<PAGE>
================================================================================
UNITED STATES
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 JUNE 30, 1998
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.
EL PASO, TEXAS 79905
(Address of principal executive offices) (Zip Code)
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
--- ---
================================================================================
<PAGE>
PART 1. Financial Information
Item 1. Financial Statements
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,796 $ 19,978
Trade accounts receivable, net of allowance for uncollectible
accounts of $330 in 1997 and $566 in 1998 12,548 13,239
Inventories, net 16,362 17,492
Other current assets 2,551 2,329
Due from affiliates 980 784
Land held for sale 4,442 4,442
-------- --------
Total current assets 61,679 58,264
Property and equipment, net 153,363 155,531
Deferred debt issuance and organization costs, net of
accumulated amortization of $5,489 in 1997 and $ 6,650 in 1998 16,353 15,205
Other assets 8,271 7,487
-------- --------
Total assets $239,666 $236,487
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 3,000 $ 3,750
Trade accounts payable 9,350 5,610
Accrued expenses and other liabilities 26,491 23,322
Due to affiliates 18,988 22,144
-------- --------
Total current liabilities 57,829 54,826
Long-term debt, excluding current portion 180,190 177,846
-------- --------
Total liabilities 238,019 232,672
-------- --------
Commitments and contingencies
Mandatorily redeemable preferred partnership interests 21,202 22,182
Partners' capital (deficit):
General partners (903) (877)
Limited partners (18,652) (17,490)
-------- --------
Total partners' capital (deficit) (19,555) (18,367)
-------- --------
Total liabilities and partners' capital (deficit) $239,666 $236,487
======== ========
See accompanying notes to unaudited consolidated financial statements
</TABLE>
1
<PAGE>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues (including motor fuel taxes):
Fuel $ 119,399 $ 117,162 $ 243,096 $ 236,194
Non-Fuel 29,208 34,758 56,733 65,691
Restaurant 12,152 13,237 23,495 26,204
---------- ---------- ---------- ----------
Total net revenues 160,759 165,157 323,324 328,089
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales (including motor fuel taxes) 126,598 126,657 258,244 253,428
Operating expenses 20,704 22,901 40,961 45,511
General and administrative 3,889 4,787 7,877 9,413
Depreciation and amortization 3,149 3,874 6,144 7,580
---------- ---------- ---------- ----------
Total costs and expenses 154,340 158,219 313,226 315,932
---------- ---------- ---------- ----------
Operating income 6,419 6,938 10,098 12,157
Interest expense, net 5,345 4,972 10,415 9,989
---------- ---------- ---------- ----------
Income (loss) before extraordinary item 1,074 1,966 (317) 2,168
Extraordinary item - loss from extinguishment
of debt - - (12,745) -
---------- ---------- ---------- ----------
Net income (loss) $ 1,074 $ 1,966 $ (13,062) $ 2,168
========== ========== ========== ==========
See accompanying notes to unaudited consolidated financial statements
</TABLE>
2
<PAGE>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the Six Months Ended June 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Total
Partners'
General Limited Capital
Partners Partners (Deficit)
-------- --------- ---------
<S> <C> <C> <C>
Balances, December 31, 1997 $ (903) $ (18,652) $ (19,555)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests (21) (959) (980)
Net income 47 2,121 2,168
-------- --------- ---------
Balances, June 30, 1998 $ (877) $ (17,490) $ (18,367)
======== ========= =========
See accompanying notes to unaudited consolidated financial statements
</TABLE>
3
<PAGE>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1998
---- ----
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) $ (13,062) $ 2,168
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Loss from extinguishment of debt 12,745 -
Depreciation and amortization 6,144 7,580
Deferred debt issuance amortization 895 813
Accretion of original issue discount 72 -
Provision for losses on trade accounts receivable 59 114
Increase (decrease) from changes in:
Trade accounts receivable (1,949) (805)
Inventories 1,598 (1,130)
Other current assets (319) 222
Due from affiliates 223 196
Due to affiliates (245) 3,156
Trade accounts payable 5,349 (3,739)
Accrued expenses and other liabilities (6,200) (3,169)
--------- --------
Net cash provided by operating activities 17,710 5,406
--------- --------
Cash flows used in investing activities:
Purchases of property and equipment (3,543) (8,007)
Decrease in other assets, net (436) (623)
--------- --------
Net cash used in investing activities (3,979) (8,630)
--------- --------
Cash flows provided by (used in) financing activities:
Repayments of notes payable (23,639) -
Proceeds from notes payable 2,000 -
Repayments of long-term debt (150,450) (1,594)
