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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended April 30, 1998 Commission file number 1-14990
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GETTY PETROLEUM MARKETING INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 11-3339235
- - ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Jericho Turnpike, Jericho, New York 11753
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(Address of principal executive offices) (Zip Code)
(516) 338 - 6000
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(Registrant's telephone number, including area code)
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
--- ---
Registrant has 13,914,377 shares of Common Stock, par value $.01 per share,
outstanding as of April 30, 1998.
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<PAGE>
GETTY PETROLEUM MARKETING INC.
INDEX
Part I. FINANCIAL INFORMATION Page Number
- - ------------------------------ -----------
Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 1998 and
January 31, 1998 1
Consolidated Statements of Operations for the three months ended
April 30, 1998 and 1997 2
Consolidated Statements of Cash Flows for the three months ended
April 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6 - 7
Part II. OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 8
<PAGE>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
April 30, January 31,
- - ----------------------------------------------------------------------------------------------------
Assets: 1998 1998
- - ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $10,897 $9,798
Investments 2,009 1,705
Accounts receivable, net 10,458 11,101
Inventories 16,242 20,844
Deferred income taxes 4,677 4,325
Prepaid expenses and other current assets 4,911 2,663
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Total current assets 49,194 50,436
Property and equipment, at cost, less
accumulated depreciation and amortization 94,304 93,952
Other assets 1,909 1,941
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Total assets $145,407 $146,329
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Liabilities and Stockholders' Equity:
- - ----------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $20,701 $19,308
Accrued expenses 10,638 11,933
Gasoline taxes payable 14,651 13,039
Income taxes payable - 307
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Total current liabilities 45,990 44,587
Deferred income taxes 21,321 20,988
Other, principally deposits 20,746 20,739
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Total liabilities 88,057 86,314
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Stockholders' equity:
Preferred stock, par value $.01 per share; authorized
10,000,000 shares for issuance in series (none of which is issued) - -
Common stock, par value $.01 per share; authorized
30,000,000 shares; issued 13,914,377 at April 30, 1998
and 13,835,956 at January 31, 1998 139 138
Paid-in capital 61,546 61,234
Retained earnings (deficit) (2,131) 1,181
Unearned ESOP stock (525,850 shares at April 30, 1998 and
559,415 shares at January 31, 1998) (2,523) (2,685)
Accumulated other comprehensive earnings 319 147
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Total stockholders' equity 57,350 60,015
-------- --------
Total liabilities and stockholders' equity $145,407 $146,329
======== ========
</TABLE>
See accompanying notes.
-1-
<PAGE>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
- - --------------------------------------------------------------------------------
Three months ended April 30,
- - --------------------------------------------------------------------------------
1998 1997
- - --------------------------------------------------------------------------------
Sales and operating revenues $170,741 $225,492
Other income 170 431
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170,911 225,923
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Cost of sales and operating expenses
(excluding depreciation and amortization) 167,255 213,802
Selling, general and administrative expenses 5,198 5,300
Depreciation and amortization 3,717 3,298
Interest expense 211 222
Change of control charge - 637
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176,381 223,259
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Earnings (loss) before provision (credit)
for income taxes (5,470) 2,664
Provision (credit) for income taxes (2,158) 1,104
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Net earnings (loss) ($3,312) $1,560
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Net earnings (loss) per share:
Basic ($.25) $.12
Diluted ($.25) $.12
Weighted average shares outstanding:
Basic 13,336 12,762
Diluted 13,336 13,026
See accompanying notes.
