Business Combinations

12 Months Ended

Jul. 31, 2014

Business Combinations

Business combinations

Business combinations are accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed are recorded at their estimated fair market values as of the acquisition dates. The results of operations are included in the consolidated statements of earnings from the date of acquisition. The proforma effect of these transactions was not material to Ferrellgas’ balance sheets or results of operations.

Propane and related equipment sales

During fiscal 2014, Ferrellgas acquired seven propane distribution assets with an aggregate value of $38.7 million in the following transactions:

• KanGas, based in Kansas, acquired November 2013;

• Motor Propane, based in Wisconsin, acquired December 2013;

• Country Boys Propane, based in Georgia, acquired March 2014;

• Viking Propane, based in California, acquired May 2014;

• Kaw Valley Propane, based in Kansas, acquired June 2014;

• Wise Choice Propane, based in Ohio, acquired July 2014; and

• Sharp Propane, based in Texas, acquired July 2014.

During fiscal 2013, Ferrellgas acquired propane distribution and grilling tool assets with an aggregate value of $39.2 million in the following transactions:

• Capitol City Propane, based in California, acquired September 2012;

• Flores Gas, based in Texas, acquired October 2012;

• IGS Propane, based in Connecticut, acquired December 2012;

• Mr. Bar-B-Q, based in New York, acquired March 2013; and

• Western Petroleum, based in Utah, acquired April 2013.

During fiscal 2012, Ferrellgas acquired propane distribution assets with an aggregate value of $14.0 million in the following transactions:

• Economy Propane, based in California, acquired September 2011;

• Federal Petroleum Company, based in Texas, acquired October 2011;

• Polar Gas Company, based in Wisconsin, acquired November 2011;

• Welch Propane, based in Texas, acquired November 2011; and

• Rio Grande Valley Gas, based in Texas, acquired January 2012.

The goodwill arising from the propane and related equipment sales acquisitions consists largely of the synergies and economies of scale expected from combining the operations of Ferrellgas and the acquired companies.

Midstream Operations

During fiscal 2014, Ferrellgas acquired salt water disposal assets with an aggregate value of $130.3 million relating to the midstream operations business segment. This included the acquisition in May 2014 of Sable Environmental, LLC and Sable SWD 2, LLC ("Sable"), based in Corpus Christi, Texas and the acquisition of Dietert SWD, based in LaSalle County, Texas. The Sable acquisition was funded through borrowings from the secured credit facility, and subsequently Sable's ownership group purchased $50.0 million of Ferrellgas Partners common units. The excess of purchase consideration over net assets assumed was recorded as goodwill, which represents the strategic value assigned to Sable, including the knowledge and experience of the workforce in place.

These acquisitions, for the propane and related equipment sales and midstream operations reportable segments, respectively, were funded as follows on their dates of acquisition:

	For the year ended July 31,
	2014				2013				2012
	Propane and related equipment sales		Midstream operations		Propane and related equipment sales		Midstream operations		Propane and related equipment sales		Midstream operations
Cash payments, net of cash acquired	$	34,219	$	127,785	$	37,186	$	—	$	10,387	$	—
Issuance of liabilities and other costs and considerations	2,942		2,555		2,035		—		2,347		—
Common units, net of issuance costs	1,500		—		—		—		1,300		—
Aggregate fair value of transactions	$	38,661	$	130,340	$	39,221	$	—	$	14,034	$	—

The acquisition of Sable included contingent consideration which requires Ferrellgas to pay the former owners of Sable a multiple for earnings in excess of certain EBITDA targets for each of the first two years following the acquisition date. At the date of acquisition, the potential undiscounted amount of all future payments that Ferrellgas could be required to make under the contingent consideration arrangement is between $0 and $2.0 million based upon management's estimate of the likelihood that the target EBITDA metric will be met and exceeded and the amount by which it could be exceeded at the date of acquisition. See further discussion of the determination of the fair value of the contingent consideration at Note J - Fair Value Measurements.

The aggregate fair values, for the acquisitions in propane and related equipment sales and midstream operations reporting segments, respectively, were allocated as follows:

	For the year ended July 31,
	2014					2013				2012
	Propane and related equipment sales			Midstream operations		Propane and related equipment sales		Midstream operations		Propane and related equipment sales		Midstream operations
Working capital	$	(919	)	$	490	$	7,302	$	—	$	—	$	—
Customer tanks, buildings, land and other	14,519			622		5,155		—		7,454		—
Salt water disposal wells	—			24,288		—		—		—		—
Goodwill	2,922			16,957		4,640		—		—		—
Customer lists	19,480			64,000		12,211		—		5,574		—
Non-compete agreements	2,659			13,300		944		—		1,006		—
Permits and favorable lease arrangements	—			10,683		—		—		—		—
Other intangibles	—			—		5,678		—		—		—
Trade names & trademarks	—			—		3,291		—		—		—
Aggregate fair value of transactions	$	38,661		$	130,340	$	39,221	$	—	$	14,034	$	—

The estimated fair values and useful lives of assets acquired during fiscal 2014 are based on a preliminary valuations and are subject to final valuation adjustments. Ferrellgas intends to continue its analysis of the net assets of these transactions to determine the final allocation of the total purchase price to the various assets and liabilities acquired.  The estimated fair values and useful lives of assets acquired during fiscal 2013 and 2012 are based on internal valuations and included only minor adjustments during the 12 month period after the date of acquisition.

Ferrellgas, L.P. [Member]

Business Combinations

Business combinations

Business combinations are accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed are recorded at their estimated fair market values as of the acquisition dates. The results of operations are included in the consolidated statements of earnings from the date of acquisition. The pro forma effect of these transactions was not material to Ferrellgas, L.P.’s balance sheets or results of operations.

Propane and related equipment sales

During fiscal 2014, Ferrellgas acquired seven propane distribution assets with an aggregate value of $38.7 million in the following transactions:

• KanGas, based in Kansas, acquired November 2013;

• Motor Propane, based in Wisconsin, acquired December 2013;

• Country Boys Propane, based in Georgia, acquired March 2014;

• Viking Propane, based in California, acquired May 2014;

• Kaw Valley Propane, based in Kansas, acquired June 2014;

• Wise Choice Propane, based in Ohio, acquired July 2014; and

• Sharp Propane, based in Texas, acquired July 2014.

During fiscal 2013, Ferrellgas, L.P. acquired propane distribution and grilling tool assets with an aggregate value of $39.2 million in the following transactions:

• Capitol City Propane, based in California, acquired September 2012;

• Flores Gas, based in Texas, acquired October 2012;

• IGS Propane, based in Connecticut, acquired December 2012;

• Mr. Bar-B-Q, based in New York, acquired March 2013; and

• Western Petroleum, based in Utah, acquired April 2013.

During fiscal 2012, Ferrellgas, L.P. acquired propane distribution assets with an aggregate value of $14.0 million in the following transactions:

• Economy Propane, based in California, acquired September 2011;

• Federal Petroleum Company, based in Texas, acquired October 2011;

• Polar Gas Company, based in Wisconsin, acquired November 2011;

• Welch Propane, based in Texas, acquired November 2011; and

• Rio Grande Valley Gas, based in Texas, acquired January 2012.

The goodwill arising from the propane and related equipment sales acquisitions consists largely of the synergies and economies of scale expected from combining the operations of Ferrellgas and the acquired companies.

Midstream Operations

During fiscal 2014, Ferrellgas L.P. acquired salt water disposal assets with an aggregate value of $130.3 million relating to the midstream operations business segment. This included the acquisition in May 2014 of Sable Environmental, LLC and Sable SWD 2, LLC ("Sable"), based in Corpus Christi, Texas and the acquisition of Dietert SWD, based in LaSalle County, Texas. The Sable acquisition was funded through borrowings from the secured credit facility, and subsequently Sable's ownership group purchased $50.0 million of Ferrellgas Partners common units. The excess of purchase consideration over net assets assumed was recorded as goodwill, which represents the strategic value assigned to Sable, including the knowledge and experience of the workforce in place.

These acquisitions, for the propane and related equipment sales and midstream operations reportable segments, respectively, were funded as follows:

	For the year ended July 31,
	2014				2013				2012
	Propane and related equipment sales		Midstream operations		Propane and related equipment sales		Midstream operations		Propane and related equipment sales		Midstream operations
Cash payments, net of cash acquired	$	34,234	$	127,785	$	37,186	$	—	$	10,400	$	—
Issuance of liabilities and other costs and considerations	2,927		2,555		2,035		—		2,334		—
Contribution of net assets from Ferrellgas Partners	1,500		—		—		—		1,300		—
Aggregate fair value of transactions	$	38,661	$	130,340	$	39,221	$	—	$	14,034	$	—

The acquisition of Sable included contingent consideration which requires Ferrellgas L.P. to pay the former owners of Sable a multiple for earnings in excess of certain EBITDA targets for each of the first two years following the acquisition date. At the date of acquisition, the potential undiscounted amount of all future payments that Ferrellgas L.P. could be required to make under the contingent consideration arrangement is between $0 and $2.0 million based upon management's estimate of the likelihood that the target EBITDA metric will be met and exceeded and the amount by which it could be exceeded at the date of acquisition. See further discussion of the determination of the fair value of the contingent consideration at Note J - Fair Value Measurements.

The aggregate fair values, for the acquisitions in propane and related equipment sales and midstream operations reporting segments, respectively, were allocated as follows:

	For the year ended July 31,
	2014					2013				2012
	Propane and related equipment sales			Midstream operations		Propane and related equipment sales		Midstream operations		Propane and related equipment sales		Midstream operations
Working capital	$	(919	)	$	490	$	7,302	$	—	$	—	$	—
Customer tanks, buildings, land and other	14,519			622		5,155		—		7,454		—
Salt water disposal wells	—			24,288		—		—		—		—
Goodwill	2,922			16,957		4,640		—		—		—
Customer lists	19,480			64,000		12,211		—		5,574		—
Non-compete agreements	2,659			13,300		944		—		1,006		—
Permits and favorable lease arrangements	—			10,683		—		—		—		—
Other intangibles	—			—		5,678		—		—		—
Trade names & trademarks	—			—		3,291		—		—		—
Aggregate fair value of transactions	$	38,661		$	130,340	$	39,221	$	—	$	14,034	$	—

The estimated fair values and useful lives of assets acquired during fiscal 2014 are based on a preliminary valuations and are subject to final valuation adjustments. Ferrellgas, L.P. intends to continue its analysis of the net assets of these transactions to determine the final allocation of the total purchase price to the various assets and liabilities acquired. The estimated fair values and useful lives of assets acquired during fiscal 2013 and 2012 are based on internal valuations and included only minor adjustments during the 12 month period after the dates of acquisition.