<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
Commission file number 1-13018
-------
PETRO STOPPING CENTERS, L.P.
(Exact name of the registrant as specified in its charter)
DELAWARE 74-2628339
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6080 SURETY DR. 79905
EL PASO, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (915) 779-4711
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
--- ---
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<PAGE>
PETRO STOPPING CENTERS, L.P.
Index
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
as of December 31, 1996 and March 31, 1997 3
Unaudited Consolidated Statements of Operations
for the Three Months Ended March 29, 1996 and March 31, 1997 4
Unaudited Consolidated Statements of Cash Flows
for the Three Months Ended March 29, 1996 and March 31, 1997 5
Notes to Unaudited Consolidated Financial Statements 6-7
Report of Independent Accountants 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
2
<PAGE>
PART 1. Financial Information
Item 1. Financial Statements
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,182 $ 18,304
Accounts receivable, net of allowance
for uncollectible accounts of $321
in 1996 and $405 in 1997 10,491 12,577
Inventories 15,195 14,043
Other current assets 1,404 1,465
Due from affiliates 2,091 1,816
-------- --------
Total current assets 32,273 48,205
Property and equipment, net 159,539 158,134
Deferred debt issuance and
organization costs, net of
accumulated amortization of $6,728
in 1996 and $3,668 in 1997 11,305 17,569
Other assets 5,983 5,676
-------- --------
Total assets $209,100 $229,584
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt $ 6,928 $ 2,750
Trade accounts payable 15,723 18,181
Accrued expenses and other liabilities 21,160 23,878
Due to affiliates 2,325 2,233
-------- --------
Total current liabilities 46,136 47,042
Notes payable 21,639 -
Long-term debt, excluding current
portion 138,160 182,465
-------- --------
Total liabilities 205,935 229,507
-------- --------
Mandatorily redeemable
preferred partnership interests - 19,891
Commitments and contingencies
Partners' capital (deficit) 3,165 (19,814)
-------- --------
Total liabilities and partners'
capital $209,100 $229,584
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 31,
1996 1997
---------- ---------
<S> <C> <C>
Net revenues (including motor
fuel taxes)
Fuel $110,342 $123,739
Non-Fuel 25,677 27,098
Restaurant 11,906 11,728
-------- --------
Total net revenues 147,925 162,565
-------- --------
Costs and expenses:
Cost of sales (including motor fuel
taxes), exclusive of depreciation
and amortization 117,546 131,646
Operating expenses 19,698 20,256
General and administrative 3,068 3,988
Depreciation and amortization 2,958 2,995
-------- --------
Total costs and expenses 143,270 158,885
-------- --------
Operating income 4,655 3,680
Interest expense 5,330 5,070
-------- --------
Loss before extraordinary item (675) (1,390)
Extraordinary item - loss from
extinguishment of debt - 12,745
-------- --------
Net loss $ (675) $(14,135)
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
4
<PAGE>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 31,
1996 1997
---------- ----------
<S> <C> <C>
Cash flows provided by operating
activities:
Net Loss $ (675) $ (14,135)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Loss from extinguishment of debt - 12,745
Depreciation and amortization 2,958 2,995
Deferred debt issuance
amortization 387 452
Accretion of original issue
discount 235 72
Provision for losses on accounts
receivable 53 84
Increase (decrease) from changes in:
Accounts receivable (1,044) (2,260)
Inventories (133) 1,152
Other current assets (768) (61)
Due from affiliates 91 275
Due to affiliates 364 (92)
Trade accounts payable 1,434 2,458
Accrued expenses and other
liabilities 4,289 2,718
------- ---------
Net cash provided by operating
activities 7,191 6,403
------- ---------
Cash flows used in investing activities:
Purchases of property and equipment (1,683) (746)
Increase (decrease) in other assets,
net 147 (360)
------- ---------
Net cash used in investing
activities (1,536) (1,106)
------- ---------
Cash flows provided by (used in)
financing activities:
Repayments of notes payable (6,500) (23,639)
Proceeds from notes payable 6,000 2,000
Repayments of long-term debt (1,237) (150,450)
Proceeds of long-term debt - 185,000
Decrease in cash overdrafts (4,277) -
Capital Contribution - 11,047
Payment of debt issuance costs - (14,133)
------- ---------
Net cash provided by (used in)
financing activities (6,014) 9,825
------- ---------
Net increase in cash 359 15,122
Cash, beginning of period 5,688 3,182
------- ---------
Cash, end of period $ 5,329 $ 18,304
======= =========
================================================================================
Supplemental cash flow information
Non-cash financing activity
Assignment of Preferred partnership
interests $ - $ 19,600
======= =========
Accrual of Preferred return $ - $ 291
======= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
<PAGE>
PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The interim consolidated financial statements of Petro Stopping Centers,
L.P. (the "Company") are unaudited, and certain information and footnote
disclosures normally included in the annual consolidated financial statements
have been omitted. While management of the Company believes that the
disclosures presented are adequate to make the information not misleading, it is
suggested that these statements be read in conjunction with the Company's 1996
annual report on Form 10-K. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all necessary adjustments
(consisting of only normal recurring adjustments) for 1996 and 1997. The
results of operations for the three-month period ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year.
