Ferrellgas Partners Finance Corp - 10-K

ITEM 1A.   RISK FACTORS.

Various factors exist that pose risk to our business and the risk factors listed below outline some of the most significant risks, uncertainties, and assumptions that may affect our business. These risks are categorized by: (1) those related to our business and industry, (2) those inherent in an investment in our Class A Units, Class B Units or our debt securities and others related to our capital structure and financing arrangements, (3) those arising from our partnership structure and relationship with our general partner, and (4) those related to tax. Despite their ordering, these categories are not listed by priority, significance, or materiality. Additional risks, uncertainties, and assumptions may exist that are unforeseen, or currently deemed immaterial, that create potential for a material impact on our business. You should carefully consider the risks outlined below, in addition with other information outlined or incorporated by reference in this Annual Report.

Risks Related to our Business and Industry

Weather conditions, including warm winters, dry or warm weather in the harvest season and poor weather in the grilling season, may reduce the demand for propane, which could have a material adverse effect on our results of operations, cash flows, financial condition or liquidity.

Weather conditions have a significant impact on the demand for propane for heating, agricultural, and recreational grilling purposes. Many of our customers rely heavily on propane as a heating fuel. Accordingly, our sales volumes of propane are highest during the five-month winter-heating season of November through March and are directly affected by the temperatures during these months. During fiscal 2025, approximately 56% of our propane sales volume was attributable to sales during the winter-heating season. Actual weather conditions can vary substantially from year to year, which may significantly affect our financial performance or condition. Furthermore, variations in weather in one or more regions in which we operate can significantly affect our total propane sales volume and therefore our financial performance or condition. The agricultural demand for propane is also affected by weather, as dry or warm weather during the harvest season may reduce the demand for propane used in some crop drying applications.

Sales from portable tank exchanges experience higher volumes in the spring and summer, which includes the majority of the grilling season. Sustained periods of poor weather, particularly in the grilling season, can negatively affect our portable tank exchange revenues. In addition, poor weather may reduce consumers’ propensity to purchase and use grills and other propane-fueled appliances thereby reducing demand for portable tank exchange.

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Sudden and sharp increases in wholesale propane prices may not be completely passed on to our customers, especially those with which we have contracted pricing arrangements. These contracted pricing arrangements will adversely affect our profit margins if they are not immediately hedged with an offsetting propane purchase commitment and wholesale propane prices do increase. Conversely, sudden and sharp decreases in wholesale propane prices may result in our customers’ not fulfilling obligations under contracted pricing arrangements entered into with us. Customer defaults under these higher sales price arrangements may adversely affect our profit margins.

Gross margin from the retail distribution of propane is primarily based on the cents-per-gallon difference between the sales price we charge our customers and our costs to purchase and deliver propane to our propane distribution locations. Because our profitability is sensitive to changes in wholesale supply costs, we will be adversely affected if we cannot pass on increases in the cost of propane to our customers. We enter into propane sales commitments with a portion of our customers that provide for a contracted price agreement for a specified period of time. A certain percentage of that exposure is hedged with an offsetting propane purchase commitment.

The wholesale propane price per gallon is subject to various market conditions and may fluctuate based on changes in demand, supply and other energy commodity prices. Propane prices tend to partially correlate with crude oil and natural gas prices. Heightened levels of uncertainty related to the ongoing conflicts between Russia and Ukraine and those in the Middle East, in particular, may lead to additional economic sanctions by the U.S. and the international community and could further disrupt financial and commodities markets. Additionally, the current tariff environment is dynamic and uncertain, which may add to the disruption of the financial and commodities markets. We employ risk management activities that attempt to mitigate risks related to the purchasing, storing, transporting and selling of propane. However, sudden and sharp increases in wholesale propane prices cannot be passed on to customers with which we have contracted pricing arrangements. Therefore, we are exposed to the risk of increased wholesale propane prices and reduced profit margins on the percentage of our contractual commitments that are not immediately hedged with an offsetting propane purchase commitment. If we were to experience sudden and sharp propane price decreases, our customers may not fulfill their obligations to purchase propane from us at their previously contracted price per gallon, and we may not be able to sell the related hedged or fixed price propane at a profitable sales price per gallon in the then-current pricing environment.

We compete with other businesses to attract and retain qualified employees, and labor shortages and increased labor costs could adversely affect our business.

Our continued success depends on our ability to attract and retain qualified personnel in all areas of our business. We compete with other businesses to attract and retain qualified employees; thus, a tight labor market may cause our labor costs to increase.

A tight labor market may require us to enhance wage and benefits packages to remain competitive. Additionally, rising healthcare costs may influence the offerings provided in our total rewards package. No assurance can be given that our labor costs will not increase, or that such increases can be recovered through increased prices charged to customers.

We are dependent on our principal suppliers, which increases the risks from an interruption in supply and transportation.

Through our supply procurement activities, we purchased approximately 59% of our propane from ten suppliers during fiscal 2025. During extended periods of colder-than-normal weather, these suppliers or other suppliers in one or more of the areas in which we operate could temporarily run out of propane, necessitating the transportation of propane by truck, rail car or other means from other areas. If supplies from these sources were interrupted, certain suppliers were to default or difficulties in alternative transportation were to arise, the cost of procuring replacement supplies and transporting those supplies from alternative locations might be materially higher and, at least on a short-term basis, our margins could be reduced.

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Our failure or our counterparties’ failure to perform on obligations under commodity derivative and financial derivative contracts and increased costs associated with such contracts could materially affect our liquidity, cash flows and results of operations.

Volatility in the oil and gas commodities sector for an extended period of time or intense volatility in the near term could impair our or our counterparties’ ability to meet margin calls, which could cause us or our counterparties to default on commodity and financial derivative contracts. This could have a material adverse effect on our financial position or liquidity or on our ability to procure product at acceptable prices or at all and could increase our costs to procure product.

Legislation and rulemaking associated with parties to derivatives transactions may increase our cost of using derivative instruments to hedge risks associated with our business or may reduce the availability of such instruments or the creditworthiness of derivatives counterparties available to us. While costs imposed directly on us due to regulatory requirements for derivatives such as reporting, recordkeeping and electing the end-user exception from mandatory clearing, are relatively minor, costs imposed upon our counterparties may increase the cost of our doing business in the derivatives markets to the extent such costs are passed on to us.

Hurricanes and other natural disasters as well as epidemic diseases or similar public health crises, illnesses or pandemics could have a material adverse effect on our business, financial condition and results of operations.

Hurricanes and other natural disasters can potentially destroy numerous business structures and homes and, if occurring in the Gulf Coast region of the United States, could disrupt the supply chain for oil and gas products. Disruptions in supply could have a material adverse effect on our business, financial condition, results of operations and cash flow. Damage and higher prices caused by hurricanes and other natural disasters could also have an adverse effect on our financial condition due to the impact on the financial condition of our customers. To the extent the frequency or magnitude of significant weather events and natural disasters increases, the resulting increase in disruptions also could have adverse impacts on our business on both the supply and demand side and therefore adversely affect our results of operations and financial condition.

Similarly, epidemic diseases or similar public health crises, illnesses or pandemics or the consequences thereof may increase our operating expenses and reduce the efficiency of our operations and may have further adverse impacts on U.S. and global economic conditions, including a renewed slowdown in the U.S. economy, which could decrease demand for our products and have a material adverse effect on our results of operations and financial condition.

The propane distribution business is highly competitive, and competition may negatively affect our sales volumes and therefore our results of operations, cash flows, financial condition and liquidity.

Our profitability is affected by the competition for customers among all of the participants in the propane distribution business. We compete with a number of large national and regional firms and several thousand small independent firms. Because of the relatively low barriers to entry into the propane market, there is the potential for small independent propane distributors, as well as other companies not previously engaged in propane distribution, to compete with us. Some rural electric cooperatives and fuel oil distributors have expanded their businesses to include propane distribution. As a result, we are subject to the risk of additional competition in the future. Some of our competitors may have greater financial resources or lower costs than we do. Should a competitor attempt to increase market share by reducing prices, our operating margins and customer base may be negatively impacted. Generally, warmer-than-normal weather and increasing wholesale fuel prices further intensify competition.

The propane distribution industry is a mature one, which may limit our growth.

We foresee no growth or a small decline in total national demand for propane in the near future. Year-to-year industry volumes are primarily impacted by fluctuations in temperatures and economic conditions. Our ability to grow our sales volumes within the propane distribution industry is primarily dependent upon our ability to acquire other propane distributors and integrate those acquisitions into our operations and upon the success of our marketing efforts to acquire new customers organically. If we are unable to compete effectively in the propane distribution business, we may lose existing customers or fail to acquire new customers.

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We may not be successful in making acquisitions, and any acquisitions we make may not result in achievement of our anticipated results. In either case, this failure would potentially limit our growth, limit our ability to compete and impair our results of operations and financial condition.

We have historically expanded our business through acquisitions. We regularly consider and evaluate opportunities to acquire propane distributors. We may choose to finance these acquisitions through internal cash flow, external borrowings or the issuance of additional Class A Units or other securities. Under the terms of our current Credit Facility, total consideration paid for acquisitions is not to exceed $50.0 million in any fiscal year. We have substantial competition for acquisitions, and, although we believe there are numerous potential large and small acquisition candidates in our industry, there can be no assurance that we will be able to make any acquisitions on favorable terms or at all. There is also a risk we will not be able to successfully integrate acquired operations or achieve any expected cost savings or other synergies. We may also assume or become subject to known or unknown liabilities, including environmental liabilities, and we may not be protected against any such liabilities by indemnification from the sellers or insurance. There is no assurance that any acquisitions made will not be dilutive to our earnings and distributions and that any additional equity we issue as consideration for an acquisition will not be dilutive to our unitholders or any additional debt we incur to finance an acquisition will not affect the operating partnership’s ability to make distributions to Ferrellgas Partners or service our existing debt.

Our operations, capital expenditures and financial results may be affected by regulatory changes and/or market responses to global climate change, including competition from other energy sources in response to such changes.

There continues to be concern, both nationally and internationally, about climate change and the contribution of GHG emissions, most notably carbon dioxide, to global warming. Increased regulation of GHG emissions, especially in the transportation sector, could impose significant additional costs on us, our suppliers and our customers. Numerous proposals have been made and are likely to continue to be made at the national, regional and state levels of government to monitor and limit GHG emissions. Additionally, the U.S. Environmental Protection Agency and the SEC have also issued climate change rules, many of which are being challenged through various states, industry groups, and others. These efforts include cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that limit GHG emissions from certain sources. See “Item 1. Business – Government Regulation – Climate Change Legislation” above for more information. At this time, we cannot predict the effect that climate change regulation may have on our business, financial condition or operations in the future.

Furthermore, increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as volatility in seasonal temperatures and increased frequency and severity of storms, floods and other climatic events. To the extent weather conditions are affected by climate change or demand is impacted by regulations associated with climate change, customers’ energy use could increase or decrease depending on the duration and magnitude of the changes, leading either to increased investment or decreased revenues.

Propane competes with other sources of energy, some of which can be less costly for equivalent energy value and which also may become more prevalent in response to climate change regulation and other factors. See “Item I. Business – Industry” for additional information on our competition for customers against suppliers of electricity, natural gas and fuel oil.

Additionally, incentives offered under the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives and impact demand for propane. The One Big Beautiful Bill Act approved by Congress and signed by the President on July 4, 2025 significantly modifies the Inflation Reduction Act’s clean energy credits and incentives. The ultimate impact on propane demand and our business is uncertain and may change as legislation moves forward. We cannot predict the effect that the development of alternative energy sources and related laws or changes made by the current administration might have on our financial position or results of operations.

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Economic and political conditions may harm the energy business disproportionately to other industries.

Deteriorating regional and global economic and political conditions, including U.S. sanctions on Iran oil exports and conflict, unrest and economic instability in oil producing countries and regions, and the ongoing conflicts between Russia and Ukraine and those in the Middle East, may cause significant disruptions to commerce throughout the world. If those disruptions occur in areas of the world which are tied to the energy industry, such as the Middle East, it is likely that our industry will be either affected first or affected to a greater extent than other industries. These conditions or disruptions may impair our ability to effectively market or acquire propane or impair our ability to raise equity or debt capital for acquisitions, capital expenditures or ongoing operations.

We are subject to operating and litigation risks, and related costs or liabilities may not be covered by insurance.

