SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
|X|Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 29, 1998, 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. 1-13727
FFP MARKETING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Texas 75-2735779
(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
Common Shares 3,779,415
(Number of shares outstanding as of May 13, 1998)
FFP MARKETING COMPANY, INC.
Form 10-Q/A
March 29, 1998
FFP Marketing Company, Inc. (the "Company") amends and entirely restates its
Form 10-Q Quarterly Report for the Company's first quarter of 1998 ended March
29, 1998, filed with the Securities and Exchange Commission on May 18, 1998.
The Company is also amending its other 1998 quarterly reports, i.e., Form
10-Q Quarterly Report for its second quarter ended June 28, 1998, and Form 10-Q
Quarterly Report for its third quarter ended September 27, 1998. All three of
these amended quarterly reports are filed to reflect certain adjustments
originally reported in the fourth quarter of 1998, as included in the Company's
1998 Form 10-K Annual Report for its year ended December 27, 1998, filed April
12, 1999. The adjustments did not result from a change made in accounting
principles or practices of the Company but were made as a result of its own
internal 1998 year end accounting review and, to a lesser extent, its 1998 year
end audit. The reasons are set forth below.
These adjustments do not alter the net income (loss) reported for the fiscal
year ended December 27, 1998, as shown in the table below. The adjustments are
summarized for each of the three-month periods as follows:
Three Months Ended Year Ended
Mar. 29, June 28, Sept.27 Dec. 28, Dec. 27,
1998 1998 1998 1998 1998
(In thousands)
Net income/(loss) as
originally reported $336 $(203) $613 $(1,209) $(463)
Adjustments (59) (137) (219) 415 0
Net income/(loss) as
as adjusted $277 $(340) $394 $(794) $(463)
Per share amounts -
Net income/(loss)
per share - basic $ 0.09 $(0.05) $ 0.16 $(0.32) $(0.12)
Effect of adjustments $(0.02) $(0.04) $(0.06) $ 0.12 $ 0.00
Net income/(loss)
per share - basic $ 0.07 $(0.09) $ 0.10 $(0.20) $(0.12)
Net income/(loss)
per share - diluted $ 0.09 $(0.05) $ 0.16 $(0.32) $(0.12)
Effect of adjustments $(0.02) $(0.04) $(0.06) $ 0.12 $ 0.00
Net income/(loss)
per share - diluted $ 0.07 $(0.09) $ 0.10 $(0.20) $(0.12)
The reasons for adjustments for the three month period ended March 29, 1998,
are summarized as follows:
Three Months
(In thousands)
Reversal of duplicate billing of miscellaneous
revenues $ (3)
Recording additional gain on sale of property 15
Additional depreciation at closed locations (19)
Adjustment to reconcile inventory at 25 closed
locations (83)
Income tax benefit of foregoing adjustments 31
Total adjustments $(59)
FFP Marketing Company, Inc., and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 29, December 28,
1998 1997
(Restated)
Assets
Current Assets -
Cash and cash equivalents $9,802 $9,389
Trade receivables 12,515 10,732
Receivables from affiliates 2,244 426
Notes receivable 736 737
Inventories 15,618 15,820
Prepaid expenses and other 1,235 1,077
Total current assets 42,150 38,181
Property and equipment, net 32,019 32,095
Other assets, net 5,389 5,054
Total Assets $79,558 $75,330
Liabilities and Stockholders' Equity
Current Liabilities -
Current installments of long-term debt $7,991 $1,208
Current installments of obligation under
capital lease 622 917
Accounts payable 15,871 15,319
Money orders payable 13,512 11,299
Accrued expenses 11,011 9,623
Total current liabilities 49,007 38,366
Long-term debt, excluding current installments 14,811 21,465
Obligations under capital lease, excluding
current installments 3,068 3,110
Deferred income taxes 3,409 3,259
Other liabilities 2,723 2,866
Total Liabilities 73,018 69,066
Stockholders' Equity
Common stock and retained earnings 22,478 22,202
Reduction for joint debt obligations (15,938) (15,938)
Total Stockholders' Equity 6,540 6,264
Total Liabilities and Stockholders' Equity $79,558 $75,330
See accompanying notes to condensed consolidated financial statements.
