<PAGE>
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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 June 30, 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
<TABLE>
<CAPTION>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, June 30,
1999 2000
-------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,394 $ 10,811
Trade accounts receivable, net 7,439 9,250
Inventories, net 21,989 24,439
Other current assets 3,120 3,147
Due from affiliates 2,075 1,810
-------------- --------------
Total current assets 48,017 49,457
Property and equipment, net 184,375 198,115
Deferred debt issuance costs, net 9,972 9,367
Other assets 11,597 12,017
-------------- --------------
Total assets $ 253,961 $ 268,956
============== ==============
Liabilities and Partners' Capital
Current liabilities:
Current portion of long-term debt $ 1,001 $ 1,519
Trade accounts payable 10,767 3,845
Accrued expenses and other liabilities 20,276 23,104
Due to affiliates 25,537 33,391
-------------- --------------
Total current liabilities 57,581 61,859
Long-term debt, excluding current portion 180,297 187,280
-------------- --------------
Total liabilities 237,878 249,139
-------------- --------------
Commitments and contingencies
Partners' capital (deficit):
General partners' (254) (242)
Limited partners' 16,337 20,059
-------------- --------------
Total partners' capital 16,083 19,817
-------------- --------------
Total liabilities and partners' capital $ 253,961 $ 268,956
============== ==============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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,
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues:
Fuel (including motor fuel taxes) $118,017 $175,868 $224,898 $350,260
Non-fuel 50,423 55,272 97,115 105,370
-------- -------- -------- --------
Total net revenues 168,440 231,140 322,013 455,630
Costs and expenses:
Cost of sales -
Fuel (including motor fuel taxes) 108,292 164,005 205,915 327,628
Non-fuel 20,482 23,080 39,200 43,315
Operating expenses 24,382 27,573 47,787 53,548
General and administrative 4,953 4,231 9,760 9,050
Depreciation and amortization 3,403 3,949 6,670 7,764
(Gain) loss on disposition of fixed assets (865) 10 (849) (59)
-------- -------- -------- --------
Total costs and expenses 160,647 222,848 308,483 441,246
-------- -------- -------- --------
Operating income 7,793 8,292 13,530 14,384
Recapitalization costs (623) - (623) -
Equity in income (loss) of affiliate (230) 18 (230) (89)
Interest income 101 58 199 181
Interest expense, net (5,166) (4,907) (10,226) (9,967)
-------- -------- -------- --------
Net income $ 1,875 $ 3,461 $ 2,650 $ 4,509
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
2
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PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2000
(in thousands)
<TABLE>
<CAPTION>
General
Partners' Limited Total
Capital Partners' Partners'
(Deficit) Capital Capital
--------------- --------------- ---------------
<S> <C> <C> <C>
Balances, December 31, 1999 $ (254) $ 16,337 $ 16,083
Partners' minimum tax distribution - (775) (775)
Net income 12 4,497 4,509
--------------- --------------- ---------------
Balances, June 30, 2000 $ (242) $ 20,059 $ 19,817
=============== =============== ===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
PETRO STOPPING CENTERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
Six Months Ended
June 30,
<S> <C> <C>
1999 2000
Cash flows from operating activities: ---------------- ----------------
Net income $ 2,650 $ 4,509
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,670 7,764
Deferred debt issuance cost amortization 837 681
Bad debt expense 122 155
Equity in loss of affiliate 230 89
Gain on disposition of assets (849) (59)
Increase (decrease) from changes in:
Trade accounts receivable (4,289) (1,966)
Inventories (1,470) (2,450)
Other current assets 485 (27)
Due from affiliates (603) 265
Due to affiliates 7,611 7,854
Trade accounts payable 4,080 (6,922)
Accrued expenses and other liabilities 4,212 2,791
---------------- ----------------
Net cash provided by operating activities 19,686 12,684
---------------- ----------------
Cash flows from investing activities:
Proceeds from disposition of assets 1,394 126
Purchases of property and equipment (9,647) (21,554)
Increase in other assets, net (2,201) (489)
---------------- ----------------
Net cash used in investing activities (10,454) (21,917)
---------------- ----------------
Cash flows from financing activities:
Proceeds from bank debt 1,400 7,700
Repayments of long-term debt and capital lease (2,479) (245)
Partners' minimum tax distributions (1,935) (775)
Payment of debt issuance costs - (30)
---------------- ----------------
Net cash provided by (used in) financing activities (3,014) 6,650
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 6,218 (2,583)
Cash and cash equivalents, beginning of period 13,183 13,394
---------------- ----------------
Cash and cash equivalents, end of period $ 19,401 $ 10,811
================ ================
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Supplemental cash flow information -
Interest paid during the period, net of capitalized interest
of $21 and $589 in 1999 and 2000 $ 9,255 $ 9,290
Non-cash activities -
Preferred return on mandatorily redeemable preferred
partnership interests 1,033 -
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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. 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 June 30, 2000, the results of operations for the
three and six months ended June 30, 1999 and June 30, 2000 and cash flows for
the six months ended June 30, 1999 and June 30, 2000. The results of operations
for the three and six months ended June 30, 2000 are not necessarily indicative
of the results to be expected for the full calendar year.
