UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 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)
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class Name of Each Exchange on Which Registered
Class A Units of American Stock Exchange
Limited Partnership Interests
Unit Purchase Rights American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Class A Units held by non-affiliates of the
registrant at March 31, 1999, was $2,222,000. For purposes of this computation,
all officers, directors, and beneficial owners of 10% or more of the Class A
Units of the registrant are deemed to be affiliates. Such determination should
not be deemed an admission that such officers, directors, and beneficial owners
are affiliates.
Class A Units 2,234,262
(Number of units outstanding as of March 31, 1999)
<PAGE>
Index
Page
Part I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II
Item 5. Market for the Registrant's Units and Related
Security Holder Matters 8
Item 6. Selected Financial and Operating Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 15
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
Part III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management 20
Item 13. Certain Relationships and Related Transactions 21
Part IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 23
Signatures 25
<PAGE>
PART I
Item 1. Business
General Background
FFP Partners, L.P. (the "Company") is a Delaware limited partnership whose
sole general partner is FFP Real Estate Trust, a Texas real estate investment
trust, and whose Class A Units of limited partnership interest ("Limited Partner
Units") are listed for trading on the American Stock Exchange (trading symbol
"FFP"). {See Item 5. Market for the Registrant's Units and Related Security
Holder Matters.}
The Company was formed in December 1986, pursuant to the Agreement of Limited
Partnership of FFP Partners, L.P. (the "Partnership Agreement"). FFP Partners
Management Company, Inc. ("FFPMC") served as the sole general partner of the
Company from its formation until the Company was restructured in December 1997.
Since then, FFP Real Estate Trust has served as the Company's general partner.
In May 1987, the Company purchased convenience stores, truck stops, other retail
motor fuel outlets, and ancillary businesses from affiliates of FFPMC. The
purchase of these outlets was completed in conjunction with the Company's
initial public offering of Limited Partner Units. The senior executives of the
Company had owned and managed these operations prior to their acquisition by the
Company, and, through its subsidiaries, the Company owned and operated them, and
other businesses, until December 1997.
On December 28, 1997, the Company completed a restructuring by which the real
estate used in the aforementioned retail operations was retained by the Company
while its convenience store, truck stop, other retail motor fuel outlets, and
other businesses were transferred to FFP Marketing Company, Inc. ("FFP
Marketing"), in exchange for all the common stock of FFP Marketing. The common
stock of FFP Marketing was then distributed to the partners of the Company such
that the limited partners received one share of common stock for each Limited
Partner Unit and the general partner received common stock in proportion to its
former ownership persentage.
The real estate retained by the Company in the December 1997 restructuring
was contributed at that time to FFP Properties, L.P. ("FFP Properties"), a newly
formed Texas limited partnership, in exchange for the general partnership
interest in FFP Properties. As a result, the Company now serves as the general
partner, and owns 60%, of FFP Properties. The limited partnership interests in
the Company that were held by John H. Harvison, the Chairman and Chief Executive
Officer of FFPMC, members of his family, and corporations, partnerships, trusts,
and other business entities affiliated with him or his family members
(collectively, the "Harvison Family") were exchanged for economically equivalent
limited partnership interests in FFP Properties. As a result, the Harvison
Family owns a 40% limited partnership interest in FFP Properties. In addition,
FFP Real Estate Trust, a newly formed Texas real estate investment trust that is
wholly owned by FFPMC, became the general partner of the Company on December 28,
1997.
By virtue of the 1997 restructuring, all of the Company's non-real estate
operating activities were transferred to FFP Marketing, and the business of the
Company now solely consists of the ownership and rental of real estate.
Unless the context requires otherwise, references herein to the Company
include its subsidiary, FFP Properties, and its general partner, FFP Real Estate
Trust. References to FFP Marketing include its subsidiaries.
The Company maintains its principal executive offices at 2801 Glenda Avenue,
Fort Worth, Texas 76117-4391; its telephone number is (817) 838-4700. The
Company's Internet web site address is http://www.ffplp.com.
Business Strategy
The Company intends to pursue the following business strategy:
1. own its current portfolio of improved real properties,
2. collect rental income from those properties,
3. build equity in the properties through debt retirement and
possible appreciation,
4. refinance its current long-term debt to affiliate with longer term
fixed rate financing with a third party, and,
5. where acceptable deal terms, occupancy and financing are available,
expand its real estate holdings through the acquisition of other
real estate properties.
Such additional properties will most likely include retail sites leased to
FFP Marketing for convenience stores, truck stops, fast-food restaurants, and
other retail outlets. Any additional real estate acquired by the Company may be
used for other purposes and may be leased to other tenants. Although the Company
will consider investments in any type of real estate, it is anticipated that
most initial investments will be in convenience store locations since most of
the Company's contacts are in that industry, and the Company believes it has
considerable knowledge of the economics of those operations. In addition, the
Company expects that most real estate acquired will be in smaller communities
and towns. The Company believes that the larger real estate owners and financing
for pad retail sites and other real estate concentrate on larger metropolitan
areas. Consequently, the Company believes it can obtain better yields on
investments in smaller towns since there is less competition from other sources
of financing.
The Company may or may not pursue conversion to a real estate investment
trust for federal income tax purposes. There is no assurance that the Company
will decide to convert into a real estate investment trust. Under two possible
scenarios, if a conversion occurs through either a "merger" or an "exchange",
the Company's unitholders would receive shares of FFP Real Estate Trust in place
of their limited partnership units of the Company, and the FFP Real Estate Trust
shares would be listed on a securities exchange.
The Company has not yet made a decision to seek a tax ruling from the
Internal Revenue Service ("IRS") regarding a conversion. If the Company decides
to pursue a conversion and obtains a favorable tax ruling from the IRS that a
merger of the Company and its general partner, FFP Real Estate Trust, would be
tax-free to the Company's unitholders, then the merger alternative would most
likely be used. Under the merger alternative, the Company would be merged into
its general partner, FFP Real Estate Trust, with the Company's unitholders
receiving shares or units of FFP Real Estate Trust in exchange for their units
of the Company.
If the Company decides to pursue a conversion but is unable to obtain a
favorable ruling from the IRS on the merger alternative, then it could convert
to a real estate investment trust under the exchange alternative. Under the
exchange alternative, the Company's unitholders would be prohibited from
transferring their units to a third party but would be able to require the
Company's general partner to redeem their units either for shares of FFP Real
Estate Trust or for cash. FFP Real Estate Trust, not the Company's unitholders,
would determine whether to redeem the Company's units for shares or cash. It is
expected that such a redemption would be made in exchange for shares or units of
FFP Real Estate Trust.
The Company has no present intention to seek a revenue ruling from the IRS.
If one is sought, there can be no assurance whether or when the IRS would
respond favorably to the request.
Competition
Numerous entities and individuals, many of which have greater financial
resources than the Company, compete with the Company in acquiring real estate
for convenience stores, truck stops, and other retail activities. These entities
may be able to accept more or less risk than the Company is willing to
undertake. Competition will affect the bargaining power of property owners who
sell, buy or lease their properties, may reduce the number of suitable
investment opportunities available to the Company, and may decrease the yield
achievable on any real estate owned or purchased by the Company.
Employees
Through 1998 and at March 31, 1999, FFP Real Estate Trust, general partner of
the Company, had two executive officers, both of whom hold similar positions
with FFP Marketing. FFP Real Estate Trust has entered into a reimbursement
agreement with FFP Marketing pursuant to which the Company pays FFP Marketing an
annual lump sum of $200,000 for administrative and other indirect costs provided
to the Company and reimburses FFP Marketing for all of direct costs of the
Company. Neither FFP Real Estate Trust nor the Company have any other employees.
Government Regulation -- Environmental Regulation
Substantially all the properties leased by the Company to FFP Marketing
contain underground storage tanks used for motor fuel storage. The underground
storage tanks are owned and operated by FFP Marketing, which is responsible for
compliance with all environmental laws, rules and regulations regarding such
tanks. If for any reason FFP Marketing is unable or unwilling to take all
actions that may be required under current or future environmental laws, rules
or regulations regarding underground storage tanks or other activities, the
Company could be required to take such actions and be responsible for violations
of such environmental laws, rules or regulations.
The Company may acquire additional properties that will also be subject to
environmental regulations, either because they will also contain underground
storage tanks or for other reasons. The Company intends to structure similar
leases with the operators of such properties so that the lessees will be
responsible for compliance with such environmental regulations.
Federal Income Tax Law
As a publicly traded partnership, the Company pays no federal income tax.
