Ferrellgas Partners, L.P. Business Information, Profile, and History
Liberty, Missouri 64068
We own our business with a focus on achievement and accountability. Through our individual and collective actions, we define our ownership. We take pride in our efforts and share in the rewards of ownership. We care enough to make a difference and operate our business with excellence that surpasses the competition. When challenged, we defend our business. We step up to every opportunity to serve our Customers. Constant improvement, with continuous dedication to finding and fixing problems describes our owner pride!
History of Ferrellgas Partners, L.P.
Ferrellgas Partners, L.P. is the largest retail propane marketer in the United States, with annual sales nearing one billion gallons and a customer base of over one million in 45 states and the District of Columbia. The company sells, distributes, markets, and trades propane and other natural gas liquids largely in rural America, where propane is used for residential heating, cooking, and clothes drying, as well as for agricultural crop drying, space heating, and irrigation. A growing industrial/commercial customer base uses propane for forklift power, temporary construction heat, manufacturing, and cogeneration. In addition, Ferrellgas manages a transportation fleet consisting of 168 transport trucks and 222 railcars, as well as barges and ships on every U.S. liquefied petroleum gas (LPG) pipeline. Ferrellgas owns and operates three large underground storage facilities and an LPG fractionater, which separates LPG from other gases.
In 1939, A.C. Ferrell Butane Gas Company opened its doors in Atchison, Kansas, as a family-owned and operated gas business. A.C. Ferrell opened his business in the devastating Dust Bowl and during the Great Depression. Facing strong odds that his new venture would fail, he nevertheless forged ahead with confidence. The fortitude shown by the company's founder established a precedent for intelligent risk-taking that the company would come to regard as its hallmark. Of course, Ferrell's maternal grandfather, E.E. Samson, was a Skelgas bottle dealer in the early days of the Skelgas era, and that influence may have informed his decision as well. Ferrell and his wife embarked on a new future outside of their familiar origins; initially, they had set out to make their livelihood through farming in Valley Falls, Kansas, but moved to the city with the hopes of securing a better standard of living.
According to their son, Jim Ferrell, in the Winter 1999 Ferrell company publication, Flame, the husband and wife team optimized their individual talents to make the business work. A.C. Ferrell acted as salesman, and Mabel ran the business operations. She managed the money, collected the bills, kept the books and ran the business out of the home from 1939 until the end of World War II. To make ends meet, A.C. Ferrell took on second and even third jobs. During the war, he worked as a part-time fireman, a part-time police officer, and for the railroad.
Post World War II Prosperity
The end of World War II generated a rebirth of business. Americans were weary of rations and lean times, and pent-up demand made consumers hungry for modern conveniences. This translated into opportunity for the Ferrells. The founder began selling gas refrigerators, floor furnaces, and electric milking machines during this time, and even used a trailer outfitted with a complete kitchen as a marketing tool. He would back the trailer up close to a prospective buyer's back door and leave it there for the buyer to become familiar with and use. The notion worked; the consumer became hooked. When Ferrell returned, he managed to sell a whole new kitchen, similar to the one the consumer had been using in the trailer.
The business grew, and the Ferrells purchased a building in Atchison to house their first office. Mabel Ferrell continued to run the business while A.C. Ferrell drove the company truck, delivered propane, and handled sales. In 1947, the company established its first plant, located across the river in Missouri and on land leased from the railroad. By 1952, the company had approximately 12 employees, primarily comprised of farmers and men returning home from the war. That same year, Mabel died leaving A.C. Ferrell without a business partner and creating a significant gap in the business operations.
Business Struggles: Mid-1950s Through Mid-1960s
A.C. Ferrell continued the business, however, incorporating in 1954 as Ferrell Companies, Inc. He attempted to diversify the business by selling furniture and televisions, but that proved unsuccessful, and by 1965 the business focused solely on the sale of propane and some related equipment. The employee count dwindled to less than four, and only a slight positive cash flow due to depreciation kept the business going.
In 1963, Jim Ferrell, the founder's son, received a degree in business from the University of Kansas and returned home to help his father stabilize the business. This was only to be temporary, as he was in the Army and intended to make the military his career. However, Ferrell found that the company's problems would involve more time to resolve than he originally had anticipated. Giving up his military aspirations in 1965, he devoted himself wholeheartedly to the propane business his parents had started. Not satisfied with merely stabilizing and managing a small company, Ferrell was determined to grow the business. The latter determination marked the beginning of a growth era for the company that would continue through to the next millennium.
Initial Growth: Mid-1960s Through 1970s
In 1965, Jim Ferrell changed the company's name to the more modern moniker Ferrellgas. Within two years, he had borrowed $14,000 from a propane supplier, in return for a contract to purchase all his propane from that company, and used the money to purchase J & J Propane in Rushville, Missouri, located just over the state line from Atchison. Ferrell quickly recognized that in order to grow, he needed a bigger market. Therefore, in 1969, he formed Propane Industrial to serve the larger Kansas City industrial market. Around this time, Coffey Oil & Gas, in Platte City, Missouri, went on the auction block, and Ferrell seized the opportunity, purchasing Coffey and moving his office to that location, just outside of Kansas City. The Coffey Oil & Gas acquisition alone doubled sales for Ferrellgas.
In 1973, the next growth opportunity presented itself with the acquisition of Leavitt Propane in Kearney, Missouri. The company once again more than doubled sales and once again moved its main office to the new location. This acquisition was significant for two reasons: first, Leavitt operated in three states--Iowa, Kansas, and Missouri--and, second, with Leavitt, Ferrellgas entered the wholesale business. During this time, Ferrell employed the husband-and-wife team approach so successfully initiated by his parents; Ferrell's wife, Zibbie, came to work at Ferrellgas, keeping the books and working on collections.
