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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the fiscal year ended JANUARY 31, 1999
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission file number 1-14990
GETTY PETROLEUM MARKETING INC.
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(Exact name of registrant as specified in its charter)
Maryland 11-3339235
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(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)
Registrant's telephone number, including area code: 516-338-6000
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Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
- ---------------------------- -------------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
----
(Title of Class)
Indicate by check mark whether 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 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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates (8,422,099
shares) of the Company was $24,213,534 as of April 22, 1999.
The registrant had outstanding 13,945,526 shares of common stock as of April 22,
1999.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Document Part of Form 10-K
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<S> <C>
Annual Report to Stockholders for the fiscal year
ended January 31, 1999 (the "Annual Report")(pages 9 through 28). II
Definitive Proxy Statement for the 1999 Annual Meeting of Stockholders (the
"Proxy Statement") which will be filed by the registrant on or prior to 120
days following the end of the registrant's fiscal year ended January 31, 1999
pursuant to Regulation 14A. III
</TABLE>
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PART 1
ITEM 1. BUSINESS
Getty Petroleum Marketing Inc. (the "Company") was incorporated in Maryland on
October 1, 1996, to be the successor to the petroleum marketing and New York
Mid-Hudson Valley heating oil businesses of Getty Petroleum Corp. (now known as
Getty Realty Corp.). On January 31, 1997, Getty Realty Corp. transferred these
businesses to the Company, and on March 21, 1997 completed the spin-off of the
Company by distributing the stock of the Company to Getty Realty Corp.
stockholders on a one-for-one basis (the "spin-off"). The Company's principal
executive offices are located at 125 Jericho Turnpike, Jericho, New York 11753.
GENERAL
The Company, together with its subsidiaries, is one of the nation's largest
independent marketers of petroleum products. The Company serves retail and
wholesale customers through a distribution and marketing network of 1,263
Getty(R) and other branded retail outlets (also referred to as "service
stations") located in 12 Northeastern and Middle-Atlantic states, certain of
which also have convenience food stores. The Company stores and distributes
petroleum products from 10 proprietary distribution terminals and bulk plants
and 17 throughput and exchange terminals. The Company purchases gasoline, fuel
oil and related petroleum products from a number of Northeast and
Middle-Atlantic suppliers. These products are delivered by cargo ship, barge,
pipeline and truck to the Company's distribution terminals and bulk plants
located in the Company's marketing region. Through its proprietary truck
transportation fleet and its distribution network, the Company sells and
distributes such products throughout its 12 state marketing region. Of the 1,263
retail outlets supplied by the Company at January 31, 1999, approximately 80%
are held by the Company under long-term leases or subleases with Getty Realty
Corp. ("Realty"). The remaining retail outlets purchase petroleum products from
the Company under contract as licensed Getty dealers or from licensed Getty
distributors who purchase Getty products from the Company. The Company also
sells, on a wholesale basis, gasoline, fuel oil, diesel fuel and kerosene from
distribution terminals and bulk plants in truckload and barge quantities and
sells fuel oil, kerosene, propane and oil burner and related services to
residential, commercial and governmental customers in New York's Mid-Hudson
Valley.
The Company and its predecessors have been in the petroleum marketing business
for over 40 years. Mr. Leo Liebowitz, Chairman, Chief Executive Officer and a
director of the Company, and Mr. Milton Safenowitz, a former director of the
Company and a former executive vice president of the Company's predecessors,
entered the petroleum marketing business in 1955 with one service station and
pursued a strategy of expanding the business principally through acquisitions.
Prior to 1985, the Company's predecessors had expanded into five states under
various brand names, principally Power Test. On February 1, 1985, the Company's
predecessors acquired the marketing and distribution assets of Getty Oil Company
in the Northeastern and Mid-Atlantic states from a subsidiary of Texaco Inc. The
Getty acquisition included the Getty trademark and trade name,
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service stations, distribution terminals and a wholesale heating oil and middle
distillate marketing network in six states.
During the period from 1985 to 1991, the Company's predecessors continued to
expand by acquiring numerous small regional distributors, service stations and
convenience food stores. In addition to adding locations through fee ownership
and leasing, the Company's predecessors continued to implement its program of
adding non-petroleum products and revenue enhancing services at retail outlets
in its marketing network, particularly convenience food stores and automotive
repair shops. Commencing in 1992, the Company's predecessors implemented a
comprehensive program of evaluating retail outlets to determine the long-term
viability of certain locations as gasoline stations. Over the following five
years, this process resulted in the divestment of non-strategic and uneconomic
retail outlets. The Company and Realty are parties to a master lease ("Master
Lease") which was executed as part of the spin-off. Under the Master Lease, the
Company leased from Realty certain retail outlets which were owned by Realty at
the time of the spin-off and subleased from Realty certain retail outlets which
were leased by Realty at the time of the spin-off. In addition, the Company has
a royalty free license to use the Getty trademark in its marketing territory.
OPERATING STRATEGY
The Company's operating strategy is to market motor fuels through service
stations operated by independent Getty-licensed dealers, many of whom sublease
service stations and convenience stores from the Company. The Company's dealers
either buy their petroleum products from the Company or from licensed Getty
distributors who purchase Getty products from the Company, or sell the Company's
petroleum products and receive a commission. The Company views each of its
retail outlets as a "profit center" and believes that independent operators,
with greater financial incentive than salaried employees, generally operate
retail outlets more economically. Moreover, the leasing and subleasing of retail
outlets to independent operators has provided the Company with a steady and
increasing source of rental income and has enabled the Company to reduce its
direct operating costs.
The Company directly operated 10 retail outlets at January 31, 1999 utilizing
salaried employees. While the Company seeks to sublease retail outlets to
independent operators, it historically has retained a small number of Company
operated outlets. These outlets permit management to keep abreast of changes in
retail marketing, assist in providing practical guidance to independent dealers
and test new products and concepts.
Certain of the outlets have convenience food stores and automotive repair
centers. The Company receives higher rentals from these properties as a result
of these additional uses.
The Company intends to expand its retail operations by leasing or purchasing new
sites and by entering into supply agreements with third parties. Under the
Master Lease and other agreements, Realty has no obligation to procure and lease
new properties to the Company.
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DISTRIBUTION
The Company's retail outlets sell gasoline, diesel fuel and other related
petroleum products (such as motor oil and lubricants) under the brand name
"Getty" or, to a limited extent, under other brand names in the states of
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia.
As of January 31, 1999, the Company had 1,263 Getty and other branded retail
outlets as follows:
(i) 10 Company operated retail outlets which are operated by salaried
employees;
(ii) 100 sublessee dealer operated retail outlets (dealers who sublease retail
outlets and purchase their petroleum products from the Company);
(iii) 840 commission sublessee dealer operated retail outlets (dealers who
sublease retail outlets and receive a commission for sale of the Company's
petroleum products);
(iv) 71 retail outlets operated by management contractors (dealers who operate
the Company's retail outlets pursuant to a management contract);
(v) 95 contract dealer retail outlets (dealers who purchase their petroleum
products from the Company or sell the Company's petroleum products on a
commission basis, but do not sublease retail outlets from the Company);
(vi) 23 distributors who purchase their petroleum products from the Company,
which distributors in turn supply the petroleum product requirements of 126
retail outlets; and
(vii) 21 inactive outlets under construction or to be disposed of.
The table below summarizes the aggregate additions and deletions to the number
of retail outlets during each of the three fiscal years ended January 31, 1999:
<TABLE>
<CAPTION>
RETAIL OUTLETS RETAIL OUTLETS
AT BEGINNING AT END
FISCAL YEAR OF PERIOD ADDITIONS DELETIONS OF PERIOD
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
1999........................................ 1,317 28 82 1,263
1998........................................ 1,560 - 243(a) 1,317
1997........................................ 1,625 7 72 1,560
</TABLE>
(a) Primarily related to non-renewal of supply contract with Uni-Marts, Inc.
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The Company generally extends three-year lease terms to its dealers, except for
new dealers, who generally receive a one-year trial lease. These leases
generally provide for fixed rentals at competitive rates. In addition, most
leases provide for an additional rental if the dealer fails to sell certain
minimum quantities of gasoline during a month. The lessee of a retail outlet is
generally responsible for payment of utilities and for all maintenance and
repairs, except for structural and marketing equipment repairs and capital
improvements, which are performed by the Company.
The Company distributes its petroleum products from 10 distribution terminals
and bulk plants, which are leased from Realty pursuant to the terms of the
Master Lease. These distribution terminals and bulk plants are located in New
York, New Jersey, Rhode Island, Pennsylvania, and Connecticut, and have an
aggregate storage capacity of approximately 57 million gallons. The terminals
located in East Providence, Rhode Island and Rensselaer, New York are deep-water
terminals, capable of handling large vessels. In addition, the Company utilizes
17 additional terminals pursuant to thruput and storage agreements with
unrelated parties. A substantial portion of the petroleum products are
transported to retail outlets by the Company's truck transportation fleet
subsidiary, whose drivers are compensated in part on an incentive-based system.
The Company also sells, through its KOSCO subsidiary, heating oil, propane (LPG)
and related services directly to approximately 30,700 retail and commercial
customers in the New York Mid-Hudson Valley. In addition, the Company is a
wholesale supplier of #2 heating oil in the Northeast, supplying heating oil to
dealers who deliver to residences and commercial accounts. Diesel fuel and
kerosene are marketed both to distributors of such products and directly by the
Company to retail outlets and consumers.
PRODUCT SUPPLY
The Company has agreements with a number of Northeast and Middle-Atlantic
suppliers for the purchase of refined petroleum products. These agreements
typically have one-year terms, and prices under the agreements are generally
based on formulas which are tied to the New York Harbor price for the petroleum
product being purchased. The Company has no crude oil reserves or refining
capacity.
Historically, petroleum prices have been subject to extreme volatility and there
have been periodic shortages followed by periods of oversupply. We cannot assure
you that petroleum prices will not fluctuate greatly or that petroleum products
will continue to be available from multiple sources or available in times of
shortage. Furthermore, a large, rapid increase in petroleum prices could
adversely affect the Company's margins and/or profitability if the Company
cannot increase sales prices or automobile consumption of gasoline were to
significantly decline as a result of these price increases. Management believes,
however, that based upon its experience during times of shortage, the Company
will continue to have the ability to acquire petroleum products on competitive
terms due in part to the large volume of its purchases and the storage capacity
at its distribution terminals.
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MARKETING
In order to provide efficient service to retail dealers and other customers, the
Company is divided into four marketing regions. The Company's regional marketing
personnel provide significant guidance, counseling and assistance to the
Company's dealers, including advice on retail operations. The marketing
personnel also supervise the Company operated retail outlets.
The Company provides advertising and promotional support to its retail outlets.
The Company uses both radio and newspaper media, and implements promotional
programs on an ongoing basis.
The Company has a co-branded Getty MasterCard, and its retail outlets generally
accept Visa, MasterCard, Discover, Diners Club and American Express credit cards
and "NYCE" and "MAC" debit cards. In addition, the Company has a Getty fleet
fueling card and its retail outlets generally accept certain other fleet fueling
cards which have tracking programs that provide cost control data to fleet
customers.
COMPETITION
The Company believes that based on the number of locations served, it is
currently one of the largest independent marketers of petroleum products in the
United States. Petroleum marketing is highly competitive, and the Company
competes with a substantial number of integrated oil companies and other
companies who may have greater assets, financial resources and sales.
Accordingly, the Company's earnings may be adversely affected by the marketing
policies of these companies, which may have greater flexibility to withstand
price changes than the Company. The Company competes for new dealers and
distributors primarily on the basis of Getty brand acceptance, location, supply,
price and marketing support. The retail outlets in the Company's marketing
network compete primarily on the basis of Getty brand acceptance, location,
customer service, appearance of the retail outlet and price.
REGULATION
The petroleum products industry is subject to numerous federal, state and local
laws and regulations. Although compliance with those laws and regulations may
have a significant impact on results of operations or liquidity for any single
period, the Company believes that the costs related to compliance, except for
the environmental matters discussed below, have not had and are not expected to
have a material adverse effect on the competitive or financial position of the
Company.
The Company is not a refiner and, therefore, is not subject to the Petroleum
Marketing Practices Act ("PMPA"), a federal law, with respect to its Getty
branded stations. However, pursuant to the Company's agreements with certain of
its Getty dealers and distributors, the Company has voluntarily extended to them
coverage under PMPA. Under PMPA, the Company complies with certain notice
requirements (generally 90 days) and extends nondiscriminatory contracts to
certain
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of its Getty licensed dealers and distributors, whose franchises cannot be
terminated or not renewed unless certain PMPA imposed prerequisites are met as
provided in the Company's agreements. Although a licensed dealer or distributor
who is covered by PMPA is not required to renew his or her franchise, because
the Company has agreed to comply with PMPA with respect to such dealers or
distributors, the Company is required to renew the franchises of dealers and
distributors who elect to renew. However, franchisees may be terminated or not
renewed for violating certain provisions of the Company's agreements as
permitted under PMPA. The PMPA permitted grounds for termination or non-renewal
include, among other things, non-payment of rent, misuse of trademark,
bankruptcy, criminal misconduct, condemnation and expiration of an underlying
lease. Also, the Company may elect not to renew a franchisee upon a
determination made in good faith that the franchise relationship is uneconomical
to the Company. In such latter instance, the Company must, in accordance with
PMPA, offer the franchisee the right to purchase the Company's leasehold
interest in the property at a bona fide price. Under the terms of the Master
Lease with Realty, the Company would be required to offer to assign its
leasehold interest in the property (including all renewal options) to the
franchisee who is covered by PMPA.
In addition, the Company's operations are governed by numerous federal, state
and local environmental laws and regulations. Among these laws are (i)
requirements to dispense reformulated gasoline in accordance with the Clean Air
Act, (ii) restrictions imposed on the amount of hydrocarbon vapors which may
enter the air at the Company's terminals and service stations, (iii) OSHA and
other laws regulating terminal employee exposure to benzene and other hazardous
materials, (iv) requirements to report to governmental authorities discharges of
petroleum products into the environment and, under certain circumstances, to
remediate the soil and/or groundwater contamination pursuant to governmental
order and directive, (v) requirements to remove and replace underground storage
tanks which have exceeded governmental-mandated age limitations and (vi) the
requirement to provide a certificate of financial responsibility with respect to
claims relating to underground storage tank failures.
Environmental expenses have been attributable to remediation, monitoring, soil
disposal and governmental agency reporting incurred in connection with
contaminated sites and the replacement or upgrading of underground storage tanks
(together with related piping, underground pumps, wiring and monitoring devices,
the "USTs") to meet federal, state and local environmental standards, as well as
routine monitoring and tank testing.
Realty has agreed to pay all costs relating to, and to indemnify the Company
for, all scheduled known pre-distribution environmental liabilities and
obligations, all scheduled future upgrades necessary to cause USTs to conform to
the 1998 federal standards (the "1998 Standards"), and all environmental
liabilities and obligations arising out of discharges with respect to properties
containing USTs that have not been upgraded to meet the 1998 Standards that are
discovered prior to the date these USTs are upgraded to meet the 1998 Standards
(collectively, the "Realty Environmental Liabilities"). The Company has not
reflected a liability for the Realty Environmental Liabilities in its
consolidated balance sheet since Realty remains the primary obligor for such
liabilities. In the unlikely event that Realty fails to remediate a contaminated
property and
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the Company is held jointly and severally responsible for the remediation costs,
Realty is obligated to indemnify the Company, and any remediation costs paid by
the Company will be offset against the Company's rental obligations to Realty
under the Master Lease. Because of such rental offset, it is remote that the
Company would incur any incremental costs in connection with any such
remediation.
The Company will be responsible for, and will indemnify Realty with respect to,
all environmental obligations and liabilities other than the Realty
Environmental Liabilities. As of January 31, 1999 and 1998, the Company had
accrued $1,415,000 and $442,000, respectively, as management's best estimate for
environmental remediation costs. In view of the uncertainties associated with
environmental expenditures, however, the Company believes it is possible that
these expenditures could be substantially higher. Any additional amounts will be
reflected in the Company's financial statements as they become known. Although
future environmental expenditures may have a significant impact on results of
operations for any single fiscal year or interim period, the Company currently
believes that these costs will not have a material adverse effect on the
Company's financial position.
The Company believes that it is in substantial compliance with federal, state
and local provisions enacted or adopted pertaining to environmental matters.
Although the Company is unable to predict what legislation or regulations may be
adopted in the future with respect to environmental protection and waste
disposal, existing legislation and regulations have had no material adverse
effect on its competitive position.
PERSONNEL
As of January 31, 1999, the Company had 622 employees, of which 218 employees,
consisting of truck drivers and service technicians, are represented by
Amalgamated Local Union 355. The Company considers its relationships with its
employees and the union to be satisfactory.