Rather, the income or loss of the Company is allocated to its partners to be
included in their respective tax returns, subject to special rules for publicly
traded partnerships. Investors should note that (i) the passive loss rules of
the Internal Revenue Code are applied separately with respect to items
attributable to each publicly traded partnership, and (ii) net income from
publicly traded partnerships is not treated as passive income.
If in the future the Company becomes a real estate investment trust for
federal income tax purpose {see Business Strategy}, its earnings will no longer
be allocated to its partners, but it will not, as an entity, generally be
subject to federal income tax. However, it will be required to comply with
various complex requirements which limit the nature of its assets and sources of
its income. In addition, it will be required to distribute annually to its
shareholders at least 95% of its real estate investment trust taxable income.
Differences in timing between the actual receipt of income, the actual payment
of deductible expenses in arriving at taxable income, the creation of reserves,
and required debt amortization payments could require the Company to borrow
funds to meet the 95% distribution requirement even if management believed that
the then prevailing market conditions were not favorable for such borrowings or
that the borrowings were not advisable in the absence of such tax
considerations.
Forward-Looking Statements
This annual report on Form 10-K contains certain "forward-looking" statements
as such term is defined in the U.S. Private Securities Litigation Reform Act of
1995, and information relating to the Company and its subsidiary that is based
on the beliefs of management and assumptions made by and information currently
available to management. The Company is relying upon the "safe harbor" contained
in Section 27A of such act in making such 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; the financial
strength, cash flow, liquidity and other relevant business aspects of FFP
Marketing, the primary tenant of the Company's properties; changes in the
industries in which FFP Marketing competes; changes in general economic
conditions; the ability of management to identify acquisition and investment
opportunities meeting the Company's investment objectives; the timely leasing of
unoccupied properties; timely re-leasing 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 the Company to control the
management and operation of its tenant and the businesses conducted on the
Company's properties; financing risks, including the 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 at year end 1998 (which requires a
so-called "balloon" payment of principal in November 2000) may be refinanced at
a higher interest rate or on other terms less favorable to the Company 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 the
Company'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.
Should one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein as anticipated, believed, estimated,
expected, or intended.
Item 2. Properties.
The Company owns approximately 208 parcels of improved real estate. Those
properties include the ownership of 78 parcels of land with buildings located
thereon and 105 parcels with buildings only located on land that is owned by
affiliates of FFP Marketing or the Harvison Family. Other properties included in
the total are insignificant. The Company's real properties are principally
located in small cities and towns. The table below shows the states in which the
Company's properties are located and the uses of those properties at March 31,
1999:
Vacant
Convenience Gasoline Truck and
Stores Outlets Stops Other Total
Texas 76 63 6 12 157
Oklahoma 0 4 0 0 4
Louisiana 14 3 0 0 17
Missouri 9 1 0 5 15
Illinois 0 0 0 1 1
Mississippi 5 1 0 1 7
Kentucky 1 0 1 0 2
New Mexico 0 0 2 1 3
Tennessee 1 1 0 0 2
Totals 106 73 9 20 208
Substantially all of the real property owned by the Company is currently
leased to FFP Marketing under long term "triple net" leases and is used by FFP
Marketing in the operation of convenience stores and truck stops. Under these
"triple net" leases, the tenant (FFP Marketing), and not the landlord (the
Company), pays all real estate taxes, insurance and operating costs for the
properties.
The Company's leases to FFP Marketing covering the 78 properties where the
Company owns both the land and building generally expire in December 2002 plus
two five-year renewal periods at the sole option of FFP Marketing. If these
leases are renewed in 2002 and 2007, which is expected, the rent payable to the
Company will be adjusted by the change in the consumer price index from January
1, 1998, to the date of each such renewal. The Company's ownership in the 105
buildings leased to FFP Marketing is subject to a preexisting ground lease
between FFP Marketing, as lessee, and the Harvison Family, as lessor. The
Company's ownership interest in these buildings terminates concurrently with the
end of the underlying ground lease (generally, May 2007) and will continue
beyond that date if the underlying ground lease is renewed. The lessors under
the ground leases have indicated to the Company that they do not intend to
extend the ground leases past the lease termination date in 2007.
The Company's rental rates for all of the real estate leased to FFP Marketing
were determined by the Company based on its knowledge of the properties and the
general experience of its management in acting as lessor and lessee for similar
properties. The Company believes that the rental rates paid by FFP Marketing to
the Company are a fair rental value. Neither the Company nor FFP Marketing have
engaged a third party advisor or referred to any third party surveys or analyses
of rental rates in making this determination.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters.
The Limited Partner Units are listed for trading on the American Stock
Exchange (trading symbol "FFP"). At April 5, 1999, there were 152 holders of
record of the Limited Partner Units, and the last reported sales price of the
Units was $1.00 per Unit. {See Item 12. Security Ownership of Certain Beneficial
Owners and Management.}
The following table sets forth the range of high and low sales prices for the
Limited Partner Units as reported on the American Stock Exchange for the periods
indicated:
High Low
Dollars
1999
First Quarter 1-1/4 5/8
1998
First Quarter 3-5/8 5/8
Second Quarter 1-5/8 1-1/4
Third Quarter 1-1/2 3/4
Fourth Quarter 1 1/2
1997
First Quarter 5-13/16 4-1/4
Second Quarter 5-1/8 3-9/16
Third Quarter 4-15/16 3-3/8
Fourth Quarter 4-1/4 3-1/16
The price of the Limited Partner Units in 1998 and 1999 reflects the
restructuring of the Company on December 28, 1997, discussed earlier in this
report, and the related change at that time in the Company's business and
distribution of FFP Marketing common stock to the Company's unitholders as of
that date.
No distributions were made to partners in 1998 or 1997. The Board of Trustees
of FFP Real Estate Trust, the general partner of the Company, has not
established a distribution policy, and management does not anticipate that
distributions will be paid in the foreseeable future unless the Company's long
term debt is refinanced in a manner that causes the Company to incur positive
cash flow in excess of its debt service payments. Although the Company is
presently pursuing long term refinancing of its long term debt, no assurance can
be given that such refinancing will be obtained, that the terms of that
refinancing would allow the payment of a distribution, or that the Board of
Trustees will decide to make a distribution. The amount of any distributions
that the Company may pay is subject to limitations in its loan agreements with
its lender, which generally prohibits the payment of distributions in an amount
which would cause the Company to be unable to meet its financial covenants to
such lender. Distributions in the future will be dependent upon the Company's
earnings and cash flow, expenditures to acquire additional real estate, and debt
service requirements. {See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations, Liquidity and Capital Resources.}
In 1989, the Company entered into a Rights Agreement and distributed Rights
to purchase Limited Partner Units under certain circumstances to the holders of
its Limited Partner Units ("Unitholders"). Initially, the Rights were attached
to all Unit Certificates representing Units then outstanding, and no separate
Rights Certificates were distributed. Under the Rights Agreement, the Rights
were to separate from the Limited Partner Units and be distributed to
Unitholders if any public announcement was made that a person or group of
affiliated or associated persons (an "Acquiring Person") had acquired, or
obtained a right to acquire, beneficial ownership of 20% or more of Limited
Partner Units. In August 1994, a group of Unitholders announced that they had an
informal understanding that they would vote their Limited Partner Units together
as a block. The agreement related to Limited Partner units that constituted
approximately 25% of the Limited Partner Units then outstanding. Therefore, the
Rights became exercisable on October 7, 1994, the record date for the issuance
of the Rights Certificates (the "Distribution Date").
The Rights currently represent the right to purchase a Rights Unit (which is
substantially equivalent to a Class A Unit) of the Company at a price of $20 per
Unit. However, if any person acquires 30% or more of the Limited Partner Units,
then each holder of a Right, other than an Acquiring Person, will have the right
to receive, upon exercise, Rights Units (or in certain circumstances, other
property) having a value of $40 per Unit. The Rights will expire on August 13,
1999, and do not have any voting rights or rights to cash distributions.
In the December 1997 restructuring, the Partnership's partnership agreement
was amended to prohibit any person from owning more than 4.9% of the Limited
Partner Units. The amended agreement provides that any transfer thereafter that
would result in a person owning more than this amount will be null and void, and
the units that were to be transferred will become "Excess Units," which will
have no voting or distribution rights and will be held in escrow by the Company.
<PAGE>
Item 6. Selected Financial and Operating Data.
