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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended APRIL 30, 1997 Commission file number 1-14990
GETTY PETROLEUM MARKETING INC.
(Exact name of registrant as specified in its charter)
MARYLAND 11-3339235
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 JERICHO TURNPIKE, JERICHO, NEW YORK 11753
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(Address of principal executive offices) (Zip Code)
(516) 338 - 6000
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(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
--- ---
Registrant has 13,450,375 shares of Common Stock, par value $.01 per share,
outstanding as of April 30, 1997.
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GETTY PETROLEUM MARKETING INC.
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page Number
- - ------------------------------ -------------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 1997 and
January 31, 1997 1
Consolidated Statements of Operations for the three months ended
April 30, 1997 and 1996 2
Consolidated Statements of Cash Flows for the three months ended
April 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6 - 7
Part II. OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
</TABLE>
<PAGE> 3
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
April 30, January 31,
- - ------------------------------------------------------------------------------------------------------------
Assets: 1997 1997
- - ------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $13,341 $ 7,517
Accounts receivable, net 13,747 15,195
Inventories 15,867 15,944
Deferred income taxes 1,535 967
Prepaid expenses and other current assets 1,844 5,592
-------- --------
Total current assets 46,334 45,215
Property and equipment, at cost, less
accumulated depreciation and amortization 87,940 88,049
Other assets 2,140 2,236
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Total assets $136,414 $135,500
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- - ------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
- - ------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $20,485 $24,659
Accrued expenses 6,341 6,765
Gasoline taxes payable 14,034 12,691
Income taxes payable 1,428 -
-------- --------
Total current liabilities 42,288 44,115
Deferred income taxes 19,836 19,632
Other, principally deposits 17,482 17,212
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized
10,000,000 shares for issuance in series (none of which is issued) - -
Common stock, par value $.01 per share; authorized
30,000,000 shares; issued 13,450,375 at April 30, 1997
and 1,000 at January 31, 1997 135 -
paid-in capital 58,281 54,541
Retained earnings 1,560 -
Unearned ESOP stock (660,110 shares at
April 30, 1997) (3,168) -
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Total stockholders' equity 56,808 54,541
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Total liabilities and stockholders' equity $136,414 $135,500
======== ========
</TABLE>
See accompanying notes.
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Three months ended April 30,
- - ------------------------------------------------------------------------------------------------------
1997 1996
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $216,927 $195,273
Rental income 8,565 8,391
Other income 431 65
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225,923 203,729
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Cost of sales (excluding depreciation and amortization) 213,802 201,019
Selling, general and administrative expenses 5,300 4,923
Change of control charge 637 -
Depreciation and amortization 3,298 3,331
Interest expense 222 134
-----------------------
223,259 209,407
-----------------------
Earnings (loss) before provision (credit)
for income taxes 2,664 (5,678)
Provision (credit) for income taxes 1,104 (2,389)
-----------------------
Net earnings (loss) $ 1,560 ($3,289)
=======================
Per Share Data:
Net earnings (loss) per share $ 0.12 ($0.26)
=======================
Weighted average shares outstanding 13,040 12,668
=======================
</TABLE>
See accompanying notes.
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
April 30,
------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $1,560 ($3,289)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 3,298 3,331
Deferred income taxes (364) (24)
ESOP charge 49 -
Gain on dispositions of equipment (35) (57)
Changes in assets and liabilities:
Accounts receivable 1,448 (245)
Inventories 77 1,215
Prepaid expenses and other current assets 3,745 1,331
Other assets 85 130
Accounts payable, accrued expenses and
gasoline taxes payable (3,255) 5,955
Income taxes payable 1,428 -
Other, principally deposits 270 257
------------------
Net cash provided by operating activities 8,306 8,604
------------------
Cash flows from investing activities:
Capital expenditures (3,177) (2,808)
Proceeds from dispositions of equipment 37 148
------------------
Net cash used in investing activities (3,140) (2,660)
------------------
Cash flows from financing activities:
Stock options 658 -
Net cash transferred to Getty Realty Corp. - (5,699)
------------------
Net cash provided by (used in) financing activities 658 (5,699)
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Net increase in cash and equivalents 5,824 245
Cash and equivalents at beginning of period 7,517 676
------------------
Cash and equivalents at end of period $13,341 $921
==================
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $113 $134
Income taxes, net 40 -
</TABLE>
See accompanying notes.