Ferrellgas was faced with a significant challenge in the early 1970s. During the OPEC oil embargo, U.S. oil prices skyrocketed, and the U.S. government reacted with legislative controls that distorted the marketplace. Ferrellgas's response was to avoid traditional supply sources in favor of small producers and to enter the storage business to help offset flagging sales.
In 1977 Ferrellgas purchased Kathol Petroleum, renaming it Indian Wells Oil Company. This acquisition gave the company a natural gas liquids extraction plant, a field of gas wells, and an introduction to Wall Street, the latter being the result of Indian Wells's involvement in several drilling partnerships designed to fund the drilling necessary to feed the plant. Indian Wells was sold three years later for a profit.
Unprecedented Growth in the 1980s and 1990s
Proceeds from the Indian Wells sale helped the company acquire portions of Buckeye Gas Products Company in Nebraska and Iowa in 1984. Two years later, in 1986, Ferrellgas purchased the remainder of Buckeye and converted the company from a regional propane supplier to a national company. The Little River storage facility closed several years after the Buckeye acquisition due to the much larger Kansas storage fields that were acquired.
The success of the business resulted in the company outgrowing its offices in Kearney. Therefore, in 1981, company headquarters moved to the Building One site in Liberty, Missouri. Ferrell chose Liberty because of its proximity to Kansas City and the 35 office employees at that time. Building Two was constructed in 1983 and by 1986 both buildings were occupied to capacity.
In 1994, after several more large and small acquisitions, Ferrellgas converted from a privately owned company to a Master Limited Partnership (MLP) traded on the New York Stock Exchange. Such a partnership organization combined features of general and limited partnerships with those of publicly traded corporations. Specifically, with most limited partnerships, one group of partners, the general partners, managed a business or investment while another group, the limited partners, raised any capital required by the business. With MLPs, one could issue publicly traded securities to raise capital. For tax purposes, these securities were referred to as partnership units rather than corporate shares even though they were traded like stock. The move to form an MLP was unprecedented in the propane gas industry, giving the company greater financial flexibility and enhancing its capacity to grow. After the MLP's formation, the company acquired 50 high-quality independent retail propane companies. Among these deals was the 1996 purchase of Skelgas, for which Ferrell's grandfather had been a bottle dealer in the 1920s.
1939:A.C. Ferrell Butane Gas Company opens for business in Atchison, Kansas.
1965:Founder's son, Jim Ferrell, steps in to help stabilize and then expand the company; company is renamed Ferrellgas.
1981:New headquarters are established in Liberty, Missouri.
1998:Company initiates an Employee Stock Ownership Plan.
1999:Ferrellgas acquires Thermogas, making it the nation's largest propane retailer.
In 1997, Ferrellgas purchased the North Carolina Propane Gas Co. Inc., the second largest propane dealer in North Carolina. Also vying, unsuccessfully, for that purchase was Ferrellgas competitor Thermogas Co., a subsidiary of Mapco Inc. and The Williams Cos. Inc., both based in Tulsa. Soon after the acquisition, Ferrellgas brought a lawsuit against Thermogas, alleging that the latter had hired away employees from the North Carolina propane dealer in an attempt to learn proprietary information about Ferrellgas. The lawsuit was quickly settled out of court, and Ferrellgas would eventually be on friendlier terms with Thermogas.
In 1998, Ferrellgas became the first in its industry to form an Employee Stock Ownership Plan (ESOP) when Ferrell sold parent Ferrell Companies, Inc. to employees, resulting in approximately 50 percent ownership. Approved by Congress in 1974, and regulated by the U.S. Department of Labor and the Internal Revenue Service, the ESOP was a form of a long-term savings plan that gave tax breaks to business owners in return for assisting employees in purchasing company stock. The Ferrellgas ESOP distinguished itself from other company plans by not requiring employees to make payroll deductions to participate. The company arranged a $160 million financing package to purchase its 50 percent stake in the enterprise. The decision to enact an ESOP at Ferrellgas was Ferrell's. He was preparing to retire and had no heirs to groom for the leadership role. He recalled in a 1999 interview for the company magazine Flame: 'I knew I would much rather have the ownership changed in this way, with an ESOP, rather than see it merged into another company. It was the right thing to do.'
In late 1999, Ferrellgas became the nation's largest propane marketer in terms of retail volume when it purchased its Tulsa-based competitor Thermogas for $432.5 million. The company's largest acquisition to date, Thermogas added 1,400 employees and 330,000 residential, industrial/commercial, and agricultural customers to the company's client base, while also giving Ferrellgas a presence in Michigan and other upper Midwest states. Before the acquisition, Ferrellgas had been ranked as the nation's second-largest propane retailer; thereafter, it was first, with a workforce of 6,000 in more than 700 retail locations in 45 states and the District of Columbia.
As the company looked forward to continued years of growth, a new management team began to take over. With Jim Ferrell less involved in the day-to-day operations of the company, serving as chairman of the board, the role of president and CEO was held by Danley K. Sheldon, who had been instrumental in taking the company public in 1994, when he was chief financial officer at Ferrellgas. Rounding out the management team in June 2000, Ferrellgas brought in Patrick Chesterman as vice-president and chief operating officer. All agreed that the company's plan for the future focused on continued growth. Such growth would be achieved, according to company literature, through a combination of acquisitions, efforts to bolster client base, and retaining the loyalty of long-standing customers through superior products and service.
Principal Subsidiaries: Ferrellgas L.P.; Ferrellgas Partners Finance Corporation.
Principal Competitors: AmeriGas Partners, L.P.; MDU Resources Group, Inc.; Suburban Propane Partners, L.P.
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