1998 1997
(In thousands)
Total rental revenues $2,660 $0
Depreciation and amortization 1,203 0
Interest expense 1,336 0
Net loss (179) 0
Net loss per share (0.08) 0.00
Long-term debt reduction 1,292 0
Real property $27,258 $27,517
Accumulated depreciation (10,574) (9,374)
Real property, net $16,684 $18,143
Current installments of long-term debt $1,291 $1,208
Accrued expenses 39 0
Long-term debt, excluding current
installments 13,355 14,730
Total debt $14,685 $15,938
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
This discussion should be read in conjunction with the selected financial and
operating data, the description of the Company's business operations, and the
financial statements and related notes and schedules included elsewhere in this
Annual Report on Form 10-K. {See Item 1. Business - Forward-Looking Statements.}
The primary tenant of the Company's properties is FFP Marketing, and the
business and affairs of the Company are managed by individuals who are employed
by FFP Marketing. This discussion should be read in conjunction with the Annual
Report on Form 10-K of FFP Marketing for its fiscal year ended December 27,
1998. The failure for any reason by FFP Marketing to pay rent to the Company is
a material risk factor regarding an investment in the Limited Partner Units.
At the close of its fiscal year 1997, the Company and its assets and
businesses were restructured as follows: the Company retained all of the real
property used in its former retail operations and entered into long-term,
triple-net leases of that real property with FFP Marketing, and all of its other
assets and businesses were transferred to FFP Marketing. In addition to
retaining the real estate referred to above, the Company retained certain
liabilities, principally bank debt and other debt secured by the real estate
retained by it. All other liabilities (including trade accounts payable, accrued
expenses, money orders payable, deferred income taxes, and obligations under
capital leases) were transferred to FFP Marketing.
Accordingly, the Company's business since the December 1997 restructuring
consists of the leasing and management of its current real estate holdings and
the possible acquisition, leasing and management of additional real properties.
All operations, assets, and businesses of the Company prior to 1998 are not
comparable to the operations, assets, and businesses of the Company after the
December 1997 restructuring.
1998 Operations
In 1998, the Company completed its first year of operations after the
December 1997 restructuring. The Company incurred a net loss of $179,000. Total
revenues were $2,730,000, almost all of which was rental income received from
FFP Marketing.
Interest expense of $1,336,000 was incurred on long-term debt. In addition,
the Company also built equity in its real estate properties by making principal
payments of $1,292,000 in reduction of its long-term debt. Depreciation and
amortization expense for 1998 was $1,203,000. General and administrative
expenses were $451,000 in 1998, including the overhead reimbursement fee of
$200,000 paid to FFP Marketing.
Cash flows provided by operating activities of $1,024,000 and investing
activities of $268,000 were utilized in repaying indebtedness.
Inflation
The Company's real property leases with FFP Marketing provide that the
Company's rent income will increase every five years, assuming that those leases
are renewed at that time, as a result of increases in the consumer price index
during the prior five-year period. Otherwise, the Company believes inflation
will not have a material effect on operating results.
Liquidity and Capital Resources
The Company has contracted with FFP Marketing to provide all cash management
services on behalf of the Company. Effective June 1998, the Company, FFP
Marketing and FFP Marketing's primary bank lender reached an agreement to
restructure the revolving credit facility and term loan due to the lender. In
connection with the restructuring of the Company in December 1997, both the
Company and FFP Marketing retained the liability for this debt as both entities
were primary obligors on the loans. In accordance with the June 1998 agreement,
the lender made a loan to FFP Marketing, FFP Marketing made a loan to the
Company, and the Company repaid the balance of its debt to the lender, all of
which was done effective on June 28, 1998. This transaction included the
execution of a promissory note by the Company payable to FFP Marketing in the
original principal amount of $14,773,000 (the then current balance on the debt
due to the lender), which was recorded by the Company as notes payable to
affiliate, and the Company was released by the lender from all obligations under
the Loan and Security Agreement. At December 31, 1998, the Company was indebted
to FFP Marketing in the amount of $14,201,000.
The interest rate and repayment terms of the Company's debt payable to FFP
Marketing mirror the terms of FFP Marketing's debt to its lender, including a
maturity date of November 2000. The revised agreement with the lender also
required that the loan be secured by real estate owned by the Company, which was
pledged to FFP Marketing and then also pledged by FFP Marketing to its lender as
additional collateral on its debt to the lender. The Company makes monthly
principal payments to FFP Marketing of $95,000 plus accrued interest on the
unpaid balance at a rate equal to the bank's prime rate. All proceeds paid by
the Company to FFP Marketing on this loan are required to be applied to the
balance of FFP Marketing's debt to the lender.
The Company has other notes payable which bear interest at 6% to 10% and are
due in monthly or annual installments through 2012. Such notes are secured by
real property and had aggregate balances of $445,000 at December 31, 1998.
In February 1999, the Company purchased 14 additional improved real property
from a third party on which 12 convenience stores and two truck stops are
operational. The Company immediately leased the properties to FFP Marketing
under 20-year leases. The Company's rental income from FFP Marketing under those
leases equals $99,000 per month and equals the Company's monthly principal and
interest payments payable under its acquisition debt. Such rent amount was
established by related parties, but management believes that such rent amount is
consistent with market rates; however, no assurance can be given to that effect.
The leases are "triple net" leases, under which FFP Marketing pays all taxes,
insurance, and operating costs, and provide for an increase in rent payments
after each five-year period during the term of the leases based upon any
increase in the consumer price index.
The Company incurred long-term acquisition debt in the original principal
amount of $9,550,000 in connection with its February 1999 acquisition. That debt
is fully amortizable over 15 years with equal, monthly payments of principal and
interest. FFP Marketing also agreed to guarantee the Company's acquisition
indebtedness because the amount of FFP Marketing's monthly lease payments to the
Company equals the Company's monthly debt payments.
The Company is currently seeking funds from a third party lender to refinance
its long-term indebtedness. Such refinancing is expected to provide for equal,
monthly principal and interest payments over a 20-year amortization period. In
April 1999, the Company executed a letter of intent with a third party lender to
provide such financing. However, the Company has not yet received a binding
commitment to refinance its current debt or to fund the acquisition of any
additional properties.
"Year 2000" Computer Issues
The Year 2000 issue ("Y2K") is the result of computer software programs being
coded to use two digits rather than four to define the applicable year. Some of
computer programs that have date-sensitive coding may recognize a date using
"00" as the year 1900 rather than the year 2000. This coding could result in
system failures or miscalculations, causing disruptions of operations.
The Company relies on FFP Marketing for its information technology and
computerization and obtains those, in part, in exchange for the payment of an
annual overhead reimbursement fee. As a result, the Y2K risks of the Company are
the same as those of FFP Marketing. The following is FFP Marketing's assessment
of its 2K status.
FFP Marketing has approached the Y2K issue in phases. A Y2K project office
manager, together with strong support from management, has designed a Y2K work
plan that is currently being implemented. The Y2K work plan includes: (1)
identifying and inventorying all Year 2000 tasks and items; (2) assigning
priorities to all tasks and items; (3) remediation of information systems ("IS")
application code, testing and reintegration to production, as well as testing
all replaced systems software and non-remediated applications; (4) contacting
third-party vendors to verify their compliance and perform selected interface
tests with major vendors; (5) determining FFP Marketing's Y2K responsibilities
to its subsidiaries and affiliates; and (6) establishing contingency
alternatives assuming worst-case scenarios.
FFP Marketing continues to progress favorably in its completion of the
various tasks and target dates identified in the Y2K work plan. FFP Marketing
believes it has identified and prioritized all major Y2K-related items. In
addition, many non-IS, merchandise, equipment, financial institution, insurance
and public utility vendors are being contacted, inquiring as to their readiness
and the readiness of their respective vendors. FFP Marketing will perform
follow-up efforts with the above vendors as required. Testing compliance with
major vendors is now being planned. The following reflects management's
assessment of FFP Marketing's Y2K state of readiness at the end of its 1998
fiscal year:
Estimated Estimated
Percentage Completion
Completed Date
Phase
Internal IS and Non-IS systems and
equipment:
Awareness 90% Dec 1999
Assessment 80% Jun 1999
Remediation 60% Sep 1999
Testing 20% Oct 1999
Contingency planning 20% Sep 1999
Suppliers, customers and third party providers:
Awareness-identify companies 70% May 1999
Assessment questionnaire completed by
major suppliers 30% Aug 1999
Assessment review with third party
providers 30% Aug 1999
Review contractual commitments 10% Jul 1999
Risk assessment 10% Jun 1999
Contingency planning 10% Sep 1999
Testing as applicable 10% Sep 1999
FFP Marketing's estimates are judgmental and subject to error. It believes
that work should be significantly finished at the estimated completion date, but
FFP Marketing will continue to reevaluate awareness, send follow-up
questionnaires and update contingency plans as considered necessary.
