<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File Number 333-87371
---------
PETRO STOPPING CENTERS HOLDINGS, L.P.
(Exact name of the registrant as specified in its charter)
Delaware 74-2922482
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6080 Surety Dr.
El Paso, Texas 79905
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 779-4711
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__
-
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
--------------- ----------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,741 $ 15,858
Trade accounts receivable, net 7,439 8,689
Inventories, net 21,989 23,285
Other current assets 3,120 3,754
Due from affiliates 1,727 1,945
----------- -----------
Total current assets 49,016 53,531
Property and equipment, net 191,612 211,516
Deferred debt issuance costs, net 13,815 13,399
Other assets 11,597 12,386
Goodwill, net 35,504 34,150
----------- -----------
Total assets $ 301,544 $ 324,982
=========== ===========
Liabilities and Partners' Deficit
Current liabilities:
Current portion of long-term debt $ 1,001 $ 1,392
Trade accounts payable 10,767 4,237
Accrued expenses and other liabilities 20,426 21,966
Due to affiliates 25,537 35,616
----------- -----------
Total current liabilities 57,731 63,211
Long-term debt, excluding current portion 225,291 245,709
----------- -----------
Total liabilities 283,022 308,920
----------- -----------
Commitments and contingencies
Mandatorily redeemable preferred partnership interests 30,552 32,749
Contingently redeemable warrants 9,700 9,700
Partners' deficit:
General partners' (1,077) (1,242)
Limited partners' (20,097) (24,616)
Negative capital accounts of minority partners in consolidated
subsidiaries (556) (529)
----------- -----------
Total partners' deficit (21,730) (26,387)
----------- -----------
Total liabilities and partners' deficit $ 301,544 $ 324,982
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 2000 1999 2000
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Fuel (including motor fuel taxes) $ 132,256 $ 198,519 $ 357,154 $ 548,779
Non-fuel 51,492 58,266 148,607 163,636
-------------- ------------- ------------- -----------
Total net revenues 183,748 256,785 505,761 712,415
Costs and expenses:
Cost of sales -
Fuel (including motor fuel taxes) 122,512 186,390 328,427 514,018
Non-fuel 20,617 24,710 59,817 68,025
Operating expenses 25,843 28,787 73,630 82,335
General and administrative 4,663 4,669 14,423 13,749
Depreciation and amortization 3,872 4,757 10,542 13,632
Gain on disposition of fixed assets - - (849) (59)
-------------- ------------- ------------- -----------
Total costs and expenses 177,507 249,313 485,990 691,700
-------------- ------------ ------------- -----------
Operating income 6,241 7,472 19,771 20,715
Recapitalization costs (827) - (1,450) -
Equity in loss of affiliate (221) (22) (451) (111)
Interest income 180 79 379 285
Interest expense, net (6,635) (7,755) (16,861) (21,974)
-------------- ------------ ------------- -----------
Income (loss) before extraordinary item (1,262) (226) 1,388 (1,085)
Extraordinary item - write-off of debt restructuring
costs associated with retired debt (2,016) _ (2,016) -
-------------- ------------ ------------- -----------
Loss before minority interest (3,278) (226) (628) (1,085)
Minority interest in income of
consolidated subsidiaries 41 14 1,453 37
-------------- ------------ ------------- -----------
Net loss (3,319) (240) (2,081) (1,122)
Accrual of preferred return on mandatorily
redeemable preferred partnership interest (585) (751) (1,068) (2,197)
-------------- ------------ ------------- -----------
Net loss available to common partners $ (3,904) $ (991) $ (3,149) $ (3,319)
============== ============ ============= ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the Nine Months Ended September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Negative Capital
Accounts of
Minority
General Limited Partners in Total
Partners' Partners' Consolidated Partners'
Deficit Deficit Subsidiaries Deficit
--------- ---------- ---------------- -----------
<S> <C> <C> <C> <C>
Balances, December 31, 1999 $ (1,077) $ (20,097) $ (556) $ (21,730)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests (25) (2,172) - (2,197)
Partners' minimum tax distribution (127) (1,201) (10) (1,338)