On January 30, 1997 the Company completed a recapitalization (the
"Recapitalization"). As part of the recapitalization, affiliates of Chartwell
Investments Inc. ("Chartwell"). became limited and general partners, an
affiliate of Mobil Oil Corporation ("Mobil Long Haul") became a limited partner
and Sequoia Ventures, Inc. and Roadside, Inc. (collectively, the "Fremont
Partners") sold all their partnership interests (See Note 2).
RECAPITALIZATION
On January 30, 1997, the Company consummated a transaction, in which
Chartwell and Mobil Long Haul invested $20.7 million and $15.0 million,
respectively (the "Equity Investment"), in order to directly acquire the
partnership interests of the Company owned by the Fremont Partners for
approximately $25.6 million and invested approximately $10.1 million in the
Company. James A. Cardwell, Sr., James A. Cardwell, Jr. and certain of their
affiliates (collectively, the "Cardwell Group") maintained their capital
investment in the Company. Kirschner Investments ("Kirschner"), a Company
franchisee, invested $1.0 million in the Company (the "Kirschner Investment").
Following the Equity Investment and the Kirschner Investment, the common
partnership interests of the Company are owned by Chartwell (approximately
50.8%), the Cardwell Group (approximately 39.9%), Mobil Long Haul (approximately
7.4%), and Kirschner (approximately 2.0%), and the preferred partnership
interests are owned by Mobil Long Haul ($12.0 million) and the Cardwell Group
($7.6 million). Chartwell and the Cardwell Group own both general and limited
partnership interests and Mobil Long Haul and Kirschner own only limited
partnership interests. Mobil Oil Company and the Company also entered into
certain supply and marketing agreements in connection with the Recapitalization.
As part of the Recapitalization, the Company issued $135 million of 10
1/2% Senior Notes due 2007, (the "New Notes") and repurchased approximately 94%
of its Existing 12 1/2% Senior Notes due 2002 (the "Old Notes") and
approximately 99% of its outstanding Debt Warrants.
The Company also amended its senior collateralized credit facility (the
"Old Credit Agreement" and, as amended the "New Credit Agreement"). The New
Credit Agreement consists of a $25.0 million revolving credit facility (the "New
Credit Facility"), a $14.0 million Term Loan A, a $30.0 million Term Loan B and
a $40.0 million expansion facility (the "Expansion Facility"). The New Credit
Agreement is collateralized by substantially all of the Company's assets and the
partnership interests of Mobil Long Haul and Chartwell and guaranteed by each of
the Company's subsidiaries, which guarantees in turn are collateralized by
substantially all of such subsidiaries' assets.
In the first quarter of 1997, the Company recognized an extraordinary
charge of $12.7 million relating to amendment of the Old Credit Agreement,
retirement of Old Notes and Debt Warrants and the write-off of deferred debt
issuance costs.
Aggregate yearly term loan principal payments under the New Credit
Agreement will be as follows: (i) $2.0 million in 1997; (ii) $3.0 million in
1998; (iii) $4.5 million in 1999; (iv) $5.5 million in 2000; (v) $1.5 million in
2001; (vi) $13.5 million in 2002; and (vii) $14.0 million in 2003.
6
<PAGE>
PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3) ENVIRONMENTAL LIABILITIES AND EXPENDITURES
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Accrued liabilities are exclusive of claims against third
parties and are not discounted.