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the accounts of
Getty Petroleum Marketing Inc. and its wholly-owned subsidiaries (the
"Company"). The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
that are based on management's best estimates and judgments. While all
available information has been considered, actual amounts could differ from
those estimates. The consolidated financial statements are unaudited but, in
the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation. These statements should
be read in conjunction with the consolidated financial statements and related
notes which appear in the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1997.
On March 21, 1997, the Company became a separate publicly-held company
upon its spin-off from Getty Petroleum Corp., now known as Getty Realty Corp.
Stockholders of record of Getty Realty Corp. on March 21, 1997 received a
tax-free dividend of one share of the Company's common stock for each share of
common stock of Getty Realty Corp.
2. Earnings (loss) per share:
Earnings (loss) per share is computed by dividing net earnings (loss) by
the weighted average number of shares of common stock outstanding during the
period. Common stock equivalents are not included in earnings (loss) per share
computations since their effect is immaterial or anti-dilutive.
3. Employee Stock Ownership Plan:
In connection with the spin-off, the Company established a leveraged
Employee Stock Ownership Plan (the "ESOP") that purchased newly issued shares
of Common Stock equal to five percent of the outstanding shares of the Company.
The ESOP purchased such newly-issued shares from the Company using the
proceeds of a loan made by the Company to the ESOP. The ESOP loan will be
repaid over a five-year period, and the Company will contribute annually to the
ESOP the funds required to repay such loan. The principal amount of the ESOP
loan is equal to the number of shares purchased by the ESOP (671,298)
multiplied by the purchase price per share ($4.80) or $3,222,000. It is
expected that the repayment of the ESOP loan will result in projected
allocations to participants' accounts of an aggregate of 134,260 shares of
Common Stock per year, allocated in proportion to compensation. The Company
expects that the Common Stock purchased by the ESOP will be allocated to
covered employees over a five-year period which commenced on April 1, 1997.
The Company recognized a charge of $49,000 during the quarter ended April 30,
1997 relating to the Common Stock held by the ESOP, which charge is included
in selling, general and administrative expenses in the consolidated statement
of operations.
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4. Stockholders' equity:
A summary of the changes in stockholders' equity for the three months
ended April 30, 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
Common Paid-in Retained
Stock Capital Earnings ESOP Total
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance,
January 31, 1997 $ - $54,541 $ - $ - $54,541
Distribution of stock
in spin-off 128 (128) -
Net earnings 1,560 1,560
Issuance of stock
to ESOP 7 3,215 (3,222) -
ESOP stock committed
to be released (5) 54 49
Stock options 658 658
--------------------------------------------------------
Balance,
April 30, 1997 $135 $58,281 $1,560 ($3,168) $56,808
========================================================
</TABLE>
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the first fiscal quarter ended April 30, 1997 were $216.9
million as compared with $195.3 million for the same quarter last year, an
increase of 11.1%. Of the increase in net sales, approximately two thirds was
attributable to an increase in sales prices and the balance was due to an
increase in sales volume. Average selling prices increased by 7.2%, retail
gallonage sold increased by 5.5 million gallons or 3.0% to 187.5 million
gallons, and wholesale gallonage sold increased by 3.8 million gallons or 6.5%
to 61.3 million gallons. The average gasoline volume per retail outlet
increased by 3.8%. Gross profit before depreciation and amortization
(excluding rental and other income) was $3.1 million for the quarter ended
April 30, 1997 compared to a loss of $5.8 million in the comparable period last
year. The favorable increase of $8.9 million was principally due to an
increase in retail margins which resulted from product cost decreases of
approximately 10 cents per gallon from January 31, 1997 to April 30, 1997.