Net income (loss) (13) (1,146) 37 (1,122)
--------- ---------- ---------------- -----------
Balances, September 30, 2000 $ (1,242) $ (24,616) $ (529) $ (26,387)
========= ========== ================ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,081) $ (1,122)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority interest in earnings of consolidated subsidiaries 1,453 37
Depreciation and amortization 10,542 13,632
Extraordinary item - write-off of debt restructuring costs
associated with retired debt 2,016 -
Deferred debt issuance cost amortization 1,247 1,124
Accretion of original issue discount 1,491 6,531
Bad debt expense 185 229
Equity in loss of affiliate 451 111
Gain on disposition of assets (849) (59)
Increase (decrease) from changes in:
Trade accounts receivable (6,407) (1,479)
Inventories (2,765) (1,296)
Other current assets 512 (634)
Due from affiliates (712) (218)
Due to affiliates 7,545 10,079
Trade accounts payable 4,358 (6,530)
Accrued expenses and other liabilities 224 1,488
-------- --------
Net cash provided by operating activities 17,210 21,893
-------- --------
Cash flows from investing activities:
Proceeds from disposition of assets 1,394 126
Purchases of property and equipment (22,123) (32,224)
Purchase of minority interests in consolidated subsidiary (57,756) -
Increase in other assets, net (3,292) (910)
-------- --------
Net cash used in investing activities (81,777) (33,008)
-------- --------
Cash flows from financing activities:
Repayments of bank debt (1,400) (12,100)
Proceeds from bank debt 1,400 27,000
Repayments of long-term debt and capital lease (39,254) (622)
Proceeds from long-term debt issuance 70,300 -
Purchase of warrants from Warrant Holdings (9,700) -
Proceeds from the sale of warrants 9,700 -
Partners' minimum tax distributions (2,100) (1,338)
Cash contributions - preferred 5,000 -
Cash contributions - common 39,700 -
Payment of debt issuance and consent costs (6,472) (708)
-------- --------
Net cash provided by financing activities 67,174 12,232
-------- --------
Net increase in cash and cash equivalents 2,607 1,117
Cash and cash equivalents, beginning of period 13,183 14,741
-------- --------
Cash and cash equivalents, end of period $ 15,790 $ 15,858
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 2000
-------- --------
<S> <C> <C>
Supplemental cash flow information -
Interest paid during the period, net of capitalized interest of $114 and $717
in 1999 and 2000 $ 17,082 $ 17,585
Non-cash activities -
Preferred return on mandatorily redeemable preferred partnership interest 1,068 2,197
Assignment of mandatorily redeemable preferred partnership interests
and accrued but unpaid preferred returns 24,331 -
Preferred return from minority partners of consolidated subsidiaries
on mandatorily redeemable preferred partnership interests 617 -
Issuance of accreted value of 15.0% New Senior Discount Notes due
2008, without Warrants to Chartwell 11,272 -
Accrual of Fair Value of contingently redeemable warrants 9,700 -
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements, which
include the accounts of Petro Stopping Centers Holdings, L.P. and its
subsidiaries (the "Company"), have been prepared in accordance with the
instructions to Form 10-Q and, therefore, certain financial information has been
condensed and certain-footnote disclosures have been omitted. Such information
and disclosures are normally included in the financial statements prepared in
accordance with generally accepted accounting principles.
These unaudited condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto in the
Annual Report of the Company on Form 10-K for the year ended December 31, 1999
("1999 Form 10-K"). Capitalized terms used in this report and not defined herein
have the meanings ascribed to such terms in the 1999 Form 10-K. In the opinion
of management of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of the Company at December 31, 1999 and September 30, 2000, the results
of operations for the three and nine months ended September 30, 1999 and
September 30, 2000, partners' deficit for the nine months ended September 30,
2000, and cash flows for the nine months ended September 30, 1999 and September
30, 2000. The results of operations for the three and nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the full calendar year.
The Company's fuel revenues and cost of sales include a significant
amount of federal and state motor fuel taxes. Such taxes were $50.4 million and
$60.4 million for the three month periods ended September 30, 1999 and September
30, 2000, respectively, and $152.6 million and $176.7 million for the nine month
periods ended September 30, 1999 and September 30, 2000, respectively.
(2) Significant Accounting Policies
Reclassifications
Certain prior period amounts have been reclassified to conform to
current year presentation.
(3) Segments
The Company through its subsidiary Petro Stopping Centers, L.P. (the
"Operating Partnership"), operates large, multi-service truck stops in the
United States. The Operating Partnership's facilities, which are known as "Petro
Stopping Centers(R)," offer a broad range of products, services, and amenities,
including diesel fuel, gasoline, homestyle restaurants, truck preventive
maintenance centers, and retail merchandise stores to the professional truck
driver industry and other highway motorists. The Company has aggregated the
Operating Partnership's company truck stop operations into one reportable
operating segment based on the distribution of products and services under one
common site facility, classified as a multi-service truck stop. During the three
months ended September 30, 1999 and September 30, 2000, the revenues generated
from the Operating Partnership's truck stop operations were $182.4 million and
$255.3 million, respectively, and $502.1 million and $708.2 million for the nine
months ended September 30, 1999 and September 30, 2000, respectively.
As of September 30, 2000, the Company, through the Operating
Partnership, is also a franchisor to 23 Petro Stopping Center locations. The
Company collects royalties and fees in exchange for the use of the Operating
Partnership's tradenames and trademarks and for certain services provided to the
franchisees. Franchise fees are based generally upon a percentage of a
franchisee's sales. Given the relative insignificance of initial franchise fees
and other revenue types, the Company reports a total combined franchise revenue
amount. Revenues generated from the Operating Partnership's franchise operations
were $1.3 million and $1.5 million during the three months ended September 30,
1999 and September 30, 2000, respectively, and $3.7 million and $4.2 million for
the nine months ended September 30, 1999 and September 30, 2000, respectively.
These revenues are included in non-fuel revenues reported on the accompanying
unaudited consolidated statements of operations. The Company does not allocate
any expenses or assets in measuring this segment's profit and loss, nor does it
believe there are any significant commitments or obligations resulting from
these franchise agreements.
6
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(4) Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair market value. SFAS No. 133 requires that changes in a derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gain and loss to offset related results on the hedged item in the income
statement and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 was originally effective for fiscal years beginning after June 15, 1999, but
has been postponed by Statement of Financial Accounting Standard No. 137, "An
Amendment of SFAS No. 133," for one year with a mandatory effective date for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133
cannot be applied retroactively. In June 2000, Statement of Financial Accounting
Standard No. 138, "An Amendment of SFAS No. 133," was issued to address a
limited number of issues causing implementation difficulties for numerous
entities that applied SFAS No. 133. The Company currently expects to adopt SFAS
No. 133, as amended, as of January 1, 2001. Management does not believe that the
adoption of this statement will have significant impact on the Company's
financial statements or results of operations.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information contained in this Item 2 updates, and should be read in
conjunction with, the information set forth in Part II, Item 7 of the Company's
1999 Form 10-K.
Certain sections of this Form 10-Q, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations," contain various
"forward-looking" statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which represent the Company's expectations or beliefs
concerning future events that involve risks and uncertainties. All statements
other than statements of historical facts included in this Form 10-Q may be
considered forward-looking statements. The Company cautions that these
statements are further qualified by important factors, some of which the Company
has little or no control over, that could cause actual results to differ
materially from those in the forward-looking statements. Such factors include
without limitation, general economic change, legislative regulation, and market
change.
The forward-looking statements are included in the following sections
of this Item, including, without limitation, "-Network Development," "-Results
of Operations," and "-Liquidity and Capital Resources." The Company, in the
preparation of its financial statements, also makes various estimates and
assumptions that are forward-looking statements.
Overview
We, through our subsidiary Petro Stopping Centers, L.P. (the
"Operating Partnership"), operate large, multi-service truck stops in the United
States. The Operating Partnership's facilities, which are known as "Petro
Stopping Centers(R)," offer a broad range of products, services, and amenities,
including diesel fuel, gasoline, home-style restaurants, truck preventive
maintenance centers, and retail merchandise stores to the professional truck
driver industry and other highway motorists. We have aggregated our Operating
Partnership's company truck stop operations into one reportable operating
segment based on the distribution of products and services under one common site
facility, classified as a multi-service truck stop. During the three months
ended September 30, 1999 and September 30, 2000, the revenues generated from our
Operating Partnership's truck stop operations were $182.4 million and $255.3
million, respectively, and $502.1 million and $708.2 million for the nine months
ended September 30, 1999 and September 30, 2000, respectively.
As of September 30, 2000, we are, through our Operating Partnership,
also a franchisor to 23 Petro Stopping Center locations. We collect royalties
and fees in exchange for the use of the Operating Partnership's tradenames and
trademarks and for certain services provided to the franchisees. Franchise fees
are based generally upon a percentage of a franchisee's sales. Given the
relative insignificance of initial franchise fees and other revenue types, we
report a total combined franchise revenue amount. Revenues generated from our
Operating Partnership's franchise operations were $1.3 million and $1.5 million
during the three months ended September 30, 1999 and September 30, 2000,
respectively, and $3.7 million and $4.2 million for the nine months ended
September 30, 1999 and September 30, 2000, respectively. These revenues are
included in non-fuel revenues reported on the accompanying unaudited
consolidated statements of operations. We do not allocate any expenses or assets
in measuring this segment's profit and loss, nor do we believe there are any
significant commitments or obligations resulting from these franchise
agreements.
We derive our revenues from:
. the sale of diesel and gasoline fuels;
. non-fuel items, including the sale of merchandise and offering of
services including truck tire sales and preventative maintenance,
showers, laundry, video games, franchise royalties, and other
operations; and
. restaurant operations which include the Iron Skillet(R)and
fast-food operations.
8
<PAGE>
The following table sets forth our total consolidated revenues by major
source:
<TABLE>
<CAPTION>
SUMMARY OF SOURCES OF REVENUES
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------- -------------------------------------------
1999 2000 1999 2000
------------------- ------------------- -------------------- -------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel $ 132,256 72.0% $ 198,519 77.3% $ 357,154 70.6% $ 548,779 77.0%
Non-Fuel 37,118 20.2% 42,191 16.4% 107,247 21.2% 118,087 16.6%
Restaurant 14,374 7.8% 16,075 6.3% 41,360 8.2% 45,549 6.4%
------------------ ------------------ ------------------- ------------------
Total Net Revenues $ 183,748 100.0% $ 256,785 100.0% $ 505,761 100.0% $ 712,415 100.0%
================== ================== =================== ==================
</TABLE>
Our fuel revenues and cost of sales include a significant amount of
federal and state motor fuel taxes. Such taxes were $50.4 million and $60.4
million for the three month periods ended September 30, 1999 and September 30,
2000, respectively, and $152.6 million and $176.7 million for the nine month
periods ended September 30, 1999 and September 30, 2000, respectively.
No provision for income taxes is reflected in the accompanying
financial statements because we are organized as a partnership; taxable income
and tax deductions are passed through to the individual partners.
Network Development
The following table sets forth the development of our Operating
Partnership's Stopping Center network since 1996:
<TABLE>
<CAPTION>
As of September 30,
-------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Company-operated 26 28 28 29 33
Franchised 15 17 21 22 23
---- ---- ---- ---- ----
Total Stopping Centers 41 45 49 51 56
==== ==== ==== ==== ====
</TABLE>
The following table sets forth information on Stopping Centers opened
from September 30, 1996 through September 30, 2000, all but two of which are
full-sized facilities.
