Good morning, ladies and gentlemen, and welcome to the Ferrellgas Partners, L.P. fourth quarter and fiscal year 2026 earnings conference call. At this time, all lines are in a listen only mode. I would now like to turn the call over to Michelle Maggi, Vice President of Corporate Affairs.
Thank you, Kevin. Good morning, everyone. We filed this morning pre-market our fourth quarter and full fiscal year 2026 earnings release. If you have not seen it yet, please go to our website and you'll find it under the investor relations tab at ferrellgas.com. With me today is Tamria Zertuche, our President and Chief Executive Officer, and Nick Heimer, Ferrellgas's Vice President and Controller. Today's call includes prepared remarks where Tamria and Nick will go over our fourth quarter and full fiscal year 2026 results, concluding with responses to previously submitted questions.
Please note that this call may contain forward-looking statements as determined by federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. These statements may be affected by important factors as set forth in our filings with the Securities and Exchange Commission and our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in any forward-looking statements.
We undertake no obligation to publicly update any forward-looking statements except to the extent required by law. In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also available for replay via our website. With that, I will turn the call over to Tamria.
Thank you, Michelle, and good morning, everyone. Before I get into the numbers, I want to start where I believe we should always start, with our employee owners. Ferrellgas is unique in this industry in that our people, they're not just employees, they're owners. Through our ESOP, our employees indirectly own Class A Units of this partnership. Every result you hear today, the cost discipline, the safety improvement, the customer retention gains, is the direct product of people who show up every day because they have a real personal stake in this company's success.
Our ESOP is core to our culture, and ownership is at the genuine driver of the operating performance you're about to hear about. Fiscal 2026 was a year defined by discipline, by choosing to do the harder things now so that Ferrellgas is stronger for the future. Fourth quarter adjusted EBITDA, it grew 3% over prior year to $23.8 million. For the full fiscal year, adjusted EBITDA was $321.3 million, down 3% from fiscal 2025.
That is primarily because we made the decision to resolve several legacy general liability claims from prior years. It was the right call to make. At the same time, we made real progress on our capital structure. In October, we redeemed $650 million of 2026 senior notes and issued $650 million of new 2031 senior notes. We extended and expanded our revolving credit facility. Both S&P Global and Moody's recognized that refinancing work with credit rating upgrades. In March, we completed the conversion of Class B units into Class A units. 1.3 million Class B units became 6.5 million Class A units, which simplifies our unit structure.
It eliminates the Class B distribution obligation and redirects future cash flow towards debt reduction, investment in the business, and long-term value for our Class A unit holders. We also strengthened our Board this year. Pamela A. Breuckmann was appointed Vice Chair. Pam has been a steady and thoughtful presence in our governance and succession planning. This reflects the depth of what she brings to this company.
Andrew Safran joined the Board, bringing more than three decades of investment banking and private equity experience in natural resources and energy infrastructure. The company also welcomed Scott I. Asner to the Board, bringing of investment management experience and a 20-year legal career. Together, this Board and management brings the governance, financial, and strategic depth to Ferrellgas that we need to move into fiscal 2027.
The fourth quarter brought a cold and wet Memorial Day and then heat advisories over July 4th, which did impact some areas of our wholesale business. Persistent warm weather, especially in the West, where temperatures ran 34% above prior year for us, it kept overall gallons soft. Our team responded the way they always do.
Retail held customer retention against prior year quarter, and they grew gross margin dollars by $0.7 million, closing the year with 92.4% new customer conversion rate. Blue Rhino kept its footprint above 65,000 retail locations nationwide and continues to invest in the infrastructure and its last mile logistics. A great quarter for us. I will let Nick walk you through the numbers in more detail. Nick?
Thanks, Tamria. Starting with the fourth quarter, adjusted EBITDA increased $700,000, or 3% t o $23.8 million compared to $23.1 million in the prior year period. After adjusting for non-recurring costs, operating expense and G&A expense decreased $2 million and $1.9 million respectively, which was offset by a $3.8 million decrease in gross profit. Lease buyouts and the strategic refinancing of several operating leases into finance leases also drove a $700,000 decrease in equipment lease expense. Gross profit decreased $3.9 million, or 2% for the quarter.
