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 30, 1996, 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 3,502,872
Class B Units 175,000
(Number of units outstanding as of August 14, 1996)
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
1996 1995
ASSETS
Current Assets -
Cash $6,761 $8,106
Receivables, including current portion of
noncurrent notes receivable 12,635 10,329
Inventories 11,265 11,260
Prepaid expenses and other 1,326 615
Total Current Assets 31,987 30,310
Property and equipment, net of accumulated
depreciation 32,680 31,872
Noncurrent notes receivable, excluding curren
portion 2,098 1,156
Claims for reimbursement of environmental
remediation costs 1,293 1,255
Other assets, net 4,290 4,739
Total Assets $72,348 $69,332
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $5,041 $4,003
Current installments of long-term debt 1,012 1,028
Current installments of obligation under
capital lease 1,117 884
Accounts payable 12,046 13,030
Money orders payable 6,847 5,918
Accrued expenses 9,650 9,894
Total Current Liabilities 35,713 34,757
Long-term debt, excluding current installments 6,242 6,157
Obligation under capital lease, excluding
current installments 602 943
Other liabilities 2,953 1,774
Total Liabilities 45,510 43,631
Partners' Equity, net of treasury units of $269 at
June 30, 1996, and December 31, 1995 26,838 25,701
Total Liabilities and Partners' Equity $72,348 $69,332
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 30, June 25, June 30, June 25,
1996 1995 1996 1995
Revenues -
Motor fuel $86,801 $78,761 $164,257 $146,260
Merchandise 15,881 16,838 30,617 32,141
Miscellaneous 2,410 2,024 4,609 3,543
Total Revenues 105,092 97,623 199,483 181,944
Costs and Expenses -
Cost of motor fuel 80,490 73,307 153,369 135,586
Cost of merchandise 11,129 11,795 21,652 22,867
Direct store expenses 6,702 7,156 13,796 14,135
General and administrative
expenses 3,366 2,867 6,090 5,312
Depreciation and amortization 909 916 1,795 1,874
Total Costs and Expenses 102,596 96,041 196,702 179,774
Operating Income 2,496 1,582 2,781 2,170
Interest expense 332 285 652 594
Income Before Income Taxes 2,164 1,297 2,129 1,576
Deferred income tax expense 134 125 268 250
Net Income $2,030 $1,172 $1,861 $1,326
Income allocated to -
Limited partners $2,010 $1,160 $1,842 $1,313
General partner 20 12 19 13
Net Income per Class A and
Class B Unit $0.55 $0.32 $0.50 $0.36
Distributions declared per
Class A and Class B Unit $0.000 $0.390 $0.205 $0.390
Weighted average number of Class A
and Class B Units outstanding 3,678 3,633 3,674 3,620
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 30, June 25,
1996 1995
Cash Flows from Operating Activities -
Net income/(loss) $1,861 $1,326
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 1,795 1,874
Deferred income tax expense 268 250
Net change in operating assets and liabilities (3,072) (1,556)
Net cash provided/(used) by operating activities 852 1,894
Cash Flows from Investing Activities -
Additions of property and equipment, net (2,468) (2,101)
Net cash (used) by investing activities (2,468) (2,101)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities 999 (2,213)
Proceeds from exercise of unit options 33 69
Distributions to unitholders (761) (1,421)
Net cash provided/(used) by financing activities 271 (3,565)
Net Increase/(Decrease) in Cash (1,345) (3,772)
Cash at beginning of period 8,106 11,400
Cash at end of period $6,761 $7,628
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(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, Practical Tank
Management, Inc., and FFP Transportation, L.L.C., collectively referred to as
the "Company."
The condensed consolidated balance sheet as of June 30, 1996,
and the consolidated income statements and condensed consolidated statements of
cash flows for the three month and six month periods ended June 30, 1996, and
June 25, 1995, 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 30,
1996, and the results of its 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
31, 1995, 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 30, 1996.
2. Income per Unit
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.
3. Reclassifications.
Certain amounts previously reported in the 1995 financial
statements have been reclassified to conform to the 1996 presentation.
FFP PARTNERS, L.P., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for Second Quarter 1996 compared with Second Quarter 1995
The Company's total revenues increased $7,561,000 (7.8%) in
the second quarter 1996 as compared to 1995. This increase was caused by
increases of $8,040,000 (10.2%) in motor fuel sales and $341,000 (16.5%) in
miscellaneous revenues offset by a decline of $820,000 (4.9%) in merchandise
sales. The increased motor fuel sales resulted largely from increased fuel
prices during the 1996 period as the gallons of motor fuel sold increased only
1.2%. The increase in miscellaneous revenues is attributable to an increase of
$689,000 in gains from sales of the merchandise operations at certain
convenience stores in the 1996 quarter as compared to 1995, offset by reduced
revenues from the Company's check cashing outlets due to the closure of four
such outlets in the first quarter 1996.
