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 March 30, 1997, 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 3,529,205
Class B Units 175,000
(Number of units outstanding as of May 12, 1997)
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 30, December 29,
1997 1996
ASSETS
Current Assets -
Cash $8,453 $8,244
Trade receivables 10,238 10,303
Notes receivable 774 778
Receivable from affiliated company 409 420
Inventories 12,032 12,489
Prepaid expenses and other 690 625
Total Current Assets 32,596 32,859
Property and equipment, net of accumulated
depreciation 40,671 38,024
Noncurrent notes receivable, excluding current portion 2,056 2,069
Claims for reimbursement of environmental
remediation costs 1,126 1,038
Other assets, net 4,170 4,609
Total Assets $80,619 $78,599
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities -
Amount due under revolving credit line $5,493 $6,823
Current installments of long-term debt 1,613 1,587
Current installments of obligation under capital 868 1,122
lease
Accounts payable 15,557 14,150
Money orders payable 10,083 7,809
Accrued expenses 9,439 8,778
Total Current Liabilities 43,053 40,269
Long-term debt, excluding current installments 7,465 7,765
Obligation under capital lease, excluding
current installments 2,333 1,653
Deferred income taxes 3,916 3,781
Other liabilities 976 993
Total Liabilities 57,743 54,461
Partners' Equity, net of treasury units of $269 at
March 30, 1997, and December 29, 1996 22,876 24,138
Total Liabilities and Partners' Equity $80,619 $78,599
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per unit data)
(Unaudited)
Three Months Ended
March 30, March 31,
1997 1996
Revenues -
Motor fuel $77,117 $77,456
Merchandise 13,808 14,736
Miscellaneous 1,757 2,199
Total Revenues 92,682 94,391
Costs and Expenses -
Cost of motor fuel 72,650 72,879
Cost of merchandise 10,053 10,523
Direct store expenses 6,950 7,094
General and administrative expenses 2,745 2,724
Depreciation and amortization 1,121 886
Total Costs and Expenses 93,519 94,106
Operating Income/(Loss) (837) 285
Interest expense 291 320
Income/(Loss) Before Income Taxes (1,128) (35)
Deferred income tax expense 134 134
Net Income/(Loss) $(1,262) $(169)
Income/(Loss) allocated to -
Limited partners $(1,249) $(167)
General partner (13) (2)
Net income/(loss) per Class A and Class B Unit $(0.34) $(0.05)
Distributions declared per Class A and Class B Unit $0.000 $0.205
Weighted average number of Class A and Class B
Units outstanding 3,704 3,671
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 30, March 31,
1997 1996
Cash Flows from Operating Activities -
Net income/(loss) $(1,262) $(169)
Adjustments to reconcile net income to cash
provided/(used) by operating activities -
Depreciation and amortization 1,121 886
Deferred income tax expense 134 134
Net change in operating assets and 5,030 (1,201)
liabilities
Net cash provided/(used) by operating activities 5,023 (350)
Cash Flows from Investing Activities -
Additions of property and equipment, net (3,636) (664)
Net cash (used) by investing activities (3,636) (664)
Cash Flows from Financing Activities -
Net borrowings/(repayments) under
credit facilities (1,178) 1,806
Proceeds from exercise of unit options 0 33
Distributions to unitholders 0 (761)
Net cash provided/(used) by financing activities (1,178) 1,078
Net Increase/(Decrease) in Cash 209 64
Cash at beginning of period 8,244 8,106
Cash at end of period $8,453 $8,170
See accompanying notes to condensed consolidated financial statements.
FFP PARTNERS, L.P., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1997
(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, Practical Tank
Management, Inc., FFP Transportation, L.L.C., and FFP Money Order Company, Inc.,
collectively referred to as the "Company."
The consolidated balance sheet as of March 30, 1997, and the consolidated
income statements and condensed consolidated statements of cash flows for the
three month periods ended March 30, 1997, and March 31, 1996, 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 March 30, 1997, and the results of operations
and cash flows for the three month periods ended March 30, 1997, and March 31,
1996, 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 29, 1996,
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 three months ended
March 30, 1997.
2. Income per Unit
The Class A and Class B Units represent a 99% interest in the Company.
Accordingly, income or loss per unit is calculated by dividing 99% of the income
or loss amount by the weighted average number of units outstanding.
FFP PARTNERS, L.P., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for First Quarter 1997 (three months ended March 30, 1997)
compared with First Quarter 1996 (three months ended March 31, 1996)
The $339,000 (0.4%) decline in the Company's motor fuel revenues for the
first quarter resulted from a 1.3% decline in retail fuel volume (in gallons)
and a 27.5% decline in wholesale fuel volumes. The retail volume decline was
accompanied by a modest increase to 8.1 cents per gallon (from 7.9 cents) in the
retail fuel margin. Although the Company's retail fuel margin increased in the
1997 quarter, it was still below the 9.9 cents per gallon the Company has
averaged over the last five fiscal years. The decline in wholesale fuel sales
was due to the absence in 1997 of a large volume of lower margin sales to a
customer that purchases from the Company from time to time. The net effect of
the per gallon margin increases was offset by the significant wholesale volume
decline such that the gross profit on motor fuel declined by $110,000 (2.4%) for
the quarter.
The decline in merchandise sales of $928,000 (6.3%) resulted from the
operation of an average of 9.5 (7.0%) fewer convenience stores and truck stops
during the 1997 quarter as compared to the 1996 period. The decline in store
count resulted from the sale of the merchandise operations of certain
convenience stores throughout 1996. Such sales are the continuation of the
Company's program to sell the merchandise operations at stores that it believes
will contribute more to the profitability of the Company when operated by
independent operators. The loss of sales due to the fewer number of outlets was
offset to some extent by increases in average weekly merchandise sales at
convenience stores and truck stops of 2.3% and 3.9%, respectively. Although
average weekly sales increased, the Company's merchandise margin declined to
27.2% from 28.6%. This decrease resulted from competitive pressures and
increased merchandise shrink. In order to reverse this decline, management has
taken steps to reposition its pricing strategy, particularly in coffee, fountain
drinks, and cigarettes. The Company has also begun using limited audits by field
supervisory personnel, in addition to its routine monthly inventory counts by an
outside service, to increase the accountability of store personnel for control
over shrink.
Miscellaneous revenues declined $442,000 (20.1%) primarily due to the
recognition of less gains on the sales of the merchandise operations of
convenience stores during the 1997 quarter. In 1997, the Company completed one
such sale as compared to six sales in the first quarter 1996.
The decrease of $144,000 (2.0%) in direct store expenses is due to the
fewer number of convenience stores and truck stops operated during the quarter,
as discussed above, offset by increases in operating expenses, principally labor
and related costs, commissions paid to independent operators of the Company's
self-service fuel outlets, and repair and maintenance.
General and administrative expenses increased $21,000 (0.8%) in the first
quarter 1997 vs the 1996, as a result of modest increases in some categories of
expenses offset by decreases in others.
Depreciation and amortization increased $235,000 (26.5%) in the current
quarter due to the increases in property and equipment that have occurred over
the last couple of years, principally associated with complying with
Environmental Protection Agency standards for underground storage tanks which
are to be effective in December 1998. Depreciation expense will continue to grow
as upgrades of additional underground storage tanks are completed and the
Company's fuel terminal begins operating in the second quarter 1997 and the
investment associated with it begins to be depreciated.
The 9.1% reduction in interest expense resulted from lower debt levels
during the 1997 quarter and to a reduction in the interest rate on the Company's
floating rate debt. In early 1996 the Company's bank debt bore interest at its
primary lender's prime rate. In late 1997, the Company modified its credit
agreement to provide, among other things, for interest on its term debt at LIBOR
plus 1.75%, which is generally a lower rate than prime.
Liquidity and Capital Resources
The Company's working capital declined by $3,047,000 at the end of the
first quarter from the amount at the prior year end. This decline is
attributable to the net loss incurred by the Company during the quarter and
purchases of property and equipment during the period.
However, the Company is entering its typically strongest period of the year
when revenues and cash flows generally increase. Consequently, although the
Company has negative working capital, management believes that internally
generated funds and the Company's traditional use of trade credit along with its
bank line of credit, are such that operations can be conducted in a customary
manner.
Forward-Looking Statements
Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
should generally be considered forward-looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar phrases. Among the factors that could cause
actual results to differ materially from the statements made are the following:
general business conditions in the local markets served by the Company's
convenience stores, truck stops, and other retail outlets, and its wholesale
fuel markets; the weather in the local markets served by the Company;
competitive factors such as changes in the locations, merchandise offered, or
other aspects of competitors' operations; increases in the cost of fuel and
merchandise sold or reductions in the gross profit realized from such sales;
expense pressures relating to operating costs, including labor, repair and
maintenance, and supplies; and, unanticipated general and administrative
expenses, including costs of expansion or financing.
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule.
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: May 16, 1997 By: /s/John H. Harvison
---------------------------------
John H. Harvison
Chairman and
Chief Executive Officer
Date: May 16, 1997 By: /s/Steven B. Hawkins
---------------------------------
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer
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