Average Mont Belvieu propane prices were up 6.8% compared to the prior year period, and a $3.1 million or 2% increase in cost of sales outpaced an $800,000 or 0.2% decrease in revenue. Gallons sold were down 1 million or 1%, almost entirely on a 1 million or 1% decline in retail gallons, as persistent warm weather, particularly in the West, where temperatures ran 34% above the prior year and 10% above the 10-year average, continued to weigh on demand. Wholesale gallons were flat.
Blue Rhino's tank exchange business was affected by a cold wet Memorial Day and heat advisories over the July 4th weekend. Net loss attributable to the company increased $4.7 million or 18% to $31.5 million compared to a net loss of $26.8 million in the prior year period. That was driven by a $6.8 million increase in interest expense, the $3.9 million decrease in gross profit I just mentioned, and a $3.4 million increase in loss on disposable assets, partially offset by a $9.8 million decrease in operating expense, which included $7.8 million of non-recurring items related to an employee benefit-related change and a litigation recovery, plus a $9.5 million decrease in plant and other costs driven by lower other expense and reduced bad debt.
Those decreases were partially offset by increases of $4.9 million in personnel costs and $2.6 million in vehicle expense. Now, for the full year, adjusted EBITDA was $321.3 million compared to $330.7 million in fiscal 2025, a decrease of $9.4 million or 3%. G&A expense decreased $5.4 million after EBITDA adjustments, primarily reflecting the $125 million legal settlement we recorded in fiscal 2025, which was offset by a $20.4 million increase in operating expenses, largely those several legacy general liability claim settlements mentioned before.
Gross profit for the year increased $1.1 million, essentially flat. Average Mont Belvieu prices were down 8.9% for the year, and a $75.5 million or 8% decrease in cost of sales outpaced a $74.3 million or 4% decrease in revenue. Gallons sold were down 24.6 million or 3% on declines of 13.8 million or 6% in wholesale and 10.7 or 2% in retail in a year that ran about 3% warmer than average and 11% warmer than the prior year, 16% warmer than normal in the West alone.
Cost management initiatives helped offset the impact of lower revenue on overall profitability alongside with our continued efforts to grow weather-agnostic business. Net earnings attributable to the company were $71.7 million compared to a net loss of $15.6 million in fiscal 2025, a swing of $87.3 million, driven primarily by a $134.2 million decrease in G&A expense, largely from that 2025 litigation settlement and partially offset by a $20.4 million increase in OpEx, a $16.8 million increase in interest expense driven by the refinancing at elevated rates, and an $8.7 million increase in depreciation and amortization expense.
Capital expenditures for the year totaled $77.3 million, $49.3 million for growth capital, and $28 million of maintenance capital, down from $80 million in fiscal 2025, reflecting our continued discipline in our capital allocation. On liquidity, at July 31st, 2026, we had total liquidity of $195.1 million, made up of $48.4 million in cash and cash equivalents and $146.7 million of availability on our revolving credit facility, ample room to fund operations, seasonal working capital needs, and continued investment in our growth. Overall, this was a year where the core business held up well against real weather headwinds. Now I'll turn it back to Michelle.
Thanks, Nick. I'd like to briefly take a moment on a few other company matters before we move to closing remarks and Q&A. First, safety. Safety is always a core value and a company-wide commitment at Ferrellgas. We talk a lot about our continued focus on telematics and driver safety technology because we know it is making and will continue to make our professional drivers better. We see daily how our managers are utilizing the real-time visibility into their drivers' behavior.
How it strengthens our operational discipline and drives measurable gains in both fuel efficiency and productivity across the company. For fiscal 2026, total workers' compensation claims improved 3.9%, and lost time incidents improved 15% compared to prior year. We also saw CSA compliance performance improve across six key categories for this year. Fewer workplace injuries, faster return-to-work outcomes, and stronger compliance results all reflect the real impact of these safety and technology investments for our employee owners and for our operations.
That same commitment to our people extends beyond the road and into the communities they serve. Our business is keeping homes warm throughout the winter. Operation Warm lets us extend that to children who might otherwise go without a coat. This year, we provided nearly 1,000 new coats to children in need. For a lot of families, that's one less expense heading into the cold months. 96% of families who received a coat said it eased a financial burden. And since our partnership began, we've reached more than 9,000 children.
