<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 June 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, June 30,
1999 2000
----------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,741 $ 11,148
Trade accounts receivable, net 7,439 9,250
Inventories, net 21,989 24,439
Other current assets 3,120 3,147
Due from affiliates 1,727 1,767
----------- -----------
Total current assets 49,016 49,751
Property and equipment, net 191,612 205,141
Deferred debt issuance costs, net 13,815 13,801
Other assets 11,597 11,994
Goodwill, net 35,504 34,604
----------- -----------
Total assets $ 301,544 $ 315,291
=========== ===========
Liabilities and Partners' Deficit
Current liabilities:
Current portion of long-term debt $ 1,001 $ 1,519
Trade accounts payable 10,767 3,845
Accrued expenses and other liabilities 20,426 23,195
Due to affiliates 25,537 33,391
----------- -----------
Total current liabilities 57,731 61,950
Long-term debt, excluding current portion 225,291 236,476
----------- -----------
Total liabilities 283,022 298,426
----------- -----------
Commitments and contingencies
Mandatorily redeemable preferred partnership
interests 30,552 31,998
Contingently redeemable warrants 9,700 9,700
Partners' deficit:
General partners' (1,077) (1,216)
Limited partners' (20,097) (23,084)
Negative capital accounts of minority
partners in consolidated subsidiaries (556) (533)
----------- -----------
Total partners' deficit (21,730) (24,833)
----------- -----------
Total liabilities and partners' deficit $ 301,544 $ 315,291
=========== ===========
</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>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 2000 1999 2000
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues:
Fuel (including motor fuel taxes): $118,017 $175,868 $224,898 $350,260
Non-fuel 50,423 55,272 97,115 105,370
--------- -------- -------- --------
Total net revenues 168,440 231,140 322,013 455,630
Costs and expenses:
Cost of sales -
Fuel (including motor fuel taxes) 108,292 164,005 205,915 327,628
Non-fuel 20,482 23,080 39,200 43,315
Operating expenses 24,382 27,573 47,787 53,548
General and administrative 4,953 4,261 9,760 9,080
Depreciation and amortization 3,403 4,496 6,670 8,875
(Gain) loss on disposition of fixed assets (865) 10 (849) (59)
--------- -------- -------- --------
Total costs and expenses 160,647 223,425 308,483 442,387
--------- -------- -------- --------
Operating income 7,793 7,715 13,530 13,243
Recapitalization costs (623) - (623) -
Equity in income (loss) of affiliate (230) 18 (230) (89)
Interest income 101 67 199 206
Interest expense, net (5,166) (6,931) (10,226) (14,219)
--------- -------- -------- --------
Income (loss) before minority interest 1,875 869 2,650 (859)
Minority interest in income of
consolidated subsidiaries 999 18 1,412 23
--------- -------- -------- --------
Net income (loss) 876 851 1,238 (882)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests (243) (729) (483) (1,446)
--------- -------- -------- --------
Net income (loss) available to common partners $ 633 $ 122 $ 755 $ (2,328)
========= ======== ======== ========
</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 Six Months Ended June 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Negative Capital
Accounts of
Minority
General Limited Partners 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 (16) (1,430) - (1,446)
Partners' minimum tax distribution (112) (663) - (775)
Net income (loss) (11) (894) 23 (882)
-------------- -------------- -------------- --------------
Balances, June 30, 2000 $ (1,216) $ (23,084) $ (533) $ (24,833)
============== ============== ============== ==============
</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>
Six Months Ended
June 30,
1999 2000
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,238 $ (882)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Minority interest in earnings of consolidated subsidiaries 1,412 23
Depreciation and amortization 6,670 8,875
Deferred debt issuance cost amortization 837 676
Accretion of original issue discount - 4,248
Bad debt expense 122 155
Equity in loss of affiliate 230 89
Gain on disposition of assets (849) (59)
Increase (decrease) from changes in:
Trade accounts receivable (4,289) (1,966)
Inventories (1,470) (2,450)
Other current assets 485 (27)
Due from affiliates (603) (40)
Due to affiliates 7,611 7,854
Trade accounts payable 4,080 (6,922)
Accrued expenses and other liabilities 4,212 2,732
---------------- ----------------
Net cash provided by operating activities 19,686 12,306
---------------- ----------------
Cash flows from investing activities:
Proceeds from disposition of assets 1,394 126
Purchases of property and equipment (9,647) (21,554)
Increase in other assets, net (2,201) (489)
---------------- ----------------
Net cash used in investing activities (10,454) (21,917)
---------------- ----------------
Cash flows from financing activities:
Proceeds from expansion loan 1,400 -
Proceeds from bank debt - 7,700
Repayments of long-term debt and capital lease (2,479) (245)
Partners' minimum tax distributions (1,935) (775)
Payment of debt issuance costs - (662)
---------------- ----------------
Net cash provided by (used in) financing activities (3,014) 6,018
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 6,218 (3,593)
Cash and cash equivalents, beginning of period 13,183 14,741
---------------- ----------------
Cash and cash equivalents, end of period $ 19,401 $ 11,148
================ ================
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information -
Interest paid during the period, net of capitalized interest of $21 and $589
in 1999 and 2000 $ 9,255 $ 9,290
Non-cash activities -
Preferred return on mandatorily redeemable preferred partnership interests 1,033 1,446
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<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 June 30, 2000, the results of operations for the
three and six months ended June 30, 1999 and June 30, 2000 and cash flows for
the six months ended June 30, 1999 and June 30, 2000. The results of operations
for the three and six months ended June 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 $58.7
million for the three month periods ended June 30, 1999 and June 30, 2000,
respectively, and $102.2 million and $116.3 million for the six month periods
ended June 30, 1999 and June 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, 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, home-style 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 June 30, 1999 and
June 30, 2000, the revenues generated from the Operating Partnership's truck
stop operations were $167.0 million and $229.7 million, respectively, and $319.6
million and $452.9 million for the six months ended June 30, 1999 and June 30,
2000, respectively.
As of June 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 revenue amount. Revenues generated
from the Operating Partnership's franchise operations were $1.4 during the three
months ended June 30, 1999 and June 30, 2000 and $2.4 million and $2.7 million
for the six months ended June 30, 1999 and June 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.
5
<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.
(5) Related Party Transactions
For a full discussion of the Company's related party transactions, please
refer to Note 9 of the notes to the consolidated financial statements included
in the Company's 1999 Form 10-K.
Effective March 2000, the Company entered into a three year agreement with
C&R Distributing, Inc., a Texas corporation ("C&R"), which is 100% owned by J.A.
Cardwell, Sr. and his affiliates. Under the Agreement, C&R will provide fuel
delivery services to certain Petro Stopping Centers as designated by the
Company. The Agreement provides for one-year renewal terms upon expiration of
the first three years and may be terminated by either party on 90 days prior
notice. Pricing under the Agreement is capped at the average of the two lowest
common carrier bids obtained by the Company, and to the extent C&R is able to
deliver the services for less than the capped rate, the Company will receive a
rebate equal to 50.0% of the difference between the capped rate and actual
costs.
In May 2000, the Company and Volvo entered into an agreement authorizing
the Company, on a non-exclusive basis, to operate as a Volvo parts and service
center providing parts for and service to trucks under the VOLVO nameplate.
Under the terms of the Agreement, the Company is authorized to provide a limited
range of repair and maintenance services and light warranty service work. The
Agreement also provides a pricing schedule for Volvo parts ordered by the
Company.
6
<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 June 30, 1999 and
June 30, 2000, the revenues generated from our Operating Partnership's truck
stop operations were $167.0 million and $229.7 million, respectively, and $319.6
million and $452.9 million for the six months ended June 30, 1999 and June 30,
2000, respectively.
As of June 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 revenue amount. Revenues generated from our Operating
Partnership's franchise operations were $1.4 million during the three months
ended June 30, 1999 and June 30, 2000 and $2.4 million and $2.7 million for the
six months ended June 30, 1999 and June 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.
The following table sets forth our total consolidated revenues by major
source:
<TABLE>
<CAPTION>
SUMMARY OF SOURCES OF REVENUES
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------- ----------------------------------------------
1999 2000 1999 2000
------------------ ------------------ ------------------- --------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Fuel $118,017 70.1% $175,868 76.1% $224,898 69.8% $350,260 76.9%
Non-Fuel 36,573 21.7% 40,037 17.3% 70,129 21.8% 75,896 16.7%
Restaurant 13,850 8.2% 15,235 6.6% 26,986 8.4% 29,474 6.4%
------------------ ------------------ ------------------- --------------------
Total Net Revenue $168,440 100.0% $231,140 100.0% $322,013 100.0% $455,630 100.0%
================== ================== =================== ====================
</TABLE>
7
<PAGE>
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 $58.7 million for
the three month periods ended June 30, 1999 and June 30, 2000, respectively, and
$102.2 million and $116.3 million for the six month periods ended June 30, 1999
and June 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 June 30,
---------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Company-operated 26 26 28 29 32
Franchised 15 17 21 22 23
---- ---- ---- ---- ----
Total Stopping Centers 41 43 49 51 55
==== ==== ==== ==== ====
</TABLE>
The following table sets forth information on Stopping Centers opened from
June 30, 1996 through June 30, 2000, all but two of which are full-sized
facilities.