We are subject to all operating hazards and risks normally incidental to the handling, storing and delivering of combustible liquids such as propane. These operations face an inherent risk of exposure to general liability claims in the event that they result in injury or destruction of property. As a result, we have been, and are likely to be, a defendant in various legal proceedings arising in the ordinary course of business that may not be covered by insurance. As described in more detail in Note P “Contingencies and commitments” to the consolidated financial statements, on January 15, 2025, Ferrellgas and the other defendants entered into a Settlement Agreement with Eddystone Rail Company (“Eddystone”) resolving all issues in and related to the EDPA Lawsuit (as defined in Note P “Contingencies and commitments” to the consolidated financial statements included in this Annual Report). In settlement of the judgment in the EDPA Lawsuit, the defendants agreed to pay Eddystone the sum of $125.0 million in three installments. We paid $50.0 million on January 15, 2025 and $37.5 million on June 16, 2025. The final payment is due on or before January 15, 2026, and is secured by a letter of credit issued under the Credit Agreement (as defined in Note H “Debt” to the consolidated financial statements included in this Annual Report). As part of the settlement, the previously disclosed $190.0 million appeal bond, and the related letters of credit, were released. The litigation described above was not covered by insurance. Our insurance policies do not cover all losses, costs or liabilities that we may experience, and insurance companies that currently insure companies in our industry or in the energy industry generally may cease to do so or substantially increase premiums. Although we maintain insurance policies with insurers in such amounts and with such coverages and deductibles as we believe are reasonable and prudent, we cannot guarantee that such insurance will be adequate to protect us from all material expenses related to potential future claims for personal injury and property damage or that such levels of insurance will be available in the future at economical prices.

A significant increase in motor fuel prices may adversely affect our profits.

Motor fuel is a significant operating expense for us in connection with the purchase and delivery of propane to our customers. The price and supply of motor fuel is unpredictable and fluctuates based on events we cannot control, such as changes in trade and tariff policy and geopolitical developments, including impacts from the ongoing conflicts between Russia and Ukraine and those in the Middle East, supply and demand for oil, gas, and refined fuels, actions by oil and gas producers, actions by motor fuel refiners, conflict, unrest or economic instability in oil producing countries and regions, regional production patterns and weather conditions. We may not be able to pass any increases in motor fuel prices on to our customers. As a result, any increases in these prices may adversely affect our profitability and competitiveness.

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If we are unable to protect our information technology systems against service interruption, misappropriation of data, or breaches of security resulting from cybersecurity attacks or other events, or we encounter other unforeseen difficulties in the operation of our information technology systems, our operations could be disrupted, our business and reputation may suffer, and our internal controls could be adversely affected.

In the ordinary course of business, we rely on information technology systems, including the Internet and third-party hosted services, to support a variety of business processes and activities and to store sensitive data, including (i) intellectual property, (ii) our proprietary business information and that of our suppliers and business partners, (iii) personally identifiable information of our customers and employees, and (iv) data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities. In addition, we rely on our information technology systems to process financial information and results of operations for internal reporting purposes and to comply with financial reporting, legal, and tax requirements. Despite our security measures, our information technology systems may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, sabotage, or other disruptions.

The efficient execution of our business is dependent upon the proper functioning of our internal systems, and we depend on our management information systems to process orders, manage inventory, manage accounts receivable collections, maintain distributor and customer information, maintain cost-efficient operations and assist in delivering propane on a timely basis. In addition, our staff of management information systems professionals relies heavily on the support of several key personnel and vendors. Any disruption in the operation of those management information systems, including a cybersecurity breach or loss of employees knowledgeable about the operation of such systems, termination of our relationship with one or more of these key vendors or failure to continue to modify and upgrade such systems effectively as our business expands could negatively affect our business, financial condition or reputation.

We may incur significant costs in order to comply with privacy and data security laws and regulations, and any failure to comply with such laws and regulations could result in significant penalties or other liabilities or costs.

There are numerous laws and regulations regarding privacy and the storage, sharing, use, processing, transfer, disclosure and protection of personal data, the scope of which is changing, subject to differing interpretations, and may be inconsistent between jurisdictions. As described in “Item 1. Business – Government Regulation – Privacy and Data Security Legislation” above, the effects of these data privacy laws and regulations may require us to modify our data processing practices and policies and incur substantial compliance-related costs and expenses. It remains unclear how various provisions will be interpreted and enforced. Non-compliance with these laws could result in penalties or significant legal liability. Although we take reasonable efforts to comply with all applicable laws and regulations, there can be no assurance that we will not be subject to regulatory action, including fines, in the event of an incident. We or our third-party service providers could be adversely affected if legislation or regulations are expanded to require changes in our or our third-party service providers’ business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our or our third-party service providers’ business, results of operations or financial condition.

The conduct of our business may infringe the intellectual property rights of others, which may cause us to incur unexpected costs and place restrictions on our operations.

We cannot be certain that the conduct of our business will not infringe the intellectual property rights of others. We may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of intellectual property rights of third parties by us or our customers in connection with the conduct of our business. Any such claims, whether or not meritorious, could result in costly litigation and divert the efforts of our management and personnel. Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (if available on acceptable terms or at all) or to pay damages and to cease making or selling certain products or services. Any of the foregoing could cause us to incur significant costs and negatively affect our business, financial condition, or reputation.

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We may incur significant costs in order to comply with environmental, health and safety laws and regulations, and any failure to comply with such laws and regulations could result in significant penalties or other liabilities or costs.

Our operations are subject to stringent federal, state and local laws and regulations relating to protection of the environment or human health and safety. Compliance with current and future environmental laws and regulations may increase our overall cost of business, including our capital costs to construct, maintain and upgrade equipment and facilities. Failure to comply with these laws and regulations may result in the assessment of significant administrative, civil and criminal penalties, the imposition of investigatory and remedial liabilities, and even the issuance of injunctions that may restrict or prohibit some or all of our operations. Such laws and regulations are subject to change and we cannot provide assurance that the cost of compliance or the consequences of any failure to comply will not have a material adverse effect on our results of operations or financial condition.

Risks Inherent in an Investment in our Class A or Class B Units or our Debt Securities and Other Risks Related to Our Capital Structure and Financing Arrangements

If we are unable to access the financing markets, including through our Credit Facility, it may adversely impact our business and liquidity.

Market conditions may impact our ability to access the financing markets on terms acceptable to us or at all. In addition, there are limitations on our ability to utilize fully all commitments under our Credit Facility. Availability under our Credit Facility is determined by reference to a borrowing base comprised of a combination of accounts receivable and propane inventory that fluctuates over time and the borrowing base may be further reduced by discretionary actions of the administrative agent under the Credit Facility. See Note H “Debt” to the consolidated financial statements included in this Annual Report for details. If we are unable to access the financing markets, including through our Credit Facility, we would be required to use cash on hand to fund operations and repay outstanding debt. There is no assurance that we will be able to generate sufficient cash to fund our operations and repay or refinance such debt.

The Company has maintained constructive relationships with its lenders. Management has internal approvals necessary for a plan to restructure our capital structure and debt and refinance and/or extend the maturity date for the Credit Facility and external advisors have been engaged to assist in this process.

Our substantial indebtedness and other financial obligations could impair our financial condition and our ability to satisfy our obligations and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

We have substantial indebtedness and other financial obligations. Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. See Note H “Debt” to the consolidated financial statements included in this Annual Report for more detail. Our long-term debt obligations do not contain any sinking fund provisions, but require aggregate principal payments, without premium, as disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources–Material Cash Requirements.”

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If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Our ability to enter leasing transactions at favorable terms could also be impacted. The Indentures, the Credit Agreement and the OpCo LPA Amendment restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or obtain proceeds in an amount sufficient to meet any debt service obligations then due. For more detail, see Note H “Debt” and Note I “Preferred units” to the consolidated financial statements included in this Annual Report.

Recent lowering of the ratings assigned to us and our debt securities by rating agencies, and any future lowering or withdrawal of such ratings, may increase our future borrowing costs, reduce our access to capital and adversely affect our ability to refinance or restructure our indebtedness.

In March 2025, the operating partnership’s corporate rating was downgraded from B2 to B3 by Moody’s Investors Service (“Moody’s”) and our senior unsecured notes were downgraded from a B3 to a Caa1 rating by Moody’s. In April 2025, the operating partnership’s senior unsecured notes rating was downgraded from a B to a CCC+ rating by S&P Global Ratings (“S&P”). In June 2025, S&P further downgraded this rating to CCC. Any rating assigned could be lowered further or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. These recent downgrades and any future downgrade or withdrawal of our ratings likely could make it more difficult or more expensive for us to obtain additional debt financing, including for the purpose of refinancing or restructuring our existing indebtedness.

Due to the timing of the maturities, as described in Note H “Debt” in the notes to the consolidated financial statements included in this Annual Report, of both the 2026 Notes and the Credit Facility, and the $121.9 million letters of credit which it secures as of July 31, 2025, management has performed an evaluation to consider whether or not there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of issuance of this Annual Report. Although we have developed and received internal approval on a plan to restructure our capital structure and debt and refinance and/or extend the maturity date for the Credit Facility, recent downgrades and any future downgrade or withdrawal could adversely affect our ability to execute on this plan or make such execution more expensive. However, management believes its plans, which are probable of being executed, alleviate substantial doubt. Management maintains the Company will be able to meet its obligations and concludes there is no substantial doubt about the Company’s ability to continue as a going concern.

Further, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. If any credit rating assigned to the OpCo Notes or other debt securities is lowered or withdrawn for any reason, you may not be able to resell such debt securities without a substantial discount.

Restrictive covenants in the Indentures, the Credit Agreement and the agreements governing our other future indebtedness and other financial obligations reduce our operating flexibility and ability to make cash distributions to holders of Class A Units and Class B Units. The Indentures, the Credit Agreement and the OpCo LPA Amendment contain important exceptions to these covenants .

The Indentures and the Credit Agreement contain, and any agreement that will govern debt incurred by us in the future may contain, various covenants that limit our ability to take certain actions as described in Note H “Debt” to the consolidated financial statements included in this Annual Report. These covenants also limit the ability of the operating partnership to make distributions to Ferrellgas Partners and therefore effectively limit the ability of Ferrellgas Partners to make distributions to its Class A Unitholders and Class B Unitholders. Ferrellgas Partners is currently unable to make distributions to its Class A and Class B unitholders. See Note I “Preferred units” to the consolidated financial statements included in this Annual Report for a discussion of limitations related to distributions.

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The Indentures and the Credit Agreement contain important exceptions to the covenants, including the covenants that restrict our ability to sell assets and make restricted payments. For example, the Indentures initially permit the operating partnership to make $60 million plus the amount of the operating partnership’s Available Cash from Operating Surplus (as defined in the Indentures) for the preceding fiscal quarter (so long as the operating partnership’s fixed charge coverage ratio is greater than 1.75x) or $25 million (if the operating partnership’s fixed charge coverage ratio is equal to or less than 1.75x) plus an additional $5 million, in each case, of restricted payments for any purpose, subject to compliance with applicable conditions, as well as to make additional restricted payments for specified purposes. Furthermore, we may utilize exceptions to sell assets and such asset sales may be on unfavorable terms.

The operating partnership issued $700.0 million aggregate initial liquidation preference of Preferred Units, the terms of which restrict us from undertaking certain actions while such Preferred Units are outstanding.

The Preferred Units are entitled to quarterly distributions in cash or payment in kind and are redeemable at the option of the operating partnership at any time, or at the option of the holders no earlier than March 30, 2031, subject to the terms as described in more detail under Note I “Preferred units” to our consolidated financial statements included in this Annual Report.

For so long as at least 20% of the Preferred Units initially issued (without any adjustment for new Preferred Units issued as payment in kind) remain outstanding, holders of the Preferred Units have the right, voting as a separate class, to designate one director onto the board of the general partner, which may not exceed nine directors.

For so long as at least $35.0 million aggregate liquidation preference of Preferred Units remain outstanding, the partnership agreements of Ferrellgas Partners and the operating partnership limit certain actions, unless agreed by holders of at least 1/3 of the outstanding Preferred Units. Accordingly, the holders of the Preferred Units will have significant influence with respect to our management, business plans and policies. The interests of holders of the Preferred Units may conflict with our interests or the interests of our debtholders or securityholders.

Additionally, upon the occurrence of certain “change of control” transactions, the holders of the Preferred Units will have the option to require the redemption of all or a portion of the Preferred Units in cash in an amount equal to the redemption price; and such a “change of control” will also trigger a “change of control” under the Indentures.

In the event that no Class B Units are outstanding and the outstanding amount of Preferred Units is greater than $233.3 million after March 30, 2031, to the extent the operating partnership fails to redeem all the outstanding Preferred Units, holders of at least 1/3 of the outstanding Preferred Units will have the right to appoint a majority of the members of the board of directors of the general partner and initiate a sale of the operating partnership. These restrictions may limit our flexibility to pursue strategic opportunities.

We may be unable to repurchase the OpCo Notes or repay or repurchase other debt or other securities upon a change of control.

Upon the occurrence of a “change of control” under the Indentures, we or a third party will be required to make a change of control offer to repurchase the OpCo Notes at 101% of their principal amount, plus accrued and unpaid interest. Additionally, a change of control under the Credit Facility constitutes an event of default that permits the lenders to accelerate the maturity of borrowings under the Credit Agreement and terminate their commitments to lend thereunder. We may not have the financial resources to purchase the OpCo Notes, particularly if a change of control event triggers a similar repurchase requirement for, or results in the acceleration of, other indebtedness, including under our Credit Facility.

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In addition, the Preferred Units have similar change of control provisions which require us to offer to redeem the Preferred Units at a price equal to the then-current liquidation preference per unit, plus accrued and unpaid distributions. These restrictions could prevent us from satisfying our obligations to purchase such securities unless we are able to refinance the indebtedness or obtain waivers or consents from the holders thereof. Our failure to pay the change of control purchase price or repay borrowings when due would allow the holders to declare such indebtedness be immediately due and payable. The exercise by the holders of our indebtedness under the OpCo Notes or the Credit Agreement of their right to require us to repurchase or repay such indebtedness upon a change of control could cause a default under the agreements governing our other indebtedness or other securities, including future agreements, even if the change of control itself does not, due to the financial effect of such repurchases on us. In the event a repurchase or repayment is required at a time when we are prohibited from purchasing or repaying such indebtedness, we could attempt to refinance the indebtedness that contains such prohibitions. If we do not obtain a consent or repay such indebtedness, our failure to purchase or repay such indebtedness would constitute an event of default which could, in turn, constitute a default under our other indebtedness. Finally, our ability to pay cash to the holders of such indebtedness upon a change of control may be limited by our then existing financial resources.

We may not be able to clearly establish when a sale of all or substantially all of the assets has occurred under New York law.

One of the events that may constitute a change of control is a sale of all or substantially all our assets. The meaning of “substantially all” varies according to the facts and circumstances of the subject transaction and has no clearly established meaning under New York law, which governs the Indentures and the Credit Agreement. This ambiguity as to when a sale of substantially all of our assets has occurred may result in uncertainty regarding whether a change of control has occurred and whether an obligation to offer to repurchase or repay under the Indentures or the Credit Agreement has been triggered.

Our Class A Units are traded on the OTC markets, which have less liquidity than a major exchange and unitholders may face limited availability of market quotations for our Class A Units, reduced liquidity for the trading of our Class A Units and potentially lower trading prices for our Class A Units.

On July 1, 2025, the OTC Markets Group, Inc. eliminated the OTC Pink Market, on which our Class A Units were traded, and the Company transferred to the OTCID Basic Market. We expect our Class A Units to be quoted on the OTCID Basic Market for the foreseeable future. Unitholders may face limited availability of market quotations for our Class A Units, reduced liquidity for the trading of our Class A Units and potentially lower trading prices for our Class A Units. In addition, we could experience a decreased ability to issue additional securities and obtain additional financing in the future, and it could impair our ability to provide equity incentives to our employees. There can be no assurance that the trading market for our Class A Units will improve in the future or that any improvement will be sustained.

There may be no active trading market for our debt securities, which may limit a holder’s ability to sell our debt securities.

The OpCo Notes are not, and we do not expect any debt securities we may issue in the future to be, listed on any securities exchange quoted through any automated quotation system. An established market for our debt securities may not develop, or if one does develop, it may not be maintained. We cannot assure a debt holder that a liquid market for the debt securities will develop, or that the holder will be able to sell its debt securities or receive a specific price upon any sale of its debt securities. If a public market for our debt securities did develop, the debt securities could trade at prices that may be higher or lower than their principal amount or purchase price, depending on many factors.

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Subject to certain restrictions, Ferrellgas Partners may dilute existing interests of unitholders by selling additional limited partner interests. Ferrellgas Partners may also dilute existing Class A Units by converting Class B Units to Class A Units.

The partnership agreement of Ferrellgas Partners generally allows Ferrellgas Partners to issue additional limited partner interests and other equity securities, subject to consent by holders of the Requisite Class B Units (defined as (a) if the holder that initially holds a majority of the Class B Units (the “Initial Class B Majority Holder”) holds at least 50% of the Class B Units, holders of at least 50% of the outstanding Class B Units or (b) if the Initial Class B Majority Holder holds less than 50% of the Class B Units, holders of at least one-third of the outstanding Class B Units). When Ferrellgas Partners issues additional equity securities, a unitholder’s proportionate partnership interest in such class will decrease. Such an issuance could negatively affect the amount of cash distributed to unitholders and the market price of such units. The issuance of additional units will also diminish the relative voting strength of the previously outstanding class of units. In addition, Ferrellgas Partners may issue preferred or other securities that could have a preferred right to distributions or other priority economic terms, which could negatively affect the value of our outstanding units. See Note J “Equity (Deficit)” to the consolidated financial statements included in this Annual Report for more information related to the Class B units.

If Ferrellgas Partners is permitted to make and makes distributions to its partners, while any Class B Units remain outstanding, Class B Unitholders collectively will receive at least approximately 85.7% of the aggregate amount of each such distribution and may receive up to 100% of any such distribution. Accordingly, while any Class B Units remain outstanding, Class A Unitholders may not receive any distributions and, in any case, will not receive collectively more than approximately 14.1% of any distribution.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for information on partnership distributions pursuant to the Amended Ferrellgas Partners LPA. For additional discussion of the terms of the Class B Units, see Note J “Equity (Deficit)” in the notes to our consolidated financial statements included in this Annual Report. Although the general partner has not made any decisions or adopted any policy with respect to the allocation of future distributions by Ferrellgas Partners to its partners, the general partner may determine that it is advisable to pay more than the minimum amount of any distribution, up to 100% of the amount of such distribution, to Class B Unitholders.

Risks Arising from Our Partnership Structure and Relationship with Our General Partner

Ferrellgas Partners is a holding entity and has no material operations or assets, other than its ownership stake in the operating partnership and Ferrellgas Partners Finance Corp. Accordingly, Ferrellgas Partners is dependent on distributions from the operating partnership to service its obligations and pay distributions to its unitholders. These distributions are not guaranteed and are subject to significant limitations.

Ferrellgas Partners is a holding entity for our subsidiaries, including the operating partnership. Ferrellgas Partners has no material operations and only limited assets. Ferrellgas Partners Finance Corp. is Ferrellgas Partners’ wholly-owned finance subsidiary, acts only as a co-obligor on its debt securities, if any, conducts no business and has nominal assets. Accordingly, Ferrellgas Partners is dependent on cash distributions from the operating partnership and its subsidiaries to service any obligations of Ferrellgas Partners and pay distributions to its unitholders.

Unitholders have limited voting rights; our general partner manages and operates us, thereby generally precluding the participation of our unitholders in operational decisions.

Our general partner manages and operates us. Unlike the holders of common stock in a corporation, our unitholders generally have only limited voting rights on matters affecting our business. Holders of Ferrellgas Partners’ Class B Units and the operating partnership’s Preferred Units have certain additional voting rights focused on their respective distribution rights or preferences and their respective protective covenants and other rights under the partnership agreements of Ferrellgas Partners and the operating partnership. Amendments to the agreement of limited partnership of Ferrellgas Partners may be proposed only by or with the consent of our general partner. Proposed amendments must generally be approved by holders of at least a majority of Ferrellgas Partners’ outstanding Class A Units and, in certain cases, holders of Ferrellgas Partners’ Class B Units and the operating partnership’s Preferred Units.

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Class A Unitholders will have no right to elect our general partner or the directors of our general partner on an annual or other continuing basis. See Note J “Equity (Deficit)” to the consolidated financial statements included in this Annual Report for Board rights related to the Class B Units. Under certain circumstances, holders of the Preferred Units may have the right to appoint a majority of the Board of Directors of our general partner after March 30, 2031. See Note I “Preferred units” to the consolidated financial statements included in this Annual Report.

Our general partner may not be removed except pursuant to the vote of the holders of at least 66 2/3% of the outstanding units entitled to vote thereon, which includes the Class A Units owned by our general partner and its affiliates and upon the election of a successor general partner by the vote of the holders of not less than a majority of the outstanding Class A Units entitled to vote; provided that holders of the Class B Units will have the right to remove the general partner under certain circumstances.

Unitholders may not have limited liability in specified circumstances and may be liable for the return of distributions.

The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some states. The limited partners could be held liable in some circumstances for our obligations to the same extent as a general partner if it were determined that we had been conducting business in any state without compliance with the applicable limited partnership statute.

In addition, under some circumstances a unitholder may be liable to us for the amount of a distribution for a period of three years from the date of the distribution. Unitholders will not be liable for assessments in addition to their initial capital investment in our Class A Units. Under Delaware law, we may not make a distribution to our unitholders if the distribution causes all our liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and liabilities for which recourse is limited to specific property are not counted for purposes of determining whether a distribution is permitted. Delaware law provides that a limited partner who receives such a distribution and knew at the time of the distribution that the distribution violated the Delaware law will be liable to the limited partnership for the distribution amount for three years from the distribution date. Under Delaware law, an assignee that becomes a substituted limited partner of a limited partnership is liable for the obligations of the assignor to make contributions to the partnership. However, such an assignee is not obligated for liabilities unknown to that assignee at the time such assignee became a limited partner if the liabilities could not be determined from the partnership agreements.

Tax Risks

The U.S. Internal Revenue Service (the “IRS”) could challenge our classification as a partnership for federal income tax purposes, which, if successful, would result in our being treated as a corporation for federal income tax purposes. Additionally, changes in federal or state laws could subject us to entity-level taxation. Either of these events would substantially reduce the cash available for distribution to our unitholders.

We believe that, under current law, we have been and will continue to be classified as a partnership for federal income tax purposes; however, we have not requested, and do not plan to request, a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes. One of the requirements for such classification is that at least 90% of our gross income for each taxable year has been and will be “qualifying income” within the meaning of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Whether we will continue to be classified as a partnership depends in part on our ability to meet this qualifying income test in the future.

If we were classified as a corporation for federal income tax purposes, we would pay tax on our income at corporate rates, currently 21% at the federal level, and we would probably pay additional state income taxes as well. In addition, distributions would generally be taxable to the recipient as corporate dividends and no income, gains, losses or deductions would flow through to our unitholders. Because a tax would be imposed upon us at the entity level as a corporation, the cash available for distribution to our unitholders would be substantially reduced. Therefore, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders and thus would likely result in a substantial reduction in the value of our units.

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The tax treatment of publicly traded partnerships could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

The present U.S. federal income tax treatment of publicly traded partnerships, including us, may be modified by administrative or judicial interpretation or legislative action at any time. Any modification to the U.S. federal income tax laws and interpretations thereof may or may not be applied retroactively and could make it more difficult or impossible to meet the exception for us to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or cause us to change our business activities, affect the tax considerations of an investment in us and change the character or treatment of portions of our income. Any such changes could cause us to be treated as an association taxable as a corporation for U.S. federal income tax purposes and thereby subject us to entity-level income taxes, which would cause a material reduction in our anticipated cash flows and adversely affect the value of our units.

A successful IRS contest of the federal income tax positions we take may reduce the market value of our units and the costs of any contest will be borne by us and therefore indirectly by our unitholders and our general partner.

The IRS may adopt positions that differ from those expressed herein or from the positions we take. It may be necessary to resort to administrative or court proceedings in an effort to sustain some or all of the positions we take, and some or all of these positions ultimately may not be sustained. Any successful IRS contest may materially reduce the market value of our units and the prices at which our units trade. In addition, our costs of any contest with the IRS will be borne by us and therefore indirectly by our unitholders and our general partner.

Unitholders may be required to pay taxes on their share of our taxable income even if they do not receive cash distributions from us.

Unitholders may be required to pay federal income taxes and, in some cases, state and local income taxes on their share of our taxable income, including our taxable income associated with a disposition of property or cancellation of debt, whether or not they receive any cash distributions from us. Unless we are able to pay and actually pay cash distributions on our Class A Units, Class A Unitholders will not receive any cash from us to cover any such tax liabilities, and, if we do pay cash distributions in the future, such cash distributions may not be equal to unitholders’ share of our taxable income or even equal to the actual tax liability which results from that income.

We continue to pursue a strategy to normalize our capital structure. As part of this strategy, we may engage in transactions that could have significant adverse tax consequences to our unitholders. For example, we may sell some of our assets and use the proceeds to fund capital expenditures or a redemption or conversion of our Class B Units or Preferred Units rather than distributing the proceeds to our unitholders, and some or all of our unitholders may be allocated substantial taxable income and gain resulting from the sale without receiving a cash distribution. We may also engage in transactions to reduce our existing debt or debt service costs, such as debt exchanges, debt repurchases, or modifications of our existing debt, which could result in cancellation of indebtedness income, or other income, being allocated to our unitholders as taxable income. This may cause a unitholder to be allocated taxable income with respect to our units with no corresponding distribution of cash to fund the payment of the unitholder’s resulting tax liability. The ultimate effect of any such allocations will depend on the unitholder’s individual tax position with respect to its units. Unitholders are encouraged to consult their tax advisors with respect to the consequences to them of this income.

Our unitholders may be subject to limitations on their ability to deduct interest expense incurred by us.

In general, our Class A Unitholders are entitled to a deduction for the interest we have paid or accrued on indebtedness properly allocable to our business during our taxable year. However, as introduced under the Tax Cuts and Jobs Act of 2017 and further amended, for taxable years beginning after December 31, 2017, the deductibility of net interest expense is limited to the sum of our business interest income and 30% of our “adjusted taxable income”. Any business interest expense disallowed at the partnership level is then generally carried forward and may be deducted in a succeeding taxable year by a unitholder, in accordance with the unitholder’s applicable tax laws. These limitations might cause interest expense to be deducted by our unitholders in a later period than recognized in the GAAP financial statements.

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There are limits on the deductibility of losses.

In the case of unitholders subject to the passive loss rules (generally, individuals, closely held corporations and regulated investment companies), any losses generated by us will only be available to offset our future income and cannot be used to offset income from other activities, including passive activities or investments. Unused losses may be deducted when the unitholder disposes of its entire investment in us in a fully taxable transaction with an unrelated party. A unitholder’s share of our net passive income may be offset by unused losses carried over from prior years, but not by losses from other passive activities, including losses from other publicly-traded partnerships.

Tax gain or loss on the disposition of our Class A Units could be different than expected.

If a unitholder sells its Class A Units, the unitholder will recognize a gain or loss equal to the difference between the amount realized and its tax basis in those Class A Units. Prior distributions in excess of the total net taxable income the unitholder was allocated for a Class A Unit, which decreased its tax basis in that Class A Unit, will, in effect, become taxable income to the unitholder if the Class A Unit is sold at a price greater than its tax basis in that Class A Unit, even if the price received is less than its original cost. A substantial portion of the amount realized, whether or not representing a gain, will likely be ordinary income to that unitholder. Should the IRS successfully contest certain positions we take, a selling unitholder could recognize more gain on the sale of units than would be the case under those positions, without the benefit of decreased taxable income in prior years. In addition, if a unitholder sells its units, the unitholder may incur a tax liability in excess of the amount of cash that unitholder receives from the sale.

Tax-exempt entities, regulated investment companies, and foreign persons face unique tax issues from owning Class A Units that may result in additional tax liability or reporting requirements for them.

An investment in Class A Units by tax-exempt entities, such as employee benefit plans, individual retirement accounts, regulated investment companies, generally known as mutual funds, and non-U.S. persons, raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, will be unrelated business taxable income and thus will be taxable to them. Net income from a “qualified publicly-traded partnership” is qualifying income for a regulated investment company, or mutual fund. However, no more than 25% of the value of a regulated investment company’s total assets may be invested in the securities of one or more qualified publicly-traded partnerships. We expect to be treated as a qualified publicly-traded partnership. Distributions and dispositions involving foreign unitholders are subject to IRS withholding rules, including withholding at the highest individual rate on distributions and a 10% withholding on gross proceeds from unit sales under Section 1446(f) of the Code, which brokers are generally responsible for enforcing. Distributions may also be subject to an additional 10% withholding if they exceed cumulative net income, potentially reducing liquidity and increasing compliance burdens for foreign investors.

Reporting of partnership tax information is complicated and subject to audits; we cannot guarantee conformity to IRS requirements. As a result of investing in our units, a unitholder will likely be subject to state and local taxes and return filing requirements in jurisdictions in which it is not domiciled. Additionally, unitholders may have negative tax consequences if we default on our debt or sell assets.

We will furnish each unitholder with a Schedule K-1 that sets forth that unitholder’s allocable share of income, gains, losses and deductions. In preparing these schedules, we will use various accounting and reporting conventions and adopt various depreciation and amortization methods. We cannot guarantee that these schedules will yield a result that conforms to statutory or regulatory requirements or to administrative pronouncements of the IRS. If any of the information on these schedules is successfully challenged by the IRS, the character and amount of items of income, gain, loss or deduction previously reported by unitholders might change, and unitholders might be required to adjust their tax liability for prior years and incur interest and penalties with respect to those adjustments.

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We may be audited by the IRS and tax adjustments could be made. The rights of a unitholder owning less than a 1% interest in us to participate in the income tax audit process are very limited. Further, any adjustments in our tax returns may lead to adjustments in unitholders’ tax returns and may lead to audits of unitholders’ tax returns and adjustments of items unrelated to us. A unitholder will bear the cost of any expenses incurred in connection with an examination of its personal tax return.

Pursuant to the Bipartisan Budget Act of 2015, if the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from us. We will generally have the ability to shift any such tax liability to our general partner and our unitholders in accordance with their interests in us during the year under audit, but there can be no assurance that we will be able to do so under all circumstances. If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for distribution to our unitholders might be substantially reduced. In addition to federal consequences, audit adjustments under the Bipartisan Budget Act of 2015 may trigger separate state and local reporting obligations, which can vary significantly by jurisdiction. These state and local-level rules may result in additional tax, interest, and compliance burdens for us and our unitholders.

In addition to federal income taxes, unitholders will likely be subject to other taxes, such as state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property. A unitholder will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of the various jurisdictions in which we do business or own property and may be subject to penalties for failure to comply with those requirements. We currently conduct business in all 50 states, the District of Columbia and Puerto Rico. It is each unitholder’s responsibility to file all required federal, state and local tax returns.

If we default on any of our debt, the holders will have the right to sue us for non-payment. That action could cause an investment loss and negative tax consequences for our unitholders through the realization of taxable income by unitholders without a corresponding cash distribution. Likewise, if we were to dispose of assets and realize a taxable gain while there is substantial debt outstanding and proceeds of the sale were applied to the debt, our unitholders could have increased taxable income without a corresponding cash distribution.

A unitholder whose Class A Units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of Class A Units) may be deemed to have disposed of those Class A Units. If so, the unitholder would no longer be treated for tax purposes as a partner with respect to those Class A Units during the period of the loan and may recognize gain or loss from the disposition.

Because there are no specific rules governing the U.S. federal income tax consequences of loaning a partnership interest, a unitholder whose Class A Units are the subject of a securities loan may be deemed to have disposed of the loaned units. In that case, the unitholder may no longer be treated for tax purposes as a partner with respect to those Class A Units during the period of the loan and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our income, gain, loss or deduction with respect to those Class A Units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those Class A Units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller should modify any applicable brokerage account agreements to prohibit their brokers from borrowing their Class A Units.

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Conflicts of Interest

Conflicts of interest could arise as a result of the relationships between us, on the one hand, and our general partner and its affiliates, on the other. The directors and officers of our general partner have fiduciary duties to manage our general partner in a manner beneficial to our general partner and its stockholder. At the same time, our general partner has a contractual good faith duty of care to manage us in a manner the general partner reasonably believes to be in, or not inconsistent with, our best interests. The contractual duties of our general partner to us and our unitholders, therefore, may conflict with the fiduciary duties of the directors and officers of our general partner to our general partner and its stockholder.

Matters in which, and reasons that, such conflicts of interest may arise include:

we do not have any employees and rely solely on employees of our general partner and its affiliates;

under the terms of the partnership agreements of Ferrellgas Partners and the operating partnership, we must reimburse our general partner and its affiliates for costs incurred in managing and operating us, including costs incurred in providing employees to the operating partnership and rendering corporate staff and support services to us;

our general partner is not restricted from causing us to pay it or its affiliates for any services rendered on terms that are fair and reasonable to us or causing us to enter into additional contractual arrangements with any of such entities;

neither the partnership agreements of Ferrellgas Partners and the operating partnership nor any of the other agreements, contracts and arrangements between us, on the one hand, and our general partner and its affiliates, on the other, are or will be the result of arm’s-length negotiations;

whenever possible, our general partner limits our liability under contractual arrangements to all or a portion of our assets, with the other party thereto having no recourse against our general partner or its assets;

the partnership agreements of Ferrellgas Partners and the operating partnership permit our general partner to make these limitations even if we could have obtained more favorable terms if our general partner had not limited its liability;

any agreements between us and our general partner or its affiliates will not grant to our unitholders, separate and apart from us, the right to enforce the obligations of our general partner or such affiliates in favor of us; therefore, our general partner will be primarily responsible for enforcing those obligations against itself or such affiliates;

our general partner may exercise its limited right to call for and purchase Class A Units as provided in the partnership agreement of Ferrellgas Partners or assign that right to one of its affiliates or to us;

our partnership agreements provide that it will not constitute a breach of our general partner’s fiduciary duties to us for its affiliates to engage in activities of the type conducted by us, other than retail propane sales to end users in the continental United States in the manner engaged in by our general partner immediately prior to our initial public offering, even if these activities are in direct competition with us;

our general partner and its affiliates have no obligation to present business opportunities to us;

our general partner selects the attorneys, accountants and others who perform services for us, and these persons may also perform services for our general partner and its affiliates; however, our general partner is authorized to retain separate counsel for us or our unitholders, depending on the nature of the conflict that arises; and

James E. Ferrell was the Executive Chairman of the Board of Directors of our general partner in fiscal 2024. Effective August 5, 2024, he was appointed to serve as Chairman of the Board of Directors of our general partner. He is a related party. Mr. Ferrell owns other companies with whom we may, from time to time, conduct transactions in the ordinary course of our business. Mr. Ferrell’s ownership of these entities may conflict with his duties as an officer or director of our general partner, including with respect to our relationship and conduct of business with any of Mr. Ferrell’s companies.

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Fiduciary Responsibilities

Unless otherwise provided for in a partnership agreement, Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards under which it owes its limited partners the highest duties of good faith, fairness and loyalty and which generally prohibit the general partner from taking any action or engaging in any transaction as to which it has a conflict of interest. The partnership agreements of both Ferrellgas Partners and the operating partnership, as permitted by Delaware law, unconditionally eliminate the default fiduciary duty standards and require the general partner to adhere to the contractual good faith duty of care set forth in those agreements. Specifically, the general partner need only take actions that it, as general partner, reasonably believes to be in, or not inconsistent with, the best interest of Ferrellgas Partners and the operating partnership. Thus, neither the general partner nor Ferrellgas Partners owes traditional fiduciary duties to the unitholders.

The partnership agreements of Ferrellgas Partners and the operating partnership expressly permit our general partner to resolve conflicts of interest between itself or its affiliates, on the one hand, and us or our unitholders, on the other, and to consider, in resolving such conflicts of interest, the interests of other parties in addition to the interests of our unitholders. In addition, the partnership agreement of Ferrellgas Partners provides that a purchaser of Class A Units is deemed to have consented to specified conflicts of interest and actions of our general partner and its affiliates that might otherwise be prohibited, including those described above, and to have agreed that such conflicts of interest and actions do not constitute a breach by our general partner of any duty stated or implied by law or equity. Our general partner will not be in breach of its obligations under the partnership agreements of Ferrellgas Partners or the operating partnership or its duties to us or our unitholders if the resolution of such conflict is fair and reasonable to us. Under the partnership agreements, any conflict of interest and any resolution thereof will conclusively be deemed fair and reasonable to us if it is (i) approved by the audit committee of our general partner, or (ii) on terms no less favorable to us than those generally being provided to or available from unrelated third parties or (iii) fair to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). The latitude given in the partnership agreements to our general partner in resolving conflicts of interest may significantly limit the ability of a unitholder to challenge what might, in the absence of the partnership agreement provisions eliminating default fiduciary duties be a breach of fiduciary duty.

The partnership agreements of Ferrellgas Partners and the operating partnership expressly limit the liability of our general partner by providing that our general partner, its affiliates and their respective officers and directors will not be liable for monetary damages to us, our unitholders or assignees thereof for errors of judgment or for any acts or omissions if our general partner and such other persons acted in good faith. In addition, we are required to indemnify our general partner, its affiliates and their respective officers, directors, employees, agents and trustees to the fullest extent permitted by law against liabilities, costs and expenses incurred by our general partner or such other persons if our general partner or such persons acted in good faith and in a manner it or they reasonably believed to be in, or (in the case of a person other than our general partner) not opposed to, the best interests of us and, with respect to any criminal proceedings, had no reasonable cause to believe the conduct was unlawful.

ITEM 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Our management’s discussion and analysis of financial condition and results of operations relates to Ferrellgas Partners and the operating partnership.

Ferrellgas Partners is a holding entity that conducts no operations and has two direct subsidiaries, the operating partnership and Partners Finance Corp. Both Partners Finance Corp. and Finance Corp. have nominal assets, do not conduct any operations and have no employees other than officers. Our activities are primarily conducted through the operating partnership. Partners Finance Corp. has served as co-issuer and co-obligor for debt securities of Ferrellgas Partners, while Finance Corp., a subsidiary of the operating partnership, serves as co-issuer and co-obligor for debt securities of the operating partnership. Accordingly, and due to the reduced disclosure format, a discussion of the results of operations, liquidity and capital resources of Partners Finance Corp. and Finance Corp. is not presented in this section.

The following is a discussion of our historical financial condition and results of operations and should be read in conjunction with our audited historical consolidated financial statements and accompanying notes thereto included elsewhere in this Annual Report on Form 10-K.

The discussions set forth in the “Results of Operations” and “Liquidity and Capital Resources” sections generally refer to Ferrellgas Partners and its consolidated subsidiaries.

How We Evaluate Our Operations

We evaluate our overall business performance based primarily on a metric we refer to as “Adjusted EBITDA,” which is not defined by GAAP and should not be considered an alternative to earnings measures defined by GAAP. We do not utilize depreciation, depletion and amortization expense in our key measures because we focus our performance management on cash flow generation and our revenue generating assets have long useful lives. For the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net (loss) earnings attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, see the subheading “Non-GAAP Financial Measures” below.

Propane operations and related equipment sales

Based on our propane sales volumes in fiscal 2025, we believe that we are the second largest retail marketer of propane in the United States and a leading national provider of propane by portable tank exchange. We serve residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all 50 states, the District of Columbia and Puerto Rico. Our operations primarily include the retail distribution and sale of propane and related equipment and supplies.

We use information on temperatures to understand how our results of operations are affected by temperatures that are warmer or colder than normal. Normal temperatures computed by us are the average of the last 10 years of information published by the National Oceanic and Atmospheric Administration. Based on this information we calculate a ratio of actual heating degree days to normal heating degree days. Heating degree days are a general indicator of weather impacting propane usage.

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Weather conditions have a significant impact on demand for propane for heating purposes primarily during the months of November through March (the “winter heating season”). Accordingly, the volume of propane used by our customers for this purpose is directly affected by the severity of the winter weather in the regions we serve and can vary substantially from year to year. In any given region, sustained warmer-than-normal temperatures will tend to result in reduced propane usage, while sustained colder-than-normal temperatures will tend to result in greater usage. Although there is a strong correlation between weather and customer usage, general economic conditions in the United States and the wholesale price of propane can have a significant impact on this correlation. Additionally, there is a natural time lag between the onset of cold weather and increased sales to customers. If the United States were to experience a cooling trend, we could expect nationwide demand for propane to increase which could lead to greater sales, income and liquidity availability. Conversely, if the United States were to experience a continued warming trend, we could expect nationwide demand for propane for heating purposes to decrease which could lead to a reduction in our sales, income and liquidity availability as well as impact our ability to maintain compliance with our debt covenants.

We employ risk management activities that attempt to mitigate price risks related to the purchase, storage, transport and sale of propane generally in the contract and spot markets from major domestic energy companies. We attempt to mitigate these price risks through the use of financial derivative instruments and forward propane purchase and sales contracts. We enter into propane sales commitments with a portion of our customers that provide for a contracted price agreement for a specified period of time. These commitments can expose us to product price risk if not immediately hedged with an offsetting propane purchase commitment.

Our open financial derivative propane purchase commitments are designated as hedges primarily for fiscal 2026 and 2027 sales commitments and, as of July 31, 2025, we have experienced net mark-to-market losses of approximately $0.1 million. Because these financial derivative purchase commitments qualify for hedge accounting treatment, the resulting asset, liability and related mark-to-market gains or losses are recorded on the consolidated balance sheets as “Prepaid expenses and other current assets,” “Other assets, net,” “Other current liabilities,” “Other liabilities” and “Accumulated other comprehensive income,” respectively, until settled. Upon settlement, realized gains or losses on these contracts will be reclassified to “Cost of sales-propane and other gas liquid sales” in the consolidated statements of operations as the underlying inventory is sold. These financial derivative purchase commitment net losses are expected to be offset by increased margins on propane sales commitments that qualify for the normal purchase normal sale exception. At July 31, 2025, we estimate 90% of currently open financial derivative purchase commitments, the related propane sales commitments and the resulting gross margin will be realized into earnings during the next twelve months.

Summary Discussion of Results of Operations:

For the years ended July 31, 2025 and 2024

We recognized a net loss attributable to Ferrellgas Partners, L.P. of $15.6 million during fiscal 2025 and net earnings attributable to Ferrellgas Partners, L.P. of $110.2 million during fiscal 2024. The $125.8 million change was primarily driven by:

a $125.0 million legal settlement in “General and administrative expense;”

an increase of $29.2 million in “Operating expenses – personnel, vehicle, plant and other,” consisting of increases of $22.4 million in plant and other cost and $8.5 million in personnel expense, partially offset by a decrease of $1.7 million in vehicle expense;

a $9.8 million increase in “Interest expense;”

partially offset by the following:

a $39.7 million increase in “Gross margin,” due to increases of $26.6 million in wholesale gross margin, $9.5 million in retail gross margin, and $3.6 million in other as an increase in gallons sold was driven by weather that was cooler in fiscal 2025 than prior year and higher wholesale prices than the prior year; and

a decrease of $2.9 million in “Operating expense – equipment lease expense.”

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The Company’s “Gross margin” of over $1.0 billion was the highest in its history. Our five-year average, from fiscal years 2021 through 2025, of $0.96 billion reflects this positive trend. Approximately $0.6 billion and $0.2 billion, respectively, are attributable to our retail and wholesale business. Leveraging our telematics technology to efficiently serve our customers and the expertise of our employee-owners are the catalysts for these positive results.

Distributable cash flow attributable to equity investors decreased to $208.2 million in fiscal 2025 compared to $212.3 million in fiscal 2024. The $4.1 million decrease was primarily due to a $10.4 million increase in “Maintenance capital expenditures” and a $7.0 million increase in “Net cash interest expense,” which was partially offset by a $13.3 million increase in Adjusted EBITDA.

Distributable cash flow excess was $139.9 million and $43.2 million in fiscal 2025 and 2024, respectively. The $96.7 million increase was primarily due to $99.9 million in distributions paid to Class B unitholders in fiscal 2024, partially offset by the decrease in distributable cash flow attributable to equity investors noted above.

Consolidated Results of Operations

Year ended July 31,

(amounts in thousands)

Total revenues

Total cost of sales

Operating expense - personnel, vehicle, plant and other

Depreciation and amortization expense

General and administrative expense

Operating expense - equipment lease expense

Non-cash employee stock ownership plan compensation charge

Loss on asset sales and disposals

Operating income

Interest expense

Other income, net

(Loss) earnings before income taxes

Income tax expense

Net (loss) earnings

Net (loss) earnings attributable to noncontrolling interest

Net (loss) earnings attributable to Ferrellgas Partners, L.P.

Non-GAAP Financial Measures

In this Annual Report we present the following non-GAAP financial measures: Adjusted EBITDA, Distributable cash flow attributable to equity investors, Distributable cash flow attributable to Class A and B Unitholders, and Distributable cash flow excess.

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Adjusted EBITDA . Adjusted EBITDA for Ferrellgas Partners is calculated as net (loss) earnings attributable to Ferrellgas Partners, L.P., plus the sum of the following: income tax expense, interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, loss on asset sales and disposals, other income, net, legal fees and settlements related to non-core businesses, legal fees and settlements related to core businesses, acquisition and related costs, business transformation costs, and net (loss) earnings attributable to noncontrolling interest. Management believes the presentation of this measure is relevant and useful because it allows investors to view the partnership’s performance in a manner similar to the method management uses, adjusted for items management believes make it easier to compare its results with other companies that have different financing and capital structures. Adjusted EBITDA, as management defines it, may not be comparable to similarly titled measurements used by other companies. Items added into our calculation of Adjusted EBITDA that will not occur on a continuing basis may have associated cash payments. This method of calculating Adjusted EBITDA should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Distributable Cash Flow Attributable to Equity Investors . Distributable cash flow attributable to equity investors is calculated as Adjusted EBITDA minus net cash interest expense, maintenance capital expenditures and cash paid for income taxes, plus proceeds from certain asset sales. Management considers distributable cash flow attributable to equity investors a meaningful measure of Ferrellgas’ ability to declare and pay quarterly distributions to equity investors, including holders of the operating partnership’s Preferred Units. Distributable cash flow attributable to equity investors, as management defines it, may not be comparable to similarly titled measurements used by other companies. Items added into our calculation of distributable cash flow attributable to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to equity investors should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Distributable Cash Flow Attributable to Class A and B Unitholders . Distributable cash flow attributable to Class A and B Unitholders is calculated as Distributable cash flow attributable to equity investors minus distributions accrued or paid to Preferred Unitholders and distributable cash flow attributable to general partner and noncontrolling interest. Management considers Distributable cash flow attributable to Class A and B Unitholders a meaningful measure of the partnership’s ability to declare and pay quarterly distributions to Class A and B Unitholders. Distributable cash flow attributable to Class A and B Unitholders, as management defines it, may not be comparable to similarly titled measurements used by other companies. Items added into our calculation of distributable cash flow attributable to Class A and B Unitholders that will not occur on a continuing basis may have associated cash payments. Distributable cash flow attributable to Class A and B Unitholders should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Distributable Cash Flow Excess . Distributable cash flow excess is calculated as Distributable cash flow attributable to Class A and B unitholders minus Distributions paid to Class A and B unitholders. Distributable cash flow excess, if any, is retained to establish reserves, to reduce debt, to fund capital expenditures and for other partnership purposes, and any shortage is funded from previously established reserves, cash on hand or borrowings under our Credit Facility. Management considers Distributable cash flow excess a meaningful measure of the partnership’s ability to effectuate those purposes. Distributable cash flow excess, as management defines it, may not be comparable to similarly titled measurements used by other companies. Items added into our calculation of distributable cash flow excess that will not occur on a continuing basis may have associated cash payments. Distributable cash flow excess should be viewed in conjunction with measurements that are computed in accordance with GAAP.

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The following table reconciles Adjusted EBITDA, Distributable cash flow attributable to equity investors, Distributable cash flow attributable to Class A and B Unitholders and Distributable cash flow excess to Net (loss) earnings attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, for the fiscal years indicated:

Year ended July 31,

(amounts in thousands)

Net (loss) earnings attributable to Ferrellgas Partners, L.P.

Income tax expense

Interest expense

Depreciation and amortization expense

EBITDA

Non-cash employee stock ownership plan compensation charge

Loss on asset sales and disposals

Other income, net

Legal fees and settlements related to non-core businesses

Legal fees and settlements related to core businesses

Acquisition and related costs (1)

Business transformation costs (2)

Net (loss) earnings attributable to noncontrolling interest

Adjusted EBITDA

Net cash interest expense (3)

Maintenance capital expenditures (4)

Cash paid for income taxes

Proceeds from certain asset sales

Distributable cash flow attributable to equity investors

Less: Distributions accrued or paid to preferred unitholders

Distributable cash flow attributable to general partner and non-controlling interest

Distributable cash flow attributable to Class A and B unitholders

Less: Distributions paid to Class A and B unitholders (5)

Distributable cash flow excess

Non-recurring due diligence related to potential acquisition activities, restructuring costs, and other adjustments.

Non-recurring costs included in “Operating, general and administrative expense” related to business transformation initiatives.

Net cash interest expense is the sum of interest expense less non-cash interest expense and other income, net.

Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment, and may from time to time include the purchase of assets that are typically leased.

The Company did not pay any distributions to Class A unitholders during fiscal 2025 or 2024.

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Operating Results for the years ended July 31, 2025 and 2024

Propane operations and related equipment sales

The following table summarizes propane sales volumes and Adjusted EBITDA results for the fiscal years indicated:

Increase (Decrease)

As of July 31,

Retail customers

Tank exchange selling locations

(amounts in thousands)

Year ended July 31,

Propane sales volumes (gallons):

Retail - Sales to End Users

Wholesale - Sales to Resellers

Revenues -

Propane and other gas liquids sales:

Retail - Sales to End Users

Wholesale - Sales to Resellers

Other Gas Sales (1)

Other (2)

Propane and related equipment revenues

Gross Margin -

Propane and other gas liquids sales gross margin: (3)

Retail - Sales to End Users (1)

Wholesale - Sales to Resellers (1)

Other (2)

Propane and related equipment gross profit

Operating, general and administrative expense (4)

Operating expense - equipment lease expense

Operating income

Depreciation and amortization expense

Non-cash employee stock ownership plan compensation charge

Loss on asset sales and disposals

Legal fees and settlements related to non-core businesses

Legal fees and settlements related to core businesses

Acquisition and related costs

Business transformation costs

Adjusted EBITDA

NM – not meaningful

Gross margin for “Other Gas Sales” is allocated to Gross margin “Retail - Sales to End Users” and “Wholesale - Sales to Resellers” based on the volumes in each respective category.

“Other” primarily includes various customer fee income and to a lesser extent appliance and material sales.

Gross margin from “Propane and other gas liquids sales” represents “Revenues - Propane and other gas liquids sales” less “Cost of sales - Propane and other gas liquids sales” and does not include depreciation and amortization.

“Operating, general and administrative expense” above includes both the “Operating expense – personnel, vehicle, plant and other” and “General and administrative expense” captions in the consolidated statement of operations.

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Propane sales volumes during fiscal 2025 increased 3%, or 20.4 million gallons, compared to fiscal 2024. Temperatures for fiscal 2025 were 3% warmer than normal, based on a 10-year average, but 6% cooler compared to fiscal 2024. The cooler weather aligns with the 6% increase in sales to residential customers.