4) INVENTORIES
The following is a summary of inventories at December 31, 1996 and March
31, 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Motor fuels and lubricants $ 5,074 $ 4,608
Tires and tubes 2,993 2,806
Merchandise and accessories 7,531 7,000
Restaurant and other 726 758
Less reserve for obsolescence (1,129) (1,129)
------- -------
Total inventories $15,195 $14,043
======= =======
</TABLE>
In connection with new systems implemented in 1996, the Company identified
items that were excess or obsolete inventory. The criteria established is
merchandise in excess of a one year supply. The Company has established a
reserve for obsolete and excess inventory amounting to approximately $1.1
million.
5) PROPERTY AND EQUIPMENT
Property and equipment is summarized at December 31, 1996 and March 31,
1997 as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
(YEARS) 1996 1997
---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Land -- $ 34,970 $ 34,970
Buildings and improvements 30 94,244 94,452
Furniture and equipment 3-10 40,396 40,937
Leasehold improvements 7-30 20,238 20,233
Facilities under development -- 141 141
-------- --------
189,989 190,733
Less accumulated depreciation and
amortization 30,450 32,599
-------- --------
Net property and equipment $159,539 $158,134
======== ========
</TABLE>
Facilities under development include costs associated with new facilities
and major renovations of existing facilities. There were no future commitments
associated with new construction of facilities at March 31, 1997.
6) NOTES PAYABLE
Notes payable at December 31, 1996 consisted of a five-year revolving
credit facility under the Old Credit Agreement under which up to $35,000,000 was
available (the "Old Facility"). The Old Credit Facility was to mature in June
1999. Interest was paid monthly at 1.5% over the bank's prime rate or 2.75% over
the Eurodollar rate (the rate of which is determined by the Company at time of
borrowing). Borrowings under the Old Facility were collateralized by
substantially all of the Company's assets. The balance outstanding on the Old
Facility was $21,639,000 as of December 31, 1996, all of which was repaid in
connection with the amendment and restatement of the Old Credit Agreement in the
Recapitalization. There were no borrowings under the New Credit Facility as of
March 31, 1997.
7
<PAGE>
PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6) NOTES PAYABLE (CONTINUED)
In addition, also outstanding at December 31, 1996 under the Old Facility
and March 31, 1997 under the New Credit Facility were standby letters of credit
principally related to unfunded insurance claims in the amount of $3,500,000 and
other various standby letters of credit of approximately $500,000.
7) COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation incidental to the business
for which estimates of losses have been accrued, when appropriate. In the
opinion of management, such proceedings will not have a material adverse effect
on financial position or results of operations.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors and Partners
Petro Stopping Centers, L.P.
We have reviewed the accompanying consolidated balance sheet of Petro Stopping
Centers, L.P. as of March 31, 1997, and the related consolidated statements of
operations and cash flows for the three month periods ended March 29, 1996 and
March 31, 1997. These consolidated financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
El Paso, Texas
May 15, 1997
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Recapitalization
On January 30, 1997, the Company consummated a transaction, in which
Chartwell and Mobil Long Haul invested $20.7 million and $15.0 million,
respectively (the "Equity Investment"), in order to directly acquire the
partnership interests of the Company owned by the Fremont Partners for
approximately $25.6 million and invested approximately $10.1 million in the
Company. James A. Cardwell, Sr., James A. Cardwell, Jr. and certain of their
affiliates (collectively, the "Cardwell Group") maintained their capital
investment in the Company. Kirschner Investments ("Kirschner"), a Company
Franchisee, invested $1.0 million in the Company (the "Kirschner Investment").
Following their Equity Investment and the Kirschner Investment, the common
partnership interests of the Company are owned by Chartwell (approximately
50.8%), the Cardwell Group (approximately 39.9%), Mobil Long Haul (approximately
7.4%), and Kirschner (2.0%), and the preferred partnership interests are owned
by Mobil Long Haul ($12.0 million) and the Cardwell Group ($7.6 million).
Chartwell and the Cardwell Group own both general and limited partnership
interests and Mobil Long Haul and Kirschner own only limited partnership
interests. Mobil Oil Company and the Company also entered into certain supply
and marketing agreements.
As part of the Recapitalization, the Company issued $135 million of 10 1/2%
Senior Notes due 2007, (the "New Notes") and made a tender offer (the "Tender
Offer") for all of, and repurchased approximately 94% of its existing 12 1/2%
Senior Notes due 2002 (the "Old Notes") and approximately 99% of the outstanding
debt warrants (the "Debt Warrants").
The Company also amended its senior collateralized credit facility (the
"Old Credit Agreement" and, as amended the "New Credit Agreement"). The New
Credit Agreement consists of a $25.0 million revolving credit facility (the "New
Credit Facility"), a $14.0 million Term Loan A, a $30.0 million Term Loan B and
a $40.0 million expansion facility (the "Expansion Facility"). The New Credit
Agreement is collateralized by substantially all of the Company's assets and the
partnership interests of Mobil Long Haul and Chartwell and guaranteed by each of
the Company's subsidiaries, which guarantees in turn are collateralized by
substantially all of such subsidiaries' assets.
The Recapitalization consists of the Equity Investment, the Tender Offer,
the Kirschner Investment, the issuance of the New Notes and the entering into
the New Credit Agreement.
In the first quarter of 1997, the Company recognized an extraordinary
charge of $12.7 million relating to amendment of the Old Credit Agreement,
retirement of the Old Notes and Debt Warrants and the write-off of deferred
financing costs.
The following table sets forth the development of the Company's Stopping
Center network since 1993.
<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Company-operated Stopping Centers:
<S> <C> <C> <C> <C> <C>
Full-sized........................ 20 21 22 23 23
Petro:2 :......................... 3 3 3 3 3
Franchised........................ 12 12 14 15 16
Independently operated............ 1 1 1 - -
---- ---- ---- ---- ----
Total Stopping Centers............ 36 37 40 41 42
==== ==== ==== ==== ====
</TABLE>
10
<PAGE>
The following table sets forth information on Stopping Centers opened
since January 1, 1993, all of which were full-sized facilities.
LOCATION DATE OPENED
Company-operated Stopping Centers:
Laramie, Wyoming October 1993
Medford, Oregon February 1995
Ocala, Florida June 1995
Franchised:
Fargo, North Dakota November 1994
Carnesville, Georgia January 1995
York, Nebraska December 1996
All of the Stopping Centers opened since January 1, 1993 were newly
constructed facilities, except Medford, Oregon, where the Company purchased an
existing truck stop and converted it into a Stopping Center. In addition to the
new full-sized facilities, the Company opened new Petro:Lubes at its San
Antonio, Beaumont and Medford locations in June 1994, January 1995 and April
1996, respectively. At March 31, 1997, the Company had no new Stopping Centers
under construction. The approximate construction cost of a new stopping center
(exclusive of land) is between $7.0 and $9.5 million.
The Company has never closed a Stopping Center and has no current plans to
do so.
The Company operates 26 truck stop facilities selling diesel fuel and
gasoline, of which 23 are full size facilities. Full sized facilities include a
Diesel Fuel Island, the Iron Skillet Restaurant, a Petro:Lube and a Travel
Center. In addition, 8 of the 23 facilities also have separate convenience
stores. The Company also operates three Petro:2 facilities which are a smaller
version of the full size facility with various smaller food offerings. The
Company has 16 additional locations which operate under franchise agreements.
The Company derives its revenues from the sale of fuels, diesel and
gasoline, from non-fuel items including the sale of merchandise and offering of
services including truck weighing scales, showers, laundry, video games and
other operations, and its restaurant operations which includes Iron Skillet and
certain fast-food operations. The other operations included in non-fuel revenue
include franchise royalties, rental revenue from video poker operations in
Louisiana and a motel and RV park in Oregon.
The Company's fuel revenues and cost of sales include significant amounts
of federal and state motor fuel taxes. Such taxes were $42,288,000 and
$43,556,000 for the periods ended March 29, 1996 and March 31, 1997,
respectively.
Taxes. No provision for income taxes is reflected in the financial
statements as the Company is a partnership for which taxable income and tax
deductions are passed through to the individual partners.
RESULTS OF OPERATIONS
Overview. The Company's new management team assumed organizational
control on January 30, 1997. As a result, many new initiatives and other
organizational changes could not begin to be implemented until after that time.
During the month of February, new senior management personnel began overseeing
each of the Iron Skillet Restaurant division, Travel Center division and Diesel
Fuel Island division. February also marked the beginning of the planned
management transition, and strategic initiatives began to be implemented in
March. Operating results for the first three months of 1997 reflected the
changes occurring in the organization and lack of focus from prior management.