SPECIAL FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. When we use the words "believes", "expects",
"plans", "estimates" and similar expressions, we intend to identify
forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
these forward-looking statements. These factors include, but are not limited to:
volatility of petroleum marketing margins; maturity of the petroleum marketing
industry; the impact of economic growth, energy efficiency and technology on
demand for petroleum products; natural and political events that may affect the
supply of petroleum products; competition; the effects of regulation; the
Company's expectations as to when it will complete the remediation and testing
phases of its Year 2000 program as well as its Year
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2000 contingency plan; the estimated cost of achieving Year 2000 readiness; and
the Company's belief that its internal systems and equipment will be Year 2000
compliant in a timely manner. For a more detailed discussion of risk factors,
see the information set forth under the caption "Risk Factors" in the Company's
Information Statement dated March 13, 1997.
As a result of these and other factors, the Company may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition,
operating results and stock price. An investment in the Company involves various
risks, including those mentioned above and elsewhere in this report and those
which are detailed from time to time in the Company's other filings with the
Securities and Exchange Commission.
Readers should not place undue reliance on forward-looking statements, which
reflect the Company's view only as of the date hereof. The Company undertakes no
obligation to publicly release revisions to these forward-looking statements
that reflect events or circumstances after the date hereof or reflect the
occurrence of unanticipated events.
ITEM 2. PROPERTIES
Effective February 1, 1997, the Company and Realty entered into the Master Lease
under which service station and convenience store properties and terminal
facilities (the "Properties") are leased or subleased by Realty as the Lessor to
the Company as the Lessee. The Properties are used for gasoline sales,
convenience stores, and other complementary lawful uses in conjunction with the
sale of petroleum products or convenience store items, except where the
provisions of any underlying lease are more restrictive. The Company may sublet
any property, provided that the Company remains fully responsible for a
sublessee's performance and, except in cases of economic abandonment (as
described below), a sublease for uses other than those described above will
require Realty's consent. Except for certain environmental and UST obligations
described below (and above under Item 1. Business - Regulation), the Master
Lease is a "triple-net" lease, with the Company assuming responsibility for the
cost of all taxes, maintenance, repairs, insurance and other operating expenses.
Rent for each of the Properties was set using the then fair market value of each
Property, assuming the USTs were upgraded to meet the 1998 Standards and
Properties were free of known environmental contamination, since Realty is
responsible for all such costs. Rent for each Property will increase at the end
of each five-year period by the net increase in the Consumer Price Index for all
items in the Northeast Region for such five-year period, such increase not to
exceed fifteen percent (15%). Rents for all Properties are payable in advance on
the first day of the month. The initial term of the Master Lease is (i) fifteen
years with respect to Properties owned in fee by Realty and leased to the
Company (termination date of January 31, 2012 excluding renewals) and (ii) the
length of time remaining under underlying lease terms (which ranges up to
fifteen years under the Master Lease) with respect to other Properties leased by
Realty from other third parties and subleased to the Company. The Master Lease
terms for each
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category of Properties described above also include four ten-year renewal
options (or, with respect to category (ii), such shorter period as the
underlying lease may provide), which may be exercised by the Company with two
years advance notice on an individual property basis for all Properties then
subject to the Master Lease. For the subleased Properties, Realty has agreed to
use reasonable efforts to extend the underlying lease terms upon conditions
acceptable to the Company. In the event that the Company desires not to renew
the sublease upon terms (including any underlying lease term extensions
negotiated by Realty) available to it, Realty may extend or renew the lease and
sublease the property to a third party after the end of the Company's term. The
Bylaws of the Company require that the renewal of leases under the Master Lease,
including the exercise of any renewal options, be approved by a majority of
Directors, including, for so long as Outside Directors (as defined in Item 10
below) are required to constitute a majority of the Board of Directors, a
majority of the Outside Directors. See Item 10. Directors and Executive Officers
of the Registrant.
The Master Lease provides that if during the lease term the Company determines
that any of the leased premises have become uneconomic or unsuitable for their
use as a service station or convenience store and has discontinued use of the
Property or intends to discontinue use of the Property as a service station or
convenience store within one year of the date of determination, the Company has
the right to sublet the Property for any lawful use without Realty's consent
and, prior to the commencement of any such sublease term, the Company will
remove any USTs on the Property and thereafter perform all requisite
environmental investigations and/or remediations. The Company has this right of
economic abandonment with respect to no more than ten Properties during any
fiscal year of the lease term. The Company has no right of economic abandonment
for the terminal premises and the premises subject to third party leases.
Realty may terminate the Company's right to possession of the Properties upon
the occurrence of an event of default, including a failure of the Company to pay
rent due under the Master Lease in a timely manner or to comply with its
covenants under the Reorganization and Distribution Agreement (the "Distribution
Agreement") between the Company and Realty pursuant to which the spin-off was
effected.
The Master Lease provides that the Company may make any alterations consistent
with the use of the Properties as gasoline stations/convenience stores. Any
other alterations require Realty's consent, which may not be unreasonably
withheld.
Pursuant to the Master Lease, Realty will be responsible and pay for, and
indemnify the Company against, all pre-closing liabilities, including
environmental remediation and other matters specifically identified on the
relevant Master Lease schedule. Realty also agreed to undertake to have all USTs
in compliance with federal underground storage tank regulations not later than
December 22, 1998. Since rental rates under the Master Lease assume that the
Properties comply with the 1998 Standards, in the event that Realty fails to
make the expenditures required for underground storage tank and environmental
compliance, the Company will have the right to offset the costs of compliance
against its rental obligations under the Master Lease.
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The Company has agreed, pursuant to the Master Lease, to indemnify Realty
against, and be responsible for, all post-closing liabilities, except all
scheduled pre-closing environmental liabilities and obligations, all scheduled
future upgrades to nonupgraded USTs, and all environmental liabilities and
obligations arising out of discharges with respect to Properties containing
nonupgraded USTs that are discovered prior to the date such USTs are upgraded to
meet the 1998 Standards.
ITEM 3. LEGAL PROCEEDINGS
(a) Information in response to this item is incorporated herein by reference
from Note 7 of the Notes to Consolidated Financial Statements set forth on page
21 of the Annual Report.
In 1991, the State of New York brought an action in the New York Supreme Court
in Albany County against Kingston Oil Supply Corp. ("KOSCO"), the Company's
subsidiary, seeking reimbursement in the amount of $189,000 for cleanup costs
incurred at a service station. The State is also seeking penalties of $200,000
and interest. There has been no activity in this proceeding in the past several
years.
In April 1998, the State of New York asserted against KOSCO a claim for
$185,000, representing environmental cleanup costs allegedly incurred commencing
in 1991. On August 12, 1998, an action was filed in the New York Supreme Court
in Albany County to recover $185,000 for cleanup costs plus interest and
penalties.
Pursuant to the Distribution Agreement, Realty agreed to defend all claims or
proceedings that existed prior to the spin-off and indemnify the Company and its
subsidiaries with respect thereto. Pursuant to the Distribution Agreement,
Realty retains liability for proceedings relating to the pre-spin-off operation
of the business of the Company including KOSCO. Realty is defending and
incurring the cost of defense of the two above-described cases and all other
matters which occurred prior to the date of the spin-off. In the event any
plaintiff in such a proceeding should seek to add the Company as a defendant,
the Company believes that Realty will, pursuant to the Distribution Agreement,
indemnify and defend the Company in such proceeding.
There have been releases of petroleum products into the environment since the
spin-off for which the Company is solely responsible. Some of these releases
could result in third party claims against the Company, to which Realty's
indemnification obligation will not apply.
Several claims have been asserted against the Company and its subsidiaries for
personal injuries incurred after the spin-off, for which Realty has no
indemnification obligation. These claims, for which there is insurance coverage
subject to a $500,000 per occurrence deductible, are not expected, individually
or in the aggregate, to have a material adverse effect on the Company's
financial position or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the Company's fiscal year ended January 31, 1999.
EXECUTIVE OFFICERS OF REGISTRANT
The following table lists the executive officers of the Company as of January
31, 1999, their respective ages, the offices and positions held with the Company
and the year in which each was elected an officer.
<TABLE>
<CAPTION>
Officer
Name Age Position Since
---- --- -------- -------
<S> <C> <C> <C>
Leo Liebowitz 71 Chairman and Chief Executive Officer 1997
Vincent J. DeLaurentis 48 President and Chief Operating Officer 1997
A. R. Charnes 54 Vice President of Marketing 1998
Michael K. Hantman 47 Vice President and Corporate Controller 1997
Samuel M. Jones 62 Vice President, Corporate Secretary
and General Counsel 1997
</TABLE>
Mr. Liebowitz has been Chairman and Chief Executive Officer and a director of
the Company since March 21, 1997, the date of the spin-off from Realty. He is
also the President and Chief Executive Officer and a director of Realty, which
positions he has held since 1971. He is also a director of the Regional Banking
Advisory Board of Chase Banking Corp.
Mr. DeLaurentis joined the Company as President in August 1997 and assumed the
additional position of Chief Operating Officer in June 1998. Prior thereto, Mr.
DeLaurentis had been President of Interactive Marketing Ventures, a Safeguard
Scientifics partnership company. Until 1996, he was the Vice President and
General Manager of Sunoco's Northeast Marketing Region for Sun Company, Inc.
During his eight years there, he served in various management roles including
Vice President of Marketing, A plus Franchise Manager and Division Manager. His
prior experience was with Atlantic Refining and Marketing and ARCO.
Mr. Charnes has been Vice President of Marketing of the Company since September
1998. Prior thereto, he was General Manager of Marketing since February 1998. He
joined Realty in 1988 as a Regional Manager and continued in this capacity for
the Company effective with the March 21, 1997 spin-off from Realty. Prior to
joining Realty, he held various management positions with Marathon Oil Company,
which he joined in 1966.
Mr. Hantman has been Vice President and Corporate Controller of the Company
since March 21, 1997, the date of the spin-off from Realty. Prior thereto, he
was Vice President and Corporate Controller of Realty. He joined Realty in 1985
as Corporate Controller. Prior to joining Realty, he was a Principal of Arthur
Young & Company, an international accounting
11
<PAGE> 13
firm.
Mr. Jones has been Vice President, Corporate Secretary and General Counsel of
the Company since March 21, 1997, the date of the spin-off from Realty. Prior
thereto, he was Vice President, Corporate Secretary and General Counsel of
Realty. He joined Realty in 1986 as Vice President and General Counsel and
assumed the additional position of corporate secretary in 1994. Prior to joining
Realty, he was a Senior Attorney with Texaco Inc.
Management is not aware of any family relationships among any of the foregoing
executive officers.
12
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information in response to this item is incorporated herein by reference from
material under the heading "Common Stock" on page 28 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Information in response to this item is incorporated herein by reference from
material under the heading "Selected Financial Data" on page 13 of the Annual
Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information in response to this item is incorporated herein by reference from
material under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 9 through 13 of the Annual Report.
ITEM 7A. MARKET RISK
Information is response to this item is incorporated herein by reference from
Note 7 of the Notes to Consolidated Financial Statements set forth on page 21 of
the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information in response to this item is incorporated herein by reference from
the information set forth on pages 14 through 28 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE> 15
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to directors in response to this item is incorporated
herein by reference from material under the headings "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" on
pages 1 through 2 and 4, and page 14, respectively, of the Proxy Statement.
Information regarding executive officers is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this item is incorporated herein by reference from
material under the headings "Directors' Meetings, Committees and Executive
Officers" and "Compensation" through, and including the material under the
heading, "Compensation Committee Interlocks and Insider Participation" on
pages 4 through 9 of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this item is incorporated herein by reference from
material under the heading "Beneficial Ownership of Common Stock" on pages 2
and 3 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated by reference from material
under the heading "Certain Transactions" on pages 11 and 12 of the Proxy
Statement.
14
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the Index to Financial Statements and
Financial Statement Schedules on page 16 are filed as part of this annual
report.
2. Financial Statement Schedule
The financial statement schedule listed in the Index to Financial Statements and
Financial Statement Schedules on page 16 is filed as part of this annual report.
3. Exhibits
The exhibits listed in the Exhibit Index on pages 19 through 21 are filed as
part of this annual report.
4. Reports on Form 8-K
None.
15
<PAGE> 17
GETTY PETROLEUM MARKETING INC.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
ITEMS 14(a) 1 & 2
Reference
---------
Form 10-K 1999 Annual
(pages) Report (pages)
------- --------------
Data incorporated by reference from attached
1999 Annual Report to Stockholders of Getty
Petroleum Marketing Inc.:
Report of Independent Accountants 28
Consolidated Statements of Operations for the
years ended January 31, 1999, 1998 and 1997 14
Consolidated Balance Sheets as of January 31,
1999 and 1998 15
Consolidated Statements of Cash Flows for the
years ended January 31, 1999, 1998 and 1997 16
Notes to Consolidated Financial Statements 17 - 27
Report of Independent Accountants -
Supplemental Schedule 17
Schedule II - Valuation and Qualifying Accounts and
Reserves for the years ended January 31, 1999, 1998
and 1997 18
All other schedules are omitted for the reason that they are either not
required, not applicable, not material or the information is included in the
consolidated financial statements or notes thereto.
The financial statements listed in the above index which are included in the
1999 Annual Report to Stockholders are hereby incorporated by reference. With
the exception of the pages listed in the above index and the information
incorporated by reference included in Part II, Items 5, 6, 7, 7A and 8, the 1999
Annual Report to Stockholders is not deemed filed as part of this report.
16
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Getty Petroleum Marketing Inc.
Our report on our audits of the consolidated financial statements of Getty
Petroleum Marketing Inc. and Subsidiaries has been incorporated by reference in
this Form 10-K from page 28 of the 1999 Annual Report to Stockholders of Getty
Petroleum Marketing Inc. and Subsidiaries. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index in Item 14(a) on page 16 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
March 11, 1999
17
<PAGE> 19
GETTY PETROLEUM MARKETING INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END OF
OF PERIOD ADDITIONS DEDUCTIONS PERIOD
--------- --------- ---------- ------
<S> <C> <C> <C> <C>
1999:
Allowance for doubtful accounts*........... $ 1,208 $ 154 $ 461 $ 901
========== ========= ========== =========
1998:
Allowance for doubtful accounts*........... $ 1,185 $ 466 $ 443 $ 1,208
========== ========= ========== =========
1997:
Allowance for doubtful accounts*........... $ 1,225 $ 417 $ 457 $ 1,185
========== ========= ========== =========
</TABLE>
* Relates to accounts receivable.
18
<PAGE> 20
EXHIBIT INDEX
GETTY PETROLEUM MARKETING INC.
Annual Report on Form 10-K
for the fiscal year ended January 31, 1999
<TABLE>
<CAPTION>
Exhibit
No Description
- ------- -----------
<S> <C> <C>
3.2 Articles of Amendment and Filed as Exhibit 3.2 to Company's Registration Statement
Restatement of the Company. on Form 10, File No. 001-14990, and incorporated herein
by reference.
3.4 By-Laws of the Company. Filed as Exhibit 3.4 to Company's Registration Statement
on Form 10, File No. 001-14990, and incorporated herein
by reference.
10.1 Form of Reorganization and Filed as Exhibit 10.1 to Company's Registration Statement
Distribution Agreement between on Form 10, File No. 001-14990, and incorporated herein
the Company and Getty by reference.
Realty Corp.
10.2 Form of Master Lease Agreement Filed as Exhibit 10.2 to Company's Registration Statement
between the Company and Getty on Form 10, File No. 001-14990, and incorporated herein
Realty Corp. by reference.
10.3 Form of Tax Sharing Agreement Filed as Exhibit 10.3 to Company's Registration Statement
between the Company and Getty on Form 10, File No. 001-14990, and incorporated herein
Realty Corp. by reference.
10.4 Form of Services Agreement dated as of Filed as Exhibit 10.4 to Company's Registration Statement
February 1, 1997 between the Company on Form 10, File No. 001-14990, and incorporated herein
and Getty Realty Corp. by reference.
10.4A Services Agreement dated as of February 1, *
1999 between the Company and Getty Realty
Corp.
10.5 Form of Trademark License Agreement Filed as Exhibit 10.5 to Company's Registration Statement
between the Company and Getty Realty on Form 10, File No. 001-14990, and incorporated herein
Corp. by reference.
10.6 Form of Company's 1997 Stock Option Filed as Exhibit 10.6 to Company's Registration Statement
Plan. on Form 10, File No. 001-14990, and incorporated herein
by reference.
10.7 Form of Company's Employee Stock Filed as Exhibit 10.7 to Company's Registration Statement
Ownership Plan. on Form 10, File No. 001-14990, and incorporated herein
by reference.