The Company's fuel revenues and cost of sales include a significant
amount of federal and state motor fuel taxes. Such taxes were $50.4 million and
$58.7 million for the three month periods ended June 30, 1999 and June 30, 2000,
respectively, and $102.2 million and $116.3 million for the six month periods
ended June 30, 1999 and June 30, 2000, respectively.
(2) Significant Accounting Policies
Reclassifications
Certain prior period amounts have been reclassified to conform to
current year presentation.
(3) 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 June 30, 1999 and June 30,
2000, the revenues generated from the Company's truck stop operations were
$167.0 million and $229.7 million, respectively, and $319.6 million and $452.9
million for the six months ended June 30, 1999 and June 30, 2000, respectively.
As of June 30, 2000, the Company is also a franchisor to 23 Petro
Stopping Center locations. 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. Revenues generated from the Company's franchise operations were $1.4
million during the three months ended June 30, 1999 and June 30, 2000 and $2.4
million and $2.7 million for the six months ended June 30, 1999 and June 30,
2000, respectively. These revenues are included in non-fuel 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
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PETRO STOPPING CENTERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(4) 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. In June 2000, Statement of Financial Accounting
Standard No. 138, "An Amendment of SFAS No. 133," was issued to address a
limited number of issues causing implementation difficulties for numerous
entities that applied SFAS No. 133. The Company currently expects to adopt SFAS
No. 133, as amended, as of January 1, 2001. Management does not believe that the
adoption of this statement will have significant impact on the Company's
financial statements or results of operations.
(5) 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.
Effective March 2000, the Company entered into a three year agreement
with C&R Distributing, Inc., a Texas corporation ("C&R"), which is 100% owned by
J.A. Cardwell, Sr. and his affiliates. Under the Agreement, C&R will provide
fuel delivery services to certain Petro Stopping Centers as designated by the
Company. The Agreement provides for one year renewal terms upon expiration of
the first three years and may be terminated by either party on 90 days prior
notice. Pricing under the Agreement is capped at the average of the two lowest
common carrier bids obtained by the Company, and to the extent C&R is able to
deliver the services for less than the capped rate, the Company will receive a
rebate equal to 50.0% of the difference between the capped rate and actual
costs.
In May 2000, the Company and Volvo entered into an agreement
authorizing the Company, on a non-exclusive basis, to operate as a Volvo parts
and service center providing parts for and service to trucks under the VOLVO
nameplate. Under the terms of the Agreement, the Company is authorized to
provide a limited range of repair and maintenance services and light warranty
service work. The Agreement also provides a pricing schedule for Volvo parts
ordered by the Company.
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 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, 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, "--Network Development," "--Results
of Operations," and "--Liquidity and Capital Resources." The Company, in the
preparation of its financial statements, also makes various estimates and
assumptions that are forward-looking statements.
Overview
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. During the three months
ended June 30, 1999 and June 30, 2000, the revenues generated from our truck
stop operations were $167.0 million and $229.7 million, respectively, and $319.6
million and $452.9 million for the six months ended June 30, 1999 and June 30,
2000, respectively.