January results were significantly below the same month of the prior year.
February results reflected the management transition and March results exceeded
prior year levels reflecting the improved focus on operations due in part to the
management changes. The Company's net revenues increased 9.9% to $162,565,000 in
the first quarter of 1997 from $147,925,000 in the first
11
<PAGE>
quarter of 1996. This increase was due principally to increases in fuel gallons,
increases in fuel selling price per fuel gallon and increases in non fuel sales.
The increase in revenues were off set by higher product costs and slightly
higher operating expenses over the prior year period. General and administrative
expenses increased to approximately $4.0 million from $3.1 million in the prior
year period. This increase was principally due to an increase in the accrual of
certain employee expenses in this year's first quarter and certain transition
costs for new programs in the current year.
Fuel. Revenues increased 12.0% to $123,739,000 in 1997 from $110,342,000
in 1996. Fuel revenues increase was due to an increase in fuel volume combined
with an approximate 7.1% increase in selling price per gallon. The increased
selling price was offset by increases in the wholesale costs of product. Gross
margin on fuel was $8,622,000 for the three months ended March 1997 compared to
$8,445,000 for the prior year period. On a per gallon basis, diesel margins
declined approximately 3.6% compared to the prior year.
Non-Fuel. Revenues increased 12.4% to $27,098,000 in 1997 from $25,677,000
in 1996. The increase in revenues was due primarily to increased sales at the
Petro:Lube facilities combined with improved merchandise sales in the Company's
retail stores.
Restaurant. Revenues were basically flat to slightly down for the current
year period compared to the prior year. Management implemented certain menu
changes at its Iron Skillet Restaurants in mid March designed to enhance
revenues. Gross margin in the restaurants improved by approximately one percent
due in part to management focus on costs and implementation of menu changes.
Costs and Expenses. Total costs and expenses increased 10.9% from
$143,270,000 in the first quarter of 1996 to $158,885,000 in the first quarter
of 1997 and, as a percentage of net revenues, from 96.9% in the 1996 period to
97.7% in the comparable period of 1997. Costs of sales increased $14,100,000 or
12.0% from 1996 to 1997 due to higher fuel and product costs for both fuel and
non-fuel revenue streams. Operating expenses increased $567,000 or 2.9% to
$20,256,000 in 1997. General and administrative expenses increased to
approximately $4.0 million from $3.1 million in the prior year period. This
increase was principally due to an increase in the accrual of certain employee
expenses in this year's first quarter and certain transition costs for new
programs in the current year.
Interest Expense. Interest expense decreased $260,000 to $5,070,000
during the first quarter of 1997 due to lower interest rates and lower
amortization of debt issuance costs.
Loss before extraordinary item. The Company reported loss before
extraordinary item of $1,390,000 in 1997 as compared to $675,000 for 1996
Extraordinary item. Extraordinary item reflects a charge to earnings of
approximately $12.7 million relating to amendment of the Old Credit Agreement,
retirement of Old Notes and Debt Warrants and the write-off of deferred debt
issuance costs.
Net loss. Net loss reflects loss of $14,135,000 for 1997 after the
extraordinary item compared to a reported net loss of $675,000 for 1996.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures totaled $746,000 for 1997 and $1,683,000 for 1996.
Included in capital expenditures for 1996 were funds spent on the construction
of the new Petro:Lube facilities in Medford, Oregon and Franklin, Kentucky.
12
<PAGE>
At March 31, 1997, the Company had availability under the New Credit
Facility of approximately $21.0 million.
Insurance: The Company up to certain limits pays its own workers'
compensation and general liability claims. During 1997, the Company paid claims
aggregating $638,000 and $43,000 relating to workers compensation and general
liability, respectively. The Company believes it provides an accrual adequate
to cover both known and incurred but not reported claims.
The Company had positive working capital of $1,913,000 at March 31, 1997
and negative working capital of $13,863,000 at December 31, 1996. Negative
working capital is normal in the truckstop industry. A substantial majority of
the Company's sales are cash (or the equivalent in the case of credit card sales
or sales paid for by check on a daily basis by third-party billing companies).
Diesel fuel inventory turns every two to three days which is significantly
faster than payment is required.
