15
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended July 31, 1998
Commission File Number 0-14998
Travel Ports of America, Inc.
New York 16-1128554
3495 Winton Place, Building C, Rochester, New York 14623
716-272-1810
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
Class Outstanding at July 31, 1998
Common Stock, Par Value
$.01 Per Share 6,535,767
TRAVEL PORTS OF AMERICA, INC.
INDEX
Page
PART I Financial Information
Consolidated Balance Sheets, July 31, 1998 (unaudited)
and April 30,1998.............................................. 3
Consolidated Statements of Income (unaudited), quarter
ended July 31, 1998 and 1997................................... 4
Consolidated Statements of Cash Flows (unaudited), quarter
ended July 31, 1998 and 1997................................... 5
Notes to Consolidated Financial Information.......................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
PART II Other Information
Index to Exhibits and Legal Proceedings.............................. 9
Signatures........................................................... 14
TRAVEL PORTS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
7/31/98 4/30/98
ASSETS
CURRENT ASSETS:
CASH AND EQUIVALENTS $3,989,443 $4,082,203
ACCOUNTS RECEIVABLE, LESS ALLOWANCE
FOR DOUBTFUL ACCOUNTS OF $171,000 AT
JULY 1998 AND $158,000 AT APRIL 1998 4,594,450 4,167,966
NOTES RECEIVABLE 31,219 30,346
INVENTORIES 6,087,453 5,726,512
PREPAID AND OTHER CURRENT ASSETS 877,269 884,864
INCOME TAXES RECEIVABLE 214,676
DEFERRED TAXES - CURRENT 532,000 532,000
----------- ----------
TOTAL CURRENT ASSETS 16,111,834 15,638,567
NOTES RECEIVABLE, DUE AFTER ONE YEAR 567,795 575,548
PROPERTY, PLANT AND EQUIPMENT, NET 44,360,622 44,597,242
COST IN EXCESS OF UNDERLYING NET ASSET
VALUE OF ACQUIRED COMPANIES 1,824,069 1,840,116
OTHER ASSETS, NET 2,058,001 2,161,255
---------- ----------
$64,922,321 $64,812,728
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT PORTION OF LONG-TERM DEBT $3,382,214 $3,336,265
ACCOUNTS PAYABLE 6,656,582 6,669,874
ACCOUNTS PAYABLE - AFFILIATE 706,726 236,263
INCOME TAXES PAYABLE 305,361
ACCRUED COMPENSATION 1,109,403 1,900,184
ACCRUED SALES AND FUEL TAX 1,835,201 1,806,814
ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES 977,651 938,720
----------- ----------
TOTAL CURRENT LIABILITIES 14,973,138 14,888,120
LONG TERM DEBT 21,419,863 22,322,369
CONVERTIBLE SUBORDINATED DEBENTURES 5,456,667 6,054,167
DEFERRED INCOME TAXES 2,647,400 2,647,400
----------- ----------
TOTAL LIABILITIES 44,497,068 45,912,056
----------- ----------
SHAREHOLDERS' EQUITY
COMMON STOCK, $.01 PAR VALUE AUTHORIZED
- 10,000,000 SHARES, ISSUED AND OUTSTANDING
AT JULY 31, 1998 - 6,535,767 AND
APRIL 30, 1998 - 6,302,596 65,358 63,026
ADDITIONAL PAID-IN CAPITAL 7,945,968 7,337,021
RETAINED EARNINGS 12,413,927 11,500,625
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 20,425,253 18,900,672
---------- ----------
$64,922,321 $64,812,728
=========== ==========
TRAVEL PORTS OF AMERICA, INC.