Our wholesale sales price per gallon partially correlates to the change in the wholesale market price of propane. The wholesale market prices at major supply points in Mt. Belvieu, Texas and Conway, Kansas during fiscal 2025 averaged 5% and 4% more than fiscal 2024, respectively. The wholesale market price at Mt. Belvieu, Texas averaged $0.79 and $0.75 per gallon during fiscal 2025 and fiscal 2024, respectively, while the wholesale market price at Conway, Kansas averaged $0.75 and $0.72 per gallon during fiscal 2025 and fiscal 2024, respectively. This increase in the wholesale cost of propane contributed to our increase in sales price per gallon and therefore revenues.

Revenues

Revenues increased in 2025 in all of our customer types compared to the prior year, except for agricultural customers. We set over 5% more retail tanks during fiscal 2025 compared to prior year in response to customer demand. On the wholesale side, our tank exchange vending machine channel continues to grow with year-over-year volume increases.

Retail sales increased $48.3 million, or 4%, in fiscal 2025 compared to fiscal 2024. This increase correlates with the cooler weather and 1% increase in retail gallons sold in fiscal 2025 compared to fiscal 2024, and an increase in sales price per gallon, all as discussed above. The increase in revenues from retail customers was primarily in our residential and industrial/commercial customer bases, partially offset by a decrease in sales to agricultural customers.

Wholesale sales increased $41.6 million, or 8%, in fiscal 2025 compared to fiscal 2024. This increase correlates with a 9% increase in wholesale gallons sold in fiscal 2025 compared to fiscal 2024, as well as an increase in sales price per gallon, as discussed above. Tank exchange sales drove the increase in wholesale sales with an increase of $25.5 million, or 6%, in fiscal 2025 compared to fiscal 2024. A 3% increase in tank exchange volumes contributed to organic sales growth. Offsetting this, the 1% net decrease in tank exchange selling locations was primarily due to the removal of lower-performing drugstore sites following customer-driven store closures.

Other gas sales increased $6.7 million, or 46%, in fiscal 2025 compared to fiscal 2024 primarily due to the increase in sales price per gallon noted above.

Other revenues increased $4.6 million, or 4%, in fiscal 2025 compared to fiscal 2024 primarily due to increases of $2.0 million in transport revenue and $1.4 million in tank rental income.

Gross margin - Propane and other gas liquids sales

Gross margin increased $36.1 million due to increases of $26.6 million and $9.5 million, respectively, in wholesale and retail gross margin. Our tank exchange business yielded record results as a 6% increase in revenues, partially offset by an increase of 1% in cost of product, accounted for $22.7 million of the wholesale gross margin increase in fiscal 2025. The increase in retail gross margin was primarily driven by a $33.2 million increase related to our residential customers, as revenues increased 6% and cost of product decreased 1% as the Company utilized technology and other initiatives to manage costs. This increase was partially offset by a $32.5 million decrease in transport gross margin.

Gross margin - other

Gross margin increased $3.6 million, or 4%, in fiscal 2025 compared to fiscal 2024.

Operating income

Operating income decreased $115.0 million, primarily due to a $125.0 million legal settlement and a $29.2 million increase in operating expense, both of which are included in “Operating, general and administrative expense.” This was partially offset by the $39.7 million increase in gross margin note above.

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The $29.2 million increase in “Operating expense – personnel, vehicle, plant and other” was driven by increases of $22.4 million in plant and other costs and $8.5 million in personnel expense, which were partially offset by a decrease of $1.7 million in vehicle expense.

The $22.4 million increase in plant and other costs was primarily due to increases of $8.7 million related to legal and general insurance liability costs, $7.9 million for bad debt, miscellaneous expense, bank charges, rent expense, and tax assessments, and $3.4 million in software costs primarily related to business transformation projects.

The $8.5 million increase in personnel expense primarily relates to increases of $16.1 million in payroll and related costs and $2.8 million for incentive and vacation adjustments, partially offset by an $11.0 million decrease in medical benefits expense. The increase in payroll costs includes $2.9 million in overtime costs as we delivered more gallons to our customers.

The $1.7 million decrease in vehicle expense was driven by a $4.5 million decrease in fuel costs, partially offset by a $2.8 million increase primarily related to repairs and maintenance. Empowered by the Company’s telematics technology, employees continue to deliver positive results such as fuel savings and more efficient vehicle use.

Adjusted EBITDA

Adjusted EBITDA increased $13.3 million or 4% to $330.7 million. The $39.7 million increase in gross margin noted above and $2.9 million decrease in lease expense drove the positive increase. After EBITDA adjustments of $4.5 million in legal fees and settlements related to our core business, operating expense increased $24.7 million. See further details discussed above. After EBITDA adjustments of $123.7 million, primarily related to a $125.0 million litigation settlement, we had a $4.5 million increase in general and administrative expense, which primarily consisted of increases in incentive adjustments and other costs.

Liquidity and Capital Resources

General

Our primary sources of liquidity and capital resources are cash flows from operating activities, our Credit Facility and funds received from sales of debt and equity securities. The operating partnership, the general partner and certain of the operating partnership’s subsidiaries as guarantors are parties to a credit agreement dated March 30, 2021, as amended on January 15, 2025 (the “Credit Agreement”), with JPMorgan Chase Bank, N.A. as administrative agent and collateral agent, and the lenders and issuing lenders party thereto from time to time, which provides for a four-year revolving credit facility (the “Credit Facility”), with a maturity date of December 31, 2025, in an aggregate principal amount of up to $350.0 million. On March 31, 2025, in conjunction with the commencement of the Fifth Amendment, the commitment level of the Credit Facility was reduced from $350.0 million to $308.8 million. The Credit Agreement includes a sublimit not to exceed $300.0 million for the issuance of letters of credit. For additional discussion, see Note H “Debt” in the notes to our consolidated financial statements included in this Annual Report.

As of July 31, 2025, our total liquidity was $259.7 million, which was comprised of $96.9 million in unrestricted cash and $162.8 million of availability under our Credit Facility. These sources of liquidity and short-term capital resources are intended to fund our working capital requirements, acquisitions and capital expenditures. As of July 31, 2025, letters of credit outstanding totaled $121.9 million. Our access to long-term capital resources, to the extent needed to refinance debt or for other purposes, may be affected by our ability to access the capital markets, covenants in our debt agreements and other financial obligations, unforeseen demands on cash, or other events beyond our control.

As of July 31, 2025, we have no restricted cash. As of July 31, 2024, we had $10.7 million of restricted cash for a cash deposit made with the administrative agent under our prior senior secured credit facility that was terminated in April 2020. In January 2025, we settled our outstanding litigation as described in Note P “Contingencies and commitments” in the notes to our consolidated financial statements. As a result, the administrative agent released the restricted cash deposit in January 2025.

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Our working capital requirements are subject to, among other things, the price of propane, delays in the collection of receivables, volatility in energy commodity prices, liquidity imposed by insurance providers, downgrades in our credit ratings, decreased trade credit, significant acquisitions, the weather, customer retention and purchasing patterns and other changes in the demand for propane. Relatively colder weather or higher propane prices during the winter heating season are factors that could significantly increase our working capital requirements.

In March 2025, Moody’s downgraded the operating partnership’s corporate rating from B2 to B3 and our senior unsecured notes from B3 to Caa1. In April 2025, the operating partnership’s senior unsecured notes rating was downgraded from B to CCC+ by S&P. In June 2025, S&P further downgraded this rating to CCC.

Our ability to satisfy our obligations is dependent upon our future performance, which will be subject to prevailing weather, economic, financial and business conditions and other factors, many of which are beyond our control. Due to the seasonality of the retail propane distribution business, a significant portion of our propane operations and related products cash flows from operations is generated during the winter heating season. Our net cash provided by operating activities primarily reflects earnings from our business activities adjusted for depreciation and amortization and changes in our working capital accounts. Historically, we generate significantly lower net cash from operating activities in our first and fourth fiscal quarters as compared to the second and third fiscal quarters due to the seasonality of our propane operations and related equipment sales operations.

During periods of high volatility, our risk management activities may expose us to the risk of counterparty margin calls in amounts greater than we have the capacity to fund. Likewise, our counterparties may not be able to fulfill their margin calls from us or may default on the settlement of positions with us.

The liquidity available from cash flows from operating activities, unrestricted cash and the Credit Facility may not be sufficient to meet our capital expenditure, working capital and letter of credit requirements for the foreseeable future. Due to the timing of the maturities of both the 2026 Notes and the Credit Facility, and the $121.9 million in letters of credit which it secures as of July 31, 2025, management has performed an evaluation to consider whether or not there is substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of issuance of this Annual Report. We have developed and received internal approval on a plan to restructure our capital structure and debt and refinance and/or extend the maturity date for the Credit Facility. External advisors have been engaged to assist in this process. The general partner believes that it is probable that the plans will be successfully implemented prior to the maturities of the 2026 Notes and the Credit Facility, and these plans will alleviate the substantial doubt about the Company’s ability to continue as a going concern.

Distributable Cash Flow

Distributable cash flow attributable to equity investors is reconciled to net (loss) earnings attributable to Ferrellgas Partners, L.P., the most directly comparable GAAP measure, in this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the subheading “Non-GAAP Financial Measures” above. A comparison of distributable cash flow attributable to equity investors to cash distributions accrued or paid to equity investors for the year ended July 31, 2025 to the year ended July 31, 2024 is as follows (in thousands):

Distributable

Cash reserves

Cash   distributions

cash flow attributable

approved by our

accrued or paid to

DCF

to equity investors

General   Partner

equity investors

ratio (1)

Year ended July 31, 2025

Year ended July 31, 2024

Decrease

DCF ratio is calculated as Distributable cash flow attributable to equity investors divided by Cash distributions accrued or paid to equity investors.

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For fiscal 2025, distributable cash flow attributable to equity investors decreased $4.1 million compared to fiscal 2024 due to increases of $10.4 million in “Maintenance capital expenditures” and $7.0 million in “Net cash interest expense,” which was partially offset by a $13.3 million increase in Adjusted EBITDA. The increase in “Maintenance capital expenditures” relates to a $2.5 million increase in failed sale leaseback in addition to capitalized fleet repairs. The increase in “Net cash interest expense” consists of a $9.8 million increase in interest expense and $1.6 decrease in other income, net, which was partially offset by a $4.4 million increase in the amortization of capitalized financing costs related to amendments to our Credit Facility.

As of July 31, 2025, the accrued quarterly distribution to Preferred Unitholders was $17.3 million, net of tax. We paid $15.2 million of this distribution on August 15, 2025. The remaining $2.1 million represents Additional Amounts payable to certain holders of Preferred Units, pursuant to the side letters outlined in the OpCo LPA Amendment. Additionally, during the years ended July 31, 2025 and 2024, we paid $1.6 million and $2.0 million, respectively, for Additional Amounts payable pursuant to the side letters.

We did not pay any cash distributions to our Class A Unitholders or the general partner during fiscal 2025 or fiscal 2024, except for a $1.0 million distribution to the general partner, made in conjunction with the Class B distributions during the year ended July 31, 2024. Ferrellgas Partners made aggregate cash distributions of approximately $99.9 million to its Class B Unitholders during the year ended July 31, 2024. We have made aggregate cash distributions of approximately $250.0 million to our Class B Unitholders since inception of our Class B Units. Cash reserves, which we utilize to meet future anticipated expenditures, were $144.1 million and $147.5 million for the years ended July 31, 2025 and 2024, respectively.

Operating Activities

Ferrellgas Partners

Fiscal 2025 v Fiscal 2024

Net cash provided by operating activities was $136.3 million for fiscal 2025 compared to $245.6 million for fiscal 2024. The $109.3 million decrease in cash provided by operating activities was primarily driven by a $129.2 million increase in general and administrative expenses and a $42.2 million increase in working capital requirements. These increases were partially offset by a $39.7 million improvement in gross profit compared to prior year, and a $35.3 million increase in other current liabilities.

Both the $129.2 million increase in general and administrative expenses and the $35.3 million increase in accrued liabilities primarily result from a litigation settlement. Of the $125.0 million litigation settlement, $87.5 million was paid in fiscal 2025 with the last payment of $37.5 million due in fiscal 2026. See Note P “Contingencies and commitments” in the notes to the consolidated financial statements included in this Annual Report for more information. The $42.2 million increase in working capital requirements was primarily due to a $48.4 million increase in requirements for accounts and notes receivable, offset by a $6.2 million decrease in inventory requirements.

The $39.7 million increase in gross profit was primarily due to a $101.2 million increase in revenue, offset by a $61.5 million increase in cost of sales.

The operating partnership

Fiscal 2025 v Fiscal 2024

Net cash provided by operating activities was $136.5 million for fiscal 2025 compared to $245.2 million for fiscal 2024. The $108.7 million decrease in cash provided by operating activities was primarily driven by a $128.3 million increase in general and administrative expenses and a $42.2 million increase in working capital requirements. These increases were partially offset by a $39.7 million improvement in gross profit compared to prior year, and a $34.9 million increase in other current liabilities.

