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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, 2000 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 13,968,838 shares of Common Stock, par value $.01 per share,
outstanding as of May 31, 2000.
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GETTY PETROLEUM MARKETING INC.
INDEX
Part I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 2000 and
January 31, 2000 1
Consolidated Statements of Operations for the three months ended
April 30, 2000 and 1999 2
Consolidated Statements of Cash Flows for the three months ended
April 30, 2000 and 1999 3
Notes to Consolidated Financial Statements 4 - 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
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April 30, January 31,
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Assets: 2000 2000
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(unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 24,344 $ 10,266
Investments 1,035 548
Accounts receivable, net 14,450 12,200
Inventories 19,904 20,760
Deferred income taxes 5,048 4,860
Prepaid expenses and other current assets 1,926 5,065
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Total current assets 66,707 53,699
Property and equipment, at cost, less
accumulated depreciation and amortization 111,624 112,458
Other assets 4,733 4,758
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Total assets $ 183,064 $ 170,915
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Liabilities and Stockholders' Equity:
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Current liabilities:
Accounts payable $ 41,782 $ 34,541
Accrued expenses 15,280 15,591
Gasoline taxes payable 16,633 14,181
Income taxes payable 43 --
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Total current liabilities 73,738 64,313
Deferred income taxes 21,907 22,010
Other, principally deposits 22,646 22,346
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Total liabilities 118,291 108,669
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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 13,968,838 at April 30, 2000
and 13,960,898 at January 31, 2000 140 140
Paid-in capital 60,279 60,231
Retained earnings 5,837 3,802
Unearned ESOP stock (257,331 shares at April 30, 2000 and
290,896 shares at January 31, 2000) (1,235) (1,396)
Accumulated other comprehensive loss (248) (531)
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Total stockholders' equity 64,773 62,246
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Total liabilities and stockholders' equity $ 183,064 $ 170,915
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</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)
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Three months ended April 30
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2000 1999
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Sales and operating revenues $285,311 $158,970
Other income 316 179
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285,627 159,149
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Cost of sales and operating expenses
(excluding depreciation and amortization 271,476 148,937
Selling, general and administrative expenses 5,796 5,426
Depreciation and amortization 4,362 4,090
Interest expense 261 259
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281,895 158,712
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Earnings before provision
for income taxes 3,732 437
Provision for income taxes 1,697 193
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Net earnings $ 2,035 $ 244
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Net earnings per share:
Basic $.15 $.02
Diluted $.15 $.02
Weighted average shares outstanding:
Basic 13,683 13,532
Diluted 13,720 13,540
See accompanying notes.
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
Three months ended
April 30,
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2000 1999
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Cash flows from operating activities:
Net earnings $ 2,035 $ 244
Adjustments to reconcile net earnings to
net cash provide by operating activities:
Depreciation and amortization 4,362 4,090
Deferred income taxes (495) 1,776
Stock option charge 100 --
ESOP charge 87 92
(Gain) loss on dispositions of property
and equipment (18) 162
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable (2,250) 599
Inventories 856 (1,097)
Prepaid expenses and other current assets 3,139 (1,520)
Other assets (96) (285)
Accounts payable, accrued expenses and
gasoline taxes payable 9,382 13,073
Income taxes payable 43 (1,086)
Other, principally deposits 300 14
Net cash provided by operating activities 17,445 16,062
Cash flows from investing activities:
Capital expenditures (2,906) (6,788)
Acquisitions (543) (801)
Proceeds (payments) related to dispositions
of property and equipment 60 (135)
Net cash used in investing activities (3,389) (7,724)
Cash flows from financing activities:
Repayment of short-term borrowings -- (1,900)
Stock options and common stock 22 1
Net cash provided by (used in)
financing activities 22 (1,899)
Net increase in cash and equivalents 14,078 6,439
Cash and equivalents at beginning of period 10,266 6,169
Cash and equivalents at end of period $ 24,344 $ 12,608
Supplemental disclosures of cash flow information
Cash paid (refunded) during the period for:
Interest $ 198 $ 247
Income taxes, net (31) 1,906
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, 2000.
2. Earnings per share:
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the periods
presented. Diluted earnings per share reflects the potential dilution from the
exercise of stock options in the amounts of 37,000 and 8,000 shares for the
quarters ended April 30, 2000 and 1999, respectively.