<TABLE>
<CAPTION>
Location Date Opened
-------- -----------
<S> <C>
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
Franchised:
York, Nebraska December 1996
Scranton, 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
</TABLE>
Results of Operations
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Overview. Our net revenues of $455.6 million increased 41.5% in the first
six months of 2000 from $322.0 million in the first six months of 1999. On a
"comparable unit" basis, revenues increased by 38.3% to $432.2 million from
$312.5 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
12.1% to $53.5 million from $47.8 million in the prior year due mainly to
employee-related costs due in part to the opening of three new truckstop
locations, marketing expenses, and new site pre-opening expenses. General and
administrative expenses decreased 7.0% to $9.1 million from $9.8 million in the
prior year 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 55.7% to $350.3 million in the first six months
of 2000 compared to $224.9 million in the first six months of 1999. Fuel
revenues increased primarily due to a 38.3% 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 12.6% 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.
8
<PAGE>
Gross profits increased by 19.2% to $22.6 million for the six months ended June
30, 2000, compared to $19.0 million for the prior year. On a "comparable unit"
basis, fuel revenues increased 53.1% primarily due to a 39.1% 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 10.1% increase in fuel volumes.
Gross profits increased by 20.3% or $3.7 million for the six months ended June
30, 2000, compared to the prior year.
Non-Fuel. Revenues increased 8.2% to $75.9 million in the first six months
of 2000 from $70.1 million in the first six months of 1999. The increase in non-
fuel revenues is primarily due to an 8.0% or $4.0 million increase in sales at
our retail stores and lube facilities. Gross profits increased 6.7% to $41.1
million in the first six months of 2000 from $38.5 million in the first six
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 5.2% or $3.7 million compared to the prior year and gross profits
increased 4.1% or $1.6 million compared to the prior year.
Restaurant. Revenues increased 9.2% to $29.5 million in the first six
months of 2000 compared to $27.0 million in the first six months of 1999. We
believe revenues increased due to increased customer traffic and previous
changes in the core menu and featured meal specials, resulting in the average
ticket price increasing by 4.1%. Gross profits in the restaurants improved by
8.0% or $1.5 million. On a "comparable unit" basis, restaurant revenues
increased 4.9% or $1.3 million compared to the prior year, while gross profits
increased by 3.9% or $764,000.
Costs and Expenses. Total costs and expenses increased 43.4% to $442.4
million in the first six months of 2000 compared to $308.5 million in the first
six months of 1999. On a "comparable unit" basis, total costs and expenses
increased 39.4% or $118.0 million compared to the prior year. Cost of sales
increased 51.3% or $125.8 million from the prior year due mainly to
significantly higher fuel costs in the current year. Operating expenses
increased 12.1% or $5.8 million to $53.5 million for the first six months of
2000 from the prior year. The increase is primarily due to a $3.2 million
increase in employee-related costs due mainly to the opening of three new
truckstop locations, a $1.8 million increase in marketing expenses, and an
increase in new site pre-opening expenses of $1.6 million, all of which were
partially offset by a $509,000 decrease in system project costs. On a
"comparable unit" basis, operating expenses increased 5.4% or $2.6 million to
$49.9 million compared to the first six months of 1999. General and
administrative expenses decreased 7.0% or $680,000 to $9.1 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 Income (Loss) of Affiliate. We recognized an $89,000 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 $4.0 million in
the first six months of 2000 compared to the first six months in 1999 primarily
due to the issuance of the 15% Notes in July 1999.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Overview. Our net revenues of $231.1 million increased 37.2% in the second
quarter of 2000 from $168.4 million in the second quarter of 1999. On a
"comparable unit" basis, revenues increased by 32.9% to $217.6 million from
$163.6 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 13.1% to $27.6 million from $24.4 million in the
prior year quarter due mainly to employee-related costs due in part to the
opening of three new truckstop locations and new site pre-opening expenses.
General and administrative expenses decreased 14.0% to $4.3 million from $4.9
million in the prior year quarter 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 49.0% to $175.9 million in the second quarter of
2000 compared to $118.0 million in the second quarter of 1999. Fuel revenues
increased primarily due to a 30.2% 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 a 14.4% 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
9
<PAGE>
sites. Gross profits increased by 22.0% to $11.9 million for the three months
ended June 30, 2000, compared to $9.7 million for the prior year quarter. On a
"comparable unit" basis, fuel revenues increased 45.3% primarily due to a 30.4%
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 an 11.4%
increase in fuel volumes. Gross profits increased by 22.4% or $2.1 million for
the three months ended June 30, 2000, compared to the prior year quarter.
Non-Fuel. Revenues increased 9.5% to $40.0 million in the second quarter
of 2000 from $36.6 million in the second quarter of 1999. The increase in
non-fuel revenues is primarily due to a 9.4% or $2.5 million increase in sales
at our retail stores and lube facilities. Gross profits increased 7.0% to $21.3
million in the three months ended June 30, 2000 from $20.0 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 5.5% or $2.0 million compared to the prior year quarter and gross
profits increased 3.4% or $672,000 compared to the prior year quarter.
Restaurant. Revenues increased 10.0% to $15.2 million in the second
quarter of 2000 compared to $13.9 million in the second quarter of 1999. We
believe revenues increased due to increased customer traffic and previous
changes in the core menu and featured meal specials, resulting in the average
ticket price increasing by 4.7%. Gross profits in the restaurants improved by
8.6% or $855,000. On a "comparable unit" basis, restaurant revenues increased
4.3% or $598,000 compared to the prior year quarter, while gross profits
increased by 3.2% or $316,000.
Costs and Expenses. Total costs and expenses increased 39.1% to $223.4
million in the second quarter of 2000 compared to $160.6 million in the second
quarter of 1999. On a "comparable unit" basis, total costs and expenses
increased 33.8% or $52.7 million compared to the prior year quarter. Cost of
sales increased 45.3% or $58.3 million from the prior year quarter due mainly to
significantly higher fuel costs in the current year. Operating expenses
increased 13.1% or $3.2 million to $27.6 million for the second quarter of 2000
compared to the prior year quarter. The increase is primarily due to a $1.8
million increase in employee-related costs due mainly to the opening of three
new truckstop locations and a $1.4 million increase in new site pre-opening
expenses. On a "comparable unit" basis, operating expenses increased 3.7% or
$887,000 to $25.0 million compared to 1999. General and administrative expenses
decreased 14.0% or $692,000 compared with the prior year quarter 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 Income (Loss) of Affiliate. We recognized $18,000 in income
related to our investment in the Wheeler Ridge facility in Southern California
which opened in June 1999.
Interest Expense, net. Interest expense, net, increased 34.2% or $1.8
million in the second quarter of 2000 compared to the second quarter of 1999
primarily due to the issuance of the 15% Notes in July 1999.
Liquidity and Capital Resources
Currently our principal sources of liquidity are:
. Borrowings under our new senior credit facility, which currently
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;
. Cash flows from operating activities, which were $19.7 million and $12.3
for the six months ended June 30, 1999 and June 30, 2000, respectively.
The large decrease for the first six months of 2000 was primarily due to
normal fluctuations in the timing of payments to Mobil Diesel Supply
Corporation for fuel payments and variations in the timing related to
trade accounts payables; and
. Cash flows from financing activities, which were ($3.0) million and $6.0
million for the six months ended June 30, 1999 and June 30, 2000,
respectively. The fluctuation was almost entirely due to our borrowings
and repayments on our credit facilities. The increased borrowings were
primarily related to construction of new sites as part of our network
expansion.
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We had negative working capital of $8.7 million and $12.2 million at
December 31, 1999 and June 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 current senior credit facility consists of an $85.0 million revolving
credit facility and a $40.0 million term loan. At June 30, 2000, we had standby
letters of credit issued for approximately $2.7 million resulting in total
borrowing availability of approximately $82.3 million under our revolving credit
facility. Additionally, as of June 30, 2000, there was approximately $7.7
million in borrowings outstanding on the revolving credit facility resulting in
remaining borrowing availability of $74.6 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 $1.4 million for the six months ended June 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 $21.6 million for the six months ended June
30, 2000. Included in capital expenditures were funds spent on existing Petro
Stopping Centers and construction of new facilities.
We currently expect to invest approximately $27.0 million during the
remainder of 2000 on capital expenditures. We believe approximately $20.0
million will be spent on new sites and $7.0 million will be spent on regular
capital maintenance and volume building projects during the remainder of the
year 2000. 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 six months ended June 30, 2000, we paid $3.0 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 six months
ended June 30, 2000, aggregated provisions amounted to $4.3 million. At June 30,
2000, the aggregated accrual amounted to approximately $5.6 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 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 June 30, 2000, we were party to an interest rate swap agreement with an
aggregate principle amount of $20.0 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 .25%, which resulted in additional interest
expense of approximately $26,000.
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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 14 of this Quarterly Report.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K on May 1, 2000 reporting on
Changes in Registrant's Certifying Accountant.
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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: August 11, 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
10.29* Fuel Carrier Agreement, dated March 1, 2000 between Petro
Stopping Centers, L.P. and C&R Distributing, Inc.
10.30* Petro Parts and Service Agreement, dated May 3, 2000 between
Petro Stopping Centers, L.P. and Volvo Trucks North America, Inc.
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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