FFP Marketing Company, Inc., and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 29, March 30,
1998 1997
(Restated)
Revenues
Motor fuel $76,345 $77,117
Merchandise 22,579 13,987
Miscellaneous 2,331 1,698
Total Revenues 101,255 92,802
Costs and Expenses
Cost of motor fuel 69,867 72,650
Cost of merchandise 15,599 10,173
Direct store expenses 10,666 6,950
General and administrative expenses 3,120 2,745
Depreciation and amortization 1,339 1,121
Total Costs and Expenses 100,591 93,639
Operating Income/(Loss) 664 (837)
Interest expense 201 291
Income/(loss) before income taxes 463 (1,128)
Income tax expense
Current 16 0
Deferred 170 134
Total 186 134
Net Income/(Loss) $277 $(1,262)
Net income/(loss) per share -
Basic $0.07 $(0.33)
Diluted 0.07 (0.33)
Weighted average number of common shares
outstanding -
Basic 3,779 3,779
Diluted 3,827 3,779
See accompanying notes to condensed consolidated financial statements.
FFP Marketing Company, Inc., and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 29, March 30,
1998 1997
(Restated)
Cash Flows from Operating Activities -
Net income/(loss) $277 $(1,262)
Adjustments to reconcile net income/(loss)
to cash provided by operating activities -
Depreciation and amortization 1,339 1,121
Deferred income tax expense 170 134
Net change in operating assets
and liabilities (27) 5,030
Net cash provided by operating activities 1,759 5,023
Cash Flows from Investing Activities -
Additions of property and equipment, net (1,138) (3,636)
Net cash (used) by investing activities (1,138) (3,636)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities (208) (1,178)
Net cash (used) by financing activities (208) (1,178)
Net Increase in cash and cash equivalents 413 209
Cash and cash equivalents at beginning of
period 9,389 8,244
Cash and cash equivalents at end of period $9,802 $8,453
See accompanying notes to condensed consolidated financial statements.
FFP Marketing Company, Inc., and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 29, 1998
(Restated)
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements include the assets,
liabilities, and results of operations of FFP Marketing Company, Inc., and its
wholly owned subsidiaries, FFP Operating Partners, L.P., Direct Fuels, L.P., FFP
Financial Services, L.P., Practical Tank Management, Inc., FFP Transportation,
L.L.C., FFP Money Order Company, Inc., FFP Operating LLC, and Direct Fuels
Management Company, Inc., collectively referred to as "FFP Marketing" or the
"Company."
The condensed consolidated balance sheet as of March 29, 1998, and the
consolidated statements of operations and condensed consolidated statements of
cash flows for the three month periods ended March 29, 1998, and March 30, 1997,
have not been audited. These financial statements for the period ending March
29, 1998, have been restated to reflect certain adjustments originally made by
the Company in its financial statements for the year ended December 27, 1998,
which were attributable to the period ended March 29, 1998. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the Company's financial position as of March 29,
1998, and the results of operations and cash flows for the periods presented
have been made. Interim operating results are not necessarily indicative of
results for the entire year.
The notes to the audited consolidated financial statements which are included
in the Company's Annual Report on Form 10-K for the year ended December 28,
1997, 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 three months ended
March 29, 1998, and as discussed below.
Certain amounts previously reported in the 1997 condensed consolidated
financial statements have been reclassified to conform to the 1998 presentation.
2. Income/(Loss) per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," in the fourth quarter of 1997. First quarter 1997
income/(loss) per share amounts have been restated to conform to the new
presentation. A reconciliation of the denominators of the basic and diluted
income/(loss) per share calculations for the 1998 and 1997 periods follows:
1998 1997
In thousands
Weighted average number of common shares
outstanding 3,779 3,779
Effect of dilutive options 48 0
Weighted average number of common shares
outstanding, assuming dilution 3,827 3,779
The number of options that could potentially dilute basic income/(loss) per
share in the future that were not included in the computation of diluted
income/(loss) per share because to do so would have been antidilutive were
50,000 and 241,999 in 1998 and 1997, respectively.
