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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 JULY 31, 2000 Commission file number 1-14990
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GETTY PETROLEUM MARKETING INC.
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(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 14,002,606 shares of Common Stock, par value $.01 per share,
outstanding as of August 31, 2000.
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<PAGE> 2
GETTY PETROLEUM MARKETING INC.
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page Number
-----------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of July 31, 2000 and
January 31, 2000 1
Consolidated Statements of Operations for the three and
six months ended July 31, 2000 and 1999 2
Consolidated Statements of Cash Flows for the
six months ended July 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 11
Part II. OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
</TABLE>
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
July 31, January 31,
Assets: 2000 2000
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(unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 10,137 $ 10,266
Investments 990 548
Accounts receivable, net 13,778 12,200
Inventories 24,046 20,760
Deferred income taxes 6,148 4,860
Prepaid expenses and other current assets 6,328 5,065
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Total current assets 61,427 53,699
Property and equipment, at cost, less
accumulated depreciation and amortization 110,769 112,458
Other assets 4,584 4,758
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Total assets $ 176,780 $ 170,915
========= =========
Liabilities and Stockholders' Equity:
Current liabilities:
Short-term borrowings $ 8,700 $ --
Accounts payable 35,007 34,541
Accrued expenses 16,573 15,591
Gasoline taxes payable 14,084 14,181
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Total current liabilities 74,364 64,313
Deferred income taxes 21,830 22,010
Other, principally deposits 22,703 22,346
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Total liabilities 118,897 108,669
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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 14,002,606 at July 31, 2000
and 13,960,898 at January 31, 2000 140 140
Paid-in capital 60,462 60,231
Retained earnings (deficit) (1,383) 3,802
Unearned ESOP stock (223,766 shares at July 31, 2000 and
290,896 shares at January 31, 2000) (1,074) (1,396)
Accumulated other comprehensive loss (262) (531)
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Total stockholders' equity 57,883 62,246
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Total liabilities and stockholders' equity $ 176,780 $ 170,915
========= =========
</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 July 31, Six months ended July 31,
-------------------------- ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales and operating revenues $ 310,829 $ 195,010 $ 596,140 $ 353,980
Other income 300 343 616 522
--------- --------- --------- ---------
311,129 195,353 596,756 354,502
--------- --------- --------- ---------
Cost of sales and operating expenses
(excluding depreciation and amortization) 312,333 184,880 583,809 333,817
Selling, general and administrative expenses 6,238 5,844 12,034 11,270
Depreciation and amortization 4,481 4,232 8,843 8,322
Interest expense 282 236 543 495
--------- --------- --------- ---------
323,334 195,192 605,229 353,904
--------- --------- --------- ---------
Earnings (loss) before provision (credit)
for income taxes (12,205) 161 (8,473) 598
Provision (credit) for income taxes (4,985) 71 (3,288) 264
--------- --------- --------- ---------
Net earnings (loss) ($ 7,220) $ 90 ($ 5,185) $ 334
========= ========= ========= =========
Net earnings (loss) per share:
Basic ($ .53) $ .01 ($ .38) $ .02
Diluted ($ .53) $ .01 ($ .38) $ .02
Weighted average shares outstanding:
Basic 13,737 13,567 13,711 13,550
Diluted 13,737 13,588 13,711 13,564
</TABLE>
See accompanying notes.
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GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
July 31,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) ($ 5,185) $ 334
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 8,843 8,322
Deferred income taxes (1,662) 2,789
Stock option charge 228 --
ESOP charge 215 195
(Gain) loss on dispositions of property and equipment (35) 189
Loss on sale of investments 6 --
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (1,578) (2,352)
Inventories (3,286) (7,651)
Prepaid expenses and other current assets (1,263) (2,197)
Other assets (68) (892)
Accounts payable, accrued expenses and
gasoline taxes payable 1,351 23,180
Income taxes payable -- (1,086)
Other, principally deposits 357 188
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Net cash provided by (used in) operating activities (2,077) 21,019
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Cash flows from investing activities:
Capital expenditures (6,323) (11,746)
Acquisitions (650) (3,562)
Proceeds (payments) related to dispositions
of property and equipment 96 (103)
Proceeds from sale of investments 15 --
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Net cash used in investing activities (6,862) (15,411)
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Cash flows from financing activities:
Short-term borrowings (repayments) 8,700 (1,900)
Stock options and common stock 110 9
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Net cash provided by (used in) financing activities 8,810 (1,891)
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Net increase (decrease) in cash and equivalents (129) 3,717
Cash and equivalents at beginning of period 10,266 6,169
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Cash and equivalents at end of period $ 10,137 $ 9,886
====================
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 442 $ 381
Income taxes, net 6 2,059
</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, 2000.
