Flying J

[tdelorme]

"Flying J, Oil Refiner, Transporter, Files for Bankruptcy

By Steven Church and Dawn McCarty
Dec. 22 (Bloomberg) -- Flying J Inc., an oil refiner, transporter and travel-center owner, filed for bankruptcy, blaming a cash crisis brought on by declines in oil prices.
The Ogden, Utah-based company listed assets of more than $1 billion and debt of $500 million to $1 billion in court documents filed today in Wilmington, Delaware.
Flying J expects to recover from “the precipitous drop in the price of oil” by reorganizing under Chapter 11 of the U.S. bankruptcy code, Chief Executive Officer J. Phillip Adams said in court papers.
The company employs about 16,000 people and is among the 20 biggest closely held companies in the U.S., with sales of more than $16.2 billion in 2007, according to court records. Founded in 1968 with four gasoline stations, it now operates 200 travel centers, two refineries and a 700-mile (1,126-kilometer) pipeline that carries gasoline and diesel from Houston to El Paso, Texas, according to court filings.
Affiliates Longhorn Partners Pipeline LP, Longhorn Pipeline Holdings and Longhorn Pipeline, Big West of California, Big West Oil, Big West Transportation, also sought protection.
The 30 largest consolidated creditors without collateral supporting their claims include Zion Bank, owed $85.8 million; CononcoPhillips, owed $69.4 million; Berry Petroleum Co., owed $26.1 million; Houston Refining LP, owed $19.1 million; and BP Oil Co., owed $17.5 million.
The case is In re Longhorn Partners Pipeline LP, 08-13384, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.
Last Updated: December 22, 2008 13:15 EST"

[merle&louise]

Ted,

I have noticed as I am sure most of us have, that Flying J truck stops have consistently had the lowest prices on diesel. I wonder if that had an effect on their bankruptcy! When your business model calls for being the low price leader, how do you replace equipment when it wears out? A business has to make a profit to stay in business.

Another reason for Flying J's demise could have been the drastic increase in the cost of fuel during the summer and fall. When each tank load of fuel that is delivered costs more than the preceding one, working capital is depleted. That situation coupled with a lack of credit makes for a dismal outlook.:eek:

Just my .02

[MangoMike]

Another article in more detail by The Salt Lake Tribune:



A sharp fall-off in oil prices that triggered a credit squeeze forced Utah truck-stop giant Flying J Inc. to file for bankruptcy Monday.
The Ogden-based company estimated its liabilities at $100 million to $500 million on assets of more than $1 billion, according to documents filed in U.S. Bankruptcy Court in Delaware.
The Chapter 11 bankruptcy was a traumatic but inescapable step for Flying J. Over its 40-year history, the company has steadfastly guarded its privacy, while building a petroleum-based empire that includes more than 250 travel centers in North America, as well as affiliated oil exploration, production, distribution and refinery businesses.
"I've had better days," said J. Phillip Adams, Flying J's president and chief executive officer. "It's really directly a result of oil prices coming down as fast as they did."
As recently as July, Flying J was, well, flying. Crude oil prices were at an unprecedented $147 a barrel. Nationally, the average price for diesel was $4.85 a gallon. Regular unleaded gasoline sold for an unheard-of $4.11 a gallon.
In hindsight, it's clear the prices couldn't hold. Unbeknownst to most economists, the economy had entered a severe recession. Since their peak in July, crude prices have tumbled more than $100 a barrel, an unprecedented rout that has dragged diesel and gasoline to lows not seen in almost five years.
"The decline in oil prices has led to material declines in [Flying
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J's] liquidity in its retail operations, as well as [its] supply and distribution operations, thereby decreasing [Flying J's] accounts receivables and the value of [its] inventory as a result of writing [its] inventory down in value," the travel services company said in a court document.
The fall-off began in September and accelerated in November. Adams said the decline of oil prices happened so quickly that Flying J didn't have time to convert assets that weren't tied to petroleum prices into cash that could fund its obligations.
The credit crisis aggravated Flying J's problems. Adams said oil was the collateral that secured loans made to the company's refining and pipeline subsidiaries. As crude fell, Flying J was forced to write down the collateral's value by $100 a barrel, putting some loans afoul of their covenants and making it impossible to tap new credit.
"In most markets, we've got great assets we would have had the ability to monetize. … In this environment, we didn't have the time to get that done," Adams said.
On Friday, a $53 million loan to the refinery subsidiary was declared in default. A day later, a $45 million loan to Flying J's pipeline unit was in default.
The company has no plans to lay off any of its 16,000 employees, Adams said. Under court protection from its creditors, Flying J's operations will produce enough cash from its operations to run all of its businesses, including the travel plazas in 41 states and six Canadian provinces and its oil refinery in North Salt Lake.
Flying J isn't sure how long it will remain in bankruptcy.
"Hopefully, it will be short, meaning months rather than years," spokesman Peter Hill said.
pbeebe@sltrib.com

[Jon Wehrenberg]

What is unknown is if the J entered into any contracts at higher prices to hedge its bets, and if they are now paying more than their competitors for fuel because they guessed the prices would either hold steady or at least not drop like they have.

I doubt if they realize much gross profit per gallon of fuel so a sudden drop leaves them with more expensive fuel in their tanks or under contract and whatever the small gross profit is gets wiped out very quickly hurting their cash flow quickly and substantially.

I am sure a penny a gallon (their normal price spread between them end the competitor across the street) is very important to them right now. What we do not know is what deals they have with fleets or if they dare raise prices a penny. To be equal in price to a competitor you need something else to bring in customers and I don't see any big difference between them a Pilot, or any other truckstop.

[Steve Cooper]

I know I rarely stop at a Flying J any more. They won't take a Visa card on the truck islands, the RV islands are normally so tight that it's a nightmare getting in and out, and if you've ever eaten in the restaurant you know how bad it is. Most truckers I talk to can't stand the place and if they lose the professional drivers, they're doomed for sure.

[Pete]

They now have their own Visa card and when you use it you get the posted cash price (which is usually 5 or 6 cents cheaper than the pump price when you use a credit card) and you can use it at the pump in the truck lane. Works great, I hope they continue that.

[dreamchasers]

They now have their own Visa card and when you use it you get the posted cash price (which is usually 5 or 6 cents cheaper than the pump price when you use a credit card) and you can use it at the pump in the truck lane. Works great, I hope they continue that.

Pete,

The Visa card sounds great. I checked the Flying J website for info, but could not locate any. Any ideas on where I can get information on this Flying J Visa card is appreciated.

Hector

[Darrell McCarley]

HECTOR......Try www.tabbank.com (Transportation Alliance Bank)

[Pete]

Hector,
I'm sorry, the R.V. Real Value is a MasterCard rather than a Visa.
The address is: Transportation Alliance Bank
4185 Harrison Blvd., Suite 200
Ogden, Ut 84403
Telephone: 800-355-3063 for assistance
I just used the card on a trip to the east coast and it works great!

[hhoppe]

Flying J: The 30 largest consolidated creditors without collateral supporting their claims include Zion Bank, owed $85.8 million; CononcoPhillips,
owed $69.4 million; Berry Petroleum Co., owed $26.1 million; Houston
Refining LP, owed $19.1 million; and BP Oil Co., owed $17.5 million.

It looks like Flying J is getting a very large Xmas
bonus!!!!!!
Wow, that is some amount of unsecured debt.
Too bad they did'nt owe it all to Cesar Chavez of Venesualia.

[ajhaig]

It sounds like their debt was collateralized by their receivables and inventory, which they had to mark down by $100.00 per barrel - like one giant margin call. I'm sure their volumes have suffered as well.

[garyde]

I wonder how other Gas and diesel stations are fairing. In todays credit climate, you got to believe just about all of them are screwed.

[merle&louise]

Gary,

I only have one C store, but I am doing great. Fortunately, I don't have any debt to service.

We make higher margins when prices at the rack are falling. The street prices always lag the rack prices; therefore, our margins are higher. Also, each load of gas we receive costs less so the margins widen.

When rack prices are rising the street prices never increase commensurately, so our margins are lower.

[aggies09]

I think Tuga's explanation is a better accounting of what I see going on with most c store and truck stop operators. I have sat through several loan committee meetings where this was evidenced.