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The increases in general and administrative expenses and other current liabilities related to the litigation settlement described above. The $42.2 million increase in working capital requirements was primarily due to a $48.4 million increase in requirements for accounts and notes receivable, offset by a $6.2 million decrease in inventory requirements.

The $39.7 million increase in gross profit was primarily due to a $101.2 million increase in revenue, offset by a $61.5 million increase in cost of sales.

Investing Activities

Ferrellgas Partners

Capital Requirements

Our business requires continual investments to upgrade or enhance existing operations and to ensure compliance with safety and environmental regulations. Capital expenditures for our business consist primarily of:

Maintenance capital expenditures. These capital expenditures include expenditures for betterment and replacement of property, plant and equipment, and may from time to time include the purchase of assets that are typically leased, rather than to generate incremental distributable cash flow. Examples of maintenance capital expenditures include a routine replacement of a worn-out asset or replacement of major vehicle components; and

Growth capital expenditures. These expenditures are undertaken primarily to generate incremental distributable cash flow. Examples include expenditures for purchases of both bulk and portable propane tanks and other equipment to facilitate expansion of our customer base and operating capacity.

Fiscal 2025 v Fiscal 2024

Net cash used in investing activities was $80.8 million for fiscal 2025 compared to $85.0 million for fiscal 2024. This $4.2 million decrease in net cash used in investing activities was primarily due to a $12.7 million decrease in “Business acquisitions, net of cash acquired”. We had one acquisition during both fiscal 2025 and fiscal 2024. This decrease was partially offset by a $9.1 million increase in “Capital expenditures”, primarily driven by capitalized repair costs and assets related to failed sale-leaseback arrangements.

Due to the mature nature of our operations, we do not anticipate significant fluctuations in maintenance capital expenditures, with the exception of future decisions regarding lease versus buy financing options. However, future fluctuations in growth capital expenditures could occur due to the opportunistic nature of these projects.

The operating partnership

Fiscal 2025 v Fiscal 2024

The investing activities discussed above also apply to the operating partnership.

Financing Activities

Ferrellgas Partners

Fiscal 2025 v Fiscal 2024

Net cash used in financing activities was $82.8 million for fiscal 2025 compared to $173.7 million for fiscal 2024. This $90.9 million decrease was primarily due to $99.9 million in distributions to Class B unitholders in fiscal 2024, offset by increases in lease-related financing payments and debt-related financing payments of $6.0 million and $6.2 million, respectively.

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On July 10, 2024, letters of credit in an aggregate principal amount of $124.5 million were issued to the surety providers under an appeal bond posted on behalf of Ferrellgas Partners. On January 15, 2025, these letters of credit were released and new letters of credit were issued in an aggregate amount of $75.0 million for two $37.5 million settlement payments to occur on or before June 16, 2025 and January 15, 2026, respectively. A settlement payment of $37.5 million was made on June 16, 2025, which leaves a $37.5 million letter of credit as of July 31, 2025, related to the final settlement payment. See Note P “Contingencies and commitments” in the notes to the consolidated financial statements included in this Annual Report for further information. Letters of credit were also used to secure insurance arrangements, product purchases and commodity hedges. Letters of credit outstanding at July 31, 2025 and 2024 totaled $121.9 million and $193.4 million, respectively. As of July 31, 2025, we had available borrowing capacity under our Credit Facility of $162.8 million. Assets subject to lien under the Credit Facility were $290.7 million as of July 31, 2025.

The operating partnership

Fiscal 2025 v Fiscal 2024

The financing activities discussed above also apply to the operating partnership.

Distributions

Partnership distributions

The Sixth Amended and Restated Agreement of Limited Partnership of Ferrellgas Partners, L.P. (the “Amended Ferrellgas Partners LPA”) requires Ferrellgas Partners to make quarterly cash distributions of all of its “available cash”. Available cash is defined in the Amended Ferrellgas Partners LPA as, generally, the sum of Ferrellgas’ Partners cash receipts less consolidated cash disbursements and net changes in reserves established by our general partner for future requirements. In general, the amount of Ferrellgas Partners’ available cash depends primarily on whether and the extent to which Ferrellgas Partners receives cash distributions from the operating partnership, as such distributions generally would be Ferrellgas Partners’ only significant cash receipts.

The Fifth Amended and Restated Agreement of Limited Partnership of Ferrellgas, L.P. (the “Amended OpCo LPA”), which amended and restated in its entirety the Fourth Amended and Restated Agreement of Limited Partnership of Ferrellgas L.P., and a First Amendment to the Amended OpCo LPA (the “OpCo LPA Amendment”), sets forth the preferences, rights, privileges and other terms of the Preferred Units.

Pursuant to the Amended Ferrellgas Partners LPA, while any Class B Units remain outstanding, any distributions by Ferrellgas Partners to its partners must be made such that the ratio of (i) the amount of distributions made to holders of Class B Units to (ii) the amount of distributions made to holders of Class A Units and the general partner is not less than 6:1. The Amended Ferrellgas Partners LPA permits Ferrellgas Partners, in the general partner’s discretion, to make distributions to the Class B Unitholders in a greater proportion than the minimum 6:1 ratio, including paying 100% of any such distribution to Class B Unitholders. The Class B Units will not be convertible into Class A Units until Class B Unitholders receive distributions in the aggregate amount of $357.0 million, which was the $357.0 million aggregate principal amount of Ferrellgas Partners’ unsecured senior notes due June 15, 2020 (the “Ferrellgas Partners Notes”), and the rate at which Class B Units will convert into Class A Units increases annually. Additionally, the price at which Ferrellgas Partners may redeem the Class B Units during the first five years after March 30, 2021 is based on the Class B Unitholders’ receipt of a specified internal rate of return in respect of their Class B Units. This specified internal rate of return in respect of the Class B Units is 15.85%, but that amount increases under certain circumstances, including if the operating partnership paid distributions on the Preferred Units in-kind rather than in cash for a certain number of quarters. Accordingly, distributing cash to the Class B Unitholders in a greater proportion than the minimum 6:1 ratio could result in the Class B Units becoming convertible into Class A Units more quickly or at a lower conversion rate or reduce the redemption price for the Class B Units. For additional discussion of the terms of the Class B Units, see Note J “Equity (Deficit)” in the notes to our consolidated financial statements included in this Annual Report.

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For these reasons, although the general partner has not made any decisions or adopted any policy with respect to the allocation of future distributions by Ferrellgas Partners to its partners, the general partner may determine that it is advisable to pay more than the minimum amount of any distribution, up to 100% of the amount of such distribution, to Class B Unitholders. We did not make any distributions to Class B unitholders in fiscal 2025. In fiscal 2024, Ferrellgas Partners made a cash distribution in the aggregate amount of approximately $99.9 million to its Class B Unitholders. We have made aggregate cash distributions of approximately $250.0 million to our Class B Unitholders since inception of our Class B Units. Under its Credit Agreement, Ferrellgas Partners is currently unable to make distributions to its Class A and Class B unitholders. See Note H "Debt" and Note S "Net (loss) earnings per Unitholders' interest" in the notes to our consolidated financial statements included in this Annual Report for additional information. See “Risk Factors —Risks Inherent in an Investment in our Class A or Class B Units or our Debt Securities and Other Risks Related to Our Capital Structure and Financing Arrangements—If Ferrellgas Partners is permitted to make and makes distributions to its partners, while any Class B Units remain outstanding, Class B Unitholders collectively will receive at least approximately 85.7% of the aggregate amount of each such distribution and may receive up to 100% of any such distribution. Accordingly, while any Class B Units remain outstanding, Class A Unitholders may not receive any distributions and, in any case, will not receive collectively more than approximately 14.1% of any distribution.”

Ferrellgas Partners did not pay any distributions to Class A Unitholders, Class B Unitholders or the general partner during fiscal 2025 or fiscal 2024, except for the distributions to Class B Unitholders described above and a $1.0 million distribution to the general partner, made in conjunction with the Class B distributions during fiscal 2024.

The ability of Ferrellgas Partners to make cash distributions to its Class A Unitholders and Class B Unitholders is dependent on the receipt by Ferrellgas Partners of cash distributions from the operating partnership. For so long as any Preferred Units remain outstanding, the amount of cash that otherwise would be available for distribution by the operating partnership to Ferrellgas Partners will be reduced by the amount of cash distributions and other payments made by the operating partnership in respect of the Preferred Units, including payments to redeem Preferred Units. Further, the indentures governing the 2026 Notes and the 2029 Notes (together with the 2026 Notes, the “OpCo Notes”), the Credit Agreement and the OpCo LPA Amendment governing the Preferred Units contain covenants that limit the ability of the operating partnership to make distributions to Ferrellgas Partners and therefore effectively limit the ability of Ferrellgas Partners to make distributions to its Class A Unitholders and Class B Unitholders. See Note H “Debt” and Note I “Preferred units” for a discussion of these limitations. See also “Risk Factors—Risks Inherent in an Investment in our Class A or Class B Units or our Debt Securities and Other Risks Related to Our Capital Structure and Financing Arrangements—Restrictive covenants in the Indentures, the Credit Agreement and the agreements governing our other future indebtedness and other financial obligations reduce our operating flexibility and ability to make cash distributions to holders of Class A Units and Class B Units. The Indentures, the Credit Agreement and the OpCo LPA Amendment contain important exceptions to these covenants.”

Preferred unit distributions

Pursuant to the OpCo LPA Amendment, the operating partnership is required to pay to the holders of each Preferred Unit a cumulative, quarterly distribution (the “Quarterly Distribution”) at the Distribution Rate (as defined below) on the unit purchase price of such Preferred Unit, which is $1,000 per unit.

“Distribution Rate” means a rate per annum of (a) 8.956% through March 30, 2026, (b) 9.706% for the four-quarter period ending March 30, 2027, (c) 10.456% for the four-quarter period ending March 30, 2028, and (d) 11.125% for all periods after March 30, 2028, subject to a maximum rate of 11.125% and to other adjustments and exceptions described in the following paragraphs.

The Quarterly Distribution may be paid in cash or, at the election of the operating partnership “in kind” through the issuance of additional Preferred Units (“PIK Units”) at the quarterly Distribution Rate plus an applicable premium that escalates each year from 75 bps to 300 bps so long as the Preferred Units remain outstanding. In the event the operating partnership fails to make any Quarterly Distribution in cash, such Quarterly Distribution will automatically be paid in PIK Units.

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The Distribution Rate on the Preferred Units will increase upon violation of certain protective provisions for the benefit of Preferred Unit holders notwithstanding the cap mentioned above.

As of July 31, 2025, the Quarterly Distribution accrued was $17.3 million. During fiscal 2025, four quarterly payments of $15.4 million, net of tax, relating to Quarterly Distributions were paid in cash to holders of Preferred Units. The remaining Quarterly Distribution accrual of $2.1 million represents Additional Amounts payable to certain holders of Preferred Units pursuant to the side letters outlined in the OpCo LPA Amendment. Additionally, during the year ended July 31, 2025, we paid $1.6 million for Additional Amounts payable pursuant to the side letters.

As of July 31, 2024, the Quarterly Distribution accrued was $17.5 million. During fiscal 2024, four quarterly payments of $15.4 million, net of tax, relating to Quarterly Distributions were paid in cash to holders of Preferred Units. The remaining Quarterly Distribution accrual of $2.1 million represents Additional Amounts payable to certain holders of Preferred Units pursuant to the side letters outlined in the OpCo LPA Amendment. Additionally, during the year ended July 31, 2024, we paid $2.0 million for Additional Amounts payable pursuant to the side letters.

Preferred unit tax distributions

For any quarter in which the operating partnership makes a Quarterly Distribution in PIK Units in lieu of cash, it shall make a subsequent cash tax distribution for such quarter in an amount equal to the (i) the lesser of (x) 25% and (y) the highest combined federal, state and local tax rate applicable for corporations organized in New York, multiplied by (ii) the excess (if any) of (A) one-fourth (1/4th) of the estimated taxable income to be allocated to the holders of Preferred Units for the year in which the Quarterly Tax Payment Date (which refers to certain specified dates that next follow a Quarterly Distribution date on which PIK Units were issued) occurs, over (B) any cash paid on the Quarterly Distribution date immediately preceding the Quarterly Tax Payment Date on which a quarterly tax amount would otherwise be paid (such amount, the “Tax Distribution”). Tax Distributions are treated as advances against, and reduce, future cash distributions for any reason, including payments in redemption of Preferred Units or PIK Units, or payments to the holders in their capacity as such pursuant to any side letter or other agreement.

Cash distributions paid

Fiscal 2025

No distributions were paid in Fiscal 2025.

Fiscal 2024

On April 9, 2024, Ferrellgas Partners paid a cash distribution to holders of the Class B Units in the amount of $76.92 per Class B Unit or approximately $99.9 million in the aggregate.