Proceeds of long-term debt 185,000 -
Capital contribution 11,047 -
Payment of debt issuance costs (14,373) -
--------- --------
Net cash provided by (used in) financing activities: 9,585 (1,594)
--------- --------
Net increase (decrease) in cash and cash equivalents 23,316 (4,818)
Cash and cash equivalents, beginning of period 3,182 24,796
--------- --------
Cash and cash equivalents, end of period $ 26,498 $ 19,978
========= ========
- ------------------------------------------------------------------------------------------------------------
Supplemental cash flow information -
Interest paid during the period $ 3,751 $ 9,357
Non-cash financing activities:
Assignment of preferred partnership interests 19,600 -
Preferred return on mandatorily redeemable
preferred partnership interests 728 980
See accompanying notes to unaudited consolidated financial statements
</TABLE>
4
<PAGE>
PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements which
include the accounts of Petro Stopping Centers, L.P. (the "Company") and its
subsidiaries, have been prepared in accordance with the instructions to Form
10-Q and, therefore, certain financial information has been condensed and
certain footnote disclosures have been omitted. Such information and disclosures
are normally included in the financial statements prepared in accordance with
generally accepted accounting principles.
These condensed financial statements should be read in conjunction with
the financial statements and notes thereto in the Annual Report of the Company
on Form 10-K for the year ended December 31, 1997 ("1997 Form 10-K").
Capitalized terms used in this report and not defined here have the meaning
ascribed for such terms in the 1997 Form 10-K. In the opinion of management of
the Company, the accompanying financial statements contain all adjustments
necessary to present fairly the financial position of the Company at June 30,
1998 and December 31, 1997, the results of operations for the three and six
months ended June 30, 1998 and 1997 and cash flows for the six months ended June
30, 1998 and 1997. The results of operations for the three and six months ended
June 30, 1998 are not necessarily indicative of the results to be expected for
the full calendar year.
2) SIGNIFICANT ACCOUNTING POLICIES
Reclassifications - Certain prior period amounts have been reclassified
to conform to current year presentation.
3) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For a full discussion of recently issued accounting pronouncements, see
Note 16 of Notes to Consolidated Financial Statements in the 1997 Form 10-K.
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130 requires that comprehensive income and its components, as defined
therein, be reported in a company's financial statements. At June 30, 1998, the
Company does not have any components of comprehensive income, as defined, and
accordingly, the Company's reported net income for the period is equivalent to
its comprehensive income. The Company will continue to monitor its accounts for
components of comprehensive income.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting the Costs of Start-Up Activities"
("SOP 98-5"). SOP 98-5 requires that costs of start-up activities (including,
among other things, pre-opening costs related to the development of new sites
and organization costs) be expensed as incurred and that previously deferred
costs expensed in the initial adoption be reported as a cumulative effect of a
change in accounting principle. SOP 98-5 is required to be adopted in 1999,
although earlier adoption is allowed. The Company currently expects to adopt
SOP 98-5 as of January 1, 1999. As of June 30, 1998, the Company had
approximately $3.4 million of deferred costs that may be affected by SOP 98-5,
and management is currently analyzing these costs to determine what amount will
be required to be expensed in the initial adoption.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in a derivative's fair value be
recognized currently on earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allow a derivative's gain and
losses to offset related results on the hedged item in the income statement and
requires that a company must formally document, designate, and access the
effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. A company may also
implement the statement as of the beginning of any fiscal quarter
5
<PAGE>
after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). SFAS No. 133 cannot be applied retroactively. Management has not
yet quantified the impact of adopting SFAS No. 133 on the Company's financial
statements and has not determined the timing of or method of adoption. However,
the implementation of SFAS No. 133 could increase volatility in earnings and
other comprehensive income.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information contained in this Item 2 updates and should be read in