Recapitalization:
In connection with the Recapitalization, the Old Credit Agreement was,
amended and borrowings thereunder were repaid with borrowings under the New
Credit Agreement, the net proceeds from the sale of the New Notes, a portion of
the proceeds of the Equity Investment and the proceeds of the Kirschner
Investment. The New Credit Agreement provides for a $25.0 million New Credit
Facility, a $40.0 million Expansion Facility, a $14.0 million Term Loan A and a
$30.0 million Term Loan B.
The Revolving Credit Facility permits the Company to borrow, repay and
reborrow up to $25.0 million at any time until the fifth anniversary of the date
of recapitalization, the proceeds of which may be used for working capital and
other corporate purposes. Up to $5.0 million of the Revolving Credit Facility is
available for the issuance of standby and documentary letters of credit. The
Expansion Facility permits the Company to borrow, repay and reborrow up to $40.0
million for the acquisition and development of new Stopping Centers and stand-
alone Petro:Lubes at any time until the third anniversary of the date of
recapitalization. Term Loan A is repayable in 15 quarterly installments,
commencing on September 30, 1997. Term Loan B is repayable in 26 quarterly
installments commencing on September 30, 1997.
Aggregate yearly term loan principal payments under the New Credit
Agreement will be as follows: (i) $2.0 million in 1997; (ii) $3.0 million in
1998; (iii) $4.5 million in 1999; (iv) $5.5 million in 2000; (v) $1.5 million in
2001; (vi) $13.5 million in 2002; and (vii) $14.0 million in 2003.
Borrowings under the New Credit Agreement are collateralized by
substantially all of the Company's assets and the partnership interests of Mobil
Long Haul and Chartwell and guaranteed by each of the Company's subsidiaries,
which guarantees in turn are collateralized by substantially all of such
subsidiaries' assets.
Management of the Company believes that internally generated funds,
together with amounts available under the Revolving Credit Facility, will be
sufficient to satisfy its cash requirements for operations through 1997 and the
foreseeable future thereafter. The Company also expects that expansion and
future acquisitions would be financed from funds generated from operations,
borrowings under the New Credit Facility and the Expansion Facility and
additional financings.
13
<PAGE>
ENVIRONMENTAL
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Accrued liabilities are exclusive of claims against third
parties and are not discounted.
The Company is subject to contingencies pursuant to environmental laws and
regulations that in the future may require the Company to take action to correct
the effects on the environment of prior disposal practices or releases of
chemical or petroleum substances by the Company or other parties. The Company
has accrued for certain environmental remediation activities consistent with the
policy set forth in Note 2 to the consolidated financial statements. At March
31, 1997, such accrual amounted to approximately $182,000 and, in management's
opinion, was appropriate based on existing facts and circumstances. Under the
most adverse circumstances, however, this potential liability could be
significantly higher. In the event that future remediation expenditures are in
excess of amounts accrued, management does not anticipate that they will have a
material adverse effect on the consolidated financial position or results of
operations of the Company. At March 31, 1997, the Company has recognized
approximately $259,000 in the consolidated balance sheet related to recoveries
of certain remediation costs from third parties.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various litigation incidental to the business
for which estimates of losses have been accrued, when appropriate. In the
opinion of management, such proceedings will not have a material adverse effect
on financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
March 31, 1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PETRO STOPPING CENTERS, L.P.
(Registrant)
Date: May 15, 1996 /s/ Larry J. Zine
--------------------
Larry J. Zine
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
27 Financial Data Schedule
(in thousands)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,304
<SECURITIES> 0
<RECEIVABLES> 12,982
<ALLOWANCES> 405
<INVENTORY> 14,043
<CURRENT-ASSETS> 48,205
<PP&E> 190,733
<DEPRECIATION> 32,599
<TOTAL-ASSETS> 229,584
<CURRENT-LIABILITIES> 47,042
<BONDS> 0<F1>
19,891
0
<COMMON> 0
<OTHER-SE> (19,814)
<TOTAL-LIABILITY-AND-EQUITY> 229,584
<SALES> 0
<TOTAL-REVENUES> 162,565
<CGS> 131,646
<TOTAL-COSTS> 151,902
<OTHER-EXPENSES> 6,983
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 5,070
<INCOME-PRETAX> (1,390)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,390)
<DISCONTINUED> 0
<EXTRAORDINARY> 12,745
<CHANGES> 0
<NET-INCOME> (14,135)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR ACCOMPANYING
NOTES THERETO.
</FN>
</TABLE>
