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 quarterly period ended June 25, 1995, or
|_|Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 1-9510
FFP PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 75-2147570
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2801 Glenda Avenue; Fort Worth, Texas 76117-4391
(Address of principal executive office, including zip code)
817/838-4700
(Registrant's telephone number, including area code)
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. Yes X No
Class A Units 2,099,039
Class B Units 1,533,522
(Number of units outstanding as of August 2, 1995)
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 25, December 25,
1995 1994
ASSETS
Current Assets -
Cash $7,628 $11,400
Receivables, including current portion of
noncurrent notes receivable 12,183 8,995
Inventories 11,023 11,346
Prepaid expenses and other 746 607
Total Current Assets 31,580 32,348
Property and equipment, net of accumulated
depreciation 30,185 29,959
Noncurrent notes receivable,
excluding current portion 1,111 1,099
Claims for reimbursement of environmental
remediation costs 1,194 1,490
Other assets, net 3,065 3,082
Total Assets $67,135 $67,978
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $517 $0
Current installments of long-term debt 2,130 2,131
Current installments of obligation
under capital lease 406 552
Accounts payable 11,464 13,180
Money orders payable 5,001 4,262
Accrued expenses 14,381 12,323
Total Current Liabilities 33,899 32,448
Long-term debt, excluding current installments 5,836 8,634
Obligation under capital lease, excluding
current installments 1,108 893
Other liabilities 1,468 1,153
Total Liabilities 42,311 43,128
Partners' Equity, net of treasury units of $269 24,824 24,850
Total Liabilities and Partners' Equity $67,135 $67,978
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per unit data)
(Unaudited)
Three Months Ended Six Months Ended
June 25, June 26, June 25, June 26,
1995 1994 1995 1994
Revenues -
Motor fuel $78,761 $66,070 $146,260 $130,044
Merchandise 16,838 19,760 32,141 38,100
Miscellaneous 2,024 1,930 3,543 3,441
Total Revenues 97,623 87,760 181,944 171,585
Costs and Expenses -
Cost of motor fuel 73,307 61,694 135,586 121,009
Cost of merchandise 11,795 14,079 22,867 27,591
Direct store expenses 7,156 7,412 14,135 14,831
General and administrative
expenses 2,867 2,619 5,312 5,275
Depreciation and amortization 916 1,128 1,874 2,164
Total Costs and Expenses 96,041 86,932 179,774 170,870
Operating Income 1,582 828 2,170 715
Interest expense 285 285 594 630
Income Before Income Taxes and
Extraordinary Item 1,297 543 1,576 85
Deferred income tax expense 125 26 250 54
Income Before Extraordinary Item 1,172 517 1,326 31
Gain on extinguishment of debt 0 0 0 200
Net Income $1,172 $517 $1,326 $231
Income allocated to -
Limited partners $1,160 $512 $1,313 $229
General partner 12 5 13 2
Income per Class A and Class B Unit -
Before extraordinary item $0.32 $0.14 $0.36 $0.01
Net income 0.32 0.14 0.36 0.06
Distributions declared per Class A and
Class B Unit $0.39 $0.08 $0.39 $0.08
Weighted average number of Class A and
Class B Units outstanding 3,633 3,585 3,620 3,589
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 25, 1995 June 26, 1994
Cash Flows from Operating Activities -
Net income/(loss) $1,326 $231
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 1,874 2,164
Deferred income tax expense 250 54
Gain on extinguishment of debt 0 (200)
Net change in operating assets and liabilities (1,556) 3,063
Net cash provided/(used) by operating activities 1,894 5,312
Cash Flows from Investing Activities -
Additions of property and equipment, net (2,101) (1,891)
Net cash (used) by investing activities (2,101) (1,891)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities (2,213) (7,316)
Proceeds from exercise of unit options 69 0
Distributions to unitholders (1,421) (277)
Net cash provided/(used) by financing activities (3,565) (7,593)
Net Increase/(Decrease) in Cash (3,772) (4,172)
Cash at beginning of period 11,400 13,191
Cash at end of period $7,628 $9,019
See accompanying notes to condensed consolidated financial statements
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 25, 1995
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements include the assets,
liabilities, and results of operations of FFP Partners, L.P., and its 99%-owned
subsidiaries, FFP Operating Partners, L.P., Direct Fuels, L.P., and FFP
Financial Services, L.P., and its 100%-owned subsidiaries, FFP Illinois Money
Orders, Inc., Practical Tank Management, Inc., and FFP Transportation, L.L.C.,
collectively referred to as the "Company."