conjunction with the information set forth in Part II, Item 7 of the Company's
1997 Form 10-K.
Certain sections of this Form 10-Q, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations," contain various
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which represent the Company's expectations or beliefs
concerning future events that involve risks and uncertainties. All statements
other than statements of historical facts included in this Form 10-Q may be
considered forward-looking statements. The Company cautions that these
statements are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements. Such
factors include without limitation, general economic change, legislative
regulation and market change.
The forward-looking statements are included in, without limitation, "--
Operations," "--Liquidity and Capital Resources" and "--Environmental". The
Company, in the preparation of its financial statements, also makes various
estimates and assumptions that are forward-looking statements.
Recapitalization
On January 30, 1997, the Company consummated a transaction entered into
in October 1996, under which Chartwell and Mobil Long Haul invested $20,700,000
and $15,000,000, respectively, to directly acquire the partnership interests of
the Company owned by the Fremont Partners for approximately $25,600,000 and
invest approximately $10,100,000 in the Company. The Cardwell Group maintained
its capital investment in the Company. Kirschner Investments, a Company
franchisee, invested $1,000,000 in the Company. Following the Equity Investment
and the Kirschner Investment, the common partnership interests of the Company
are owned by Chartwell (approximately 50.6%), the Cardwell Group (approximately
39.7%), Mobil Long Haul (approximately 7.3%), and Kirschner (approximately
2.4%), and the preferred partnership interests are owned by Mobil Long Haul
($12,000,000) and the Cardwell Group ($7,600,000). 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 $135,000,000 of 10
1/2% Senior Notes due 2007, and repurchased approximately 94% of its 12 1/2%
Senior Notes due 2002 and approximately 100% of the outstanding Debt Warrants.
In connection with the issuance of the New Notes, the Company capitalized
approximately $14,500,000 of debt issuance costs and wrote off, as an
extraordinary item, $12,745,000 of debt restructuring costs associated with the
retired debt.
The Company also amended its senior collateralized credit facility (the
"Old Credit Agreement" and, as amended, the "New Credit Agreement") at the time
of Recapitalization. The New Credit Agreement consists of a $25,000,000
revolving credit facility, a $14,000,000 Term Loan A, a $30,000,000 Term Loan B
and a $40,000,000 Expansion Facility.
7
<PAGE>
Operations
The following table sets forth the development of the Company's Stopping
Center network since 1994.
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Company-operated Stopping Centers......... 24 26 26 26 28
Franchised ............................... 12 14 15 17 21
Independently operated.................... 1 1 - - -
---- ---- ---- ---- ----
Total Stopping Centers................ 37 41 41 43 49
==== ==== ==== ==== ====
</TABLE>
The following table sets forth information on Stopping Centers opened
since June 30, 1994, all of which are full-sized facilities.
LOCATION DATE OPENED
-------- -----------
Company-operated Stopping Centers:
Medford, Oregon January 1995
Ocala, Florida June 1995
North Baltimore, Ohio August 1997
North Little Rock, Arkansas September 1997
Franchised:
Fargo, North Dakota November 1994
Carnesville, Georgia January 1995
York, Nebraska December 1996
Scranton, Pennsylvania May 1997
Claysville, Pennsylvania November 1997
Breezewood, Pennsylvania February 1998
Milton, Pennsylvania March 1998
Monee, Illinois April 1998
All of the Stopping Centers opened since June 30, 1994 were newly
constructed facilities, except Medford, Oregon and North Little Rock, Arkansas,
where the Company purchased existing truck stops and converted them into a
Stopping Center. The North Baltimore, Ohio facility is operated under a lease
agreement. 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 June 30, 1998, 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.