2. Earnings (loss) per share:
Basic earnings (loss) per share is computed by dividing net earnings (loss)
by the weighted average number of shares of common stock outstanding during the
periods presented. For the quarter and six months ended July 31, 2000, diluted
loss per share amounts do not reflect the potential dilution from the exercise
of stock options since such inclusion would be antidilutive. For the quarter and
six months ended July 31, 1999, diluted earnings per share reflects the
potential dilution from the exercise of stock options in the amounts of 21,000
shares and 14,000 shares, respectively.
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3. Stockholders' equity:
A summary of the changes in stockholders' equity for the six months ended
July 31, 2000 is as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated
Retained Other
Common Paid-in Earnings Comprehensive
Stock Capital (Deficit) 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 loss:
Net loss (5,185) (5,185)
Net unrealized gain
on equity securities 269 269
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Total (4,916)
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ESOP stock committed
to be released (107) 322 215
Issuance of
common stock 15 15
Stock options 323 323
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Balance,
July 31, 2000 $140 $ 60,462 $(1,383) $ (262) $(1,074) $57,883
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</TABLE>
(*) Represents net unrealized loss on equity securities. For the three months
ended July 31, 2000, the Company had a net unrealized loss on equity securities
of $14. For the three and six months ended July 31, 1999, the Company had a net
unrealized gain (loss) on equity securities of $70 and ($319), respectively.
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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 and six month periods ended July 31, 2000 and 1999 are set
forth below (in thousands):
<TABLE>
<CAPTION>
Quarter ended July 31, 2000 Quarter ended July 31, 1999
----------------------------------- ---------------------------------
Petroleum Heating Petroleum Heating
Marketing Oil Total Marketing Oil Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales and operating revenues $ 306,344 $ 4,485 $ 310,829 $ 191,792 $ 3,218 $ 195,010
Other income 276 24 300 331 12 343
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306,620 4,509 311,129 192,123 3,230 195,353
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Cost of sales and operating
expenses (excluding depreciation
and amortization) 307,908 4,425 312,333 181,749 3,131 184,880
Selling, general and
administrative expenses 5,626 612 6,238 5,255 589 5,844
Depreciation and amortization 4,289 192 4,481 4,038 194 4,232
Interest expense 282 -- 282 236 -- 236
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318,105 5,229 323,334 191,278 3,914 195,192
------------------------------------------------------------------------
Earnings (loss) before provision
(credit) for income taxes (11,485) (720) (12,205) 845 (684) 161
Provision (credit) for
income taxes (4,640) (345) (4,985) 373 (302) 71
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Net earnings (loss) $ (6,845) $ (375) $ (7,220) 472 $ (382) $ 90
=========================================================================
Identifiable assets $ 170,019 $ 6,761 $ 176,780 $ 162,532 $ 7,354 $ 169,886
Capital expenditures 3,415 2 3,417 4,893 65 4,958
</TABLE>
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<TABLE>
<CAPTION>
Six months ended July 31, 2000 Six months ended July 31, 1999
----------------------------------- ---------------------------------
Petroleum Heating Petroleum Heating
Marketing Oil Total Marketing Oil Total
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales and operating revenues $ 580,599 $ 15,541 $ 596,140 $ 342,987 $ 10,993 $ 353,980
Other income 575 41 616 496 26 522
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581,174 15,582 596,756 343,483 11,019 354,502
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Cost of sales and operating
expenses (excluding depreciation
and amortization) 570,168 13,641 583,809 325,320 8,497 333,817
Selling, general and
administrative expenses 10,733 1,301 12,034 10,004 1,266 11,270
Depreciation and amortization 8,459 384 8,843 7,936 386 8,322
Interest expense 543 -- 543 495 -- 495
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589,903 15,326 605,229 343,755 10,149 353,904
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Earnings (loss) before provision
(credit) for income taxes (8,729) 256 (8,473) (272) 870 598
Provision (credit) for
income taxes (3,387) 99 (3,288) (120) 384 264
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Net earnings (loss) $ (5,342) $ 157 $ (5,185) $ (152) $ 486 $ 334
=========================================================================
Identifiable assets $ 170,019 $ 6,761 $ 176,780 $ 162,532 $ 7,354 $ 169,886
Capital expenditures 6,303 20 6,323 11,645 101 11,746
</TABLE>
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Quarter ended July 31, 2000 compared with quarter ended
July 31, 1999
Sales and operating revenues for the second fiscal quarter ended July
31, 2000 were $310.8 million as compared with $195.0 million for the same
quarter last year. The 59.4% increase in sales and operating revenues was
primarily due to a 60.3% increase in average selling prices (net of taxes) to
$1.16 per gallon from $.72 per gallon and a 1.0% increase in sales volume to
258.7 million gallons from 256.2 million gallons.
