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 September 29, 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 3,527,872
Class B Units 175,000
(Number of units outstanding as of November 13, 1996)
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 29, December 31,
1996 1995
ASSETS
Current Assets -
Cash $8,149 $8,106
Receivables, including current portion of
noncurrent notes receivable 12,220 10,329
Inventories 11,764 11,260
Prepaid expenses and other 726 615
Total Current Assets 32,859 30,310
Property and equipment, net of accumulated
depreciation 34,725 31,872
Noncurrent notes receivable,
excluding current portion 2,218 1,156
Claims for reimbursement of environmental
remediation costs 1,159 1,255
Other assets, net 4,298 4,739
Total Assets $75,259 $69,332
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $6,500 $4,003
Current installments of long-term debt 1,199 1,028
Current installments of obligation
under capital lease 1,079 884
Accounts payable 10,750 13,030
Money orders payable 7,112 5,918
Accrued expenses 12,885 9,894
Total Current Liabilities 39,525 34,757
Long-term debt, excluding current installments 6,431 6,157
Obligation under capital lease, excluding
current installments 1,578 943
Other liabilities 984 1,774
Total Liabilities 48,518 43,631
Partners' Equity, net of treasury units of $269 26,741 25,701
Total Liabilities and Partners' Equity $75,259 $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 Nine Months Ended
Sept 29, Sept 24, Sept 29, Sept 24,
1996 1995 1996 1995
Revenues -
Motor fuel $77,428 $75,471 $241,685 $221,731
Merchandise 15,365 16,277 45,982 48,418
Miscellaneous 1,505 1,968 6,114 5,511
Total Revenues 94,298 93,716 293,781 275,660
Costs and Expenses -
Cost of motor fuel 72,030 68,460 225,399 204,046
Cost of merchandise 10,861 11,293 32,513 34,160
Direct store expenses 6,713 7,458 20,509 21,593
General and administrative
expenses 2,720 3,156 8,810 8,468
Depreciation and amortization 960 869 2,755 2,743
Total Costs and Expenses 93,284 91,236 289,986 271,010
Operating Income 1,014 2,480 3,795 4,650
Interest expense 316 284 968 878
Income Before Income Taxes 698 2,196 2,827 3,772
Deferred income tax expense 134 125 402 375
Net Income $564 $2,071 $2,425 $3,397
Income allocated to -
Limited partners $558 $2,050 $2,401 $3,363
General partner 6 21 24 34
Net income per Class A and
Class B Unit $0.15 $0.56 $0.65 $0.93
Distributions declared per
Class A and Class B Unit $0.210 $0.180 $0.415 $0.570
Weighted average number of
Class A and
Class B Units outstanding 3,686 3,635 3,678 3,625
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
Sept 29, 1996 Sept 24, 1995
Cash Flows from Operating Activities - $2,425 $3,397
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 2,755 2,743
Deferred income tax expense 402 375
Net change in operating assets and
liabilities (2,507) (165)
Net cash provided by operating activities 3,075 6,350
Cash Flows from Investing Activities -
Additions of property and equipment, net (5,397) (3,436)
Net cash (used) by investing activities (5,397) (3,436)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities 3,772 (3,023)
Proceeds from exercise of unit options 135 89
Distributions to unitholders (1,542) (2,092)
Net cash (used) by financing activities 2,365 (5,026)
Net Increase/(Decrease) in Cash 43 (2,112)
Cash at beginning of period 8,106 11,400
Cash at end of period $8,149 $9,288
See accompanying notes to condensed consolidated financial statements
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 29, 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, 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 September 29, 1996, and the
consolidated income statements and condensed consolidated statements of cash
flows for the three month and nine month periods ended September 29, 1996, and
September 24, 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
September 29, 1996, and the results of operations and cash flows for the three
and nine 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 nine months ended
September 29, 1996.
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.
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 Third Quarter 1996 compared with Third Quarter 1994
Total revenues in the 1996 quarter increased $582,000 (0.6%) over the 1995
period due to an increase in motor fuel sales offset by a decline in merchandise
sales and miscellaneous revenues. The increase of $1,957,000 (2.6%) in motor
fuel sales resulted from increased retail volumes and increased retail prices.
Although retail prices were higher in the current year, the 10.3 cent per gallon
margin was significantly below the 14.2 cents realized in the prior year. This
substantial decline in the margin resulted in the overall motor fuel gross
profit being $1,613,000 (23.0%) less than in 1995. This decline in retail fuel
margin has been experienced by convenience store operators in general.
The $912,000 (5.6%) decline in merchandise sales is attributable to the
Company's operating an average of 10 less convenience stores during the 1996
period. The reduction in average stores reflects the impact of the program to
sell the merchandise operations of selected convenience stores to independent
operators. The Company's gross profit on merchandise sales declined by 9.6% due
to the reduced sales levels and a decline in merchandise margin to 29.3% vs
30.6% caused by increased competitive pressures.
