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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 March 31, 2000
Commission file number 1-13018
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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
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, March 31,
1999 2000
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 13,394 $ 8,835
Trade accounts receivable, net 7,439 9,559
Inventories, net 21,989 22,261
Other current assets 3,120 2,363
Due from affiliates 2,075 2,078
------------ ------------
Total current assets 48,017 45,096
Property and equipment, net 184,375 189,787
Deferred debt issuance costs, net 9,972 9,685
Other assets 11,597 12,411
------------ ------------
Total assets $ 253,961 $ 256,979
============ ============
Liabilities and Partners' Capital (Deficit)
Current liabilities:
Current portion of long-term debt $ 1,001 $ 1,260
Trade accounts payable 10,767 4,233
Accrued expenses and other liabilities 20,276 19,736
Due to affiliates 25,537 29,751
------------ ------------
Total current liabilities 57,581 54,980
Long-term debt, excluding current portion 180,297 185,165
------------ ------------
Total liabilities 237,878 240,145
------------ ------------
Commitments and contingencies
Partners' capital (deficit):
General partners' (254) (251)
Limited partners' 16,337 17,085
------------ ------------
Total partners' capital (deficit) 16,083 16,834
------------ ------------
Total liabilities and partners' capital
(deficit) $ 253,961 $ 256,979
============ ============
See accompanying notes to unaudited consolidated financial statements.
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PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Three Months Ended
March 31,
1999 2000
-------- --------
Net revenues:
Fuel (including motor fuel taxes) $106,881 $174,392
Non-fuel 46,692 50,098
-------- --------
Total net revenues 153,573 224,490
Costs and expenses:
Cost of sales -
Fuel (including motor fuel taxes) 97,623 163,623
Non-fuel 18,718 20,235
Operating expenses 23,405 25,975
General and administrative 4,808 4,819
Depreciation and amortization 3,267 3,815
(Gain) loss on disposition of fixed assets 15 (69)
-------- --------
Total costs and expenses 147,836 218,398
-------- --------
Operating income 5,737 6,092
Equity in loss of affiliate - (107)
Interest income 98 123
Interest expense (5,060) (5,060)
-------- --------
Net income $ 775 $ 1,048
======== ========
See accompanying notes to unaudited consolidated financial statements.
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PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the Three Months Ended March 31, 2000
(in thousands)
General Total
Partners' Limited Partners'
Capital Partners' Capital
(Deficit) Capital (Deficit)
--------- --------- ---------
Balances, December 31, 1999 $(254) $16,337 $16,083
Partners' minimum tax distribution - (297) (297)
Net income 3 1,045 1,048
--------- --------- ---------
Balances, March 31, 2000 $(251) $17,085 $16,834
========= ========= =========
See accompanying notes to unaudited consolidated financial statements.
3
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PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
1999 2000
-------- --------
Cash flows from operating activities:
Net income $ 775 $ 1,048
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,267 3,815
Deferred debt issuance cost amortization 418 365
Bad debt expense 61 84
Equity in loss of affiliate - 107
(Gain) loss on disposition of assets 15 (69)
Increase (decrease) from changes in:
Trade accounts receivable (1,330) (2,204)
Inventories (1,717) (272)
Other current assets 568 757
Due from affiliates (41) (3)
Due to affiliates 4,539 4,214
Trade accounts payable 3,350 (6,534)
Accrued expenses and other liabilities (6,030) (540)
-------- --------
Net cash provided by operating activities 3,875 768
-------- --------
Cash flows from investing activities:
Proceeds from disposition of assets - 126
Purchases of property and equipment (2,973) (9,282)
Increase in other assets, net (1,084) (923)
-------- --------
Net cash used in investing activities (4,057) (10,079)
-------- --------
Cash flows from financing activities:
Proceeds from bank debt - 5,200
Repayments of long-term debt and capital lease (1,239) (122)
Partners' minimum tax distributions - (297)
Payment of debt issuance costs - (29)
-------- --------
Net cash provided by (used in) financing
activities (1,239) 4,752
-------- --------
Net decrease in cash and cash equivalents (1,421) (4,559)
Cash and cash equivalents, beginning of period 13,183 13,394
-------- --------
Cash and cash equivalents, end of period $ 11,762 $ 8,835
======== ========
- --------------------------------------------------------------------------------
Supplemental cash flow information -
Interest paid during the period, net of
capitalized interest of $0 and $184
in 1999 and 2000 $ 7,932 $ 7,556
Non-cash financing activities -
Preferred return on mandatorily redeemable
preferred partnership interests 514 -
See accompanying notes to unaudited consolidated financial statements.
4
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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. and its subsidiaries (the
"Company"), 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 unaudited condensed consolidated 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, 1999 ("1999
Form 10-K"). Capitalized terms used in this report and not defined herein have
the meanings ascribed to such terms in the 1999 Form 10-K. In the opinion of
management of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of the Company at December 31, 1999 and March 31, 2000, the results of
operations for the three months ended March 31, 1999 and March 31, 2000 and cash
flows for the three months ended March 31, 1999 and March 31, 2000. The results
of operations for the three months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the full calendar year.
The Company's revenues and cost of sales include a significant amount of
federal and state motor fuel taxes. Such taxes were $51.8 million and $57.6
million for the three month periods ended March 31, 1999 and March 31, 2000,
respectively.
(2) Recapitalization
On July 23, 1999, the Company, certain of its partners and Volvo Petro
Holdings L.L.C. ("Volvo Trucks"), an affiliate of Volvo Trucks North America,
Inc. ("Volvo"), consummated a series of transactions pursuant to which:
. Petro Stopping Centers Holdings, L.P. ("Holdings") was formed, and
substantially all of the owners in the Company at that time (other
than Petro Holdings G.P. Corp. and Petro Holdings L.P. Corp., each of
which were affiliates of Chartwell Investments, Inc. (collectively,
"Chartwell") and Kirschner Investments ("Kirschner"), a Company
franchisee), exchanged their interests in the Company for identical
interests in Holdings and became owners of Holdings;
. Petro Holdings Financial Corporation was formed for the purpose of
serving as co-issuer of the 15.0% senior discount notes issued by
Holdings;
. Petro Holdings Financial Corporation, the Company and the Company's
subsidiary, Petro Financial Corporation, became subsidiaries of
Holdings;
. Petro Warrant Holdings Corporation was formed for the purpose of
owning a common limited partnership interest in Holdings and issuing
the warrants that are exchangeable into all of the common stock of
Petro Warrant Holdings Corporation;
. Volvo Trucks invested $30.0 million to acquire a 28.7% common limited
partnership interest in Holdings;
. Mobil Long Haul, Inc. ("Mobil Long Haul"), an affiliate of Mobil Oil
Corporation ("Mobil"), invested an additional $5.0 million in Class B
convertible preferred partnership interests in Holdings;
. Holdings purchased the 50.8% common interest in the Company owned by
affiliates of Chartwell for aggregate consideration of approximately
$69.8 million, which consisted of a $55.0 million cash payment and the
issuance to Chartwell of approximately $14.8 million in accreted value
of 15.0% senior discount notes, without warrants;
5
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PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(2) Recapitalization - continued
. Holdings purchased the 2.0% common interests in the Company owned by
Kirschner for cash consideration of $2.8 million; and
. Holdings and Petro Holdings Financial Corporation sold for cash $82.7
million in principal amount at stated maturity 15.0% senior discount
notes due 2008, and warrants to purchase all the common stock of Petro
Warrant Holdings Corporation.
The foregoing transactions are referred to as the "Recapitalization." The
acquisition of the interests of Chartwell and Kirschner was accounted for by
Holdings under the purchase method during the third quarter of 1999.
As part of the Recapitalization, Holdings issued 82,707 units, each
consisting of $1,000 principal amount at stated maturity of Holdings 15.0%
senior discount notes due 2008 (the "15% Notes") and one warrant (collectively,
all such warrants are defined herein as the "Warrants"). As consideration for
the 15% Notes and the Warrants, Holdings received cash proceeds of $40.0
million, of which $30.3 million was allocated to the 15% Notes and $9.7 million
was allocated to the Warrants. Holdings acquired the Warrants from Petro Warrant
Holdings Corporation for $9.7 million. Petro Warrant Holdings Corporation, in
turn, invested the $9.7 million to acquire a 10.0% common limited partnership
interest in Holdings.
As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common partnership interests in the Company, and the minority
interest of 0.5% is owned by affiliates of the Cardwell Group. The common
limited partnership interests of Holdings are owned by:
Cardwell Group:
General partnership interest..................................... 1.1%
Limited partnership interest..................................... 50.5%
Volvo Trucks....................................................... 28.7%
Mobil Long Haul.................................................... 9.7%
Petro Warrant Holdings Corporation................................. 10.0%
The mandatorily redeemable preferred partnership interests of Holdings are
owned by Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).
As discussed above, Holdings funded a portion of its purchase of the
Chartwell and Kirschner interests with debt. Holdings currently has no
operations of its own and is, therefore, dependent upon the Company's earnings
and cash flows to satisfy its obligations under the 15% Notes and the Warrants.
Effect of Recapitalization on the Company
In connection with the exchange of interests referred to above, the Company
and its partners (Holdings and various individuals and affiliates of the
Cardwell Group) agreed to restate the Company's partnership agreement. Among
other things, the parties agreed to convert the outstanding amount of
mandatorily redeemable preferred partnership interests ($24.3 million, including
accrued but unpaid preferred returns) into common limited partnership interests.
Holdings raised funds from the capital contributions of Volvo Trucks and
Mobil Long Haul and from the offering of the 15% Notes and the Warrants
exceeding the amounts necessary to purchase the Chartwell and Kirschner
interests. As a consequence, Holdings made a cash contribution to the Company
in the amount of approximately $10.8 million.
As part of the Recapitalization, the Company also amended its senior
collateralized credit facility. The new senior credit facility consists of an
$85.0 million revolving credit facility and a $40.0 million term loan. The
proceeds of the new term loan were used to repay principal amounts due under the
Company's previous senior credit facility of approximately $38.1 million, plus
accrued interest. The new senior credit facility is collateralized by
substantially all of the Company's assets and contains certain covenants as
described in Note 7 to notes to consolidated financial
6
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PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(2) Recapitalization - continued
statements included in the Company's 1999 Form 10-K.
The Company capitalized debt issuance and other costs of approximately $2.3
million and expensed legal, accounting, and other professional fees of $1.2
million incurred in connection with the Recapitalization. Holdings incurred
approximately $279,000 of these costs on the Company's behalf and that amount
has been reflected as a non-cash capital contribution as described in the
consolidated financial statements included in the Company's 1999 Form 10-K. The
Company also wrote-off approximately $2.0 million in previously deferred debt
issuance costs on the date of the Recapitalization.
Other than described above, the Recapitalization had no effect on the
historical book values of the Company's assets and liabilities.
(3) Significant Accounting Policies
Reclassifications
Certain prior period amounts have been reclassified to conform to current
year presentation.
(4) Segments
The Company operates large, multi-service truck stops in the United States.
The Company's facilities, which are known as "Petro Stopping Centers(R)," offer
a broad range of products, services, and amenities, including diesel fuel,
gasoline, home-style restaurants, truck preventive maintenance centers, and
retail merchandise stores to the professional truck driver industry and other
highway motorists. The Company has aggregated its corporate truck stop
operations into one reportable operating segment based on the distribution of
products and services under one common site facility, classified as a multi-
service truck stop. During the three months ended March 31, 1999 and March 31,
2000, the revenues generated from the Company's truck stop operations were
$152.6 million and $223.2 million, respectively.
The Company is also a franchisor to 23 Petro Stopping Center locations as
of March 31, 2000. The Company collects royalties and fees in exchange for the
use of its tradenames and trademarks and for certain services provided to the
franchisees. Franchise fees are based generally upon a percentage of a
franchisee's sales. Given the relative insignificance of initial franchise
fees and other revenue types, the Company reports a total combined franchise
revenue amount. During the three months ended March 31, 1999 and March 31,
2000, revenues generated from the Company's franchise operations were $1.0
million and $1.3 million, respectively. These revenues are included in net
revenues reported on the accompanying unaudited consolidated statements of
operations. The Company does not allocate any expenses or assets in measuring
this segment's profit and loss, nor does it believe there are any significant
commitments or obligations resulting from these franchise agreements.
(5) Recently Issued Accounting Pronouncements
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 market value.
SFAS No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gain and loss to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133 was originally
effective for fiscal years beginning after June 15, 1999, but has been postponed
by Statement of Financial Accounting Standard No. 137, "An Amendment of SFAS No.
133," for one year with a mandatory effective date for all fiscal quarters of
all fiscal years beginning after June 15, 2000. 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.
7
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PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(6) Related Party Transactions
For a full discussion of the Company's related party transactions, please
refer to Note 9 of the notes to the consolidated financial statements included
in the Company's 1999 Form 10-K.
The Company has been advised by Mobil Long Haul that as a result of the
Consent Decree issued by the Federal Trade Commission which became effective in
the first quarter of 2000 in connection with the proposed merger of Mobil and
Exxon Corporation, that Mobil will no longer be able to sell direct branded fuel
products in certain markets. The Company anticipates that the effect of this
Consent Decree will be that unbranded diesel fuel will be sold in one market
area where the Company operates a Petro Stopping Center. The Company does not
believe that the loss of the Mobil diesel brand in this market will have a
material adverse effect on either its volumes or results of operations.
8
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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
1999 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 including many factors,
some of which we have little or no control over, 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 the following sections of
this Item, including, without limitation, "--General," "--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.
Reporting Format
We operate large, multi-service truck stops in the United States. Our
facilities, which are known as "Petro Stopping Centers(R)," offer a broad
range of products, services and amenities, including diesel fuel, gasoline,
home-style restaurants, truck preventive maintenance centers, and retail
merchandise stores to the professional truck driver industry and other highway
motorists. We have aggregated our company truck stop operations into one
reportable operating segment based on the distribution of products and
services under one common site facility, classified as a multi-service truck
stop.
We are also a franchisor to 23 Petro Stopping Center locations as of March
31, 2000. We collect royalties and fees in exchange for the use of our
tradenames and trademarks and for certain services provided to the
franchisees. Franchise fees are based generally upon a percentage of a
franchisee's sales. Given the relative insignificance of initial franchise
fees and other revenue types, we report a total combined franchise revenue
amount. During the three months ended March 31, 1999 and March 31, 2000,
revenues were $1.0 million and $1.3 million, respectively. These revenues are
included in non-fuel revenues reported on the accompanying unaudited
consolidated statements of operations. We do not allocate any expenses or
assets in measuring this segment's profit and loss, nor do we believe there
are any significant commitments or obligations resulting from these franchise
agreements.
We derive our revenues from:
. the sale of diesel and gasoline fuels;
. non-fuel items, including the sale of merchandise and offering of
services including truck tire sales and preventative maintenance,
showers, laundry, video games, franchise royalties, and other
operations; and
. restaurant operations which include the Iron Skillet(R) and fast-food
operations.
The following table sets forth our total consolidated revenues by major
source:
SUMMARY OF SOURCES OF REVENUES
Three Months Ended March 31,
------------------------------------
1999 2000
---------------- ----------------
(dollars in thousands)
Fuel $106,881 69.6% $174,392 77.7%
Non-Fuel 33,556 21.8% 35,859 16.0%
Restaurant 13,136 8.6% 14,239 6.3%
-------- ------ -------- ------
Total Net Revenues $153,573 100.0% $224,490 100.0%
======== ====== ======== ======
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Our fuel revenues and cost of sales include federal and state motor fuel
taxes. Such taxes were $51.8 million and $57.6 million for the three month
periods ended March 31, 1999 and March 31, 2000, respectively.
Taxes
No provision for income taxes is reflected in the accompanying financial
statements because we are organized as a partnership, taxable income and tax
deductions are passed through to the individual partners.
General
Recapitalization
On July 23, 1999, we, certain of our partners and Volvo Petro Holdings
L.L.C. ("Volvo Trucks"), an affiliate of Volvo Trucks North America, Inc.
("Volvo"), consummated a series of transactions pursuant to which:
. Petro Stopping Centers Holdings, L.P. ("Holdings") was formed, and
substantially all of the owners in us at that time (other than Petro
Holdings G.P. Corp. and Petro Holdings L.P. Corp., each of which were
affiliates of Chartwell Investments, Inc. (collectively, "Chartwell")
and Kirschner Investments ("Kirschner"), one of our franchisees),
exchanged their interests in us for identical interests in Holdings
and became owners of Holdings;
. Petro Holdings Financial Corporation was formed for the purpose of
serving as co-issuer of the 15.0% senior discount notes issued by
Holdings;
. Petro Holdings Financial Corporation, ourselves and our subsidiary,
Petro Financial Corporation, became subsidiaries of Holdings;
. Petro Warrant Holdings Corporation was formed for the purpose of
owning a common limited partnership interest in Holdings and issuing
the warrants that are exchangeable into all of the common stock of
Petro Warrant Holdings Corporation;
. Volvo Trucks invested $30.0 million to acquire a 28.7% common limited
partnership interest in Holdings;
. Mobil Long Haul, Inc. ("Mobil Long Haul"), an affiliate of Mobil Oil
Corporation, invested an additional $5.0 million in Class B
convertible preferred partnership interests in Holdings;
. Holdings purchased the 50.8% common interest in us owned by affiliates
of Chartwell for aggregate consideration of approximately $69.8
million, which consisted of a $55.0 million cash payment and the
issuance to Chartwell of approximately $14.8 million in accreted value
of 15.0% senior discount notes, without warrants;
. Holdings purchased the 2.0% common interests in us owned by Kirschner
for cash consideration of $2.8 million; and
. Holdings and Petro Holdings Financial Corporation sold for cash $82.7
million in principal amount at stated maturity 15.0% senior discount
notes due 2008, and warrants to purchase all the common stock of Petro
Warrant Holdings Corporation.
The foregoing transactions are referred to as the "Recapitalization." The
acquisition of the interests of Chartwell and Kirschner was accounted for by
Holdings under the purchase method during the third quarter of 1999.
As part of the Recapitalization, Holdings issued 82,707 units, each
consisting of $1,000 principal amount at stated maturity of Holdings 15.0%
senior discount notes due 2008 (the "15% Notes") and one warrant (collectively,
all such warrants are defined herein as the "Warrants"). As consideration for
the 15% Notes and the Warrants, Holdings received cash proceeds of $40.0
million, of which $30.3 million was allocated to the 15% Notes and $9.7
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million was allocated to the Warrants. Holdings acquired the Warrants from Petro
Warrant Holdings Corporation for $9.7 million. Petro Warrant Holdings
Corporation, in turn, invested the $9.7 million to acquire a 10.0% common
limited partnership interest in Holdings.
As a result of the Recapitalization, Holdings is the owner of approximately
99.5% of the common partnership interests in us, and the minority interest of
0.5% is owned by affiliates of the Cardwell Group. The common limited
partnership interests of Holdings are owned by:
Cardwell Group:
General partnership interest..................................... 1.1%
Limited partnership interest..................................... 50.5%
Volvo Trucks....................................................... 28.7%
Mobil Long Haul.................................................... 9.7%
Petro Warrant Holdings Corporation................................. 10.0%
The mandatorily redeemable preferred partnership interests of Holdings are
owned by Mobil Long Haul ($17.0 million) and the Cardwell Group ($7.6 million).
As discussed above, Holdings funded a portion of its purchase of the
Chartwell and Kirschner interests with debt. Holdings currently has no
operations of its own and is, therefore, dependent upon our earnings and cash
flows to satisfy its obligations under the 15% Notes and the Warrants.
Effect of our Recapitalization
In connection with the exchange of interests referred to above, we and our
partners (Holdings and various individuals and affiliates of the Cardwell Group)
agreed to restate our partnership agreement. Among other things, the parties
agreed to convert the outstanding amount of mandatorily redeemable preferred
partnership interests ($24.3 million, including accrued but unpaid preferred
returns) into common limited partnership interests.
Holdings raised funds from the capital contributions of Volvo Trucks and
Mobil Long Haul and from the offering of the 15% Notes and the Warrants
exceeding the amounts necessary to purchase the Chartwell and Kirschner
interests. As a consequence, Holdings made a cash contribution to us in the
amount of approximately $10.8 million.
As part of the Recapitalization, we also amended our senior collateralized
credit facility. The new senior credit facility consists of an $85.0 million
revolving credit facility and a $40.0 million term loan. The proceeds of the new
term loan were used to repay principal amounts due under our previous senior
credit facility of approximately $38.1 million, plus accrued interest. The new
senior credit facility is collateralized by substantially all of our assets and
contains certain covenants as described in Note 7 to notes to consolidated
financial statements included in our 1999 Form 10-K.
We capitalized debt issuance and other costs of approximately $2.3 million
and expensed legal, accounting, and other professional fees of $1.2 million
incurred in connection with the Recapitalization. Holdings incurred
approximately $279,000 of these costs on our behalf and that amount has been
reflected as a non-cash capital contribution as described in the consolidated
financial statements included in our 1999 Form 10-K. We also wrote-off
approximately $2.0 million in previously deferred debt issuance costs on the
date of the Recapitalization.
Other than described above, the Recapitalization had no effect on the
historical book values of our assets and liabilities.
Operations
The following table sets forth the development of our Stopping Center
network since 1996:
As of March 31,
---------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Company-operated 26 26 28 28 30
Franchised 15 16 20 21 23
---- ---- ---- ---- ----
Total Stopping Centers 41 42 48 49 53
==== ==== ==== ==== ====
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The following table sets forth information on Stopping Centers opened from
March 31, 1996 through March 31, 2000, all but two of which are full-sized
facilities.
Location Date Opened
-------- -----------
Company-operated:
North Baltimore, Ohio August 1997
North Little Rock, Arkansas September 1997
Wheeler Ridge, California June 1999
Jackson, Mississippi November 1999
Franchised:
York, Nebraska December 1996
Dupont, Pennsylvania May 1997
Claysville, Pennsylvania November 1997
Breezewood, Pennsylvania February 1998
Milton, Pennsylvania March 1998
Monee, Illinois April 1998
Lowell, Indiana April 1999
Racine, Wisconsin December 1999
We purchased land in Glendale, Kentucky, North Las Vegas, Nevada, Marianna,
Florida, and Cordele, Georgia in November of 1998, September of 1999, October of
1999, and March of 2000, respectively, for the future construction of four new
Petro Stopping Centers. We also own a site in Green River, Wyoming which is
suitable for the construction of a new Petro Stopping Center. At March 31,
2000, we had under construction new Petro Stopping Centers in Glendale, Kentucky
and North Las Vegas, Nevada which are scheduled to open in June and October of
2000, respectively. In April of 2000, we completed construction on and opened a
company-operated Stopping Center in Mebane, North Carolina.
All franchises are operated under franchise agreements which, with one
exception, are for an initial ten-year term and are automatically renewed for
two consecutive five-year terms, unless the franchisee gives a termination
notice at least twelve months prior to the expiration of its franchise agreement
with the Company. One franchise agreement has been amended so that its initial
term is approximately fifteen years (expiring in December 2001), and such
agreement provides for only one five-year renewal thereof.
With the exception of Jerome/Twin Falls, Idaho, no notices of termination
were received from any franchisees, under franchise agreements with expiring
initial terms. Notice of intent not to renew the Jerome/Twin Falls, Idaho
franchise was received December 9, 1999 and accordingly, this franchise
agreement will terminate effective December 15, 2000. We have both a right of
first refusal to acquire this location and the option to purchase it at fair
market value. We are currently evaluating options regarding this site.
In an effort to enhance our franchisee relationship, we completed
negotiation with our existing franchisees of a revised form franchise agreement
in 1999. The revised franchise agreement has now been given to those
franchisees for execution and each franchisee has been given the choice to
either enter into the new agreement or remain as a franchisee under the terms of
their existing agreement. Execution of new franchise agreements is in various
stages of completion, however, in our opinion the election by the franchisees
and the timing of the execution of the new agreements will not have a material
adverse effect on the Company.
In addition to our currently operational 23 franchise locations, we have
signed an agreement for an additional franchise location in Frederick, Maryland.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Overview. Our net revenues of $224.5 million increased 46.2% in the first
three months of 2000 from $153.6 million in the first three months of 1999. On
a "comparable unit" basis, revenues increased by 44.2% to $214.6 million from
$148.9 million in the prior year quarter. The increases were primarily due to
an increase in fuel revenues from the prior year quarter as a result of an
increase in our average retail-selling price per fuel gallon, as well as an
increase in the volume of fuel gallons sold from the prior year quarter.
Operating expenses increased 11.0% to $26.0 million from $23.4 million in the
prior year quarter due mainly to our loyalty program, new site pre-opening
expenses, and employee-related costs. General and administrative expenses
remained relatively consistent to the prior year quarter at $4.8 million. A
Petro Stopping Center is considered a "comparable unit" as to a particular
period in the
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current year if it was open during the same period of the prior year.
Fuel. Revenues increased 63.2% to $174.4 million in the first three months
of 2000 compared to $106.9 million in the first three months of 1999. Fuel
revenues increased primarily due to a 47.2% increase in our average retail-
selling price per fuel gallon stemming from higher fuel costs compared to the
prior year quarter. The increase in fuel revenues was also due to a 10.9% or
12.7 million gallon increase in fuel volumes. We believe the increased volume
is due primarily to the success of our customer loyalty program and our
commitment to customer service. Gross margins increased by 16.3% to $10.8
million for the three months ended March 31, 2000, compared to $9.3 million for
the prior year quarter. On a "comparable unit" basis, fuel revenues increased
61.8% primarily due to a 48.7% increase in our average retail-selling price per
fuel gallon stemming from higher fuel costs compared to the prior year quarter.
The increase in fuel revenues was also due to an 8.8% or 9.9 million gallon
increase in fuel volumes. Gross margins increased by 18.1% or $1.6 million for
the three months ended March 31, 2000, compared to the prior year quarter.
Non-Fuel. Revenues increased 6.9% to $35.9 million in the first three
months of 2000 from $33.6 million in the first three months of 1999. The
increase in non-fuel revenues is primarily due to a 12.2% or $2.0 million
increase in sales at our retail stores, oil, new and used tire, and repair part
sales. Gross margins increased 6.5% to $19.7 million in the first three months
of 2000 from $18.5 million in first three months of 1999. In addition to the
increase in sales, we believe the improved margins reflect the results of
improved product procurement and our continued focus on margin management. On a
"comparable unit" basis, non-fuel revenues increased 5.0% or $1.7 million
compared to the prior year quarter and gross margins increased 4.8% or $882,000
compared to the prior year quarter.
Restaurant. Revenues increased 8.4% to $14.2 million in the first three
months of 2000 compared to $13.1 million in the first three months of 1999. We
believe revenues increased due to increased customer traffic and previous
changes in the core menu and featured meal specials, resulting in the average
ticket price increasing by 3.9%. Gross margins in the restaurants improved by
7.3% or $693,000. On a "comparable unit" basis, restaurant revenues increased
5.6% or $738,000 compared to the prior year quarter, while gross margins
increased by 4.7% or $448,000.
Costs and Expenses. Total costs and expenses increased 47.7% to $218.4
million in the first three months of 2000, compared to $147.8 million in the
first three months of 1999. On a "comparable unit" basis, total costs and
expenses increased 45.1% or $64.8 million compared to the prior year quarter.
Cost of sales increased 58.0% or $67.5 million from the prior year quarter due
mainly to significantly higher fuel costs in the current year. Operating
expenses increased 11.0% or $2.6 million to $26.0 million for the first three
months of 2000 from 1999. The increase is mainly due to a $1.0 million increase
in expenses associated with our customer loyalty program, an increase of $1.4
million in employee-related costs due in part by the opening of two new
truckstop locations, and an increase in new site pre-opening expenses of
$200,000. On a "comparable unit" basis, operating expenses increased 7.3% or
$1.6 million to $24.8 million compared to the first three months of 1999.
General and administrative expenses remained relatively consistent with the
prior year at $4.8 million.
Equity in Loss of Affiliate. We recognized a $107,000 loss related to our
investment in the Wheeler Ridge facility in Southern California, as is typical
in the early stages of operation of a new Stopping Center. This Stopping Center
began operations in June 1999.
Interest Expense, net. Interest expense, net, remained relatively
consistent with that of the first three months in 1999.
Liquidity and Capital Resources
Currently our principal sources of liquidity are:
. Borrowings under our new senior credit facility, which currently
consists of an $85.0 million revolving credit facility and a $40.0
million term loan, providing an aggregate borrowing up to $125.0
million;
. Sales of common and preferred partnership interests and capital
contribution transactions which raised $10.8 million in 1999;
. Cash flows from operations, which provided $3.9 million and $768,000
for the three months ended March 31, 1999 and March 31, 2000,
respectively. The large decrease for the first three months of 2000
was
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primarily due to normal fluctuations in the timing of payments to
Mobil Diesel Supply Corporation for fuel payments and variations in
the timing related to trade account payables;
. Our cash flow used in investing activities was ($4.1) million and
($10.1) million for the three months ended March 31, 1999 and March
31, 2000, respectively. The increase was due primarily to additional
investment in property and equipment of $9.3 million for the three
months ended March 31, 2000; and
. Cash flows from financing activities were ($1.2) million and $4.8
million for the three months ended March 31, 1999 and March 31, 2000,
respectively. The fluctuations are almost entirely due to our
borrowings and repayments on our credit facilities.
We had negative working capital of $9.6 million and $9.9 million at
December 31, 1999 and March 31, 2000, respectively. Negative working capital is
normal in the truckstop industry. Diesel fuel inventory turns every two to
three days, while payment is generally required in twelve to fifteen days.
Approximately 74.0% of our sales are cash sales (or the equivalent in the case
of credit card sales or sales paid for by check which are funded on a daily
basis by third-party billing companies).
Our current senior credit facility consists of an $85.0 million revolving
credit facility and a $40.0 million term loan. At March 31, 2000, we had
standby letters of credit issued for approximately $2.7 million resulting in
availability of approximately $82.3 million on the revolving credit facility.
As of March 31, 2000, there was approximately $5.2 million outstanding on the
revolving credit facility. Principal payments on the term loan are due
quarterly, beginning September 30, 2000. The first sixteen quarterly payments
due are $250,000 each.
We are partly self-insured, paying our own employment practices, workers'
compensation, general liability, and group health benefit claims, up to stop-
loss amounts ranging from $50,000 to $250,000 on a per occurrence basis. During
the first quarter of 2000, we paid $1.4 million on claims related to these self-
insurance programs. Provisions established under these self-insurance programs
are made for both estimated losses on known claims and claims incurred but not
reported, based on claims history. For the three months ended March 31, 2000,
aggregated provisions amounted to $2.3 million. At March 31, 2000, the
aggregated accrual amounted to approximately $5.2 million, which we believe is
adequate to cover both reported and incurred but not reported claims.
Capital expenditures totaled $9.3 million for the three months ended March
31, 2000. Included in capital expenditures were funds we spent on existing
Petro Stopping Centers and construction of new facilities.
We currently expect to invest approximately $55.5 million during the
remainder of 2000 on capital expenditures. We currently plan to open three new
truck stops (in addition to the location opened in Mebane, North Carolina in
April of 2000) during the year 2000, with a cost of approximately $10.0 million
to $11.0 million per site including land acquisition costs. Approximately $10.0
million will be spent on regular capital maintenance and volume building
projects during the year 2000. These capital outlays will be funded through our
senior credit facility and internally generated cash.
We believe that internally generated funds, together with amounts available
under the senior credit facility, will be sufficient to satisfy our cash
requirements for operations through 2000 and the foreseeable future thereafter.
We also expect that current and future expansion and acquisitions will be
financed from funds generated from operations, the senior credit facility, and
to the extent necessary, additional financing.
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.
Contingencies under environmental laws and regulations may require us to
take action to correct the effects on the environment of prior disposal
practices or releases of chemical or petroleum substances by us or other
parties. We have accrued liabilities for environmental remediation activities
consistent with the policy set forth in the notes
14
<PAGE>
to the consolidated financial statements of our 1999 Form 10-K. At March 31,
2000, this accrual amounted to approximately $75,000 and, in our opinion, is
appropriate based on existing facts and circumstances. We accrue for
environmental remediation expenses based upon initial estimates obtained from
contractors engaged to perform the remediation work as required by local, state,
and federal authorities. It is often difficult to predict the extent and the
cost of environmental remediation until work has commenced and the full scope of
the contamination determined. Accruals are periodically evaluated and updated as
information regarding the nature of the clean up work is obtained. In the event
that future remediation expenditures are in excess of amounts accrued, we do not
anticipate that they will have a material adverse effect on our consolidated
financial position or results of operations. Actual results, however, could
differ from estimated amounts and those differences could be material. At March
31, 2000, we have recognized approximately $163,000 in the consolidated balance
sheet related to recoveries of remediation costs from third parties.
15
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are party to various ordinary litigation incidental to our business
for which estimates of losses have been accrued, when appropriate. In our
opinion, such proceedings will not have a material adverse effect on our
financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Incorporated herein by reference is a list of Exhibits contained in
the Exhibit Index on page 18 of this Quarterly Report.
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
March 31, 2000.
16
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SIGNATURE
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 12, 2000 By: /s/ David A. Appleby
----------------------------------------
David A. Appleby
Vice President of Finance and Treasurer
(on behalf of Registrant and as
Registrant's Principal Financial and
Chief Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
3.1 (aa) Amended and Restated Certificate of Limited Partnership of
Petro Stopping Centers, L.P.
3.2 (bb) Fourth Amended and Restated Limited Partnership Agreement of
Petro Stopping Centers, L.P., dated July 23, 1999, by and
among Petro Inc., as a General Partner and Petro Stopping
Centers Holdings, L.P., Petro Holdings GP, L.L.C., and James
A. Cardwell, Jr., as Limited Partners.
10.18* Property Lease Agreement, dated November 12, 1998 between
Petro Stopping Centers, L.P. and Petro Truckstops, Inc.
27* Financial Data Schedule
- ----------
(aa) Incorporated by reference. Filed with the Company's Current Report on
Form 8-K, filed on August 6, 1999.
(bb) Incorporated by reference. Filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
* Filed herewith.
18
<PAGE>
Exhibit 10.18
PROPERTY LEASE AGREEMENT
------------------------
BE IT KNOWN, that, before the undersigned Notary(is) Public in the State of
Texas, and in the presence of the undersigned competent witnesses, personally
came and appeared:
PETRO STOPPING CENTERS, L.P., a limited partnership of the State of
Delaware, whose present mailing address is declared to be 6080 Surety
Drive, El Paso, Texas, 79905, herein represented by its duly authorized
Executive Vice-President, Larry J. Zine, in accordance with a resolution of
the partners thereof, hereinafter referred to as "Lessor",
who hereby leases and delivers unto:
PETRO TRUCKSTOPS, INC., a corporation of the State of Delaware, whose
present mailing address is declared to be P.O. Box 29249, Shreveport,
Louisiana, 71129, herein represented by its duly authorized President,
James A. Cardwell, Jr., in accordance with a resolution of the board of
directors thereof, hereinafter referred to as "Lessee",
hereby accepting and leasing for itself, its successors and assigns, and
acknowledging due delivery and possession thereof, the Shreveport Facility,
constituting the land and improvements of the Petro Stopping Center in
Shreveport, Louisiana, less and except those parcels of property upon which are
located the truck wash, the truck scales and the truck lube/repair facility,
said Shreveport Facility being located on the following described property, to-
wit:
See property description in Exhibit "A" made a part hereof for all
purposes.
Together with all buildings and structures located on the property
described in Exhibit "A", and all of the contents of said furniture, fixtures,
buildings, sign poles, equipment, personal property and other structures and
improvements, less and except the truck wash, the truck scales and the truck
lube/repair facility, hereinafter referred to as the "Premises".
Provided, however, that Lessee hereby acknowledges the reservation of a
non-exclusive easement in, to, over and across all portions of the Premises for
the use, enjoyment, ingress, egress and access by the customers, invitees,
agents and employees of Lessor and any other tenants of the Premises, including
without limitation those utilizing and providing the services at the truck wash,
truck scales, truck lube/repair facility, the restaurant and the convenience
store situated on or about the Premises.
NOW, THEREFORE, in consideration of the mutual covenants agreements
contained herein and other valuable consideration, and upon the terms and
conditions hereinafter set forth, this lease is made and accepted by Lessor and
Lessee (sometimes hereinafter referred to as the "Parties") for and in
consideration of all of the terms, conditions and stipulations hereinafter set
forth:
1. TERM: The term of this lease (hereinafter referred to as the
----
"Agreement") shall be for a period of three (3) years commencing on the 1/st/
day of July, 1999, with an option, at Lessee's discretion, to renew this
Agreement for three (3) additional three (3) year terms at the expiration of the
initial term hereof
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<PAGE>
by giving Lessor written notice of its intent to renew this Agreement at least
ninety (90) days before the expiration of the primary term or any renewal term
that has begun to run.
Both Lessor and Lessee further agree that this Agreement may be terminated
at any time by either party hereto by a party giving the other party written
notice of its intent to terminate this agreement at least sixty (60) days before
the date that said party desires to terminate this Agreement.
