Executives: Al Heitmann - EVP and CFO Jim Ferrell - Chairman, Interim President, and CEO

Analysts: Mike Gyure - Janney Mirek Zak - Citigroup James Spicer - Wells Fargo

Operator: Good morning. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter Fiscal Year 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Al Heitmann, Executive Vice President and Chief Financial Officer, you may begin your conference.

Al Heitmann: Thank you, Megan, and good morning everyone. I am joined this morning by Jim Ferrell, Chairman of the Board and Interim President and CEO. Now before we get started, I'd like to remind all of you that some of the statements made during our call today may be considered forward-looking, and that various risk, uncertainties and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our form 10-Q and other documents filed from time to time with the SEC. Now with that, I'd like to address some of the financial highlights for the quarter before turning the call over to Jim for his remarks. Ferrellgas this morning announced net earnings of $6.7 million in the third quarter or $0.07 per common unit, compared to net earnings of 18.9 million in the prior year quarter or $0.19 per common unit. As detailed in our earnings release and form 10-Q both of which were filed earlier today, our third fiscal quarter adjusted EBITDA was 76.8 million compared to a 108 million in the prior year period. This reflects the effects of the termination of the Jamex contract in September of last year, which resulted in the loss of Bridger's largest customer. Temperatures during the quarter were approximately 20% warmer than normal and approximately 3% warmer than the prior year period. Although we were able to maintain our retail gallon sales on a weather adjusted basis our gross margin decreased as a result of customer mix and location. Propane sales volumes for the third quarter were 212 million gallons versus 223 million gallons sold a year ago with the majority of this decrease coming from lower margin wholesale gallons. Total gross profit for the quarter was 201 million compared to 244.2 million in the prior year's third quarter. The decrease is primarily attributable to the termination of the Jamex contract and to a lesser extent reduced margins in the propane operations segment due to the customer mix. Operating expense for the quarter was $104.8 million, a decrease of over $10 million from the prior year period. This decrease is primarily from a combination of efficiencies in our propane operations and related equipment sales segment plus reductions in our midstream segment related to the termination of the Jamex contract. General and administrative expense for the quarter was $10 million, a decrease of almost $2.5 million from the prior year period, reflecting our commitment to reduce expense and operate more efficiently. Interest expense was $39.9 million, up from $34.4 million in the prior year largely due to the $175 million MLP bond offering in our second quarter. Our third quarter leverage ratio was 6.45 times significantly lower than the 7.75 times limit allowed under our recently amended secured credit facility. And finally on a personal note, as we disclosed in our 10-Q this morning, I've announced my plans to retire from Ferrellgas effective January 31, 2018. While I'm looking forward to retirement, I will miss the work and the relationships I've developed over the past 22 years here at Ferrellgas. I'm committed to doing everything possible to ensure a smooth transition with my successor. Now with that, I would like to turn the call over to Jim for his comments.

Jim Ferrell: Thanks, Al, and good morning everyone. To say, I'm disappointed with third quarter results is an understatement. I think Al summed it up quite well. The only thing to add is that much is underway to create improved financial results in the near future. In a few short months, I would have been here for an entire year, a year full of changes and the way we do business and the termination of several top personnel. To list them all here would be to drown you in detail and not really make the point that I know our results have to improve and improve soon. I know change is always inviting until it happens, but I believe we're doing the right things for the right reasons and soon you will be able to see proof. I wish Al all the best in his retirement. When I came back, I persuaded him to stay as long as he has, but I know he and his wife are looking forward to him getting loose from work so they can travel and enjoy their small farm. We’re actively looking for a replacement. I want to make sure that Al knows his tenure with us has been greatly appreciated. We wish him all the best. Now, I’ll turn it back to the operator for questions.

Operator: [Operator Instructions] Our first question comes from Mike Gyure with Janney. Your line is open.

Mike Gyure: Can you guys talk a little bit about the Bridger business and kind of what's going on there as far as the changes you're making and kind of what you're seeing as far as revenue trends and things like that?

Jim Ferrell: I can talk about that, I think you know the midstream business pretty well. It’s a tough place to be. We have a lot of excess assets left over from a business that wasn’t been worked very well. Every day, we put trucks to work. Every day, we put terminals to work. Every day, more salt water, more oil goes through our salt water disposal wells. We've restarted holding frac sand for instance and intend to make that as big a business as we possibly can. In the Permian basin, we're probably the largest trucking hauler now. We were when we bought the business. We're getting that back. We're dependable. We've got a system that allows us to operate better than others, and it's rocking and rolling in a very difficult part of the oil industry. By that I mean, it's competitive out there. But we've got a great guy running that thing, got a great team of people and I'm very pleased with what's going on there.