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<PAGE>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
April 30,
--------------------------
1998 1997
---- ----
Cash flows from operating activities:
Net earnings (loss) ($3,312) $1,560
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 3,717 3,298
Deferred income taxes (151) (364)
ESOP charge 211 49
Change of control charge - 637
(Gain) loss on dispositions of equipment 4 (35)
Changes in assets and liabilities:
Accounts receivable 643 1,448
Inventories 4,602 77
Prepaid expenses and other current assets (2,250) 3,745
Other assets 22 85
Accounts payable, accrued expenses and
gasoline taxes payable 1,710 (3,300)
Income taxes payable (307) 1,428
Other, principally deposits 7 270
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Net cash provided by operating activities 4,896 8,898
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Cash flows from investing activities:
Capital expenditures (4,090) (3,177)
Proceeds from dispositions of equipment 29 37
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Net cash used in investing activities (4,061) (3,140)
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Cash flows from financing activities:
Stock options and common stock 264 66
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Net cash provided by financing activities 264 66
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Net increase in cash and equivalents 1,099 5,824
Cash and equivalents at beginning of period 9,798 7,517
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Cash and equivalents at end of period $10,897 $13,341
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Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $147 $113
Income taxes, net 1,212 40
See accompanying notes.
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<PAGE>
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the accounts of
Getty Petroleum Marketing Inc. and its wholly-owned subsidiaries (the
"Company"). The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
that are based on management's best estimates and judgments. While all available
information has been considered, actual amounts could differ from those
estimates. The consolidated financial statements are unaudited but, in the
opinion of management, reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation. These statements should be read in
conjunction with the consolidated financial statements and related notes which
appear in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1998.
2. Earnings (loss) per share:
Basic earnings (loss) per share is computed by dividing net earnings (loss)
by the weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share reflects the potential dilution from the
exercise of stock options in the amount of 264,000 shares for the quarter ended
April 30, 1997. For the quarter ended April 30, 1998, diluted earnings per share
does not reflect the potential dilution from the exercise of stock options since
such inclusion would be antidilutive.
-4-
<PAGE>
3. Stockholders' equity:
A summary of the changes in stockholders' equity for the three months ended
April 30, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated
Retained Other
Common Paid-in Earnings Comprehensive
Stock Capital (Deficit) ESOP Earnings(*) Total
----- ------- --------- ---- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 31, 1998 $138 $ 61,234 $ 1,181 $(2,685) $147 $60,015
Comprehensive loss:
Net loss (3,312) (3,312)
Net unrealized gains
on equity securities 172 172
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Total comprehensive
loss (3,140)
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ESOP stock committed
to be released 49 162 211
Issuance of
common stock 56 56
Stock options 1 207 208
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Balance,
April 30, 1998 $139 $ 61,546 $(2,131) $(2,523) $319 $57,350
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<FN>
(*) Represents net unrealized gain on equity securities. For the three months ended April 30, 1997, the
Company had no other comprehensive earnings.
</FN>
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
Sales and operating revenues for the first fiscal quarter ended April
30, 1998 were $170.7 million as compared with $225.5 million for the same
quarter last year, a decrease of 24.3%. The decrease in sales and operating
revenues was due primarily to a 19.0% decrease in sales prices and a 7.6%
decline in sales volume. Gallonage sold decreased by 19.7 million gallons to
238.5 million gallons primarily because of the previously announced termination
of a wholesale supply contract, partially offset by gasoline volume increases of
2.5% per retail outlet.
Gross profit before depreciation and amortization was $3.5 million for
the three months ended April 30, 1998 compared to $11.7 million for the three
months ended April 30, 1997. The $8.2 million decrease was principally due to a
decrease in retail and wholesale product margins of approximately 2.9 cents and
1.0 cent per gallon, respectively, which resulted in a reduction of $5.4
million of gross profit. In addition, gross profit was impacted by $1.0 million
of higher maintenance and environmental expenses during the current period and a
LIFO credit of $2.3 million which was recorded during the prior year first
quarter.
The Company's financial results have depended largely on retail
marketing margins and rental income from its dealers. The petroleum marketing
industry has been and continues to be volatile and highly competitive. The cost
of petroleum products purchased as well as the price of petroleum products sold
have fluctuated widely. As a result of the historic volatility of product
margins and the fact that they are affected by numerous diverse factors, it is
impossible to predict future margin levels.