2. RENTAL: Lessee agrees to pay to Lessor as rental payments during the
------
full term hereof the sum of ONE HUNDRED EIGHT THOUSAND THREE HUNDRED THIRTY-
THREE AND 33/100 DOLLARS ($108,333.33) per month, said rental payment being due
on the 1st day of the month subsequent to the execution hereof and on the first
day of every month thereafter. The rental payment for the month of November
shall be prorated.
All rental payments shall be paid to Lessor on a monthly basis, and shall
be due on or before the 1st of the month. Rental payments shall be remitted to
Lessor's address as provided in the notice paragraph 24 hereof.
Any rental payment received after the 5th day of any month during the full
term hereof shall be considered delinquent. If any rental payment is not paid
on or before the 5th day of any month, Lessee shall pay interest on the unpaid
rent at the simple interest rate of twelve percent (12%) per annum.
3. USE OF PREMISES: Lessee will not carry on or permit upon the Premises
---------------
any offensive use nor allow same to be used for any unlawful or immoral purpose.
Lessee shall use and occupy the Premises only for the purpose of operating a
qualified truck stop facility as defined in LSA-R.S. 27:301 et seq. and the
Louisiana Administrative Code, Title 42:Part XI:Section 2401 et seq., as
presently existing, and in any subsequent amendments thereto, and for such uses
as are related thereto but for no other purpose whatsoever.
4. LAW, ORDINANCES AND REGULATIONS: Lessee hereby agrees to comply with
-------------------------------
any and all laws of the State of Louisiana and all lawful federal, state and
local ordinances and regulations pertaining to the operation of the business on
the Premises, and shall obtain all necessary licenses or permits to do business
on the Premises which may be required by any municipal or parish ordinances,
state laws or regulations, governmental authority, or otherwise, and shall pay
all fees in connection therewith as well as fees imposed by reason of inspection
of the Premises or the equipment situated therein.
5. WARRANTY OF PEACEABLE POSSESSION: Lessor covenants and agrees with
--------------------------------
Lessee that Lessor has the right to lease the Premises, that, except as
indicated in the mortgage and conveyance records of the Parish of Caddo, the
same is free and clear of any and all liens, claims and encumbrances, and that
Lessor shall defend the same against all such claims whatsoever. Lessor further
covenants and agrees that Lessee, by paying all rental payments and by observing
and fulfilling the covenants and obligations of this
Page 2
<PAGE>
Agreement, shall lawfully and peaceably, hold, occupy and enjoy the Premises
during the initial term hereof and any term thereafter, without any hindrance or
molestation by Lessor, or by any person(s) whomsoever purporting to claim a
right or interest in the Premises. Lessor does not warrant Lessee against
disturbances by any person(s) not claiming any rights or interest in the
Premises.
6. ASSUMPTION OF LIABILITY: As additional consideration by the Lessee for
-----------------------
its undertaking herein, and pursuant to the authority of LSA-R.S. 9:3221, as now
existing and as hereafter amended, Lessor fully avails itself of the liability
shifting and limiting provisions thereof, and Lessee, in conformance therewith,
hereby assumes all responsibility for the condition and use of the Premises and
for any buildings or structures now located thereon or hereafter constructed
thereon, and Lessee agrees to hold harmless, indemnify and defend Lessor from
any claims, actions or causes of action which may arise from injuries caused to
persons or property by any defect in the Premises or any building or structure
now located thereon or hereafter constructed thereon, during the term of this
Agreement, or while Lessee occupies the Premises, or which may arise after the
termination of this Agreement from the fault of the Lessee, Lessee's employees,
agents or invitees, to the full extent and in the manner prescribed by law.
7. HOLD HARMLESS: Except as provided in paragraph 8 hereof, Lessee shall
-------------
indemnify, defend and hold harmless Lessor and Lessor's agents from and against
any and all claims, liabilities, losses, damages and actions, including costs
and expenses of defending against same, resulting or alleged to result from any
breach, violation or nonperformance of any covenant or condition hereof,
excepting therefrom any such claims or expenses resulting from the failure of
Lessor to fulfill any of its obligations hereunder.
Except as provided in paragraph 8 hereof, Lessee shall indemnify, defend
and hold harmless Lessor and Lessor's agents from and against the payment of any
and all losses, damages, legal costs and charges, inclusive of attorney's fees,
paid by Lessor and lawfully and reasonably incurred or expended in or about the
prosecution or defense of any suit or other proceeding in the discharging of the
leased premises, or any part thereof, from any lien, judgment or encumbrance
created, or permitted to be created, by Lessee upon or against the Premises, or
any building or structure located thereon, or against Lessee's leasehold
interest in the Premises, and also any costs and charges, inclusive of
attorney's fees, incurred or expended on account of proceedings instituted by
Lessor to obtain possession of the Premises covered by this Agreement after the
termination of this Agreement by forfeiture or otherwise.
Lessee shall indemnify, defend and hold harmless Lessor and Lessor's agents
from and against any and all fines, suits, claims, demands, liabilities, losses,
damages and actions, including costs and expenses of defending against same,
resulting or alleged to result from Lessee's use or occupancy of the Premises
during
Page 3
<PAGE>
the term hereof and any term thereafter, excepting therefrom any such claims,
losses or expenses resulting from or caused by the negligence of Lessor or
Lessor's agents.
8. UNDERGROUND STORAGE TANKS: Lessee does not assume responsibility for
-------------------------
the condition of any underground storage tanks or other equipment, pipes,
appurtenant structures or devices used for the storage and dispensation of any
gasoline or petroleum products and Lessor shall indemnify Lessee and hold Lessee
harmless from and against all fines, suits, claims, demands, liabilities, and
actions, including costs and expenses of defending against such claims,
resulting or alleged to result from any breach, violations, or non-performance,
any federal, state, or local rules, laws, or ordinances, including but not
limited to, the State of Louisiana, Department of Environmental Quality, or any
federal authority or agency regulating the storage and dispensation of any
gasoline or petroleum products.
9. MAINTENANCE: Lessee, at its sole cost and expense, shall maintain and
-----------
keep in good repair all portions of the Premises, including without limitation
the roof, foundation and the concrete walkways and parking surface areas
thereof.
In addition, Lessee, at its sole cost and expense, shall maintain all
portions of the interior of the Premises, including without limitation,
plumbing, electrical, piping, fixtures, equipment, painting or decorating of any
kind, and shall be responsible for all glass frames that may be broken or
damaged. Lessee shall also be responsible for the repair, maintenance and
replacement of the heating and air conditioning system in said Premises. Lessee
further agrees to replace the whole or any portion of the sewerage and sanitary
fixtures should the need arise, at its sole cost and expense. Upon expiration
or termination of this Agreement, Lessee shall redeliver possession of the
Premises in as good condition as at the commencement of the term of this
Agreement, reasonable wear and tear only excepted.
Lessee shall not construct or install any signs on the Premises without the
prior written consent of Lessor. Any such signs placed on the Premises by
Lessee shall be and remain the property and responsibility of Lessee, and Lessee
shall cause to be removed from said Premises any and all signs so placed at the
termination of this Agreement so that the Premises will be in the same condition
as before said signs were placed thereon. All signs shall be approved by Lessor
prior to placement on the Premises.
Lessee shall be responsible for keeping the paved parking area of the
Premises clean and free of debris. Lessee shall also be responsible for the
painting and maintenance of any parking stripes that may be placed on said
parking surface, and for the upkeep of the grass on the Premises. Lessee shall
keep the entire Premises free for debris.