Mike Gyure: Great. And maybe you could touch on the growth capital what you spent this quarter and kind of what you are looking at for maybe the next 12 months? And kind of I guess maybe the businesses whether its propane or midstream and kind of what you are looking at there?

Jim Ferrell: We’d have to go back and read the 10-K here. Let's -- I'll tell you what, you read it. And what we're doing with capital by the way, we're not being stingy, we are being particular about whether we can make money with that or not. And our intention here is organic growth. We have plenty of projects; we’ve got a lot of things underway. This is a -- this is not -- we are not pulling our head back in the sand here. And I can't give you the numbers, but I can tell you that we are going to have a positive significant result from all of the investments we make.

Operator: Your next question comes from Mirek Zak with Citigroup. Your line is open.

Mirek Zak: I was just wondering if you've done some reassessments on those non-core business I guess the water disposal, the railcar that seems like you've had some positive trends there on the trucking and the water disposal. But have you reassessed those, if those -- if you expect to keep those and you are in your business portfolio plan going forward?

Jim Ferrell: Well, that's an interesting question, but we are considerably long on railcars. We've got about 1,000 parked. They -- we put 300 to work, 300 of the 117 eventually all of the 117. That have gone to work on the long-term contract, making more money than what our cost of storage is, but we've got one guy dedicated to getting railcars working. It's not easy. There are a lot of railcars sitting. This is -- but we are not -- we -- I don’t think you are going to find us buying another railcar, but it's typical of the Company that there are lot of assets in Bridger that are just sitting there and we're doing all we can to get him back to work. As far as non-core, I wouldn’t classify Bridger as non-core. There are synergies there that are a little difficult to see, but we have a part of the old propane business is able to work with Bridger on railcar, on trucking. It's not a non-core business. I can tell you one that probably is and that's one we've had for a number of years called -- we called products inside of our Blue Rhino business where we make a lot of things in China, and we sell them to Walmart or somebody. And that -- I would say that's not a core, but we haven’t moved on any of this stuff. We're trying to make it better. And then, we'll decide whether we're going to keep it or whether we're going to unload it. Midstream, we're going to keep.

Mirek Zak: Okay. All right guys. Thanks for the color and just one quick follow-up. I noticed your revolver borrowing ticked up a little bit in the quarter, I was just wondering if you could talk about that a little bit since we generally see -- you don't see a draw in the third quarter there?

Al Heitmann: That primarily relates to the timing of our capital expenditures.

Mirek Zak: And those capital expenditures were towards what there in the quarter?

Al Heitmann: It's both maintenance and growth for all the segments and a little bit for acquisitions too.

Operator: [Operator Instructions] Our next question is from James Spicer with Wells Fargo. Your line is open.

James Spicer: Can you talk a little bit about the sort of M&A environment and whether you expect to maintain your pace of sort of smaller acquisitions during the remainder of the year to make up for any degradation in volumes?

Al Heitmann: I hate that term degradation in volumes, but you know first of all we're growing organically without making acquisitions right now, which is I think pretty stunning given that the weather is off 20%. We've -- this is our -- we don't have -- intend to have any more degradation. The other thing I would say is that we are -- we will continue, and I don’t know -- I can't tell you how many over the next year. But we'll continue to buy small companies that are nothing big, you may or may not notice it, but its small companies that compete with us out there and they pop up all the time. So, we stay right in that.

James Spicer: Okay, great. And then I was wondering if you could just talk a little bit about just the overall deleveraging plan here? I know your target is I think 4.5 times. Can you just talk a little bit about you know outside of colder weather, what other steps you guys are looking at?

Jim Ferrell: Colder weather, yes, we love to have that. Have we had colder weather this winter we would have reduced our debt. We cut our distribution from paying out a couple hundred million to paying out 40 million. We more than cover that distribution in our operating businesses, but the de-levering if we have a -- whether we ever have -- someday, we have a normal winter. If we have a normal winter, you save that 160 million and that goes to debt reduction, also the organic growth should grow the EBITDA. If it doesn't, you'll tell me about that. Then we've always been courted by your bank and others to sell equity, which we're not going to do. So, we're working hard right now with what we have and what we’ve done so far to get this, get back into a normal leverage condition.

Operator: We have no further questions at this time, turning the call back to the presenters.

Jim Ferrell: Okay, thank you everyone. See you next quarter.

Operator: And this concludes today's conference call. You may now disconnect.