Other income was $.2 million for the three months ended April 30, 1998
as compared with $.4 million for the quarter ended April 30, 1997. The decrease
was primarily due to a $.2 million charge related to the Company's Mt. Vernon
terminal (See Item 1. Legal Proceedings in Part II of this Form 10-Q).
Selling, general and administrative expenses were $5.2 million for the
three months ended April 30, 1998 as compared with $5.3 million for the quarter
ended April 30, 1997. The decrease was primarily due to a $.4 million reduction
in stock option expense, partially offset by a charge for the Company's ESOP
which was created in connection with the spin-off of the Company by Getty Realty
Corp. on March 21, 1997.
Depreciation and amortization was $3.7 million for the three month
period ended April 30, 1998 as compared with $3.3 million for the three months
ended April 30, 1997. The increase was due to higher depreciation as a result of
capital expenditures.
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<PAGE>
The Company recorded a charge of $.6 million during the quarter ended
April 30, 1997 related to change of control agreements in connection with the
spin-off of the Company from Getty Realty Corp.
Liquidity and Capital Resources
- - -------------------------------
As of April 30, 1998, the Company's working capital amounted to $3.2
million as compared with $5.8 million as of January 31, 1998. The decrease in
working capital was primarily due to the net loss incurred during the first
quarter.
The Company's principal source of liquidity is its cash flows from
operations, which amounted to $4.9 million during the three months ended April
30, 1998. Management believes that cash requirements for operations, including
payments required to be made to Getty Realty Corp. under a master lease and
capital expenditures, can be met by cash flows from operations, cash and
equivalents and credit lines. The Company has uncommitted lines of credit with
three banks in the aggregate amount of $60 million, which may be utilized for
working capital borrowings and letters of credit. Borrowings under such lines of
credit are unsecured and principally bear interest at the applicable bank's
prime rate or, at the Company's option, 1.1% above LIBOR. Such lines of credit
are subject to renewal at the discretion of the banks.
The Company's capital expenditures for the three months ended April 30,
1998 amounted to $4.1 million. The Company's capital expenditures include
expenditures to improve the image of the service stations, to improve the
terminal facilities and for routine replacement of service station equipment.
-7-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 22, 1998, the Company discharged two employees based at
its Mt. Vernon, New York terminal for violating Company policy
in the performance of their duties. The employees' actions
resulted in certain irregularities with respect to
environmental testing and reporting requirements at the
terminal, which were discovered as a consequence of an
inspection by the New York Department of Environmental
Conservation immediately followed by an internal investigation
conducted by the Company's outside counsel. The matter is
currently under investigation by the Westchester County, New
York District Attorney's Office, with which the Company is
fully cooperating.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
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27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
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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.
GETTY PETROLEUM MARKETING INC.
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(Registrant)
Dated: June 11, 1998 BY: /s/ Michael K. Hantman
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(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Principal Financial and
Accounting Officer)
Dated: June 11, 1998 BY: /s/ Leo Liebowitz
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(Signature)
LEO LIEBOWITZ
Chairman and Chief
Executive Officer
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GETTY PETROLEUM MARKETING INC. AND
SUBSIDIARIES AS OF APRIL 30, 1998 AND FOR THE THREE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 10,897
<SECURITIES> 2,009
<RECEIVABLES> 11,761
<ALLOWANCES> 1,303
<INVENTORY> 16,242
<CURRENT-ASSETS> 49,194
<PP&E> 193,358
<DEPRECIATION> 99,054
<TOTAL-ASSETS> 145,407
<CURRENT-LIABILITIES> 45,990
<BONDS> 0
<COMMON> 139
0
0
<OTHER-SE> 57,211
<TOTAL-LIABILITY-AND-EQUITY> 145,407
<SALES> 170,741
<TOTAL-REVENUES> 170,911
<CGS> 167,255
<TOTAL-COSTS> 170,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 109
<INTEREST-EXPENSE> 211
<INCOME-PRETAX> (5,470)
<INCOME-TAX> (2,158)
<INCOME-CONTINUING> (3,312)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,312)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