10. TAXES AND ASSESSMENTS: Lessee shall, within five (5) days after
---------------------
receipt of an invoice from Lessor, reimburse Lessor for all taxes and
assessments applicable to the Premises that are paid by Lessor,
Page 4
<PAGE>
including without limitation, any ad valorem taxes assessed against the property
underlying the Premises. In case of any default hereof on the part of Lessee in
reimbursing Lessor for taxes, assessments or other amounts herein provided to be
paid, the amount due shall bear interest at the rate of twelve percent (12%) per
annum from the date of the invoice until paid by Lessee. In no event shall such
rate of interest to be charged to Lessee be higher than the maximum rate
permitted by law.
11. ASSIGNMENT, SUBLETTING AND ALTERATION: This Agreement is personal to
-------------------------------------
the Lessee, and the Lessee may not assign, sublease or otherwise delegate rights
or obligations hereunder without first obtaining the written consent of the
Lessor.
12. UTILITIES: During the terms of this Lease, Lessee shall pay all
---------
charges accruing for water, gas, electricity, sewerage and garbage pick-up with
respect to the Premises. Upon its failure to do so, Lessor may, at its option,
pay such charges and, in that event, such charges shall be added to the rental
payable and shall be collectible as rent.
13. DEFAULT; FAILURE TO REMIT RENTAL PAYMENTS; OTHER BREACHES: In the
---------------------------------------------------------
case of default in payment of the rent in accordance with the terms hereof or
the non-performance of any of the covenants herein, Lessor may enforce the
performance of this Agreement in any mode provided by law and, in addition
thereto, Lessor may, at its option, declare all of the remaining unpaid
installments of rent immediately due and payable, or terminate this Agreement,
if the non-payment of rent or such default shall continue for a period of
fifteen (15) days after Lessor notifies Lessee of such default and of its
intention to declare all remaining installments of rent due and payable, or to
declare the Agreement forfeited, such notice to be sent by Lessor to Lessee by
certified mail as provided in paragraph 24 hereof, and thereupon (unless Lessee
shall have paid said rent and completely removed or cured said default) all of
said remaining installments of rent shall be due or, at Lessor's option, this
Agreement shall cease and come to an end as if that were the day originally
fixed herein for the right, and without further notice or demand, to re-enter
and remove all persons and Lessee's property therefrom without being deemed
guilty or liable of or for any manner of trespass, and without prejudice to any
remedies for arrears of rent or breach of covenant, and Lessor or Lessor's agent
or attorney may resume possession of the Premises and let the same for the
remainder of the term at the best rent said agent or attorney may obtain, for
the account of Lessee, who shall make good any deficiency, and Lessor shall have
a lien as security for the rent aforesaid upon all goods, wares, chattels,
instruments, fixtures, furniture, appliances, tools and other personal property
which are/may be on the Premises.
In the event of a default of any condition or obligation of this Agreement
on the part of any of the Parties hereto which results in any legal proceeding,
the non-prevailing party shall pay to the prevailing party
Page 5
<PAGE>
of the litigation all reasonable costs and expenses of the legal proceeding and
any appeal therefrom, including attorney's fees.
14. LIABILITY INSURANCE: Lessee accepts the Premises and all equipment
-------------------
and other personal property, fixtures and improvements thereon in their present
AS IS, WHERE IS CONDITION, WITH ALL FAULTS, and hereby assumes responsibility
for the condition of the Premises and equipment, and all property of every kind
which may be on said Premises during the term hereof and same shall be at the
sole risk of Lessee or those claiming under it, and Lessor shall not be liable
to Lessee or any other persons whomsoever for any injury, loss or damage to any
person or property in or upon said Premises, or upon the parking lot, sidewalks
and drives contiguous thereto. Lessee hereby covenants and agrees to assume all
liability for or on account of any injury, loss or damage above described and to
save Lessor harmless therefrom. Lessee obligates and binds itself at all times
during the term of this Agreement to carry public liability and property damage
insurance (owner's, landlord's and tenant's policy) issued by companies
authorized to do business in the state wherein the Premises are situated, with a
rating acceptable to Lessor, and with such coverages and deductibles as may be
acceptable to Lessor, for the protection of Lessor and Lessee, all at Lessee's
sole cost and expense. Lessor shall be named as an additional insured and loss
payee as applicable on all such policies and shall be furnished with copies of
such policies and a certificate certifying that said policies are in full force
and effect at all times during the term of this Agreement.
15. LIENS ON PREMISES: Lessee shall not mortgage, pledge or otherwise
-----------------
encumber the Premises, nor permit the Premises to become encumbered by a
mechanic's lien or materialman's lien, and if such mechanic's lien or
materialman's lien be filed against the Premises, Lessee shall discharge same
within ten (10) days after the date of such filing. Notice is hereby given that
Lessor shall not be liable for any labor or material furnished Lessee upon
credit or furnished to anyone else to be employed in or on the Premises and that
no mechanic's or materialman's lien shall attach to or affect the interest of
Lessor in the Premises.
16. FUEL FACILITY EMPLOYEES: As further consideration from the Lessor to
-----------------------
the Lessee, Lessor agrees to lease all employees of the fuel facility to Lessee.
17. WORKER'S COMPENSATION INSURANCE: In consideration of the lease of the
-------------------------------
employees as provided in paragraph 16 hereof, Lessee agrees to provide, at its
sole cost and expense, worker's compensation insurance on each and every
employee of the fuel facility located on the Premises of the qualified truck
stop facility and employed by Lessee during the full term of this Agreement, and
during any extension(s) hereof. Throughout the term of this lease, Lessee shall
provide Lessor with a certificate of insurance verifying worker's compensation
coverage as required hereinabove.
Page 6
<PAGE>
18. CANCELLATION: In the event that Lessee should lose its right to place
------------
video draw poker devices on any portion of the qualified truck stop facility
operated thereby, or in the event that the original video draw poker truck stop
license application of Lessee shall be finally denied, the Lessee may, at
Lessee's sole option and discretion, cancel this Agreement without any further
liability other than its obligations hereunder to leave all improvements and
alterations made to the Premises.
19. INSPECTION OF PREMISES: Lessee shall, at any time during the term of
----------------------
the Agreement, permit inspection by Lessor or prospective tenants of the
Premises. Lessee shall permit signs or other notices, indicating that the
Premises are to be let or are for sale, to be posted or remain on the Premises.
20. FIRE AND EXTENDED COVERAGE INSURANCE; WAIVER OF SUBROGATION: Lessee
-----------------------------------------------------------
shall keep the Premises insured against fire and explosion with extended
coverage for at least 80% of its full replacement value, such coverage to be for
the benefit of Lessor and any mortgagee of the Premises, and Lessee shall insure
all property owned by it against fire and explosion which is located on or in
the Premises with extended coverage for such amount and with such deductible
amounts as may be required by Lessor, issued by companies authorized to do
business in the state wherein the Premises are situated, with a rating
acceptable to Lessor, all at Lessee's sole cost and expense. Lessor shall be
named as an additional insured and loss payee as applicable on all such policies
and shall be furnished with copies of such policies and a certificate certifying
that said policies are in full force and effect at all times during the term of
this Agreement.
Neither Lessor nor Lessee shall be under obligation to pay any amount to
the other, their heirs, successors or assigns, or to the insurance company
issuing the policy of insurance, even though the loss or damage is caused by the
negligence of the other, their agents, or employees, if such loss or damage
would be the kind covered by a fire, explosion, and extended coverage insurance
policy. Lessor and Lessee each agree to notify their present or future insurer
or insurers that they have waived subrogation against the other during the
entire term of this Agreement and to furnish satisfactory evidence showing that
notice of such waiver has been given. Lessor and Lessee hereby agree to
indemnify and hold the other harmless from any loss sustained because of the
other's failure to carry out the obligations provided in this Agreement relating
to the waiver of subrogation.