3. Reporting of Comprehensive Income
At the beginning of its 1998 fiscal year, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires the presentation of "comprehensive income" in
financial statements. Comprehensive income includes net income and all revenues,
expenses, gains, and losses that had previously been recorded directly to
equity. The Company does not have any items of other comprehensive income,
therefore comprehensive income and net income are identical. Accordingly, the
effect of the adoption of SFAS No. 130 had no effect on the Company's
consolidated financial statements.
FFP Marketing Company, Inc., and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
FFP Marketing was formed in connection with the December 1997 restructuring
of FFP Partners, L.P. ("FFP Partners"), in which the real estate owned by FFP
Partners and used in its retail operations was retained by it while all other
assets and businesses were transferred to FFP Marketing. FFP Marketing then
entered into agreements to lease the real estate retained by FFP Partners.
Unless the context requires otherwise, references in this report to "FFP
Marketing" or the "Company" for periods or activities prior to the completion of
the December 1997 restructuring include the activities of FFP Partners and its
then subsidiaries, which are now subsidiaries of FFP Marketing.
These operating results for the period ending March 28, 1998, have been
restated to reflect certain adjustments originally made by the Company in its
financial statements for the year ended December 27, 1998, which were
attributable to the period ended March 29, 1998.
Results of Operations for First Quarter 1998 compared with First Quarter 1997
The gallons of motor fuel sold by the Company in the first quarter 1998
increased 15.4% over the volume of fuel sold in the 1997 period. The principal
factor causing the increase in gallons sold was sales from the 94 operating
convenience stores acquired in December 1997. However, the industry wide decline
in fuel prices that began in 1997 and has continued into 1998 resulted in a
decline of $772,000 (1.0%) in the Company's motor fuel revenues. Although motor
fuel revenues declined, the Company's profit on motor fuel sales improved
$2,011,000 (45.0%) in 1998 over the 1997 quarter due to the increased fuel
volumes from the additional convenience stores purchased in December 1997 and a
28.4% improvement in the margin per gallon realized on retail sales. The retail
fuel margin in 1998 was 10.4 cents per gallon as compared to 8.1 cents per
gallon in the 1997 quarter. Wholesale fuel sales, in gallons, increased 9.3% in
the first quarter 1998 over 1997, but the per gallon margin on the sales was
flat between the two periods.
Merchandise sales increased $8,592,000 (61.4%) in the first quarter 1998 due
to the sales at the convenience stores acquired in December 1997. Merchandise
gross profit increased $3,116,000 (83.0%) as a result of the additional
merchandise sales and an improvement in the margin on merchandise sales to 30.9%
in 1998 from 27.3% in 1997. The improved merchandise margin is the result of the
management's emphasis on strengthening this key aspect of the Company's
operations.
As with fuel and merchandise volumes, the increase in miscellaneous revenues
is largely due to the additional revenue from the 94 convenience stores acquired
in December 1997.
The $3,716,000 (53.5%) increase in direct store expenses also relates, in
part, to the additional direct store costs associated with operating the stores
purchased in December 1997. In addition, as a result of the December 1997
restructuring by which FFP Marketing was formed, as mentioned above, the Company
now pays rent on a number of locations that were formerly owned by the Company.
This additional rent is also reflected in direct store expenses.
General and administrative expenses increased $375,000 (13.7%) in the 1998
period. This increase is due to the addition of field supervisory personnel to
oversee the operations of the convenience stores acquired in December and to
operating costs at the Company's fuel terminal which began operations in June
1997.