Gross profit (loss) before depreciation and amortization was $(1.5)
million for the three months ended July 31, 2000 as compared to $10.1 million
for the three months ended July 31, 1999. The decrease was principally due to a
$4.8 million LIFO inventory charge in the current quarter related to higher
product costs, a decrease in retail product margins of approximately 1.3 cents
per gallon which resulted in $3.1 million of lower gross profit, and higher
operating expenses of $4.2 million (primarily maintenance, environmental, credit
card and trucking expenses), partially offset by $.9 million of higher rental
income.
Other income was $.3 million for the each of the three months ended
July 31, 2000 and 1999. Included in other income for the three months ended July
31, 2000 and 1999 were $159,000 and $205,000, 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 July 31, 1999 also included a charge of $37,000 related to the early
termination of two leases under a master lease agreement with Realty.
Selling, general and administrative expenses were $6.2 million for the
three months ended July 31, 2000, an increase of $.4 million or 6.7% as compared
with the three months ended July 31, 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 salary and benefit costs.
Depreciation and amortization was $4.5 million for the three month
period ended July 31, 2000 as compared with $4.2 million for the three months
ended July 31, 1999. The increase was due to higher depreciation as a result of
capital expenditures and acquisitions.
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,
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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 over time we have only been modestly affected
by inflation since increased costs are passed along to customers to the extent
permitted by competition.
Results of Operations - Six months ended July 31, 2000 compared with six months
ended July 31, 1999
Sales and operating revenues for the six months ended July 31, 2000
were $596.1 million as compared with $354.0 million for the six months ended
July 31, 1999. The 68.4% increase in sales and operating revenues was primarily
due to a 66.7% increase in average selling prices (net of taxes) to $1.12 per
gallon from $.67 per gallon and a 2.9% increase in sales volume to 512.4 million
gallons from 497.7 million gallons.
Gross profit before depreciation and amortization was $12.3 million for
the six months ended July 31, 2000 as compared to $20.2 million for the six
months ended July 31, 1999. The decrease was principally due to a $5.8 million
LIFO inventory charge in the current period related to higher product costs,
higher operating expenses of $7.7 million (primarily maintenance, environmental,
credit card and trucking expenses) and $.6 million lower gross profit from our
heating oil operations. The decrease was partially offset by an increase in
retail product margins of approximately 0.7 cents per gallon which contributed
$3.2 million of additional gross profit, higher retail volumes which contributed
$2.0 million of additional gross profit, and $2.1 million of higher rental
income.
Other income was $.6 million for the six months ended July 31, 2000 as
compared with $.5 million for the six months ended July 31, 1999. Included in
other income for the six months ended July 31, 2000 and 1999 were $318,000 and
$432,000, respectively, of net fees received from Realty for administrative and
technical services we have provided pursuant to the services agreement since the
spin-off. The six months ended July 31, 1999 also included a charge of $218,000
related to the early termination of four leases under a master lease agreement
with Realty.
Selling, general and administrative expenses were $12.0 million for the
six months ended July 31, 2000 as compared with $11.3 million for the six months
ended July 31, 1999, an increase of 6.8%. The increase was primarily due to a
stock compensation charge of $.4 million resulting from changes in Getty's stock
price during the current six month period, and higher salary and benefit costs.
Depreciation and amortization was $8.8 million for the six month period
ended July 31, 2000 as compared with $8.3 million for the six months ended July
31, 1999. The increase was primarily due to higher depreciation as a result of
capital expenditures and acquisitions.
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Liquidity and Capital Resources
As of July 31, 2000, we had a working capital deficit of $12.9 million
as compared with a deficit of $10.6 million as of January 31, 2000. The decrease
in working capital was primarily due to $6.3 million of capital expenditures at
existing locations and $.7 million of capital expended at newly leased
locations, partially offset by working capital generated during the period from
operations. 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.
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 July 31, 2000, we utilized $8.7 million
of the lines of credit for short-term borrowings and $3.1 million 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 July 31, 2000, we leased 1,086 retail outlets (1,007 from Realty)
and 9 terminal facilities from Realty. Rent expense aggregated $29.9 million for
the six months ended July 31, 2000, including $28.1 million under the master
leases with Realty.
Our capital expenditures for the six months ended July 31, 2000 were
$6.3 million. Our capital expenditures include discretionary expenditures to
improve the image of the retail outlets, to replace service station equipment
and to improve the terminal facilities. In addition, during the six months ended
July 31, 2000, we spent $.7 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.
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<PAGE> 13
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 5. Other Information
The date by which proposals of security holders intended to be
presented at the next annual meeting, currently scheduled for June 21,
2001, must be received by the Company for inclusion in the proxy
statement for such meeting is December 31, 2000.
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: September 13, 2000 BY: /s/ Michael K. Hantman
---------------------------------
(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Principal Financial and
Accounting Officer)
Dated: September 13, 2000 BY: /s/ Leo Liebowitz
---------------------------------
(Signature)
LEO LIEBOWITZ
Chairman and
Chief Executive Officer
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