Miscellaneous revenues declined $463,000 (23.5%) in 1996 as compared to
1995 due to closing four of the Company's check cashing stores in early 1995 and
reduced gains from the sales of convenience store merchandise operations as the
number of such sales was less in the 1996 quarter.
Direct store expenses (those expenses, such as payroll, utilities, and
repair and maintenance, that are directly attributable to the operation of an
outlet) declined $745,000 (10.0%) from the 1995 period due primarily to the
reduced number of convenience stores operated during the quarter and to the
closing in early 1996 of some check cashing stores, both as mentioned above
General and administrative expenses also declined in the in the third
quarter 1996 as compared to the 1995 quarter. The $436,000 (13.8%) reduction
resulted from modest declines in substantially every expense category with a
large decline in bad debt expenses due to improved monitoring of wholesale and
gas only receivables.
Interest expense increased $32,000 (11.3%) in the 1996 quarter over 1995
due to increases in total debt (long term debt, capitalized lease obligations,
and average borrowings on the revolving credit line) and to the generally higher
levels of interest rates in the 1996 period.
Results of Operations for First Nine Months of 1996 compared with First Nine
Months of 1995
Motor fuel sales increased $19,954,000 (9.6%) due to a 3.6% increase in
retail fuel gallons sold coupled with generally higher fuel prices. Wholesale
fuel sales (in gallons) were essentially unchanged from the prior year. The
increased retail fuel volumes resulted from a 5.4% increase in the average
number of outlets operated during the first nine months of 1996 to 330 from 312
in the 1995 period and from an increase in average weekly fuel volumes at the
Company's self-service gasoline outlets.
As in the third quarter, however, even though fuel sales were up, fuel
gross profit declined due to per gallon margins being less than in the prior
year. Through the first nine months of 1996, retail fuel margins were 1.5 cents
per gallon (13.3%) less than in the prior year period; wholesale fuel margins
were flat as compared to 1995. The increased fuel sales and reduced margin
resulted in overall fuel gross profit being $1,399,000 (7.9%) less in 1996 than
in 1995.
The merchandise sales decline of $2,436,000 (5.0%) in the 1996 period is
attributable to the reduced number of convenience stores operated due to the
sale of the merchandise operations at selected stores and to slightly lower
average weekly sales at the remaining stores and truck stops. The Company
operated an average of 5.9 fewer convenience stores in the 1995 period as
compared to 1994 and average weekly sales declined about 1.5%. Because of the
sales decline, the margin realized on merchandise sales declined $789,000
(5.5%). Merchandise margin was essentially flat between the two years at 29.3%
for 1996 and 29.4% for 1995.
Miscellaneous revenues were up $609,000 (10.9%) in 1996 due to increases in
the gains recognized on the sales of convenience store merchandise operations to
independent operators, discussed above, offset by the reduction in revenue due
to the closing of four check cashing outlets.
The $1,084,000 (5.0%) decrease in direct store expenses is related to the
operation of fewer convenience stores in the 1996 period and the closure of the
check cashing outlets offset by increased commissions paid to the operators of
the Company's self-service gasoline outlets due to the increase in the number of
such outlets.
General and administrative expenses increased $342,000 (4.0%) for the first
nine months of 1996 as compared to 1995 due primarily to increased legal and
professional fees offset by reductions in salaries and personnel costs and
equipment rents.
As in the third quarter, interest expense increased $90,000 (10.3%) due to
increases in total debt (long term debt, capitalized lease obligations, and
average borrowings on the revolving credit line) in the 1996 period and to the
generally higher levels of interest rates as compared to 1995.
Liquidity and Capital Resources
The Company's working capital at the end of its third quarter 1996 was a
negative $6,666,000, a decline from the negative $4,447,000 at year end 1995.
This decline was caused by the reduced earnings during the first nine months of
1996 coupled with the increased investment in property and equipment during the
nine month period attributable to the Company's purchase in March 1996 of a
non-operating fuel terminal and the on-going renovation of the facility.
Although working capital has declined, management believes the availability of
funds under its revolving credit line, its lease lines of credit which fund a
significant portion of routine capital expenditures coupled with the traditional
use of trade credit, will permit operations to be conducted in a customary
manner.
The Company is also exploring refinancing its existing term debt to provide
for a longer amortization period and additional working capital. While there can
be no assurance that this effort will be successful, the Company has received
proposals for such refinancing and believes that appropriate funding on
reasonable terms is available.
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.
Forward Looking Statements
Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
should generally be considered forward-looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar phrases. Among the factors that could cause
actual results to differ materially from the statements made are the following:
general business conditions in the various markets served by the Company's
retail outlets, competitive factors such as changes in the locations, pricing,
services offered, or other aspects of competitors' operations, weather in the
areas in which the Company's retail outlets are located, expense pressures
relating to labor and supplies, and unanticipated general and administrative
expenses, including costs of expansion or financing.
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: November 15, 1996 By: /s/John H. Harvison
--------------------------
John H. Harvison
Chairman and
Chief Executive Officer
Date: November 15, 1996 By: /s/Steven B. Hawkins
--------------------------
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer