SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000, 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 limited partner units outstanding as of May 10, 2000)
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000, AND DECEMBER 31, 1999
(In thousands)
(Unaudited)
MARCH 31, DECEMBER 31,
2000 1999
ASSETS
Current assets -
Investments in debt and equity securities $284 $0
Receivable from affiliate 881 892
Investment in lease from affiliate,
current portion 53 53
Prepaid expenses and other 76 31
Total current assets 1,294 976
Real property -
Land and improvements 8,630 8,685
Buildings 21,413 21,413
30,043 30,098
Accumulated depreciation (12,130) (11,825)
17,913 18,273
Net investment in direct financing lease
with affiliate 3,832 3,844
Notes receivable 110 114
Other assets, net 762 772
Total assets $23,911 $23,979
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities -
Current installments of long-term debt $565 $565
Accrued expenses 218 263
Total current liabilities 783 828
Long-term debt, excluding current
installments 20,673 20,812
Total liabilities 21,456 21,640
Minority interests in subsidiary 991 945
Commitments and contingencies
Partners' capital -
Limited partners' capital 1,442 1,372
General partner's capital 22 22
Total partners' capital 1,464 1,394
Total liabilities and partners' capital $23,911 $23,979
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(In thousands, except per unit data)
(Unaudited)
MARCH 31, MARCH 31,
2000 1999
Revenues -
Rental income $768 $704
Interest and other income 304 69
Total revenues 1,072 773
Expenses -
General and administrative expenses 126 173
Depreciation and amortization 315 297
Interest expense 513 331
Total expenses 954 801
Income (loss) before minority interest 118 (28)
Minority interest in subsidiary (47) 11
Net income (loss) $71 $(17)
Net income (loss) per unit -
Basic $0.03 $(0.01)
Diluted $0.03 $(0.01)
Weighted average number of units outstanding -
Basic 2,272 2,272
Diluted 2,278 2,272
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000, AND MARCH 31, 1999
(In thousands)
(Unaudited)
MARCH 31, MARCH 31,
2000 1999
Cash Flows from Operating Activities -
Net income (loss) $71 $(17)
Adjustments to reconcile net income (loss)
to cash provided by operating activities -
Depreciation and amortization 315 297
Increase in debt and equity
securities (284) 0
Minority interest in subsidiary 47 (11)
Net change in operating assets
and liabilities (77) (280)
Net cash provided (used) by operating activities 72 (11)
Cash Flows from Investing Activities -
(Additions) reductions in direct
financing leases 12 (3,959)
(Additions) dispositions of property, net 55 (2,295)
Net cash provided (used) by investing activities 67 (6,254)
Cash Flows from Financing Activities -
Net borrowing (repayments) under credit
facilities (139) 6,265
Net cash provided (used) by financing activities (139) 6,265
Net increase (decrease) in cash $0 $0
Cash at beginning of period 0 0
Cash at end of period $0 $0
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
FFP PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. Basis of Presentation
These 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 "Partnership."
The Condensed Consolidated Balance Sheets at March 31, 2000, and December 31,
1999, and the Consolidated Statements of Operations and Condensed Consolidated
Statement of Cash Flows for the periods presented, have been prepared by the
Partnership without audit. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present the
Partnership's financial position as of March 31, 2000, and the results of its
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.
In December 1997, the Partnership 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, the Partnership retained the real estate used in the retail
businesses and leased those properties to FFP Marketing.
The notes to the audited consolidated financial statements which are included
in the Partnership's Annual Report on Form 10-K for the year ended December 31,
1999, include a description of accounting policies and additional information
pertinent to an understanding of these interim financial statements. That
information has not changed other than as a result of normal transactions in the
three months ended March 31, 2000, except as discussed below.
2. Income (Loss) per Unit
A reconciliation of the denominator of the basic and diluted net income
(loss) per unit for general partner and limited partner units for the three
months ended March 31, 2000, and March 31, 1999, follows:
MARCH 31, MARCH 31,
2000 1999
(In thousands)
Weighted average number of units outstanding 2,272 2,272
Effect of dilutive options 6 0
Weighted average number of units
outstanding assuming dilution 2,278 2,272
Options to purchase 292,999 units were included in the computation of diluted
net income per unit for the three months ended March 31, 2000. Options to
purchase 295,999 units were not included in the computation of diluted net
(loss) per unit for the three months ended March 31, 1999 because to do so would
have been antidilutive. Such options could potentially dilute basic income per
unit in the future.
3. Investments in Debt Securities and Certain Equity Securities
The Partnership classifies at acquisition all of its investments in debt
securities and all of its investments in equity securities that have a readily
determinable fair value, other than investments accounted for under the equity
method or its investments in consolidated subsidiaries, as trading securities.
Trading securities are securities that are bought and held principally for the
purpose of a resale in the near term. FASB No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", provides that unrealized and
realized gains and losses from trading securities are included in earnings.
Dividend and interest income from trading securities, including the amortization
of premium and discount arising at acquisition, are also included in earnings.
In addition to $42,000 of interest income and discount accretion on debt
securities, the Partnership's income in first quarter of 2000 included $38,000
from net unrealized holding gains from trading securities.
<PAGE>
FFP PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
FFP Partners, L.P. (the "Partnership") restructured its operations in
December 1997 by transferring its convenience store, retail motor fuel, and
other businesses to FFP Marketing Company, Inc. ("FFP Marketing"). In the
restructuring, the Partnership retained the real estate formerly used in the
retail businesses and now leases those properties to FFP Marketing.
Substantially all of the Partnership's rental income is derived from the
various convenience store and other retail outlets that it leases to FFP
Marketing on a "triple net" basis. Under those leases, FFP Marketing as tenant,
instead of the Partnership as landlord, bears all taxes, insurance, operating
costs, and capital costs for the properties. The leases also provide for
increased rent payments after each five-year period during the term of the
leases in accordance with any increase in the consumers price index.
The Partnership may acquire additional real estate properties in the future.
Those properties may be leased to FFP Marketing or to others, although no
assurance exists that additional properties will be acquired. Future leases may
or may not be on a "triple-net" basis.
RESULTS OF OPERATIONS FOR FIRST QUARTER 2000 COMPARED WITH FIRST QUARTER 1999
Rent income of $768,000 in the first quarter of 2000 represented a 9%
increase, or $64,000, over rent income of $704,000 in the first quarter of 1999.
Likewise, interest and other income of $304,000 in the first quarter of 2000
represented an increase of $235,000 over interest and other income of $69,000 in
the first quarter of 1999. These increases were largely due to the receipt of
only one month's land rent and interest income from the direct financing lease
on the buildings at the 14 properties acquired on February 26, 1999, compared to
three months of such revenue received in first quarter of 2000. Another reason
for the increase in interest income was $80,000 of earnings from bond
investments made in first quarter of 2000.
General and administrative expenses were $126,000 in the first quarter of
2000, compared to $173,000 in the first quarter of 1999. This decrease was
largely due to additional costs incurred in connection with the acquisition of
the 14 additional properties in February 1999 that were not incurred in first
quarter of 2000.
Interest expense increased to $513,000 in the first quarter of 2000, compared
to $331,000 in the first quarter of 1999, or 55%. This increase resulted
primarily from the additional debt incurred in purchasing the 14 properties in
February 1999, and a higher percentage of interest expense and a higher interest
rate in the long-term loan obtained in October 1999 to refinance a prior loan
that had a maturity date in November 2000.
COMPARISON TO REIT'S
The Partnership 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 Partnership's operating
performance, or to cash flow from operating activities determined in accordance
with GAAP as a measure of either liquidity or the Partnership's ability to make
distributions or to fund its other operations. The following table presents the
determination of FFO for the Partnership for the three month periods ended March
31, 2000 and 1999:
MARCH 31, MARCH 31,
2000 1999
(In thousands, except per unit data)
Income (loss) before minority interests $118 $(28)
Adjustments -
Depreciation and amortization 315 297
Funds from operations 433 269
Less - FFO attributable to 40%
minority interest in subsidiary (173) (107)
Funds from operations attributable
to the Partnership $260 $162
FFO per unit (based on units outstanding
for diluted income (loss) calculations) $0.11 $0.07
Although the Partnership has generated positive FFO, it has not made
distributions to unitholders because substantially all cash generated from the
Partnership's operations has been required for debt payments. Thus far, the
Trust Managers have determined to utilize such funds to build equity in its
properties.