We've also partnered with Operation BBQ Relief for more than 14 years. Together, we've helped provide more than 13 million meals to people affected by natural disasters. Our dedication to giving back also extended globally this year. We served as presenting sponsor of the International Rhino Foundation's Keep the Five Alive campaign, supporting conservation efforts for all five rhino species across Africa and Asia. Finally, focusing on the regulatory landscape, we are encouraged by several recent events coming out of Washington.
On June 8, 2026, the U.S. Supreme Court struck down a Department of Energy rule that would have required 95% annual fuel utilization efficiencies on all residential furnace sales by 2028, a standard that roughly 55% of all gas furnaces sold, including non-condensing propane furnaces, simply cannot meet. Congress separately overturned, through the Congressional Review Act, an Advanced Clean Truck mandate that would have forced electrification of commercial delivery vehicles, which would have required us to electrify our own bobtail delivery fleet on a timeline we did not control.
That is a direct benefit to our own capital planning, not just an industry-level tailwind. A new five-year FERC pipeline shipping rate index, in effect from July 2026 through June 2031, caps rate increases below inflation. The National Propane Gas Association estimates that saves the propane industry roughly $7 billion versus the prior index and closer to $14 billion versus what the pipelines had originally thought. We also continue to be a longstanding leader in autogas, which positions us well for both the EPA's Clean School Bus Program that encourages diesel to propane conversions and for the early but growing demand for propane power backup at data centers. I will now hand the call back to Tamria for closing remarks.
Thanks, Michelle. Fiscal 2026 demonstrates what Ferrellgas is capable of when our people are prepared, our operations are disciplined, and our strategy is clear. We navigated real weather volatility, settled legacy general liability claims, advanced our capital structure, and continued to expand our Blue Rhino exchange footprint while holding retail customer retention steady in those segments we are focused on.
As the second-largest retail propane marketer in the United States by gallons sold with a low operating cost structure among national publicly reporting peers, a fully developed telematics program, and a dual-channel model spanning bulk delivery and Blue Rhino tank exchange, we enter fiscal 2027 from a position of real operational strength. Several tailwinds support our outlook entering the new fiscal year. Propane supply remains plentiful, which underpins stable margins and reliable service. Our national accounts team continues to build momentum with new expanded customer relationships.
As Michelle touched on, we also saw favorable regulatory developments in fiscal 2026, creating long-term positives for this industry. We will keep actively managing the headwinds we cannot control, like elevated diesel costs and evolving tariff environment, through our operational efficiencies and our ongoing cost discipline. Based on our own analysis of publicly available information, our operating expense per employee continues to compare favorably to other publicly reporting national propane companies, a lean cost structure built over years of operational investment.
We believe it is a competitive advantage. We enter fiscal 2027 with a stronger balance sheet, a simplified unit structure, and full confidence in our ability to build on this momentum. Thank you for joining our call today and for your continued interest and support of Ferrellgas. We will move into some previously submitted questions. I am going to pass the call back to Nick.
Thanks, Tamria. To start, we had a question on net loss for the quarter increasing year-over-year. To break that down, the increase was driven by a $6.8 million rise in interest expense following our refinancing, a $3.9 million decrease in gross profit tied to the weather impacts we described, and a $3.4 million increase in loss on disposable assets.
Those were partially offset by a $9.8 million decrease in OpEx, which included $7.8 million of non-recurring items, the employee benefit-related change in a litigation recovery, along with lower plant and other costs. Outside of that, the underlying business performed well. Gross profit for the year was essentially flat, despite a 3% decline in gallons sold in a warmer than normal year, and margin per gallon also improved.
Thank you, Nick. As you would imagine, we have several questions that came in regarding our capital structure and liquidity. With the refinancing of the Class B conversion and basically asking where does that leave our balance sheet heading into fiscal 2027? Also a question around interest expense rising and how that might impact free cash flow. So break those into two answers. First, we believe we're in a stronger position. Much stronger position. We thank our bank group and our bondholders for their support last October and throughout the year.
S&P Global and Moody's recognized that refinancing with credit rating upgrades. Then in March, we converted the Class B units to Class As, which simplified our unit structure and eliminated that Class B distribution obligation. At July 31st, we had total liquidity of $195.1 million, so that was $48.4 million of cash and $146.7 million available on our revolver, which all gives us much flexibility for seasonal working capital and also to be able to continue to invest in our growth.
