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 June 30, 1998, 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 2,234,262
(Number of units outstanding as of August 17, 1998)
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998, AND DECEMBER 28, 1997
(In thousands)
(Unaudited)
June 30, December 28,
1998 1997
ASSETS
Current Assets
Prepaid expenses and other $214 $196
Real Property
Land and improvements 6,024 6,026
Buildings 21,495 21,491
27,519 27,517
Accumulated depreciation (9,975) (9,374)
17,544 18,143
Note receivable 47 0
Total Assets $17,805 $18,339
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Current installments of long-term debt $113 $1,208
Current installments of long-term debt
to affiliate 1,143 0
Due to affiliated company 189 0
Accrued liabilities 121 0
Total current liabilities 1,566 1,208
Long-term debt, excluding current installments 361 14,730
Long-term debt due to affiliate, excluding
current installments 13,630 0
Total Liabilities 15,557 15,938
Minority interests in subsidiary 915 960
Commitments and contingencies
Partners' Capital 1,333 1,441
Total Liabilities and Partners' Capital $17,805 $18,339
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998
(In thousands, except per unit data)
(Unaudited)
Three Six
Months Months
Revenues -
Rental income $700 $1,313
Gain on sale of property 0 52
Interest and other income 10 12
Total revenues 710 1,377
Expenses -
General and administrative expenses 95 168
Depreciation and amortization 312 602
Interest expense 390 759
Total expenses 797 1,529
(Loss) before minority interest (87) (152)
Minority interest in subsidiary 26 44
Net (Loss) $(61) $(108)
Net (loss) per unit -
Basic $(0.03) $(0.05)
Diluted (0.03) (0.05)
Weighted average number of units outstanding -
Basic 2,272 2,272
Diluted 2,300 2,327
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998
(In thousands)
(Unaudited)
Cash Flows from Operating Activities -
Net (loss) $(108)
Adjustments to reconcile net (loss) to cash
provided by operating activities -
Depreciation and amortization 602
Minority interest in subsidiary (44)
Net change in operating assets
and liabilities 54
Net cash provided by operating activities 504
Cash Flows from Investing Activities -
Additions of property, net (2)
Net cash (used) by investing activities (2)
Cash Flows from Financing Activities
Net (repayments) under credit facilities (502)
Net cash (used) by financing activities (502)
Net Increase/(Decrease) in Cash 0
Cash at beginning of period 0
Cash at end of period $0
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(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 60%-owned
subsidiary, FFP Properties, L.P., collectively referred to as the "Company" or
"FFPLP."
The condensed consolidated balance sheet as of June 30, 1998, and
the condensed consolidated statements of operations and condensed consolidated
statement of cash flows for the periods presented, 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 June 30, 1998, and the results of it operations and
cash flows for each of the periods presented, have been made. Interim operating
results are not necessarily indicative of results for the entire year.
The notes to the audited consolidated financial statements which are
included in the Company's Annual Report on Form 10-K for the year ended December
28, 1997, 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 six months ended
June 30, 1998, except as discussed below.
2. Change in Fiscal Year
Prior to the restructuring of the Company that occurred in December
1997, the Company prepared its financial statements on the basis of a fiscal
year which ended on the last Sunday in December. However, in connection with the
restructuring, the Company has changed its fiscal year to coincide with the
calendar year. Accordingly, the accompanying unaudited financial statements for
the six months ended June 30, 1998, include the six months then ended and the
three-day period immediately following the restructuring through the end of 1997
(December 29 through December 31, 1997) . The effect of including these three
additional days in financial statements for the period ended June 30, 1998, is
not material.
3. Long-Term Debt
Effective June 28, 1998, the Company, FFP Marketing Company, Inc.
("FFP Marketing"), and the Company's primary bank lender reached an agreement to
restructure the debt due to the lender for which FFPLP and FFP Marketing were
jointly liable but for which FFPLP had retained the liability in connection with
its December 1997 restructuring. Under this agreement, the lender will release
FFPLP from all obligations under the Loan Agreement covering the debt and will
permit a subsidiary of FFP Marketing to make a loan to FFPLP for approximately
$14,773,000 (the current balance of the debt for which FFPLP had retained
liability in the restructuring). The terms of the loan from FFP Marketing to
FFPLP will mirror the terms of the debt to the lender (for which FFP Marketing
is liable) and the loan will be secured by all real estate owned by FFPLP and
will be pledged as additional collateral on the debt of FFP Marketing to the
lender.
