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 29, 1997, 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 3,529,205
Class B Units 175,000
(Number of units outstanding as of August 13, 1997)
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 29, December 29,
1997 1996
ASSETS
Current Assets -
Cash $8,907 $8,244
Trade receivables 11,644 10,303
Notes receivable 775 778
Receivable from affiliated company 398 420
Inventories 13,046 12,489
Prepaid expenses and other 871 625
Total Current Assets 35,641 32,859
Property and equipment, net of accumulated
depreciation 41,587 38,024
Noncurrent notes receivable, excluding current portion 1,893 2,069
Claims for reimbursement of environmental
remediation costs 1,041 1,038
Other assets, net 4,052 4,609
Total Assets $84,214 $78,599
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $7,263 $6,823
Current installments of long-term debt 1,564 1,587
Current installments of obligation under capital
lease 823 1,122
Accounts payable 14,773 14,150
Money orders payable 11,070 7,809
Accrued expenses 9,498 8,778
Total Current Liabilities 44,991 40,269
Long-term debt, excluding current installments 7,087 7,765
Obligation under capital lease, excluding
current installments 2,166 1,653
Deferred income taxes 4,050 3,781
Other liabilities 2,704 993
Total Liabilities 60,998 54,461
Partners' Equity, net of treasury units of $269 at
June 29, 1997, and December 29, 1996 23,216 24,138
Total Liabilities and Partners' Equity $84,214 $78,599
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 29, June 30, June 29, June 30,
1997 1996 1997 1996
Revenues -
Motor fuel $82,408 $86,801 $159,525 $164,257
Merchandise 15,423 15,881 29,231 30,617
Miscellaneous 1,633 2,410 3,390 4,609
Total Revenues 99,464 105,092 192,146 199,483
Costs and Expenses -
Cost of motor fuel 76,864 80,490 149,514 153,369
Cost of merchandis 10,649 11,129 20,702 21,652
Direct store expenses 6,781 6,702 13,731 13,796
General and administrative expenses 2,945 3,366 5,690 6,090
Depreciation and amortization 1,393 909 2,514 1,795
Total Costs and Expenses 98,632 102,596 192,151 196,702
Operating Income/(Loss) 832 2,496 (5) 2,781
Interest expense 357 332 648 652
Income/(Loss) Before Income Taxes 475 2,164 (653) 2,129
Deferred income tax expense 135 134 269 268
Net Income/(Loss) $340 $2,030 $(922) $1,861
Income/(Loss) allocated to -
Limited partners $337 $2,010 $(913) $1,842
General partner 3 20 (9) 19
Net Income/(Loss) per Class A and
Class B Unit $0.09 $0.55 $(0.25) $0.50
Distributions declared per Class A and
Class B Unit $0.000 $0.000 $0.000 $0.205
Weighted average number of Class A and
Class B Units outstanding 3,704 3,678 3,704 3,674
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 29, June 30,
1997 1996
Cash Flows from Operating Activities -
Net income/(loss) $(922) $1,861
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 2,514 1,795
Deferred income tax expense 269 268
Net change in operating assets and liabilities 4,671 (3,072)
Net cash provided/(used) by operating activities 6,532 852
Cash Flows from Investing Activities -
Additions of property and equipment, net (5,822) (2,468)
Net cash (used) by investing activities (5,822) (2,468)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities (47) 999
Proceeds from exercise of unit options 0 33
Distributions to unitholders 0 (761)
Net cash provided/(used) by financing activities (47) 271
Net Increase/(Decrease) in Cash 663 (1,345)
Cash at beginning of period 8,244 8,106
Cash at end of period $8,907 $6,761
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 29, 1997
(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., FFP Money Order Company, Inc., and FFP Transportation, L.L.C.,
collectively referred to as the "Company."
The consolidated balance sheet as of June 29, 1997, and the consolidated
income statements and condensed consolidated statements of cash flows for the
three month and six month periods ended June 29, 1997, and June 30, 1996, 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 29, 1997, 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 29, 1996,
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 29, 1997.
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 1996 financial statements have
been reclassified to conform to the 1997 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 1997 compared with Second Quarter 1996
The $5,628,000 (5.4%) decline in the Company's revenues for the 1997
quarter as compared to the 1996 period resulted primarily from the lower level
of retail fuel prices during the current year. Although fuel prices were lower
in the 1997 period, the Company's fuel volumes, measured in gallons, grew
slightly, with retail gallons increasing 1.6% and wholesale volumes being up
0.7%. The gross profit on motor fuel sales declined $767,000 (12.2%) in the
second quarter 1997 as compared to the 1996 quarter due to continued weak retail
fuel margins, a situation which has affected the fuel retailing industry for the
past year. The Company's retail fuel margin was 9.5 cents per gallon in the
second quarter 1997 vs 11.2 cents in the 1996 period. Wholesale fuel margin per
gallon was up in the current year period to 2.6 cents per gallon from 1.8 cents.
There was also a decline in merchandise sales ($458,000 or 2.9%) which was
related to the lesser number of stores operated during the second quarter 1997
as compared to the 1996 period. Due to the sales of the merchandise operations
of certain convenience stores in 1996 and the first half of 1997, the Company
operated an average of 8.3 fewer convenience stores and truck stops during the
1997 quarter. However, the average weekly merchandise sales per store at the
Company's outlets increased 2.8% over the second quarter 1996. The gross margin
on merchandise sales also increased in 1997, to 31.0% from 29.9% in the 1996
quarter. Because of the increased average weekly sales and increased gross
margin, the Company realized $22,000 (0.5%) more gross profit on merchandise
sales in 1997 than in 1996 despite the operation of fewer stores.