The condensed consolidated balance sheet as of June 25, 1995, and the
consolidated income statements and condensed consolidated statements of cash
flows for the three month and six month periods ended June 25, 1995, and June
26, 1994, have been prepared by the Company without audit. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the Company's financial position as of June 25,
1995, and the results of operations and cash flows for the three and six month
periods presented have been made. Interim operating results are not necessarily
indicative of results for the entire year.
The notes to the consolidated financial statements which are included in
the Company's Annual Report on Form 10-K for the year ended December 25, 1994,
include accounting policies and additional information pertinent to an
understanding of these interim financial statements. That information has not
changed other than as a result of normal transactions in the six months ended
June 25, 1995, except as described in notes 2 and 3 below.
2. Income per Unit and Distributions
The Class A and Class B Units represent a 99% interest in the Company.
Accordingly, income per unit is calculated by dividing 99% of the income
amount by the weighted average number of units outstanding.
The Company paid distributions to its unitholders during the 1994 and 1995
six month periods, as follows:
Record Date Payment Date Amount per Unit
Six months ended June 26, 1994 -
April 26, 1994 May 12, 1994 $0.08
Six months ended June 25, 1995 -
March 31, 1995 April 12, 1995 0.12
April 24, 1995 May 9, 1995 0.27
3. Amendment to Credit Agreement
In May 1995, the Company and its primary bank lender amended their existing
Credit Agreement. Under this amendment, the Company made a $2,000,000 payment on
its term debt (bringing the balance then outstanding to $7,500,000), rescheduled
the amortization of the then outstanding balance to $312,500 per quarter (rather
than $500,000 per quarter), and reduced the interest rate on the term loan to
the bank's prime rate (from prime plus 1/2 point). In addition, certain
financial ratios were modified which will generally allow the Company to make
larger distributions to its unitholders than were permitted under the Credit
Agreement prior to the amendment.
FFP PARTNERS, L.P., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for Second Quarter 1995 (three months ended June 25, 1995)
compared with Second Quarter 1994 (three months ended June 26, 1994)
The Company's total revenues increased $9,863,000 (11.2%) in the second
quarter 1995 over the 1994 period. This increase was the net effect of a
$12,961,000 (19.2%) increase in motor fuel sales, a decline of $2,092,000
(14.8%) in merchandise sales, and an increase of $94,000 (4.9%) in miscellaneous
revenues. The increased motor fuel sales resulted from a 53.2% increase (in
gallons) in sales of motor fuel on a wholesale basis offset by a slight decline
in retail fuel sales. The large increase in wholesale fuel sales relates to a
marketing arrangement begun in July 1994 which emphasizes sales to contractors
and other commercial users. The increased wholesale sales volumes, along with
increased margins per gallon on both wholesale and retail sales, provided the
Company with a $1,078,000 (24.6%) increase in the margin on motor fuel sold. The
1995 retail margin per gallon was 9.6 cents vs 7.9 cents in the 1994 period and
the wholesale margin increased to 1.9 cents from 1.3 cents per gallon.
The decline in merchandise sales resulted from a decline in the average
number of convenience stores operated during the second quarter 1995 as compared
with the 1994 quarter. This decline, an average of 17.3 stores for the quarter,
was due to the closing in late 1994 of the Company's five convenience stores in
Illinois and to a program, begun by the Company in mid-1994, to sell the
merchandise operations of selected convenience stores to independent operators.
The $638,000 (11.2%) decline in merchandise gross profit is attributable to the
lower sales volume as the merchandise margin percentage increased to 30.0% from
28.8% between the two periods. This increase is due to management's efforts to
improve the overall yield on merchandise sales.
Direct store expenses (those expenses, such as payroll, utilities, repair
and maintenance, that are directly attributable to the operation of an outlet)
declined $256,000 (3.5%) in the second quarter 1995 quarter as compared to the
1994 period. This decline was the net result of the impact of the decrease in
the number of convenience stores, mentioned above, offset by increases in
payroll, supplies, and cash shortages at the remaining convenience stores, and
by increased fuel commissions (related to the increased retail fuel margin) paid
to the operators of the Company's self-service motor fuel outlets.
General and administrative expenses increase $248,000 (9.5%) in 1995 vs
1994. This increase was the net effect of a 6.0% decline in payroll and related
costs offset by increases in legal and professional fees, attributable to the
cost of consultants assisting in reorganizing certain of the Company's back
office processes, and insurance costs.
The decline in depreciation and amortization resulted from the complete
depreciation in mid-1994 of certain assets acquired upon the Company's initial
formation in May 1987 offset by increased expense due to routine property
additions since that time.