As of June 30, 2000, we are also a franchisor to 23 Petro Stopping
Center locations. 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. Revenues generated
from our franchise operations were $1.4 million during the three months ended
June 30, 1999 and June 30, 2000 and $2.4 million and $2.7 million for the six
months ended June 30, 1999 and June 30, 2000, 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:
<TABLE>
<CAPTION>
SUMMARY OF SOURCES OF REVENUES
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------- ----------------------------------------
1999 2000 1999 2000
----------------- ----------------- ----------------- -----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel $118,017 70.1% $175,868 76.1% $224,898 69.8% $350,260 76.9%
Non-Fuel 36,573 21.7% 40,037 17.3% 70,129 21.8% 75,896 16.7%
Restaurant 13,850 8.2% 15,235 6.6% 26,986 8.4% 29,474 6.4%
----------------- ----------------- ----------------- -----------------
Total Net Revenue $168,440 100.0% $231,140 100.0% $322,013 100.0% $455,630 100.0%
================= ================= ================= =================
</TABLE>
7
<PAGE>
Our fuel revenues and cost of sales include a significant amount of
federal and state motor fuel taxes. Such taxes were $50.4 million and $58.7
million for the three month periods ended June 30, 1999 and June 30, 2000,
respectively, and $102.2 million and $116.3 million for the six month periods
ended June 30, 1999 and June 30, 2000, respectively.
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.
Network Development
The following table sets forth the development of our Stopping Center
network since 1996:
<TABLE>
<CAPTION>
As of June 30,
--------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Company-operated 26 26 28 29 32
Franchised 15 17 21 22 23
---- ---- ---- ---- ----
Total Stopping Centers 41 43 49 51 55
==== ==== ==== ==== ====
</TABLE>
The following table sets forth information on Stopping Centers opened
from June 30, 1996 through June 30, 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
Mebane, North Carolina April 2000
Glendale, Kentucky June 2000
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
Results of Operations
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Overview. Our net revenues of $455.6 million increased 41.5% in the
first six months of 2000 from $322.0 million in the first six months of 1999. On
a "comparable unit" basis, revenues increased by 38.3% to $432.2 million from
$312.5 million in the prior year. The increases were primarily due to an
increase in fuel revenues from the prior year 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. Operating expenses increased
12.1% to $53.5 million from $47.8 million in the prior year due mainly to
employee-related costs due in part to the opening of three new truckstop
locations, marketing expenses, and new site pre-opening expenses. General and
administrative expenses decreased 7.3% to $9.1 million from $9.8 million in the
prior year primarily due to the discontinuance of management fees formerly paid
to certain Partners prior to the consummation of our Recapitalization in July
1999. A Petro Stopping Center is considered a "comparable unit" as to a
particular period in the current year if it was open during the same period of
the prior year.
Fuel. Revenues increased 55.7% to $350.3 million in the first six
months of 2000 compared to $224.9 million in the first six months of 1999. Fuel
revenues increased primarily due to a 38.3% increase in our average retail-
selling price per fuel gallon stemming from higher fuel costs compared to the
prior year. The increase in fuel revenues was also due to a 12.6% increase in
fuel volumes. We believe the increased volume is due primarily to the success of
our
8
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various marketing programs, our continued commitment to customer service, as
well as the addition of our new sites. Gross profits increased by 19.2% to $22.6
million for the six months ended June 30, 2000, compared to $19.0 million for
the prior year. On a "comparable unit" basis, fuel revenues increased 53.1%
primarily due to a 39.1% increase in our average retail-selling price per fuel
gallon compared to the prior year. The increase in fuel revenues was also due to
a 10.1% increase in fuel volumes. Gross profits increased by 20.3% or $3.7
million for the six months ended June 30, 2000, compared to the prior year.
Non-Fuel. Revenues increased 8.2% to $75.9 million in the first six
months of 2000 from $70.1 million in the first six months of 1999. The increase
in non-fuel revenues is primarily due to an 8.0% or $4.0 million increase in
sales at our retail stores and lube facilities. Gross profits increased 6.7% to
$41.1 million in the first six months of 2000 from $38.5 million in the first
six 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 5.2% or $3.7 million compared to the prior year and gross
profits increased 4.1% or $1.6 million compared to the prior year.
Restaurant. Revenues increased 9.2% to $29.5 million in the first six
months of 2000 compared to $27.0 million in the first six 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 4.1%. Gross profits in the restaurants improved by
8.0% or $1.5 million. On a "comparable unit" basis, restaurant revenues
increased 4.9% or $1.3 million compared to the prior year, while gross profits
increased by 3.9% or $764,000.