10.8 Form of Stock Option Reformation Filed as Exhibit 10.8 to Company's Registration Statement
Agreement between the Company and on Form 10, File No. 001-14990, and incorporated herein
Getty Realty Corp. by reference.
10.9 Form of Company's Retirement and Filed as Exhibit 10.9 to Company's Registration Statement
Profit Sharing Plan. on Form 10, File No. 001-14990, and incorporated herein
by reference.
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit
No Description
- ------- -----------
<S> <C> <C>
10.10 Form of Supplemental Retirement Plan Filed as Exhibit 10.10 to Company's Registration Statement
for Executives of the Company and on Form 10, File No. 001-14990, and incorporated herein
Participating Subsidiaries. by reference.
10.11 Form of Indemnification Agreement Filed as Exhibit 10.11 to Company's Annual Report on
between Company and directors. Form 10-K for the year ended January 31, 1997,
File No. 001-14990, and incorporated herein by reference.
10.12 Vincent J. DeLaurentis Employment Filed as Exhibit 10.12 to Company's Quarterly Report
Agreement dated as of July 10, 1997. on Form 10-Q for the quarter ended July 31, 1997,
File No. 001-14990, and incorporated herein by reference.
10.12a First Amended and Restated Employment *
Agreement between Getty Petroleum
Marketing Inc. and Vincent J.
DeLaurentis dated as of
April 8, 1999 (See Exhibit 10.12).
10.13 General Release and Severance Filed as Exhibit 10.13 to Company's Quarterly Report
Agreement between Alvin A. Smith on Form 10-Q for the quarter ended October 31, 1997,
and Getty Petroleum Marketing Inc. File No. 001-14990, and incorporated herein by reference.
10.14 Form of Letter Agreement dated Filed as Exhibit 10.14 to Company's Annual Report
April 8, 1997, wherein the Company on Form 10-K for the year ended January 31, 1998,
(i) confirmed that a change of control File No. 001-14990, and incorporated herein by reference.
event had occurred pursuant to certain
Agreements dated December 9, 1994, as
amended on March 7, 1996, between Getty
Petroleum Corp. and the officers and
certain key employees of Getty Petroleum
Corp., and (ii) agreed to perform Getty
Petroleum Corp.'s obligations under the
Agreements as to those officers and key
employees of Getty Petroleum Corp. who
had become officers and employees of the
Company.
10.15 Form of Letter Agreement dated Filed as Exhibit 10.23 to the Annual Report on Form 10-K
December 9, 1994 regarding compensation for the fiscal year ended January 31, 1995 (File No. 1-8059)
upon change of control (See Exhibit of Getty Petroleum Corp. and incorporated herein by
10.14) reference.
10.16 Form of Letter Agreement dated Filed as Exhibit 10.27 to the Annual Report on Form 10-K
March 7, 1996 amending Agreement dated for the fiscal year ended January 31, 1996 (File No. 1-8059)
December 9, 1994 regarding compensation of Getty Petroleum Corp. and incorporated herein by
upon change of control (See Exhibits reference.
10.14 and 10.15).
10.17 Form of Letter Agreement dated March 9, Filed as Exhibit 10.17 to Company's Annual Report
1998 between the Company and the on Form 10-K for the year ended January 31, 1998,
officers and certain key employees of File No. 001-14990, and incorporated herein by reference.
the Company amending the change of
control agreements (See Exhibits 10.14,
10.15 and 10.16).
</TABLE>
20
<PAGE> 22
13 Annual Report to Stockholders. *
22 List of Subsidiaries of the Company. *
24 Consent of Independent Accountants. *
27 Financial Data Schedule. *
- ---------------
*Filed herewith.
21
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
By /s/ Michael K. Hantman
---------------------------
Michael K. Hantman,
Vice President and
Corporate Controller
April 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By /s/ Leo Liebowitz By /s/ Michael K. Hantman
------------------------- ---------------------------
Leo Liebowitz, Chairman, Michael K. Hantman,
Chief Executive Officer Vice President and
and Director Corporate Controller
April 30, 1999 (Principal Financial and
Accounting Officer)
April 30, 1999
By /s/ Matthew J. Chanin By /s/ Ronald E. Hall
------------------------- ---------------------------
Matthew J. Chanin, Ronald E. Hall,
Director Director
April 30, 1999 April 30, 1999
By /s/ Richard E. Montag By /s/ Howard Safenowitz
------------------------- ---------------------------
Richard E. Montag, Howard Safenowitz,
Director Director
April 30, 1999 April 30, 1999
22
<PAGE> 1
EXHIBIT 10.4A
SERVICES AGREEMENT
AGREEMENT, dated as of February 1, 1999 between GETTY REALTY CORP., a
Maryland corporation ("Realty"), and GETTY PETROLEUM MARKETING INC., a Maryland
corporation ("Marketing").
SUMMARY
Pursuant to a Reorganization and Distribution Agreement dated as of
January 31, 1997, (the "Distribution Agreement") between Getty Properties Corp.
(f/k/a Getty Realty Corp. hereinafter "Properties") and Marketing, Properties on
the date thereof transferred to Marketing the Marketing Assets and Marketing
Business (as such terms are defined in the Distribution Agreement) in
anticipation of a distribution by Properties of the common stock of Marketing to
the stockholders of Properties. A condition of the closing of the transactions
contemplated by the Distribution Agreement was that Properties and Marketing
enter into a services agreement pursuant to which Marketing shall provide
certain services as agent for Properties and Properties shall provide certain
services as agent for Marketing.
A Services Agreement dated as of February 1, 1997 was entered into
between Properties and Marketing which Agreement was for a term of two (2) years
and which expired January 31, 1999.
The parties hereto wish to enter into a new agreement to cover the
services to be performed.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and intending to be legally bound
hereby, the parties agree as follows:
1. MARKETING SERVICES. Marketing agrees, as agent for Realty, to utilize
its employees and assets to provide certain services consistent with
the type, quality and level of such services required by Realty and
provided by Getty Petroleum Corp. immediately prior to the Distribution
Date, in connection therewith. The services to be provided are set
forth below, together with the applicable monthly charge for each such
service:
<TABLE>
<CAPTION>
SERVICES MONTHLY CHARGE
-------- --------------
<S> <C>
Financial Reporting $ 8,900.00
Accounting/Payroll $10,700.00
Data Processing/Computer $10,900.00
Tax $ 5,600.00
Legal $13,900.00
Treasury $ 4,400.00
Office Services $ 2,300.00
Human Resources $ 2,900.00
Engineering/Environmental $ 7,900.00
Investor Relations $ 3,900.00
Purchasing $ 700.00
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
SERVICES MONTHLY CHARGE
-------- --------------
<S> <C>
Servicing of Non-Petroleum
Class "37" Leases $ 5,500.00
</TABLE>
2. INVOICE AND PAYMENT. Marketing shall invoice Realty once each month for
the services performed during the prior month and Realty shall pay
Marketing for such services not later than ten (10) days from the
receipt of invoice. The amount paid shall be net of the amount owing to
Realty under Paragraphs 3 and 4.
3. REALTY SERVICES. Realty agrees that as agent for Marketing (i) Realty
will act as the permittee or licensee under all permits and licenses
until such time(s) as all permits and licenses are either transferred
to Marketing or new ones are issued therefor; (ii) Realty will continue
to act as the party at interest in all instances where contracts,
leases or the like are not assignable to Marketing or Realty has been
unable to obtain consent to assignment where consent is required; and
(iii) Realty will draw on all electronic funds transfer authorizations
("EFT") issued by third parties to Realty and letters of credit in
favor of Realty (collectively hereinafter "draws") until such time as
new EFT agreements and letters of credit are issued, all for the
benefit of Marketing. Marketing (x) will reimburse Realty for any
out-of-pocket expenses it may incur in performing such services, and
(y) will defend, indemnify and hold harmless Realty in the event that
any such draws made at Marketing=s direction result in claims for
damages for wrongful draws made under clause (iii) above. The services
to be provided are set forth below together with the applicable monthly
charge for each such service.
<TABLE>
<CAPTION>
Services Monthly Charge
-------- --------------
<S> <C>
Servicing of Permits and Licenses $ 700.00
Servicing of Non-Assignable Contracts and Leases $ 700.00
Servicing of EFT Transfers and Letters of Credit $ 500.00
</TABLE>
4. OUTSIDE SERVICES; ADJUSTMENTS TO CHARGES. The charges for the foregoing
services to be performed hereunder shall be all-inclusive of supplies
and utilities required for such services, provided, however, that, if
the level of activity for any service should increase above the level
required prior to the date hereof, the party providing such service
(the "providing party") shall have the right to charge the other party
for the additional supplies and utilities being used, on a cost-plus
10% basis. In the event that the providing party is required to retain
outside consultant/contractor assistance to perform any of the services
hereunder, the providing party shall first obtain the consent of the
other party to such retention and the other party shall pay directly
the fees of such consultant/contractor. The providing party shall not
be held responsible for the performance of such consultant/contractor
services and the other party assumes the risk thereof. At any time the
other party desires reports, software, files or the like, the providing
party shall provide them to the other party at cost.
The services to be performed hereunder shall be performed and used in
compliance with the applicable provisions of the Distribution
Agreement.
The parties hereto agree that once every six (6) months they will
review the foregoing monthly
2
<PAGE> 3
charges and, if it is mutually determined in good faith that certain
monthly charge(s) do not correctly compensate the providing party for
the service(s) rendered, the monthly charge(s) shall be increased or
reduced, as the case may be.
5. CONTRACTUAL RELATIONSHIP. The relationship between Realty and Marketing
under this Agreement shall be that of principal and agent in respect of
the services to be performed hereunder. In no event is the relationship
of the parties intended to be that of employer and employee and in no
event is either party to be deemed or purported to be the partner or
joint venturer of the other for any purpose whatsoever.
6. TERM. The term of this Agreement shall be one (1) year from the date
hereof, and shall renew automatically for successive periods of one (1)
year each, PROVIDED, HOWEVER, that, upon thirty (30) days notice (i) to
Realty, Marketing shall have the right to terminate any or all of the
services set forth in Paragraph 1; and (ii) to Marketing, Realty shall
have the right to terminate any or all of the services set forth in
Paragraph 3. In the event of partial termination, the monthly charge
for such terminated service shall cease upon the effective date of the
partial termination. Realty understands and agrees that certain
services (e.g. Data Processing) cannot be terminated if other services
(e.g. Accounting ) are to continue and that "Office Services" cannot be
terminated while Realty is subleasing office space in the Jericho
Building. Upon the termination of all services, payment therefor and
payment of all consultants/contractors, this Agreement shall terminate.
7. LIMITATION OF LIABILITY. Neither party shall have any liability
whatsoever to the other party or to any third party for any loss,
liability, damage, cost or deficiency (collectively "Losses"), or for
any claim for Losses, including, without limitation, Losses or claims
for personal injury, death or property damage, warranty, tort or
products liability, resulting from, caused by or arising out of a
party's performance under this Agreement except for claims arising out
of the negligence or willful default or breach of such party hereunder.
In no event shall any party have liability to the other party or to any
third party for indirect, special or consequential damages or loss of
profits (except with respect to its willful default or breach), or for
punitive damages for any reason whatsoever.
8. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by
facsimile transmission, telexed or mailed by overnight delivery service
or by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt
thereof):
(a) if to Getty Realty Corp.:
125 Jericho Turnpike
Jericho, New York 11753
Attention: President
(b) if to Getty Petroleum Marketing Inc.:
125 Jericho Turnpike
Jericho, New York 11753
Attention: President
3
<PAGE> 4
9. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the
other party (other than to an affiliate of Marketing ). Any purported
assignment in violation of the provisions hereof shall be void.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York (regardless of the laws that might otherwise govern
under applicable New York conflict of laws principles) as to all
matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
11. SUITS IN NEW YORK. The parties agree that any action or proceeding
relating in any way to this Agreement shall be brought and enforced in
the Supreme Court of the State of New York for Nassau County or the
United States District Court for the Eastern District of New York and
the parties hereby waive any objection to jurisdiction or venue in any
such proceeding commenced in such court.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
14. SEVERANCE. In the event that any provision of this Agreement is
declared illegal, invalid or unenforceable or contrary to law, it shall
not affect any other provision in the Agreement.
15. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter
hereof. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the transactions
contemplated hereby.
IN WITNESS WHEREOF, each of Realty and Marketing has caused this
Agreement to be executed by its duly authorized officer as of the date
first above written.
GETTY REALTY CORP.
By:
---------------------------------
Leo Liebowitz, President
GETTY PETROLEUM MARKETING INC.
By:
---------------------------------
Vincent J. DeLaurentis, President
4
<PAGE> 1
EXHIBIT 10.12a
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, DATED AS OF JULY 10, 1997, EFFECTIVE AS OF AUGUST 4,
1997 AND RESTATED AS OF APRIL 8, 1999 IS MADE BY AND BETWEEN GETTY PETROLEUM
MARKETING INC., A MARYLAND CORPORATION (THE "COMPANY"), AND VINCENT J.
DELAURENTIS (THE "EXECUTIVE").
RECITALS:
a) AS OF JULY 10, 1997 THE COMPANY AND THE EXECUTIVE ENTERED INTO AN
EMPLOYMENT AGREEMENT EFFECTIVE AS OF AUGUST 4, 1997.
b) Such parties now desire to amend and restate such Employment
Agreement on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:
I. CERTAIN DEFINITIONS.
A. "BASE SALARY" IS DEFINED IN SECTION 4(a).
B. "BENEFITS" IS DEFINED IN SECTION 4(d).
C. "BOARD" MEANS THE BOARD OF DIRECTORS OF THE COMPANY.
D. "BONUS" IS DEFINED IN SECTION 4(b).
E. "CHANGE IN CONTROL" MEANS THE OCCURRENCE OF ANY OF THE FOLLOWING:
1. THE COMPANY IS MERGED, CONSOLIDATED OR REORGANIZED INTO OR
WITH ANOTHER CORPORATION OR OTHER LEGAL PERSON, AND AS A RESULT OF
SUCH MERGER, CONSOLIDATION OR REORGANIZATION LESS THAN FIFTY PERCENT
OF THE COMBINED VOTING POWER OF THE THEN OUTSTANDING SECURITIES OF
SUCH RESULTING CORPORATION OR PERSON IMMEDIATELY AFTER SUCH
TRANSACTION ARE HELD IN THE AGGREGATE BY THE HOLDERS OF VOTING STOCK
OF THE COMPANY IMMEDIATELY PRIOR TO SUCH TRANSACTION; OR
1
<PAGE> 2
2. THE COMPANY SELLS OR OTHERWISE TRANSFERS ALL OR SUBSTANTIALLY
ALL OF ITS ASSETS TO ANOTHER CORPORATION OR OTHER LEGAL PERSON, AND AS
A RESULT OF SUCH SALE OR TRANSFER LESS THAN FIFTY PERCENT OF THE
COMBINED VOTING POWER OF THE THEN OUTSTANDING VOTING STOCK OF SUCH
CORPORATION OR PERSON IMMEDIATELY AFTER SUCH SALE OR TRANSFER IS HELD
IN THE AGGREGATE BY THE HOLDERS OF VOTING STOCK OF THE COMPANY
IMMEDIATELY PRIOR TO SUCH SALE OR TRANSFER.
F. "COMMITTEE" SHALL MEAN THE COMPENSATION COMMITTEE OF THE BOARD.
G. "DISABILITY" SHALL MEAN THE ABSENCE OF THE EXECUTIVE FROM THE
EXECUTIVE'S DUTIES TO THE COMPANY ON A FULL-TIME BASIS FOR A PERIOD OF 120
CONSECUTIVE DAYS AS A RESULT OF INCAPACITY DUE TO MENTAL OR PHYSICAL
ILLNESS WHICH IS DETERMINED TO BE TOTAL AND PERMANENT BY A PHYSICIAN
SELECTED BY THE COMPANY AND ACCEPTABLE TO THE EXECUTIVE OR THE EXECUTIVE'S
LEGAL REPRESENTATIVE (SUCH AGREEMENT AS TO ACCEPTABILITY NOT TO BE WITHHELD
UNREASONABLY).
H. "EFFECTIVE DATE" SHALL MEAN AUGUST 4, 1997.
I. "GOOD REASON" SHALL MEAN
1. A MATERIAL UNFAVORABLE CHANGE IN EXECUTIVE'S JOB
RESPONSIBILITIES OR DUTIES, OR
2. ANY REDUCTION IN EXECUTIVE'S RATE OF BASE SALARY
IN EITHER CASE AS COMPARED WITH THOSE OR THAT IN EFFECT IMMEDIATELY PRIOR
TO A CHANGE IN CONTROL.
A. "STOCK OPTION PLAN" MEANS THE 1997 STOCK PLAN OF GETTY PETROLEUM
MARKETING INC.