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3. Stockholders' equity:
A summary of the changes in stockholders' equity for the three months ended
April 30, 2000 is as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Common Paid-in Retained Earnings
Stock Capital Earnings (Loss)(*) ESOP Total
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<S> <C> <C> <C> <C> <C> <C>
Balance,
January 31, 2000 $140 $ 60,231 $ 3,802 $ (531) $(1,396) $62,246
Comprehensive earnings:
Net earnings 2,035 2,035
Net unrealized gain
on equity securities 283 283
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Total 2,318
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ESOP stock committed
to be released (74) 161 87
Issuance of
common stock 7 7
Stock options 115 115
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Balance,
April 30, 2000 $140 $ 60,279 $ 5,837 $ (248) $(1,235) $64,773
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</TABLE>
(*) Represents net unrealized gain (loss) on equity securities. For the three
months ended April 30, 1999, the Company had a net unrealized loss on equity
securities of $389.
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4. Segment information:
The Company has two reportable segments: Petroleum Marketing and Heating
Oil. The Petroleum Marketing segment distributes, markets and sells gasoline and
diesel fuel to consumers through a network of 1,287 Getty and other branded
retail outlets. The Heating Oil segment sells fuel oil, kerosene and propane,
and provides oil burner and related services to residential and commercial
customers in the New York Mid-Hudson Valley region.
The financial results of the Petroleum Marketing and Heating Oil segments
for the quarters ended April 30, 2000 and 1999 are set forth below (in
thousands):
<TABLE>
<CAPTION>
Quarter ended April 30, 2000 Quarter ended April 30, 1999
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Petroleum Heating Petroleum Heating
Marketing Oil Total Marketing Oil Total
--------- ------- ----- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Sales and operating revenues $274,255 $11,056 $285,311 $151,195 $7,775 $158,970
Other income 299 17 316 165 14 179
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274,554 11,073 285,627 151,360 7,789 159,149
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Cost of sales and operating
expenses (excluding depreciation
and amortization) 262,260 9,216 271,476 143,571 5,366 148,937
Selling, general and
administrative expenses 5,107 689 5,796 4,749 677 5,426
Depreciation and amortization 4,170 192 4,362 3,898 192 4,090
Interest expense 261 - 261 259 - 259
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271,798 10,097 281,895 152,477 6,235 158,712
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Earnings (loss) before provision
(credit) for income taxes 2,756 976 3,732 (1,117) 1,554 437
Provision (credit) for
income taxes 1,253 444 1,697 (493) 686 193
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Net earnings (loss) $ 1,503 $ 532 $ 2,035 $ (624) $ 868 $ 244
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Identifiable assets $174,725 $8,339 $183,064 $151,939 $7,431 $159,370
Capital expenditures 2,888 18 2,906 6,752 36 6,788
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales and operating revenues for the first fiscal quarter ended April 30,
2000 were $285.3 million as compared with $159.0 million for the same quarter
last year. The 79.5% increase in sales and operating revenues was primarily due
to a 74.7% increase in average selling prices (net of taxes) from $.62 per
gallon to $1.08 per gallon and a 5.0% increase in volume from 242 million
gallons to 254 million gallons.
Gross profit before depreciation and amortization was $13.8 million for the
three months ended April 30, 2000 as compared to $10.0 million for the three
months ended April 30, 1999. The improvement of $3.8 million was principally due
to an increase in retail product margins of approximately 2.9 cents per gallon
which contributed $6.0 million of additional gross profit, higher retail volumes
which contributed $2.0 million of additional gross profit and $1.2 million of
higher rental income, partially offset by a $1.0 million LIFO charge in the
current quarter related to higher product costs, and higher operating expenses
of $3.3 million.
Other income was $.3 million for the three months ended April 30, 2000 as
compared to $.2 million for the same quarter last year. Included in other income
for the three months ended April 30, 2000 and 1999 were $159,000 and $227,000,
respectively, of net fees received from Getty Realty Corp. ("Realty") for
administrative and technical services we have provided pursuant to the services
agreement since the spin-off. The quarter ended April 30, 1999 also included a
charge of $181,000 related to the early termination of two leases under a master
lease agreement with Realty.