The Company's financial results depend largely on retail marketing margins
and rental income from its dealers. The petroleum marketing industry has been
and continues to be volatile and highly competitive. The cost of petroleum
products purchased as well as the price of petroleum products sold have
fluctuated widely. As a result of the historical volatility of product margins
and the fact that they are affected by numerous diverse factors, it is
impossible to predict future margin levels. The Company believes that it has
only been modestly affected by inflation since increased costs are passed along
to its customers to the extent permitted by competition.
Rental income was $8.6 million for the three months ended April 30, 1997,
an increase of 2.1% over rental income of $8.4 million for the comparable
period last year. The increase was about equally due to rent escalations
provided under existing lease agreements, lease renewals and higher rentals as
a result of improvements to the facilities.
Other income was $.4 million for the three months ended April 30, 1997 as
compared to $.1 million for the quarter ended April 30, 1996. The increase was
primarily due to $.2 million of net fees charged to Getty Realty Corp. by the
Company under a Services Agreement and $.1 million of additional investment
income.
Selling, general and administrative expenses were $5.3 million for the
three months ended April 30, 1997 as compared to $4.9 million for the quarter
ended April 30, 1996. The increase was primarily due to $.4 million of stock
option expense.
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The Company recorded a charge for the quarter ended April 30, 1997 of $.6
million related to certain "change of control" agreements.
Depreciation and amortization was $3.3 million for both of the three month
periods ended April 30, 1997 and 1996.
Liquidity and Capital Resources
As of April 30, 1997, working capital amounted to $4.0 million as compared
to $1.1 million as of January 31, 1997. The increase was primarily due to
working capital generated during the first quarter from operations, partially
offset by $3.2 million of capital expenditures.
The Company's principal sources of liquidity are cash flows from
operations, which amounted to $8.3 million during the three months ended April
30, 1997, and its unsecured lines of credit. Management believes that cash
requirements for operations, including payments to Getty Realty Corp. under the
Master Lease and capital expenditures, can be met by cash flows from
operations, cash and equivalents and credit lines. The Company has uncommitted
lines of credit from two banks in the aggregate amount of $50 million, which
may be utilized for working capital borrowings and letters of credit.
Borrowings under such lines of credit are unsecured and bear interest at the
applicable bank's prime rate or, at the Company's option, 1.1% above LIBOR.
Such lines of credit, which were unused as of April 30, 1997, are subject to
renewal at the discretion of the banks.
The Company's capital expenditures for the three months ended April 30,
1997 amounted to $3.2 million. The Company's capital expenditures include
discretionary expenditures to improve the image of the service stations, to
improve the terminal facilities and for replacement of service station
equipment. Pursuant to agreements with Getty Realty Corp. entered into in
connection with the spin-off, expenditures with respect to tank replacements
required to meet 1998 federal environmental standards and certain environmental
liabilities and obligations are the responsibility of, and will be paid by,
Getty Realty Corp.
7
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
------------ -----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GETTY PETROLEUM MARKETING INC.
------------------------------
(Registrant)
Dated: June 12, 1997 BY: /s/ Michael K. Hantman
-----------------------------
(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Principal Financial and
Accounting Officer)
Dated: June 12, 1997 BY: /s/ Leo Liebowitz
-----------------------------
(Signature)
LEO LIEBOWITZ
President (Chief Executive
Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GETTY PETROLEUM MARKETING INC. AND
SUBSIDIARIES AS OF APRIL 30, 1997 AND FOR THE THREE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1997
<CASH> 13,341
<SECURITIES> 0
<RECEIVABLES> 15,070
<ALLOWANCES> 1,323
<INVENTORY> 15,867
<CURRENT-ASSETS> 46,334
<PP&E> 173,843
<DEPRECIATION> 85,903
<TOTAL-ASSETS> 136,414
<CURRENT-LIABILITIES> 42,288
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 56,673
<TOTAL-LIABILITY-AND-EQUITY> 136,414
<SALES> 216,927
<TOTAL-REVENUES> 225,923
<CGS> 213,802
<TOTAL-COSTS> 217,100
<OTHER-EXPENSES> 637
<LOSS-PROVISION> 109
<INTEREST-EXPENSE> 222
<INCOME-PRETAX> 2,664
<INCOME-TAX> 1,104
<INCOME-CONTINUING> 1,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,560
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