B. "STOCK OPTION" IS DEFINED IN SECTION 4(c).
C. "TERM OF EMPLOYMENT" IS DEFINED IN SECTION 2.
I. EMPLOYMENT. THE COMPANY SHALL EMPLOY THE EXECUTIVE AND THE EXECUTIVE
SHALL ENTER THE EMPLOY OF THE COMPANY IN THE POSITION SET FORTH IN SECTION 3 AND
UPON THE OTHER TERMS AND CONDITIONS HEREIN PROVIDED. THE INITIAL TERM OF
EXECUTIVE'S EMPLOYMENT WITH THE COMPANY (THE "INITIAL TERM") SHALL COMMENCE ON
THE EFFECTIVE DATE AND END ON THE SECOND ANNIVERSARY THEREOF. AFTER THE INITIAL
TERM, THE TERM OF EMPLOYMENT HEREUNDER SHALL AUTOMATICALLY BE EXTENDED FOR
SUCCESSIVE ONE-YEAR PERIODS (COLLECTIVELY WITH THE INITIAL TERM, THE "TERM OF
EMPLOYMENT") UNLESS EITHER THE COMPANY OR THE EXECUTIVE SHALL GIVE WRITTEN
NOTICE OF NON-RENEWAL AT LEAST 90 DAYS PRIOR TO THE THEN SCHEDULED EXPIRATION OF
THE TERM.
II. POSITION AND DUTIES.
2
<PAGE> 3
A. DURING THE TERM OF EMPLOYMENT, THE EXECUTIVE SHALL SERVE AS THE
PRESIDENT OF THE COMPANY WITH SUCH AUTHORITY AND DUTIES AS ARE CUSTOMARILY
ENJOYED AND PERFORMED BY A PERSON HOLDING THE POSITION OF PRESIDENT IN A
SIMILAR BUSINESS OR ENTERPRISE, SUBJECT TO THE OVERALL AUTHORITY AND
SUPERVISION OF THE BOARD.
B. DURING THE TERM OF EMPLOYMENT, THE EXECUTIVE SHALL DEVOTE ALL HIS
WORKING TIME AND EFFORTS TO THE BUSINESS AND AFFAIRS OF THE COMPANY AND
WILL NOT ENTER THE EMPLOY OF OR SERVE AS A CONSULTANT TO, OR IN ANY WAY
PERFORM ANY SERVICES WITH OR WITHOUT COMPENSATION FOR, ANY OTHER PERSON,
BUSINESS OR ORGANIZATION, WHERE SUCH CONDUCT WOULD BE INCONSISTENT WITH, IN
COMPETITION WITH, OR PREVENT THE EXECUTIVE FROM CARRYING OUT, HIS DUTIES TO
THE COMPANY, WITHOUT THE PRIOR WRITTEN CONSENT OF THE BOARD.
III. COMPENSATION AND RELATED MATTERS.
A. BASE SALARY. DURING THE TERM OF EMPLOYMENT, THE EXECUTIVE SHALL
RECEIVE A BASE SALARY ("BASE SALARY") INITIALLY AT A RATE OF $300,000 PER
ANNUM, PAYABLE NO LESS FREQUENTLY THAN MONTHLY, SUBJECT TO INCREASES AT THE
DISCRETION OF THE COMMITTEE; PROVIDED, HOWEVER, THAT THE EXECUTIVE SHALL BE
ELIGIBLE FOR A FORMAL SALARY REVIEW ON THE DATE THAT IS SIX MONTHS AFTER
THE EFFECTIVE DATE.
B. BONUS. UPON THE COMPLETION OF EACH 12-MONTH PERIOD OF EMPLOYMENT
DURING THE TERM, THE EXECUTIVE SHALL BE ELIGIBLE TO RECEIVE A PERFORMANCE
BONUS IN AN AMOUNT NO GREATER THAN THE ANNUAL RATE OF BASE SALARY AS IN
EFFECT ON THE FIRST DAY OF SUCH 12-MONTH PERIOD. THE AMOUNT OF THE BONUS,
IF ANY, WILL BE DETERMINED BY THE COMMITTEE BASED UPON THE COMPANY'S AND
THE EXECUTIVE'S ACHIEVEMENT OF PERFORMANCE OBJECTIVES ESTABLISHED BY THE
COMMITTEE UPON RECOMMENDATION OF THE CHAIRMAN OF THE BOARD.
C. STOCK OPTION. AS OF JULY 10, 1997, THE COMPANY SHALL GRANT THE
EXECUTIVE AN OPTION TO PURCHASE 75,000 SHARES OF THE COMPANY'S COMMON STOCK
(THE "STOCK OPTIONS"). THE STOCK OPTION SHALL BE GRANTED PURSUANT TO THE
STOCK OPTION PLAN AND SHALL BE EVIDENCED AND GOVERNED BY A WRITTEN STOCK
OPTION AGREEMENT. THE EXERCISE PRICE OF THE STOCK OPTION WILL BE THE FAIR
MARKET VALUE OF A SHARE OF THE COMPANY'S COMMON STOCK ON JULY 10,1997, AS
DETERMINED PURSUANT TO THE STOCK OPTION PLAN, AND THE STOCK OPTION SHALL
BECOME EXERCISABLE WITH RESPECT TO 15,000 SHARES ON EACH OF THE FIRST FIVE
ANNIVERSARIES OF THE EFFECTIVE DATE, SUBJECT TO THE TERMS AND CONDITIONS OF
THE STOCK OPTION AGREEMENT. NOTWITHSTANDING THE FOREGOING, UPON THE
CONSUMMATION OF ANY CHANGE IN CONTROL THE STOCK OPTIONS AND ANY OTHER
OPTIONS TO PURCHASE THE COMPANY'S COMMON STOCK THEN HELD BY THE EXECUTIVE
SHALL IMMEDIATELY VEST AND BECOME FULLY EXERCISABLE.
D. BENEFITS. DURING THE TERM OF EMPLOYMENT, THE EXECUTIVE SHALL BE
ENTITLED TO PARTICIPATE IN OR RECEIVE BENEFITS UNDER ANY EMPLOYEE BENEFIT
PLAN OR OTHER ARRANGEMENT MADE AVAILABLE BY THE COMPANY ON TERMS NO LESS
FAVORABLE THAN THOSE GENERALLY APPLICABLE TO SENIOR EXECUTIVES OF THE
COMPANY, SUBJECT TO AND ON A BASIS CONSISTENT WITH THE TERMS, CONDITIONS
AND OVERALL ADMINISTRATION OF SUCH PLAN OR ARRANGEMENT.
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E. EXPENSES. THE COMPANY SHALL PROMPTLY REIMBURSE THE EXECUTIVE FOR
ALL REASONABLE TRAVEL AND OTHER BUSINESS EXPENSES INCURRED BY THE EXECUTIVE
IN THE PERFORMANCE OF HIS DUTIES TO THE COMPANY HEREUNDER.
F. NO WAIVER. THE EXECUTIVE SHALL ALSO BE ENTITLED TO SUCH OTHER
BENEFITS OR TERMS OF EMPLOYMENT AS ARE PROVIDED BY LAW.
G. RELOCATION EXPENSES.
1. THE EXECUTIVE SHALL BE REIMBURSED FOR REASONABLE ACTUAL
EXPENSES INCURRED BY HIM IN MOVING AND SETTLEMENT OF HIS PERSONAL
PROPERTY FROM HIS CURRENT PRINCIPAL RESIDENCE IN PENNSYLVANIA TO A
RESIDENCE NEAR THE COMPANY'S EXECUTIVE OFFICES IN JERICHO, NEW YORK,
INCLUDING CLOSING COSTS FOR THE SALE OF HIS CURRENT PRINCIPAL
RESIDENCE. SUCH REIMBURSEMENT SHALL BE MADE TO THE EXTENT THAT THE
EXECUTIVE PROPERLY ACCOUNTS THEREFOR IN ACCORDANCE WITH THE COMPANY'S
REIMBURSEMENT PRACTICES.
2. THE EXECUTIVE AGREES TO RELOCATE TO THE ENVIRONS OF THE
COMPANY'S HEADQUARTERS AS SOON AS PRACTICABLE, BUT IN NO EVENT LATER
THAN THREE (3) MONTHS AFTER THE EFFECTIVE DATE.
IV. CHANGE IN CONTROL.
A. UPON THE CONSUMMATION OF A CHANGE IN CONTROL, EXECUTIVE SHALL
RECEIVE THE BENEFIT DESCRIBED IN THE LAST SENTENCE OF SECTION 4(c).
B. IF, FOLLOWING A CHANGE IN CONTROL BUT NO LATER THAN THE SECOND
ANNIVERSARY THEREOF , EXECUTIVE'S EMPLOYMENT IS TERMINATED BY THE COMPANY
FOR ANY REASON OR BY EXECUTIVE FOR GOOD REASON THEN, FOR THE PERIOD
COMMENCING ON THE DATE OF SUCH TERMINATION OF EMPLOYMENT AND ENDING ON THE
SECOND ANNIVERSARY OF THE CHANGE IN CONTROL, AND UPON EXECUTIVE'S EXECUTION
OF A GENERAL RELEASE IN THE COMPANY'S CUSTOMARY FORM, EXECUTIVE SHALL, FOR
SUCH PERIOD
1. RECEIVE A SEVERANCE BENEFIT, PAYABLE IN INSTALLMENTS IN
ACCORDANCE WITH THE COMPANY'S GENERAL PAYROLL PRACTICES, AT THE RATE
OF $450,000 PER ANNUM,
2. CONTINUE TO PARTICIPATE IN THE SAME MANNER AND TO THE FULLEST
EXTENT IN THE COMPANY'S MEDICAL, LIFE INSURANCE AND DISABILITY PLANS,
AND
3. RECEIVE A CASH PAYMENT EQUAL TO THE MATCHING CONTRIBUTION THE
COMPANY WOULD HAVE MADE TO HIS ACCOUNT HAD HE CONTINUED TO PARTICIPATE
IN THE COMPANY'S 401(k) PLAN.
C. IF THE EXECUTIVE'S EMPLOYMENT SHALL TERMINATE BY REASON OF A CHANGE
IN CONTROL, THE COMPANY SHALL REIMBURSE THE EXECUTIVE FOR REASONABLE ACTUAL
EXPENSES INCURRED
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BY HIM IN RELOCATING HIS PERSONAL PROPERTY FROM HIS THEN CURRENT PRINCIPAL
RESIDENCE TO A RESIDENCE IN PENNSYLVANIA. SUCH REIMBURSEMENT SHALL BE MADE
TO THE EXTENT THAT THE EXECUTIVE PROPERLY ACCOUNTS THEREFOR IN ACCORDANCE
WITH THE COMPANY'S REIMBURSEMENT PRACTICES.
D. NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS AGREEMENT, IN THE
EVENT THAT SOME OR ALL OF ANY PAYMENT TO EXECUTIVE OTHERWISE REQUIRED UNDER
THIS AGREEMENT, OR OTHERWISE, WOULD SUBJECT EXECUTIVE TO TAX UNDER THE
PROVISIONS OF SECTION 4999 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, (THE "PARACHUTE TAX") THEN THE COMPANY SHALL OBTAIN, AS SOON AS
REASONABLY PRACTICABLE, FROM ITS OUTSIDE AUDITORS A CERTIFICATION AS TO
AMOUNT BY WHICH SUCH PAYMENTS WOULD NEED TO BE REDUCED IN ORDER THAT
EXECUTIVE NOT BE LIABLE FOR ANY PARACHUTE TAX AND THE PAYMENT SHALL BE
REDUCED BY THE AMOUNT INDICATED IN THE REDUCTION CERTIFICATION (WITH THE
AMOUNT OF SUCH REDUCTION BEING MADE FIRST FROM CASH PAYMENTS AND THEN, TO
THE EXTENT NECESSARY, FROM NON-CASH PAYMENTS) (THE "PORTION") AND EXECUTIVE
SHALL HAVE NO RIGHT TO SUCH PORTION.
V. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. THE EXECUTIVE ACKNOWLEDGES
THAT DURING HIS EMPLOYMENT HE WILL HAVE ACCESS TO:
A. CONFIDENTIAL OR SECRET PLANS, PROGRAMS, DOCUMENTS, AGREEMENTS,
INTERNAL MANAGEMENT REPORTS, FINANCIAL INFORMATION OR OTHER MATERIAL
RELATING TO THE BUSINESS, SERVICES OR ACTIVITIES OF THE COMPANY, AND
B. TRADE SECRETS, MARKET REPORTS, CUSTOMER INVESTIGATIONS, CUSTOMER
LISTS AND OTHER SIMILAR INFORMATION THAT IS PROPRIETARY INFORMATION OF THE
COMPANY (COLLECTIVELY REFERRED TO AS "CONFIDENTIAL INFORMATION").
The Executive acknowledges that such Confidential Information as is
acquired and used by the Company is a special, valuable and unique asset of the
Company. In addition, all records, files and other materials obtained by the
Executive in the course of his employment with the Company shall remain the
property of the Company. The Executive will not use Confidential Information or
property of the Company for his own benefit or the benefit of any person or
entity with which he may be associated. The Executive will not disclose any
Confidential Information to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever without the prior written consent of
the Company. The obligations of this Section shall not apply to (i) information
that enters the public domain without a breach of this Agreement by the
Executive or (ii) information developed by or known to the Executive
independently of disclosure to him by the Company.
I. NON-COMPETITION. THE EXECUTIVE SHALL BE PROHIBITED FOR ONE YEAR
FOLLOWING TERMINATION OF EMPLOYMENT WITH THE COMPANY FOR ANY REASON FROM
PROVIDING SERVICES TO, OR OWNING ANY INTEREST IN (OTHER THAN BENEFICIAL
OWNERSHIP OF NOT MORE THAN 5% OF THE OUTSTANDING VOTING STOCK OF ANY PUBLICLY
TRADED COMPANY), ANY ENTITY WHICH COMPETES WITH THE COMPANY IN ANY GEOGRAPHIC
MARKET.
II. NON-SOLICITATION. DURING THE TERM OF EMPLOYMENT AND FOR TWO YEARS
THEREAFTER, EXECUTIVE SHALL NOT (i) INDUCE OR ATTEMPT TO INDUCE ANY EMPLOYEE OF
THE COMPANY TO LEAVE THE EMPLOY OF THE COMPANY, OR IN ANY WAY INTERFERE WITH THE
RELATIONSHIP BETWEEN THE COMPANY AND ANY EMPLOYEE THEREOF, (ii) HIRE DIRECTLY OR
THROUGH ANOTHER ENTITY ANY PERSON WHO WAS AN EMPLOYEE OF
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<PAGE> 6
THE COMPANY AT ANY TIME DURING THE TERM, OR (iii) INDUCE OR ATTEMPT TO INDUCE
ANY CUSTOMER, SUPPLIER, LICENSEE OR OTHER BUSINESS RELATION OF THE COMPANY TO
CEASE DOING BUSINESS WITH THE COMPANY, OR IN ANY WAY INTERFERE WITH THE
RELATIONSHIP BETWEEN ANY SUCH CUSTOMER, SUPPLIER, LICENSEE OR BUSINESS RELATION
AND THE COMPANY.
III. DISPUTES.
A. ANY DISPUTE OR CONTROVERSY ARISING UNDER, OUT OF, IN CONNECTION
WITH OR IN RELATION TO THIS AGREEMENT SHALL BE FINALLY DETERMINED AND
SETTLED BY ARBITRATION IN NEW YORK, NEW YORK IN ACCORDANCE WITH THE RULES
AND PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION, AND JUDGMENT UPON
THE AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.
B. THE PREVAILING PARTY IN ANY SUCH PROCEEDING SHALL BE ENTITLED TO
COLLECT FROM THE OTHER PARTY, ALL LEGAL FEES AND EXPENSES REASONABLY
INCURRED IN CONNECTION THEREWITH.
IV. BINDING ON SUCCESSORS. THIS AGREEMENT SHALL BE BINDING UPON AND INURE
TO THE BENEFIT OF THE COMPANY, THE EXECUTIVE AND THEIR RESPECTIVE SUCCESSORS,
ASSIGNS, PERSONNEL AND LEGAL REPRESENTATIVES, EXECUTORS, ADMINISTRATORS, HEIRS,
DISTRIBUTEES, DEVISEES AND LEGATEES, AS APPLICABLE. THE COMPANY SHALL CAUSE ANY
SUCCESSOR OR ASSIGNEE OF THE COMPANY TO ASSUME THE COMPANY'S OBLIGATIONS UNDER
THIS AGREEMENT.
V. GOVERNING LAW. THIS AGREEMENT IS BEING MADE AND EXECUTED IN AND IS
INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK, AND SHALL BE GOVERNED,
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF
THE STATE OF NEW YORK.