Three new franchises have been opened since December 31, 1997. Two of
the franchises are located in Pennsylvania and one in Illinois. The Breezewood,
Milton and Monee locations opened in January, February and April of 1998,
respectively. The Company signed an agreement in July 1998 to open a new
franchise location in Lowell, Indiana.
All franchises are operated under franchise agreements which, with the
exception of one, are for an initial ten-year term and are automatically renewed
for two five-year terms subject to the satisfaction of certain conditions,
unless the franchisee gives a termination notice at least 12 months prior to the
expiration of its franchise agreement with the Company. The franchise agreement
for the Portage, Wisconsin location has been amended so that its initial term is
approximately 15 years (expiring on December 2001), and it provides for only one
five-year renewal. All franchise agreements are in their initial term including
the Elkton, Ft. Chiswell, Joplin, Lake Station and Ruther Glen agreements, whose
initial terms have been extended from their initial termination dates of
September 1995, March 1996, June 1997, October 1997 and March 1998,
respectively, to September 30, 1998 by letter agreements. The Company is
currently in the process of obtaining a first renewal of such agreements.
In addition, the Company has entered into a joint venture agreement with
Tejon Development Corporation ("Tejon") to build and operate a Petro branded
location in Southern California. Pursuant to the terms of the Limited
8
<PAGE>
Liability Company Operating Agreement of Petro Travel Plaza LLC, dated as of
December 5, 1997, among the Company, Tejon and Tejon Ranch Company, as guarantor
(the "Agreement"), the Company is required to make an initial capital
contribution for working capital and inventory and contemplates that the joint
venture will finance construction of the location with a non recourse credit
facility. Under the Agreement, the Company will receive a management fee of
$250,000 per annum and will share in 40% of the location's operating earnings.
The Company derives its revenues from (i) the sale of fuels, diesel and
gasoline; (ii) non-fuel items including the sale of merchandise and offering of
services such as truck weighing scales, showers, laundry, video games and other
operations; and (iii) restaurant operations which include the Iron Skillet and
certain fast-food operations. The Company's franchise royalties and rental
revenue from video poker operations in Louisiana are also included in non-fuel
revenue.
The Company's fuel revenues and cost of sales include significant
amounts of federal and state motor fuel taxes. Such taxes were $45,540,000 and
$52,038,000 for the three-month periods ended June 30, 1997, and June 30, 1998,
respectively, and $89,095,000 and $103,811,000 for the six-month period ended
June 30, 1997, and June 30, 1998, respectively.
Taxes. No provision for income taxes is reflected in the accompanying
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
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Overview. The Company's net revenues of $328,089,000 increased 1.5% in
the first six months of 1998 from $323,324,000 in the first six months of 1997.
The increase is primarily due to an increase of 15.8% and 11.5% in total non-
fuel and restaurant sales, respectively, from the prior year. Fuel revenues
decreased 2.8% as a result of a 13.7% decline from the prior year in the retail
selling price per gallon. However, this decrease was almost entirely offset by
a 12.1% increase in gallons sold. Operating expenses increased 11.1% from the
prior year due mainly to employee related costs and the addition of two new
Company locations in the third quarter of 1997. General and administrative
expenses increased 19.5% to approximately $9,413,000 compared to $7,877,000 in
the prior year. This increase was principally due to employee related expenses
from the Company's expanding operations.
Fuel. Revenues decreased 2.8% overall to $236,194,000 compared to
$243,096,000 in 1997. Fuel revenues decreased primarily due to lower pump
prices stemming from lower fuel costs compared to 1997. The decrease in fuel
prices were offset by a 12.1% increase in fuel volumes which, together with
improved pricing strategies, resulted in increased fuel margins of 13.6%
compared to the prior year. On a comparable unit basis, fuel volumes increased
7.0% while margins increased 8.2%.
Non-Fuel. Revenues increased 15.8% overall to $65,691,000 from
$56,733,000 in the prior year. The increase in non-fuel revenues is primarily
due to increased tire and repair part sales and sales at the Company's retail
stores. On a comparable unit basis, non-fuel revenues increased 11.4% and
margins increased 11.9%. The improved margins reflect management's continued
focus on improving profitability in those areas.
Restaurant. Revenues of $26,204,000 were 11.5% over prior year's
revenues of $23,495,000. Comparable unit revenues of $24,586,000 were 4.6% over
the prior year. Revenue increases were primarily due to the addition of the
Company's two new locations. Revenues were enhanced by the implementation of new
menus and featured meal specials. Gross margin in the restaurants improved by
13.3% overall and 6.5% on a comparable unit basis due to management's continued
focus on costs and the implementation of menu changes.
Costs and Expenses. Total costs and expenses increased slightly over
prior year. Cost of sales decreased 1.9% or $4,816,000 from prior year,
primarily due to reduced fuel costs experienced during the current year.
Operating expenses increased $4,550,000, or 11.1%, to $45,511,000. The increase
is mainly due to employee related
9
<PAGE>
costs and the addition of the Company's two new locations. General and
administrative expenses increased $1,536,000, or 19.5%, compared to total
general and administrative expense of $7,877,000 during the same period in the
prior year. This increase was principally due to employee related expenses from
the Company's expanding operations.
Interest Expense, net. Interest expense decreased $426,000 to
$9,989,000 during the second quarter of 1998 due primarily to increased interest
income compared to the prior year and a .25% per annum decrease in interest
rates on Term Loans A and B beginning March 31, 1998.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Overview. The Company's net revenues of $165,157,000 increased 2.7% or
$4,398,000 over prior year. The increase is primarily due to an increase of 19%
and 8.9% in total non-fuel and restaurant sales, respectively, over the prior
year. Fuel revenues decreased 1.9% as a result of an 11.7% decline from the
prior year in the retail selling price per gallon. The decrease in selling
prices almost entirely offset an 11.4% increase in the volume of gallons sold.
Operating expenses increased 10.6% from the prior year due mainly to employee
related costs and the addition of two new Company locations. General and
administrative expenses increased 23.1% to approximately $4,787,000 compared to
$3,889,000 in the prior year. This increase was principally due to employee
related expenses from the Company's expanding operations.
Fuel. Revenues decreased 1.9% overall to $117,162,000 compared to
$119,399,000 in 1997. Fuel revenues decreased primarily because of reductions
in pump prices stemming from lower fuel costs compared to 1997. The decrease in
fuel prices were offset by an 11.4% increase in fuel volume which, together
with improved pricing strategies, resulted in increased fuel margins of 6.0%
compared to the prior year.
Non-Fuel. Revenues increased 19% overall to $34,758,000 from
$29,208,000 in the prior year quarter. The increase in non-fuel revenues is
primarily due to increased tire and repair part sales, sales at the Company's
retail stores, and the addition of two new Company locations. On a comparable
unit basis non-fuel revenues increased by 14.4% and margins increased by 14.0%
due to management's continued focus on improving profitability in these areas.
Restaurant. Revenues of $13,237,000 were 8.9% over prior year's
revenues of $12,152,000. Comparable unit revenues of $12,520,000 were 3.0% over
the prior year. Revenue increases were primarily due to the addition of the two
new Company locations. Revenues were also enhanced by the implementation of new
menus and featured meal specials. Gross margin in the restaurants improved by
9.7% overall and 4.0% on a comparable unit basis due to management's continued
focus on costs and the implementation of menu changes.
Costs and Expenses. Total costs and expenses increased $3,879,000 or
2.5% from the prior year quarter. Costs of sales also remained consistent with
prior year. Operating expenses increased $2,197,000, or 10.6%, to $22,901,000.