Costs and Expenses. Total costs and expenses increased 43.0% to $441.2
million in the first six months of 2000 compared to $308.5 million in the first
six months of 1999. On a "comparable unit" basis, total costs and expenses
increased 39.0% or $116.8 million compared to the prior year. Cost of sales
increased 51.3% or $125.8 million from the prior year due mainly to
significantly higher fuel costs in the current year. Operating expenses
increased 12.1% or $5.8 million to $53.5 million for the first six months of
2000 from the prior year. The increase is primarily due to a $3.2 million
increase in employee-related costs due mainly to the opening of three new
truckstop locations, a $1.8 million increase in marketing expenses, and an
increase in new site pre-opening expenses of $1.6 million, all of which were
partially offset by a $509,000 decrease in system project costs. On a
"comparable unit" basis, operating expenses increased 5.4% or $2.6 million to
$49.9 million compared to the first six months of 1999. General and
administrative expenses decreased 7.3% or $710,000 to $9.1 million compared to
the prior year primarily due to the discontinuance of management fees formerly
paid to certain Partners prior to the consummation of our Recapitalization in
July 1999.
Equity in Income (Loss) of Affiliate. We recognized an $89,000 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, decreased $259,000 or
2.6% in the first six months of 2000 compared to the first six months in 1999
primarily due to increased capitalized interest of $568,000 related to new site
construction, partially offset by increased interest expense of $309,000 due to
increased borrowings in the first six months of 2000 compared to the prior year.
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Overview. Our net revenues of $231.1 million increased 37.2% in the
second quarter of 2000 from $168.4 million in the second quarter of 1999. On a
"comparable unit" basis, revenues increased by 32.9% to $217.6 million from
$163.6 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 13.1% to $27.6 million from $24.4 million in the prior year quarter
due mainly to employee-related costs due in part to the opening of three new
truckstop locations and new site pre-opening expenses. General and
administrative expenses decreased 14.6% to $4.2 million from $4.9 million in the
prior year quarter primarily due to the discontinuance of management fees
formerly paid to certain Partners prior to the consummation of our
Recapitalization in July 1999. A Petro Stopping Center is considered a
"comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year.
Fuel. Revenues increased 49.0% to $175.9 million in the second quarter
of 2000 compared to $118.0 million in the second quarter of 1999. Fuel revenues
increased primarily due to a 30.2% increase in our average retail-selling
9
<PAGE>
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 14.4% increase in fuel
volumes. We believe the increased volume is due primarily to the success of our
various marketing programs, our continued commitment to customer service, as
well as the addition of our new sites. Gross profits increased by 22.0% to $11.9
million for the three months ended June 30, 2000, compared to $9.7 million for
the prior year quarter. On a "comparable unit" basis, fuel revenues increased
45.3% primarily due to a 30.4% increase in our average retail-selling price per
fuel gallon compared to the prior year quarter. The increase in fuel revenues
was also due to an 11.4% increase in fuel volumes. Gross profits increased by
22.4% or $2.1 million for the three months ended June 30, 2000, compared to the
prior year quarter.
Non-Fuel. Revenues increased 9.5% to $40.0 million in the second
quarter of 2000 from $36.6 million in the second quarter of 1999. The increase
in non-fuel revenues is primarily due to a 9.4% or $2.5 million increase in
sales at our retail stores and lube facilities. Gross profits increased 7.0% to
$21.3 million in the three months ended June 30, 2000 from $20.0 million in the
prior year quarter. 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 5.5% or $2.0 million compared to the prior year quarter and
gross profits increased 3.4% or $672,000 compared to the prior year quarter.
Restaurant. Revenues increased 10.0% to $15.2 million in the second
quarter of 2000 compared to $13.9 million in the second quarter 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 4.7%. Gross profits in the restaurants improved by
8.6% or $855,000. On a "comparable unit" basis, restaurant revenues increased
4.3% or $598,000 compared to the prior year quarter, while gross profits
increased by 3.2% or $316,000.