VI. VALIDITY. THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OR
PROVISIONS OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH SHALL REMAIN IN FULL FORCE AND
EFFECT.
VII. NOTICES. ANY NOTICE, REQUEST, CLAIM, DEMAND, DOCUMENT AND OTHER
COMMUNICATION HEREUNDER TO ANY PARTY SHALL BE EFFECTIVE UPON RECEIPT (OR REFUSAL
OF RECEIPT) AND SHALL BE IN WRITING AND DELIVERED PERSONALLY OR SENT BY TELEX,
TELECOPY, OR CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, AS FOLLOWS:
IF TO THE COMPANY, TO THE ATTENTION OF LEO LIEBOWITZ AT:
125 JERICHO TURNPIKE
JERICHO, NEW YORK 11753
If to the Executive, to him at the address set forth below under his
signature;
or at any other address as any party shall have specified by notice in writing
to the other parties.
I. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN SEVERAL COUNTERPARTS,
EACH OF WHICH SHALL BE DEEMED TO BE AN ORIGINAL, BUT ALL OF WHICH TOGETHER WILL
CONSTITUTE ONE AND THE SAME AGREEMENT.
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<PAGE> 7
II. ENTIRE AGREEMENT. THE TERMS OF THIS AGREEMENT ARE INTENDED BY THE
PARTIES TO BE THE FINAL EXPRESSION OF THEIR AGREEMENT WITH RESPECT TO THE
EMPLOYMENT OF THE EXECUTIVE BY THE COMPANY AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS AGREEMENT. THE PARTIES FURTHER INTEND
THAT THIS AGREEMENT SHALL CONSTITUTE THE COMPLETE AND EXCLUSIVE STATEMENT OF ITS
TERMS AND THAT NO EXTRINSIC EVIDENCE WHATSOEVER MAY BE INTRODUCED IN ANY
JUDICIAL, ADMINISTRATIVE, OR OTHER LEGAL PROCEEDING TO VARY THE TERMS OF THIS
AGREEMENT.
III. AMENDMENTS; WAIVERS. THIS AGREEMENT MAY NOT BE MODIFIED, AMENDED, OR
TERMINATED EXCEPT BY AN INSTRUMENT IN WRITING, SIGNED BY THE EXECUTIVE AND THE
COMPANY. BY AN INSTRUMENT IN WRITING SIMILARLY EXECUTED, THE EXECUTIVE OR THE
COMPANY MAY WAIVE COMPLIANCE BY THE OTHER PARTY WITH ANY PROVISION OF THIS
AGREEMENT THAT SUCH OTHER PARTY WAS OR IS OBLIGATED TO COMPLY WITH OR PERFORM,
PROVIDED, HOWEVER, THAT SUCH WAIVER SHALL NOT OPERATE AS A WAIVER OF, OR
ESTOPPEL WITH RESPECT TO, ANY OTHER OR SUBSEQUENT FAILURE. NO FAILURE TO
EXERCISE AND NO DELAY IN EXERCISING ANY RIGHT, REMEDY, OR POWER HEREUNDER
PRECLUDE ANY OTHER OR FURTHER EXERCISE OF ANY OTHER RIGHT, REMEDY, OR POWER
PROVIDED HEREIN OR BY LAW OR IN EQUITY.
IV. NO INCONSISTENT ACTIONS; COOPERATION.
A. THE PARTIES HERETO SHALL NOT VOLUNTARILY UNDERTAKE OR FAIL TO
UNDERTAKE ANY ACTION OR COURSE OF ACTION INCONSISTENT WITH THE PROVISIONS
OR ESSENTIAL INTENT OF THIS AGREEMENT. FURTHERMORE, IT IS THE INTENT OF THE
PARTIES HERETO TO ACT IN A FAIR AND REASONABLE MANNER WITH RESPECT TO THE
INTERPRETATION AND APPLICATION OF THE PROVISIONS OF THIS AGREEMENT.
B. EACH OF THE PARTIES HERETO SHALL COOPERATE AND TAKE SUCH ACTIONS, AND
EXECUTE SUCH OTHER DOCUMENTS AS MAY BE REASONABLY REQUESTED BY THE OTHER IN
ORDER TO CARRY OUT THE PROVISIONS AND PURPOSES OF THIS AGREEMENT.
V. NO ALIENATION OF BENEFITS. TO THE EXTENT PERMITTED BY LAW THE BENEFITS
PROVIDED BY THIS AGREEMENT SHALL NOT BE SUBJECT TO GARNISHMENT, ATTACHMENT OR
ANY OTHER LEGAL PROCESS BY THE CREDITORS OF THE EXECUTIVE, HIS BENEFICIARY OR
HIS ESTATE.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
EXECUTIVE
-----------------------------
VINCENT J. DELAURENTIS
ADDRESS
GETTY PETROLEUM MARKETING INC.,
A MARYLAND CORPORATION
BY:
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Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- -------------------------------------------------------------------------------
Getty Petroleum OVERVIEW AND OUTLOOK
Marketing Inc. Getty Petroleum Marketing Inc., a Maryland corporation (the
and Subsidiaries "Company"), was formed on October 1, 1996 as a wholly-owned
subsidiary of Getty Petroleum Corp., the successor to which
is now known as Getty Realty Corp. ("Realty"). Realty
separated its petroleum marketing business from its real
estate business with each business to be conducted by a
separate, New York Stock Exchange listed company. In order
to effect the separation of these businesses, Realty
transferred to the Company the assets and liabilities of its
petroleum marketing business and the New York Mid-Hudson
Valley heating oil business, and on March 21, 1997
distributed all of the common shares of the Company to the
stockholders of Realty.
The Company is one of the nation's largest independent
marketers of petroleum products. It distributes, markets and
sells gasoline and diesel fuel to the general public through
a network of 1,263 Getty and other branded retail outlets
located in 12 Northeastern and Middle-Atlantic states,
certain of which also have convenience food stores. The
Company also sells gasoline, fuel oil, diesel fuel and
kerosene in truckload and barge quantities on a wholesale
basis. The Company purchases its gasoline, fuel oil and
related petroleum products from a number of Northeast and
Middle-Atlantic suppliers. These products are delivered by
cargo ship, barge, pipeline and truck to the Company's 10
storage and distribution terminals and bulk plants, all of
which are located in the Company's distribution region. The
Company distributes and markets its products to retail
outlets through its distribution network, its truck
transportation fleet and also through common carriers. The
Company engages in activities such as negotiating the prices
and terms in connection with the purchase of petroleum
products, developing the prices, terms and methods of
selling the products to its customers, monitoring
compliance by the service station and convenience store
operators with its retail standards program and providing
marketing services to the operators.
The Company also derives revenues from its heating oil
business, which involves the purchase, storage,
transportation and sale of fuel oil, kerosene and propane,
and oil burner and related services to residential and
commercial customers in the New York Mid-Hudson Valley
region.
Petroleum products are commodities whose prices depend
on numerous factors beyond the Company's control including
global, national and regional factors and, accordingly, such
prices may vary substantially over time. From time to time,
competitive market conditions may limit the Company's
ability to pass on to its customers large, rapid changes in
the price the Company pays for its products and,
accordingly, its operating margins may vary substantially.
Because the Company's operating margins may vary
significantly from time to time while certain of its
expenses do not, its earnings may fluctuate substantially.
RESULTS OF OPERATIONS
Fiscal year ended January 31, 1999 compared to fiscal year
ended January 31, 1998
Sales and operating revenues for the year ended January
31, 1999 ("fiscal 1999") were $660.8 million as compared
with $891.1 million for the year ended January 31, 1998
("fiscal 1998"). The 25.9% decrease in sales and operating
revenues was primarily due to a 19.2% decrease in sales
prices and a 9.5% decrease in sales volume. Total gallonage
sold in fiscal 1999 decreased by 101.3 million gallons to
959.2 million gallons, primarily because of the termination
of a wholesale supply contract as of December 31, 1997.
Wholesale gallonage sold decreased by 134.8 million gallons
or 57.9% to 98.1 million gallons and heating oil decreased
by 2.7 million gallons or 10.3% to 24.0 million gallons,
principally due to warmer weather. These gallonage declines
were partially offset by an increase in retail gallonage
sold of 36.2 million gallons or 4.5% to 837.2 million
gallons. The average gasoline volume per retail outlet
decreased by 0.6% to 770,000 gallons per outlet.
Gross profit before depreciation and amortization was
$36.6 million for fiscal 1999 as compared to $43.9 million
in fiscal 1998. The $7.3 million decrease was principally
due to a decrease in retail product margins of approximately
0.4 cents per gallon which resulted in a reduction of $3.5
million of gross profit. In addition, gross profit declined
due to $2.2 million of higher environmental and maintenance
expenses during the current year and a LIFO benefit of $2.5
million which was recorded during the prior year.
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
not possible to predict with any degree of accuracy future
product margin levels. However, the Company believes that it
has only been modestly affected by inflation since increased
costs are passed along to its customers to the extent
permitted by competition.
Other income was $1.5 million in fiscal 1999 as
compared to $1.7 million for fiscal 1998. The decrease was
primarily due to a $0.2 million legal charge related to the
Company's Mount Vernon terminal.
Selling, general and administrative expenses amounted
to $20.0 million for fiscal 1999, a decrease of $5.8 million
or 22.4% from the $25.8 million for fiscal 1998. The
decrease was primarily due to a stock compensation credit of
$2.1 million recorded during fiscal 1999 and a charge of
$4.2 million recorded during fiscal 1998 for stock
compensation resulting from changes in the Company's stock
prices during the respective periods.
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<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Continued
- -------------------------------------------------------------------------------
Getty Petroleum Depreciation and amortization was $15.9 million for
Marketing Inc. fiscal 1999 as compared with $13.6 million for fiscal 1998.
and Subsidiaries The increase was due to higher depreciation as a result of
additions to equipment and improvements to facilities.
Interest expense of $0.9 million in fiscal 1999
increased by $0.1 million over fiscal 1998 interest expense
of $0.8 million, primarily due to interest on higher dealer
security deposits.
Severance charges of $0.2 million were recorded during
fiscal 1999 in connection with a work force reduction of six
employees and $2.2 million were recorded during fiscal 1998
related to the resignations of two Company officers.
A "change of control" charge of $0.6 million was
recorded during fiscal 1998 in connection with the spin-off.
Pre-tax earnings for fiscal 1999 were $1.1 million,
comprised of a pre-tax loss of $0.4 million from the
petroleum marketing business and pre-tax earnings of $1.5
million from the Company's heating oil business. For fiscal
1998, pre-tax earnings were $2.6 million, comprised of $0.8
million of pre-tax earnings from the petroleum marketing
business and $1.8 million from the Company's heating oil
business.
For fiscal 1999, the Company had net earnings of $0.6
million or $.04 per diluted share as compared with $1.2
million or $.09 per diluted share for the prior fiscal year.
Fiscal year ended January 31, 1998 compared to fiscal year
ended January 31, 1997
Sales and operating revenues for fiscal 1998 were
$891.1 million as compared with $888.4 million for the year
ended January 31, 1997 ("fiscal 1997"). The 0.3% increase in
sales and operating revenues for fiscal 1998 was primarily
due to an increase in sales volume, partially offset by a
decrease in sales prices. Retail gallonage sold increased by
32.6 million gallons or 4.2% to 800.9 million gallons,
partially offset by a 5.1 million gallon or 2.1% decrease in
wholesale gallonage sold to 232.8 million gallons, and a
decrease in average selling prices of 2.2%. During fiscal
1998, the average gasoline volume per retail outlet
increased by 3.5% to 775,000 gallons per outlet.
Gross profit before depreciation and amortization was
$43.9 million for fiscal 1998 compared to $9.2 million in
fiscal 1997. This $34.7 million increase was principally due
to a $21.2 million pre-tax charge recorded in the fourth
quarter of fiscal 1997 related to a revision of the
Company's estimated future environmental costs (see
"Environmental Matters"). During fiscal 1998, the Company's
increased retail sales volume of 32.6 million gallons added
$3.1 million in gross profit while higher retail product
margins of approximately 0.8 cents per gallon generated $6.1
million of additional gross profit. In addition, the Company
recorded a LIFO benefit of $2.5 million during fiscal 1998,
reversing a LIFO charge of $2.5 million which was recorded
during fiscal 1997.
Other income was $1.7 million in fiscal 1998 as
compared to $0.2 million for fiscal 1997. The increase was
primarily due to $1.0 million of net fees received from
Realty under an administrative services agreement and $0.5
million of additional investment income.
Selling, general and administrative expenses amounted
to $25.8 million for fiscal 1998, an increase of $5.5
million or 27.0% over the $20.3 million for fiscal 1997. The
increase was primarily due to $4.2 million of stock
compensation expense resulting from appreciation of the
Company's stock price during fiscal 1998 and $0.6 million
relating to the Company's Employee Stock Ownership Plan.
Depreciation and amortization was $13.6 million for
fiscal 1998, which was comparable to the $13.9 million
expense for fiscal 1997.
Interest expense of $0.8 million in fiscal 1998
increased by $0.4 million over fiscal 1997 interest expense
of $0.4 million, primarily due to interest on higher dealer
security deposits.
A severance charge of $2.2 million was recorded during
fiscal 1998 relating to the resignations of the Company's
Senior Vice President and Chief Operating Officer and the
Vice President of Marketing.
A "change of control" charge of $.6 million was
recorded during fiscal 1998 in connection with the spin-off.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1999, the Company had a working capital
deficit of $2.5 million as compared to positive working
capital of $5.8 million as of January 31, 1998. The decrease
in working capital was primarily due to $21.5 million of
capital expenditures and $3.8 million of acquisitions,
partially offset by working capital generated during the
year from operations. The Company is able to operate its
business with negative working capital, principally because
most sales are for cash and payment terms have been received
from vendors and for gasoline taxes.
The Company's principal source of liquidity is its cash
flows from operations, which amounted to $18.9 million
during the fiscal year ended January 31, 1999. Management
believes that cash requirements for operations, including
rental payments required under the master lease with Realty
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. As of
January 31, 1999, $1.9 million of the lines of credit were
utilized for short-term borrowings and $2.0 million were
utilized in connection with outstanding letters of credit to
support the Company's insurance programs. Borrowings under
the 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. The lines of credit are
subject to renewal at the discretion of the banks.
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- -------------------------------------------------------------------------------
During fiscal 1999, the Company experienced product
cost decreases of approximately 16 cents per gallon which
resulted in lower sales prices to customers and lower
accounts receivable balances as compared to January 31,
1998. In addition, the Company's inventory and accounts
payable balances decreased as of January 31, 1999, in
comparison to the prior fiscal year end, principally due to
the product cost declines.
As of January 31, 1999, the Company leased 1,013 retail
outlets and 10 terminal facilities from Realty under a
master lease agreement. The annual rental expense under the
master lease for fiscal 1999 was $56.4 million.
The Company's capital expenditures for the fiscal years
ended January 31, 1999, 1998 and 1997 amounted to $21.5
million, $19.1 million and $17.8 million, respectively,
which included $10.0 million for the replacement of
underground storage tanks ("USTs") in 1997. The Company's
capital expenditures include discretionary expenditures to
improve the image of the retail outlets, to improve the
terminal facilities and for routine replacement of service
station equipment at existing and newly acquired locations.
In accordance with the master lease agreement and the
reorganization and distribution agreement with Realty
pursuant to which the spin-off was effected, commencing
February 1, 1997, expenditures with respect to tank
replacements required to meet the 1998 federal standards
have remained the responsibility of, and will be paid by,
Realty.
In addition, during fiscal 1999, the Company expended
$2.1 million related to the acquisition of a heating oil
business and $1.7 million for improvements to 21 additional
properties which the Company commenced leasing in the last
quarter of fiscal 1999.
ENVIRONMENTAL MATTERS
The petroleum products industry is subject to numerous
existing federal, state and local laws and regulations,
including matters relating to the protection of the
environment. Environmental expenses have been attributable
to remediation, monitoring, soil disposal and governmental
agency reporting (collectively, "Remediation Costs")
incurred in connection with contaminated sites and the
replacement or upgrading of USTs to meet federal, state and
local environmental standards, as well as routine monitoring
and tank testing. Environmental exposures are difficult to
assess and estimate for numerous reasons, including the
extent of contamination, alternative treatment methods that
may be applied, location of the property which subjects it
to differing local laws and regulations and their
interpretations, as well as the time it takes to remediate
contamination. In developing the estimates of environmental
remediation costs, consideration is given to, among other
things, enacted laws and regulations, assessments of
contamination, currently available technologies for
treatment, alternative methods of remediation and prior
experience. Estimates of such costs are subject to change as
contingencies become more clearly defined and remediation
treatment progresses. For the fiscal years ended January 31,
1999, 1998 and 1997, environmental expenses included in the
Company's cost of sales and operating expenses amounted to
$2,774,000, $1,375,000 and $22,822,000, respectively, of
which $21,182,000 was paid by Realty in fiscal 1997.
