

 
| ** **          | ** ** | **For the year ended July 31,** | ** ** |
|---------------------|------------|--------------------------------------|------------|
| ** **          | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Ferrellgas Partners |       | $                                    | 156,031    |   | $ | 150,815 |   | $ | 150,522 |   |
| General partner     |       | $                                    | 1,592      |   | $ | 1,539 |   | $ | 1,536 |   |

 

OnAugust 28, 2009, Ferrellgas, L.P. declared distributions to FerrellgasPartners and the general partner of $34.5 million and $0.4 million,respectively, which were paid on September 14, 2009.

 

*Partnership contributions received*

 

During fiscal 2009, Ferrellgas, L.P.received cash contributions totaling $70.6 million and net asset contributionsrelated to acquisitions totaling $5.6 million from Ferrellgas Partners and thegeneral partner.

 

During fiscal 2008, Ferrellgas, L.P.received no cash or net asset contributions related to acquisitions fromFerrellgas Partners and the general partner.

 

During fiscal 2007, Ferrellgas, L.P.received cash contributions totaling $46.6 million and net asset contributionsrelated to acquisitions totaling $2.0 million from Ferrellgas Partners and thegeneral partner.

 

See additional discussions abouttransactions with related parties in Note K — Transactions with relatedparties.

 

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**J.****             ****Derivatives**

 

*Commodity Price Risk Management*

 

Ferrellgas, L.P.’s risk management activitiesprimarily attempt to mitigate price risks related to the purchase, storage,transport and sale of propane generally in the contract and spot markets frommajor domestic energy companies on a short-term basis. Ferrellgas, L.P.attempts to mitigate these price risks through the use of financial derivativeinstruments and forward propane purchase and sales contracts.

 

Ferrellgas,L.P.’s risk management strategy involves taking positions in the forward orfinancial markets that are equal and opposite to Ferrellgas, L.P.’s positionsin the physical products market in order to minimize the risk of financial lossfrom an adverse price change. This risk management strategy is successful whenFerrellgas, L.P.’s  gains or losses inthe physical product markets are offset by its losses or gains in the forwardor financial markets. These financial derivatives are designated as cash flowhedges.

 

Ferrellgas,L.P.’s risk management activities include the use of financial derivativeinstruments including, but not limited to, price swaps, options, futures andbasis swaps to seek protection from adverse price movements and to minimizepotential losses. Ferrellgas, L.P. enters into these financial derivativeinstruments directly with third parties in the over-the-counter market and withbrokers who are clearing members with the New York Mercantile Exchange.Ferrellgas, L.P. also enters into forward propane purchase and sales contractswith counterparties. These forward contracts qualify for the normal purchasenormal sales exception within SFAS 133 and are therefore not recorded byFerrellgas, L.P. prior to settlement.

 

*Cash Flow Hedging Activity*

 

Ferrellgas,L.P. uses financial derivative instruments for risk management purposes tohedge a portion of its exposure to market fluctuations in propane prices. Thesefinancial derivative instruments are designated as cash flow hedginginstruments, thus the effective portions of changes in the fair value of thefinancial derivatives are recorded in OCI prior to settlement and aresubsequently recognized in the consolidated statements of earnings in “Cost ofgoods sold — propane and other gas liquids sales” when the forward orforecasted propane sales transaction impacts earnings. The effectiveness ofcash flow hedges is evaluated at inception and on an on-going basis. Changes inthe fair value of cash flow hedges due to hedge ineffectiveness, if any, arerecognized in “Cost of product sold — propane and other gas liquids sales.”During the years ended July 31, 2009, 2008 and 2007, Ferrellgas, L.P. didnot recognize any gain or loss in earnings related to hedge ineffectiveness anddid not exclude any component of the financial derivative contract gain or lossfrom the assessment of hedge effectiveness related to these cash flow hedges.

 

The fair value of financial derivativeinstruments are classified gross on the consolidated balance sheets as “Pricerisk management assets” and “Other current liabilities” as follows:

 
| ** **                                            | ** ** | **2009** | ** **  | **2008** | ** ** |
|-------------------------------------------------------|------------|----------|-------------|----------|------------|
| Derivatives — Price risk  management assets      |       | $        |  3,391 |     | $          | 26,086 |   |
| Derivatives — Price risk  management liabilities |       | $        |  4,380 |     | $          |  7,337 |   |

 

Ferrellgas,L.P. had the following cash flow hedge activity included in OCI in theconsolidated statements of partners’ capital:

 

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| ** **                                                                                                                      | ** ** | **For the year  ended July 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                      | ** ** | **2009**                              | ** ** |
| Fair value loss adjustment classified as OCI with  offset in Price risk management assets and Price risk management liabilities |       | $                                     | (186,449   | ) |
|                                                                                                                            |       |                                  |       |   |
| Reclassification of net losses originally recorded  within OCI to Cost of product sold — propane and other gas liquids     |       | $                                     | (166,711   | ) |

 

Thefair value losses reported above relate to the significant decrease inwholesale propane prices that occurred during fiscal 2009. Assuming a minimalchange in future market prices, Ferrellgas, L.P. expects to reclassify netlosses of approximately $1.0 million to earnings during the next year. Thesenet losses are expected to be offset by margins on propane sales commitmentsFerrellgas, L.P. has with its customers that qualify for the normal purchasenormal sales exception under SFAS 133.

 

During the years ended July 31,2009, 2008 and 2007, Ferrellgas, L.P. had no reclassifications to earningsresulting from discontinuance of any cash flow hedges arising from theprobability of the original forecasted transactions not occurring within theoriginally specified period of time defined within the hedging relationship.

 

Asof July 31, 2009, Ferrellgas, L.P. had financial derivative contractscovering 0.7 million barrels of propane that were entered into as cash flowhedges of forward and forecasted purchases of propane.

 

During the year ended July 31, 2009,four counterparties represented 85% of net settled cash flow hedging positionsreported in “Cost of goods sold — propane and other gas liquids sales.” Duringthe year ended July 31, 2009, Ferrellgas, L.P. neither held nor enteredinto financial derivative contracts that contained credit risk relatedcontingency features.

 

In accordance with SFAS 157, Ferrellgas,L.P. determines the fair value of its assets and liabilities subject to fairvalue measurement by using the highest possible “Level” as defined within SFAS157. The three levels defined by the SFAS 157 hierarchy are as follows:

 

·                  Level 1 —Quoted prices available in active markets for identical assets or liabilities.

·                  Level 2 —Pricing inputs not quoted in active markets but either directly or indirectlyobservable.

·                  Level 3 —Significant inputs to pricing that have little or no transparency with inputsrequiring significant management judgment or estimation.

 

Ferrellgas,L.P. considers over-the-counter derivative instruments entered into directlywith third parties as Level 2 valuation since the values of these derivativesare quoted by third party brokers and are on an exchange for similartransactions. The market prices used to value Ferrellgas, L.P.’s derivativeshave been determined using independent third party prices, readily availablemarket information, broker quotes, and appropriate valuation techniques.

 

At July 31, 2009 and 2008, allderivative assets and liabilities qualified for classification as Level 2 -other observable inputs as defined within SFAS 157. All financial derivativesassets and liabilities were non-trading positions.

 

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**K.****       ****Transactionswith related parties**

 

Ferrellgas, L.P. has no employees and is managed and controlled by itsgeneral partner. Pursuant to Ferrellgas, L.P.’s partnership agreement, thegeneral partner is entitled to reimbursement for all direct and indirectexpenses incurred or payments it makes on behalf of Ferrellgas, L.P., and allother necessary or appropriate expenses allocable to Ferrellgas, L.P. orotherwise reasonably incurred by its general partner in connection withoperating Ferrellgas, L.P.’s business. These costs primarily includecompensation and benefits paid to employees of the general partner who performservices on Ferrellgas, L.P.’s behalf and are reported in the consolidatedstatements of earnings as follows:

 
| ** **                         | ** ** | **For the year ended July 31,** | ** ** |
|------------------------------------|------------|--------------------------------------|------------|
| ** **                         | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
|                               |       |                                 |       |   |   |   |   |
| Operating expense                  |       | $                                    | 217,374    |   | $ | 185,576 |   | $ | 202,824 |   |
|                               |       |                                 |       |   |   |   |   |
| General and administrative expense |       | $                                    | 23,801     |   | $ | 27,203 |   | $ | 26,542 |   |

 

Ferrellgas,L.P. has a subleasing and a shared services agreement with Samson DentalPractice Management, LLC (“Samson”), a company wholly-owned by Mr. Ferrell.During the year ended July 31,2009, Ferrellgas, L.P. received payments totaling $0.3 million for servicesprovided to and sublease revenue receipts from Samson. No payments werereceived from Samson during the years ended July 31, 2008 and 2007.

 

Duringfiscal 2009, Ferrellgas, L.P. paid Fleishman-Hillard Inc. $0.2 million for marketingand communications services. Elizabeth Solberg, a member of the general partner’sboard of directors, serves as the General Manager of Fleishman—Hillard Inc.

 

Seeadditional discussions about transactions with related parties in Note I —Partner’s capital.

 

**L.****            ****Contingenciesand commitments**

 

*Litigation*

 

Ferrellgas, L.P.’s operations are subject to all operating hazards andrisks normally incidental to handling, storing, transporting and otherwiseproviding for use by consumers of combustible liquids such as propane. As aresult, at any given time, Ferrellgas, L.P. is threatened with or named as adefendant in various lawsuits arising in the ordinary course of business.Currently, Ferrellgas, L.P. is not a party to any legal proceedings other thanvarious claims and lawsuits arising in the ordinary course of business. It isnot possible to determine the ultimate disposition of these matters; however,management is of the opinion that there are no known claims or contingentclaims that are reasonably expected to have a material adverse effect on theconsolidated financial condition, results of operations and cash flows ofFerrellgas, L.P.

 

Ferrellgas,L.P. has been named as a defendant in lawsuits filed in multiple federal andstate courts that seek to certify nationwide or statewide classes. Theplaintiffs in each case generally allege that Ferrellgas, L.P. failed to informconsumers of the amount of propane contained in propane tanks they purchasedrelated to its Blue Rhino branded propane tank exchange activities. The caseshave generally been stayed until motions are heard regarding coordination formultidistrict treatment in a single court prior to trial. Based on Ferrellgas,L.P.’s business and consumer notification practices in its Blue Rhino tankexchange operations, Ferrellgas, L.P. believes that all of these claims arewithout merit and intend to defend the claims vigorously.

 

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* *

*Long-term debt-related commitments*

 

Ferrellgas, L.P. has longand short-term payment obligations under agreements such as senior notes andits unsecured credit facility. See Note H - Debt - for a description of thesedebt obligations and a schedule of future maturities.

 

*Operatinglease commitments and buyouts*

 

Ferrellgas, L.P. leasescertain property, plant and equipment under noncancelable and cancelableoperating leases. Amounts shown in the table below represent minimum leasepayment obligations under Ferrellgas, L.P.’s third-party operating leases withterms in excess of one year for the periods indicated. These arrangementsinclude the leasing of transportation equipment, property, computer equipmentand propane tanks. Ferrellgas, L.P. accounts for these arrangements asoperating leases.

 

Ferrellgas, L.P. isrequired to recognize a liability for the fair value of guarantees issued afterDecember 31, 2002. The only material guarantees Ferrellgas, L.P. has areassociated with residual value guarantees of operating leases. Most of theoperating leases involving Ferrellgas, L.P.’s transportation equipment containresidual value guarantees. These transportation equipment lease arrangementsare scheduled to expire over the next seven fiscal years. Most of thesearrangements provide that the fair value of the equipment will equal or exceeda guaranteed amount, or Ferrellgas, L.P. will be required to pay the lessor thedifference. The fair value of these residual value guarantees entered intoafter December 31, 2002 was $0.7 million as of July 31, 2009.Although the fair values of the underlying equipment at the end of the leaseterms have historically exceeded these guaranteed amounts, the maximumpotential amount of aggregate future payments Ferrellgas, L.P. could berequired to make under these leasing arrangements, assuming the equipment isworthless at the end of the lease term, was $10.0 million as of July 31,2009. Ferrellgas, L.P. does not know of any event, demand, commitment, trend oruncertainty that would result in a material change to these arrangements.

 

Operating lease buyoutsrepresent the maximum amount Ferrellgas, L.P. would pay if it were to exerciseits right to buyout the assets at the end of their lease term.

 

Thefollowing table summarizes Ferrellgas, L.P.’s contractual operating leasecommitments and buyout obligations as of July 31, 2009:

 
| ** **                  | ** ** | **Future minimum rental and buyout amounts by fiscal year** | ** ** |
|-----------------------------|------------|-------------------------------------------------------------|------------|
| ** **                  | ** ** | **2010**                                                    | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** |
|                        |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Operating lease obligations |       | $                                                           | 22,246     |   | $ | 15,475 |   | $ | 8,431 |   | $ | 5,590 |   | $ | 4,734 |   | $ | 11,137 |   |
| Operating lease buyouts     |       | $                                                           | 8,641      |   | $ | 5,323 |   | $ | 2,827 |   | $ | 357 |   | $ | 784 |   | $ | 1,418 |   |

 

Certainproperty and equipment is leased under non-cancelable operating leases, whichrequire fixed monthly rental payments and which expire at various dates through2024. Rental expense under these leases totaled $38.6 million, $44.3 million,and $45.3 million for fiscal 2009, 2008 and 2007, respectively.

 

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**M.****         ****Employee benefits**

 

Ferrellgas, L.P. has no employees and is managed and controlled by itsgeneral partner. Ferrellgas, L.P. assumes all liabilities, which includespecific liabilities related to the following employee benefit plans for thebenefit of the officers and employees of the general partner.

 

FerrellCompanies makes contributions to the ESOT, which causes a portion of the sharesof Ferrell Companies owned by the ESOT to be allocated to employees’ accountsover time. The allocation of Ferrell Companies’ shares to employee accountscauses a non-cash compensation charge to be incurred by Ferrellgas, L.P.,equivalent to the fair value of such shares allocated. This non-cashcompensation charge is reported separately in Ferrellgas, L.P.’s consolidatedstatements of earnings and thus excluded from operating and general andadministrative expenses. The non-cash compensation charges were $6.8 million,$12.4 million, and $11.2 million during fiscal 2009, 2008 and 2007,respectively. Ferrellgas, L.P. is not obligated to fund or make contributionsto the ESOT.

 

The general partner and its parent,Ferrell Companies, have a defined contribution profit-sharing plan whichincludes both profit sharing and matching contributions. The plan coverssubstantially all full time employees. With the establishment of the ESOP in July 1998,Ferrellgas, L.P. suspended future contributions to the profit sharing planbeginning with fiscal 1998. The plan, which qualifies under section 401(k) ofthe Internal Revenue Code, also provides for matching contributions under acash or deferred arrangement based upon participant salaries and employeecontributions to the plan. Matching contributions for fiscal 2009, 2008 and2007 were $2.7 million, $2.6 million, and $3.0 million, respectively.

 

Thegeneral partner has a defined benefit plan that provides participants who werecovered under a previously terminated plan with a guaranteed retirement benefitat least equal to the benefit they would have received under the terminatedplan. Until July 31, 1999, benefits under the terminated plan weredetermined by years of credited service and salary levels. As of July 31,1999, years of credited service and salary levels were frozen. The generalpartner’s funding policy for this plan is to contribute amounts deductible forFederal income tax purposes and invest the plan assets primarily in corporatestocks and bonds, U.S. Treasury bonds and short-term cash investments. Duringfiscal 2009, 2008 and 2007 other comprehensive income and other liabilitieswere adjusted by $(6.0) thousand $(0.1) million and $(0.4) million, respectively.

 

**N**.            **Quarterlydata (unaudited)**

 

Thefollowing summarized unaudited quarterly data includes all adjustments(consisting only of normal recurring adjustments), which Ferrellgas, L.P.considers necessary for a fair presentation. Due to the seasonality of thepropane distribution industry, first and fourth quarter revenues, gross marginfrom propane and other gas liquids sales and net earnings are consistently lessthan the second and third quarter results. Other factors affecting the resultsof operations include competitive conditions, demand for product, timing ofacquisitions, variations in the weather and fluctuations in propane prices.

 

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| **For the year ended July 31, 2009**                  | ** ** | ** **         | ** ** | ** **          | ** ** | ** **         | ** ** | ** **          | ** ** |
|------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|
| ** **                                                 | ** ** | ** **         | ** ** | ** **          | ** ** | ** **         | ** ** | ** **          | ** ** |
| ** **                                                 | ** ** | **First  quarter** | ** ** | **Second  quarter** | ** ** | **Third  quarter** | ** ** | **Fourth  quarter** | ** ** |
|                                                       |       |               |       |                |       |               |       |                |       |
| Revenues                                                   |       | $                  | 480,074    |                | $          | 715,625            |       | $                   | 561,133    |   | $ | 312,690 |   |
| Gross margin from propane and other gas liquids  sales (a) |       | 119,143            |       | 219,009             |       | 165,969            |       | 118,164             |       |
| Net earnings (loss)                                        |       | (8,948             | )          | 76,431              |       | 39,293             |       | (29,275             | )          |
|                                                            |            |                    |            |                     |            |                    |            |                     |            |  |  |  |  |

 
| **For the year ended July 31, 2008**                  | ** ** | ** **         | ** ** | ** **          | ** ** | ** **         | ** ** | ** **          | ** ** |
|------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|
| ** **                                                 | ** ** | ** **         | ** ** | ** **          | ** ** | ** **         | ** ** | ** **          | ** ** |
| ** **                                                 | ** ** | **First  quarter** | ** ** | **Second  quarter** | ** ** | **Third  quarter** | ** ** | **Fourth  quarter** | ** ** |
|                                                       |       |               |       |                |       |               |       |                |       |
| Revenues                                                   |       | $                  | 394,916    |                | $          | 763,968            |       | $                   | 712,090    |   | $ | 419,715 |   |
| Gross margin from propane and other gas liquids  sales (a) |       | 106,416            |       | 179,932             |       | 165,968            |       | 111,047             |       |
| Net earnings (loss)                                        |       | (17,084            | )          | 57,854              |       | 41,588             |       | (33,126             | )          |
|                                                            |            |                    |            |                     |            |                    |            |                     |            |  |  |  |  |

 

----

(a)          Grossmargin from “Propane and other gas liquids sales” represents “Propane and othergas liquids sales” less “Cost of product sold — propane and other gas liquidssales.”

 

**O**.           **Subsequentevents**

 

During August 2009, Ferrellgas, L.P. made scheduled principalpayments of $73.0 million on the 8.87% Series C senior notes usingavailability under its unsecured credit facility due April 2010.

 

DuringSeptember 2009, Ferrellgas, L.P. issued $300.0 million in aggregateprincipal amount of new 9.125% senior notes due 2017 at an offering price equalto 98.6% of par. Ferrellgas, L.P. then gave early redemption notice to theholders of its $82.0 million 7.24% series D notes due August 1, 2010 andits $70.0 million 7.42% series E notes due August 1, 2013. The principalamount of these senior notes and the related prepayment penalties are expectedto be funded with the proceeds from the new senior notes offering withremaining proceeds used to reduce borrowings on Ferrellgas, L.P.’s unsecuredcredit facility due April 2010.

 

During September 2009,Ferrellgas, L.P. and several banks and other financial institutions executedinto escrow a Credit Agreement (“Credit Agreement”) which will be released fromescrow pending certain closing conditions. The Credit Agreement is intended toreplace Ferrellgas, L.P.’s existing unsecured credit facility. The CreditAgreement, at closing, will provide for a $400.0 million revolving creditfacility with the entire amount available for loans and with a sublimit of$200.0 million for letters of credit. The obligations under such creditfacility will be secured by substantially all assets of Ferrellgas, L.P., thegeneral partner and certain subsidiaries of Ferrellgas, L.P. but specificallyexcluding (a) assets that are subject to the operating partnership’sreceivables securitization facility, (b) the general partner’s equityinterest in Ferrellgas Partners, L.P. and (c) equity interest in certainunrestricted subsidiaries. Such obligations will also be guaranteed by thegeneral partner and certain subsidiaries of Ferrellgas, L.P. The securedrevolving credit facility will mature on the third anniversary of theclosing date for such facility.

 

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During September 2009,Ferrellgas, L.P. acquired Vanson, LLC, based in Michigan. The propanedistribution assets acquired have an aggregate value of $45.1 million. Thisacquisition was funded by $36.6 million in cash payments, the issuance of $5.4million of liabilities and other costs and considerations, and the contributionof net assets of $3.1 million from Ferrellgas Partners.

 

Ferrellgas, L.P.has evaluated events and transactions for subsequent events disclosuresoccurring after the balance sheet date through its Form 10-K filing on September 28,2009 with the Securities and Exchange Commission.

 

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

To theBoard of Directors ofFerrellgas Finance Corp.**Overland Park, Kansas

 

Wehave audited the accompanying balance sheets of Ferrellgas Finance Corp. (awholly-owned subsidiary of Ferrellgas, L.P., referred to herein as “the Company”)as of July 31, 2009 and 2008, and the related statements of earnings,stockholder’s equity, and cash flows for each of the three years in the periodended July 31, 2009.  These financial statements are theresponsibility of the Company’s management.  Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Our audits included consideration ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting.  Accordingly, we express no such opinion*.*  An audit also includes examining,on a test basis, evidence supporting the amounts and disclosures in thefinancial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation.  We believe that our audits provide a reasonablebasis for our opinion.

 

In our opinion, such financial statements present fairly, in all materialrespects, the financial position of Ferrellgas Finance Corp. as of July 31,2009 and 2008, and the results of its operations and its cash flows for each ofthe three years in the period ended July 31, 2009, in conformity withaccounting principles generally accepted in the United States of America.

 

/s/DELOITTE & TOUCHE LLP

KansasCity, Missouri

September 28,2009

 

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**FERRELLGAS FINANCE CORP.**

**(a wholly-owned subsidiary ofFerrellgas, L.P.)**

 

**BALANCE SHEETS**

 
| ** **                                                                                 | ** ** | **July 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                 | ** ** | **2009**          | ** ** | **2008** | ** ** |
| **ASSETS**                                                                                 | ** ** | ** **        | ** ** | ** ** | ** ** |
| Cash                                                                                       |       | $                 | 1,100      |   | $ | 1,100 |   |
| **Total assets**                                                                           |       | $                 | 1,100      |   | $ | 1,100 |   |
|                                                                                       |       |              |       |   |   |
| **STOCKHOLDER’S EQUITY**                                                              |       |              |       |   |   |
| Common  stock, $1 par value; 2,000 shares authorized; 1,000 shares issued and  outstanding |       | $                 | 1,000      |   | $ | 1,000 |   |
|                                                                                       |       |              |       |   |   |
| Additional  paid in capital                                                                |       | 6,757             |       | 3,312 |   |
|                                                                                       |       |              |       |   |   |
| Accumulated  deficit                                                                       |       | (6,657            | )          | (3,212 | ) |
| **Total stockholder’s equity**                                                        |       | $                 | 1,100      |   | $ | 1,100 |   |

 

See notes to financialstatements.

 

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**FERRELLGAS FINANCE CORP.**

**(a wholly-owned subsidiary ofFerrellgas, L.P.)**

 

**STATEMENTSOF EARNINGS**

 
| ** **                          | ** ** | **For the year ended July 31,** | ** ** |
|-------------------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| General  and administrative expense |       | $                                    | 3,445      |   | $ | 992 |   | $ | 444 |   |
|                                |       |                                 |       |   |   |   |   |
| **Net loss**                        |       | $                                    | (3,445     | ) | $ | (992 | ) | $ | (444 | ) |

 

See notes to financialstatements.

 

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**FERRELLGAS FINANCE CORP.**

**(a wholly-owned subsidiary ofFerrellgas, L.P.)**

 

**STATEMENTS OF STOCKHOLDER’S EQUITY**

 
| ** **             | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **             | ** ** | **Total**  | ** ** |
|------------------------|------------|------------------|------------|-------------|------------|-----------------|------------|------------------------|------------|------------|------------|
| ** **             | ** ** | **Common stock** | ** ** | **paid in** | ** ** | **Accumulated** | ** ** | **stockholder’s** | ** ** |
| ** **             | ** ** | **Shares**       | ** ** | **Dollars** | ** ** | **capital**     | ** ** | **deficit**            | ** ** | **equity** | ** ** |
| **July 31, 2006** |       | 1,000            |       | $           | 1,000      |            | $          | 1,776                  |       | $          | (1,776     | ) | $ | 1,000 |   |
| Capital  contribution  |       | —           |       | —      |       | 444             |       | —                 |       | 444        |       |
| Net  loss              |       | —           |       | —      |       | —          |       | (444                   | )          | (444       | )          |
| **July 31, 2007** |       | 1,000            |       | 1,000       |       | 2,220           |       | (2,220                 | )          | 1,000      |       |
| Capital  contribution  |       | —           |       | —      |       | 1,092           |       | —                 |       | 1,092      |       |
| Net  loss              |       | —           |       | —      |       | —          |       | (992                   | )          | (992       | )          |
| **July 31, 2008** |       | 1,000            |       | 1,000       |       | 3,312           |       | (3,212                 | )          | 1,100      |       |
| Capital  contribution  |       | —           |       | —      |       | 3,445           |       | —                 |       | 3,445      |       |
| Net  loss              |       | —           |       | —      |       | —          |       | (3,445                 | )          | (3,445     | )          |
| **July 31, 2009** |       | 1,000            |       | $           | 1,000      |            | $          | 6,757                  |       | $          | (6,657     | ) | $ | 1,100 |   |

 

See notes to financialstatements.

 

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**FERRELLGASFINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas, L.P.)**

 

**STATEMENTS OF CASH FLOWS**

 
| ** **                                | ** ** | **For the year ended July 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------|------------|
| ** **                                | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Cash flows from operating activities:** |       |                                 |       |   |   |   |   |
| Net  loss                                 |       | $                                    | (3,445     | ) | $ | (992 | ) | $ | (444 | ) |
| Cash  used in operating activities        |       | (3,445                               | )          | (992 | ) | (444 | ) |
|                                      |       |                                 |       |   |   |   |   |
| **Cash flows from financing activities:** |       |                                 |       |   |   |   |   |
| Capital  contribution                     |       | 3,445                                |       | 1,092 |   | 444 |   |
| Cash  provided by financing activities    |       | 3,445                                |       | 1,092 |   | 444 |   |
|                                      |       |                                 |       |   |   |   |   |
| Change  in cash                           |       | —                               |       | 100 |   | — |   |
| Cash  - beginning of year                 |       | 1,100                                |       | 1,000 |   | 1,000 |   |
| **Cash - end of year**                    |       | $                                    | 1,100      |   | $ | 1,100 |   | $ | 1,000 |   |

 

See notes to financialstatements.

 

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**FERRELLGASFINANCE CORP.**

**(awholly-owned subsidiary of Ferrellgas, L.P.)**

 

**NOTES TO FINANCIAL STATEMENTS**

 

**A.****           ****Formation**

 

FerrellgasFinance Corp. (the “Finance Corp.”), a Delaware corporation, was formed on January 16,2003 and is a wholly-owned subsidiary of Ferrellgas, L.P. (the “Partnership”).

 

ThePartnership contributed $1,000 to the Finance Corp. on January 24, 2003 inexchange for 1,000 shares of common stock.

 

TheFinance Corp. has nominal assets, does not conduct any operations and has noemployees.

 

**B.**            **Commitment**

 

On April 20, 2004the Partnership issued $250.0 million of 6 3/4% senior notes due 2014. On August 4,2008, the Partnership issued $200.0 million of 6 3/4% senior notes due 2014 atan offering price equal to 85% of par. The Partnership may redeem some or allof the aggregate principal amount of the notes at any time on or after May 1,2009.

 

TheFinance Corp. serves as co-obligor for the senior notes.

 

**C.**            **Income Taxes**

 

Income taxes have beencomputed separately as the Finance Corp. files its own income tax return.Deferred income taxes are provided as a result of temporary differences betweenfinancial and tax reporting using the asset/liability method. Deferred incometaxes are recognized for the tax consequences of temporary differences betweenthe financial statement carrying amounts and tax basis of existing assets andliabilities.

 

Due to the inability ofthe Finance Corp. to utilize the deferred tax benefit of $2,589 associated withthe net operating loss carryforward of $6,656, which expires at various datesthrough July 31, 2029, a valuation allowance has been provided on the fullamount of the deferred tax asset. Accordingly, there is no net deferred taxbenefit for fiscal 2009, 2008 and 2007, and there is no net deferred tax assetas of July 31, 2009 and 2008.

 

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**INDEX TOFINANCIAL STATEMENT SCHEDULES**

 
| ** **                                      | **Page**                                                                                                                                                       |
|-------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Ferrellgas  Partners, L.P. and Subsidiaries** |                                                                                                                                                           |
|                                            |                                                                                                                                                           |
| Schedule I                                      | Parent Only Balance Sheets as of July 31, 2009  and 2008 and Statements of Earnings and Cash Flows for the years ended  July 31, 2009, 2008 and 2007 | S-2 |
|                                            |                                                                                                                                                           |   |
| Schedule II                                     | Valuation and  Qualifying Accounts for the years ended July 31, 2009, 2008 and 2007                                                                       | S-5 |
|                                            |                                                                                                                                                           |
| **Ferrellgas, L.P. and Subsidiaries**           |                                                                                                                                                           |
|                                            |                                                                                                                                                           |
| Schedule II                                     | Valuation and  Qualifying Accounts for the years ended July 31, 2009, 2008 and 2007                                                                       | S-6 |

 

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| ** ** | **FERRELLGAS  PARTNERS, L.P.**        | **Schedule  I** |
|------------|---------------------------------------|-----------------|
| ** ** | **PARENT  ONLY**                      | ** **      |
| ** ** | ** **                            | ** **      |
| ** ** | **BALANCE  SHEETS**                   | ** **      |
|       | **(in  thousands, except unit data)** |            |

 
| ** **                                                                                        | ** ** | **July 31,** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                        | ** ** | **2009**          | ** ** | **2008** | ** ** |
| **ASSETS**                                                                                        | ** ** | ** **        |       |   |   |
|                                                                                              |       |              |       |   |   |
| Cash  and cash equivalents                                                                        |       | $                 | 16         |   | $ | 69 |   |
| Prepaid  expenses and other current assets                                                        |       | 675               |       | 673 |   |
| Investment  in Ferrellgas, L.P.                                                                   |       | 417,338           |       | 432,049 |   |
| Other  assets, net                                                                                |       | 1,237             |       | 1,868 |   |
| **Total assets**                                                                                  |       | $                 | 419,266    |   | $ | 434,659 |   |
| ** **                                                                                        |       |              |       |   |   |
| **LIABILITIES AND PARTNERS’ CAPITAL**                                                        |       |              |       |   |   |
| ** **                                                                                        |       |              |       |   |   |
| Other  current liabilities                                                                        |       | $                 | 3,102      |   | $ | 3,064 |   |
| Long  term debt                                                                                   |       | 269,091           |       | 269,471 |   |
|                                                                                              |       |              |       |   |   |
| **Partners’ capital**                                                                        |       |              |       |   |   |
| Common  unitholders (68,236,755 and 62,961,674 units outstanding at 2009 and 2008,  respectively) |       | 206,255           |       | 201,618 |   |
| General  partner (689,260 and 635,977 units outstanding at 2009 and 2008,  respectively)          |       | (57,988           | )          | (58,036 | ) |
| Accumulated  other comprehensive income (loss)                                                    |       | (1,194            | )          | 18,542 |   |
| **Total partners’ capital**                                                                  |       | 147,073           |       | 162,124 |   |
| **Total liabilities and partners’ capital**                                                  |       | $                 | 419,266    |   | $ | 434,659 |   |

 

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| ** ** | **FERRELLGAS PARTNERS, L.P.** | ** ** |
|------------|-------------------------------|------------|
| ** ** | **PARENT ONLY**               | ** ** |
| ** ** | ** **                    | ** ** |
| ** ** | **STATEMENTS OF EARNINGS**    | ** ** |
|       | **(in thousands)**            |       |

 
| ** **                             | ** ** | **For the  year ended July 31,** | ** ** |
|----------------------------------------|------------|---------------------------------------|------------|
| ** **                             | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                             | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Equity in earnings of Ferrellgas, L.P. |       | $                                     | 76,718     |   | $ | 48,735 |   | $ | 58,827 |   |
| Operating expense                      |       | 328                                   |       | 259 |   | 275 |   |
|                                   |       |                                  |       |   |   |   |   |
| **Operating income**                   |       | 76,390                                |       | 48,476 |   | 58,552 |   |
|                                   |       |                                  |       |   |   |   |   |
| Interest expense                       |       | (23,734                               | )          | (23,711 | ) | (23,752 | ) |
| Income tax expense                     |       | (84                                   | )          | (76 | ) | — |   |
|                                   |       |                                  |       |   |   |   |   |
| **Net earnings**                       |       | $                                     | 52,572     |   | $ | 24,689 |   | $ | 34,800 |   |

 

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| ** ** | **FERRELLGAS PARTNERS, L.P.** | ** ** |
|------------|-------------------------------|------------|
| ** ** | **PARENT ONLY**               | ** ** |
| ** ** |                          | ** ** |
| ** ** | **STATEMENTS OF CASH FLOWS**  | ** ** |
| ** ** | **(in thousands)**            | ** ** |

 
| ** **                                                                           | ** ** | **For the  year ended July 31,** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                           | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Cash flows from operating  activities:**                                           |       |                                  |       |   |   |   |   |
| Net earnings                                                                         |       | $                                     | 52,572     |   | $ | 24,689 |   | $ | 34,800 |   |
| Reconciliation of net earnings to net cash used in  operating activities:            |       |                                  |       |   |   |   |   |
| Other                                                                                |       | 292                                   |       | 519 |   | (142 | ) |
| Equity in earnings of Ferrellgas, L.P.                                               |       | (76,718                               | )          | (48,735 | ) | (58,827 | ) |
| Net cash used in operating activities                                                |       | (23,854                               | )          | (23,527 | ) | (24,169 | ) |
|                                                                                 |       |                                  |       |   |   |   |   |
| **Cash flows from investing  activities:**                                           |       |                                  |       |   |   |   |   |
| Distributions received from Ferrellgas, L.P.                                         |       | 156,031                               |       | 150,815 |   | 150,522 |   |
| Cash contributed to Ferrellgas, L.P.                                                 |       | (69,848                               | )          | — |   | (46,100 | ) |
| Net cash provided by investing activities                                            |       | 86,183                                |       | 150,815 |   | 104,422 |   |
|                                                                                 |       |                                  |       |   |   |   |   |
| **Cash flows from financing  activities:**                                           |       |                                  |       |   |   |   |   |
| Distributions                                                                        |       | (132,581                              | )          | (127,190 | ) | (127,072 | ) |
| Cash paid for financing costs                                                        |       | 50                                    |       | (383 | ) | (367 | ) |
| Issuance of common units (net of issuance costs of  $401, $0 and $226, respectively) |       | 69,447                                |       | — |   | 44,319 |   |
| Proceeds from exercise of common unit options                                        |       | —                                |       | 76 |   | 1,025 |   |
| Other                                                                                |       | 702                                   |       | — |   | 470 |   |
| Net cash used in financing activities                                                |       | (62,382                               | )          | (127,497 | ) | (81,625 | ) |
|                                                                                 |       |                                  |       |   |   |   |   |
| Decrease in cash and cash equivalents                                                |       | (53                                   | )          | (209 | ) | (1,372 | ) |
| Cash and cash equivalents - beginning of year                                        |       | 69                                    |       | 278 |   | 1,650 |   |
| **Cash and cash equivalents - end of  year**                                         |       | $                                     | 16         |   | $ | 69 |   | $ | 278 |   |

 

S-4

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Table of Contents

 

| ** ** | **FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES** | **Schedule II** |
|------------|------------------------------------------------|-----------------|
| ** ** |                                           | ** **      |
| ** ** | **VALUATION AND QUALIFYING ACCOUNTS**          | ** **      |
| ** ** | **(in thousands)**                             | ** **      |

 
| ** **                       | ** ** | ** **     | ** **  | **Additions**  | ** ** | ** **    | ** ** | ** **       | ** ** |
|----------------------------------|------------|----------------|-------------|----------------|------------|---------------|------------|------------------|------------|
| ** **                       | ** ** | **Balance at** | ** **  | **Charged to** | ** ** | ** **    | ** ** | **Deductions**   | ** ** | **Balance** | ** ** |
| ** **                       | ** ** | **beginning**  | ** **  | **cost /**     | ** ** | **Other**     | ** ** | **(amounts**     | ** ** | **at end** | ** ** |
| **Description**                  | ** ** | **of period**  | ** **  | **expenses**   | ** ** | **additions** | ** ** | **charged-off)** | ** ** | **of period** | ** ** |
|                             |       |           |        |           |       |          |       |             |       |   |   |
| **Year  ended July 31, 2009**    | ** ** | ** **     | ** **  | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                       | ** ** | ** **     | ** **  | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| Allowance for  doubtful accounts |       | $              |  5,977 |           | $          | 4,421         |       | $                | 961        |   | $ | (7,065 | ) | $ | 4,294 |   |
| ** **                       |       |           |        |           |       |          |       |             |       |   |   |
| **Year  ended July 31, 2008**    |       |           |        |           |       |          |       |             |       |   |   |
| ** **                       |       |           |        |           |       |          |       |             |       |   |   |
| Allowance for  doubtful accounts |       | $              |  4,358 |           | $          | 8,092         |       | $                | 643        |   | $ | (7,116 | ) | $ | 5,977 |   |
| ** **                       |       |           |        |           |       |          |       |             |       |   |   |
| **Year  ended July 31, 2007**    |       |           |        |           |       |          |       |             |       |   |   |
| ** **                       |       |           |        |           |       |          |       |             |       |   |   |
| Allowance for  doubtful accounts |       | $              |  5,628 |           | $          | 4,745         |       | $                | 419        |   | $ | (6,434 | ) | $ | 4,358 |   |

 

S-5

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Table of Contents

 

| ** ** | **FERRELLGAS, L.P. AND SUBSIDIARIES** | ** ** |
|------------|---------------------------------------|------------|
| ** ** | ** **                            | ** ** |
| ** ** | **VALUATION AND QUALIFYING ACCOUNTS** | ** ** |
| ** ** | **(in thousands)**                    | ** ** |

 
| ** **                        | ** ** | ** **     | ** ** | **Additions**  | ** ** | ** **    | ** ** | ** **       | ** ** |
|-----------------------------------|------------|----------------|------------|----------------|------------|---------------|------------|------------------|------------|
| ** **                        | ** ** | **Balance at** | ** ** | **Charged to** | ** ** | ** **    | ** ** | **Deductions**   | ** ** | **Balance** | ** ** |
| ** **                        | ** ** | **beginning**  | ** ** | **cost /**     | ** ** | **Other**     | ** ** | **(amounts**     | ** ** | **at end** | ** ** |
| **Description**                   | ** ** | **of period**  | ** ** | **expenses**   | ** ** | **additions** | ** ** | **charged-off)** | ** ** | **of period** | ** ** |
| ** **                        | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended July 31, 2009** | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                        | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| Allowance for doubtful accounts   |       | $              | 5,977      |           | $          | 4,421         |       | $                | 961        |   | $ | (7,065 | ) | $ | 4,294 |   |
| ** **                        | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended July 31, 2008** | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                        | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| Allowance for doubtful accounts   |       | $              | 4,358      |           | $          | 8,092         |       | $                | 643        |   | $ | (7,116 | ) | $ | 5,977 |   |
| ** **                        | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended July 31, 2007** | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                        | ** ** | ** **     | ** ** | ** **     | ** ** | ** **    | ** ** | ** **       | ** ** | ** ** | ** ** |
| Allowance for doubtful accounts   |       | $              | 5,628      |           | $          | 4,745         |       | $                | 419        |   | $ | (6,434 | ) | $ | 4,358 |   |

 

S-6

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Table of Contents

 

The exhibits listed beloware furnished as part of this Amendment No. 1 to the Annual Report on Form 10-K/A.Exhibits required by Item 601 of Regulation S-K of the Securities Act, whichare not listed, are not applicable.

 
| **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 3.1  to our registration statement on Form S-3 filed March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.2 |   | First Amendment to  Fourth Amended and Restated Agreement of Limited Partnership of Ferrellgas  Partners, L.P. dated as of March 8, 2005. Incorporated by reference to  Exhibit 3.2 to our registration statement on Form S-3 filed  March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.3 |   | Second Amendment to  Fourth Amended and Restated Agreement of Limited Partnership of Ferrellgas  Partners, L.P. dated as of June 29, 2005. Incorporated by reference to  Exhibit 3.3 to our registration statement on Form S-3 filed  March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.4 |   | Third Amendment to  Fourth Amended and Restated Agreement of Limited Partnership of Ferrellgas  Partners, L.P. dated as of October 11, 2006. Incorporated by reference  to Exhibit 3.4 to our registration statement on Form S-3 filed  March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.5 |   | Certificate of  Incorporation of Ferrellgas Partners Finance Corp. filed with the Delaware  Division of Corporations on March 28, 1996. Incorporated by reference to  Exhibit 3.6 to our registration statement on Form S-3 filed  March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.6 |   | Bylaws of Ferrellgas  Partners Finance Corp. Incorporated by reference to Exhibit 3.7 to our  registration statement on Form S-3 filed March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.7 |   | Third Amended and  Restated Agreement of Limited Partnership of Ferrellgas, L.P. dated as of  April 7, 2004. Incorporated by reference to Exhibit 3.5 to our  registration statement on Form S-3 filed March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.8 |   | Certificate of  Incorporation of Ferrellgas Finance Corp. filed with the Delaware Division of  Corporations on January 16, 2003. Incorporated by reference to  Exhibit 3.8 to our registration statement on Form S-3 filed  March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 3.9 |   | Bylaws of Ferrellgas  Finance Corp. adopted as of January 16, 2003. Incorporated by reference  to Exhibit 3.9 to our registration statement on Form S-3 filed  March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 4.1 |   | Specimen Certificate  evidencing Common Units representing Limited Partner Interests. Incorporated  by reference to Exhibit A of Exhibit 3.1 to our registration  statement on Form S-3 filed March 6, 2009. |
|                      |       |            |   |   |   |
|                      |       |            | 4.2 |   | Indenture dated as of  September 24, 2002, with form of Note attached, among Ferrellgas  Partners, L.P., Ferrellgas Partners Finance Corp. and U.S. Bank National  Association, as trustee, relating to $170,000,000 aggregate principal amount  of the Registrant’s 8 3⁄4% Senior Notes due 2012. Incorporated by reference to  Exhibit 4.2 to our Quarterly Report on Form 10-Q filed  March 10, 2009. |

 

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|   |   |   | 4.3    |   | Indenture dated as of  April 20, 2004, with form of Note attached, among Ferrellgas Escrow LLC,  Ferrellgas Finance Escrow Corporation and U.S. Bank National Association, as  trustee, relating to 6 3⁄4% Senior Notes due 2014. Incorporated by reference to  Exhibit 4.3 to our Quarterly Report on Form 10-Q filed  March 10, 2009.                                                                                                                                                                                                                                                        |
|--------|--------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.4    |   | Ferrellgas, L.P. Note  Purchase Agreement dated as of July 1, 1998, relating to: $109,000,000 6.99%  Senior Notes, Series A, due August 1, 2005, $37,000,000 7.08%  Senior Notes, Series B, due August 1, 2006, $52,000,000 7.12%  Senior Notes, Series C, due August 1, 2008, $82,000,000 7.24%  Senior Notes, Series D, due August 1, 2010, and  $70,000,000 7.42% Senior Notes, Series E, due August 1, 2013.  Incorporated by reference to Exhibit 4.4 to our Quarterly Report on  Form 10-Q filed March 10, 2009. |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.5    |   | Ferrellgas, L.P. Note  Purchase Agreement dated as of February 1, 2000, relating to: $21,000,000 8.68%  Senior Notes, Series A, due August 1, 2006, $90,000,000 8.78%  Senior Notes, Series B, due August 1, 2007, and  $73,000,000 8.87% Senior Notes, Series C, due August 1, 2009.  Incorporated by reference to Exhibit 4.5 to our Quarterly Report on  Form 10-Q filed March 10, 2009.                                                                                                                                                          |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.6    |   | Indenture dated as of  August 4, 2008, with form of Note attached, among Ferrellgas, L.P.,  Ferrellgas Finance Corp. and U.S. Bank National Association, as trustee,  relating to 6 3⁄4% Senior Notes due 2014. Incorporated by reference to  Exhibit 4.1 to our Current Report on Form 8-K filed August 5,  2008.                                                                                                                                                                                                                                                                             |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.7    |   | Indenture dated as of  September 14, 2009 with form of Note attached, among Ferrellgas, L.P.,  Ferrellgas Finance Corp. and U.S. Bank National Association, as trustee,  relating to 9 1/8% Senior Notes due 2017. Incorporated by reference to  Exhibit 4.1 to our Current Report on Form 8-K filed  September 14, 2009.                                                                                                                                                                                                                                                                         |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.8    |   | Registration Rights  Agreement dated as of September 14, 2009, by and among Ferrellgas, L.P.,  Ferrellgas Finance Corp. and the initial purchasers named therein.  Incorporated by reference to Exhibit 4.2 to our Current Report on  Form 8-K filed September 14, 2009.                                                                                                                                                                                                                                                                                                                          |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.9    |   | Registration Rights  Agreement dated as of August 4, 2008, by and among Ferrellgas, L.P.,  Ferrellgas Finance Corp. and the initial purchasers named therein.  Incorporated by reference to Exhibit 4.2 to our Current Report on  Form 8-K filed August 5, 2008.                                                                                                                                                                                                                                                                                                                                  |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.10   |   | Registration Rights  Agreement dated as of December 17, 1999, by and between Ferrellgas  Partners, L.P. and Williams Natural Gas Liquids, Inc. Incorporated by  reference to Exhibit 4.8 to our Quarterly Report on Form 10-Q filed  March 10, 2009.                                                                                                                                                                                                                                                                                                                                         |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.11   |   | First Amendment to  Registration Rights Agreement dated as of March 14, 2000, by and between  Ferrellgas Partners, L.P. and Williams Natural Gas Liquids, Inc.  Incorporated by reference to Exhibit 4.9 to our Quarterly Report on  Form 10-Q filed March 10, 2009.                                                                                                                                                                                                                                                                                                                         |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |   | 4.12   |   | Second Amendment to  Registration Rights Agreement dated as of April 6, 2001, by and between  Ferrellgas Partners, L.P. and The Williams Companies, Inc. Incorporated  by reference to Exhibit 4.10 to our Quarterly Report on Form 10-Q  filed March 10, 2009.                                                                                                                                                                                                                                                                                                                              |

 

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|   |   |   | 4.13   |   | Third Amendment to  Registration Rights Agreement dated as of June 29, 2005, by and between  Ferrellgas Partners, L.P. and JEF Capital Management, Inc. Incorporated  by reference to Exhibit 10.1 to our Current Report on Form 8-K  filed June 30, 2005.                                                                                                                                                                     |
|--------|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.1   |   | Fifth Amended and  Restated Credit Agreement dated as of April 22, 2005, among Ferrellgas,  L.P. as the borrower, Ferrellgas, Inc. as the general partner of the  borrower, Bank of America, N.A., as administrative agent and swing line  lender, and the lenders and L/C issuers party hereto. Incorporated by  reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q  filed June 8, 2005.                          |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.2   |   | First Amendment to  Fifth Amended and Restated Credit Agreement dated as of April 11, 2008,  by and among Ferrellgas, L.P. as the borrower, Ferrellgas, Inc. as the  general partner of the borrower, Bank of America, N.A. as administrative  agent, swing line lender and L/C issuer, and the lenders party hereto.  Incorporated by reference to Exhibit 10.1 to our Current Report on  Form 8-K filed April 14, 2008.      |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.3   |   | Second Amendment to  Fifth Amended and Restated Credit Agreement dated as of October 15,  2008, by and among Ferrellgas, L.P. as the borrower, Ferrellgas, Inc. as  the general partner of the borrower, Bank of America, N.A. as administrative  agent, swing line lender and L/C issuer, and the lenders party hereto.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K  filed October 16, 2008. |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.4   |   | Third Amendment to  Fifth Amended and Restated Credit Agreement dated as of April 15, 2009,  by and among Ferrellgas, L.P. as the borrower, Ferrellgas, Inc. as the  general partner of the borrower, Bank of America, N.A. as administrative  agent, swing line lender and L/C issuer, and the lenders party hereto.  Incorporated by reference to Exhibit 10.4 to our Quarterly Report on  Form 10-Q filed June 8, 2009.     |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.5   |   | Credit Agreement dated  as of May 1, 2007, among Ferrellgas, L.P. as the borrower,  Ferrellgas, Inc. as the general partner of the borrower, Bank of America  N.A. as administrative agent and the lenders party hereto. Incorporated by  reference to Exhibit 10.1 to our Current Report on Form 8-K filed  May 4, 2007.                                                                                                      |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.6   |   | Lender Addendum dated  as of June 6, 2006, by and among Deutsche Bank Trust Company Americas as  the new lender, Ferrellgas, L.P. as the borrower, Ferrellgas, Inc. and  Bank of America, N.A., as administrative agent. Incorporated by reference to  Exhibit 10.2 to our Annual Report on Form 10-K filed  October 12, 2006.                                                                                                 |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.7   |   | Commitment Increase  Agreement dated as of August 28, 2006, by and among Fifth Third Bank as  the increasing lender, Ferrellgas, L.P. as the borrower, Ferrellgas, Inc.  and Bank of America, N.A. as administrative agent. Incorporated by reference  to Exhibit 10.3 to our Annual Report on Form 10-K filed  October 12, 2006.                                                                                              |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |   | 10.8   |   | Amended and Restated  Receivable Interest Sale Agreement dated as of June 7, 2005 between  Ferrellgas, L.P., as originator, and Ferrellgas Receivables, LLC, as buyer.  Incorporated by reference to Exhibit 10.9 to our Quarterly Report on  Form 10-Q filed June 8, 2005.                                                                                                                                                         |

 

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|   |   |   | 10.9   |   | Amendment No. 1 to  Amended and Restated Receivable Interest Sale Agreement and Subordinated Note  dated as of June 6, 2006 between Ferrellgas, L.P., as originator, and  Ferrellgas Receivables, LLC, as buyer. Incorporated by reference to  Exhibit 10.11 to our Quarterly Report on Form 10-Q filed on  June 8, 2006.                                                                                                                                                            |
|--------|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.10  |   | Amendment No. 2 to  Amended and Restated Receivable Interest Sale Agreement dated as of  August 16, 2006 between Ferrellgas, L.P., as originator, and Ferrellgas  Receivables, LLC, as buyer. Incorporated by reference to Exhibit 10.6 to  our Annual Report on Form 10-K filed October 12, 2006.                                                                                                                                                                                   |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.11  |   | Amendment No. 3 to  Amended and Restated Receivable Interest Sale Agreement dated as of  May 31, 2007 between Ferrellgas, L.P., as originator, and Ferrellgas  Receivables, LLC, as buyer. Incorporated by reference to Exhibit 10.2 to  our Current Report on Form 8-K Filed June 1, 2007.                                                                                                                                                                                          |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.12  |   | Amendment No. 4 to  Amended and Restated Receivable Interest Sale Agreement dated as of  May 5, 2008 between Ferrellgas, L.P., as originator, and Ferrellgas  Receivables, LLC, as buyer. Incorporated by reference to Exhibit 10.2 to  our Current Report on Form 8-K Filed May 6, 2008.                                                                                                                                                                                            |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.13  |   | Second Amended and  Restated Receivable Sale Agreement dated as of April 15, 2009 between  Ferrellgas, L.P., as originator, and Ferrellgas Receivables, LLC, as buyer.  Incorporated by reference to Exhibit 10.1 to our Current Report on  Form 8-K Filed April 20, 2009.                                                                                                                                                                                                                |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.14  |   | Second Amended and  Restated Receivables Purchase Agreement dated as of June 6, 2006, among  Ferrellgas Receivables, LLC, as seller, Ferrellgas, L.P., as servicer,  Jupiter Securitization Corporation, the financial institutions from time to  time party hereto, Fifth Third Bank and JPMorgan Chase Bank, NA, as agent.  Incorporated by reference to Exhibit 10.19 to our Quarterly Report on  Form 10-Q filed June 8, 2006.                                                        |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.15  |   | Amendment No. 1 to  Second Amended and Restated Receivables Purchase Agreement dated as of  August 16, 2006, by and among Ferrellgas Receivables, LLC, as seller,  Ferrellgas, L.P., as servicer, JP Morgan Chase Bank, N.A., Jupiter  Securitization Company, LLC, Fifth Third Bank and JPMorgan Chase Bank, N.A.,  as agent. Incorporated by reference to Exhibit 99.2 to our Current  Report on Form 8-K filed August 18, 2006.                                                   |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.16  |   | Amendment No. 2 to  Second Amended and Restated Receivables Purchase Agreement dated as of  May 31, 2007, by and among Ferrellgas Receivables, LLC, as seller,  Ferrellgas, L.P., as servicer, JP Morgan Chase Bank, N.A., Jupiter  Securitization Company, LLC, Fifth Third Bank and JPMorgan Chase Bank, N.A.,  as agent. Incorporated by reference to Exhibit 10.1 to our Current  Report on Form 8-K filed June 1, 2007.                                                         |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   | 10.17  |   | Amendment No. 3 to  Second Amended and Restated Receivables Purchase Agreement dated as of  May 5, 2008, by and among Ferrellgas Receivables, LLC, as seller,  Ferrellgas, L.P., as servicer, JP Morgan Chase Bank, N.A., Falcon Asset  Securitization Company, LLC, as assignee of Jupiter Securitization Company,  LLC, Fifth Third Bank and JPMorgan Chase Bank, N.A,. as agent. Incorporated  by reference to Exhibit 10.1 to our Current Report on Form 8-K  filed May 6, 2008. |

 