4. Income/(Loss) per Unit
A reconciliation of the denominator of the basic and diluted (loss)
per unit for the three month and six month periods ended June 30, 1998, follows:
Three Six
Months Months
In thousands
Weighted average number of units outstanding 2,272 2,272
Effect of dilutive options 28 55
Weighted average number of units outstanding
assuming dilution 2,300 2,327
The number of options that could potentially dilute basic
income/(loss) per unit in the future that were not included in the computation
of diluted (loss) per unit because to do so would have been antidilutive was
50,000 in the both the three month period and the six month period.
5. Reporting of Comprehensive Income
At the beginning of its 1998 fiscal year, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires the presentation of "comprehensive
income" in financial statements. Comprehensive income includes net income and
all revenues, expenses, gains, and losses that had previously been recorded
directly to equity. The Company does not have any items of other comprehensive
income, therefore comprehensive income and net income are identical.
Accordingly, the effect of the adoption of SFAS No. 130 had no effect on the
Company's condensed consolidated financial statements.
<PAGE>
FFP PARTNERS, L.P., AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
In December 1997, FFP Partners, L.P. ("FFPLP" or the "Company")
completed a restructuring which resulted in the transfer of the convenience
store, retail motor fuel, and other businesses previously operated by it to FFP
Marketing Company, Inc. ("FFP Marketing"). In the restructuring, FFPLP retained
the real estate used in the retail businesses and leases those properties to FFP
Marketing. Accordingly, there is no comparative income data for the Company for
the prior year periods.
Results of Operations, Liquidity, and Capital Resources
Substantially all of the Company's rental income is from the various
convenience store and other retail outlets that it leases to FFP Marketing. The
leases were entered into in connection with the December 1997 restructuring of
FFPLP and are for five years; accordingly, the rental income from these
locations is expected to remain constant for that period. However, upon securing
additional financing, the Company expects to acquire additional locations, which
may be leased to FFP Marketing or to others. The Company expects that all leases
will be on a "triple-net" basis.
The Company has entered into a management agreement with FFP
Marketing under which FFP Marketing provides various administrative and other
services to FFPLP. Under this agreement, FFP Marketing makes payments on behalf
of FFPLP and charges such payments to its account while the rental income due to
FFPLP by FFP Marketing is applied to this account. Accordingly, FFPLP does not,
at this time, maintain separate cash accounts. However, as FFPLP grows and
expands its real estate holdings, it is expected to function more independently
although management anticipates that FFP Marketing will continue to provide
various administrative services to FFPLP for the foreseeable future.
Effective June 28, 1998, the Company, FFP Marketing, and the
Company's primary bank lender reached an agreement to restructure the debt due
to the lender for which FFPLP and FFP Marketing were jointly liable but for
which FFPLP had retained the liability in connection with its December 1997
restructuring. Under this agreement, the lender will release FFPLP from all
obligations under the Loan Agreement covering the debt and will permit a
subsidiary of FFP Marketing to make a loan to FFPLP for approximately
$14,773,000 (the current balance of the debt for which FFPLP had retained
liability in the restructuring). The loan from FFP Marketing to FFPLP will be
secured by all real estate owned by FFPLP and will be pledged as additional
collateral on the debt of FFP Marketing to the lender. The terms of the loan
will mirror the terms of the debt of FFP Marketing to the lender, which will
remain unchanged. Accordingly, the restructuring of this debt will have no
economic impact on the Company although it is now liable to FFP Marketing rather
than the lender for this debt.
The Company is continuing to evaluate alternatives for refinancing
the foregoing debt. As a part of any such refinancing, the Company is seeking to
obtain additional capital to permit it to expand its real estate holdings. The
Company has had discussions with various lenders who have expressed an interest
in providing funds both to refinance the existing debt and to acquire additional
real estate. However, it has not yet received any formal financing proposals.
Although the Company expects that its property acquisitions will be centered on
convenience store and similar properties, it will also look for opportunities in
other types of property that yield an above average return with an acceptable
level of risk.