Under the master lease, Realty committed to a program
to bring the leased properties requiring remediation to
regulatory closure and, thereafter, transfer all future
environmental risks from Realty to the Company. Upon
achieving closure of each individual site, Realty's
environmental liability under the master lease for that site
will be satisfied, and future remediation obligations will
be the responsibility of the Company. In order to establish
the Remediation Costs obligation and estimate the
incremental cost of accelerated remediation, the Company and
Realty commissioned a detailed property-by-property
environmental study of all retail outlets, with the
objective of achieving closure in approximately five years.
This acceleration program, utilizing new, more effective
remediation techniques, resulted in a substantial increase
in environmental costs over those that had been previously
identified and accrued, as the acceleration program
contemplated the use of additional active remediation
systems at many sites in lieu of relying on periodic
monitoring and natural attenuation permitted by applicable
environmental regulations. As a result, the Company revised
its estimate of future Remediation Costs in the fourth
quarter of fiscal 1997 and recorded a pre-tax charge in such
quarter for Remediation Costs of $21.2 million. The pre-tax
charge resulted from the acceleration of remediation
activities to be paid by Realty through more aggressive
means of treating contaminated sites to bring them to
closure in approximately five years, which resulted in
significant incremental Remediation Costs, changes in
estimated Remediation Costs at previously identified
properties, including costs to be incurred in connection
with UST upgrades, and additional charges to comply with
AICPA Statement of Position 96-1, "Environmental Remediation
Liabilities."
Realty has agreed to pay all costs relating to, and to
indemnify the Company for, all scheduled known pre-spin-off
environmental liabilities and obligations, all scheduled
upgrades necessary to cause USTs to conform to the 1998
federal standards, and all environmental liabilities and
obligations arising out of discharges with respect to
properties containing USTs that have not been upgraded to
meet the 1998 federal standards that are discovered prior to
the date such USTs are upgraded to meet the 1998 federal
standards (collectively, the "Realty Environmental
Liabilities"). Realty will also collect recoveries from
state UST remediation funds related to Realty Environmental
Liabilities.
The Company has not reflected a liability for the
Realty Environmental Liabilities in its consolidated balance
sheet since Realty remains the primary obligor for such
liabilities. The liabilities, which were initially recorded
in the Company's balance sheet, were subsequently
capitalized into stockholders' equity as a contribution to
capital by Realty to the Company.
11
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Continued
- -------------------------------------------------------------------------------
Getty Petroleum In the unlikely event that Realty fails to remediate a
Marketing Inc. contaminated property and the Company is held jointly and
and Subsidiaries severally responsible for the Remediation Costs, Realty is
obligated to indemnify the Company, and any Remediation
Costs paid by the Company will be offset against the
Company's rental obligations under the master lease. Because
of such rental offset, it is remote that the Company would
incur any incremental costs in connection with any such
remediation.
The Company will be responsible for, and will indemnify
Realty with respect to, all environmental obligations and
liabilities other than the Realty Environmental Liabilities.
As of January 31, 1999 and 1998, the Company had accrued
$1,415,000 and $442,000, respectively, as management's best
estimate for environmental remediation costs. In view of the
uncertainties associated with environmental expenditures,
however, the Company believes it is possible that such
expenditures could be substantially higher. Any additional
amounts will be reflected in the Company's financial
statements as they become known. Although future
environmental expenditures may have a significant impact on
results of operations for any single fiscal year or interim
period, the Company believes that such costs will not have a
material adverse effect on the Company's financial position.
The Company cannot predict what environmental
legislation or regulations may be enacted in the future or
how existing laws or regulations will be administered or
interpreted with respect to products or activities to which
they have not previously been applied. Compliance with more
stringent laws or regulations as well as more vigorous
enforcement policies of the regulatory agencies or stricter
interpretation of existing laws which may develop in the
future, could have an adverse effect on the financial
position or operations of the Company and could require
substantial additional expenditures for future remediation
or the installation and operation of required environmental
or pollution control systems and equipment.
TERMINATION OF WHOLESALE SUPPLY CONTRACT
On December 31, 1997, the leases and supply contract
with Uni-Marts, Inc. were terminated. As a result of the
termination of the supply contract pursuant to which the
Company previously supplied an additional 190 Uni-Marts
controlled locations, the Company's sales of petroleum
products were reduced by approximately 84 million gallons
per annum, or about 8% of the Company's total annual volume
from fiscal 1998. Product sales to Uni-Marts had been on a
lower margin, wholesale basis, and the loss of sales volume
was substantially offset in fiscal 1999 by higher retail
margin sales at the Getty-controlled locations previously
leased to Uni-Marts. The termination of the Uni-Marts
leases, however, negatively affected the Company's results
of operations for fiscal 1999 by approximately $4.0 million
in comparison to fiscal 1998 due to higher maintenance
charges, lower rental income received as a result of the
Company's decision to divest, temporarily close or Company
operate certain locations and higher depreciation charges
related to equipment purchased and capital improvements made
to the locations.
On January 30, 1998, the Company purchased, for
investment purposes, 487,000 shares or approximately 7.3% of
Uni-Marts, Inc. Common Stock for $1,461,000, all of which
was funded by available cash. As of January 31, 1999 and
1998, the fair market value of such shares recorded in the
Company's consolidated balance sheets was $1,339,000 and
$1,705,000, respectively.
YEAR 2000
The Year 2000 issue has arisen because for many years some
computer software programs and systems have utilized only
two digits to specify the year. As a result, these programs
and systems may not be able to recognize and process dates
beyond 1999, which may cause these programs to malfunction
or not be able to accurately process information.
The Company has implemented a Year 2000 program for its
internal systems and equipment relating to its information
technology systems and non-information technology systems
which has four phases: (1) identification; (2) assessment;
(3) remediation (including modification, upgrading and
replacement); and (4) testing. The identification and
assessment phases for all of the Company's significant
internal business systems and equipment are complete. Of the
information technology systems that require modification,
approximately 90% have been remediated as of January 31,
1999. The remediation phase is expected to be completed in
April 1999. Most of the remediation phase consists of
modifying existing systems and programs. Testing of systems
and programs following remediation is expected to be
completed by July 31, 1999.
The Company is also reviewing the Year 2000 readiness
of third parties who provide goods or services which are
essential to the Company's operations, such as the parties
who provide banking services, credit card processing and
product suppliers. The Company has initiated formal
communications with significant third parties in order to
determine the extent to which the Company is vulnerable to
any failure by such third parties to remediate their
respective Year 2000 problems and resolve such problems to
the extent practicable.
The Company is developing a contingency plan to address
issues specific to the Year 2000 problem. The Plan is
expected to include performing certain processes manually,
obtaining replacement systems, changing suppliers where
necessary as well as other appropriate measures.
The Company's senior management and the Board of
Directors receive regular updates on the status of the
Company's Year 2000 program. The Company does not expect the
cost of these Year 2000 efforts to be material since the
Company believes the majority of the compliance costs have
been, and will continue to be, funded by reallocating
existing internal resources rather than incurring
incremental costs.
12
<PAGE> 5
- -------------------------------------------------------------------------------
The Year 2000 issue presents a number of risks and
uncertainties that could affect the Company, which include,
but are not limited to, the availability of qualified
personnel and other information technology resources; the
ability to identify and remediate all date sensitive lines
of computer code or to replace embedded computer chips in
affected systems or equipment; and the ability of third
parties to remediate their respective systems. The failure
to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and
adversely affect the Company's results of operations,
liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of
third-party suppliers and customers, the Company is unable
to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition.
SPECIAL FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report may constitute
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. When used
herein, the words "believes", "expects", "plans",
"estimates" and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance and
achievements of the Company to be materially different from
any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors
include, but are not limited to: volatility of petroleum
marketing margins; maturity of the petroleum marketing
industry; the impact of economic growth, energy efficiency
and technology on demand for petroleum products; natural and
political events that may affect the supply of petroleum
products; competition; the effects of regulation; the
Company's expectations as to when it will complete the
remediation and testing phases of its Year 2000 program as
well as its Year 2000 contingency plan; the estimated cost
of achieving Year 2000 readiness; and the Company's belief
that its internal systems and equipment will be Year 2000
compliant in a timely manner.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Getty Petroleum
Marketing Inc. For the years ended January 31,
and Subsidiaries -----------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Revenues $662,292 $892,843 $888,543 $791,194 $753,735
===========================================================================================================
Net earnings (loss) 566 1,181 (15,225)(a) 3,664(b) (2,434)
===========================================================================================================
Net earnings per share (c):
Basic .04 .09
Diluted .04 .09
===========================================================================================================
FINANCIAL POSITION:
Total assets 149,421 146,329 135,500 124,498 117,097
===========================================================================================================
Stockholders' equity 60,220 60,015 54,541 50,311 37,061
===========================================================================================================
</TABLE>
(a) Includes after-tax charge of $12,323 related to revision
of estimate of future environmental costs.
(b) Includes after-tax charge of $282 from the cumulative
effect of adopting Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be
Disposed Of."
(c) The Company was spun-off from Getty Realty Corp. on
March 21, 1997. Accordingly, per share amounts are not
presented for each of the three years ended January 31,
1997.
13
<PAGE> 6
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Getty Petroleum For the years ended January 31,
Marketing Inc. ---------------------------------------------------------------------------------------------------------
and Subsidiaries (in thousands, except per share amounts) 1999 1998 1997
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and operating revenues $660,754 $891,109 $888,388
Other income 1,538 1,734 155
---------------------------------------------------------------------------------------------------------
662,292 892,843 888,543
---------------------------------------------------------------------------------------------------------
Cost of sales and operating expenses
(excluding depreciation and amortization) 624,182 847,234 879,187
Selling, general and administrative expenses 20,006 25,794 20,307
Depreciation and amortization 15,927 13,647 13,922
Interest expense 909 786 426
Severance charges 216 2,175 --
Change of control charge -- 637 --
---------------------------------------------------------------------------------------------------------
661,240 890,273 913,842
---------------------------------------------------------------------------------------------------------
Earnings (loss) before provision (credit) for income taxes 1,052 2,570 (25,299)
Provision (credit) for income taxes 486 1,389 (10,074)
---------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 566 $ 1,181 $(15,225)
=========================================================================================================
Net earnings per share:
Basic $ .04 $ .09
Diluted $ .04 $ .09
---------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 13,422 12,970
Diluted 13,526 13,257
=========================================================================================================
</TABLE>
See accompanying notes.
14
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Getty Petroleum January 31,
Marketing Inc. -----------------------------------------------------------------------------------------------
and Subsidiaries (in thousands, except share data) 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and equivalents $ 6,169 $ 9,798
Investments 1,339 1,705
Accounts receivable, less allowance for doubtful accounts
of $901 in 1999 and $1,208 in 1998 9,458 11,101
Inventories 16,475 20,844
Deferred income taxes 7,315 4,325
Prepaid expenses and other current assets 2,886 2,663
-----------------------------------------------------------------------------------------------
Total current assets 43,642 50,436
Property and equipment, at cost, less accumulated
depreciation and amortization 101,504 93,952
Other assets 4,275 1,941
-----------------------------------------------------------------------------------------------
Total assets $149,421 $146,329
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowings $ 1,900 $ --
Accounts payable 16,781 19,308
Accrued expenses 12,836 11,933
Gasoline taxes payable 13,560 13,039
Income taxes payable 1,086 307
-----------------------------------------------------------------------------------------------
Total current liabilities 46,163 44,587
Deferred income taxes 21,863 20,988
Other, principally deposits 21,175 20,739
-----------------------------------------------------------------------------------------------
Total liabilities 89,201 86,314
-----------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 4 and 7)
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 13,945,156 at January 31, 1999
and 13,835,956 at January 31, 1998 139 138
Paid-in capital 60,446 61,234
Retained earnings 1,747 1,181
Unearned ESOP stock (425,155 shares at January 31, 1999
and 559,415 shares at January 31, 1998) (2,041) (2,685)
Accumulated other comprehensive earnings (loss) (71) 147
-----------------------------------------------------------------------------------------------
Total stockholders' equity 60,220 60,015
-----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $149,421 $146,329
===============================================================================================
</TABLE>
See accompanying notes
15
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Getty Petroleum For the years ended January 31,
Marketing Inc. ---------------------------------------------------------------------------------------------------------
and Subsidiaries (in thousands) 1999 1998 1997
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 566 $ 1,181 $(15,225)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 15,927 13,647 13,922
Deferred income taxes (1,967) (2,099) 7,096
Stock option charge (credit) (1,146) 2,029 --
ESOP charge 645 593 --
Change of control charge -- 637 --
Gain on dispositions of property and equipment (317) (26) (72)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 1,643 4,094 (3,001)
Inventories 4,373 (4,900) 3,973
Prepaid expenses and other current assets 207 2,919 (2,827)
Other assets (650) (198) 257
Accounts payable, accrued expenses and gasoline taxes payable (1,578) 165 (2,442)
Income taxes payable 779 307 --
Other, principally deposits 436 3,527 3,371
---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 18,918 21,876 5,052
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21,492) (19,105) (17,839)
Acquisitions (3,840) -- --
Investments -- (1,461) --
Proceeds from dispositions of property and equipment 527 84 173
---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (24,805) (20,482) (17,666)
---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings 1,900 -- --
Stock options and common stock 358 887 --
Net cash transferred from Getty Realty Corp. -- -- 19,455
---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,258 887 19,455
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents (3,629) 2,281 6,841
Cash and equivalents at beginning of year 9,798 7,517 676
---------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year $ 6,169 $ 9,798 $ 7,517
=========================================================================================================
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 704 $ 390 $ 426
Income taxes, net 1,674 2,739 --
</TABLE>
See accompanying notes.
16
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Getty Petroleum 1. BASIS OF PRESENTATION
Marketing Inc. Getty Petroleum Marketing Inc., a Maryland corporation
and Subsidiaries (the "Company"), was formed on October 1, 1996 as a
(the "Company"), was formed on October 1, 1996 as a
wholly-owned subsidiary of Getty Petroleum Corp., the
successor to which is now known as Getty Realty Corp.
("Realty"). Realty then separated its petroleum marketing
business from its real estate business and, on March 21,
1997, distributed all of the common shares of the Company to
the stockholders of Realty (the "Distribution").
For periods prior to the Distribution, the consolidated
financial statements of the Company contained herein have
been prepared on the basis that the assets and liabilities
of the petroleum marketing business were transferred using
historical carrying values as recorded by Realty, and the
Company's results of operations and cash flows were derived
from Realty's historical financial statements. Assets,
liabilities, revenues and expenses were specifically
identified as being related to either the business of the
Company or Realty, except that the Company's results of
operations included allocations of certain selling, general
and administrative expenses, namely employee benefits,
payroll taxes and travel and entertainment expenses. Such
allocations were generally based on number of personnel and
salaries specifically identified to the Company. Selling,
general and administrative expenses allocated to the Company
from Realty were $1,879,000 for the fiscal year ended
January 31, 1997. Management believes this allocation to be
reasonable. The financial information presented for periods
prior to the Distribution is not necessarily indicative of
the financial results that would have occurred had the
Company been operated as a separate, stand-alone entity
during such reporting periods.
As part of the separation of the petroleum marketing
business from the real estate business, the Company and
Realty entered into various agreements which addressed the
allocation of assets and liabilities between them and govern
future relationships, including a Reorganization and
Distribution Agreement, a Master Lease Agreement, a Tax
Sharing Agreement, a Services Agreement and a Trademark
License Agreement.
Under the terms of the Services Agreement, the Company
provides certain administrative and technical services to
Realty, and Realty provides certain limited services to the
Company. The net fees paid by Realty to the Company for
services performed (after deducting the fees paid by the
Company to Realty for services provided by Realty) were
$960,000 for each of the years ended January 31, 1999 and
1998, and are included in other income in the Company's
consolidated statements of operations.
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly-owned
subsidiaries. The Company is principally engaged in the
marketing and distribution of petroleum products in 12
Northeastern and Middle-Atlantic states. All significant
intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES: The 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 results
could differ from those estimates.
CASH AND EQUIVALENTS: The Company considers highly liquid
investments purchased with an original maturity of three
months or less to be cash equivalents.
INVESTMENTS: Investments, which consist of equity
securities, are all considered available-for-sale and are
carried at fair value, based on quoted market prices, with
unrealized gains or losses excluded from earnings and
reported as a separate component of stockholders' equity
until realized. During the years ended January 31, 1999 and
1998, net unrealized gains (losses) of ($218,000) and
$147,000, respectively, were reported as a separate
component of stockholders' equity (see Note 10).