Selling, general and administrative expenses were $5.8 million for the
three months ended April 30, 2000, an increase of $.4 million or 6.8% as
compared with $5.4 million for the quarter ended April 30, 1999. The increase
was primarily due to a stock compensation charge of $.2 million resulting from
changes in Getty's stock price during the current quarter and higher employee
costs.
Depreciation and amortization was $4.4 million for the three month period
ended April 30, 2000 as compared with $4.1 million for the three months ended
April 30, 1999. The increase was due to higher depreciation as a result of
capital expenditures.
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Our financial results are largely dependent on retail marketing margins and
rental income from dealers. The petroleum marketing industry has been and
continues to be volatile and highly competitive. Petroleum products are
commodities whose prices depend on numerous factors beyond our control, and,
accordingly, their prices may vary substantially over time. From time to time,
competitive market conditions may limit our ability to pass on to our customers
changes in the price we pay for products and, accordingly, our operating margins
may vary. Because our operating margins may vary significantly from time to time
while certain of our expenses do not, our earnings may fluctuate substantially.
As a result of the historic volatility of product margins and the fact that they
are affected by numerous diverse factors, we cannot predict with any degree of
accuracy future product margin levels. However, we believe that we have only
been modestly affected by inflation since increased costs are passed along to
customers to the extent permitted by competition.
Liquidity and Capital Resources
As of April 30, 2000, we had a working capital deficit of $7.0 million as
compared with a deficit of $10.6 million as of January 31, 2000. The increase in
working capital was primarily due to working capital generated during the period
from operations, partially offset by $2.9 million of capital expenditures at
existing locations and $.5 million at newly leased locations. We are able to
operate our business with negative working capital, principally because most of
our product sales are for cash, payment terms are received from vendors and
there is a time interval in the payment of motor fuel taxes.
Our principal source of liquidity is cash flows from operations, which
amounted to $17.4 million during the three months ended April 30, 2000.
Management believes that cash requirements for operations, including rental
payments required under the master leases with Realty and capital expenditures,
can be met by cash flows from operations, cash and equivalents and credit lines.
We have uncommitted lines of credit with three banks in the aggregate amount of
$50 million, which may be utilized for working capital borrowings and letters of
credit. As of April 30, 2000, we are utilizing $3.1 million of the lines of
credit in connection with outstanding letters of credit to support insurance
programs. Borrowings under the lines of credit are unsecured and principally
bear interest at the applicable bank's prime rate or, at our option, 1.1% above
LIBOR. The lines of credit are subject to renewal at the discretion of the
banks.
As of April 30, 2000, we leased 1,009 retail outlets and 9 terminal
facilities from Realty under the master lease agreements. Rent expense
aggregated $14.9 million for the quarter ended April 30, 2000, including $14.1
million under the master leases with Realty.
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Our capital expenditures for the three months ended April 30, 2000 were
$2.9 million. Our capital expenditures include discretionary expenditures to
improve the image of the retail outlets, for replacement of service station
equipment and to improve the terminal facilities. In addition, during the three
months ended April 30, 2000, we spent $.5 million for improvements to properties
which we commenced leasing during the past year.
Special Factors Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. When we use the words "believes", "expects",
"plans", "estimates" and similar expressions, we intend to identify
forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance and achievements to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, but are not limited to:
volatility of petroleum marketing margins; maturity of the petroleum marketing
industry; the impact of economic growth, energy efficiency and technology;
natural and political events that may affect the supply of petroleum products;
competition; and the effects of regulation.
As a result of these and other factors, we may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect our business, financial condition,
operating results and stock price. An investment in our common stock involves
various risks, including those mentioned above and elsewhere in this report and
those which are detailed from time to time in our other filings with the
Securities and Exchange Commission.
You should not place undue reliance on forward-looking statements, which
reflect our view only as of the date hereof. We undertake no obligation to
publicly release revisions to these forward-looking statements that reflect
future events or circumstances or reflect the occurrence of unanticipated
events.
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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.
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(Registrant)
Dated: June 12, 2000 BY: /s/ Michael K. Hantman
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(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Principal Financial and
Accounting Officer)
Dated: June 12, 2000 BY: /s/ Leo Liebowitz
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(Signature)
LEO LIEBOWITZ
Chairman and Chief
Executive Officer
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