On March 15, 2024, the operating partnership paid a cash distribution to Ferrellgas Partners in the amount of approximately $99.9 million, which Ferrellgas Partners used to pay the April 9, 2024 distribution to its Class B Unitholders described above.

The operating partnership paid cash distributions for the year ended July 31, 2024 in respect of its Preferred Units as discussed above under “—Preferred unit distributions.”

The operating partnership

The financing activities discussed above also apply to the operating partnership except for distributions by Ferrellgas Partners.

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Disclosures about Effects of Transactions with Related Parties

We have no employees and are managed and controlled by our general partner. Pursuant to our partnership agreements, our general partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on our behalf, and all other necessary or appropriate expenses allocable to us or otherwise reasonably incurred by our general partner in connection with operating our business. These reimbursable costs, which totaled $356.6 million for fiscal 2025, include operating expenses such as compensation and benefits paid to employees of our general partner who perform services on our behalf as well as related general and administrative expenses.

Issuance of letter of credit on behalf of Ferrellgas Partners by the operating partnership

The operating partnership guaranteed the issuance of a $37.5 million letter of credit related to a final settlement payment due on or before January 15, 2026. See Note O “Transactions with related parties” and Note P “Contingencies and Commitments” in the notes to the consolidated financial statements included in this Annual Report for more information.

Related party Class A Unitholders

Related party Class A Unitholder information consisted of the following:

Distributions

Class A Unit

(in thousands)

ownership at

paid during the year ended

July 31, 2025

July 31, 2025

Ferrell Companies (1)

FCI Trading Corp. (2)

Ferrell Propane, Inc. (3)

James E. Ferrell (4)

Ferrell Companies is the owner of the general partner and is an approximate 23% direct owner of Class A Units and thus a related party. Ferrell Companies also beneficially owns 9,784 and 2,560 Class A Units held by FCI Trading Corp. (“FCI Trading”) and Ferrell Propane, Inc. (“Ferrell Propane”), respectively, bringing Ferrell Companies’ beneficial ownership to 23.4% at July 31, 2025.

FCI Trading is an affiliate of the general partner and thus a related party.

Ferrell Propane is controlled by the general partner and thus a related party.

James E. Ferrell was the Executive Chairman of the Board of Directors of our general partner in fiscal 2024. Effective August 5, 2024, he was appointed to serve as Chairman of the Board of Directors of our general partner. He is a related party. JEF Capital Management owns 237,942 of these Class A Units and is owned by the James E. Ferrell Revocable Trust Two and other family trusts, all of which James E. Ferrell and/or his family members are trustees and beneficiaries. James E. Ferrell holds all voting common stock of JEF Capital Management. The remaining 230 Class A Units are held by Ferrell Resources Holdings, Inc., which is wholly-owned by the James E. Ferrell Revocable Trust One, for which James E. Ferrell is the trustee and sole beneficiary.

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Material Cash Requirements

The following table summarizes our future material cash requirements as of July 31, 2025:

Payment or settlement due by fiscal year

(in thousands)

Thereafter

Total

Long-term debt, including current portion (1)

Fixed rate interest obligations (2)

Operating lease obligations (3)

Finance lease obligations (4)

Litigation settlement (5)

Pension withdrawal liability (6)

Product purchase commitments (7)

Total

Underlying product purchase volume commitments (in gallons)

We have long and short-term payment obligations under agreements such as the indentures governing our senior notes. Amounts shown in the table represent our scheduled future maturities of long-term debt (including current maturities thereof) for the periods indicated. For additional information regarding our debt obligations, see Note H “Debt” to our consolidated financial statements included in this Annual Report.

Fixed rate interest obligations represent the amount of interest due on fixed rate long-term debt.

We lease certain property, plant and equipment under noncancelable and cancelable operating leases. Amounts shown in the table represent minimum lease payment obligations under our third-party operating leases for the periods indicated.

We lease certain property, plant and equipment under noncancelable and cancelable financing leases. Amounts shown in the table represent minimum lease payment obligations under our third-party financing leases for the periods indicated.

Represents the final payment due under a settlement agreement. See Note P “Contingencies and commitments” to our consolidated financial statements included this in this Annual Report for more information.

These payments relate to a liability incurred in connection with the withdrawal from certain pension plans.

We define a purchase obligation as an agreement to purchase goods or services that is enforceable and legally binding (unconditional) on us that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions. We have long and short-term product purchase obligations for propane and energy commodities with third-party suppliers. These purchase obligations are entered into at either variable or fixed prices. The purchase prices that we are obligated to pay under variable price contracts approximate market prices at the time we take delivery of the volumes. Our estimated future variable price contract payment obligations are based on the July 31, 2025 market price of the applicable commodity applied to future volume commitments. Actual future payment obligations may vary depending on market prices at the time of delivery. The purchase prices that we are obligated to pay under fixed price contracts are established at the inception of the contract. Our estimated future fixed price contract payment obligations are based on the contracted fixed price under each commodity contract. Quantities shown in the table represent our volume commitments and estimated payment obligations under these contracts for the periods indicated.

The components of other noncurrent liabilities included in our consolidated balance sheets principally consist of property and casualty liabilities and the fair value of derivatives in connection with our risk management activity. These liabilities are not included in the table above because they are estimates of future payments and not contractually fixed as to timing or amount.

The operating partnership

The cash requirements discussed above also apply to the operating partnership.

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New Accounting Standards

New accounting standards that we have recently adopted, as well as those that have been recently issued but not yet adopted by us, are included in Note B “Summary of significant accounting policies” to our consolidated financial statements in this Annual Report.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates and assumptions that affect our reported amounts of assets and liabilities at the date of the consolidated financial statements. These financial statements include some estimates and assumptions that are based on informed judgments and estimates of management. We evaluate our policies and estimates on an on-going basis and discuss the development, selection and disclosure of critical accounting policies with the Audit Committee of the Board of Directors of our general partner. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our consolidated financial statements may differ based upon different estimates and assumptions.

We discuss our significant accounting policies in Note B “Summary of significant accounting policies” to our consolidated financial statements in this Annual Report. Our significant accounting policies are subject to judgments and uncertainties that affect the application of such policies. We believe these financial statements include the most likely outcomes with regard to amounts that are based on our judgment and estimates. Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from the actual amounts, adjustments are made in subsequent periods to reflect more current information. We believe the following accounting policies are critical to the preparation of our consolidated financial statements due to the estimation process and business judgment involved in their application:

Depreciation of property, plant and equipment

We calculate depreciation on property, plant and equipment using the straight-line method based on the estimated useful lives of the assets ranging from 2 to 30 years. Changes in the estimated useful lives of our property, plant and equipment could have a material effect on our results of operations. The estimates of the assets’ useful lives require our judgment regarding assumptions about the useful life of the assets being depreciated. When necessary, the depreciable lives are revised and the impact on depreciation is treated on a prospective basis. There were no material revisions to depreciable lives in fiscal 2025.

Residual value of customer and storage tanks

We use an estimated residual value when calculating depreciation for our customer and bulk storage tanks. Customer and bulk storage tanks are classified as property, plant and equipment on our consolidated balance sheets. The depreciable basis of these tanks is calculated using the original cost less the residual value. Depreciation is calculated using straight-line method based on the tanks’ estimated useful life of 30 years. Changes in the estimated residual value could have a material effect on our results. The estimates of the tanks’ residual value require our judgment of the value of the tanks at the end of their useful life or retirement. When necessary, the tanks’ residual values are revised and the impact on depreciation is treated on a prospective basis. There were no such revisions to residual values in fiscal 2025, 2024 or 2023.

Valuation methods, amortization methods and estimated useful lives of intangible assets

The specific, identifiable intangible assets of a business enterprise depend largely upon the nature of its operations. Potential intangible assets include intellectual property such as trademarks and trade names, customer lists and relationships, and non-compete agreements, permits, favorable lease arrangements as well as other intangible assets. The approach to the valuation of each intangible asset will vary depending upon the nature of the asset, the business in which it is utilized, and the economic returns it is generating or is expected to generate. During fiscal 2025 or 2024, we did not find it necessary to adjust the valuation methods used for any acquired intangible assets.

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Our recorded intangible assets primarily include the estimated value assigned to certain customer-related and contract-based assets representing the rights we own arising from the acquisition of propane distribution companies and related contractual agreements. A customer-related or contract-based intangible with a finite useful life is amortized over its estimated useful life, which is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the entity. We believe that trademarks and trade names have an indefinite useful life due to our intention to utilize all acquired trademarks and trade names indefinitely. When necessary, the intangible assets’ useful lives are revised and the impact on amortization will be reflected on a prospective basis. The determination of the fair market value of the intangible asset and the estimated useful life are based on an analysis of all pertinent factors including (1) the use of widely-accepted valuation approaches, the income approach or the cost approach, (2) the expected use of the asset by the entity, (3) the expected useful life of related assets, (4) any legal, regulatory or contractual provisions, including renewal or extension periods that would cause substantial costs or modifications to existing agreements, (5) the effects of obsolescence, demand, competition, and other economic factors and (6) the level of maintenance required to obtain the expected future cash flows.

If the underlying assumption(s) governing the amortization of an intangible asset were later determined to have significantly changed (either favorably or unfavorably), then we may be required to adjust the amortization period of such asset to reflect any new estimate of its useful life. Such a change would increase or decrease the annual amortization charge associated with the asset at that time. During fiscal 2025 or 2024, we did not find it necessary to adjust the valuation method, estimated useful life or amortization period of any of our intangible assets.

Should any of the underlying assumptions indicate that the value of the intangible asset might be impaired, we may be required to reduce the carrying value and may also be required to reduce the subsequent useful life of the asset. Any such write-down of the value and any unfavorable change in the useful life (i.e., amortization period) of an intangible asset would increase operating expense at that time.

We did not recognize any impairment losses related to our intangible assets during fiscal 2025, 2024 or 2023. For additional information regarding our intangible assets, see Note B “Summary of significant accounting policies” and Note G “Goodwill and intangible assets, net” to our consolidated financial statements in this Annual Report.

Accounting for risk management activities and derivative financial instruments

We enter into commodity forward, futures, swaps and options contracts involving propane to hedge exposures to price risk. These derivative contracts are reported in the consolidated balance sheets at fair value with changes in fair value recognized in cost of sales and operating expenses in the consolidated statements of operations or in other comprehensive income in the consolidated statement of partners’ capital. We utilize published settlement prices for exchange-traded contracts, quotes provided by brokers and estimates of market prices based on daily contract activity to estimate the fair value of these contracts. Changes in the methods used to determine the fair value of these contracts could have a material effect on our consolidated balance sheets and consolidated statements of operations. For further discussion of derivative commodity and interest rate contracts, see Item 7A. “Quantitative and Qualitative Disclosures about Market Risk,” Note B “Summary of significant accounting policies,” Note M “Fair value measurements” and Note N “Derivative instruments and hedging activities” to our consolidated financial statements in this Annual Report. We do not anticipate future changes in the methods used to determine the fair value of these derivative contracts.

Litigation accruals and environmental liabilities

Our operations are subject to all operating hazards and risks normally incidental to handling, storing, transporting and otherwise providing for use by consumers of combustible liquids such as propane. As a result, at any given time, we can be threatened with or named as a defendant in various lawsuits arising in the ordinary course of business as described in Note P “Contingencies and commitments” to our audited consolidated financial statements. It is not possible to determine the ultimate disposition of these matters; however, management is of the opinion that there are no known claims or contingent claims that are reasonably expected to have a material adverse effect on our consolidated financial condition, results of operations and cash flows.

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We are involved in litigation regarding pending claims and legal actions that arise in the normal course of business and may own sites at which hazardous substances may be present. In accordance with GAAP, we establish reserves for pending claims and legal actions or environmental remediation liabilities when it is probable that a liability exists and the amount or range of amounts can be reasonably estimated. Reasonable estimates involve management judgments based on a broad range of information and prior experience. These judgments are reviewed quarterly as more information is received and the amounts reserved are updated as necessary. Such estimated reserves may differ materially from the actual liability and such reserves may change materially as more information becomes available and estimated reserves are adjusted.

Goodwill impairment

We record goodwill as the excess of the cost of acquisitions over the fair value of the related net assets at the date of acquisition. Goodwill recorded is not deductible for income tax purposes. We have determined that we have one reporting unit for goodwill impairment testing purposes. As of July 31, 2025, this reporting unit contains goodwill that is subject to at least an annual goodwill impairment test. In the first step of the test, the carrying value of the reporting unit is determined by assigning the assets and liabilities, including existing goodwill and intangible assets, to the reporting unit as of the date of evaluation. To the extent a reporting unit’s carrying value exceeds it fair value, the reporting unit’s goodwill is impaired. The amount of impairment would be equal to the lesser of the excess of reporting unit carrying value over its fair value and the reporting unit’s recorded amount of goodwill.