Also contributing to the lower total revenues, was the decline in
miscellaneous revenues of $777,000 (32.3%) due to fewer sales of the merchandise
operations of convenience stores. The Company had one such sale in the 1997
quarter while there were nine in 1996.
Although the Company operated fewer stores, on average, during the 1997
quarter, direct store expenses (those expenses, such as payroll, utilities,
repair and maintenance, that are directly attributable to the operation of an
outlet) increased $79,000 (1.2%) due to increases in salaries and related costs
at its remaining convenience stores and truck stops related to the renovation of
certain locations and other costs associated with the branding of additional
locations.
General and administrative expenses declined in the second quarter 1997 as
compared to 1996 primarily due to declines in legal and professional fees and
bad debts partially offset by increases in salaries and related personnel costs.
The $484,000 (53.2%) increase in depreciation and amortization expense in
the 1997 quarter vs the 1996 period is due to the significant additions to
property and equipment made by the Company during the year of 1996 and the first
half of 1997. A substantial amount of these expenditures are related to the
upgrading of the Company's retail fuel equipment to comply with environmental
requirements as of the end of 1998 and another significant portion is related to
the purchase and renovation of the Company's fuel terminal. The expenditures
related to the fuel terminal had little impact on the current quarter's
depreciation expense because the facility commenced operations in June 1997;
however, the impact of the additional expense associated with the depreciation
of the fuel terminal facility will increase in upcoming periods.
The Company's net income for the second quarter 1997 was significantly
below its earnings for the 1996 quarter due principally to the lower retail fuel
margin, less gain recognized on the sale of the merchandise operations of its
convenience stores due to fewer such sales, and the increased depreciation and
amortization expense.
Results of Operations for First Half 1997 compared with First Half 1996
The principal factors which affected the Company's second quarter 1997
performance were present in the first quarter 1997, as well, and consequently
impacted its earnings for the first half of 1997 in a similar manner. The
reduced fuel sales for the six month period are attributable to the decline in
retail fuel prices although they were also affected by a decline of 13.6% in
wholesale fuel sales (in gallons) in the first quarter of 1997. This decline in
wholesale fuel sales was due to the absence in 1997 of a large volume of lower
margin sales to a customer that purchases from the Company infrequently.
As in the second quarter, the average weekly merchandise sales per store
for the first six months of 1997 at the Company convenience stores and truck
stops increased by 2.8% over the corresponding 1996 period. However, due to the
sales of the merchandise operations at various convenience stores mentioned
above, the Company's total merchandise sales declined $1,386,000 (4.5%) in the
first six months of 1997 as compared to the first half of 1996. The merchandise
gross profit decline of $436,000 (4.9%) during the period was comparable to the
sales decline. The significant improvement in the merchandise gross margin
percentage in the second quarter was offset by the weak margin in the first
quarter 1997 such that the Company realized a 29.2% gross profit margin in the
first half of 1997 vs 29.3% in the first six months of 1996.
The $1,262,000 (26.4%) decline in miscellaneous revenues in the 1997 period
from 1996 is attributable to the lesser amount of gains recognized on the sales
of merchandise operations of convenience stores during the period.
The decline in direct store expenses of $65,000 (0.5%) relates to the
expense reductions associated with operating an average of 8.6 (7.0%) fewer
convenience stores in the first half of 1997 as compared to 1996 offset by
increases in wages and other costs at the Company's other convenience stores,
truck stops, and fuel outlets.
The $400,000 (6.6%) decrease in general and administrative costs during the
first six months of 1997 resulted from the decline in legal and professional
expenses and bad debts, experienced the principally in second quarter 1997,
along with reduced advertising and promotion costs, offset by increases in
salaries and related costs.
The increased depreciation and amortization expense of $719,000 (40.1%) in
the six month period of 1997 relates to the significant property additions
covered in the discussion above regarding the second quarter.
As in the second quarter, the substantial decline in the Company's net
income for the first six months of 1997 is primarily due to the reduced retail
fuel margins, the recognition of less gain on sales of the merchandise
operations of convenience stores, and increased depreciation charges.
Liquidity and Capital Resources -
The Company's working capital declined by $1,940,000 at the close of the
second quarter 1997 from year end 1996. This decline is attributable to the net
loss incurred by the Company during the first six months of the year and to
purchases of property and equipment during 1997, principally expenditures made
to bring its underground storage tanks into compliance with environmental
requirements that are effective in December 1998 and to the renovation of the
fuel terminal and processing plant that was completed in June 1997.
The Company has received a proposal from a lender to refinance its existing
bank debt. If consummated as proposed, the amortization period of its existing
term debt would be extended and the credit available under the revolving line of
credit would be increased. The Company is also negotiating with another lender
for a lease line of credit that would be used to finance a portion of the
capital expenditures incurred thus far in 1997 as well as a portion of the
expenditures to be incurred in the remainder of the year and into 1998.
The Company has traditionally been able to operate its business with
negative working capital, principally because most sales are for cash and it has
received payment terms from vendors. Consequently, if the refinancing referred
to above is not completed, the Company believes that the availability of funds
under its current revolving line of credit and the traditional use of trade
credit will permit operations to be conducted in a customary manner.
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 local markets served by the Company's
convenience stores, truck stops, and other retail outlets, and its wholesale
fuel markets; the weather in the local markets served by the Company;
competitive factors such as changes in the locations, merchandise offered, or
other aspects of competitors' operations; increases in the cost of fuel and
merchandise sold or reductions in the gross profit realized from such sales;
expense pressures relating to operating costs, including labor, repair and
maintenance, 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: August 15, 1997 By: /s/John H. Harvison
---------------------------------
John H. Harvison
Chairman and
Chief Executive Officer
Date: August 15, 1997 By: /s/Steven B. Hawkins
---------------------------------
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer