Q3 2024 Ferrellgas Partners LP Earnings Call
To ask a question. During this session you may send them via the ask a question tab on the webcast.
Speaker Change: Please be advised that today's conference is being recorded.
Michael Cole: Additionally, we know that the purpose of this call is to discuss the results of operations for the third fiscal quarter and at April 30, 2024. As Camaria commented, warm weather negatively impacted our financial results as hating degree days during the third fiscal quarter were 15.7% warmer than normal. In 9.8% warmer than the prior year of quarter, record high temperatures across much of the United States drove an 11% decrease in gallon soil. Today, Blue Rinal Operations Professionals have installed over 500 self-service keyouts, which allow consumers to purchase a propane cylinder 24 hours a day, 7 days a week, quickly and conveniently.
Speaker Change: I would now like to hand, the conference over to your speaker today Cambria to Chee. Please go ahead.
Tim Reid: Good morning, My name is Tim Reid of their Tucci, Chief Executive Officer, and President of Federal gas.
Tim Reid: I want to start by saying how proud I am of our more than 4000 federal gas employees, our experienced operations professionals, they planned well and they executed even better against the weather anomaly, we experienced this quarter.
Tim Reid: They managed expenses in key areas of operations, including driving fleet expenses down by over 8% when compared to prior year rigs.
Speaker Change: Regarding weather impact we'd have taken positive steps over the last four years to create balance in our demand across the different customer segments of our business.
Speaker Change: Our focus has been on growing our weather agnostic customer base by both customer type and geographic location. We have made great progress in the areas of tank exchange auto gas and in our industrial commercial segments. However, the extended an unseasonably warm heating season negative.
Speaker Change: It really impacted the heating segments of our business, we experienced about 10% warmer temperatures across the done centrally geographic areas of our business.
Speaker Change: Additionally, we regret it seem some long standing businesses downsized their footprints and even closed their doors the effects of inflation did make a mark this quarter.
Speaker Change: But our hard working account managers, they were able to redeploy some of the assets related to those clothes businesses and other areas, allowing for a decrease in overall capital expenditure.
Speaker Change: Finally, I would like to again call out the hard work of all of the employees of federal gas and with strong contributions that they make to this great industry.
Speaker Change: I will now turn the floor over to our Chief Financial Officer, Michael to go over our financial results for the quarter.
Speaker Change: Thank you Tia Maria and thank you all for joining us on today's call.
Speaker Change: I'd like to remind everyone that some statements made during this call maybe considered forward looking.
Speaker Change: Various risks uncertainties and other factors could cause actual performance to differ materially from anticipated.
Speaker Change: These factors are discussed in our Form 10-K filed on September 29, 2023, and other documents filed from time to time with the Securities and Exchange Commission.
[music].
Speaker Change: Additionally, we note that the purpose of this call is to discuss the results of operations for the third fiscal quarter ended April 32024.
Speaker Change: As Tim commented warm weather negatively impacted our financial results as heating degree days during the third fiscal quarter or 15, 7% warmer than normal.
Speaker Change: And nine 8% warmer than the prior year quarter.
Speaker Change: Record high temperatures across much of the United States drove an 11% decrease in gallons sold.
Tim Reid: Revenues were $71 $6 million, lower which was partially offset by a decrease of $52 million and cost of product as compared to the prior year period.
Speaker Change: As a result gross profit decreased 7% for the third fiscal quarter of 2024 compared to the prior year period.
Speaker Change: Margin per gallon for the third fiscal quarter of 2024 increased 4% compared to the prior year period.
<unk> increase was due to segment mix, our platinum plus fixed cost program for residential customers.
Speaker Change: National account pricing improvements and other cost dynamics.
Speaker Change: Operating income per gallon for the third fiscal quarter of 2024 decreased 10% compared to the prior year period.
Speaker Change: Primarily due to the decrease in gross profit previously noted.
Speaker Change: We recognize net earnings attributable to <unk> partners LP of $52 8 million and $72 $4 million in the third fiscal quarter of 2024 and 2023, respectively.
Operating expense as a percent of total revenue increased 16% for the third fiscal quarter.
Michael Cole: Home delivery service is also available in 19 markets with plans to expand. Additionally, Blue Rinal decreased capital expense by nearly 8 million this fiscal year due to supply chain improvements and inventory turns improvements.
Speaker Change: The $3 $2 million or 2% increase in operating expense was primarily due to a $2 $6 million increase in personnel expense.
Michael Cole: Now to turn to the technology fund, the company continues to invest in opportunities to improve customer service and reduce overall costs through automation and other tools. We've made great progress on our logistics projects, which have reduced cost over 1.2 million in fiscal 2024. Tank monitoring and telematics technology ensures our customers have an adequate supply of propane in addition to improving the efficiency of our delivery efforts. Also, our new credit processing platform went live a few months ago. This platform offers a seamless payment process for our customers, and it is on track for an estimated 1.2 million in annual cost reductions.
Speaker Change: Which was comprised of a $5 $2 million increase in medical claims paid partially offset by a $2 $6 million decrease in incentive accruals.
Speaker Change: Adjusted EBITDA, a non-GAAP financial measure decreased by $21 $6 million or 17% to $104 million in the third fiscal quarter compared to $125 6 million in the prior year quarter.
Speaker Change: The change was primarily due to the increase in gross profit noted above and warmer than normal weather.
Operator: Now, before we move to the live Q&A section of our call, I want to turn the call back to our moderator. But before I do that, as mentioned in the announcement for this call, any additional questions might be submitted via our investor relations email box at investor relations at ferrellgas.com.
Speaker Change: We also made a $99 9 million cash distribution on April 19, 2024 to class B unit holders of record as of March 22, 2020 for.
Speaker Change: This brings our total class b distributions paid to date to approximately $250 million. It is important to note that these distributions are discretionary and are made possible by the Companys continued a strong performance.
Operator: Thank you, ladies and gentlemen. As a reminder to submit a question, please use the "ask a question" tab on the webcast. Please stand by while we compare the Q&A roster.
Speaker Change: Even after giving effect to these distributions the companys cash balance at the end of the third quarter was $73 6 million.
Operator: All right, good morning. As we're looking through the questions, we see that there are several related to the June 7 filing of the Eddy Stone.
Speaker Change: I will now turn the call back to Tim Murray.
Operator: We are still evaluating that pending case, and we will not be addressing questions on that topic today. I think, and we're going to start with a question regarding our opx and movement of an opx, as compared to prior year, and what are things that we're doing to mitigate the overall opx expense. So, first of all, I think you've seen in some of our releases that we're working on an enterprise-wide ERP system. So obviously there's consultants widespread training across the company that are related to that. Additionally, we have seen higher medical expenses this year, which we believe to be one time in a current that's compared to prior year.
Tim Murray: Thank you Mike.
Speaker Change: Focusing again on our counter seasonal blue Rhino business.
Tim Murray: Warmer than normal temperatures and strategic initiatives resulted in an increase of 19% during the third fiscal quarter and blue Rhinos EBITDA compared to prior year period consumer demand surged as the warmer weather prompted an early kickoff to the grilling season. Additionally, blue Rhino tank.
Speaker Change: <unk> increased in areas, where the electric grid failed due to the heat, we leveraged our national footprint supply contracts and our experienced labor force executing well against higher than normal demand in our tank exchange business.
Speaker Change: To date Blue Rhino operations professionals have installed over 500 self service kiosks, which allow consumers to purchase our propane cylinder 24 hours a day seven days a week quickly and conveniently home delivery service is also available in 19 markets with plans to expand.
Michael Cole: And then when you think about our business, it's people and it's our fleet. And the fleet side of things, we implemented telematics technology at the beginning of this year, actually fast-tracked it as we saw. Diesel prices sort of seem steady in comparison to prior year and the cost of auto parts. The telematics will greatly reduce those two areas. So those are the expenses, mitigating items that we're currently working on.
Speaker Change: Yes.
Speaker Change: Additionally, blue Rhino decreased capital expense by nearly $8 million this fiscal year due to supply chain improvements and inventory turns improvement.
Okay.
Speaker Change: Good day, and thank you for standing by welcome to the Pearl gas Partners' third quarter fiscal 2024 earnings conference call.
Speaker Change: Now I'll turn to the technology front. The company continues to invest in opportunities to improve customer service and reduce overall cost through automation and other tools we.
Michael Cole: Good morning, this is Mike. So we have received some questions around our non-maintenance capex, in particular the investment returns for non-maintenance capex. Thank you.
Speaker Change: After the Speakers' presentation, there would be a question and answer session.
Speaker Change: We've made great progress on our logistics projects, which have reduced cost over $1 2 million in fiscal 2020 for tank monitoring and telematics technology ensures our customers have a ready supply of propane in addition to improving the efficiency of our delivery efforts.
Speaker Change: Asked a question during this session you may send them via the ask a question tab on the webcast.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to your Speaker today Cambria just Ritchie. Please go ahead.
Speaker Change: Also our new credit processing platform went live a few months ago. This platform offers a seamless payment process for our customers and it is on track for an estimated $1 $2 million in annual cost reductions.
Tim Reid: Good morning, My name is Tim Reid of their Tucci, Chief Executive Officer, and President of feral gas.
Tim Reid: I want to start by saying, how proud I am of our more than 4000 barrel gas employees, our experienced operations professionals, they planned well and they executed even better against the weather anomaly, we experienced this quarter.
Speaker Change: Now before we move to the live Q&A section of our call I want to turn the call back to our moderator, but before I do that as mentioned in the announcement for this call any additional questions might be submitted via our Investor Relations E Mail box at Investor Relations at <unk> Dot com.
Speaker Change: They manage the expenses in key areas of operations, including driving fleet expenses down by over 8% when compared to prior year rigs.
Speaker Change: Regarding weather impact we'd have taken positive steps over the last four years to create balance in our demand across the different customer segments of our business.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder to submit a question. Please use the ask the question tab on the webcast.
Speaker Change: Our focus has been on growing our weather agnostic customer base by both customer type and geographic location. We've made great progress in the areas of tank exchange auto gas and in our industrial commercial segments. However, this extended an unseasonably warm heating season negative.
Speaker Change: Please standby, while we compile the Q&A roster.
Alright, good morning, as we're looking through the questions. We see that there are several related to the June seven filing.
Speaker Change: Of the Edie stone.
Speaker Change: We are still evaluating that pending case, and we will not be addressing questions on that topic today, I think and we're going to start with a question regarding.
Speaker Change: It really impacted the heating segments of our business, we experienced about 10% warmer temperatures across the done centrally geographic areas of our business.
Speaker Change: Our.
Speaker Change: Opex and movement up in Opex as compared to prior year and what are things that we're doing to mitigate the overall opex expense. So first of all I think you've seen in some of our releases that were working on a enterprise wide ERP system. So obviously, there's consultants widespread.
Speaker Change: Additionally, we regret it seems some long standing businesses downsized their footprints and even close their doors the effects of inflation did make a mark this quarter.
Speaker Change: But our hard working and account managers, they were able to redeploy some of the assets related to those clothes businesses in other areas, allowing for a decrease in overall capital expenditure.
Speaker Change: Training across the company that are related to that Additionally, we have seen higher medical expenses. This year, which we believe to be one time in our and.
Speaker Change: Finally, I would like to again call out the hard work of all of the employees of feral gas and the strong contribution that they make to this great industry.
Speaker Change: An occurrence as compared to prior year and then when you think about our business its people and its our fleet and the fleet side of things, we implemented telematics technology at the beginning of this year actually fast tracked it as we saw diesel prices sort of themes study and comparison to prior year and the cost of autopart.
Speaker Change: I will now turn the floor over to our Chief Financial Officer, Michael to go over our financial results for the quarter.
Speaker Change: Thank you Tia Maria and thank you all for joining us on today's call.
Speaker Change: Telematics will greatly reduce those two areas. So those are the expense management mitigating items that we're currently working on.
Speaker Change: I'd like to remind everyone that some statements made during this call maybe considered forward looking.
Speaker Change: Various risks uncertainties and other factors could cause actual performance to differ materially from anticipated.
Speaker Change: Hey, good morning. This is Mike. So we have received some questions around our non maintenance capex in a particular.
Speaker Change: These factors are discussed in our Form 10-K filed on September 29, 2023, and other documents filed from time to time with the Securities and Exchange Commission.
Mike: The investment returns for non maintenance Capex.
Speaker Change: Okay.
Mike: And so when we look at capital spending there is essentially three buckets. We all look at maintenance Capex growth Capex, and then M&A capex and so when I refer to non maintenance Capex, it's really growth in M&A capex.
Speaker Change: Additionally, we note that the purpose of this call is to discuss the results of operations for the third fiscal quarter ended April 32024.
Mike: And that is more a function of opportunities and business needs in terms of the investment returns.
Speaker Change: As Tim commented warm weather negatively impacted our financial results as heating degree days during the third fiscal quarter or 15, 7% warmer than normal.
I think as everyone knows on the call is there is a hurdle rate that companies will look to in terms of making those type of discretionary investments.
Speaker Change: And nine 8% warmer than the prior year quarter.
Speaker Change: We don't disclose what our hurdle rate as we think.
Tim Reid: The high temperatures across much of the United States drove an 11% decrease in gallons sold.
Speaker Change: Sensitive information, especially as it relates to M&A activities.
Speaker Change: Those discretionary investments are made when they meet or exceed our internal hurdle rate.
Speaker Change: Revenues were $71 $6 million, lower which was partially offset by a decrease of $52 million and cost of products as compared to the prior year period.
Speaker Change: The cost of our capital is out there in the market in terms of what our senior notes are trading at and with the class B units in the preferreds are at so.
Speaker Change: As a result gross profit decreased 7% for the third fiscal quarter of 2024 compared to the prior year period.
Speaker Change: People you can calculate what you think our cost of capital is Budd.
Speaker Change: Margin per gallon for the third fiscal quarter of 2024 increased 4% compared to the prior year period.
Speaker Change: What we'll do on discretionary capital spending is to make sure. It exceeds our hurdle rate and then thats what drives the financial portion of that decision.
Speaker Change: <unk> increase was due to segment mix, our platinum plus fixed cost program for residential customers.
Speaker Change: There was a question that came up about when do we expect to file our 10-Q when is the deadline for the filing. The 10-Q was filed last evening with the federal holiday It will be available tomorrow morning.
Speaker Change: National account pricing improvements and other cost dynamics.
Speaker Change: Operating income per gallon for the third fiscal quarter of 2024 decreased 10% compared to the prior year period.
We received an extension and an automatic extension from the SEC filing that we made with either last Thursday, our last Friday for the 10-Q has been filed and will be available.
Speaker Change: Merrily due to the decrease in gross profit previously noted.
Speaker Change: We recognize net earnings attributable to Ferro gas partners LP of $52 $8 million and $72 4 million in the third fiscal quarter of 2024 and 2023, respectively.
Speaker Change: Sure.
Speaker Change: Tomorrow morning.
Speaker Change: In turn there's been some questions.
Speaker Change: We're looking at the question. So we're trying to prioritize them so apologies for the pause.
Speaker Change: Operating expense as a percent of total revenue increased 16% for the third fiscal quarter.
Speaker Change: The extending the revolver and 26 senior notes two separate issues.
Speaker Change: The $3 $2 million or 2% increase in operating expense was primarily due to a $2 $6 million increase in personnel expense.
Speaker Change: As many know the revolver matures in March of 25% and one current this past March we have been in discussions with the banks about extending and amending the revolver. We've had generally supportive conversations with the banks that process or that extension is in process.
Speaker Change: Which was comprised of a $5 $2 million increase in medical claims paid partially offset by a $2 $6 million decrease in incentive accruals.
Speaker Change: In terms of the 2006 senior notes and an early refinancing of the 2006 senior notes that are callable currently at 134, 4% March of next year there'll be callable at par.
Speaker Change: Adjusted EBITDA, a non-GAAP financial measure decreased by $21 $6 million or 17% to $104 million in the third fiscal quarter compared to $125 $6 million in the prior year quarter.
Speaker Change: We have been evaluating whether or not it makes economic sense to do an early refinancing of the 2006 senior notes.
The.
Speaker Change: The indicative pricing that we've seen coming out of the high yield market now is much more attractive compared to where it was six to nine months ago, and it's something that has caught our attention and when we've had discussions with some of the fixed income investors they've been very supportive of our access to the debt capital markets.
Speaker Change: The change was primarily due to the increase in gross profit noted above and warmer than normal weather.
Speaker Change: We also made a $99 9 million cash distribution on April 19, 2024 to class B unit holders of record as of March 22.
Speaker Change: We continue to evaluate whether or not that makes sense. Obviously the ruling this past Friday adds another aspect to that discussion.
Speaker Change: 124. This brings our total class b distributions paid to date to approximately $250 million.
Speaker Change: It is important to note that these distributions are discretionary and are made possible by the Companys continued just strong performance.
Speaker Change: We will continue to evaluate whether or not it makes sense for us to come to the capital markets now for the early refinancing of the 'twenty six notes.
Speaker Change: Even after giving effect to these distributions the companys cash balance at the end of the third quarter was $73 6 million.
Speaker Change: Some questions on liquidity.
Speaker Change: We have a couple of different questions on liquidity.
Speaker Change: I will now turn the call back to Tamara.
Speaker Change: So when we talk about liquidity there are several theres a couple components. One is the cash balance and at the end of the quarter. The cash balance was 70 $374 million.
Tamara: Thank you Mike.
Focusing again on our counter seasonal blue Rhino business, the warmer than normal temperatures and strategic initiatives resulted in an increase of 19% during the third fiscal quarter and blue Rhinos EBITDA compared to prior year period consumer demand surged as the warmer weather prompted an early kick.
Speaker Change: <unk> I'm going to round up to 75 for easy math, we have a $350 million revolver, we do need to maintain per the financing documents of $100 million of liquidity, so that puts revolver availability at $250 million.
Speaker Change: Off to the grilling season.
Speaker Change: Additionally, blue Rhino tank exchange increased in areas, where the electric grid failed due to the heat.
Speaker Change: And then we have about $70 million of L. Three's outstanding all of this is obviously public information that puts us down to about $180 million of availability under the revolver combined with the $75 million of cash that puts us at roughly 250 million.
Speaker Change: We leveraged our national footprint supply contracts, and our experienced labor force executing well against higher than normal demand in our tank exchange business.
Date Blue Rhino operations professionals have installed over 500 self service kiosks, which allow consumers to purchase our propane cylinder 24 hours a day seven days a week quickly and conveniently.
Speaker Change: <unk> of liquidity.
Speaker Change: How much.
Speaker Change: Home delivery service is also available in 19 markets with plans to expand.
Speaker Change: Okay.
Speaker Change: Let's take a question here on sort of the.
Speaker Change: CPG margin performance over prior.
Speaker Change: Italy Blue Rhino decrease capital expense by nearly $8 million this fiscal year due to supply chain improvements and inventory turns improvement.
Speaker Change: Prior years in our outlook on that I think.
Margin performance is directly related to our ability to safely deliver our products to our customers with an experienced they like and want to engage with again. So we believe our investments in safety and training customer service and technology.
Speaker Change: Now I'll turn to the technology front. The company continues to invest in opportunities to improve customer service and reduce overall cost through automation and other tools.
Speaker Change: Great progress on our logistics projects, which have reduced cost over $1 2 million in fiscal 2024.
Speaker Change: Largely supportive of continued margin performance and margin pressures are the same today as they have always been the economic well being of our customers demand factors. Some related to weather also fluctuations in the commodity pricing. We have shown great acumen in terms of being able to take advantage of those fluctuations.
Speaker Change: <unk> monitoring and telematics technology ensures our customers have a ready supply of propane in addition to improving the efficiency of our delivery efforts.
Speaker Change: Also our new credit processing platform went live a few months ago. This platform offers a seamless payment process for our customers and it is on track for an estimated $1 2 million in annual cost reductions.
<unk> and the supply.
Ferro gases: Things are opportunities that will always remain in this industry and if you've looked at it over the past 10 years, you can see that Ferro gases has always taken advantage of those and we see those opportunities in the future as well.
Speaker Change: Now before we move to the live Q&A section of our call I want to turn the call back to our moderator, but before I do that as mentioned in the announcement for this call any additional questions might be submitted via our Investor Relations E Mailbox at Investor Relations at <unk> Dot com.
Speaker Change: Related to the refinancing of the senior notes there are a couple of questions coming in around the capital stack and plans that we may have regarding restructuring our capital structure.
Speaker Change: This seems to be a quest.
Speaker Change: Thank you ladies.
Speaker Change: A question, we get often when we go to the.
Speaker Change: Ladies and gentlemen, as a reminder to submit a question. Please use the ask the question tab on the webcast.
Speaker Change: Industry conferences.
Speaker Change: We are continuing to evaluate whether or not there is options around the capital structure I talked earlier about the 2006 senior notes.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: There is nothing obviously were that we could announce today in terms of the restructuring right. Now we are focusing on operating the business and reducing cost, including reducing our capital cost will continue to evaluate restructuring options.
Speaker Change: And when it makes sense for us.
Speaker Change: Take actions.
Speaker Change: We'll do that but right now there's nothing to announce.
Speaker Change: Regarding the restructuring of the capital structure.
Speaker Change: We're jumping around between capital structure and company performance items that I think that hopefully.
Speaker Change: Helps with keeping the questions moving there are a few questions around blue Rhino.
Speaker Change: Okay.
Speaker Change: Alright, good morning, as we're looking through the questions. We see that there are several related to the June seven filing.
Speaker Change: So I want to call out again, the fact that we were able to decrease capex expense in regards to blue Rhino by $8 million. This fiscal year really due to supply chain improvements and the inventory turns.
Speaker Change: The Edie stone, we are still evaluating that pending case, and we will not be addressing questions on that topic today, I think and we're going to start with a question regarding.
Speaker Change: We focused the first three years of this transformation of our company on our retail division, we haven't been shy about sharing that in our sights turns to blue Rhino really over this past year. We've added 6600 accounts, we've been able to increase our inventory turns into the supply chain tweaks at our production.
Our.
Speaker Change: Opex.
Speaker Change: Movement up in Opex as compared to prior year and what are things that we're doing to mitigate the overall opex expense. So first of all I think you've seen in some of our releases that were working on a enterprise wide ERP system.
Speaker Change: <unk> to really continue to drive Capex expense, which then obviously increases our cash flow that has been a focus. We've also installed over 500 self service kiosks that will create demand.
Speaker Change: Obviously, theres consultants widespread training across the company that are related to that Additionally, we have seen higher medical expenses. This year, which we believe to be one time in that.
Speaker Change: Meeting demand in 24 hours a day. So we're excited about all that is happening on the blue Rhino front excited about the people.
Speaker Change: An occurrence as compared to prior year and then when you think about our business its people and its our fleet and the fleet side of things, we implemented telematics technology at the beginning of this year actually fast tracked it as we saw diesel prices sort of things.
Speaker Change: And what they're doing in that area of the business.
Speaker Change: Another question came in on the refinancing of our bonds and how we think about the refinancing of the bonds from a conceptual perspective, there is the economic evaluation, where you quantify what the call premium is you quantify what the increase in interest expense would be.
Speaker Change: <unk> in comparison to prior year and the cost of auto parts to help telematics will greatly reduce those two areas. So those are the expense management mitigating items that we're currently working on.
From going from $5 38, or whatever the rate is seven three quarters, 8% whatever rate people want to assume and you could quantify what that impact is on the dollar amount of interest expense. You can then do kind of a breakeven analysis to figure out okay. What are we to treasuries or credit spreads need to.
Speaker Change: Yes. Good morning. This is Mike. So we have received some questions around our non maintenance capex and in particular the.
Mike: The investment returns for non maintenance Capex.
Mike: Okay.
Mike: And so when we look at capital spending there's essentially three buckets. We all look at maintenance Capex growth Capex, and then M&A capex and so when I refer to non maintenance Capex, it's really growth in M&A capex.
Speaker Change: Move in order to mitigate that benefit so we certainly look at it from a economic perspective, but then there is more of a qualitative aspect to that evaluation and Thats one of Derisking. The company in terms of taking refinancing risk off the table in 2006, and if we were to go out now.
Mike: And that is more a function of opportunities and business needs in terms of the investment returns.
Mike: I think as everyone knows on the call is there is a hurdle rate that companies will look to in terms of making those type of discretionary investments.
Speaker Change: Sometime in the next few months and do an early refinancing of the 2006 that would de risk.
Speaker Change: That 2026 refinancing event. So we look at it both from a quantitative and qualitative perspective, and as I mentioned earlier, we continue to evaluate.
Speaker Change: We don't disclose what our hurdle rate as we think.
Speaker Change: Sensitive information, especially as it relates to M&A activities.
Speaker Change: Whether or not an early refinancing of the senior notes it makes sense.
Speaker Change: Those discretionary investments are made when they meet or exceed our internal hurdle rate.
Speaker Change: We also received a question on the amount required to retire the class B shares.
Speaker Change: The cost of our capital is out there in the market in terms of what our senior notes are trading at and what the class B units in the preferreds are at so.
Speaker Change: That's a function of.
Speaker Change: Additional distributions, it's a function of the timing of the redemption of the class B just to level set with everyone. The class fees can be written.
Speaker Change: People you can calculate what you think our cost of capital is Budd.
Speaker Change: What we'll do on discretionary capital spending is to make sure. It exceeds our hurdle rate and then thats what drives the financial portion of that decision.
Speaker Change: Higher.
Speaker Change: When you talk about the retirement of the class B shares that really im interpreting that to mean, the redemption of the class B shares.
Speaker Change: There is a IRR requirement and the class B documents.
Speaker Change: Those are available publicly I believe through prior filings back in 2021, you can go in there you could calculate.
Speaker Change: There is a question that came up about when do we expect to file our 10-Q when is the deadline.
Speaker Change: Just on the.
Speaker Change: For the filing the 10-Q was filed last evening with the federal holiday It will be available tomorrow morning.
Speaker Change: The distributions we have made to date and you could pick a redemption date and you can calculate what the.
Speaker Change: The redemption amount would be.
Speaker Change: We received an extension and an automatic extension from the SEC filing that we made with either last Thursday, our last Friday. So the 10-Q has been filed and will be available.
Speaker Change: So I can't give you a specific answer because it's dependent on the time period in which of those are redeemed.
Speaker Change: But the distributions that we've made certainly reduce that redemption value versus not having made any distributions.
Speaker Change: Sure.
Speaker Change: Tomorrow morning.
Speaker Change: We're pausing we're rebuilding some of these questions to make sure that we've hit the categories that you can.
Speaker Change: Answer most of what is here.
Speaker Change: In turn there's been some questions.
Speaker Change: Yes.
A question that's come in regarding ways to increase liquidity.
Speaker Change: We're looking at the question. So we're trying to prioritize them so apologies for the pause.
Speaker Change: To deal with things like the class B shares as well as any litigation expenses.
Speaker Change: The extending the revolver and a 26 senior notes two separate issues.
Speaker Change: As Tamara you said at the onset of the Q&A, we're not going to go into detailed comments around the litigation are responsible litigation or potential responses to the litigation and the impact that those various responses might have on the company.
Speaker Change: As many know the revolver matures in March of 25, and one current this past March we have been in discussions with the banks about extending and amending the revolver. We've had generally supportive conversations with the banks that process or that extension is in process.
Speaker Change: As I mentioned earlier, our liquidity right now is consistent with prior periods in terms of revolver availability and cash balances. We think we have sufficient liquidity to continue to operate the business.
Speaker Change: Yes.
Speaker Change: In terms of the 26 senior notes and an early refinancing of the 2006 senior notes that are callable currently at 134, 4%.
Speaker Change: March of next year there'll be callable at par.
Tamara: And we will continue to evaluate what our liquidity needs are and given the events that are in front of the company, including the Edie stone and judgment.
Speaker Change: We have been evaluating whether or not it makes economic sense to do an early refinancing of the 2006 senior notes.
Speaker Change: <unk>.
Speaker Change: The indicative pricing that we've seen coming out of the high yield market now is much more attractive compared to where it was six to nine months ago, and it's something that has caught our attention and when we've had discussions with some of the fixed income investors they've been very supportive.
Speaker Change: There's a couple of questions around sort of whether and how it impacts the company and I always take that opportunity to talk about the positive sides of how it impacts before all kind of dive into the other so on the positive side. If you think about we have spent much time trying to move the company into weather agnostic areas.
Speaker Change: Our access to the debt capital markets. So we continue to evaluate whether or not that makes sense. Obviously the ruling this past Friday add another aspect to that discussion.
Speaker Change: Spoke a little bit about tank exchange, our blue Rhino brand already Theres also auto gas we continue to have wins in this area.
Speaker Change: Obviously audit asking whether agnostic. Additionally business support of small businesses forklift cylinder and our industrial commercial and we've done a really good job of managing our volumes across all of those areas weather events like ice storms hurricanes anything that leads to power outages creates a huge.
Speaker Change: We will continue to evaluate whether or not it makes sense for the comp to the capital markets now for the early refinancing of the 'twenty six notes.
Speaker Change: Some questions on liquidity.
Speaker Change: We have a couple of different questions on liquidity, so when we talk about liquidity.
Speaker Change: <unk> for propane it's portable it has one of the best distribution networks, there is especially at times of great need. So when there is unpredictable weather such as that I just talked about it really creates great demand.
Speaker Change: Theres a couple components one is the cash balance and at the end of the quarter. The cash balance was 70 $374 million thereabouts I'm going to round up to $75 for easy math, we have a $350 million revolver, we do need to maintain per the financing.
Speaker Change: A little bit of a picture into the tank exchange side January the month of January had.
Speaker Change: Power outages due to heat and cold and the tank exchange business actually had volumes that were close to summer months in this off in the off season month on the flip side, it's no secret that the federal gas footprint finds itself most dense in the center of the country and the upper Midwest in particular.
Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation.
Speaker Change: Documents are $100 million of liquidity, so that puts revolver availability at $250 million.
Operator: You may now disconnect.
Speaker Change: And then we have about $70 million of LTE is outstanding all of this is obviously public information that puts us down to about $180 million of availability under the revolver combined with the $75 million of cash that puts us at roughly 250 million.
Speaker Change: <unk>.
Speaker Change: And we have done our acquisitions on the coast.
Speaker Change: Specific geographic diversity.
Speaker Change: Tactic to move ourselves out of just that middle of the country. It was warmer there warmer than it's been in our in our 10 year study. So we believe that the web.
Speaker Change: <unk> of liquidity.
Speaker Change: How much.
Speaker Change: Thank you.
Well, let's take a question here on sort of the.
Speaker Change: Weather agnostic tactics, we're taking will help mitigate that as we go forward and we will never be completely whether independent, but we are continuing to take steps to create less dependency in particular in that center part of the country.
Speaker Change: CPG margin performance over prior.
Speaker Change: Prior years in our outlook on that I think.
Speaker Change: Margin performance is directly related to our ability to safely deliver our products to our customers with an experienced they like and want to engage with again. So we believe our investments in safety and training customer service and technology.
Speaker Change: There was one more one more question.
Speaker Change: That just came in that we will.
Speaker Change: <unk> before <unk>.
Speaker Change: Provides for closing comments.
Speaker Change: Largely supportive of continued margin performance margin pressures are the same today as they have always been the economic well being of our customers demand factors. Some related to weather also fluctuations in the commodity pricing. We have shown great acumen in terms of being able to take advantage of those fluctuations.
Question is to what extent do you revolver lenders think about the 26 maturity when considering extending the revolver maturity.
Speaker Change: I can't speak for the revolver banks and you would have to talk to them directly or talk to banks generally about how they view those things I would say from a conceptual perspective.
<unk> and the supply.
Things are opportunities that will always remain in this industry and if you've looked at it over the past 10 years, you can see that Ferro gases has always taken advantage of those and we see those opportunities in the future as well.
Speaker Change: The banks.
Speaker Change: Thanks, generally would want to sit in front of any type of refinancing event.
Speaker Change: Whether or not that's the case for our bank group I can't opine on that but generally banks do like to sit in front of material refinancing.
Speaker Change: Related to the refinancing of the senior notes there are a couple of questions coming in around the capital stack and plans that we may have regarding restructuring our capital structure.
Speaker Change: <unk>.
Speaker Change: But that's.
Speaker Change: I think that is the end of our questions Pam Maria Alright. Thank you can come back to you. Thank you well. Thank you for your interest in Ferro gas listen we we truly appreciate you calling in today and asking questions and allowing us to speak about the company. It's something that we're very proud of we think we have a great story, we know we have a.
Speaker Change: It seems to be a quest.
Speaker Change: A question, we get often when we go to the the industry.
Speaker Change: Industry conferences.
Speaker Change: We are continuing to evaluate whether or not there is there is options around the capital structure I talked earlier about the 2006 senior notes.
Speaker Change: Future, we're really proud of the work we've been doing to continue to transform the company those of US in this room here answering this question, we know that the success of the company is entirely due to the efforts of our employee owners across the country. It's their attention to safety. They are attempting to our customer's expense management did they fueled our success.
Speaker Change: There is nothing obviously, where that we can announce today in terms of the restructuring right. Now we are focusing on operating the business and reducing costs, including reducing our capital cost will continue to evaluate restructuring options.
Speaker Change: And when it makes sense for us.
Speaker Change #100: So thank you for.
Speaker Change: Take actions.
Speaker Change #101: Tuning in today, and I'll turn it back over to the moderator.
Speaker Change: We'll do that but right now there's nothing to announce.
Speaker Change #102: Thank you ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Regarding the restructuring of the capital structure.
Speaker Change: We're jumping around between capital structure and company performance items that I think that hopefully.
Speaker Change: Helps with keeping the questions moving there are a few questions around blue Rhino.
So I want to call out again, the fact that we were able to decrease capex expense in regards to blue Rhino by $8 million. This fiscal year really due to supply chain improvements and the inventory turns.
Speaker Change: We focused the first three years of this transformation of our company on our retail division, we haven't been shy about sharing that in our sights turns to blue Rhino really over this past year. We've added 6600 accounts, we've been able to increase our inventory turns into the supply chain tweaks at our production.
Speaker Change: <unk> to really continue to drive Capex expense, which then obviously increases our cash flow that has been a focus. We've also installed over 500 self service kiosks that will create demand.
Speaker Change: Meeting demand in 24 hours a day. So we're excited about all that's happening on the Blue Rhino front excited about the people.
And what they are doing in that area of the business.
Speaker Change: Another question came in on the refinancing of our bonds and how we think about the refinancing of the bonds from a conceptual perspective.
Speaker Change: The economic evaluation, where U S. You quantify what the call premium is you quantify what the increase in interest expense would be from going from $5 38.
Speaker Change: Whatever the rate is seven three quarters, 8% whatever rate people want to assume and you could quantify what that impact is on the dollar amount of interest expense.
Speaker Change: And then do a kind of a breakeven analysis to figure out, okay, where do we treasuries or credit spreads need to move in order to mitigate that benefit. So we certainly looked at from economic perspective, but then there is more of a qualitative aspect to that evaluation and thats one of Derisking the <unk>.
Speaker Change: Company in terms of taking refinancing risk off the table in 2006, and if we were to go out now or sometime in the next few months and do an early refinancing of the 26 that would de risk.
That 2026 refinancing event. So we look at it both from a quantitative and qualitative perspective, and as I mentioned earlier, we continue to evaluate.
Speaker Change: Whether or not an early refinancing of the senior notes makes sense.
Speaker Change: We also received a question on the amount required to retire the class B shares.
Speaker Change: That's a function of.
Speaker Change: Additional distributions, it's a function of the timing of the redemption of the class B just to level set with everyone. The class A's can be higher.
Speaker Change: Can you talk about the retirement of the class B shares that really im interpreting that domain. The redemption of the class B shares. So there is a IRR requirement and the class B documents.
Speaker Change: Those are available publicly I believe through prior filings back in 2021, you can go in there you can calculate based on.
Speaker Change: The distributions we have made to date and you could pick a redemption date in you could calculate what Deborah.
Speaker Change: The redemption amount would be.
Speaker Change: So I can't give you a specific answer because it's dependent on the time period in which of those are redeemed.
Speaker Change: The distributions that we've made certainly reduce that redemption value versus not having made any distributions.
Speaker Change: We're pausing we're rebuilding some of these questions make sure that we've hit the category.
Speaker Change: And to answer most of what is here.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: A question has come in regarding ways to increase liquidity.
Speaker Change: To deal with things like the class B shares as well as any litigation expenses.
Speaker Change: As Tamara you said at the onset of the Q&A, we're not going to go into detailed comments around the litigation.
Tamara: Responsible litigation or potential responses to the litigation and the impact that those various responses might have on the company as I mentioned earlier, our liquidity right now is consistent with prior periods in terms of revolver availability and cash balances. We think we have sufficient liquidity.
Tamara: To continue to operate the business.
Tamara: And we will continue to evaluate what our liquidity needs are and given the events that are in front of the company, including the Edie stone and judgment.
Tamara: Sure.
Speaker Change: A couple of questions around sort of whether and how it impacts the company.
Speaker Change: And I always take that opportunity to talk about the positive sides of how it impacts before all kind of dive into the other so on the positive side. If you think about we have spent much time trying to move the company into weather agnostic areas and I spoke a little bit about tank exchange, our blue Rhino brand already Theres also auto gas we can.
Speaker Change: You need to have wins in this area.
Speaker Change: Obviously audit asking whether agnostic. Additionally business support of small businesses forklift cylinder and our industrial commercial and we've done a really good job of managing our volumes across all of those areas weather events like ice storms hurricanes anything that leads to power outages creates a huge demand.
Speaker Change: Propane it's portable it has one of the best distribution networks, there is especially at times of great need. So when there is unpredictable weather such as that I just talked about it really creates great demand.
Speaker Change: A little bit of a picture into the tank exchange side. The January the month of January had.
Speaker Change: Power outages due to heat and cold.
Speaker Change: And the tank exchange business actually had volumes that were close to summer months in this off in the off season month on the flip side, it's no secret that the Ferrell gas footprint science itself most dense in the center of the country in the upper Midwest in particular.
Speaker Change #100: And we have done our acquisitions on the coast.
Speaker Change #101: Specific geographic diversity.
Speaker Change #102: <unk> to move ourselves out of just that middle of the country. It was warmer there.
Speaker Change #103: Warmer than it's been in art and our 10 year study. So we believe that the weather.
Speaker Change #104: Weather agnostic tactics, we're taking will help mitigate that as we go forward and we will never be completely whether independent, but we are continuing to take steps to create less dependency in particular in that center part of the country.
Speaker Change #104: Yes.
Speaker Change #105: There is one more one more question that just came in that we will address before camry.
Speaker Change #106: Provides for closing comments.
Speaker Change #107: The question is to what extent do you revolver lenders think about the 26 maturity when considering extending the revolver maturity.
Speaker Change #108: I can't speak for the revolver banks and you would have to talk to them directly or talk to banks generally about how they view those things I would say from a conceptual perspective.
Speaker Change #108: The banks.
Speaker Change #109: Generally we would want to sit in front of any type of refinancing of that.
Speaker Change #109: Whether or not that's the case for our bank group I can't opine on that but generally banks would do like as I sit in front of material refinancing.
Speaker Change #109: Events.
Speaker Change #109: But that's.
I think that is the end of our questions Cambria alright. Thank you. If you go back to you. Thank you well. Thank you for your interest in Ferro gas listen we we truly appreciate you calling in today and asking questions and allowing us to speak about the company. It's something that we're very proud of we think we have a great story, we know we have a.
Speaker Change #110: Future. We are really proud of the work we've been doing to continue to transform the company those of US in this room here answering this question, we know that the success of the company is entirely due to the efforts of our employee owners across the country. It's their attention to safety. They are attempting to our customer's expense management did they fueled a success.
Speaker Change #111: So thank you for.
Speaker Change #112: Tuning in today and.
Speaker Change #113: Turn it back over to the moderator.
Speaker Change #114: Thank you ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
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Speaker Change #115: Good day and thank you for standing by welcome to the Ferrellgas partners third quarter fiscal 2024 earnings conference call.
Speaker Change #115: After the speaker's presentation, there will be a question and answer session.
Speaker Change #116: To ask a question. During this session you may send them via the ask a question tab on the webcast. Please be advised that today's conference is being recorded I would now.
Speaker Change #117: Now like to hand, the conference over to your Speaker today Cambria Desert Fuji. Please go ahead.
Tim <unk>: Good morning, My name is Tim <unk>, Chief Executive Officer, and President of Ferro gas I want to start by saying how proud I am of our more than 4000 barrel gas employees, our experienced operations professionals, they planned well and they executed.
Tim <unk>: Executed even better against the weather anomaly, we experienced this quarter.
Speaker Change #119: We managed expenses in key areas of operations, including driving fleet expenses down by over 8% when compared to prior year.
Speaker Change #120: Regarding weather impact, we would have taken positive steps over the last four years to create balance in our demand across the different customer segments of our business.
Speaker Change #121: Our focus has been on growing our weather agnostic customer base by <unk>.
Speaker Change #122: <unk> customer type and geographic location, we have made great progress in the areas of tank exchange auto gas and in our industrial commercial segments. However, the extended an unseasonably warm heating season negatively impacted the heating segments of our business, we experienced about 10 <unk>.
Speaker Change #123: Sent warmer temperatures across the dance centrally geographic areas of our business.
Speaker Change #124: Additionally, we regret it seems some long standing businesses downsized their footprints and even closed their doors the effects of inflation did make a mark this quarter.
Speaker Change #125: But our hardworking account managers, they were able to redeploy some of the assets related to those clothes businesses and other areas, allowing for a decrease in overall capital expenditure.
Speaker Change #126: Finally, I would like to again call out the hard work of all of the employees of federal gas and the strong contribution that they make to this great industry.
Speaker Change #126: I will now turn the floor over to our Chief Financial Officer, Michael to go over our financial results for the quarter.
Michael: Thank you Tia Maria and thank you all for joining us on today's call.
Michael: I'd like to remind everyone that some statements made during this call may be considered forward looking and that various risks uncertainties and other factors could cause actual performance to differ materially from anticipated headwinds.
Michael: These factors are discussed in our Form 10-K filed on September 29, 2023, and other documents filed from time to time with the Securities and Exchange Commission.
Michael: Additionally, we note that the purpose of this call is to discuss the results of operations for the third fiscal quarter ended April 32024.
Michael: As Tim Maria commented warm weather negatively impacted our financial results as heating degree days during the third fiscal quarter or 15, 7% warmer than normal.
Tim Maria: Nine 8% warmer than the prior year quarter record high temperatures across much of the United States drove an 11% decrease in gallons sold.
Tim Maria: Revenues were $71 $6 million, lower which was partially offset by a decrease of $52 million and cost of product as compared to the prior year period.
Speaker Change #129: As a result gross profit decreased 7% for the third fiscal quarter 2024 compared to the prior year period.
Speaker Change #130: Margin per gallon for the third fiscal quarter, 2024 increased 4% compared to the prior year period. The favorable increase was due to segment mix, our platinum plus fixed cost program for residential customers Nash.
Speaker Change #130: National account pricing improvements and other cost dynamics.
Speaker Change #130: Operating income per gallon for the third fiscal quarter of 2024 decreased 10% compared to the prior year period, primarily due to the decrease in gross profit previously noted.
Speaker Change #131: We recognize net earnings attributable to Ferro gas partners LP of $52 8 million and $72 $4 million in the third fiscal quarter of 2024 and 2023, respectively.
Speaker Change #131: Operating expense as a percent of total revenue increased 16% for the third fiscal quarter.
$3 $2 million or 2% increase in operating expense was primarily due to a $2 $6 million increase in personnel expense, which was comprised of a $5 $2 million increase in medical claims paid partially offset by a $2 $6 million decrease.
Speaker Change #132: In incentive accruals.
Speaker Change #133: Adjusted EBITDA, a non-GAAP financial measure decreased by $21 6 million or 17% to $104 million in the third fiscal quarter compared to $125 6 million in the prior year quarter.
Speaker Change #133: The change was primarily due to the increase in gross profit noted above.
Speaker Change #134: Warmer than normal weather.
Speaker Change #135: We also made a $99 9 million cash distribution on April nine 2024 to class B unit holders of record as of March 25th 2824.
Speaker Change #136: This brings our total class b distributions paid to date to approximately $250 million. It is important to note that these distributions are discretionary and are made possible by the Companys continued a strong performance.
Speaker Change #137: Even after giving effect to these distributions the companys cash balance at the end of the third quarter was $73 6 million.
I will now turn the call back to Tamara.
Thank you Mike.
Tamara: Focusing again on our counter seasonal blue Rhino business, the warmer than normal temperatures and strategic initiatives resulted in an increase of 19% during the third fiscal quarter and blue Rhinos EBITDA compared to prior year period consumer demand surge as the warmer weather prompted an early kick.
Speaker Change #138: Off to the grilling season.
Additionally, blue Rhino tank exchange increased in areas, where the electric grid failed due to the heat, we leveraged our national footprint supply contracts and our experienced labor force executing well against higher than normal demand in our take exchange business.
Speaker Change #139: Date Blue Rhino operations professionals have installed over 500 self service kiosks, which allow consumers to purchase our propane cylinder 24 hours a day seven days a week quickly and conveniently.
Speaker Change #140: Home delivery service is also available in 19 markets with plans to expand.
Speaker Change #141: Italy Blue Rhino decreased capital expense by nearly $8 million this fiscal year due to supply chain improvements and inventory turns improvement.
Speaker Change #142: Now I'll turn to the technology front. The company continues to invest in opportunities to improve customer service and reduce overall cost through automation and other tools we have.
Speaker Change #143: Great progress on our logistics projects, which have reduced cost over $1 2 million in fiscal 2024.
Speaker Change #144: <unk> monitoring and telematics technology ensures our customers have a ready supply of propane in addition to improving the efficiency of our delivery efforts.
Speaker Change #145: Also our new credit processing platform went live a few months ago. This platform offers a seamless payment process for our customers and it is on track for an estimated $1 $2 million in annual cost reductions.
Speaker Change #146: Now before we move to the live Q&A section of our call I want to turn the call back to our moderator, but before I do that as mentioned in the announcement for this call any additional questions might be submitted via our Investor Relations E Mail box at Investor Relations at <unk> Dot com.
Speaker Change #145: Yes.
Speaker Change #147: Thank you ladies.
Speaker Change #148: Ladies and gentlemen, as a reminder to submit a question. Please use the ask the question tab on the webcast.
Speaker Change #149: Please standby, while we compile the Q&A roster.
Speaker Change #150: Alright, good morning, as we're looking through the questions. We see that there are several related to the June seven filing.
Speaker Change #151: Of the Edie stone.
Speaker Change #152: We're still evaluating that pending case, and we will not be addressing questions on that topic. Today I think we're going to start with a question regarding.
Speaker Change #152: Our.
Speaker Change #153: Opex and movement up in Opex as compared to prior year and what are things that we're doing to mitigate the overall opex expense. So first of all I think you've seen in some of our releases that were working on a enterprise wide ERP system.
Obviously, theres consultants widespread training across the company that are related to that Additionally, we have seen higher medical expenses. This year, which we believe to be one time in occurrence as compared to prior year and then when you think about our business its people and its our fleet and the <unk>.
Speaker Change #154: <unk> side of things, we implemented telematics technology at the beginning of this year actually fast tracked it as we saw diesel prices sort of themes study and comparison to prior year and the cost of auto parts.
Speaker Change #155: Telematics will greatly reduce those two areas. So those are the expense management mitigating items that we're currently working on.
Speaker Change #155: Yes. Good morning. This is Mike. So we have received some questions around our non maintenance capex in a particular.
The investment returns for non maintenance Capex.
Speaker Change #155: Okay.
Mike: And so when we look at capital spending there is essentially three buckets. We all look at maintenance Capex growth Capex, and then M&A capex and so when I refer to non maintenance Capex, it's really growth in M&A capex.
Mike: And that is more a function of opportunities and business needs in terms of the investment returns.
Mike: I think as everyone knows on the call is there is a hurdle rate that companies will look to in terms of making those type of discretionary investments.
Speaker Change #156: We don't disclose what our hurdle rate as we think.
Speaker Change #157: Sensitive information, especially as it relates to M&A activities.
Speaker Change #157: Those discretionary investments are made when they meet or exceed our internal hurdle rate.
Speaker Change #158: The cost of our capital is out there in the market in terms of what our senior notes are trading at and with the class B units in the preferreds are at so.
Speaker Change #158: People you can calculate what you think our cost of capital is Budd.
Speaker Change #158: What we'll do on discretionary capital spending is to make sure. It exceeds our hurdle rate and then thats what drives the financial portion of that decision.
Speaker Change #159: There was a question that came up about when do we expect to file our 10-Q when is the deadline for the filing. The 10-Q was filed last evening with the federal holiday It will be available tomorrow morning.
Speaker Change #160: We received an extension and an automatic extension from the SEC filing that we made with either last Thursday, our last Friday. So the 10-Q has been filed and will be available.
Speaker Change #159: Sure.
Speaker Change #159: Tomorrow morning.
Speaker Change #161: In turn there's been some questions.
Speaker Change #162: We're looking at the question. So we're trying to prioritize them so apologies for the pause.
The extending the revolver and a 26 senior notes two separate issues.
Speaker Change #163: As many know the revolver matures in March of 25, and one current this past March we have been in discussions with the banks about extending and amending the revolver. We've had generally supportive conversations with the banks that process or that extension is in process.
Speaker Change #164: In terms of the 2006 senior notes and an early refinancing of the 2006 senior notes that are callable currently at 134, 4% March of next year there'll be callable at par.
We have been evaluating whether or not it makes economic sense to do an early refinancing of the 2006 senior notes.
Speaker Change #164: The.
Speaker Change #165: The indicative pricing that we've seen coming out of the high yield market now is much more attractive compared to where it was six to nine months ago, and it's something that has caught our attention and when we've had discussions with some of the fixed income investors they've been very supportive of our access to the debt capital markets.
Speaker Change #165: We continue to evaluate whether or not that makes sense. Obviously the ruling this past Friday adds another aspect to that discussion.
Speaker Change #165: We will continue to evaluate whether or not it makes sense for us to come to the capital markets now for the early refinancing of the 'twenty six notes.
Speaker Change #165: Some questions on liquidity.
Speaker Change #165: We have a couple of different questions on liquidity.
Speaker Change #166: So when we talk about liquidity there are several theres a couple components. One is the cash balance and at the end of the quarter. The cash balance was 70 $374 million thereabouts I'm going to round up to $75 for easy math.
A $350 million revolver, we do need to maintain per the financing documents of $100 million of liquidity, so that puts revolver availability at $250 million.
Speaker Change #166: And then we have about $70 million of LTE is outstanding all of this is obviously public information that puts us down to about $180 million of availability under the revolver combined with the $75 million of cash that puts us at roughly 250 million.
Speaker Change #167: <unk> of liquidity.
Speaker Change #168: How much.
Speaker Change #169: Thank you.
Speaker Change #170: Well take a question here on sort of the.
Speaker Change #171: CPG margin performance over prior.
Speaker Change #171: Prior years in our outlook on that I think.
Speaker Change #172: Margin performance is directly related to our ability to safely deliver our products to our customers with an experienced they like and want to engage with again. So we believe our investments in safety and training customer service and technology are largely supportive of continued margin performance in March.
Speaker Change #173: Pressures are the same today as they've always been the economic well being of our customers demand factors some related to weather also fluctuations in the commodity pricing. We have shown great acumen in terms of being able to take advantage of those fluctuations disruptions in the supply. So those things are opportunities that will.
Ferro gases: These remain in this industry and if you've looked at it over the past 10 years, you can see that Ferro gases has always taken advantage of those and we see those opportunities in the future as well.
Speaker Change #175: Related to the refinancing of the senior notes there are a couple of questions coming in around the capital stack and plans that we may have regarding restructuring our capital structure.
So it seems to be a quest.
Speaker Change #176: A question, we get often when we go to the.
Speaker Change #177: Industry conferences, we are continuing to evaluate whether or not there is there is options around the capital structure I talked earlier about the 2006 senior notes.
Speaker Change #178: There is nothing obviously were that we could announce today in terms of the restructuring right. Now we are focusing on operating the business and reducing cost, including reducing our capital cost will continue to evaluate restructuring options.
Speaker Change #178: And when it makes sense for us.
Speaker Change #179: Take actions.
We'll do that but right now there's nothing to announce.
Speaker Change #179: Regarding the restructuring of the capital structure.
Speaker Change #180: We're jumping around between capital structure and company performance items that I think that hopefully.
Speaker Change #181: Helps with keeping the questions moving there are a few questions around blue Rhino.
Speaker Change #182: So I want to call out again, the fact that we were able to decrease capex expense in regards to blue Rhino by $8 million. This fiscal year really due to supply chain improvements and the inventory turns.
Speaker Change #183: We focused the first three years of this transformation of our company on our retail division, we haven't been shy about sharing that in our sights turns to blue Rhino really over this past year. We've added 6600 accounts, we've been able to increase our inventory turns into the supply chain tweaks at our production facilities.
Speaker Change #184: <unk> to really continue to drive Capex expense, which then obviously increases our cash flow that has been a focus. We've also installed over 500 self service kiosks that will create demand.
Speaker Change #185: Meeting demand than 24 hours a day. So we're excited about all that is happening on the blue Rhino front excited about the people.
Speaker Change #186: And what they're doing in that area of the business.
Speaker Change #187: Another question came in on the refinancing of our bonds and how we think about the refinancing of the bonds from a conceptual perspective.
Speaker Change #188: The economic evaluation, where U S. You quantify what the call premium is you quantify what the increase in interest expense would be from going from $5 38, or whatever the rate is seven three quarters, 8% whatever rate people want to assume and you could quantify what that impact.
Speaker Change #188: On the dollar amount of interest expense.
Speaker Change #189: And then do a kind of a breakeven analysis to figure out, okay, where do we treasuries or credit spreads need to move in order to mitigate that benefit. So we certainly look at it from economic perspective, but then there is more of a qualitative aspect to that evaluation and Thats one of de risking the company and <unk>.
Taking refinancing risk off the table in 2006, and if we were to go out now or sometime in the next few months and do an early refinancing of the 2006 that would de risk.
Speaker Change #189: That 2026 refinancing event. So we look at it both from a quantitative and qualitative perspective, and as I mentioned earlier, we continue to evaluate.
Speaker Change #189: Whether or not an early refinancing of the senior notes makes sense.
Speaker Change #190: We also received a question on the amount required to retire the class B shares.
Speaker Change #190: That is a function of.
Speaker Change #190: Additional distributions, it's a function of the timing of the redemption of the class B just to level set with everyone. The class is can be higher.
Speaker Change #190: Can you talk about the retirement of the class B shares that really I'm interpreting that domain. The redemption of the class B shares. So there is a IRR requirement in the classified documents.
Speaker Change #190: Those are available publicly I believe through prior filings back in 2021, you can go in there you can calculate based on.
Speaker Change #191: The distributions we have made to date and you can pick a redemption date in you could calculate what Deborah.
The redemption amount would be.
Speaker Change #192: So I can't give you a specific answer because it's dependent on the time period in which of those are redeemed.
Speaker Change #192: But the distributions that we've made certainly reduce that redemption value versus not having made any distributions.
Speaker Change #193: We're pausing we're rebuilding some of these questions make sure that we've hit the category but.
Speaker Change #194: Answer most of what is here.
Speaker Change #194: Yes.
Speaker Change #195: A question has come in a regarding ways to increase liquidity.
To deal with things like the class B shares as well as any litigation expenses.
Speaker Change #195: As Tamara you said at the onset of the Q&A, we're not going to go into detailed comments around the litigation.
Responsible litigation or potential responses to the litigation and the impact that those various responses might have on the company as I mentioned earlier, our liquidity right now is consistent with prior periods in terms of revolver availability and cash balances.
Speaker Change #195: We think we have sufficient liquidity to continue to operate the business.
Speaker Change #196: And we will continue to evaluate what our liquidity needs are and given the events that are in front of the company, including the Edie stone and judgment.
Speaker Change #196: There's a couple of questions around sort of whether and how it impacts the company.
Speaker Change #197: And I always take that opportunity to talk about the positive sides of how it impacts before all kind of dive into the other so on the positive side. If you think about we have spent much time trying to move the company into weather agnostic areas and I spoke a little bit about tank exchange, our blue Rhino brand already Theres also auto gas we can.
To have wins in this area.
Speaker Change #198: Obviously audit asking weather agnostic. Additionally.
Speaker Change #199: Supportive small businesses forklift cylinder and our industrial commercial and we've done a really good job of managing our volumes across all of those areas weather events like ice storms hurricanes anything that leads to power outages creates a huge demand for propane. It's portable it has one of the best distribution.
Networks, there is especially at times of great need. So when there is unpredictable weather such as that I just talked about it really creates great demand.
Speaker Change #200: A little bit of a picture into the tank exchange side. The January the month of January had.
Speaker Change #201: Power outages due to heat and cold and the tank exchange business actually had volumes that were close to summer months in this off in the off season month on the flip side, it's no secret that the federal gas footprint science itself, most dense in the center of the country and the upper Midwest in particular.
Speaker Change #200: <unk>.
Speaker Change #202: And we have done our acquisitions on the coast.
Speaker Change #203: As a specific geographic diversity.
Speaker Change #204: Tactic to move ourselves out of just that middle of the country. It was warmer there warmer than it's been in art and our 10 year study. So we believe that the web.
Speaker Change #205: Weather agnostic tactics, we're taking will help mitigate that as we go forward.
Speaker Change #206: And we will never be completely whether independent, but we are continuing to take steps to create less dependency in particular in that center part of the country.
Speaker Change #206: There is one.
One more one more question that just came in that we will.
Speaker Change #207: Dress before camry.
Speaker Change #208: It provides for closing comments.
Speaker Change #209: The question is to what extent do you revolver lenders think about the 26 maturity when considering extending the revolver maturity.
Speaker Change #210: I can't speak for the revolver banks and you would have to talk to them directly or talked to banks generally about how they view those things I would say from a conceptual perspective.
Speaker Change #211: The banks.
Speaker Change #212: Generally we would want to sit in front of any type of refinancing of that.
Speaker Change #212: Whether or not that's the case for our bank group I can't opine on that but generally banks would do like as I sit in front of material refinancing.
Speaker Change #212: Events.
Speaker Change #212: But that's.
Speaker Change #213: I think that is the end of our questions Cambria alright. Thank you. If you go back to you. Thank you well. Thank you for your interest in Ferro gas listen we we truly appreciate you calling in today and asking questions and allowing us to speak about the company. It's something that we're very proud of we think we have a great story, we know we have a great.
Speaker Change #214: Future. We are really proud of the work we've been doing to continue to transform the company those of US in this room here answering this question, we know that the success of the company is entirely due to the efforts of our employee owners across the country. It's their attention to safety. They are attempting to our customer's expense management did they fueled our success.
Speaker Change #215: So thank you for tuning in today and I will.
Speaker Change #216: Turn it back over to the moderator.
Speaker Change #217: Thank you ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.