CONSOLIDATED STATEMENT OF INCOMES
(UNAUDITED)
QUARTER ENDED
JULY
1998 1997
NET SALES AND OPERATING REVENUE $52,910,737 $56,397,785
COST OF GOODS SOLD 39,548,611 43,036,822
------------ -------------
GROSS PROFIT 13,362,126 13,360,963
------------ -------------
OPERATING EXPENSE 9,864,486 9,762,266
GENERAL AND ADMINISTRATIVE EXPENSE 1,306,541 1,309,305
INTEREST EXPENSE 745,618 809,722
OTHER INCOME, NET (43,621) (58,271)
------------ -------------
11,873,024 11,823,022
------------ -------------
INCOME BEFORE TAXES 1,489,102 1,537,941
PROVISION FOR TAXES ON INCOME 575,800 636,700
============ =============
NET INCOME $913,302 $901,241
============ =============
PER SHARE DATA:
NET INCOME PER SHARE - BASIC $0.14 $0.15
============ =============
NET INCOME PER SHARE - DILUTED $0.11 $0.12
============ =============
SHARES OUTSTANDING - BASIC 6,531,069 6,047,737
============ =============
SHARES OUTSTANDING - DILUTED 8,626,136 8,039,023
============ =============
TRAVEL PORTS OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED JULY 31
1998 1997
OPERATING ACTIVITIES:
NET INCOME $913,302 $901,241
DEPRECIATION AND AMORTIZATION 940,537 861,055
CHANGES IN OPERATING ASSETS AND LIABILITIES -
ACCOUNTS RECEIVABLE (426,484) (411,091)
INVENTORIES (360,941) 8,515
PREPAID AND OTHER CURRENT ASSETS 7,595 51,804
ACCOUNTS PAYABLE 457,171 1,783,364
ACCRUED COMPENSATION (790,781) (643,973)
ACCRUED SALES AND FUEL TAX 28,387 125,521
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 41,430 (155,950)
INCOME TAXES PAYABLE/RECEIVABLE 520,037 925,283
OTHER NON-CURRENT ASSETS 68,494 47,578
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,398,747 3,493,347
----------- -----------
INVESTING ACTIVITIES:
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT (653,109) (1,704,649)
PROCEEDS FROM DISPOSITION OF PROPERTY,
PLANT AND EQUIPMENT 0 12,937
NET PROCEEDS RECEIVED ON NOTES RECEIVABLE 6,880 4,963
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (646,229) (1,686,749)
----------- -----------
FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS ON LONG-TERM DEBT (856,557) (991,535)
PROCEEDS FROM LONG-TERM BORROWING
PRINCIPAL PAYMENT ON DEBENTURES (11,000)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS/WARRANTS 22,279 11,352
NET CASH (USED IN) PROVIDED BY
----------- -----------
FINANCING ACTIVITIES (845,278) (980,183)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (92,760) 826,415
CASH AND EQUIVALENTS - BEGINNING OF PERIOD 4,082,203 3,134,871
---------- ---------
CASH AND EQUIVALENTS - END OF PERIOD $3,989,443 $3,961,286
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD:
INTEREST PAID $741,997 $941,230
INCOME TAXES PAID $55,600 $0
TRAVEL PORTS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
JULY 31, 1998
NOTE 1 BASIS OF PRESENTATION
- ----------------------------
The unaudited financial information has been prepared in accordance with the
Summary of Accounting Policies of the Company as outlined in Form 10-K filed for
the year ended April 30, 1998, and should be read in conjunction with the Notes
to Consolidated Financial Statements appearing therein. The consolidated
financial information includes the accounts of Travel Ports of America, Inc. and
its wholly-owned subsidiaries, Travel Port Franchising, Inc. and Travel Port
Systems, Inc., after elimination of all significant intercompany transactions.
In the opinion of management, the unaudited financial information contains all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's financial position as of July 31, 1998 and the
results of operations for the three months ended July 31, 1998 and 1997. The
financial information is based in part on estimates and has not been audited by
independent accountants. The annual statements will be audited by
PricewaterhouseCoopers LLP.
NOTE 2 INVENTORIES
- ------------------
Major classifications of inventories are as follows:
July 31, 1998 April 30, 1998
At first-in, first-out (FIFO) cost:
Petroleum Products $1,190,200 $ 837,080
Store Merchandise 2,316,215 2,385,387
Parts for repairs and tires 1,926,870 1,823,610
Other 654,168 680,435
---------- -----------
$5,754,508 $ 5,726,512
========== ===========
NOTE 3 EARNINGS PER SHARE
- -------------------------
The company has adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share" (EPS). Basic EPS excludes the
effect of common stock equivalents and is computed by dividing income available
to common shareholders by the weighted average of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could result if
securities or other contracts to issue common stock were exercised or converted
into common stock. Historical earnings per share have been restated to conform
with the provisions of SFAS 128.
For quarter ended July 31
1998 1997
BASIC EARNINGS PER SHARE:
Income applicable to common stock $ 913,302 $ 901,241
Weighted average common stock outstanding 6,531,069 6,047,737
Basic earnings per common share $ .14 $ .15
DILUTED EARNINGS PER SHARE:
Income applicable to common stock $ 913,302 $ 901,241
interest expense on convertible debentures 70,178 59,288
----------- -----------
$ 983,480 $ 960,529
=========== ===========
Weighted average common stock outstanding 6,531,069 6,047,737
Options and warrants 233,388 216,727
Convertible debentures 1,861,679 1,774,559
8,626,136 8,039,023
Diluted earnings per common share $ .11 $ .12
=========== ===========
NOTE 4 FINANCING AGREEMENTS AND DEBENTURES
- ------------------------------------------
The Company's primary lending institution has renewed its commitment for the
Company's existing line of credit until September 28, 1999. The regular line of
credit is limited to the lesser of $3,750,000 or the sum of 80% of the Company's
accounts receivable under 90 days old, plus 45% of the Company's inventory. As
of July 31, 1998, the Company has utilized $200,000 of its available line of
credit as collateral for various letters of credit. In addition the Company has
$4,500,000 for a capital line of credit available from its primary lender. The
capital line of credit calls for interest only at prime plus 1/4% until
September 28, 1999. At that time the line can be repaid or amortized over 42
months with interest at prime plus or LIBOR plus interest rate based upon funded
debt to EBITDA. No advances have been made against the capital line of credit.
During the quarter, the Company called $450,000 of the 8.5% convertible senior
subordinated debentures due January 15, 2005. The holders of all but $11,000 of
the debentures elected to convert their debentures into common stock of the
Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
- ----------------------
First Quarter ended July 31, 1998 and 1997
- ------------------------------------------
Sales from operations were $52,911,000 for the first quarter of fiscal 1999, a
decrease of $3,487,000, or 6%, from the first quarter of last year. Non-fuel
sales increased 4% over last year. Diesel gallons sold also increased 4% but
lower retail selling prices, as a result of lower cost of diesel fuel, decreased
sales by $3,850,000.
Gross profit for the first quarter was $13,362,000, even with the prior year.
Diesel gross profit declined almost $325,000 from lower margins, as a result of
competitive pressures. This was offset by improved non-fuel margins in the
restaurants, merchandise stores, shops and motels.
Operating expenses of $9,864,000 for the first quarter were $102,000, 1% more
than last year, primarily as a result of increased depreciation expense. General
and administrative expenses for the quarter were $1,307,000, a decrease of
$3,000 from last year. Interest expense decreased from last year by $64,000 as a
result of decreased levels of debt and use of LIBOR rate financing.
Net income for the quarter was $913,000, an increase of $12,000 or 1% over last
year for the reasons discussed above.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
The Company's cash position decreased by $93,000 to $3,989,000 during the three
months ended July 31, 1998. Cash from operations was $1,399,000 for the quarter
compared to $3,493,000 in the prior year. Lower cost of diesel fuel reduced
accounts payable levels from last year and inventories increased slightly.
Investing activities resulted in a net use of $646,000. Capital expenditures
during the first three months of fiscal 1998 were $653,000, $1,052,000 lower
than last year. The major renovation projects from last year are mostly
completed.
Financing activities for the first three months of fiscal 1999 used $845,000 due
to principal payments on long-term debt. During the quarter, the Company called
$450,000 of the 8.5% convertible senior subordinated debentures due January 15,
2005. The holders of all but $11,000 of the debentures elected to convert their
debentures into common stock of the Company.
The Company's primary lending institution has renewed its commitment for the
Company's existing line of credit until September 28, 1999. The regular line of
credit is limited to the lesser of $3,750,000 or the sum of 80% of the Company's
accounts receivable under 90 days old, plus 45% of the Company's inventory. As
of July 31, 1998, the Company has utilized $200,000 of its available line of
credit as collateral for various letters of credit. In addition the Company has
$4,500,000 for a capital line of credit available from its primary lender. The
capital line of credit calls for interest only at prime plus 1/4% until
September 28, 1999. At that time the line can be repaid or amortized over 42
months with interest at prime plus or LIBOR plus interest rate based upon funded
debt to EBITDA. No advances have been made against the capital line of credit.
The Company has completed a review of its operational and financial systems and
believe all areas except one to be Year 2000 compliant. New software is being
acquired for its accounting systems. The new system is Year 2000 compliant and
will be implemented prior to December 31, 1998.
Authorized, but unissued stock is available for financing needs; however, there
are no current plans to use this source.
TRAVEL PORTS OF AMERICA, INC.