Interest expense between the 1995 and 1994 quarters was unchanged even
though the debt levels declined because of the generally higher levels of
interest rates in the 1995 period.
The Company's net income for the second quarter 1995 increased $655,000
(126.7%) over 1994 largely due to the improved fuel margins realized in the 1995
period as compared to 1994.
Results of Operations for First Half 1995 (six months ended June 25, 1995)
compared with First Half 1994 (six months ended June 26, 1994)
The factors influencing the Company's performance in the first half of 1995
as compared to the first half of 1994 were much the same as those that affected
the second quarter (which were also basically the same reasons for the improved
performance in the Company's first quarter).
The $16,216,000 (12.5%) increase in motor fuel sales resulted from
increased wholesale fuel sales offset by a small (2.7%) decrease in retail fuel
gallons sold. The decrease in retail fuel volumes was due to the operation of an
average of 3.6 fewer outlets that sold motor fuel and to a decline in gallons
sold at the Company's truck stops. The reduced fuel sales at the truck stops
resulted from a planned effort to improve fuel margins and from increased
competition at one of the Company's locations. Because of the increased fuel
sales, and improved per gallon margins that the Company realized in both the
first and second quarters of 1995, the dollar margin realized on fuel sales
increased $1,639,000 (18.1%) over the 1994 period.
The merchandise sales decline of $5,959,000 (15.6%) in the first half of
1995 resulted, as in the second quarter, from the closing of the Company's five
Illinois stores in late 1994 and to the reduced number of stores operated due to
the sale of the merchandise operations at selected stores. The Company operated
an average of 17.5 fewer convenience stores in the first half of 1995 as
compared to 1994. Because of the sales decline, the margin realized on
merchandise sales declined $1,235,000 (11.8%); however, due to better margin
management, the merchandise gross profit percentage increased to 28.9% in the
1995 period vs 27.6% in 1994.
The $696,000 (4.7%) decline in direct store expenses relates to the
operation of few stores in the first six months of 1995, referred to above,
offset by increased fuel commissions paid to the self-service motor fuel outlet
operators due to the higher fuel margins in 1995.
The $290,000 (13.4%) decline in depreciation and amortization and the
modest reduction in interest expense are attributable resulted from the same
factors affecting the second quarter discussed above
At the end of February 1994, the Company completed a refinancing of its
primary bank debt with another financial institution. In connection with this
transaction, the Company received a discount of $200,000 on the early pay-off of
the existing debt. This $200,000 is reflected as an extraordinary item in the
accompanying consolidated statement of operations.
Liquidity and Capital Resources
The Company's working capital at the end of the second quarter 1995 was a
negative $2,319,000, a decline from the negative $100,000 at year end 1994. This
decline was principally due to the $2,000,000 debt reduction payment made in May
1995 in connection with the amendment of the Credit Agreement between the
Company and its primary bank lender. Under this amendment, the Company reduced
its term debt by $2,000,000, rescheduled the amortization of the resulting
outstanding balance to $312,500 per quarter (rather than $500,000 per quarter),
and reduced the interest rate on the term loan to the bank's prime rate (from
prime plus 1/2 point). In addition, certain financial ratios were modified which
will generally allow the Company to make larger distributions to its unitholders
than were permitted under the Credit Agreement prior to the amendment
The $2,000,000 reduction in the Company's term debt will result in reduced
interest expense. Although the payment negatively impacts the Company's working
capital, management believes the availability of funds under its revolving
credit line ($7,483,000 at the end of the June period), coupled with the
Company's traditional use of trade credit, will permit operations to be
conducted in a customary manner.
During April and May 1995, the Company declared distributions to its
unitholders totaling $1,431,000 ($0.39 per Class A and Class B Unit). Management
believes that, subject to the continued profitability of the Company,
distributions will be declared on a regular basis; however, it does not expect
that distributions will be of a fixed regular amount. The Board of Directors of
the General Partner meets on a quarterly basis and considers, among other
things, the declaration of distributions. Factors that influence the Board's
evaluation as to whether to make distributions and the amount of any such
distributions include the recent profitability of the Company, the outlook for
continued profitability, liquidity needed to meet scheduled debt repayments and
other obligations, and capital expenditure requirements.
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FFP PARTNERS, L.P.
Registrant
Date: August 2, 1995 By: /s/John H. Harvison
John H. Harvison
Chairman and
Chief Executive Officer
Date: August 2, 1995 By: /s/Steven B. Hawkins
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer