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What happened

Shares of propane distributor Ferrellgas Partners (FGP) are down a whopping 23.6% as of 11:15 a.m. EDT today after the company posted poor earnings, announced a potential distribution cut, and CEO Stephen Wambold was unceremoniously shown the door. 

So what

Ferrellgas Partners posted one of its worst showings in a long, long time. Net loss for the fiscal year came in at $665 million, compared to a net profit of $29.6 million in fiscal year 2015. The biggest difference between the two was the major writedowns it took on some of its assets. It took over $650 million in writedowns for its non-propane-related business segments -- crude oil logistics and water solutions. If we strip out those charges, the company swung to a loss, which was mostly attributed to the record-high temperatures in the winter, the time when propane distribution pretty much makes its hay for the year.

If that were the only thing, it would have been enough to send shares down a bit, but then there came news that CEO Stephen Wambold was stepping down and being replaced with James Ferrell, the company's founder and executive chairman. It's not a stretch to say that these asset writedowns were related to its acquisition of Bridger Logistics, a deal that Wambold orchestrated. The acquisition, the debt it took on as a result of the deal, and the tough times in the propane business mean that the company is coming up on the limits of its debt covenants, and it is now in negotiations with its creditors to get things under control. As Ferrell put it, there is a very likely chance that a distribution cut is coming.

Now what

A possible distribution cut and fears that the company is in credit trouble are clear signs to investors that this price drop isn't a market overreaction. There are obviously some issues that the company needs to work out. The one promising sign for the future is that it has a founder with a very high interest in righting the ship. In the meantime, though, it's best to stay away.