Depreciation and amortization increased $218,000 (19.4%) in the current
quarter. This increase is the net of increased depreciation related to the
relatively high level of property additions during 1997 (primarily associated
with the upgrade of underground storage tanks to meet 1998 environmental
requirements), depreciation of the fixtures and equipment acquired in the
December 1997 purchase of the 94 operating convenience stores, and depreciation
of equipment at the Company's fuel terminal, offset by the reduction in
depreciation on buildings that were retained by FFP Partners in the December
1997 restructuring, mentioned above.
The $90,000 (30.9%) reduction in interest expense resulted from the retention
by FFP Partners of a significant amount of debt in the December restructuring
offset by the additional interest on the debt incurred to purchase the
convenience stores acquired by the Company in December 1997.
In 1997 and prior years, the Company was treated as a publicly traded
partnership for income tax purposes. Accordingly, it recorded deferred income
taxes associated with differences in the timing of the recognition for financial
and tax reporting of those items that were expected to reverse after the Company
became taxable as a corporation in January 1998. The current income tax
"expense" or "benefit" that would otherwise have been recorded by the Company
had it been taxable as a corporation was allocated to its partners. However, in
January 1998, as a result of the expiration of its grandfather status as a
publicly traded partnership and in connection with the December 1997
restructuring of FFP Partners, the Company became taxable as a corporation and
has begun recording income tax expense accordingly. Therefore, the income tax
expense reflected in the accompanying consolidated statement of operations for
1998 is not comparable to that shown for the prior year.
Liquidity and Capital Resources
The Company's working capital at the end of the first quarter was a negative
$6,857,000 as compared to a negative $185,000 at year end 1997. This change
resulted primarily from the reclassification to current liabilities of the
bridge loan used to finance the acquisition of the December 1997 convenience
store purchase. The Company expects to complete the refinancing of this debt
with a term loan by the end of the second quarter 1998. Although the terms of
the permanent financing are being negotiated, the Company expects that the
bridge loan will be replaced with fully amortizing loan with a term of 12 to 15
years.
In addition, the Company is entering its typically strongest period of the
year when revenues and cash flows generally increase. Consequently, although the
Company has negative working capital, management believes that the completion of
the refinancing, referred to above, together with internally generated funds and
the Company's traditional use of trade credit, along with its bank line of
credit, are such that operations can be conducted in a customary manner.
In connection with the December 1997 restructuring of FFP Partners, referred
to previously, the balances due at year end 1997 on certain bank and other debt
were retained by FFP Partners. However, pending its refinancing, subsidiaries of
FFP Marketing remain liable on such debt, and could be required to repay the
debt if FFP Partners were unable to do so. FFP Partners has indemnified FFP
Marketing against this liability and has granted to FFP Marketing the right to
offset any payments FFP Marketing might be required to make on the debt against
any amounts otherwise due to FFP Partners by FFP Marketing. However, since
subsidiaries of FFP Marketing are liable on this debt and continue to access the
bank revolving credit facility, this debt must be reflected as a liability on
the balance sheets of both FFP Marketing and FFP Partners and it reduces the
reported equity of FFP Marketing. (It is reflected in the equity section of FFP
Marketing's consolidated balance sheets as "reduction for joint debt
obligations.") At such time as FFP Partners completes the refinancing of the
debt, the liability will be removed from FFP Marketing's balance sheet and its
reported equity will be increased by $15,938,000.
Forward-Looking Statements
Certain of the statements made in this report are forward-looking statements
that involve inherent 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.
Reports on Form 8-K
A report on Form 8-K dated January 12, 1998, was filed with the Securities
and Exchange Commission reporting the December 1997 restructuring of FFP
Partners, L.P., by which FFP Marketing Company, Inc., succeeded to the
convenience store, retail motor fuel marketing, and other businesses previously
conducted by FFP Partners, L.P.
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 Marketing Company, Inc.
Registrant
Date: March 13, 2000 By: /s/John H. Harvison
---------------------------------
John H. Harvison
Chairman and
Chief Executive Officer
Date: March 13, 2000 By: /s/Craig T. Scott
---------------------------------
Craig T. Scott
Vice President - Finance and
Chief Financial Officer