FFP Marketing estimates that the cost of the Y2K project will be
approximately $500,000 to $750,000, of which about one-half will be capital
costs. FFP Marketing has indicated that it does not intend to pass through any
Y2K costs to the Company. The costs incurred to date approximate $200,000, with
the remaining cost for outside consultants, software and hardware applications
to be funded through operating cash flow. This estimate includes costs related
to the upgrade and/or replacement of computer software and hardware; costs of
remediated code testing and test result verification; and the reintegration to
production of all remediated applications. In addition, the costs include the
testing of applications and software currently certified as Y2K compliant. FFP
Marketing does not separately track the internal costs incurred for the Y2K
project, which are primarily the related payroll costs for the IS and various
user personnel participating in the project.
Due to the general uncertainty inherent in the Y2K process, primarily due to
issues surrounding the Y2K readiness of third-party suppliers and vendors, a
reasonable worst-case scenario is difficult to determine at this time. FFP
Marketing does not anticipate more than temporary isolated disruptions
attributed to Y2K issues to affect either FFP Marketing or its primary vendors.
FFP Marketing is concentrating on four critical business areas in order to
identify, evaluate and determine the scenarios requiring the development of
contingency plans: (1) merchandise ordering and receipt, (2) petroleum products
ordering and receipt, (3) disruption of power at retail sites, and (4) cash
collection and disbursement systems. To the extent vendors are unable to deliver
products due to their own Year 2000 issues, FFP Marketing believes it will
generally have alternative sources for comparable products and does not expect
to experience any material business disruptions. Although considered unlikely,
the failure of public utility companies to provide telephone and electrical
service could have material consequences. Contingency planning efforts will
escalate as FFP Marketing continues to receive and evaluate responses from all
of its primary merchandise vendors and service providers. These contingency
plans are scheduled to be complete by September 1999.
The costs of the Y2K project and the date on which FFP Marketing plans to
complete the Y2K modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third-party modification plans and
other factors. As a result, there can be no assurance that these forward-looking
estimates will be achieved and the actual costs. Vendor compliance could differ
materially from FFP Marketing's current expectations and result in a material
financial risk. In addition, while FFP Marketing is making significant efforts
in addressing all anticipated Y2K risks within its control, this event is
unprecedented. Consequently, there can be no assurance that the Y2K issue will
not have a material adverse impact on its own or on the Company's operating
results and financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is subject to a market risk related to variable interest rates
because the interest expense on its long-term debt payable to FFP Marketing
equals the prime rate of interest, which is subject to change.
Item 8. Financial Statements and Supplementary Data.
The financial statements begin on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
General Partner
FFP Real Estate Trust is a Texas real estate investment trust formed in
December 1997. To date, its only activities have been to serve as the Company's
sole general partner and to manage its affairs and business. FFP Real Estate
Trust succeeded FFP Partners Management Company, Inc., as the Company's general
partner in conjunction with the December 1997 restructuring of the Company. The
holders of Limited Partner Units have no power, as limited partners, to direct,
or participate in the control of, the business of the Company.
Management of the General Partner
The names, ages, positions, and business experience of the executive officers
and trust managers of FFP Real Estate Trust on December 31, 1998, were as
follows:
Name Age Position
John H. Harvison 65 Chairman of the Board of Trust
Managers, President, and
Chief Executive Officer
Craig T. Scott 52 Vice President - Finance,
General Counsel, Secretary,
Treasurer and Chief Financial
Officer
Robert E. Garrison, II 57 Trust Manager
[1][2]
Joseph F. Leonardo [1] 52 Trust Manager
J. D. St.Clair 64 Trust Manager
Randall W. Harvison 41 Trust Manager
[1] Member of Audit Committee
[2] Mr. Garrison resigned from the Board on February 23, 1999. No
replacement has yet been made.
John H. Harvison has been Chairman of the Board of Trust Managers of FFP Real
Estate Trust since December 1997. He was Chairman of the Board of the Company's
former general partner since the commencement of the Company's operations in May
1987. Mr. Harvison is also the Chairman of the Board and Chief Executive Officer
of FFP Marketing, which leases all of the real property owned by the Company.
Mr. Harvison is a founder and an executive officer of each of the companies from
which the Company initially acquired the retail outlets that were transferred to
FFP Marketing in the December 1997 restructuring of the Company. He has been
active in the retail gasoline business since 1958 and in the convenience store
business since 1973. In addition, he has been involved in real estate
development, oil and gas exploration and production, the ownership and
management of an oil refinery and other personal investments. In January 1995,
Mr. Harvison consented to the entry of a cease and desist order by the United
States Office of Thrift Supervision that, among other things, prohibits him from
participating in any manner in the conduct of the affairs of federally insured
depository institutions. This Order was issued in connection with Mr. Harvison's
ownership in a federal savings bank and transactions between him (and companies
in which he had an ownership interest) and that institution. In consenting to
the issuance of the Order, Mr. Harvison did not admit any of the allegations
against him and consented to the issuance of the Order solely to avoid the cost
and distraction that would be caused by prolonged litigation to contest the
positions taken by the Office of Thrift Supervision. Mr. Harvison is the father
of Randall W. Harvison, who is also a Trust Manager of the General Partner.
Craig T. Scott has been Vice President-Finance, General Counsel, Secretary,
Treasurer and Chief Financial Officer of FFP Real Estate Trust since October
1998. He is employed with similar titles by FFP Marketing and its subsidiaries.
From October 1996 until September 1998, Mr. Scott was an self-employed attorney
engaged in the private practice of law in Dallas and McKinney, Texas. From
December 1991 until October 1996, he was employed by Box Energy Corporation as
an attorney and from July 1993 until October 1996 as its Executive Vice
President. Prior to joining such company, Mr. Scott engaged in the practice of
law for seven years with large law firms in Dallas, Texas; practiced law in
McKinney, Texas for four years; and was the president and co-owner of an oil and
gas exploration company for two years. Mr. Scott was previously employed for six
years by Arthur Andersen & Co., an international public accounting firm. He is a
member of the State Bar of Texas, the American Institute of Certified Public
Accountants and the Texas Society of CPAs.
Robert E. Garrison, II, was a director of the Company's former general
partner from May 1987 until the December 1997 restructuring of the Company. He
was elected to the Board of Trust Managers of FFP Real Estate Trust in December
1997 and serves as such until his resignation from the Board on February 23,
1999, due to added responsibilities as President and Chief Executive Officer at
Pinnacle Global Group, Inc. Mr. Garrison had been a managing partner of Harris,
Webb & Garrison, a regional merchant and investment bank, and also Chairman and
Chief Executive Officer of Pinnacle Management & Trust Co., a state chartered
independent trust company. From October 1992 through February 1994, Mr. Garrison
was Chairman of Healthcare Capital Group, Inc., a regional investment bank
focusing on the health care industry. From April 1991 through October 1992, Mr.
Garrison was Chairman and Chief Executive Officer of Med Center Bank & Trust,
one of the leading independent banks in Houston, Texas. Mr. Garrison served as
President of Iroquois Brands, Ltd. ("IBL"), a manufacturer of material handling
and construction equipment, pharmaceutical and personal care products, and
operator of convenience stores and retail fuel outlets in the United Kingdom
from 1989 until September 1990. From 1982 through March 1989, Mr. Garrison
served as Executive Vice President and director of Lovett Mitchell Webb &
Garrison, Inc. ("LMW&G"), one of the representatives of the underwriters in the
initial public offering of the Company in May 1987, where he managed the
Investment Research and Investment Banking Division, and Boettcher & Company,
Inc., which acquired LMW&G in September 1987. From 1971 to 1982, Mr. Garrison
was First Vice President and Director of Institutional Research at Underwood
Neuhaus & Co. From 1969 to 1971, Mr. Garrison was Vice President of BDSI, a
venture capital subsidiary of General Electric.
Joseph F. Leonardo has been a Trust Manager of FFP Real Estate Trust since
December 1997. Since August 1992, Mr. Leonardo has been President and Chief
Executive Officer of Leonardo Management Corporation, which provide strategic
planning, market positioning, and other sales and marketing consulting services.
Mr. Leonardo also operates Convenience Directions which publishes Info
Marketing, a convenience store industry newsletter. Prior to forming Leonardo
Management, Mr. Leonardo served in various executive positions with several
convenience store operators.
J. D. St.Clair was a director of the Company's former general partner from
May 1987 until the December 1997 restructuring. He has served as a Trust Manager
of FFP Real Estate Trust since December 1997. Mr. St.Clair is also a director of
FFP Marketing and has been Vice President-Fuel Supply and Distribution of FFP
Marketing, and its predecessor, since May 1987. Mr. St.Clair is a founder and an
executive officer of several of the companies from which the Company initially
acquired the retail outlets that were transferred to FFP Marketing in the
December 1997 restructuring. He has been involved in the retail gasoline
marketing and convenience store business since 1971. Prior to 1971, Mr. St.Clair
performed operations research and system analysis for Bell Helicopter, Inc.,
from 1967 to 1971; for the National Aeronautics and Space Administration from
1962 to 1967; and Western Electric Company from 1957 to 1962.
Randall W. Harvison has served as a Trust Manager of FFP Real Estate Trust
since December 1997. He is an attorney and has been engaged in a solo practice
in Fort Worth, Texas, since 1994. Since 1987, Mr. Harvsion was also employed by
a subsidiary of FFP Marketing and of various companies controlled by the
Harvison Family that are engaged in real estate investment and management and
other investment activities. Randall W. Harvison is the son of John H. Harvison,
the Chairman of the Board of Trust Managers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Regulations issued under the Securities Exchange Act of 1934 require certain
persons to report their holdings of the Company's Class A to the Securities and
Exchange Commission and to the Company. To the best of the Company's knowledge,
based upon copies of reports and other representations provided to the Company,
all 1998 reports required under Section 16 of the Securities Exchange Act of
1934 were filed in a timely manner except that a report has not yet been filed
for the month of October to report the purchase of 5,000 Limited Partner Units
by J.D. St. Clair.
Item 11. Executive Compensation.
Each Trust Manager of FFP Real Estate who is not an officer or employee of
the FFP Real Estate receives an annual retainer of $4,000 plus $1,000 for each
Board meeting, or committee meeting not held in conjunction with a Board
meeting, which he attends and $500 for each telephone meeting in which he
participates. Each Trust Manager is also reimbursed for expenses related to
attendance at Board meetings.
In addition, non-employee Trust Managers are generally granted options to
acquire 25,000 Limited Partner Units at the fair market value of the underlying
units on the date of grant. The options become exercisable with respect to
one-third of the units covered thereby on each of the anniversary dates
following the grant and expire ten years after grant. In the event of a change
in control of the Company, any unexercisable portion of the options will become
immediately exercisable. Upon exercise, the option price may be paid, in whole
or in part, in Limited Partner Units owned by the Trust Manager.
Trust Managers who are officers or employees of FFP Real Estate Trust receive
no additional compensation for attendance at Board or committee meetings.
Neither the Company nor FFP Real Estate Trust, the general partner of the
Company, paid any salary or bonus (cash or non-cash) to any person in 1998.
Accordingly, there were no "Named Executive Officers" of the Company in 1998.
The Company and FFP Marketing are parties to a reimbursement agreement
pursuant to which the Company reimburses FFP Marketing for all direct costs of
the Company (such as costs to prepare the Company's annual partnership tax
returns, annual audit fees, etc.) and an agreed upon lump sum amount for
indirect overhead costs allocable to the Company. The reimbursement for
officers' compensation costs incurred by FFP Marketing in connection with the
Company's activities is determined by the amount of time management and other
personnel spend on activities of the Company compared to the amount of time they
spend on activities of FFP Marketing. Since FFP Real Estate Trust's only
activity is to serve as the general partner of the Company, all of its costs and
expenses will be borne by the Company. The indirect cost reimbursement paid by
the Company to FFP Marketing for 1998 was $200,000.
Options Exercised during Fiscal 1998 and Fiscal Year End Option Values. All
options held by directors, officers, and employees to acquire Limited Partner
Units of the Company that were outstanding at the completion of the December
1997 restructuring of the Company were divided into separate options to purchase
Limited Partner Units of the Company and a like number of FFP Marketing common
shares. The exercise price for the then existing options for the Company's units
was divided between the two new options in proportion to the average closing
price on the American Stock Exchange of the Company's Limited Partner Units and
shares of FFP Marketing's common stock during the first month of trading
following completion of the restructuring.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Limited Partner Units
The following table sets forth as of March 31, 1999, information regarding
the only persons known by the Company to own, directly or indirectly, more than
5% of its Limited Partner Units:
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership of Class
Edmund & Mary Shea Real Property Trust 126,700 units 5.7%
Edmund H. Shea, Jr., Trustee Direct
655 Brea Canyon Road
P. O. Box 489
Walnut, California 91789-0489
The following table sets forth as of March 31, 1999, information with respect
to the Limited Partner Units beneficially owned by all Trust Managers and
executive officers of FFP Real Estate Trust (such information is based on
ownership reported to the Company by such persons):
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership [1] of Class [1]
John H. Harvison, Chairman and 40,000 [2] 1.8%
President
Craig T. Scott, Vice President 0 [3] 0.0%
Robert E. Garrison, II, Trust Manager 0 [4] 0.0%
Joseph F. Leonardo, Trust Manager 0 [5] 0.0%
J.D. St.Clair, Trust Manager 42,400 [6] 1.9%
Randall W. Harvison, Trust Manager 0 [5] 0.0%
All directors and executive
officers as a group (6 persons) 82,400 3.7%
[1] Based on 2,234,262 Limited Partner Units outstanding at March 31, 1999,
plus any Limited Partner Units that an individual has the right to acquire
within 60 days pursuant to the exercise of options. Options are deemed to
be outstanding for the purpose of computing the percentage ownership of
such individual but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person or group shown in
the table.
[2] Consists of options to acquire 40,000 units.
[3] Excludes options to acquire 30,000 units not exercisable within 60 days.
[4] Mr. Garrison resigned as a Trust Manager on February 23, 1999.
[5] Excludes options to acquire 25,000 units not exercisable within 60 days.
[6] Includes 12,400 units held directly and options to acquire 30,000 units.
General Partner
FFP Real Estate Trust has been sole general partner of the Company since
December 1997 and, as such, makes all decisions relating to the management of
the Company. FFP Partners Management Company, a Delaware corporation indirectly
owned by John H. Harvison and members of his immediate family, is the sole
shareholder of FFP Real Estate Trust.
Item 13. Certain Relationships and Related Transactions.
Related Transactions
The Company and FFP Marketing are parties to a reimbursement agreement
pursuant to which the Company reimburses FFP Marketing for all direct costs of
the Company (such as costs to prepare the Company's annual partnership tax
returns, annual audit fees, etc.) and an agreed upon lump sum amount for
indirect overhead costs allocable to the Company. The reimbursement for
officers' compensation costs incurred by FFP Marketing in connection with the
Company's activities is determined by the amount of time management and other
personnel spend on activities of the Company compared to the amount of time they
spend on activities of FFP Marketing. Since FFP Real Estate Trust's only
activity is to serve as the general partner of the Company, all of its costs and
expenses will be borne by the Company. The indirect cost reimbursement paid by
the Company to FFP Marketing for 1998 was $200,000.
After the December 1997 restructuring of the Company and until June 1998, the
Company and FFP Marketing were jointly liable on substantially all the debt that
was transferred to the Company in the restructuring. In June 1998, that debt was
restructured such that the Company was released from the liability to the bank
lender but is now liable to FFP Marketing. During 1998, the Company paid FFP
Marketing $693,000 in interest expense on that indebtedness. The balance due on
Company's notes payable to affiliate at December 31, 1998, was $14,201,000.
FFP Marketing leases buildings or land and buildings for some of its retail
outlets from the Company. John H. Harvison, Chairman and Chief Executive Officer
of FFP Marketing, and Craig T. Scott, Vice President - Finance, General Counsel
and Chief Financial Officer of FFP Marketing, hold similar positions with the
Company. In addition, companies owned directly or indirectly by Mr. Harvison and
members of his immediate family and/or other members of the senior management of
FFP Marketing hold corresponding ownership interests in the Company. The leases
on these properties were entered into in conjunction with the restructuring of
the Company that was completed in December 1997 in which the non-real estate
assets and businesses of the Company were transferred to FFP Marketing while the
real estate used in the retail operations was retained by the Company. The lease
rates for the locations were established based on knowledge of the properties by
the management of the Company and FFP Marketing and their general experience in
acting as lessor and lessee for similar properties. The management of FFP
Marketing believes that the lease rates are comparable to lease rates that could
be entered into with unrelated third parties. However, FFP Marketing did not
engage any third party advisors or refer to any third party surveys or analyses
of rental rates in making this determination. FFP Marketing paid $2,628,000 in
lease payments to the Company for these properties during 1998.
Prior to the December 1997 restructuring of FFP Partners, the Company was
managed by its former general partner, which made determinations with respect to
costs incurred by it (whether directly or indirectly through its affiliates)
that were reimbursed by the Company. The Company reimbursed the former general
partner and any of its affiliates for direct and indirect general and
administrative costs, principally officers' compensation and associated
expenses, related to the business of the Company. The reimbursement was based on
the time devoted by employees to the Company's business or upon such other
reasonable basis as was determined by the former general partner.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this Annual Report on Form
10-K:
(1) Financial Statements. See Index to Financial Statements on page F-1
hereof.
(2) Financial Statement Schedules. No Financial Statement Schedules are
included because they are either not required, not applicable, or the required
information is included in the consolidated financial statements or notes
thereto.
(3) Exhibits.
3.1 Amended and Restated Certificate of Limited
Partnership of FFP Partners, L.P. {1 - Ex.
3.7}
4.1 Amended and Restated Agreement of Limited
Partnership of FFP Partners, L.P., dated May
21, 1987, as amended by the First Amendment
to Amended and Restated Agreement of Limited
Partnership dated August 14, 1989, and by
the Second Amendment to Amended and Restated
Agreement of Limited Partnership dated July
12, 1991. {2 - Ex 4.1}
4.2 Third Amendment to Amended and Restated
Agreement of Limited Partnership of FFP
Partners, L.P., dated as of December 28,
1997. {4}
4.3 Rights Agreement dated as of August 14, 1989,
between the Company and NCNB Texas National
Bank, as Rights Agent. {3 - Ex. 1}
10.1 Nonqualified Unit Option Plan of FFP Partners,
L.P. {1 - Ex. 10.2}
10.2 Form of Lease Agreement between FFP
Properties, L.P., and FFP Operating
Partners, L.P. {4}
10.3 Form of Building Lease Agreement between FFP
Properties, L.P., and FFP Operating
Partners, L.P. {4}
10.4 Loan Agreement among FFP Partners, L.P., FFP
Operating Partners, L.P., Direct Fuels,
L.P., and HSBC Business Loans, Inc., dated
October 31, 1997. {4}
21.1 Subsidiary of the Registrant. {5}
23.1 Consent of KPMG LLP. {5}
27 Financial data schedule. {5}
- -------------------
{1} Included as the indicated exhibit in the
Partnership's Registration Statement on
Form S-1 (Registration No. 33-12882) dated
May 14, 1987, and incorporated herein by
reference.
{2} Included as the indicated exhibit in the
Partnership's Annual Report on Form 10-K
for the fiscal year ended December 27,
1992, and incorporated herein by reference.
{3} Included as the indicated exhibit in the
Partnership's registration statement on
Form 8-A dated as of August 29, 1989, and
incorporated herein by reference.
{4} Included as the indicated exhibit in the
Partnership's Annual Report on Form 10-K
for the fiscal year ended December 28,
1997, and incorporated herein by reference.
{5} Included herewith.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this Annual Report on Form 10-K.
<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 Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 15, 1999 FFP Partners, L.P.
(Registrant)
By: FFP Real Estate Trust
General Partner
By: /s/ John H. Harvison
John H. Harvison
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated as of April 15, 1999.
/s/ John H. Harvison President and Chief Executive
- --------------------------------- Officer and Trust Manager of FFP
John H. Harvison Real Estate Trust (Principal
executive officer)
/s/ Craig T. Scott Vice President - Finance,
- --------------------------------- Secretary, Treasurer, General
Craig T. Scott Counsel and Chief Financial
Officer of FFP Real Estate Trust
(Principal financial and
accounting officer)
- --------------------------------- Trust Manager of FFP Real Estate Trust
Joseph F. Leonardo
/s/ J. D. St.Clair Trust Manager of FFP Real Estate Trust
- ---------------------------------
J. D. St.Clair
/s/ Randall W. Harvison Trust Manager of FFP Real Estate Trust
- ---------------------------------
Randall W. Harvison
<PAGE>
Item 8. Index to Financial Statements
Page
Number
Independent Auditors' Report F-2
Consolidated Balance Sheets as of December 31, 1998 F-3
and December 28, 1997
Consolidated Statement of Operations for the Period F-4
Ended December 31, 1998
Consolidated Statement of Partners' Capital for the Period F-5
Ended December 31, 1998
Consolidated Statement of Cash Flows for the Period F-6
Ended December 31, 1998
Notes to Consolidated Financial Statements F-7
<PAGE>
Independent Auditors' Report
The Partners
FFP Partners, L.P.:
We have audited the accompanying consolidated financial statements of FFP
Partners, L.P. (a Delaware limited partnership) and its subsidiary, as listed in
the accompanying index. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FFP
Partners, L.P. and its subsidiary as of December 31, 1998 and December 28, 1997,
and the results of their operations and their cash flows for the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
KPMG LLP
Fort Worth, Texas
March 30, 1999
<PAGE>
FFP PARTNERS L.P. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1998 and December 28, 1997
(In thousands)
1998 1997
Assets
Current assets
Prepaid expenses $26 $196
Real property
Land and improvements 5,929 6,026
Buildings 21,329 21,491
27,258 27,517
Accumulated depreciation (10,574) (9,374)
16,684 18,143
Notes receivable 44 0
Other assets, net 50 0
Total assets $16,804 $18,339
Liabilities and Partners' Capital
Current liabilities
Current installments of long-term debt $148 $1,208
Current installments of notes payable to
affiliate 1,143 0
Accrued expenses 39 0
Total current liabilities 1,330 1,208
Long-term debt, excluding current installments 297 14,730
Notes payable to affiliate, excluding current
installments 13,058 0
Total liabilities 14,685 15,938
Minority interest in subsidiary 857 960
Commitments and contingencies
Partners' capital
Limited partners' capital 1,242 1,418
General partner's capital 20 23
Total partners' capital 1,262 1,441
Total liabilities and partners' capital $16,804 $18,339
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statement of Operations
Period Ended December 31, 1998
(In thousands, except per unit)
1998
Revenues
Rental income $2,660
Gain on sale of property 56
Interest and other income 14
Total revenues 2,730
Expenses
General and administrative expenses 473
Depreciation and amortization 1,203
Interest expense 1,336
Total expenses 3,012
Net loss before minority interest in subsidiary (282)
Minority interest in subsidiary 103
Net loss $(179)
Net loss per unit
Basic $(0.08)
Diluted (0.08)
Weighted average number of units outstanding
Basic 2,272
Diluted 2,272
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statement of Partners' Capital
Period Ended December 31, 1998
(In thousands)
Limited General
Partners Partner Total
Balance, December 28, 1997 $1,418 $23 $1,441
Net loss (176) (3) (179)
Balance, December 31, 1998 $1,242 $20 $1,262
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statement of Cash Flows
Period Ended December 31, 1998
(In thousands)
1998
Cash flows from operating activities
Net loss $(179)
Adjustments to reconcile net loss to net cash
provided by operating activities -
Depreciation and amortization 1,203
Gain on sales of real property (56)
Minority interest in subsidiary (103)
Changes in operating assets and liabilities -
Decrease in prepaid expenses 170
Increase in other assets (50)
Increase in accrued expenses 39
Net cash provided by operating activities 1,024
Cash flows from investing activities
Purchases of land and building (96)
Proceeds from the sale of real property 408
Increase in notes receivable (44)
Net cash provided by investing activities 268
Cash flows from financing activities
Payments on long-term debt (15,493)
Proceeds from long-term debt to affiliate 14,773
Payments on long-term debt to affiliate (572)
Net cash used by financing activities (1,292)
Net increase/(decrease) in cash 0
Cash at beginning of year 0
Cash at end of year $0
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest during 1998 was approximately $1,300.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1998 and December 28, 1997
1. Basis of Presentation
(a) Organization of Company
These Consolidated Financial Statements include the assets, liabilities, and
results of operations of FFP Partners, L.P. (the "Company"), and its 60%-owned
subsidiary, FFP Properties, L.P. ("FFP Properties").