Inventories: Inventories, primarily finished petroleum
products, are principally accounted for under the lower of
last-in, first-out ("LIFO") cost or market. The Company
enters into product exchange agreements with various
parties to improve its supply logistics and reduce its
delivery costs. Net product exchange positions with other
companies are reflected in inventory and are generally
immaterial. The Company may take positions in the futures
market as part of its overall purchasing strategy in order
to reduce the risk associated with price fluctuations. Gains
and losses on futures contracts are included as a part of
product costs and have been
17
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
- -------------------------------------------------------------------------------
immaterial for each of the three years in the period ended
January 31, 1999. As of January 31, 1999 and 1998,
outstanding futures contracts were immaterial.
PROPERTY AND EQUIPMENT: Expenditures for renewals and
betterments are capitalized; maintenance and repairs are
charged to income when incurred. When property and equipment
is sold or retired, the cost and related accumulated
depreciation and amortization are eliminated from the
respective accounts and any gain or loss is credited or
charged to income.
Depreciation and Amortization: Depreciation of property and
equipment is computed on the straight-line method based upon
the estimated useful lives of the assets. Leasehold
improvements are amortized on the straight-line method over
the shorter of the term of the lease or the useful life of
the related asset.
Insurance: The Company is self-insured for workers'
compensation, general liability and vehicle liability up to
predetermined amounts above which third-party insurance
applies. Accruals are based on the Company's claims
experience and actuarial assumptions followed in the
insurance industry. Due to uncertainties inherent in the
estimation process, actual losses could differ from accrued
amounts.
ENVIRONMENTAL COSTS: The estimated future costs for known
environmental remediation requirements are accrued when it
is probable that a liability has been incurred and the
amount of remediation costs can be reasonably estimated.
Recoveries of environmental costs, principally from state
underground storage tank remediation funds, are accrued as
income when such recoveries are considered probable. Such
accruals are adjusted as further information develops or
circumstances change.
INCOME TAXES: Deferred income taxes are provided for the
effect of items which are reported for income tax purposes
in years different from that in which they are recorded for
financial statement purposes.
REVENUE RECOGNITION: Revenue is recognized from sales when
product ownership is transferred to the customer and from
rentals as earned.
EARNINGS PER SHARE: Basic earnings per share is computed by
dividing net earnings by the weighted average number of
shares of common stock outstanding during the year. Diluted
earnings per share reflects the potential dilution from the
exercise of stock options in the amounts of 104,000 and
287,000 shares for the years ended January 31, 1999 and
1998, respectively. There are no earnings per share amounts
presented for periods prior to the Distribution.
ACCOUNTING CHANGES: In fiscal 1999, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income." The Statement
establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive
income consists of earnings and net unrealized gains and
losses on equity securities (see Note 10). The adoption of
SFAS No. 130 had no effect on the Company's net earnings or
stockholders' equity.
In fiscal 1999, the Company also adopted SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related
Information." The Statement establishes standards for the
way that companies report information about operating
segments (see Note 13).
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The Statement, which is effective
for the fiscal year beginning February 1, 2000, establishes
accounting and reporting standards for derivative
instruments and for hedging activities. The Company is
currently assessing the impact of this new Statement but
does not expect any material effect on its consolidated
financial statements.
- -------------------------------------------------------------------------------
3. INVENTORIES
As of January 31, 1999 and 1998, the carrying value of the
Company's LIFO inventories approximated the first-in,
first-out ("FIFO") inventory method or replacement cost. As
of January 31, 1997, had the Company utilized the FIFO
inventory method, inventories would have been higher by
$2,481,000.
18
<PAGE> 11
- -------------------------------------------------------------------------------
4. LEASES
Effective February 1, 1997, the Company and Realty entered
into a Master Lease Agreement (the "Master Lease") under
which, as of January 31, 1999, 1,013 retail outlets and 10
terminal facilities (the "Properties") were leased or
subleased by Realty as the lessor to the Company as the
lessee. The Properties are used for gasoline sales,
convenience store uses and other complementary or related
lawful uses in conjunction with the sale of petroleum
products and convenience store items, except when the
provisions of any underlying lease are more restrictive. The
Company may sublet any property, provided that the Company
remains fully responsible for a sublessee's performance and,
except in cases of economic abandonment (as described
below), a sublease for non-petroleum purposes will require
Realty's consent. Except for certain environmental
obligations, and obligations pertaining to certain
underground storage tanks, related piping, underground
pumps, wiring and monitoring devices (collectively, the
"USTs"), the Master Lease is a "triple-net" lease, with the
Company having responsibility for all taxes, maintenance,
repairs and insurance. For financial statement purposes, the
Master Lease has been recorded as an operating lease.
Rent for each of the Properties was set using the then
fair market value of each such Property, assuming the USTs
had been upgraded to meet the 1998 federal standards and
such Properties were free of known environmental
contamination, since Realty was responsible for such known
items. Rent for each Property will increase at the end of
each five-year period by the net increase in the Consumer
Price Index for all items in the Northeast Region for such
five-year period, such increase not to exceed fifteen
percent (15%). Rents for all Properties are payable in
advance on the first day of the month. The initial term of
the Master Lease is (i) fifteen years with respect to
Properties owned in fee by Realty and leased to the Company
and (ii) the length of time remaining (which ranges up to
fifteen years under the Master Lease) with respect to
Properties leased by Realty from third parties and subleased
to the Company. The Master Lease terms for each category of
Properties described above also include four ten-year
renewal options (or, with respect to category (ii) above,
such shorter period as the underlying lease may provide),
which may be exercised by the Company with two years advance
notice on an individual property basis for all Properties
then subject to the Master Lease. For the subleased
Properties, Realty has agreed to use reasonable efforts to
extend the underlying lease terms upon conditions acceptable
to the Company. In the event that the Company desires not to
renew the sublease upon terms (including any underlying
lease term extension negotiated by Realty) available to it,
Realty may extend or renew the lease and sublease the
property to a third party after the end of the Company's
term.
The Master Lease provides that if during the lease term
the Company determines that any of the leased premises have
become uneconomic or unsuitable for their use as a service
station or convenience store and has discontinued use of the
property or intends to discontinue use of the property as a
service station or convenience store within one year of the
date of said determination, the Company has the right to
sublet the property for any lawful use without Realty's
consent and, prior to the commencement of any such sublease
term, the Company will remove any USTs on the Property and
thereafter perform all requisite environmental
investigations and/or remediations. The Company has this
right of economic abandonment with respect to no more than
ten properties during any fiscal year of the lease term. The
Company has no right of economic abandonment for the
terminal premises and the premises subject to third party
leases.
Rent expense, which is included in cost of sales and
operating expenses, amounted to $57,007,000, $57,213,000 and
$56,460,000 for the years ended January 31, 1999, 1998 and
1997, respectively, substantially all of which is payable to
Realty under the Master Lease. Future minimum annual
rentals, which have terms in excess of one year as of
January 31, 1999, are as follows:
-----------------------------------------------------------
Other
Years ended January 31, Realty Lessors Total
-----------------------------------------------------------
(in thousands)
2000........................ $ 56,200 $ 1,558 $ 57,758
2001........................ 55,797 1,542 57,339
2002........................ 55,475 1,557 57,032
2003........................ 54,794 1,673 56,467
2004........................ 53,933 1,337 55,270
Thereafter.................. 402,792 5,714 408,506
-----------------------------------------------------------
$678,991 $13,381 $692,372
============================
19
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
- -------------------------------------------------------------------------------
Rent income received under subleases, which is included
in sales and operating revenues, amounted to $34,712,000,
$34,828,000 and $33,312,000 for the years ended January 31,
1999, 1998 and 1997, respectively. Substantially all of
these subleases have remaining terms which range from one to
three years. Although there is no assurance that these
subleases will be renewed, no significant difficulty has
been experienced in subleasing retail outlets.
- -------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
-----------------------------------------------------------
Depreciable
1999 1998 Life (Years)
-----------------------------------------------------------
(in thousands)
Equipment................. $192,160 $178,227 10 to 15
Motor vehicles............ 4,166 3,798 3 to 10
Furniture and fixtures.... 1,404 1,338 10
Leasehold improvements.... 14,619 5,991 See Note 2
----------------------------------------------
212,349 189,354
Less, accumulated
depreciation and
amortization........... 110,845 95,402
----------------------------------------------
$101,504 $ 93,952
===================
- -------------------------------------------------------------------------------
6. ENVIRONMENTAL REMEDIATION COSTS
The petroleum products industry is subject to numerous
existing federal, state and local laws and regulations,
including matters relating to the protection of the
environment. Environmental expenses have been attributable
to remediation, monitoring, soil disposal and governmental
agency reporting (collectively, "Remediation Costs")
incurred in connection with contaminated sites and the
replacement or upgrading of USTs to meet federal, state and
local environmental standards, as well as routine monitoring
and tank testing. For the years ended January 31, 1999, 1998
and 1997, environmental expenses included in the Company's
cost of sales and operating expenses amounted to $2,774,000,
$1,375,000 and $22,822,000, respectively.
Under the Master Lease with Realty, Realty committed to
a program to bring the leased properties requiring
remediation to regulatory closure and, thereafter, transfer
all future environmental risks from Realty to the Company.
In order to establish the Remediation Costs obligation and
estimate the incremental cost of accelerated remediation,
the Company and Realty commissioned a detailed
property-by-property environmental study of all retail
outlets in fiscal 1997, with the objective of achieving
closure in approximately five years. As a result, the
Company revised its estimate of future Remediation Costs in
the fourth quarter of fiscal 1997 and recorded a pre-tax
charge in such quarter for Remediation Costs of $21,182,000.
The pre-tax charge resulted from the acceleration of
remediation activities to be paid by Realty through more
aggressive means of treating contaminated sites to bring
them to closure in approximately five years, which resulted
in significant incremental Remediation Costs, changes in
estimated Remediation Costs at previously identified
properties, including costs to be incurred in connection
with UST upgrades, and additional charges to comply with
AICPA Statement of Position 96-1, "Environmental Remediation
Liabilities."
Realty has agreed to pay all costs relating to, and to
indemnify the Company for, all known pre-Distribution
environmental liabilities and obligations as scheduled in
the Master Lease, all upgrades necessary to cause USTs to
conform to the 1998 federal standards (the "1998 Standards")
as scheduled in the Master Lease, and all environmental
liabilities and obligations arising out of discharges with
respect to properties containing USTs that have not been
upgraded to meet the 1998 Standards that are discovered
prior to the date such USTs are upgraded to meet the 1998
Standards (collectively, the "Realty Environmental
Liabilities").
20
<PAGE> 13
- -------------------------------------------------------------------------------
The Company has not reflected a liability for the
Realty Environmental Liabilities in its consolidated balance
sheet since Realty remains the primary obligor for such
liabilities. In connection with the Distribution, the
liabilities, which were initially recorded in the Company's
balance sheet, were subsequently capitalized into
stockholders' equity as a contribution to capital by Realty
to the Company. In the unlikely event that Realty fails to
remediate a contaminated property and the Company is held
jointly and severally responsible for the Remediation Costs,
Realty is obligated to indemnify the Company, and any
Remediation Costs paid by the Company will be offset against
the Company's rental obligations under the Master Lease.
Because of such rental offset, it is remote that the Company
would incur any incremental costs in connection with any
such remediation.
The Company will be responsible for, and will indemnify
Realty with respect to, all environmental obligations and
liabilities other than the Realty Environmental Liabilities.
As of January 31, 1999 and 1998, the Company had accrued
$1,415,000 and $442,000, respectively, as management's best
estimate for environmental remediation costs. In view of the
uncertainties associated with environmental expenditures,
however, the Company believes it is possible that such
expenditures could be substantially higher. Any additional
amounts will be reflected in the Company's financial
statements as they become known. Although future
environmental expenditures may have a significant impact on
results of operations for any single fiscal year or interim
period, the Company currently believes that such costs will
not have a material adverse effect on the Company's
financial position.
- -------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings in the
ordinary course of its business. Such proceedings are not
expected to have a material adverse effect on the Company's
financial condition or results of operations. Pursuant to
the Distribution Agreement, Realty has agreed to defend all
claims or proceedings that existed prior to the Distribution
and indemnify the Company with respect thereto.
On September 16, 1996, Realty entered into an Agreement
with the New York State Department of Taxation and Finance
(the "Department"), settling the license revocation
proceedings brought by the Department whereby the Company's
wholly-owned subsidiary Getty Terminals Corp.'s ("Getty
Terminals") licenses and permits for its three New York
State terminals and its New York motor fuels and diesel
distributor licenses would be terminated. Prior to the
Distribution, the Company became a party to the Agreement,
and in connection with the Distribution, Kingston Oil Supply
Corp. ("KOSCO") became a subsidiary of the Company. Under
the terms of the Agreement, KOSCO will be permitted to
assume all of the storage and distribution activities and
operations now performed by Getty Terminals in New York.
KOSCO is required to obtain new or amended licenses and
permits and, upon the issuance thereof, Getty Terminals will
surrender its licenses and permits. KOSCO's Board of
Directors consists of three persons, one of whom is an
independent director, and KOSCO provides periodic reports to
the Department relating to New York tax laws. The Agreement
terminates on September 15, 1999. Under the terms of the
settlement, no penalties or fines are payable. The
implementation of the settlement will have no adverse impact
on the results of operations, financial condition or
liquidity of the Company, including the ability to sell
motor fuels in New York or operate its New York State
terminals.
In order to minimize the Company's exposure to credit
risk associated with financial instruments, the Company
places its temporary cash investments with high credit
quality institutions and, by policy, limits the amount
invested with any one institution other than the U.S.
Government. Concentration of credit risk with respect to
trade receivables generally is limited due to the large
number of customers comprising the Company's customer base.
As of January 31, 1999, the Company had uncommitted
lines of credit with three banks in the aggregate amount of
$60,000,000, of which $1,900,000 was utilized for working
capital borrowings and $2,000,000 was utilized in the form
of outstanding letters of credit to support the Company's
insurance programs. Borrowings under the 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. The lines of credit are subject to renewal
at the discretion of the banks.
21
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
- -------------------------------------------------------------------------------
The Company's financial results depend largely on
retail marketing margins and rental income from its dealers.
Retail marketing margins in the petroleum marketing industry
have been and continue to be volatile and highly
competitive. The cost of petroleum products purchased by the
Company as well as the price of petroleum products sold have
fluctuated widely in the past. As a result of the historic
volatility of product margins and the fact that they are
affected by numerous diverse factors, it is not possible to
predict with any degree of accuracy future product margin
levels.
- -------------------------------------------------------------------------------
8. INCOME TAXES
The Company and Realty have entered into a Tax Sharing
Agreement that defines the parties' rights and obligations
with respect to filing of returns, payments, deficiencies
and refunds of federal, state and other income, franchise or
motor fuel taxes relating to Realty's business for tax years
prior to and including the Distribution and with respect to
certain tax attributes of Realty after the Distribution. In
general, the Tax Sharing Agreement provides that Realty will
be responsible for all federal, state and local tax
liabilities that relate to periods (or portions thereof)
ending on or prior to the Distribution. For periods
subsequent to the Distribution, the Company will file its
own tax returns. The provision for income taxes is reflected
in the consolidated financial statements as if Marketing
had been operating on a stand-alone basis for periods prior
to the Distribution.
The provision (credit) for income taxes is summarized
as follows:
-----------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------
(in thousands)
Federal:
Current.................. $ 1,806 $ 2,483 $(12,534)
Deferred................. (1,475) (1,499) 5,322
State and local:
Current.................. 647 908 (4,636)
Deferred................. (492) (503) 1,774
-----------------------------------------------------------
Provision (credit) for
income taxes............. $ 486 $ 1,389 $(10,074)
==============================
The tax effects of temporary differences which comprise
the deferred tax assets and liabilities are as follows:
-----------------------------------------------------------
1999 1998
-----------------------------------------------------------
(in thousands)
Property and equipment..... $(21,826) $(21,503)
Accruals................... 3,109 3,249
Inventories................ 4,169 1,591
-----------------------------------------------------------
Net deferred tax
liabilities.............. $(14,548) $(16,663)
===================
The following is a reconciliation of the expected
statutory federal income tax provision (credit) and the
actual provision (credit) for income taxes:
-----------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------
in thousands)
Expected provision (credit)
at statutory federal
income tax rate.......... $ 358 $ 874 $ (8,856)
State and local income
taxes, net of federal
benefit.................. 102 267 (1,716)
Other...................... 26 248 498
-----------------------------------------------------------
Provision (credit) for
income taxes............. $ 486 $ 1,389 $(10,074)
==============================
22
<PAGE> 15
- -------------------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS
The Company has a retirement and profit sharing plan with
deferred 401(k) savings plan provisions (the "Retirement
Plan") for non-union employees meeting certain service
requirements and a Supplemental Plan for executives. Under
the terms of these plans, the annual discretionary
contributions to the plans are determined by the Board of
Directors. Under the Retirement Plan, employees may make
voluntary contributions and the Company has elected to match
an amount equal to 50% of such contributions but in no event
more than 3% of the employee's eligible compensation. Under
the Supplemental Plan, participating executives may receive
an amount equal to 10% of their compensation, reduced by the
amount of any contributions allocated to such executives
under the Retirement Plan. Contributions to the Retirement
Plan and Supplemental Plan, net of forfeitures, made by the
Company, or by Realty prior to the Distribution in respect
of persons who are Company employees, approximated $569,000,
$470,000 and $557,000 for the years ended January 31, 1999,
1998, and 1997, respectively. In addition, the Company has
contributed $342,000, $345,000 and $328,000 to a union
welfare plan for the years ended January 31, 1999, 1998 and
1997, respectively. Such amounts are included in the
accompanying consolidated statements of operations.