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|     |     |     | 10.18    |     | Third Amended and  Restated Receivables Purchase Agreement dated as of April 15, 2009,  among Ferrellgas Receivables, LLC, as seller, Ferrellgas, L.P., as servicer,  Falcon Asset Securitization Company, LLC, the financial institutions from  time to time party hereto, Fifth Third Bank and JPMorgan Chase Bank, N.A., as  agent. Incorporated by reference to Exhibit 10.2 to our Current Report  on Form 8-K filed April 20, 2009. |
|----------|----------|----------|----------|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *        |     |     | 10.19    |     | Assignment and  Amendment Agreement dated as of May 20, 2009, by and between Falcon  Asset Securitization Company, LLC as assignor and JS Siloed Trust as  assignee.                                                                                                                                                                                                                                                                                     |
| * * | * * | * * | * * | * * | * *                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| #        |     |     | 10.20    |     | Ferrell  Companies, Inc. Supplemental Savings Plan, as amended and restated  effective January 1, 2009. Incorporated by reference to  Exhibit 10.1 to our Current Report on Form 8-K filed  February 25, 2009.                                                                                                                                                                                                                       |
| * * | * * | * * | * * | * * | * *                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| #        |     |     | 10.21    |     | Amended and Restated  Ferrellgas Unit Option Plan. Incorporated by reference to Exhibit 10.17  to our Quarterly Report on Form 10-Q filed March 10, 2009.                                                                                                                                                                                                                                                                                      |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        | *        |     | 10.22    |     | Ferrell  Companies, Inc. 1998 Incentive Compensation Plan, as amended and  restated effective October 11, 2004.                                                                                                                                                                                                                                                                                                                                     |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        |     |     | 10.23    |     | Employment,  Confidentiality, and Noncompete Agreement dated as of July 17, 1998 by  and among Ferrell Companies, Inc. as the company, Ferrellgas, Inc.  as the company, James E. Ferrell as the executive and LaSalle National Bank  as trustee of the Ferrell Companies, Inc. Employee Stock Ownership Trust.  Incorporated by reference to Exhibit 10.19 to our Quarterly Report on  Form 10-Q filed March 10, 2009.    |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        |     |     | 10.24    |     | Waiver to Employment,  Confidentiality, and Noncompete Agreement dated as of December 19, 2006  by and among Ferrell Companies, Inc. as the company, Ferrellgas, Inc.  as the company, James E. Ferrell as the executive and Greatbanc Trust Company  as successor trustee to LaSalle National Bank. Incorporated by reference to  Exhibit 10.19 to our Quarterly Report on Form 10-Q filed  March 9, 2007.                     |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        |     |     | 10.25    |     | Amended and Restated  Change In Control Agreement dated as of March 5, 2008 by and between  Ferrellgas, Inc. as the company and Patrick J. Walsh as the executive.  Incorporated by reference to exhibit 10.25 to our Quarterly Report on  Form 10-Q filed March 7, 2008.                                                                                                                                                                 |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        |     |     | 10.26    |     | Change In Control  Agreement dated as of March 5, 2008 by and between Ferrellgas, Inc.  as the company and Richard V. Mayberry as the executive. Incorporated by  reference to exhibit 10.28 to our Quarterly Report on Form 10-Q filed March 7,  2008.                                                                                                                                                                                   |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        |     |     | 10.27    |     | Change In Control  Agreement dated as of October 9, 2006 by and between  Ferrellgas, Inc. as the company and James E. Ferrell as the executive.  Incorporated by reference to Exhibit 10.30 to our Annual Report on  Form 10-K filed October 12, 2006.                                                                                                                                                                               |
|     |     |     |     |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| #        |     |     | 10.28    |     | Employment Agreement  dated as of August 10, 2009 by and between Ferrellgas, Inc. as the  company and Stephen L. Wambold as the executive. Incorporated by reference to  Exhibit 10.1 to our Current Report on Form 8-K filed  August 10, 2009.                                                                                                                                                                                      |

 

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| #      |   |   | 10.29  |   | Employment Agreement  dated as of August 10, 2009 by and between Ferrellgas, Inc. as the  company and James R. VanWinkle as the executive. Incorporated by reference to  Exhibit 10.2 to our Current Report on Form 8-K filed  August 10, 2009.                                                           |
|--------|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.30  |   | Employment Agreement  dated as of August 10, 2009 by and between Ferrellgas, Inc. as the  company and Jennifer Boren as the executive. Incorporated by reference to  Exhibit 10.3 to our Current Report on Form 8-K filed  August 10, 2009.                                                               |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.31  |   | Employment Agreement  dated as of August 10, 2009 by and between Ferrellgas, Inc. as the  company and Tod Brown as the executive. Incorporated by reference to  Exhibit 10.4 to our Current Report on Form 8-K filed  August 10, 2009.                                                                    |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.32  |   | Employment Agreement  dated as of August 10, 2009 by and between Ferrellgas, Inc. as the  company and Eugene D. Caresia as the executive. Incorporated by reference to  Exhibit 10.5 to our Current Report on Form 8-K filed  August 10, 2009.                                                            |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.33  |   | Employment Agreement  dated as of August 10, 2009 by and between Ferrellgas, Inc. as the  company and George L. Koloroutis as the executive. Incorporated by reference  to Exhibit 10.6 to our Current Report on Form 8-K filed  August 10, 2009.                                                         |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.34  |   | Agreement and release  dated as of December 4, 2007 by and among Ferrell Companies, Inc.,  Ferrellgas, Inc., Ferrellgas Partners L.P., Ferrellgas L.P. and Brian J.  Kline as the employee. Incorporated by reference to Exhibit 10.33 to our  Quarterly Report on Form 10-Q filed December 6, 2007. |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.35  |   | Agreement and release  dated as of March 28, 2008 by and among Ferrell Companies, Inc.,  Ferrellgas, Inc., Ferrellgas Partners L.P., Ferrellgas, L.P. and Kevin  T. Kelly as the employee. Incorporated by reference to Exhibit 10.1 to  our Current Report on Form 8-K filed March 28, 2008.        |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.36  |   | Services Agreement  dated as of September 26, 2008 between Samson Dental Practice  Management, LLC as the client and Ferrellgas, L.P. as the provider.  Incorporated by reference to Exhibit 10.33 to our Annual Report on  Form 10-K filed September 29, 2008.                                                |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| #      |   |   | 10.37  |   | Amendment No. 1 to  Services Agreement dated as of May 1, 2009 between Samson Dental  Practice Management, LLC as the client and Ferrellgas, L.P. as the provider.  Incorporated by reference to Exhibit 99.1 to our Current Report on  Form 8-K filed May 4, 2009.                                       |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| *      |   |   | 21.1   |   | List of subsidiaries                                                                                                                                                                                                                                                                                                               |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| *      |   |   | 23.1   |   | Consent of  Deloitte & Touche, LLP, independent registered public accounting  firm, for the certain use of its report appearing in Amendment No. 1 to  the Annual Report on Form 10-K/A of Ferrellgas Partners, L.P. for the  year ended July 31, 2009.                                                    |
|   |   |   |   |   |                                                                                                                                                                                                                                                                                                                               |
| *      |   |   | 23.2   |   | Consent of  Deloitte & Touche, LLP, independent registered public accounting  firm, for the certain use of its report appearing in Amendment No. 1 to  the Annual Report on Form 10-K/A of Ferrellgas Partners Finance Corp.  for the year ended July 31, 2009.                                            |

 

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| *          |       |       | 23.3       |       | Consent of  Deloitte & Touche, LLP, independent registered public accounting  firm, for the certain use of its report appearing in Amendment No. 1 to  the Annual Report on Form 10-K/A of Ferrellgas, L.P. for the year ended  July 31, 2009.         |
|------------|------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 23.4       |       | Consent of  Deloitte & Touche, LLP, independent registered public accounting  firm, for the certain use of its report appearing in Amendment No. 1 to  the Annual Report on Form 10-K/A of Ferrellgas Finance Corp. for the  year ended July 31, 2009. |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 31.1       |       | Certification of  Ferrellgas Partners, L.P. pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Exchange Act.                                                                                                                                             |
| ** ** | ** ** | ** ** | ** ** | ** ** | ** **                                                                                                                                                                                                                                                                     |
| *          |       |       | 31.2       |       | Certification of  Ferrellgas Partners Finance Corp. pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Exchange Act.                                                                                                                                     |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 31.3       |       | Certification of  Ferrellgas, L.P. pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Exchange Act.                                                                                                                                                      |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 31.4       |       | Certification of  Ferrellgas Finance Corp. pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Exchange Act.                                                                                                                                              |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 32.1       |       | Certification of  Ferrellgas Partners, L.P. pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                           |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 32.2       |       | Certification of  Ferrellgas Partners Finance Corp. pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                   |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 32.3       |       | Certification of  Ferrellgas, L.P. pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                    |
|       |       |       |       |       |                                                                                                                                                                                                                                                                           |
| *          |       |       | 32.4       |       | Certification of  Ferrellgas Finance Corp. pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                            |

 

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|   | * | Filed herewith                               |
|--------|---|----------------------------------------------|
|   | # | Management contracts or  compensatory plans. |

 

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