The Company is not a real estate investment trust ("REIT") but its
activities are much like those of a REIT. One performance measure used within
the REIT industry is funds from operations ("FFO"). FFO, as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), means net
income (loss) (determined in accordance with generally accepted accounting
principles or "GAAP"), excluding gains (or losses) from debt restructurings, and
similar activities, and sales of properties, plus depreciation and amortization
of real estate assets, and after adjustments for unconsolidated partnerships and
joint ventures. FFO was developed by NAREIT as a relative measure of performance
and liquidity of an equity REIT in order to recognize that income-producing real
estate historically has not depreciated on the basis determined under GAAP.
While FFO is one appropriate measure of performance of an equity REIT, it (i)
does not represent cash generated from operating activities determined in
accordance with GAAP (which, unlike FFO, generally reflects all cash effects of
transactions and other events that enter into the determination of net income),
(ii) is not necessarily indicative of cash flow available to fund cash needs,
and (iii) should not be considered as an alternative to net income determined in
accordance with GAAP as an indication of the Company's operating performance, or
to cash flow from operating activities determined in accordance with GAAP as a
measure of either liquidity or the Company's ability to make distributions or to
fund its other operations. The following table presents the determination of FFO
for the Company for the three and six month periods ended June 30, 1998:
Three Six
Months Months
In thousands,
except per unit data
(Loss) before minority interests $(87) $(152)
Adjustments -
(Gain)from early payoff of debt (11) (11)
(Gains) from sales of properties 0 (52)
Depreciation and amortization 312 602
Funds from operations 214 387
Less - FFO attributable to minority
interests in subsidiary 85 154
Funds from operations attributable
to the Company $129 $233
FFO per unit (based on units
outstanding for diluted loss
per unit calculations $0.06 $0.10
Although the Company has positive funds from operations, it has not
made distributions to unitholders because substantially all cash generated from
the Company's operations is required for scheduled principal payments on its
debt. In connection with the refinancing of its debt, referred to above, the
Company is seeking to lengthen the maturity of the debt, which might make funds
available for distribution to unitholders. However, there can be no assurance
that the Company will be successful in refinancing its debt or in obtaining
terms, in the event of a refinancing, that would permit distributions.
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. Although the Company believes that
the expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those set forth in the forward-looking statements. Among the factors that
could cause actual results to differ materially from the forward-looking
statements made include the following: changes in real estate conditions,
including rental rates and the construction or availability of competing
properties; changes in the industry in which FFPLP's sole tenant competes;
changes in general economic conditions; the ability of management to identify
acquisitions and investment opportunities meeting the investment objectives of
FFPLP; the timely leasing of unoccupied properties; timely releasing of
currently occupied properties upon expiration of the current leases or the
default of the current tenant; the Company's ability to generate funds
sufficient to meet its debt service payments and other operating expenses; the
inability of FFPLP to control the management and operation of its tenant and the
businesses conducted on the Company's properties; financing risks, including the
availability, or lack of availability, of funds to service or refinance existing
debt and to finance acquisitions of additional property, changes in interest
rates associated with its variable rate debt; the possibility that the Company's
existing debt (which requires a so-called "balloon" payment of principal) may be
refinanced at a higher interest rate or on other terms less favorable to FFPLP
than at present; the existence of complex tax regulations relating to the
Company's status as a publicly-traded real estate partnership and, if achieved,
to its status as a real estate investment trust and the adverse consequences of
the failure to qualify as such; and other risks detailed from time to time in
FFPLP's filings with the Securities and Exchange Commission. Given these
uncertainties, readers are cautioned not to place undue reliance on the
forward-looking statements. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances.
<PAGE>
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27 Financial Data Schedule [included in electronic filing only].
Reports on Form 8-K
The Company did not file any reports on Form 8-K for the quarter
covered by this Report on Form 10-Q.
<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
By: FFP Real Estate Trust
sole general partner
Date: August 19, 1998 By: /s/Steven B. Hawkins
-------------------------------------------
Steven B. Hawkins
Vice President - Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 214
<PP&E> 27,519
<DEPRECIATION> 9,975
<TOTAL-ASSETS> 17,805
<CURRENT-LIABILITIES> 1,566
<BONDS> 15,557
0
0
<COMMON> 1,333
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,805
<SALES> 0
<TOTAL-REVENUES> 1,377
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 759
<INCOME-PRETAX> (108)
<INCOME-TAX> 0
<INCOME-CONTINUING> (108)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (108)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