The Company is a Delaware limited partnership formed in December 1986
pursuant to the Agreement of Limited Partnership of FFP Partners, L.P. (the
"Partnership Agreement"), with FFP Partners Management Company, Inc. ("FFPMC")
as its initial general partner. In May 1987, the Company purchased convenience
stores, truck stops, other retail motor fuel outlets, and ancillary businesses
from affiliates of its general partner. The purchase of those outlets was
completed in conjunction with the Company's initial public offering of Class A
Units of limited partnership interest. Through its subsidiaries, the Company
owned and operated these outlets, and other businesses, until December 1997.
In December 1997, the Company completed an organizational restructuring by
which the real estate used in the aforementioned retail operations was retained
by the Company while the convenience store, truck stop, other retail motor fuel
outlets, and other businesses it conducted were transferred to FFP Marketing
Company, Inc., a Texas corporation ("FFP Marketing"), in exchange for all the
common stock of FFP Marketing. The common stock of FFP Marketing was then
distributed on a one-for-one basis to the general partner and limited partners
of the Company. The assets and liabilities in the accompanying consolidated
balance sheet of the Company have been reflected at the historical carrying
values of the predecessor entity prior to the restructuring. Accordingly, no
gain or loss was recognized as a result of the 1997 organizational
restructuring.
Also in that December 1997 restructuring, the Company distributed the real
estate it retained to FFP Properties, a newly formed Texas limited partnership,
in exchange for the general partnership interest in FFP Properties. The limited
partnership interests in the Company held by John H. Harvison, the Chairman and
Chief Executive Officer of FFPMC, members of his family, and corporations,
partnerships, trusts, and other business entities affiliated with him or his
family members (collectively, the "Harvison Family") were exchanged for
economically equivalent limited partnership interests in FFP Properties. In
addition, FFP Real Estate Trust, a newly formed Texas real estate investment
trust that is wholly owned by FFPMC, then became the sole general partner of the
Company.
By virtue of this restructuring, all of the operating activities of the
Company were transferred to FFP Marketing, and there is no comparative income
data for the Company for the prior periods.
The Company owns the real estate and conducts its rental activities through
FFP Properties, its operating subsidiary. The Company owns a 60% partnership
interest in FFP Properties and serves as its sole general partner. In the
consolidated financial statements of the Company, the minority interest in
subsidiary represents the Harvison Family's 40% limited partnership interest in
FFP Properties.
(b) Consolidation
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiary. All significant intercompany accounts and
transactions are eliminated in the consolidated financial statements.
(c) Change in Fiscal Year
Prior to the restructuring of the Company on December 28, 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 changed its fiscal year to coincide with the calendar year. Accordingly,
the accompanying consolidated financial statements for the year period December
31, 1998, include the 12 months then ended plus the three-day period from
December 29, 1997 through December 31, 1997. The effect of including these three
additional days in the consolidated financial statements for the period ended
December 31, 1998, is immaterial.
2. Significant Accounting Polices
(a) Real Property
Real property is stated at cost, which may differ from fair market value.
Depreciation is provided on the straight-line method over the estimated useful
lives of the respective assets, which range from five to 20 years.
(b) Fair Value of Financial Instruments
The carrying value of notes receivable approximates fair value because of the
short maturity of the instrument. The carrying amount of notes payable to
affiliate approximates fair value because the interest rate on such obligations
varies with the prime rate. The carrying value of long-term debt approximates
fair value because the fixed rate on such debt is not materially different from
the current rates available to the Company.
(c) Notes Receivable
The Company evaluates the collectibility of notes receivable in accordance
with the provisions of Statement of Financial Accounting Standards, ("SFAS") No.
114, "Accounting by Creditors for Impairment of Loans", as amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." At December 31, 1998, no notes receivable were determined to be
impaired.
(d) Units Issued and Outstanding
The equity interests in the Company are comprised of Class A Units of Limited
Partnership interest and units representing the general partner interest. These
units issued and outstanding at December 31, 1998, and December 28, 1997, were
as follows:
1998 1997
Limited partners 2,234,262 2,234,262
General partner 37,416 37,416
The Company's limited partner units are traded on the American Stock Exchange
under the "FFP" trading symbol. The general partner units are owned by its sole
general partner, FFP Real Estate Trust.
(e) Use of Estimates
The use of estimates is required to prepare the Company's consolidated
financial statements in conformity with generally accepted accounting
principles. Although management believes that such estimates are reasonable,
actual results could differ from the estimates.
(f) Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of such assets to future net cash flows
expected to be generated by the assets. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
(g) Rental Revenue
The Company recognizes rental revenues when earned.
(h) Unit Option Plan
The Company accounts for its unit option plan in accordance with the
provisions of Accounting Principles Board ("APB") Option No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such, compensation
expense would be recorded only if the current market price of the underlying
unit on the date of the grant of the option exceeded the exercise price of the
option. The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," which permits entities either to (i) recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant, or (ii) continue to apply the provisions of APB Opinion No. 25 and
provide proforma net income and earnings per share disclosures for employee
option grants made in 1995 and subsequent years as if the fair-value based
method defined in SFAS No. 123 had been applied. The Company elected the second
alternative (See Note 5).
(i) Income Taxes
As a publicly traded partnership, the Company pays no federal income tax.
Rather, the income or loss of the Company is allocated to its partners to be
included in their respective tax returns. Special tax rules for publicly traded
partnership The net difference between the tax bases and the reported amounts of
assets and liabilities at December 31, 1998, and Decemer 28, 1997, is $5,277,000
and $4,923,000, respectively.
(j) Reporting of Comprehensive Income
As of December 29, 1997, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires the presentation of "comprehensive income"
in financial statements. Comprehensive income includes net income and all
revenues, expenses, gains, and losses that are recorded directly to equity.
Because the Company does not have any such items that are recorded directly to
equity, comprehensive income and net income are identical. Accordingly, the
effect of the adoption of SFAS No. 130 has no effect on the Company's
consolidated financial statements.
(k) Segment Information
As of December 29, 1997, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for reporting information about a company's operating segments. It also
establishes standards for related disclosures regarding products and services,
geographic areas and major customers. The Company operates in a single operating
segment, the ownership and rental of real estate. The Company earns
substantially all of its rental income from a single entity, FFP Marketing.
3. Notes Payable and Long-Term Debt
Effective June 1998, the Company, FFP Marketing and FFP Marketing's primary
bank lender reached an agreement to restructure the revolving credit facility
and term loan due to the lender. In connection with the restructuring of the
Company in December 1997, both the Company and FFP Marketing retained the
liability for this debt as both entities were primary obligors on the loans. In
accordance with the June 1998 agreement, the lender made a loan to FFP
Marketing, FFP Marketing made a loan to the Company, and the Company repaid the
balance of its debt to the lender, all of which was done effective on June 28,
1998. This transaction included the execution of a promissory note by the
Company payable to FFP Marketing in the original principal amount of $14,773,000
(the then current balance on the debt due to the lender), which was recorded by
the Company as notes payable to affiliate, and the Company was released by the
lender from all obligations under the Loan and Security Agreement. At December
31, 1998, the Company was indebted to FFP Marketing in the amount of
$14,201,000.
The interest rate and repayment terms of the Company's note payable to FFP
Marketing mirror the terms of FFP Marketing's debt to its lender, including a
maturity date of November 2000. The revised agreement with the lender also
required that the loan be secured by real estate owned by the Company, which was
pledged to FFP Marketing and then also pledged by FFP Marketing to its lender as
additional collateral on its debt to the lender. The Company makes monthly
principal payments to FFP Marketing of $95,000 plus accrued interest on the
unpaid balance at a rate equal to the bank's prime rate. All proceeds paid by
the Company to FFP Marketing on this loan are required to be applied to the
balance of FFP Marketing's debt to the lender.
The Company has other notes payable which bear interest at 6% to 10% and are
due in monthly or annual installments through 2012. Such notes are secured by
real property and had aggregate balances of $445,000 at December 31, 1998.
The aggregate fixed maturities of long-term debt for each of the five years
subsequent to 1998 are as follows:
(In thousands)
1999 1,291
2000 13,110
2001 45
2002 42
2003 41
Thereafter 117
$14,646
4. Loss Per Unit
The following table reconciles the denominator in the calculation of the
basic and diluted loss per unit for partnership units in 1998:
(In thousands)
Weighted average number of units outstanding 2,272
Effect of dilutive options 0
Weighted average number of units outstanding
assuming dilution 2,272
Options to purchase 295,999 units were not included in the computation of
diluted loss per unit for 1998 because to do so would have been antidilutive.
Such options could potentially dilute basic income per unit in the future.