When thinking about free cash flow and liquidity, remember, over the last few years, the company has paid out $357 million in distributions to the B units. When you add to that another $125 million to settle the Eddystone case. That's nearly $500 million in cash outflows, all while continuing to service our debt and maintain our operations. Although the capital markets have seen some upward movement, absent those two major liabilities, we feel very comfortable that we have the cash available to cover our interest expense, to reinvest in the business, to reduce our debt, and to support a distribution at some point in the future.
The next question falls right in line with that one, which is have we made any progress in respect to the preferred units? Obviously, the preferreds remain a focus for us. As we've said before, we are fortunate to have strong partners as key stakeholders in our capital structure. That includes PGIM, Ares, and our bank group, and that's led by our administrative agent, JP Morgan. They have supported the company since our restructuring, and they continue to support the company as we work to simplify and improve our capital structure. Nick, the next questions are really around performance. I'm going to hand it back to you.
Yep. I can take the next two. There was a comment on both the quarter and the year being affected by unusual weather and how much of that is weather versus the underlying business. I would say weather was a real factor. The fourth quarter ran 17% warmer than the prior year, and the West was 34% warmer than the prior year, which really softened tank exchange and retail gallon demand right in our peak selling window in Q4. For the full year, we ran about 11% warmer than prior year, but the underlying business held strong.
Full year gross profit was essentially flat. Margin per gallon improved 4%. Retail's new customer conversion rate reached over 92%, with 87% retention, and Blue Rhino held its footprint above 65,000 locations. That would tell us the fundamentals are sound even when the weather doesn't cooperate. We had another question on how we compare to other national propane players. I would say those comps are very favorable. On a trailing 12-month basis, we sold approximately 759 million gallons, which would be nearly double Suburban Propane and just behind AmeriGas, the largest player in the industry, which would keep us solidly in the number two position by gallons sold.
We mentioned it before, but we also do run a leaner cost structure than either of those two named peers. We calculate our expense per employee as nearly $10,000 less than Suburban and around $20,000 lower than AmeriGas, and our total expenses run meaningfully lower as a share of revenue than either of them as well. That combination of scale and cost discipline is a real competitive advantage for us.
There was another question, Nick, around beyond the cost structure, what else might give Ferrellgas a winning edge? There's plenty to talk about here, but I think one area which ties back to Michelle's share earlier, which is just how is the landscape nationally changing to help companies like ourselves that have a national footprint? A growing number of states have adopted hazmat endorsement laws for those that are 18 years of age rather than waiting to 21 years. That's now a law in 13 states. Because we operate broadly across the country, we can recruit against that pool of drivers in a way that a smaller single state competitor just can't.
That same footprint also positions us to win the larger autogas and data center backup contracts that require a multi-state capability. Competitors that are confined to one or two states, they're just not able to bid on those types of contracts where we are. That really ties us to another question around AI data centers. I'm going to flip it to you, Michelle, to take that one.
Okay. Yes. A lot of talk about data centers. For us, where we're sitting is, it's early. States are still writing the backup generation rules that will govern how that demand gets served, but we really like our position. Data centers operators building backup power capacity need a supplier with a national infrastructure and bulk delivery capacity, and that's exactly what we have.
We're also a longstanding leader in autogas, which gives us a head start on the technical and logistical side of such large-scale propane deployment. We see this as an emerging opportunity, still in its early stage, and have not yet sized it in our numbers, but our footprint is well-positioned to capture as this develops.
Thanks, Michelle. That's exciting. The last question I think that is in our queue here is around any plans or a timeline to up list the Class A Units from the OTC market to a national security exchange like the NYSE or Nasdaq. We continually evaluate exchange listing options to maximize unit value, but our immediate priority is operational performance and balance sheet strength. While an eventual up listing to the National Securities Exchange like an NYSE or a NASDAQ remains an available strategic pathway, we manage the business to optimize free cash flow and EBITDA regardless of the trading venue.
We continue to believe that we satisfy applicable listing standards, and we will communicate any formal uplisting actions if and when determined by the Board. With that, thank you to all who have joined the call this morning. We truly appreciate your continued support of Ferrellgas. I will now hand the call back to our moderator, Kevin, to close us out.
Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.