SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X|Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 24, 1995, or
|_|Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 1-9510
FFP PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 75-2147570
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2801 Glenda Avenue; Fort Worth, Texas 76117-4391
(Address of principal executive office, including zip code)
817/838-4700
(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
Class A Units 2,104,206
Class B Units 1,533,522
(Number of units outstanding as of October 31, 1995)
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 24, December 25,
1995 1994
ASSETS
Current Assets -
Cash $9,288 $11,400
Receivables, including current portion of
noncurrent notes receivable 10,937 8,995
Inventories 11,303 11,346
Prepaid expenses and other 638 607
Total Current Assets 32,166 32,348
Property and equipment, net of accumulated
depreciation 30,427 29,959
Noncurrent notes receivable,
excluding current portion 1,128 1,099
Claims for reimbursement of environmental
remediation costs 938 1,490
Other assets, net 3,030 3,082
Total Assets $67,689 $67,978
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $0 $0
Current installments of long-term debt 2,028 2,131
Current installments of obligation
under capital lease 406 552
Accounts payable 10,291 13,180
Money orders payable 5,409 4,262
Accrued expenses 16,039 12,323
Total Current Liabilities 34,173 32,448
Long-term debt, excluding
current installments 5,496 8,634
Obligation under capital lease, excluding
current installments 1,257 893
Other liabilities 518 1,153
Total Liabilities 41,444 43,128
Partners' Equity, net of
treasury units of $269 26,245 24,850
Total Liabilities and Partners' Equity $67,689 $67,978
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per unit data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept 24, Sept 25, Sept 24, Sept 25,
1995 1994 1995 1994
Revenues -
Motor fuel $75,471 $76,022 $221,731 $206,066
Merchandise 16,277 18,817 48,418 56,917
Miscellaneos 1,968 1,932 5,511 5,373
Total Revenues 93,716 96,771 275,660 268,356
Costs and Expenses -
Cost of motor fuel 68,460 69,428 204,046 190,437
Cost of merchandise 11,293 13,444 34,160 41,035
Direct store expenses 7,458 7,400 21,593 22,231
General and administrative
expenses 3,156 2,700 8,468 7,975
Depreciation and amortization 869 965 2,743 3,129
Total Costs and Expenses 91,236 93,937 271,010 264,807
Operating Income 2,480 2,834 4,650 3,549
Interest expense 284 270 878 900
Income Before Income Taxes and
Extraordinary Item 2,196 2,564 3,772 2,649
Deferred income tax expense 125 91 375 145
Income Before Extraordinary Item 2,071 2,473 3,397 2,504
Gain on extinguishment of debt 0 0 0 200
Net Income $2,071 $2,473 $3,397 $2,704
Income allocated to -
Limited partners $2,050 $2,448 $3,363 $2,677
General partner 21 25 34 27
Income per Class A and Class
B Unit -
Before extraordinary item $0.56 $0.68 $0.93 $0.69
Net income 0.56 0.68 0.93 0.75
Distributions declared per
Class A and Class B Unit $0.18 $0.00 $0.57 $0.08
Weighted average number of
Class A and Class B Units
outstanding 3,635 3,589 3,625 3,589
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
Sept 24, 1995 Sept 25,1995
Cash Flows from Operating Activities -
Net income $3,397 $2,704
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 2,743 3,129
Deferred income tax expense 375 145
Gain on extinguishment of debt 0 (200)
Net change in operating assets and liabilities (165) 2,305
Net cash provided by operating activities 6,350 8,083
Cash Flows from Investing Activities -
Additions of property and equipment, net (3,436) (2,444)
Net cash (used) by investing activities (3,436) (2,444)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities (3,023) (7,939)
Proceeds from exercise of unit options 89 0
Distributions to unitholders (2,092) (287)
Net cash (used) by financing activities (5,026) (8,226)
Net Increase/(Decrease) in Cash (2,112) (2,587)
Cash at beginning of period 11,400 13,191
Cash at end of period $9,288 $10,604
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 24, 1995
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements include the assets,
liabilities, and results of operations of FFP Partners, L.P., and its 99%-owned
subsidiaries, FFP Operating Partners, L.P., Direct Fuels, L.P., and FFP
Financial Services, L.P., and its 100%-owned subsidiaries, FFP Illinois Money
Orders, Inc., Practical Tank Management, Inc., and FFP Transportation, L.L.C.,
collectively referred to as the "Company."
The condensed consolidated balance sheet as of September 24, 1995, and the
consolidated income statements and condensed consolidated statements of cash
flows for the three month and nine month periods ended September 24, 1995, and
September 25, 1994, have been prepared by the Company without audit. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the Company's financial position as of
September 24, 1995, and the results of operations and cash flows for the three
and nine month periods presented have been made. Interim operating results are
not necessarily indicative of results for the entire year.