PART II -- OTHER INFORMATION
----------------------------
Item 1. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation (i) that is not
covered by insurance or (ii) which singly or in the aggregate would have a
material adverse effect on the Company's financial condition and results of
operations, and management has no knowledge that any other litigation has been
threatened.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
(2) Plan of acquisition, reorganization, agreement, liquidation, or
succession
Not applicable
(3) Articles of Incorporation and By-laws
Exhibit 3-a and exhibit 3-b to the Company's Registration Statement
on Form S-18, File No. 33-7870-NY are incorporated herein by reference
with respect to the Restated Certificate of Incorporation and By-laws of
the Company.
Certificate of Amendment of Certificate of Incorporation changing
the name of the Corporation, is incorporated herein by reference to
Exhibit 3-c of the Company's report of Form 10-K dated July 27, 1993.
(4) Instruments defining the rights of security holders, including
indentures
Exhibit 4-a, Form of Common Stock Certificate, to the Company's
Registration Statement on Form S-18, File No. 33-7870-NY is incorporated
herein by reference with respect to instruments defining the rights of
security holders.
Exhibit 4-c, Form of Indenture dated as of January 24, 1995, between
Travel Ports of America, Inc. and American Stock Transfer and Trust
Company, as Trustee, with respect to up to $5,000,000 principal amount of
8.5% Convertible Senior Subordinated Debentures due January 15, 2005 is
incorporated by reference to Exhibit 4-c to the Company's Current Report
on Form 8-K dated February 15, 1995.
Exhibit 4-d, Form of Warrant to purchase Common Stock is
incorporated by reference to Exhibit 4-d to the Company's Current Report
on Form 8-K dated February 15, 1995.
Exhibit 4-e, Form of Indenture as of December 4, 1997, between
Travel Ports of America, Inc. and Cephas Capital Partners, L.P., with
respect to $2,000,000 principal amount of 7.81% Convertible Subordinated
Debentures due December 4, 2007, is incorporated by reference to Exhibit
4-e to the Company's Form 10-Q dated December 12, 1997.
Exhibit 4-f, Form of Warrant to purchase Common Stock is
incorporated by reference to Exhibit 4-e to the Company's Form 10-Q dated
December 12, 1997.
(11) Statement re: computation of earnings per share
Computation of earnings per share is set forth in Exhibit (11) on
page 12 of this report.
(15) Letter re: unaudited interim financial information
Not applicable
(18) Letter re: change in accounting principals
Not applicable
(19) Previously unfiled documents
None
(20) Report furnished to security holders
Not applicable
(22) Published report regarding matters submitted to vote of security
holders
None
(23) Consents of experts and counsel
Not applicable
(24) Power of attorney
None
(27) Financial Data Schedule
Exhibit (27) on page 15 of this report.
(99) Additional exhibits
None
(b) REPORT ON FORM 8-K
None
EXHIBIT (11)
COMPUTATION OF BASIC EARNINGS PER SHARE
---------------------------------------
FOR THE QUARTER ENDED JULY 31, 1998
Net income per share was computed by dividing net income by the weighted average
number of common shares outstanding.
Shares outstanding at end of May 6,521,672
Shares outstanding at end of June 6,535,767
Shares outstanding at end of July 6,535,767
---------
Average number of shares outstanding 6,531,069
=========
Net income per basic share $.14
COMPUTATION OF DILUTED EARNINGS PER SHARE
-----------------------------------------
FOR THE QUARTER ENDED JULY 31, 1998
Net income per share was computed by dividing net income, adjusted for debenture
interest, by the weighted average number of common shares outstanding and common
stock equivalents.
Total Options
and Warrants Average Average
Qtr. Ended Below Market Exercise Price Market Price Shares
- ---------- ------------ -------------- ------------ ------
7/31/98 816,937 $2.217 $3.104 233,388
Average number of shares outstanding 6,531,069
8.5% convertible debenture 1,359,167
7.81% convertible debenture 502,512
---------
8,626,136
=========
Net income for quarter ended 7/31/98 $ 913,302
Interest on convertible debentures 70,178
---------
$ 983,480
=========
Net income per diluted share $.11
====
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAVEL PORTS OF AMERICA, INC.
Date: September 14, 1998 s/ John M. Holahan
------------------
John M. Holahan, President
Date: September 14, 1998 s/ William Burslem III
----------------------
William Burslem III
Vice President