21. MODIFICATIONS AND IMPROVEMENTS; PRIOR APPROVAL: Lessee does hereby
----------------------------------------------
agree that Lessee shall not make any additions, alterations or improvements to
the Premises without the prior written consent of the Lessor. If the Lessor
permits, in writing, additions, alterations or improvements by the Lessee to the
Premises, Lessee agrees that it shall: 1) make such additions, alterations or
improvements in a workmanlike manner and in all respects in accordance with
applicable law; and 2) provide protection against
Page 7
<PAGE>
liens against the Premises by providing a lien waiver for any and all such
construction costs necessary for the completion of the additions, alterations or
improvements.
All additions, alterations or improvements made by the Lessee with or
without the consent of the Lessor, no matter how attached to the Premises
(except movable trade fixtures), shall become the property of the Lessor, and
Lessee hereby waives all rights to any compensation for such. Notwithstanding
the preceding sentence, however, Lessor and Lessee may agree in writing that
Lessee may retain possession of certain additions, alterations or improvements
made by the Lessee subsequent to the termination or expiration of this
Agreement, provided that said agreement is provided for in writing and said
document is executed by both the Lessor and the Lessee prior to the construction
of any such additions, alterations or improvements to the Premises.
Notwithstanding the aforementioned, Lessor further hereby agrees that
Lessee may take any and all affirmative action as may be necessary to remedy any
non-compliance with the aforementioned gaming laws by making additional
improvements or alterations to the Premises.
22. INTEREST AND ATTORNEY'S FEES: All past due installments of rent or
----------------------------
other payments due by Lessee to Lessor shall bear interest at the rate of twelve
percent (12%) per annum from date due until paid. In the event Lessee fails to
pay the rent in accordance with the terms of this Agreement or fails to perform
or carry out any of its obligations and covenants hereunder, and if it should
become necessary for Lessor to employ an attorney at law to enforce any of the
terms or conditions of this Agreement or the collection of said rent, then an
additional sum of twenty-five percent (25%) of said amount due shall be paid as
attorney's fees. If no money is due, then reasonable attorney's fees, which in
any event shall not be less than $1000.00, shall be paid by Lessee.
23. AUTHORITY TO TRANSACT BUSINESS: Lessee has all requisite partnership
------------------------------
or corporate power and authority, if required, to execute, deliver and perform
its obligations under this Agreement. The execution of this Agreement by Lessee
has been duly and validly authorized by all necessary partnership or corporate
action on the part of Lessee, and this Agreement is the valid and binding
obligation of Lessee, enforceable against Lessee in accordance with the terms
hereof.
24. NOTICES: All rental payments hereunder shall be made to Lessor by
-------
ordinary mail and all notices required to be given to Lessor hereunder shall be
sent by certified mail addressed to Lessor as follows: Petro Stopping Centers,
L.P., Attn: General Counsel, 6080 Surety Drive, El Paso, Texas, 79905, or such
address as Lessor may direct from time to time by written notice forwarded to
Lessee by certified mail.
All notices required to be given by Lessor to Lessee shall be sent by
certified mail addressed to Lessee as follows: Petro Truckstops, Inc., Attn:
James A. Cardwell, Jr., President, P.O. Box 29249, Shreveport,
Page 8
<PAGE>
Louisiana, 71129, or such address as Lessee may direct from time to time by
written notice forwarded to Lessor by certified mail.
25. MODIFICATIONS: No change or modification hereof shall be valid or
-------------
binding unless the same is in writing and signed by the party intended to be
bound. No waiver of any provisions of this Agreement shall be valid unless the
same is in writing and signed by the party against whom such waiver is sought to
be enforced; moreover, no valid waiver of any provisions of this Agreement at
any time shall be deemed a waiver of any other provision of this Agreement at
such time, nor shall it be deemed a valid waiver of such.
26. CLAIMS AND DEFENSES: The existence of any claims or causes of action
-------------------
against the Lessor by the Lessee shall not constitute a defense to the
enforcement of this Agreement.
27. BINDING EFFECT: This Agreement shall be binding upon and inure to the
--------------
benefit of the Parties hereto, their respective heirs, successors,
representatives, executors, purchasers, administrators and permitted assigns,
subject to the restrictions herein set forth.
28. HEADINGS: It is understood by the Parties hereto that the headings in
--------
this Agreement are for convenience only and shall not be used to interpret or
construe the provisions hereof.
29. SEVERABILITY: If any provision of this Agreement is held invalid such
------------
invalidity shall not affect other provisions and to this end, the provisions of
this Agreement are hereby declared severable.
30. CONSTRUCTION OF THIS AGREEMENT: The parties hereto have participated
------------------------------
jointly in the negotiation and drafting of this Agreement. In the event any
ambiguity or questions of intent or interpretation arise, this Agreement shall
be construed as if jointly drafted by the parties and no presumption or burden
of proof shall arise favoring any of the parties by virtue of authorship of any
of the provisions of this Agreement.
31. NON-DISCLOSURE: Both Lessor and Lessee hereby covenant and agree that
--------------
they will not, directly or indirectly, reveal, divulge, disclose or otherwise
communicate to any person or other entity whatsoever in any manner, excepting
those affiliates, officers, directors, employees, agents and representatives of
either the Lessor or the Lessee who have a reasonable need for access thereto,
any information of any kind, nature or description, relating to or concerning
the obligations, terms and conditions of this Agreement, and except as may
otherwise reasonably be required by either the Lessor or the Lessee in
negotiations for the sale of the business of either party hereto. The parties
agree, however, that notwithstanding the aforementioned non-disclosure, any
party hereto may record an extract of this Agreement in the mortgage and
conveyance records and include all information therein as required by law,
including but not limited to, the term of the Agreement, a description of the
property affected, and the restriction on the transfer of the property.
Page 9
<PAGE>
THUS DONE AND PASSED on the 12th day of November, 1998, at the City of El
Paso, State of Texas, the undersigned party having affixed its signature in the
presence of me, Notary, and the undersigned competent witnesses, after due
reading of the whole.
WITNESSES: LESSOR:
PETRO STOPPING CENTERS, L.P.
____________________________ By:_______________________________________
Larry J. Zine, Executive Vice-President
____________________________
________________________________________
Notary Public
THUS DONE AND PASSED on the 12th day of November, 1998, at the City of El
Paso, State of Texas, the undersigned party having affixed its signature in the
presence of me, Notary, and the undersigned competent witnesses, after due
reading of the whole.
WITNESSES: LESSEE:
PETRO TRUCKSTOPS, INC.
___________________________ By:_________________________________________
James A. Cardwell, Jr., President
___________________________
__________________________________________
Notary Public
Page 10
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION:
- --------------------
LESSOR leases to LESSEE, the following described property, to wit:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,835
<SECURITIES> 0
<RECEIVABLES> 10,420
<ALLOWANCES> 861
<INVENTORY> 22,261
<CURRENT-ASSETS> 45,096
<PP&E> 258,420
<DEPRECIATION> 68,633
<TOTAL-ASSETS> 256,979
<CURRENT-LIABILITIES> 54,980
<BONDS> 0<F1>
0
0
<COMMON> 0
<OTHER-SE> 16,834
<TOTAL-LIABILITY-AND-EQUITY> 256,979
<SALES> 0
<TOTAL-REVENUES> 224,490
<CGS> 183,858
<TOTAL-COSTS> 209,833
<OTHER-EXPENSES> 4,750
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 4,937
<INCOME-PRETAX> 1,048
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,048
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR ACCOMPANYING
NOTES THERETO.
</FN>
</TABLE>