The notes to the consolidated financial statements which are included in
the Company's Annual Report on Form 10-K for the year ended December 25, 1994,
include accounting policies and additional information pertinent to an
understanding of these interim financial statements. That information has not
changed other than as a result of normal transactions in the nine months ended
September 24, 1995, except as described in notes 2 and 3 below.
2. Income per Unit and Distributions
The Class A and Class B Units represent a 99% interest in the Company.
Accordingly, income per unit is calculated by dividing 99% of the income amount
by the weighted average number of units outstanding.
The Company paid distributions to its unitholders during the 1994 and 1995
nine month periods, as follows:
Record Date Payment Date Amount per Unit
Nine months ended September 25,1994 -
April 26, 1994 May 12, 1994 $0.08
Nine months ended September 24,1995 -
March 31, 1995 April 12, 1995 0.12
April 24, 1995 May 9, 1995 0.27
August 16, 1995 August 31, 1995 0.18
3. Amendment to Credit Agreement
In May 1995, the Company and its primary bank lender amended their existing
Credit Agreement. Under this amendment, the Company made a $2,000,000 payment on
its term debt (bringing the balance then outstanding to $7,500,000), rescheduled
the amortization of the then outstanding balance to $312,500 per quarter (rather
than $500,000 per quarter), and reduced the interest rate on the term loan to
the bank's prime rate (from prime plus 1/2 point). In addition, certain
financial ratios were modified which will generally allow the Company to make
larger distributions to its unitholders than were permitted under the Credit
Agreement prior to the amendment.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for Third Quarter 1995 (three months ended September
24, 1995) compared with Third Quarter 1994 (three months ended September 25,
1994)
Total revenues for the quarter decreased $3,055,000 (3.2%) from the year
ago period principally due to a $2,540,000 (13.5%) decline in merchandise sales.
In addition, motor fuel sales declined slightly (0.7%) in the third quarter
1995. The reduced motor fuel sales resulted from a 6.2% drop (in gallons) in
retail motor fuel sales offset by a 9.5% gain in wholesale fuel gallons sold.
The decrease in retail fuel sales is due to the Company's operating an average
of 10.7 fewer outlets that sold motor fuel as well as a decline in the gallons
of fuel sold by the Company's ten truck stops due to increased competitive
pressures. The improved wholesale volumes resulted from the marketing
arrangement, that began in July 1994, which emphasizes sales to contractors and
other commercial users. Although sales declined, improved per gallon margins at
the retail level (14.2 cents in 1995 vs 11.5 cents in 1994) increased motor fuel
margin by $417,000 (6.3%).
The merchandise sales decline resulted from a reduction in the average
number of convenience stores operated during the current year quarter as
compared with the 1994 quarter. This decline, an average of 14.2 stores for the
quarter, was due to the closing in late 1994 of the Company's five convenience
stores in Illinois and to a program, begun by the Company in mid-1994, to sell
the merchandise operations of selected convenience stores to independent
operators. Although merchandise sales declined by 13.5%, merchandise margin
decreased only 7.2% ($389,000) as a result of improved merchandise gross profit
percentages at both convenience stores and truck stops. The Company's overall
merchandise gross profit increased to 30.6% in the 1995 quarter as compared to
28.6% in the prior year period.
Direct store expenses (those expenses, such as payroll, utilities, and
repair and maintenance, that are directly attributable to the operation of an
outlet) increased $58,000 (0.8%) in the 1995 third quarter as compared to the
1994 period. The reduction in expenses resulting from the operation of fewer
convenience stores and truck stops during the 1995 quarter was offset by
increases in expenses, particularly salaries and other payroll related costs,
supplies, and credit card fees, at the remaining outlets. In addition, the
commissions paid to the operators of the Company's self-service fuel outlets
increased due to the improved fuel margins realized in 1995.
General and administrative expenses rose $456,000 (16.9%) in the third
quarter 1995 over 1994. This increase resulted principally from additional
professional fees, attributable to the cost of consultants assisting in
reorganizing certain of the Company's back office processes, and an increase in
the provision for bad debts, related primarily to wholesale fuel receivables.
Interest expense between the 1995 and 1994 quarters was relatively flat
even though the debt levels declined because of the generally higher levels of
interest rates in the 1995 period.
Results of Operations for First Nine Months of 1995 (nine months ended
September 24, 1995) compared with First Nine Months of 1994 (nine months ended
September 25, 1994)
The factors affecting the Company's performance in the first nine months of
1995 as compared to the same period of 1994 were much the same as those that
influenced the third quarter (and previous 1995 quarters).
Motor fuel sales increased $15,665,000 (7.6%) due to a 17.1% increase in
wholesale fuel gallons sold offset by a 3.9% decrease in retail fuel gallons
sold. The decrease in retail fuel volumes was due to the operation of an average
of 5.8 fewer outlets that sold motor fuel and to a decline in gallons sold at
the Company's truck stops. The reduced fuel sales at the truck stops resulted
from a planned effort to improve fuel margins and from increased competition at
one of the Company's locations. Retail fuel margin for the nine months increased
to 11.3 cents per gallon in 1995 vs 9.2 cents in 1994. Because of the increased
wholesale fuel sales, and improved per gallon margins that the Company realized
in the first nine months of 1995, the dollar margin realized on fuel sales
increased $2,056,000 (13.2%) over the 1994 period.
The merchandise sales decline of $8,499,000 (14.9%) in the 1995 period
resulted from the closing of the Company's five Illinois convenience stores in
late 1994 and to the reduced number of convenience stores operated due to the
sale of the merchandise operations at selected stores. The Company operated an
average of 16.4 fewer convenience stores in the 1995 period as compared to 1994.
Because of the sales decline, the margin realized on merchandise sales declined
$1,624,000 (10.2%); however, due to better margin management, the merchandise
gross profit percentage increased to 29.4% in the 1995 period vs 27.9% in 1994.
The $638,000 (2.9%) decline in direct store expenses resulted from the
operation of fewer stores in the first nine months of 1995, referred to above,
offset by increased fuel commissions paid to the self-service motor fuel outlet
operators due to the higher fuel margins in 1995 and to higher expenses in the
third quarter at the truck stops and remaining convenience stores, as discussed
above.
The $386,000 (12.3%) decline in depreciation and amortization resulted from
the complete depreciation in mid-1994 of certain assets acquired upon the
Company's initial formation in May 1987 offset by increased expenses due to
routine property additions since that time.
Although debt levels declined during 1995 from 1994, interest expense was
relatively unchanged due to generally higher interest rate levels in the 1995
period.
At the end of February 1994, the Company completed a refinancing of its
primary bank debt with another financial institution. In connection with this
transaction, the Company received a discount of $200,000 on the early pay-off of
the existing debt. This $200,000 is reflected as an extraordinary item in the
accompanying consolidated income statement.
Liquidity and Capital Resources
The Company's working capital at the end of the second quarter 1995 was a
negative $2,007,000, a decline from the negative $100,000 at year end 1994. This
decline was due principally to the $2,000,000 debt reduction payment made in May
1995 in connection with the amendment of the Credit Agreement between the
Company and its primary bank lender. Under this amendment, the Company reduced
its term debt by $2,000,000, rescheduled the amortization of the resulting
outstanding balance to $312,500 per quarter (rather than $500,000 per quarter),
and reduced the interest rate on the term loan to the bank's prime rate (from
prime plus 1/2 point). In addition, certain financial ratios were modified which
will generally allow the Company to make larger distributions to its unitholders
than were permitted under the Credit Agreement prior to the amendment
Although the payment discussed above negatively impacts the Company's
working capital, the reduction in the Company's term debt will result in reduced
interest expense. In addition, management believes the availability of funds
under its revolving credit line ($8,000,000 at the end of the September 1995
period), coupled with the Company's traditional use of trade credit, will permit
operations to be conducted in a customary manner.
During 1994 and thus far during 1995, the Company has paid distributions to
its unitholders totaling, respectively, $1,342,000 ($0.37 per Class A and Class
B Unit) and $2,092,000 ($0.57 per unit). Management believes that, subject to
the continued profitability of the Company, distributions will be declared on a
regular basis; however, it does not expect that distributions will be of a fixed
regular amount. The Board of Directors of the General Partner meets on a
quarterly basis and considers, among other things, the declaration of
distributions. Factors that influence the Board's evaluation as to whether to
make distributions and the amount of any such distributions include the recent
profitability of the Company, the outlook for continued profitability, liquidity
needed to meet scheduled debt repayments and other obligations, and capital
expenditure requirements.
<PAGE>
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FFP PARTNERS, L.P.
Registrant
Date: November 3, 1995 By: /s/John H. Harvison
John H. Harvison
Chairman and
Chief Executive Officer
Date: November 3, 1995 By: /s/Steven B. Hawkins
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-24-1995
<CASH> 9288
<SECURITIES> 0
<RECEIVABLES> 11061
<ALLOWANCES> 1234
<INVENTORY> 11303
<CURRENT-ASSETS> 32166
<PP&E> 60588
<DEPRECIATION> (30161)
<TOTAL-ASSETS> 67689
<CURRENT-LIABILITIES> 34173
<BONDS> 0
<COMMON> 26245
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 67689
<SALES> 270149
<TOTAL-REVENUES> 275660
<CGS> 238206
<TOTAL-COSTS> 238206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 371
<INTEREST-EXPENSE> 878
<INCOME-PRETAX> 3772
<INCOME-TAX> 375
<INCOME-CONTINUING> 3397
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3397
<EPS-PRIMARY> .93
<EPS-DILUTED> .93
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