In connection with the Distribution, the Company
established in April 1997 a leveraged Employee Stock
Ownership Plan (the "ESOP") that purchased newly issued
shares of Common Stock from the Company equal to five
percent of the then outstanding shares of the Company. The
ESOP purchased such newly-issued shares from the Company
using the proceeds of a loan made by the Company to the
ESOP. The ESOP loan is being repaid over a five-year
period, and the Company contributes annually to the ESOP the
funds required to repay such loan. The original principal
amount of the ESOP loan was equal to the number of shares
purchased by the ESOP (671,298) multiplied by the purchase
price per share of $4.80. Allocations to participants'
accounts will aggregate approximately 134,260 shares of
Company Common Stock per year and will be allocated to
covered employees in proportion to compensation over a
five-year period. The Company recognized a charge to
operating results of $645,000 and $593,000 for the years
ended January 31, 1999 and 1998, respectively, relating to
the ESOP based on the average market value of the Common
Stock during the respective years. The ESOP had 537,038 and
671,298 suspense shares at January 31, 1999 and 1998,
respectively, of which 111,883 shares were committed to be
released as of each respective period.
Immediately prior to the Distribution, each holder of
an option to acquire shares of Realty Common Stock pursuant
to Realty's Stock Option Plans received, in exchange
therefor, two separately exercisable options: one to
purchase shares of Realty Common Stock (a "Realty Option")
and one to purchase Marketing Common Stock (a "Marketing
Option"), each exercisable for the same number of shares and
containing substantially equivalent terms as the
pre-Distribution option. The exercise price of each Realty
Option and Marketing Option (each, a "Replacement Option")
was set so as to preserve the Aggregate Spread (as defined
below) in value attributed to the options held by such
directors, officers and key employees. The "Aggregate
Spread" is an amount representing the difference between the
exercise price of an option and the price of a share of
Realty Common Stock immediately prior to the Distribution
multiplied by the number of shares underlying such option.
Certain previously unexercisable options covering a total of
223,587 shares became immediately exercisable at the date of
the Distribution for persons covered by "change of control"
agreements. Accordingly, the Company recognized a charge to
operating results of $637,000 at the date of the
Distribution equal to the product of the number of such
options and the difference between their exercise price and
the market price.
The Company's Stock Option Plan authorizes the Company
to grant options to purchase shares of the Company's Common
Stock. The aggregate number of shares of the Company's
Common Stock which may be made the subject of options under
the Stock Option Plan will not exceed 2,000,000 shares,
subject to further adjustment for stock dividends and stock
splits. The Stock Option Plan provides that options are
exercisable starting one year from the date of grant, on a
cumulative basis at the annual rate of 25 percent of the
total number of shares covered by the option.
23
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
- -------------------------------------------------------------------------------
The following is a schedule of stock option prices and
activity relating to the Marketing Stock Option Plan (and
Realty Stock Option Plan prior to the Distribution) for the
three fiscal years ended January 31, 1999:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------
WEIGHTED Weighted Weighted
NUMBER AVERAGE Number Average Number Average
OF EXERCISE of Exercise of Exercise
SHARES PRICE Shares Price(a) Shares Price(a)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year... 851,586 $4.44 1,014,226 $3.02 927,428 $2.96
Granted.................. 71,750 3.25 410,389 5.87 166,400 3.35
Exercised................ (86,251) 2.92 (461,542) 2.89 ( 29,519) 2.63
Cancelled................ (10,374) 5.97 (111,487) 3.19 (50,083) 3.17
--------------------------------------------------------------------------------------------
Outstanding at
end of year......... 826,711 $4.48 851,586 $4.44 1,014,226 $3.02
===============================================================
Exercisable at
end of year......... 568,245 $4.21 594,026 $3.86 687,761 $3.04
===============================================================
Available for grant at
end of year......... 681,045 42,421 176,881
===============================================================
</TABLE>
(a) In connection with the Distribution, each Realty Option
was reformed into separate options for Realty Common
Stock and Marketing Common Stock. The exercise price
of each reformed Marketing Option shown herein,
except grants in 1998, represents 22.71% of the
original exercise price.
The following table summarizes information concerning
options outstanding and exercisable at January 31, 1999:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life (Years) Price Exercisable Price
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.47-4.23............... 426,696 6 $3.17 353,509 $3.15
5.69-6.00............... 400,015 7 5.87 214,736 5.94
--------------------------------------------------------------------------------------------
826,711 568,245
===============================================================
</TABLE>
The Company accounts for its stock-based employee
compensation plans under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." The
Company recorded a stock compensation (credit) charge of
$(2,087,000) and $4,203,000 for the years ended January 31,
1999 and 1998, respectively, since certain options required
variable plan accounting treatment.
Had compensation cost for the Company's Plans been
determined based upon the fair value methodology prescribed
under SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net earnings (loss) and net
earnings (loss) per share on a diluted basis would have
resulted in the following pro forma amounts:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------
AS REPORTED PRO FORMA As Reported Pro Forma As Reported Pro Forma
-------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net earnings (loss)...... $566 $(112) $1,181 $1,755 $(15,225) $(15,380)
Net earnings (loss)
per share.............. .04 (.01) .09 .13 (a) (a)
</TABLE>
(a) The Company was spun-off from Getty Realty Corp. on
March 21, 1997. Accordingly, per share amounts are
not presented for fiscal 1997.
24
<PAGE> 17
- -------------------------------------------------------------------------------
The fair value of the options granted during fiscal
1999, 1998 and 1997 were estimated as $1.91, $3.03 and $1.47
per share, respectively, on the date of grant using the
Black-Scholes option pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
-----------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield............... 0% 0% 0%
Expected volatility................... 38% 37% 35%
Risk-free interest rate............... 5.1% 5.6% 6.2%
Expected life of options (years)...... 7 6 5
</TABLE>
- -------------------------------------------------------------------------------
10. STOCKHOLDERS' EQUITY
A summary of the changes in stockholders' equity for the
three years ended January 31, 1999 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated
Capital Stock Other ESOP
---------------- Paid-in Retained Comprehensive --------------
Shares Amount Capital Earnings Earnings (Loss) Shares Amount Total
- -----------------------------------------------------------------------------------------------------------------------------
in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1996........... -- $ -- $ 50,311 $ -- $ -- -- $ -- $ 50,311
Net loss............................ (15,225) (15,225)
Net cash transferred from Realty.... 19,455 19,455
Issuance of common stock............ 1 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1997........... 1 -- 54,541 -- -- -- -- 54,541
Distribution of stock in spin-off 12,754 127 (127) --
Comprehensive earnings:
Net earnings........................ 1,181 1,181
Net unrealized gain
on equity securities.............. 147 147
--------
Total.......................... 1,328
--------
Issuance of stock to ESOP........... 671 7 3,215 (671) (3,222) --
ESOP stock committed
to be released.................... 56 112 537 593
Issuance of common stock............ 3 -- 18 18
Stock options....................... 406 4 3,531 3,535
---------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1998........... 13,835 138 61,234 1,181 147 (559) (2,685) 60,015
Comprehensive earnings:
Net earnings........................ 566 566
Net unrealized loss
on equity securities.............. (218) (218)
--------
Total.......................... 348
--------
ESOP stock committed
to be released...................... 1 134 644 645
Issuance of common stock............ 24 -- 107 107
Stock options....................... 86 1 (896) (895)
--------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1999........... 13,945 $139 $ 60,446 $1,747 $ (71) (425) $(2,041) $60,220
====================================================================================
</TABLE>
25
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
- --------------------------------------------------------------------------------
11. Quarterly Financial Data
The following is a summary of the quarterly results of
operations for the years ended January 31, 1999 and 1998
(unaudited as to quarterly information):
--------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Three months ended Year ended
------------------------------------------------------------------------------------------------------------
Fiscal 1999: April 30 July 31 October 31 January 31 January 31
------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues................................. $170,911 $173,230 $159,148 $159,003 $662,292
Gross profit (a)......................... 3,486 6,190 9,308 17,588 36,572
Depreciation and amortization............ 3,717 3,784 3,889 4,537 15,927
Earnings (loss) before income taxes...... (5,470) (2,492) 165 8,849 1,052
Net earnings (loss)...................... (3,312) (1,496) 96 5,278 566
Net earnings (loss) per share:
Basic.................................. (.25) (.11) .01 .39 .04
Diluted................................ (.25) (.11) .01 .39 .04
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Three months ended Year ended
------------------------------------------------------------------------------------------------------------
Fiscal 1998: April 30 July 31 October 31 January 31 January 31
------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues............................... $ 225,923 $ 222,751 $ 235,560 $ 208,609 $ 892,843
Gross profit (a)....................... 11,690 4,453 11,923 15,809 43,875
Depreciation and amortization.......... 3,298 3,362 3,461 3,526 13,647
Earnings (loss) before income taxes ... 2,664 (7,442) 3,021 4,327 2,570
Net earnings (loss).................... 1,560 (4,491) 1,859 2,253 1,181
Net earnings (loss) per share:.........
Basic................................ .12 (.35) .14 .17 .09
Diluted.............................. .12 (.35) .14 .17 .09
</TABLE>
(a) Gross profit is calculated as sales and operating
revenues less cost of sales and operating expenses
(excluding depreciation and amortization).
- --------------------------------------------------------------------------------
12. SEVERANCE CHARGES
During the year ended January 31, 1999, the Company
recorded severance charges aggregating $216,000 related
to a reduction in work force of six employees. Such
amounts are payable through February 2000 pursuant to
the Company's severance policy.
During the year ended January 31, 1998, the
Company recorded severance charges aggregating
$2,175,000 related to the resignations of two of the
Company's officers. Such amounts are payable over the
terms of the severance agreements and aggregate
approximately $558,000 per year through June 2000 and
$287,000 per year thereafter through October 2002. The
agreement with one of the officers includes a covenant
not to compete and provides for consulting services.
- --------------------------------------------------------------------------------
13. SEGMENT INFORMATION
In fiscal 1999, the Company adopted SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related
Information." The Statement establishes standards for
the way that companies report information about
operating segments.
The Company has two reportable segments:
Petroleum Marketing and Heating Oil. The Petroleum
Marketing segment distributes, markets and sells
gasoline and diesel fuel to consumers through a network
of 1,263 Getty and other branded retail outlets. The
Heating Oil segment is involved in the sale of fuel oil,
kerosene and propane, and oil burner and related
services to residential and commercial customers in the
New York Mid-Hudson Valley region. The accounting
policies of each business segment are the same as those
described in the summary of significant accounting
policies (see Note 2).
26
<PAGE> 19
- --------------------------------------------------------------------------------
The financial results of the Petroleum Marketing and Heating Oil segments
for the years ended January 31, 1999, 1998 and 1997 are set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
For the years ended January 31,
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
PETROLEUM HEATING Petroleum Heating Petroleum Heating
MARKETING OIL TOTAL Marketing Oil Total Marketing Oil Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and operating
revenues $ 635,041 $25,713 $660,754 $858,656 $32,453 $891,109 $851,255 $37,133 $888,388
Other income 1,487 51 1,538 1,687 47 1,734 124 31 155
- --------------------------------------------------------------------------------------------------------------------------------
636,528 25,764 662,292 860,343 32,500 892,843 851,379 37,164 888,543
- --------------------------------------------------------------------------------------------------------------------------------
Cost of sales and
operating expenses
(excluding depreciation
and amortization) 602,725 21,457 624,182 819,169 28,065 847,234 846,274 32,913 879,187
Selling, general and
administrative expenses 17,622 2,384 20,006 23,466 2,328 25,794 18,010 2,297 20,307
Depreciation and
amortization 15,498 429 15,927 13,341 306 13,647 13,450 472 13,922
Interest expense 908 1 909 786 -- 786 426 -- 426
Severance charges 216 -- 216 2,175 -- 2,175 -- -- --
Change of control charge -- -- -- 637 -- 637 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
636,969 24,271 661,240 859,574 30,699 890,273 878,160 35,682 913,842
- --------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before
provision (credit)
for income taxes (441) 1,493 1,052 769 1,801 2,570 (26,781) 1,482 (25,299)
Provision (credit) for
income taxes (204) 690 486 416 973 1,389 (10,664) 590 (10,074)
- --------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (237) $ 803 $ 566 $ 353 $ 828 $ 1,181 $(16,117) $ 892 $(15,225)
============================================================================================
Identifiable assets $ 140,299 $ 9,122 $149,421 $139,440 $ 6,889 $146,329 $127,972 $ 7,528 $135,500
Capital expenditures 21,180 312 21,492 19,014 91 19,105 17,553 286 17,839
============================================================================================
</TABLE>
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of Getty
Petroleum Marketing Inc.:
In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of
operations and cash flows present fairly, in all
material respects, the financial position of Getty
Petroleum Marketing Inc. and Subsidiaries (the
"Company") at January 31, 1999 and January 31, 1998, and
the results of their operations and their cash flows for
each of the three years in the period ended January 31,
1999, in conformity with generally accepted accounting
principles. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these
financial statements based on our audits. We conducted
our audits of these statements in accordance with
generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
March 11, 1999
COMMON STOCK
- --------------------------------------------------------------------------------
The common stock of Getty Petroleum Marketing Inc., its
only outstanding voting security, is traded on the New
York Stock Exchange (symbol: "GPM"). At April 22, 1999,
there were approximately 2,800 holders of record of
Getty Petroleum Marketing's common stock. The price
range of common stock from March 21, 1997, the effective
date of the spin-off, to January 31, 1999 was as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------
Price Range
----------------
Quarter Ending High Low
--------------------------------------------------------
<S> <C> <C>
January 31, 1999....................... $4 3/8 $2 5/8
October 31, 1998....................... 4 11/16 3 1/4
July 31, 1998.......................... 6 1/2 4 3/8
April 30, 1998......................... 6 3/4 5 7/8
January 31, 1998....................... 6 3/4 4 3/4
October 31, 1997....................... 6 15/16 5
July 31, 1997.......................... 7 3/8 3 1/2
April 30, 1997......................... 5 3/8 3 1/4
</TABLE>
28
<PAGE> 1
Exhibit 22. Subsidiaries of the Company.
- --------------------------------------------
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY INCORPORATION
---------- -------------
<S> <C>
GASWAY INC. New York
GETTY TERMINALS CORP. New York
KINGSTON OIL SUPPLY CORP. New York
PT PETRO CORP. New York
</TABLE>
<PAGE> 1
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Getty Petroleum Marketing Inc. on Form S-8 (Registration Nos. 333-23375 and
333-23379) of our reports dated March 11, 1999, on our audits of the
consolidated financial statements and financial statement schedule of Getty
Petroleum Marketing Inc. and Subsidiaries as of January 31, 1999 and 1998 and
for each of the three years in the period ended January 31, 1999 which reports
have been included or incorporated by reference in this Annual Report on Form
10-K.
PricewaterhouseCoopers LLP
New York, New York
March 11, 1999
<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 JANUARY 31, 1999 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 6,169
<SECURITIES> 1,339
<RECEIVABLES> 10,359
<ALLOWANCES> 901
<INVENTORY> 16,475
<CURRENT-ASSETS> 43,642
<PP&E> 212,349
<DEPRECIATION> 110,845
<TOTAL-ASSETS> 149,421
<CURRENT-LIABILITIES> 46,163
<BONDS> 0
0
0
<COMMON> 139
<OTHER-SE> 60,081
<TOTAL-LIABILITY-AND-EQUITY> 149,421
<SALES> 660,754
<TOTAL-REVENUES> 662,292
<CGS> 624,182
<TOTAL-COSTS> 640,109
<OTHER-EXPENSES> 216
<LOSS-PROVISION> 119
<INTEREST-EXPENSE> 909
<INCOME-PRETAX> 1,052
<INCOME-TAX> 486
<INCOME-CONTINUING> 566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 566
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