The increase is mainly due to employee related costs and the addition of the two
new Company locations. General and administrative expenses increased $898,000,
or 23.1%, compared to total general and administrative expense of $3,889,000 in
the prior year's second quarter. This increase was principally due to employee
related expenses from the Company's expanding operations.
Interest Expense, net. Interest expense decreased $373,000 to
$4,972,000 during the second quarter of 1998 due primarily to increased interest
income compared to the prior year and a .25% per annum decrease in interest
rates on Term Loans A and B beginning March 31, 1998.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures through the first six months totaled $8,007,000 for
1998 and $3,543,000 for 1997. Included in capital expenditures for 1998 were
funds spent on the new and existing facilities, in addition to systems
implementation projects.
The Company had positive working capital of $3,490,000 at June 30, 1998
and $3,850,000 at December 31, 1997. Negative working capital is normal in the
truckstop industry; however, due to the Recapitalization and the
reclassification of land held for sale during the fourth quarter of 1997, the
Company currently has positive working capital. 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.
During the quarter ended June 30, 1998, the Company made principal
payments on its Term Loans A and B of $652,000 and $192,000, respectively, and
made principal payments of $1,277,000 and $317,000 on these loans, respectively,
during the six months ended June 30, 1998.
In accordance with the New Credit Agreement, the interest rate the
Company is required to pay on its Term Loans A and B was reduced .25% per
annum, effective March 31, 1998, due to the Company's improved leverage ratio,
as defined in the New Credit Agreement.
At June 30, 1998, the Company had standby letters of credit issued for
approximately $807,000, resulting in availability of approximately $24,193,000
on the Revolving Credit Facility. As of June 30, 1998, there were no borrowings
on the Revolving Credit Facility or the Expansion Facility.
Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $980,000 for the six months ended June 30, 1998. The
dividends are only payable in cash if permitted by the Company's then existing
debt instruments. The Indenture and the New Credit Agreement restrict payment
of dividends on mandatorily redeemable preferred partnership interests.
The Company, within certain limits, pays its own workers' compensation
and general liability claims. During the second quarter of 1998, the Company
paid claims aggregating $433,000 and $214,000 relating to workers' compensation
and general liability, respectively, on such claims. On a year to date basis,
the Company has paid $924,000 and $311,000, respectively, on such claims. The
Company believes it provides an accrual adequate to cover both reported and
incurred but not reported claims.
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 1998 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 Revolving Credit Facility and the Expansion Facility and
additional financings.
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 the notes to the consolidated financial statements.
11
<PAGE>
At June 30, 1998, such accrual amounted to approximately $179,000 and, in
management's opinion, is 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 June 30, 1998, the Company has recognized
approximately $269,000 in the consolidated balance sheet related to recoveries
of certain remediation costs from third parties.
12
<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 the Company's financial position or results of operations. See also
the Company's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998.
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
June 30, 1998.
13
<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: August 14, 1998 /s/ Larry J. Zine
--------------------------
Larry J. Zine
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
27* Financial Data Schedule
* Filed herewith.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 19,978
<SECURITIES> 0
<RECEIVABLES> 13,805
<ALLOWANCES> 566
<INVENTORY> 17,492
<CURRENT-ASSETS> 58,264
<PP&E> 202,626
<DEPRECIATION> 47,095
<TOTAL-ASSETS> 236,487
<CURRENT-LIABILITIES> 54,826
<BONDS> 0<F1>
22,182
0
<COMMON> 0
<OTHER-SE> (18,367)
<TOTAL-LIABILITY-AND-EQUITY> 236,487
<SALES> 0
<TOTAL-REVENUES> 328,089
<CGS> 253,428
<TOTAL-COSTS> 315,932
<OTHER-EXPENSES> 16,993
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 9,989
<INCOME-PRETAX> 2,168
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,168
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR
ACCOMPANYING NOTES THERETO.
</FN>
</TABLE>