Costs and Expenses. Total costs and expenses increased 38.7% to $222.8
million in the second quarter of 2000 compared to $160.6 million in the second
quarter of 1999. On a "comparable unit" basis, total costs and expenses
increased 33.4% or $52.1 million compared to the prior year quarter. Cost of
sales increased 45.3% or $58.3 million from the prior year quarter due mainly to
significantly higher fuel costs in the current year. Operating expenses
increased 13.1% or $3.2 million to $27.6 million for the second quarter of 2000
compared to the prior year quarter. The increase is primarily due to a $1.8
million increase in employee-related costs due mainly to the opening of three
new truckstop locations and a $1.4 million increase in new site pre-opening
expenses. On a "comparable unit" basis, operating expenses increased 3.7% or
$887,000 to $25.0 million compared to 1999. General and administrative expenses
decreased 14.6% or $722,000 compared with the prior year quarter primarily due
to the discontinuance of management fees formerly paid to certain Partners
prior to the consummation of our Recapitalization in July 1999.
Equity in Income (Loss) of Affiliate. We recognized $18,000 in income
related to our investment in the Wheeler Ridge facility in Southern California
which opened in June 1999.
Interest Expense, net. Interest expense, net, decreased 5.0% or
$259,000 in the second quarter of 2000 compared to the second quarter of 1999
primarily due to increased capitalized interest of $384,000 related to new site
construction, partially offset by increased interest expense of $125,000 due to
increased borrowings in the second quarter of 2000 compared to the prior year
quarter.
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;
. Cash flows from operating activities, which were $19.7 million
and $12.7 million for the six months ended June 30, 1999 and June
30, 2000, respectively. The large decrease for the first six
months of 2000 was 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; and
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. Cash flows from financing activities, which were ($3.0) million
and $6.7 million for the six months ended June 30, 1999 and June
30, 2000, respectively. The fluctuation was almost entirely due
to our borrowings and repayments on our credit facilities. The
increased borrowings were primarily related to construction of
new sites as part of our network expansion.
We had negative working capital of $9.6 million and $12.4 million at
December 31, 1999 and June 30, 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 over a longer period of time.
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 June 30, 2000, we
had standby letters of credit issued for approximately $2.7 million resulting in
total borrowing availability of approximately $82.3 million under our revolving
credit facility. Additionally, as of June 30, 2000, there was approximately $7.7
million in borrowings outstanding on the revolving credit facility resulting in
remaining borrowing availability of $74.6 million. Principal payments on the
term loan are due quarterly, beginning September 30, 2000. The first sixteen
quarterly payments due are $250,000 each.
Capital expenditures totaled $21.6 million for the six months ended
June 30, 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 $27.0 million during the
remainder of 2000 on capital expenditures. We believe approximately $20.0
million will be spent on new sites and $ 7.0 million will be spent on regular
capital maintenance and volume building projects during the remainder of the
year 2000. These capital outlays will be funded through borrowings under our
senior credit facility and internally generated cash.
We are partially 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 six months ended June 30, 2000, we paid $3.0 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 six months
ended June 30, 2000, aggregated provisions amounted to $4.3 million. At June 30,
2000, the aggregated accrual amounted to approximately $5.6 million, which we
believe is adequate to cover both reported and incurred but not reported claims.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk due to changes in commodity prices and
interest rates. For a complete discussion of our market risks and our market
risk sensitive assets and liabilities, please refer to Item 7A, "Quantitative
and Qualitative Disclosures about Market Risk," included in our 1999 Form 10-K.
At June 30, 2000, we were party to an interest rate swap agreement
with an aggregate principle amount of $20.0 million. Under the agreement, we pay
a fixed rate of 6.395% in exchange for a floating rate based on LIBOR on the
aggregate principal amount as determined in three-month intervals. The
transaction effectively changes a portion of our interest rate exposure from a
floating rate to a fixed rate basis. The effect of the swap was to increase the
rate we were required to pay by .25%, which resulted in additional interest
expense of approximately $26,000.
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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 14 of this Quarterly Report.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K on May 1, 2000 reporting on
Changes in Registrant's Certifying Accountant.
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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: August 11, 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.
10.19* Fuel Carrier Agreement, dated March 1, 2000 between Petro
Stopping Centers, L.P. and C&R Distributing, Inc.
10.20* Petro Parts and Service Agreement, dated May 3, 2000 between
Petro Stopping Centers, L.P. and Volvo Trucks North America, Inc.
27* Financial Data Schedule
_________
(aa) Incorporated by reference. Filed with the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
(bb) Incorporated by reference. Filed with the Company's Current Report on Form
8-K, filed on August 6, 1999.
* Filed herewith.
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