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 June 28, 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 August 10, 1998)
FFP MARKETING COMPANY, INC.
Form 10-Q/A
June 28, 1998
FFP Marketing Company, Inc. (the "Company") amends and entirely restates its
Form 10-Q Quarterly Report for the Company's second quarter of 1998 ended June
28, 1998, filed with the Securities and Exchange Commission on August 17, 1998.
The Company is also amending its other 1998 quarterly reports, i.e., Form
10-Q Quarterly Report for its first quarter ended March 29, 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 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 and six month periods ended June
28, 1998, are summarized as follows:
Three Months Six Months
(In thousands)
Reverse duplicate billing of miscellaneous revenues $ (7) $ (10)
Expense small EPA fees at 450 locations (7) (7)
Record additional gain on sale of property 0 15
Additional depreciation at closed locations (86) (105)
Adjustment to reconcile inventory at 25 closed locations (109) (192)
Income tax benefit of foregoing adjustments 72 103
Total adjustments $(137) $ (196)
FFP Marketing Company, Inc., and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 28, December 28,
1998 1997
(Restated)
Assets
Current Assets -
Cash and cash equivalents $8,224 $9,389
Trade receivables 13,813 10,732
Notes receivable from affiliates 1,828 426
Notes receivable 736 737
Inventories 16,187 15,820
Prepaid expenses and other 1,804 1,077
Total current assets 42,592 38,181
Property and equipment, net 32,771 32,095
Note receivable from affiliate 13,630 0
Other assets, net 5,502 5,054
Total Assets $94,495 $75,330
Liabilities and Stockholders' Equity
Current Liabilities -
Current installments of long-term debt $1,556 $1,208
Current installments of obligation under
capital lease 648 917
Accounts payable 15,574 15,319
Money orders payable 11,712 11,299
Accrued expenses 12,276 9,623
Total current liabilities 41,766 38,366
Long-term debt, excluding current installments 21,182 21,465
Obligations under capital lease, excluding
current installments 3,214 3,110
Deferred income taxes 3,616 3,259
Other liabilities 2,578 2,866
Total Liabilities 72,356 69,066
Stockholders' Equity
Common stock and retained earnings 22,139 22,202
Reduction for joint debt obligations 0 (15,938)
Total Stockholders' Equity 22,139 6,264
Total Liabilities and Stockholders' Equity $94,495 $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 Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(Restated) (Restated)
Revenues
Motor fuel $85,059 $82,209 $161,404 $159,326
Merchandise 24,902 15,482 47,481 29,469
Miscellaneous 2,601 1,631 4,932 3,329
Total Revenues 112,562 99,322 213,817 192,124
Costs and Expenses
Cost of motor fuel 78,535 76,660 148,402 149,310
Cost of merchandise 17,455 10,694 33,054 20,867
Direct store expenses 11,208 6,691 21,874 13,533
General and administrative
expenses 4,355 3,053 7,475 5,906
Depreciation and amortization 1,434 1,393 2,773 2,514
Total Costs and Expenses 112,987 98,491 213,578 192,130
Operating Income/(Loss) (425) 831 239 (6)
Interest expense 119 357 320 648
Income/(loss) before income taxes (544) 474 (81) (654)
Income tax expense/(benefit)
Current (22) 0 (6) 0
Deferred (182) 134 (12) 268
Total (204) 134 (18) 268
Net Income/(Loss) $(340) $340 $(63) $(922)
Net income/(loss) per share -
Basic $(0.09) $0.09 $(0.02) $(0.24)
Diluted (0.09) 0.09 (0.02) (0.24)
Weighted average number of
common shares outstanding -
Basic 3,779 3,779 3,779 3,779
Diluted 3,911 3,797 3,877 3,824
See accompanying notes to condensed consolidated financial statements.
FFP Marketing Company, Inc., and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 28, June 29,
1998 1997
(Restated)
Cash Flows from Operating Activities -
Net income/(loss) $(63) $(922)
Adjustments to reconcile net income/(loss)
to cash provided by operating activities -
Depreciation and amortization 2,773 2,514
Deferred income tax expense/(benefit) (12) 268
Net change in operating assets (1,739) 4,672
and liabilities
Net cash provided by operating activities 959 6,532
Cash Flows from Investing Activities -
Advances from affiliate, net of reduction
for joint debt obligations 1,165 0
Additions of property and equipment, net (3,189) (5,822)
Net cash (used) by investing activities (2,024) (5,822)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities (100) (47)
Net cash (used) by financing activities (100) (47)
Net Increase/(Decrease) in cash and cash (1,165) 663
equivalents
Cash and cash equivalents at beginning of
period 9,389 8,244
Cash and cash equivalents at end of period $8,224 $8,907
See accompanying notes to condensed consolidated financial statements.
FFP MARKETING COMPANY, INC.
Notes to Condensed Consolidated Financial Statements
June 28, 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 June 28, 1998, and the
consolidated statements of operations and condensed consolidated statements of
cash flows for the three and six month periods ended June 28, 1998, and June 29,
1997, have not been audited. These financial statements for the periods ending
June 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 periods ended June 28, 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 June 28,
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
June 28, 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. Notes Payable and Long-Term Debt
On June 30, 1998, the Company completed the financing of the purchase of 94
convenience stores in December 1997. This financing consists of 44 fully
amortizing mortgage loans in the aggregate principal amount of $9,420,000, at an
interest rate of 8.66%, with maturities of 112 to 180 months, and requiring
initial aggregate payments of principal and interest of $101,000 per month. The
proceeds of these loans were used to repay the $5,735,000 balance on the bridge
loan used to finance the purchase of the outlets and for general corporate
purposes. Because the refinancing was completed prior to the issuance of these
condensed consolidated financial statements, the accompanying condensed
consolidated balance sheet as of June 28, 1998, reflects the reclassification of
the bridge loan balance between current maturities and long-term debt.
Effective June 28, 1998, the Company, FFP Partners, L.P ("FFPLP"), and the
Company's primary bank lender reached an agreement to restructure the debt due
to the lender for which FFPLP had retained the liability in connection with its
December 1997 restructuring. The Company acquired its operations in connection
with the December 1997 restructuring of FFPLP. Under this agreement, the lender
will permit a subsidiary of FFP Marketing to make a loan to FFPLP for
approximately $14,773,000 (the current balance on the debt due to the lender for
which FFPLP had retained liability in the restructuring) and will release FFPLP
from all obligations under the Loan Agreement covering its loans to the Company.
The interest rate and repayment terms of the loan to FFPLP will mirror such
terms (which are unchanged from year end 1997) of the debt to the lender. The
agreement with the lender also requires that the loan be secured by all real
estate owned by FFPLP and be pledged as additional collateral on the debt to the
lender, that all proceeds received by the Company from the loan to FFPLP be
applied to the term loan of the lender to the Company, and that FFP Marketing
Company, Inc., be added as a primary obligor under the Loan Agreement. As a
result of this agreement, there is no longer any joint liability on the debt
obligations to the lender and the reduction of stockholders' equity for such
liability has been removed as of June 28, 1998.
3. Income/(Loss) per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," in the fourth quarter of 1997. Income/(loss) per share
amounts for 1997 periods 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:
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(In thousands)
Weighted average number of common
shares outstanding 3,779 3,779 3,779 3,779
Effect of dilutive options 132 18 98 45
Weighted average number of common
shares outstanding, assuming dilution 3,911 3,797 3,877 3,824
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 -0-
and 70,000 in the three months ended 1998 and 1997, respectively, and were -0-
and 50,000 in the six months ended 1998 and 1997, respectively.
4. 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 condensed
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.
Results of Operations
Fuel Sales and Margins
Second Quarter Year-to-Date
Change Change
1998 1997 Amount Percent 1998 1997 Amount Percent
In thousands, except per gallon data
Fuel sales $85,059 $82,209 $2,850 3.5% $161,404 $159,326 $2,078 1.3%
Fuel margin 6,524 5,549 975 17.6% 13,002 10,016 2,986 29.8%
Gallons sold
Retail 61,764 50,856 10,908 21.4% 119,259 99,717 19,542 19.6%
Wholesale 27,373 24,096 3,277 13.6% 47,216 42,248 4,968 11.8%
Total 89,137 74,952 14,185 18.9% 166,475 141,965 24,510 17.3%
Margin per
gallon (cents)
Retail 9.7 9.5 0.2 2.1% 10.1 8.8 1.3 14.8%
Wholesale 1.7 2.6 (0.9)(34.6%) 2.0 2.5 (0.5)(20.0%)
The increases in the Company's motor fuel sales in both the quarter and
year-to-date periods is the net effect of the increases in the volumes of fuel
sold in the respective periods offset by declines in the price per gallon during
1998 as compared to the 1997 periods. The wholesale fuel sales increases are due
to the Company's continued increase on this activity while the increase in
retail fuel volumes is due to the sales from the 94 convenience stores that the
Company purchased in December 1997.
The 17.6% increase in fuel margin in the second quarter is consistent with
the overall 18.9% increase in sales volumes for the period. However, in the
year-to-date period, the increase in fuel margin outpaced the increase in
volumes sold because of the 14.8% increase in the margin per gallon realized by
the Company in the 1998 period as compared to 1997.
Merchandise Sales and Margin
Second Quarter Year-to-Date
Change Change
1998 1997 Amount Percent 1998 1997 Amount Percent
In thousands, except average weekly sales data
Mdse sales $24,902 $15,482 $9,420 60.8% $47,481 $29,469 $18,012 61.1%
Mdse margin 7,447 4,788 2,659 55.5% 14,427 8,602 5,825 67.7%
Margin percentage,
convenience stores and
truck stops 29.2% 29.3% (0.1%)(0.3%) 29.7% 27.4% 2.3% 8.4%
Average weekly
mdse sales -
Convenience
stores $9,624 $10,130 $(506)(5.0%) 8,936 9,659 (723) (7.5%)
Truck stops 17,685 18,592 (907)(4.9%) 16,951 17,700 (749) (4.2%)
The increases in merchandise sales both time periods is due principally to
the sales at the convenience stores acquired in December 1997. The slight
decline in the margin percentage on merchandise sales in the second quarter 1998
as compared to 1997 is due to a decline in the margin percentage on sales at the
Company's two restaurants operated in conjunction with its truck stops. Although
the margin percentage declined, the absolute dollar margin at the restaurants
was up slightly in the 1998 period.
As with fuel and merchandise volumes, the increases in miscellaneous revenues
in both the quarter and year-to-date periods are largely due to the additional
revenue from the 94 convenience stores acquired in December 1997.
Direct store expenses are those expenses, such as salaries, utilities,
repair, maintenance, and rent, that are directly attributable to the operation
of the Company's retail outlets. These expenses increased $4,517,000 (67.5%) in
the quarter and $8,341,000 (61.6%) in the year-to-date period due in part to the
expenses of operating the additional outlets acquired in December 1997. In
addition, as a result of the restructuring by which FFP Marketing was formed,
the Company now pays rent on a number of locations that were formerly owned by
the Company. This additional rent, approximately $216,000 per month, is
reflected in direct store expenses.
General and administrative expenses increased $1,302,000 (42.6%) and
$1,569,000 (26.6%) in the quarter and year-to-date periods, respectively. These
increases are principally due to the additional field supervisory personnel to
oversee the operations of the convenience stores acquired in December 1997, to
operating costs at the Company's fuel terminal which began operations in June
1997, and, in the second quarter, increased bad debt expenses related to the
Company's money order activities.
Depreciation and amortization increased $41,000 (2.9%) in the second quarter
and $259,000 (10.3%) in the year-to-date period. These changes reflect the
increased depreciation related to the relatively high level of property addition
during 1997, which were 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
convenience stores, and depreciation of equipment at the Company's fuel terminal
(which began operating in June 1997), offset by the reduction in depreciation on
the buildings that were retained by FFP Partners in the December 1997
restructuring mentioned above.
The reductions in interest expense in both the quarter and year-to-date time
frames 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 second quarter was $826,000
as compared to a negative $185,000 at year end 1997. This change resulted from
the agreement among the Company, FFP Partners, and the Company's primary bank
lender to restructure the debt due to the lender for which FFPLP had retained
the liability in connection with its December 1997 restructuring. Under this
agreement, the lender will permit FFP Marketing to make a loan to FFP Partners
for approximately $14,773,000 (the current balance of the debt due the lender
for which FFPLP had retained liability). The interest rate and repayment terms
of this loan will mirror such terms of the debt to the lender. The loan will be
secured by all real estate owned by FFP Partners and the loan will be pledged as
additional collateral on the debt to the lender. In addition, all proceeds
received by the Company from the loan to FFPLP must be applied to the term loan
of the lender to the Company, and FFP Marketing Company, Inc., will be added as
a primary obligor under the Loan Agreement. Since the repayment terms of this
loan will mirror the repayment terms of the debt to the lender, the Company has
a current receivable equivalent to the current amount due on the debt. In
addition, since there is no longer any joint liability on the debt obligations
to the lender, the reduction of stockholders' equity for such liability has been
removed as of June 28, 1998.
The Company also completed, on June 30, the permanent financing for the
purchase of the 94 convenience stores it acquired in December 1997. This
financing consists of 44 loans with an aggregate principal amount of $9,420,000.
All of the loans bear interest at 8.66% and have maturities ranging from 112 to
180 months. The loans require initial aggregate payments of principal and
interest of $101,000 per month. The proceeds of these loans were used to repay
the $5,735,000 balance on the bridge loan used to finance the purchase of the
outlets and for general corporate purposes. Because the refinancing was
completed prior to the issuance of these condensed consolidated financial
statements, the accompanying condensed consolidated balance sheet as of June 28,
1998, reflects the reclassification of the bridge loan balance between current
maturities and long-term debt.
The Company believes that its internally generated funds and traditional use
of trade credit, along with its bank line of credit, are such that operations
will be conducted in a customary manner.
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, 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; changes in the cost of refined petroleum products, changes in the
cost of merchandise items sold by the Company, or changes in the gross profit
realized from sales of motor fuel and merchandise; expense pressures relating to
operating costs, including labor, repairs, maintenance, and supplies; and,
unanticipated general and administrative expenses, including costs of expansion
and financing.
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule [included in electronic filing only].
Reports on Form 8-K
The Company did not file any reports on Form 8-K for the quarter covered by
this Report on Form 10-Q.
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