5. Nonqualified Unit Option Plan
The Company has previously granted and has outstanding at year end 1998
nonqualified options to acquire 295,999 Class A Units. Such options were granted
under its Nonqualified Unit Option Plan and a Nonqualified Unit Option Plan for
Nonexecutive Employees. The Nonqualified Unit Option plan has terminated, but
another plan with the same terms was adopted by the Company. Options for 37,998
units are available for grant under the Nonqualified Unit Option Plan for
Nonexecutive Employees. A summary of activity under the unit option plans
follows:
Weighted
Limited Exercise Average
Partner Price Exercise
Units Range Price
Options outstanding, December 28, 1997 241,999 $1.211-$2.261 $1.410
Options granted during year 80,000 0.75-1.0625 0.946
Options expired or terminated during year (26,000) 1.211 1.211
Options exercised during year 0
Options outstanding, December 31, 1998 295,999 $0.75-2.261 $1.302
Options exercisable, December 31, 1998 202,665 $1.211-2.261 $1.438
All options to acquire Class A Units of the Company that were outstanding at
the completion of the December 1997 restructuring of the Company were divided
into separate options to purchase Class A Units of the Company and a like number
of FFP Marketing common shares. The exercise price for the then existing options
for Company units was divided between the two new options in proportion to the
closing price on the American Stock Exchange of the Company Class A Units and
FFP Marketing common shares. The adjusted exercise prices of the unit options
outstanding at December 31, 1998, are as follows:
Exercise Options Options
Price Outstanding Exercisable
$0.7500 30,000 0
1.0625 50,000 0
1.2110 139,333 139,333
1.2520 6,666 6,666
1.3930 20,000 6,666
1.9380 25,000 25,000
2.2610 25,000 25,000
295,999 202,665
The weighted average exercise price of outstanding options under the plans at
year end was $1.302 unit with a remaining contractual life of 5.0 years.
The per share weighted-average fair value of options granted in 1998 and
1997, estimated using the Black Scholes option-pricing model, and the underlying
assumptions used are:
Underlying Assumptions
-------------------------------------------
Estimated Risk-Free Expected
Year Fair Dividend Interest Expected Option
Granted Value Yield Rate Volatility Life
1998 $0.73 0.0% 6.00% 53% 7 years
1997 0.91 0.0% 6.40% 58% 7 years
The Company applies APB Opinion No. 25 in accounting for its option plans.
Accordingly, no compensation cost related to the plans has been recognized in
the consolidated financial statements. Had the Company determined compensation
under SFAS No. 123, the Company's net loss would have been reduced to the pro
forma amounts indicated below:
1998
(In thousands, except
per unit information)
Net loss
As reported $(179)
Pro forma (213)
Net loss per share
As reported
Basic $(0.08)
Diluted (0.08)
Pro forma
Basic (0.10)
Diluted (0.10)
Pro forma net loss reflects only options granted subsequent to 1994.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net loss amounts presented
above because compensation cost for options granted prior to 1995 is not
considered.
6. Unit Purchase Rights and Transfer Restrictions
In August 1989, the Company entered into a Rights Agreement and distributed
the right to its unitholders to purchase Rights Units (substantially equivalent
to Class A Units) under certain circumstances. Initially, the Rights were
attached to all unit certificates representing units then outstanding and no
separate Rights Certificates were distributed. Under the Rights Agreement, the
Rights were to separate from the units and be distributed to unitholders
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") had acquired, or obtained a right to
acquire, beneficial ownership of 20% or more of the Partnership's Class A Units
or all classes of outstanding units. On August 8, 1994, a group of unitholders
announced that they had an informal understanding that they would vote their
units together as a block. The agreement related to units constituting
approximately 25% of the Class A Units then outstanding. Therefore, the Rights
became exercisable on October 7, 1994, the record date for the issuance of the
Rights Certificates (the "Distribution Date").
The Rights currently represent the right to purchase a Rights Unit (which is
substantially equivalent to a Class A Unit) of the Company at a price of $20.00
per Unit. However, the Rights Agreement provides, among other things, that if
any person acquires 30% or more of the Class A Units or of all classes of
outstanding Units, then each holder of a Right, other than an Acquiring Person,
will have the right to receive, upon exercise, Rights Units (or in certain
circumstances, other property) having a value of $40.00 per Unit. The Rights
will expire on August 13, 1999, and do not have any voting rights or rights to
cash distributions.
In the December 1997 restructuring, the Partnership's partnership agreement
was amended to prohibit any person from owning more than 4.9% of the Class A
Units. The amended agreement provides that any transfer that would result in a
person owning more than this amount will be null and void, and the units that
were to be transferred will become "Excess Units," which will have no voting or
dividend rights and will be held in escrow by the Company.
7. Leases
Substantially all real property owned by the Company is leased to FFP
Marketing under operating leases which generally expire in 2002 and 2007 plus
two five-year renewal periods at the sole option of FFP Marketing. The leases
provide for an increase in rent payments after each five-year renewal period,
based upon any increase in the consumers price index. The leases are "triple
net" leases, under which FFP Marketing pays all taxes, insurance, and operating
costs. Annual minimum rent under these leases is approximately $2,600,000
through 2002.
The Company leases two types of properties to FFP Marketing: parcels where
the land and building are owned by the Company, and parcels where only the
building is owned by the Company but is subject to a superior ground lease which
extends until 2007 (the "Building Only Properties"). Under the terms of the
deeds by which the Company acquired the Building Only Properties, the Company's
ownership of the Building Only Properties will terminate upon the expiration of
the ground leases. The lessors under those ground leases have indicated to the
Company that they do not intend to extend the ground leases past 2007. In 1998,
$795,000 of the Company's rental income was derived from Building Only
Properties, and the remaining $1,833,000 was derived from properties in which
the Company owns the land and building.
8. Related Party Transactions
The chief executive officer, vice president-finance, secretary, treasurer,
general counsel and chief financial officer of the Company's sole general
partner, FFP Real Estate Trust, hold similar positions with FFP Marketing. In
addition, entities owned directly or indirectly by the Company's chief executive
officer, members of his immediate family, and other members of the senior
management of the Company have in the past, and intend to do so in the future,
engaged in transactions with the Company. Although such related parties believe
that such transactions have been fair and reasonable to the Company and on terms
no less favorable to the Company than could be obtained from an unaffiliated
party in an arms' length transaction, no assurance can be given to that effect.
The Company leases its real properties principally to FFP Marketing. The
Company's management believes that the lease rates are comparable to leases that
could be entered into with unrelated third parties. Since these leases became
effective concurrently with the close of 1997, no lease payments were received
by the Company during its 1997 year. The Company received $2,628,000 in lease
payments from FFP Marketing for these properties during 1998. The Company paid
$693,000 in interest to FFP Marketing related to the note payable to affiliate.
9. Subsequent Event
In February 1999, the Company purchased 14 additional improved real
properties from a third party on which 12 convenience stores and two truck stops
are operational. The Company immediately leased the properties to FFP Marketing
under 20-year leases. The Company's rental income from FFP Marketing under those
leases equals $99,000 per month and equals the Company's monthly principal and
interest payments payable under its acquisition debt. The leases are "triple
net" leases, under which FFP Marketing pays all taxes, insurance, and operating
costs, and provide for an increase in rent payments after each five-year period
during the term of the leases based upon any increase in the consumer price
index.
The Company incurred long-term acquisition debt in the original principal
amount of $9,550,000, which is fully amortizable over 15 years with equal,
monthly payments of principal and interest. FFP Marketing also agreed to
guarantee the Company's acquisition indebtedness because the amount of FFP
Marketing's monthly lease payments to the Company equals the Company's monthly
debt payments.
Exhibit 21.1
FFP Partners, L.P.
Subsidiary of the Registrant
State of Percent
Legal Name of Subsidiary Organization Type of Entity Owned
FFP Properties, L.P. Texas Limited 60%
partnership
Exhibit 23.1
Independent Auditors' Consent
The Partners
FFP Partners, L.P.:
We consent to incorporation by reference in the registration statement (No.
33-73170) on Form S-8 of FFP Partners, L.P. of our report dated March 30, 1999,
relating to the consolidated balance sheets of FFP Partners, L.P. and subsidiary
as of December 31, 1998, and December 28, 1997, and the related consolidated
statements of operations, partners' capital, and cash flow for the period ended
December 31, 1998, which report appears in the December 31, 1998, annual report
on Form 10-K of FFP Partners, L.P.
KPMG LLP
Fort Worth, Texas
April 15, 1999
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