The refinancing of Partnership long-term debt closed in October 1999 has
improved the Partnership's net cash flow. The terms of such new long-term
financing provide that the Partnership shall limit distributions to its partners
such that, after making any distribution, (a) the Fixed Charge Coverage Ratio
for each of the 63 pledged properties secured by that loan (summarized below)
shall not be less than 1.30 to 1.00, and (b) the Fixed Charge Coverage Ratio for
the Partnership (summarized below) shall be less than 1.35 to 1.00. In general,
the Fixed Charge Coverage Ratio during any period for a pledged store equals the
cash flow (pre-tax income before minority interest, plus depreciation and
interest expense) of that store for that period, divided by the amount of debt
payments for that store for that period, and the Fixed Charge Coverage Ratio
during a period equals the cash flow (pre-tax income before minority interest,
plus depreciation and interest expense) of the Partnership for that period,
divided by the amount of debt payments of the Partnership for that period. Each
Fixed Charge Coverage Ratio is calculated for the 12-month period ending each
December 31. Management has not yet determined if or how much of any Partnership
distributions will be made to the Partnership's unitholders.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has contracted with FFP Marketing to provide all cash
management services on behalf of the Partnership. For that reason, the
Partnership does not maintain a bank account. All of the Partnership's cash
receipts are received, and all of its disbursements are made, by FFP Marketing
on behalf of the Partnership, with the appropriate records being made to account
for amounts owed by the Partnership to FFP Marketing, or visa versa. On March
26, 2000, FFP Marketing owed the Partnership $881,000. Such obligation bears
interest at the prime rate.
Assuming no additional properties are acquired or sold, based upon executed
real estate leases, in 2000 the Partnership is projected to receive from FFP
Marketing $252,000 per month for rent plus $71,000 per month for the direct
financing leases, and the Partnership's current debt service requirements in
2000 are fixed at $222,000 per month. Such amounts are before reduction for the
40% minority interest in the Partnership's subsidiary owned by the Harvison
Family. In prior years the Partnership was obligated to pay debt service
obligations at a variable interest rate and with a balloon payment of remaining
principal due in November 2000. That prior debt was refinanced in October 1999
with long-term fully-amortizing, fixed rate financing. As a result of its
forecast of positive cash flow, management believes that the Partnership will be
able to meet its obligations for general and administrative expenses from
operations.
All of the Partnership's real estate leases are "triple net" leases,
providing for the tenant (FFP Marketing), and not the landlord (the
Partnership), to pay all real estate taxes, insurance, operating and capital
costs for the properties. Therefore, the Partnership does not have any material
commitments for capital expenditures on those properties.
"YEAR 2000" COMPUTER ISSUES
Over the past several years, the Partnership has prepared for the possible
disruptions that might have resulted from the date change to year 2000. No
significant year 2000 problems were experienced, and the Partnership believes
that no material exposure to year 2000 issues exist. The Partnership 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 Partnership did not incur any capital expenditures related
to modifications of existing software and conversions to new software for the
year 2000 issue.
FORWARD-LOOKING STATEMENTS
Certain of the statements made in this report are "forward-looking"
statements that involve inherent risks and uncertainties. As defined by the U.S.
Private Securities Litigation Reform Act of 1995, "forward-looking" statements
include information about the Partnership that is based on the beliefs of
management and the assumptions made by, and information currently available to,
management. In making such forward-looking statements, the Partnership is
relying upon the "statutory safe harbors" contained in the applicable statutes
and the rules, regulations and releases of the Securities and Exchange
Commission.
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," "expects," "believes," and similar phrases. Among
the factors that could cause actual results to differ materially from the
statements made are the following: changes in real estate conditions, including
rental rates and the construction or availability of competing properties;
changes in the industry in which the Partnership's sole tenant competes; changes
in general economic conditions; the ability of management to identify
acquisitions and investment opportunities meeting the investment objectives of
the Partnership; 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; a risk of leasing all of the Partnership's
properties to only one tenant; the Partnership's ability to generate funds
sufficient to meet its debt service payments and other operating expenses; the
inability of the Partnership to control the management and operation of its
tenant and the businesses conducted on the Partnership's properties; financing
risks, including the availability, or lack of availability, of funds to service
debt obligations or to finance acquisitions of additional property; the
existence of complex tax regulations relating to the Partnership'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 Partnership'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 Partnership 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.
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27 Financial Data Schedule [included in electronic filing only].
REPORTS ON FORM 8-K
The Partnership 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: May 12, 2000 By: /s/ Craig T. Scott
-----------------------------------
Craig T. Scott
Vice President - Finance,
Chief Financial Officer and
General Counsel
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,294
<PP&E> 30,043
<DEPRECIATION> 12,130
<TOTAL-ASSETS> 23,911
<CURRENT-LIABILITIES> 783
<BONDS> 20,673
0
0
<COMMON> 1,464
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,911
<SALES> 0
<TOTAL-REVENUES> 1,072
<CGS> 0
<TOTAL-COSTS> 0
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<INCOME-TAX> 0
<INCOME-CONTINUING> 71
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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