Location Date Opened
-------- -----------
Company-operated:
North Baltimore, Ohio August 1997
North Little Rock, Arkansas September 1997
Wheeler Ridge, California June 1999
Jackson, Mississippi November 1999
Mebane, North Carolina April 2000
Glendale, Kentucky June 2000
Carlisle, Pennsylvania September 2000
Franchised:
York, Nebraska December 1996
Dupont, Pennsylvania May 1997
Claysville, Pennsylvania November 1997
Breezewood, Pennsylvania February 1998
Milton, Pennsylvania March 1998
Monee, Illinois April 1998
Lowell, Indiana April 1999
Racine, Wisconsin December 1999
In September 2000, we purchased land in Hermiston, Oregon for the
construction of a new Petro Stopping Center. At September 30, 2000, we had a new
Petro Stopping Center under construction in North Las Vegas, Nevada, which is
scheduled to open in January 2001. Also, in September 2000, we commenced
operation of the truck diesel fuel island portion of an existing truckstop in
Carlisle, Pennsylvania and acquired this facility in October 2000. The Carlisle
facility will undergo remodeling and we will construct a new main building
scheduled for completion in October 2001. At the time of the Carlisle,
Pennsylvania acquisition, we entered into an agreement with the seller of that
facility for a new Petro franchise location in Frystown, Pennsylvania. We also
entered into a lease of an existing truckstop in Los Banos, California in
October 2000, which will be opened as a Petro:2 Center.
9
<PAGE>
Pursuant to a notice previously received from the Twin Falls
franchisee, the Twin Falls, Idaho franchise will cease operations as a Petro
Stopping Center in December 2000. In August 2000, we decided not to exercise our
right to retain the Twin Falls site in our network. We do not believe that the
loss of the Twin Falls, Idaho franchise will have a material adverse effect on
our results of operations or network offerings to our customers.
In addition to our currently operational 23 franchise locations, in
December 1998, we had signed an agreement for a new franchise location in
Frederick, Maryland, which was terminated by us in September 2000.
Results of Operations
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Overview. Our net revenues of $712.4 million increased 40.9% in the
first nine months of 2000 from $505.8 million in the first nine months of 1999.
On a "comparable unit" basis, revenues increased by 35.7% to $666.2 million from
$490.9 million in the prior year. The increases were primarily due to an
increase in fuel revenues from the prior year as a result of an increase in our
average retail-selling price per fuel gallon, as well as an increase in the
volume of fuel gallons sold from the prior year. Operating expenses increased
11.8% to $82.3 million from $73.6 million in the prior year due mainly to
employee-related costs due in part to the opening of four new truckstop
locations, marketing expenses, and new site pre-opening expenses. General and
administrative expenses decreased 4.7% to $13.7 million from $14.4 million in
the prior year primarily due to the discontinuance of management fees formerly
paid to certain partners prior to the consummation of our Recapitalization in
July 1999. A Petro Stopping Center is considered a "comparable unit" as to a
particular period in the current year if it was open during the same period of
the prior year.
Fuel. Revenues increased 53.7% to $548.8 million in the first nine
months of 2000 compared to $357.2 million in the first nine months of 1999. Fuel
revenues increased primarily due to a 34.0% increase in our average
retail-selling price per fuel gallon stemming from higher fuel costs compared to
the prior year. The increase in fuel revenues was also due to a 14.7% increase
in fuel volumes. We believe the increased volume is due primarily to the success
of our various marketing programs, our continued commitment to customer service,
as well as the addition of our new sites. Gross profits increased by 21.0% to
$34.8 million for the nine months ended September 30, 2000, compared to $28.7
million for the prior year. On a "comparable unit" basis, fuel revenues
increased 48.8% primarily due to a 35.1% increase in our average retail-selling
price per fuel gallon compared to the prior year. The increase in fuel revenues
was also due to a 10.2% increase in fuel volumes. Gross profits increased by
20.8% or $5.7 million for the nine months ended September 30, 2000, compared to
the prior year.
Non-Fuel. Revenues increased 10.1% to $118.1 million in the first nine
months of 2000 from $107.2 million in the first nine months of 1999. The
increase in non-fuel revenues is primarily due to an 11.0% or $8.6 million
increase in sales at our retail stores and lube facilities due in part to the
addition of our new sites. Gross profits increased 6.8% to $63.1 million in the
first nine months of 2000 from $59.1 million in the first nine months of 1999.
In addition to the increase in sales, we believe the improved margins reflect
the results of improved product procurement and our continued focus on margin
management. On a "comparable unit" basis, non-fuel revenues increased 5.7% or
$6.1 million compared to the prior year and gross profits increased 2.9% or $1.7
million compared to the prior year.
Restaurant. Revenues increased 10.1% to $45.5 million in the first nine
months of 2000 compared to $41.4 million in the first nine months of 1999. We
believe revenues increased due to the addition of our new sites, increased
customer traffic, and previous changes in the core menu and featured meal
specials, resulting in an average ticket price increase of 4.7%. Gross profits
in the restaurants improved by 9.4% or $2.8 million. On a "comparable unit"
basis, restaurant revenues increased 4.4% or $1.8 million compared to the prior
year, while gross profits increased by 4.0% or $1.2 million.
Costs and Expenses. Total costs and expenses increased 42.3% to $691.7
million in the first nine months of 2000 compared to $486.0 million in the first
nine months of 1999. On a "comparable unit" basis, total costs and expenses
increased 36.5% or $172.0 million compared to the prior year. Cost of sales
increased 49.9% or $193.8 million from the prior year due mainly to
significantly higher fuel costs in the current year. Operating expenses
increased 11.8% or $8.7 million to $82.3 million for the first nine months of
2000 compared to the prior year. The increase is primarily due to a $5.2 million
increase in employee-related costs due in part to the opening of four new
truckstop locations, a $2.0 million increase in marketing expenses, and an
increase in new site pre-opening expenses of $1.0 million, all of which were
partially offset by a $916,000 decrease in system project costs. On a
"comparable
10
<PAGE>
unit" basis, operating expenses increased 4.5% or $3.3 million to $76.2 million
compared to the first nine months of 1999. The increase is primarily due to a
$1.3 million increase in employee-related costs and a $1.6 million increase in
marketing expenses, both of which were partially offset by a $916,000 decrease
in system project costs. General and administrative expenses decreased 4.7% or
$674,000 to $13.7 million compared to the prior year primarily due to the
discontinuance of management fees formerly paid to certain partners prior to the
consummation of our Recapitalization in July 1999.
Equity in Loss of Affiliate. We recognized a $111,000 loss related to
our investment in the Wheeler Ridge facility in Southern California, as is
typical in the early stages of operation of a new Stopping Center. This Stopping
Center began operations in June 1999.
Interest Expense, net. Interest expense, net, increased $5.1 million or
30.3% in the first nine months of 2000 compared to the first nine months in 1999
primarily due to the issuance of the 15% Notes in July 1999.
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Overview. Our net revenues of $256.8 million increased 39.7% in the
third quarter of 2000 from $183.7 million in the third quarter of 1999. On a
"comparable unit" basis, revenues increased by 31.2% to $234.0 million from
$178.4 million in the prior year quarter. The increases were primarily due to an
increase in fuel revenues from the prior year quarter as a result of an increase
in our average retail-selling price per fuel gallon, as well as an increase in
the volume of fuel gallons sold from the prior year quarter. Operating expenses
increased 11.4% to $28.8 million from $25.8 million in the prior year quarter
due mainly to employee-related costs due in part to the opening of four new
truckstop locations. General and administrative expenses in the third quarter of
2000 approximated the prior year quarter. A Petro Stopping Center is considered
a "comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year.
Fuel. Revenues increased 50.1% to $198.5 million in the third quarter
of 2000 compared to $132.3 million in the third quarter of 1999. Fuel revenues
increased primarily due to a 26.5% increase in our average retail-selling price
per fuel gallon stemming from higher fuel costs compared to the prior year
quarter. The increase in fuel revenues was also due to an 18.7% increase in fuel
volumes. We believe the increased volume is due primarily to the success of our
various marketing programs, our continued commitment to customer service, as
well as the addition of our new sites. Gross profits increased by 24.5% to $12.1
million for the three months ended September 30, 2000, compared to $9.7 million
for the prior year quarter. On a "comparable unit" basis, fuel revenues
increased 41.5% primarily due to a 28.2% increase in our average retail-selling
price per fuel gallon compared to the prior year quarter. The increase in fuel
revenues was also due to a 10.3% increase in fuel volumes. Gross profits
increased by 21.8% or $2.0 million for the three months ended September 30,
2000, compared to the prior year quarter.
Non-Fuel. Revenues increased 13.7% to $42.2 million in the third
quarter of 2000 from $37.1 million in the third quarter of 1999. The increase in
non-fuel revenues is primarily due to a 16.9% or $4.5 million increase in sales
at our retail stores and lube facilities due in part to the addition of our new
sites. Gross profits increased 6.9% to $22.0 million in the three months ended
September 30, 2000 from $20.6 million in the prior year quarter. In addition to
the increase in sales, we believe the improved margins reflect the results of
improved product procurement and our continued focus on margin management. On a
"comparable unit" basis, non-fuel revenues increased 6.5% or $2.4 million
compared to the prior year quarter and gross profits increased 0.8% or $156,000
compared to the prior year quarter.
Restaurant. Revenues increased 11.8% to $16.1 million in the third
quarter of 2000 compared to $14.4 million in the third quarter of 1999. We
believe revenues increased due to the addition of our new sites, increased
customer traffic, and previous changes in the core menu and featured meal
specials, resulting in an average ticket price increase of 5.9%. Gross profits
in the restaurants improved by 12.2% or $1.3 million. On a "comparable unit"
basis, restaurant revenues increased 3.4% or $496,000 compared to the prior year
quarter, while gross profits increased by 4.0% or $415,000.
Costs and Expenses. Total costs and expenses increased 40.5% to $249.3
million in the third quarter of 2000 compared to $177.5 million in the third
quarter of 1999. On a "comparable unit" basis, total costs and expenses
increased 31.4% or $54.1 million compared to the prior year quarter. Cost of
sales increased 47.5% or $68.0 million from the prior year quarter due mainly to
significantly higher fuel costs in the current year. Operating expenses
increased 11.4% or $2.9 million to $28.8 million for the third quarter of 2000
compared to the prior year quarter. The
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increase is primarily due to a $2.0 million increase in employee-related costs
due in part to the opening of four new truckstop locations. On a "comparable
unit" basis, operating expenses in the third quarter of 2000 increased 2.8% or
$721,000 to $26.3 million compared to the third quarter of 1999. General and
administrative expenses for the third quarter of 2000 approximated the prior
year quarter.
Equity in Loss of Affiliate. We recognized a $22,000 loss related to
our investment in the Wheeler Ridge facility in Southern California, as is
typical in the early stages of operation of a new Stopping Center. This Stopping
Center began operations in June 1999.
Interest Expense, net. Interest expense, net, increased 16.9% or $1.1
million in the third quarter of 2000 compared to the third quarter of 1999
primarily due to the issuance of the 15% Notes in July 1999. Additionally,
interest expense increased $367,000 resulting from increased borrowings in the
third quarter of 2000 compared to the prior year quarter.
Liquidity and Capital Resources
Currently our principal sources of liquidity are:
. Borrowings under our senior credit facility, which consists of an
$85.0 million revolving credit facility and a $40.0 million term
loan, providing an aggregate borrowing up to $125.0 million; and
. Cash flows from operating activities, which were $17.2 million and
$21.9 million for the nine months ended September 30, 1999 and
September 30, 2000, respectively. The increase for the first nine
months of 2000 as compared to the same period in 1999, was
primarily due to the timing of receipts related to trade accounts
receivable and to normal fluctuations in the timing of payments to
Mobil Diesel Supply Corporation for fuel purchases offset by
variations in the timing related to trade account payables.
We had negative working capital of $8.7 million and $9.7 million at
December 31, 1999 and September 30, 2000, respectively. Negative working capital
is normal in the truckstop industry. Diesel fuel inventory turns every two to
three days, while payment is generally required over a longer period of time.
Approximately 74.0% of our sales are cash sales (or the equivalent in the case
of credit card sales or sales paid for by check which are funded on a daily
basis by third-party billing companies).
Our senior credit facility consists of an $85.0 million revolving
credit facility and a $40.0 million term loan. At September 30, 2000, we had
standby letters of credit issued for approximately $2.6 million and
approximately $14.9 million in borrowings outstanding on the revolving credit
facility resulting in remaining borrowing availability of $67.5 million.
Principal payments on the term loan are due quarterly, beginning September 30,
2000. The first sixteen quarterly payments due are $250,000 each.
Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $2.2 million for the nine months ended September 30, 2000.
The dividends are only payable in cash if permitted by our then existing debt
instruments. Our various credit agreements currently restrict payment of
dividends on the mandatorily redeemable preferred partnership interests.
Capital expenditures totaled $32.2 million for the nine months ended
September 30, 2000. Included in capital expenditures were funds spent on
existing Petro Stopping Centers of approximately $6.4 million and acquisition
and construction of new facilities of approximately $25.8 million.
We currently expect to invest approximately $17.4 million during the
remainder of 2000 on capital expenditures. Of this amount, we believe
approximately $13.5 million will be spent on new sites and $3.9 million will be
spent on regular capital maintenance and volume building projects. These capital
outlays will be funded through borrowings under our senior credit facility and
internally generated cash.
We are partially self-insured, paying our own employment practices,
workers' compensation, general liability, and group health benefit claims, up to
stop-loss amounts ranging from $50,000 to $250,000 on a per occurrence basis.
During the nine months ended September 30, 2000, we paid $6.4 million on claims
related to these self-insurance programs. Provisions established under these
self-insurance programs are made for both estimated losses on known claims and
claims incurred but not reported, based on claims history. For the nine months
ended September 30, 2000,
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aggregated provisions amounted to $6.8 million. At September 30, 2000, the
aggregated accrual amounted to approximately $4.7 million, which we believe is
adequate to cover both reported and incurred but not reported claims.
We believe that internally generated funds, together with amounts
available under the senior credit facility, will be sufficient to satisfy our
cash requirements for operations through the year 2000 and the foreseeable
future thereafter. We also expect that current and future expansion and
acquisitions will be financed from funds generated from operations, the senior
credit facility, and to the extent necessary, additional financing.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk due to changes in commodity prices and
interest rates. For a complete discussion of our market risks and our market
risk sensitive assets and liabilities, please refer to Item 7A, "Quantitative
and Qualitative Disclosures about Market Risk," included in our 1999 Form 10-K.
At September 30, 2000, we were party to an interest rate swap agreement
with an aggregate principal amount of $19.9 million. Under the agreement, we pay
a fixed rate of 6.395% in exchange for a floating rate based on LIBOR on the
aggregate principal amount as determined in three-month intervals. The
transaction effectively changes a portion of our interest rate exposure from a
floating rate to a fixed rate basis. The effect of the swap was to increase the
rate we were required to pay by .04%, which resulted in additional interest
expense of approximately $6,000.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are party to various ordinary litigation incidental to our business
for which estimates of losses have been accrued, when appropriate. In our
opinion, such proceedings will not have a material adverse effect on our
financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Incorporated herein by reference is a list of Exhibits contained in the
Exhibit Index on page 16 of this Quarterly Report.
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
September 30, 2000.
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SIGNATURE
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.
PETRO STOPPING CENTERS HOLDINGS, L.P.
(Registrant)
Date: November 13, 2000 By: /s/ David A. Appleby
-----------------------------------------
David A. Appleby
Vice President of Finance and
Treasurer (on behalf of Registrant
and as Registrant's Principal
Financial and Chief Accounting
Officer)
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EXHIBIT INDEX
Exhibit No. Exhibit Description
----------- -------------------
3.1 (aa) Certificate of Limited Partnership of Petro Stopping Centers
Holdings, L.P.
3.2 (aa) Limited Partnership Agreement of Petro Stopping Centers
Holdings, L.P., dated July 23, 1999
27* Financial Data Schedule
_________
(aa) Incorporated by reference. Filed with the Company's Registration Statement
on Form S-4 (Registration No. 333-87371) filed on September 17, 1999.
* Filed herewith.
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