The reduced merchandise sales was caused by a 4.5% decline in
the average number of convenience stores operated during the current year
quarter. This decline resulted from the sale of the merchandise operations of
selected convenience stores to independent operators. Such sales are the
continuation of a program, begun by the Company in the second quarter 1995, to
sell the merchandise operations at stores that it believes will contribute more
to the profitability of the Company when operated by independent operators.
The Company's gross profit on fuel sales increased $857,000
(15.7%) due to a significant improvement in retail fuel margins. The Company
realized a retail margin of 11.2 cents per gallon in the second quarter 1996 as
compared to 9.6 cents per gallon in 1995. The per gallon margin on wholesale
sales was essentially flat, declining 0.1 cent in the 1996 period. The gross
profit on merchandise sales during the 1996 quarter of 29.9% was unchanged from
the prior year period.
Direct store expenses (those expenses, such as payroll,
utilities, repair and maintenance, that are directly attributable to the
operation of an outlet) declined $454,000 (6.3%) in the 1996 second quarter
compared to the prior year period due to the reduced number of convenience
stores operated during the quarter and from the closure of the four check
cashing outlets, referred to above.
General and administrative expenses increased $499,000 (17.4%)
in 1996 vs 1995. This increase was principally attributable to increases in
legal and professional fees and bad debt expenses.
Interest expense between the 1996 and 1995 quarters was up
$47,000 (16.5%) due to higher rates during the current year period and to
increased levels of debt. The Company incurred additional long-term debt during
the second quarter 1996 to finance the purchase and renovation of a fuel
terminal and processing plant.
Results of Operations for First Half 1996 compared with First Half 1995
The stronger performance in the second quarter, discussed
above, resulted in the improved earnings in the first half of 1996 as compared
with 1995.
The fuel sales increase of $17,997,000 (12.3%) resulted from
the much-publicized higher level of fuel prices during 1996 and to an increase
in the volumes of fuel sold at both retail and wholesale, particularly in the
first quarter. For the first six months of 1996 the Company sold $8,377,000 (6%)
more gallons of motor fuel than in the comparable 1995 period. The significant
improvement in retail fuel margin experienced by the Company during the second
quarter almost completely offset, on a year-to-date basis, the poor fuel margin
realized in the first quarter such that the retail fuel margin for the first
half of 1996 was 9.6 cents per gallon vs 9.9 cents in 1995. The wholesale fuel
margin during the first six months of 1996 was 1.9 cents per gallon, unchanged
from the prior year period. Accordingly, the $214,000 (2.0%) improvement in
motor fuel gross profit resulted from the increased volume of fuel sales.
The merchandise sales decline of $1,524,000 (4.7%) in the
first half of 1996 resulted, as in the second quarter, from the reduced number
of stores operated due to the sale of the merchandise operations at selected
stores. The Company operated an average of 3.9 (3.1%) fewer convenience stores
in the first half of 1996 as compared to the first half of 1995. Because of this
sales decline, the gross profit on merchandise sales declined $309,000 (3.3%);
however, due to efforts by the Company to improve its margin on merchandise
sales, the merchandise margin percentage increased to 29.3% for the first half
of the year from 28.9% in the prior year period.
The $1,066,000 (30.1%) increase in miscellaneous revenues is
due to an increase of $1,400,000 in the gains from the sale of merchandise
operations at convenience stores offset by the loss of revenues at the four
check cashing outlets that were closed in early 1996.
The $454,000 (6.3%) decline in direct store expenses relates
to the reduced number of convenience stores during the first half of 1996, the
closure of four check cashing outlets in early 1996, and the operation by
independent operators of two of the truck stop restaurants previously operated
by the Company.
The $778,000 (14.6%) increase in general and administrative
expenses in the first half of 1996 was driven by the increased legal and
professional fees and bad debt expense in the second quarter.
The $58,000 (9.8%) increase in interest expense between the
1996 and 1995 periods, as in the second quarter, is due to higher rates during
the current year period and to increased debt levels.
Liquidity and Capital Resources
The Company's working capital at the end of the second quarter
1996 was a negative $3,726,000, an improvement from the negative $4,447,000 at
year end 1995. This improvement resulted from the Company's profitability and
positive operating cash flow during the six month period. The Company's
investment in property and equipment during the first six months is greater than
in the prior year due to the purchase of the fuel terminal and processing plant
in the second quarter and to expenditures that are being made so that its
underground storage tanks will comply with environmental requirements that are
effective in December 1998. The purchase and renovation of the fuel terminal and
processing plant was financed with a five year term loan and the environmental
upgrades to underground storage tanks are being financed from internally
generated funds and with lease lines of credit. Although the Company has
negative working capital, management believes that internally generated funds,
the availability of funds under bank and lease lines of credit, and the
traditional use of trade credit will permit operations to be conducted in a
customary manner.
In April and August 1996, the Company declared distributions
to its unitholders totaling $762,000 ($0.205 per Class A and Class B Unit) and
$780,000 ($0.21 per Unit), respectively. 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
regular fixed 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 15, 1996 By: /s/John H. Harvison
---------------------------------------
John H. Harvison
Chairman and
Chief Executive Officer
Date: August 15, 1996 By: /s/Steven B. Hawkins
---------------------------------------
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer