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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
\X\ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-11392
CLARK REFINING & MARKETING, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1491230
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8182 Maryland Avenue 63105-3721
St. Louis, Missouri (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (314) 854-9696
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes (*) No ( )
Number of shares of registrant's common stock, $.01 par value, outstanding
as of May 10, 1996: 100, all of which are owned by Clark USA, Inc.
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<PAGE> 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Clark Refining & Marketing, Inc.:
We have reviewed the accompanying consolidated balance sheet of Clark
Refining & Marketing, Inc. (a Delaware corporation) and subsidiary
as of March 31, 1996, and the related consolidated statements of earnings and
cash flows for the three month periods ended March 31, 1995 and 1996. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of obtaining an understanding of
the system for the preparation of interim financial information, applying
analytical review procedures to the financial data and making inquiries of
persons responsible for financial and accounting matters. It is substantially
less in scope than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Clark Refining &
Marketing, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of earnings, stockholders equity, and cash flows
for the year then ended (not presented herein); and in our report dated
February 2, 1996, we expressed an unqualified opinion on those statements.
In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the financial statements from which it
has been derived.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri,
April 30, 1996
<PAGE> 2
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
<TABLE>
Reference December 31, March 31,
ASSETS Note 1995 1996
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 60,477 $ 90,790
Short-term investments 2 46,116 41,902
Accounts receivable 179,200 186,689
Inventories 3 290,444 311,348
Prepaid expenses and other 18,875 18,478
----------- -----------
Total current assets 595,112 649,207
PROPERTY, PLANT AND EQUIPMENT 6 549,292 546,774
OTHER ASSETS 4 43,930 42,948
----------- -----------
$ 1,188,334 $ 1,238,929
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 315,236 $ 361,115
Accrued expenses and other 5 41,501 39,116
Accrued taxes other than income 45,240 41,863
------------- ------------
Total current liabilities 401,977 442,094
LONG-TERM DEBT 420,441 419,094
DEFERRED INCOME TAXES 22,861 14,436
OTHER LONG-TERM LIABILITIES 38,937 39,332
CONTINGENCIES 7 -- --
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value per share;
1,000 shares authorized and 100 shares
issued and outstanding) -- --
Paid-in capital 195,610 229,210
Retained earnings 2 108,508 94,763
------------- -----------
Total stockholder's equity 304,118 323,973
------------- -----------
$ 1,188,334 $ 1,238,929
============= ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 3
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands)
<TABLE>
For the three months
Reference ended March 31,
Note 1995 1996
<S> <C> <C> <C>
NET SALES AND OPERATING REVENUES $ 827,298 $ 1,140,200
EXPENSES:
Cost of sales (759,640) (1,025,208)
Operating expenses (70,665) (99,990)
General and administrative expenses (13,597) (14,469)
Depreciation (7,020) (9,039)
Amortization 4 (2,890) (3,613)
------------- -------------
(853,812) (1,152,319)
------------- -------------
OPERATING LOSS (26,514) (12,119)
Interest and financing costs, net 2, 4, 5 (8,852) (9,851)
------------- -------------
LOSS BEFORE INCOME TAXES (35,366) (21,970)
Income tax benefit 13,417 8,349
------------- -------------
NET LOSS $ (21,949) $ (13,621)
============= =============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 4
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
For the three months
ended March 31,
1995 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (21,949) $ (13,621)
Adjustments:
Depreciation 7,020 9,039
Amortization 3,741 5,332
Share of earnings of affiliates,
net of dividends (569) 333
Deferred income taxes (13,417) (8,349)
Other 263 (1,418)
Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other (99,573) (8,578)
Inventories (137,417) (20,987)
Accounts payable, accrued expenses, taxes other
than income, and other 201,245 39,889
-------------- ---------------
Net cash (used in) provided by operating
activities (60,656) 1,640
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (5,862) 14
Sales of short-term investments -- 4,000
Expenditures for property, plant and equipment (8,071) (7,387)
Expenditures for turnaround (569) (3,574)
Refinery acquisition expenditures (68,112) --
Proceeds from disposals of property, plant
and equipment 15,023 3,621
-------------- ---------------
Net cash used in investing activities (67,591) (3,326)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments (4) (1,347)
Capital contribution 150,000 33,600
Deferred financing costs (12,175) (254)
-------------- ---------------
Net cash provided by financing activities 137,821 31,999
-------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,574 30,313
CASH AND CASH EQUIVALENTS, beginning of period 105,450 60,477
-------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 115,024 $ 90,790
============== ===============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 5
FORM 10-Q - PART I
ITEM 1 Financial Statements (continued)
Clark Refining & Marketing, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1996
(tabular dollar amounts in thousands of US dollars)
1. Basis of Preparation
The unaudited consolidated balance sheet of Clark Refining & Marketing,
Inc. and Subsidiary (the "Company"), a Delaware corporation, as of
March 31, 1996, and the related consolidated statements of earnings and
cash flows for the three month periods ended March 31, 1995 and 1996,
have been reviewed by independent accountants. Clark Port Arthur
Pipeline Company, a Delaware corporation, is included in the consolidated
results of the Company. In the opinion of the management of the Company,
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of the financial statements have been included
therein. The results of this interim period are not necessarily indicative
of results for the entire year.
Certain reclassifications have been made to the operating and general
administrative expenses in the 1995 financial statements to conform to current
year presentation.
The financial statements have been prepared in accordance with the
instructions to Form 10-Q. Accordingly, certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These unaudited financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended
December 31, 1995.
The Company's earnings and cash flow from operations are primarily
dependent upon processing crude oil and selling quantities of refined
petroleum products at margins sufficient to cover operating expenses. Crude
oil and refined petroleum products are commodities, and factors largely out
of the Company's control can cause prices to vary, in a wide range, over a
short period of time. This potential margin volatility can have a material
effect on financial position, current period earnings and cash flow.
2. Short-term Investments
The Company's short-term investments are all considered "Available-for-
Sale" and are carried at fair value with the resulting unrealized
gain or loss (net of applicable taxes) shown as a component of retained
earnings.
<TABLE>
Short-term investments consisted of the following:
December 31, 1995 March 31, 1996
Amortized Unrealized Aggregate Amortized Unrealized Aggregate
Major Security Type Cost Gain/(Loss) Fair Value Cost Gain/(Loss) Fair Value
<S> <C> <C> <C> <C> <C> <C>
U.S. Debt Securities $ 46,116 $ -- $ 46,116 $ 42,102 $ (200) $ 41,902
</TABLE>
The net unrealized position at March 31, 1996 included gains of $0.0
million and losses of $0.2 million (1995 -- gains of $0.1 million
and losses of $0.1 million).
<PAGE> 6
The contractual maturities of the short-term investments at March
31, 1996 were:
<TABLE>
Amortized Aggregate
Cost Fair Value
<S> <C> <C>
Due in one year or less $ 27,058 $ 27,023
Due after one year through five years 15,044 14,879
------- -------
$ 42,102 $ 41,902
======= =======
</TABLE>
Although some of the contractual maturities of these short-term
investments are over one year, management's intent is to use the funds
for current operations and not hold the investments to maturity.
For the three month period ended March 31, 1996, proceeds from the
sale of Available-for-Sale securities was $4.0 million with no realized
gains or losses recorded for the period. For the same period in 1995,
their were no sales of Available-for-Sale securities. Realized gains
and losses are presented in Interest and financing costs, net and are
computed using the specific identification method.
The change in the net unrealized holding gains or losses on Available-
for-Sale securities for the three month period ended March 31,
1996, was a loss of $0.2 million ($0.1 million after taxes). For the
same period in 1995, the change in the net unrealized holding gains or
losses was a gain of $0.7 million ($0.5 million after taxes).
3. Inventories
<TABLE>
The carrying value of inventories consisted of the following:
December 31, March 31,
1995 1996
<S> <C> <C>
Crude oil.......................... $ 90,635 $ 130,291
Refined and blendstocks............ 163,915 143,638
Convenience products............... 20,532 22,767
Warehouse stock and other.......... 15,362 14,652
----------- ---------
$ 290,444 $ 311,348
=========== =========
</TABLE>
The market value of these inventories at March 31, 1996 was approximately
$33.2 million above the carrying value (December 31, 1995
- - $5.4 million).
4. Other Assets
Amortization of deferred financing costs for the three month period
ended March 31, 1996, was $1.6 million (1995 - $0.9 million), and is
included in "Interest and financing costs, net".
Amortization of turnaround costs for the three month period ended
March 31, 1996, was $3.6 million (1995 - $2.9 million).
<PAGE> 7
5. Interest and Financing Costs, Net
Interest and financing costs, net, consisted of the following:
<TABLE>
For the three months
ended March 31,
1995 1996
<S> <C> <C>
Interest expense................... $ 10,271 $ 10,737
Financing costs.................... 851 1,615
Interest income.................... (1,619) (2,273)
----------- -----------
9,503 10,079
Capitalized interest............... (651) (228)
----------- -----------
$ 8,852 $ 9,851
=========== ===========
</TABLE>
Accrued interest payable at March 31, 1996, of $8.7 million (December 31,
1995 - $6.8 million) is included in "Accrued Expenses and Other".
6. New Accounting Standard Adopted
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of. The standard requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable with future cash flows.
Implementation of this SFAS did not result in an impairment loss.
The Company has expended approximately $25 million on a project to
produce low sulfur diesel fuel at the Hartford refinery ("DHDS Project")
which was delayed in 1992. Should the Company determine in the future
to permanently discontinue this project, the carrying value of the DHDS
Project may not be fully recoverable.
7. Contingencies
Clark and the Company are subject to various legal proceedings related to
governmental regulations and other actions arising out of the normal course of
business, including legal proceedings related to environmental matters.
In early April, 1996, Clark learned that its Hartford, Illinois refinery
is the subject of a Clean Air Act enforcement referral by the United States
Environmental Protection Agency to the United States Department of Justice.
The referral pertains to alleged violations of the Clean Air Act and
regulations promulgated thereunder in the operation and permitting of the
Hartford refinery fluid catalytic cracking unit ("FCCU") and alleged
modification of the FCCU. Although a complaint has not yet been filed, the
government requested additional information from Clark pursuant to Section
114 of the Clean Air Act for the stated purpose of completing its pre-
enforcement evaluation. Clark is gathering the requested information and is
otherwise cooperating with the government in its investigation. No estimate
can be made at this time of Clark's potential liability, if any, as a result
of this enforcement referral.
While it is not possible at this time to establish the ultimate amount of
liability with respect to such contingent liabilities, Clark and the Company
are of the opinion that the aggregate amount of any such liabilities, for
which provision has not been made, will not have a material adverse effect
on their financial position, however, an adverse outcome of any one or more
of these matters could have a material effect on quarterly or annual
operating results or cash flows when resolved in a future period.
<PAGE> 8
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Clark Refining & Marketing, Inc. (the "Company" or "Clark") is a
wholly-owned subsidiary of Clark USA, Inc. ("Clark USA"). The Company
also owns all of the outstanding capital stock of Clark Port Arthur Pipeline
Company which is reported as a component of the Company's refining division.
Certain reclassifications were made to 1995 operating expenses and
general and administrative expenses to conform to current period presentation.
In addition, certain reclassifications were made to 1995 refining division
results for the Port Arthur refinery and Blue Island, Hartford and Other
Refining to allocate certain crude oil acquisition and inventory management
results and conform to current period presentation. Such reclassifications
did not change the Company's total results of operations.
Results of Operations
Financial Highlights
The following tables reflect the Company's financial and operating
highlights for the three month periods ended March 31, 1995 and 1996.
All dollars listed are in millions except per barrel, per gallon and other
statistical data.
Financial Results: (a)
<TABLE>
For the three months
ended March 31,
1995 1996
<S> <C> <C>
Net sales and operating revenues $ 827.3 $ 1,140.2
Cost of sales 759.6 1,025.2
Operating expenses 70.7 100.0
General and administrative expenses 13.6 14.5
Depreciation and amortization 9.9 12.6
Interest and financing costs 10.5 12.1
Interest and financing income 1.6 2.3
- ----------------------------------------------------------------------------------------
Loss before income taxes (35.4) (21.9)
Income tax benefit 13.5 8.3
- ----------------------------------------------------------------------------------------
Net loss $ (21.9) $ (13.6)
========================================================================================
Operating Income:
Refining contribution to operating income $ (20.5) $ (5.3)
Retail contribution to operating income 8.2 9.1
Corporate general and administrative 4.3 3.3
Depreciation and amortization 9.9 12.6
- ----------------------------------------------------------------------------------------
Operating loss $ (26.5) $ (12.1)
========================================================================================
</TABLE>
(a) This table provides supplementary data and is not intended to
represent an income statement presented in accordance with generally accepted
accounting principles.
The Company's net loss and operating loss for the first quarter of
1996 narrowed over the comparable period in 1995 due to a rebound in refining
margins reflecting more normal winter demand for distillates and continued
strong demand for gasoline. Weather was unseasonably warm in the prior year's
first quarter reducing industry-wide demand for petroleum products. The
majority of the Company's products are commodities that are subject to
seasonal and market volatility. Net sales and operating revenues increased
significantly over the prior year because of the inclusion in 1996 of a full
quarter of incremental sales from production at the Port Arthur refinery,
which was acquired on February 27, 1995.
<PAGE> 9
Refining
Refining Division Operating Statistics:
<TABLE>
For the three months
ended March 31,
1995 1996
Port Arthur Refinery (acquired February 27, 1995)
<S> <C> <C>
Crude oil throughput (m bbls/day) 179.7 199.0
Production (m bbls/day) 186.6 203.7
Gross margin ($/barrel of production) $ 1.83 $ 2.39
Operating expenses ($/barrel of production) $ 2.08 $ 2.09
Net margin (millions) $ (1.5) $ 5.7
Blue Island, Hartford and other refining
Crude oil throughput (m bbls/day) 122.1 125.6
Production (m bbls/day) 125.3 132.3
Gross margin ($/barrel of production) $ 1.55 $ 2.17
Operating expenses ($/barrel of production) $ 2.83 $ 2.61
Net margin (millions) $(14.5) $ (5.4)
Divisional G & A expenses (millions) 4.6 5.6
Contribution to operating income (millions) $(20.6) $ (5.3)
</TABLE>
The refining division reduced its quarterly loss by $15.3 million
to $5.3 million in the first quarter of 1996 (1995 - loss of $20.6 million).
Gulf Coast and Midwest industry refining margin indicators improved
substantially in the current year's first quarter as compared to the unusually
weak period a year ago. The principal factors that contributed to the poor
industry margins in 1995 were the transition to reformulated gasoline in
certain markets and an unseasonably warm winter, which reduced demand for
heating oil. The Company's actual results in the first quarter of 1996
benefited from the industry margin improvement and the impact of rising crude
oil prices on forward crude oil purchase commitments, but were tempered by
increased refinery fuel gas costs caused by high winter demand for natural
gas, lower chemical and by-product margins, higher relative foreign crude oil
costs and weather-related crude oil supply delays. Port Arthur refinery
results in 1996 reflected a full quarter of ownership as compared to one month
in the first quarter of 1995.
Refining production during the quarter was below capacity as routine
maintenance was successfully completed on the alkylation unit at the Blue
Island refinery and the vacuum unit at the Hartford refinery, while
unscheduled repairs were completed on the coker unit at the Port Arthur
refinery. Refinery production was reduced by an average of approximately
20,000 barrels per day in the first quarter of 1995 due to the poor industry
refining margins and a fire in an operating unit at the Blue Island refinery.
Per barrel operating expenses in the first quarter of 1996 and 1995 were
negatively affected by the reduced production rates and 1996 expenses were
increased by the higher market prices for refinery fuel gas.
During the first four months of 1996, the commodity markets for crude oil
and refined products were characterized by rising crude oil prices, daily
volatility and steep premiums for prompt crude oil deliveries. The Company
believes such conditions have been magnified in early 1996 due to inventory
levels reaching 20 year lows and the perception of possible shortages. The
Company believes refiners have reduced inventories as a result of strong
winter demand, the prospect for lower crude oil and product prices caused by
the possible return of Iraqi crude oil to the world markets and the desire by
refiners to reduce their investment in working capital. Current commodity
market conditions have disrupted many normal options
<PAGE> 10
and futures relationships making it difficult for the Company to effectively
hedge short-term price risk. Governmental agencies are investigating
increased retail gasoline prices and considering strategies to reduce future
prices. The Company is unable to predict what effect, if any, the current
state of commodity markets or potential government action may have on the
Company's future results of operation.
Retail
Retail Division Operating Statistics:
<TABLE>
For the three months
ended March 31,
1995 1996
<S> <C> <C>
Gasoline volume (mm gals.) 250.9 236.5
Gasoline gross margin (c/gal) 9.9c 11.9c
Convenience product sales (millions) $ 51.8 $ 58.5
Convenience product and other income (millions) 14.4 16.3
Operating expenses (millions) $ 26.2 $ 29.8
Divisional G & A expenses (millions) 4.8 5.6
Contribution to operating income (millions) $ 8.2 $ 9.1
Per Month Per Store
Company operated stores (average) 838 826
Gasoline volume (m gals.) 99.8 95.4
Convenience product sales (m) $ 20.6 $ 23.6
Convenience product gross margin (m) $ 5.7 $ 5.8
</TABLE>
The retail division contribution to operating income of $9.1 million in
the first quarter of 1996 exceeded year ago levels even though gasoline margins
were squeezed by rapidly rising wholesale gasoline costs that the Company
was not able to fully capture at the pump. Last year's first quarter gasoline
margins per gallon were comparatively low due to significant promotional
activity which increased volume, but lowered per gallon margins. Retail
gasoline margins per gallon typically narrow when wholesale gasoline costs rise
rapidly and widen when they fall rapidly. The improvement in first quarter
results was realized from improved pricing strategies, strong performance from
newly acquired stores and a modest gain on the sale of non-core stores.
Convenience product and other income increased over the previous year
primarily due to the gain on the sale of stores. Operating expenses increased
over the prior year principally due to operating leases and other costs related
to new store properties and increased costs related to the expansion of the
Company's credit card programs.
The Company continued to implement its targeted retail growth strategy in
the first quarter by adding 10 high volume stores in its core Chicago market
which raised its Chicago market share to approximately 10%. Early in the
quarter, the Company completed its withdrawal from the Minnesota market. As
part of its overall growth strategy, the Company expects to continue to
consider retail store growth in both existing and new markets while also
evaluating current markets for possible divestiture.
<PAGE> 11
Other Financial Highlights
Corporate general and administrative expenses for the first quarter
of 1996 were below the same period in 1995 principally because of the
transfer of certain activities to the retail and refining divisions in
the current year. Depreciation and amortization expenses for the first
quarter of 1996 exceeded the comparable period of 1995 principally because of
the newly acquired Port Arthur refinery.
Interest expense in the first quarter of 1996 increased over the
comparable period in 1995 primarily due to the amortization of bondholder
consent fees incurred in 1995 and costs related to the expanded working
capital facility.
Liquidity and Capital Resources
Net cash used in operating activities, excluding working capital
changes, for the first quarter of 1996 was $8.7 million, an improvement
of $16.2 million from the year-earlier period. The improvement in cash
flows resulted primarily from the improved refining market conditions.
Working capital at March 31, 1996 was $207.1 million, a 1.47 to 1 current
ratio, versus $193.1 million at December 31, 1995, a 1.48 to 1
current ratio.
In general, the Company's short-term working capital requirements
fluctuate with the price and payment terms of crude oil. The Company
has in place a $400 million committed revolving line of credit expiring
November 30, 1997 for the issuance of letters of credit primarily to support
purchases of crude oil, other feedstocks and refined products. The amount
available under the borrowing base associated with such facility at
March 31, 1996 was $400 million and approximately $249 million of the facility
was utilized for letters of credit. There were no direct borrowings under the
Company's line of credit at March 31, 1996.
Cash flows used in investing activities in the first quarter in 1996,
excluding short-term investment activities for which management's intent is
similar to cash and cash equivalents, decreased to $7.3 million from $61.7
million in the year-earlier period. The higher investing activities in 1995
resulted principally from the Port Arthur
refinery acquisition which closed on February 27, 1995. Capital expenditures
for property, plant and equipment totaled $7.4 million (1995 - $8.1 million)
during the first quarter of 1996 with an additional $3.6 million (1995 - $0.6
million) for refinery maintenance turnaround expenditures. Refinery capital
expenditures totaled $3.9 million in the first quarter of 1996 (1995 - $1.3
million), the majority of which was for discretionary projects at the Port
Arthur and Hartford refineries. Retail capital expenditures for the first
quarter of 1996 totaled $3.4 million (1995 - $6.8 million), the majority of
which related to the purchase of equipment associated with the first quarter
acquisition of stores in Chicago.
Cash flows from financing activities declined in the first quarter
of 1996 as compared to the prior year. Financing activities in 1995 related
to the financing of the Port Arthur refinery acquisition.
Funds generated from operating activities together with the Company's
existing cash, cash equivalents and short-term investments are
expected to be adequate to fund requirements for working capital and capital
expenditure programs for the next year. Future working capital,
discretionary capital expenditures, environmentally-mandated spending
and acquisitions may require additional debt or equity financing.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
In early April, 1996, the Company learned that its Hartford, Illinois
refinery is the subject of a Clean Air Act enforcement referral by the United
States Environmental Protection Agency to the United States Department of
Justice. The referral pertains to alleged violations of the Clean Air Act
and regulations promulgated thereunder in the operation and permitting of the
Hartford refinery fluid catalytic cracking unit ("FCCU") and alleged
modification of the FCCU. Although a complaint has not yet been filed, the
government requested additional information from the Company pursuant to
Section 114 of the Clean Air Act for the stated purpose of completing its
pre-enforcement evaluation. The Company is gathering the requested
information and is otherwise cooperating with the government in its
investigation. No estimate can be made at this time of the Company's
potential liability, if any, as a result of this enforcement referral.
On January 5, 1995, the Company received a Unilateral Administrative
Order from the EPA pursuant to CERCLA alleging that Clark Oil & Refining
Corp. is a PRP with respect to shipments of hazardous substances to a solid
waste disposal site known as the Ninth Avenue Site, Gary, Indiana. The
alleged shipments all occurred prior to 1987. The Order instructs the Company
and the other approximately ninety PRPs to design and implement certain
remedial work at the site. The Company has informed the EPA that it is not a
proper party to this matter, because its purchase of certain assets of a
company previously operating under the Clark name ("Old Clark") was free
and clear of all Old Clark liabilities. Information provided with the Order
estimates that the remedial work may cost approximately $25 million. No
estimate of liability can be made with respect to this proceeding at this
time. In addition, on December 28, 1994, the Company was served
with a summons and complaint brought by certain private parties seeking
to recover all past and future response costs with respect to that site
on the basis of shipments of hazardous substances allegedly made prior
to 1987. The Company moved to dismiss this action on the basis that the
action is barred by the free and clear Order pursuant to which the Company
purchased certain assets of Old Clark. The plaintiffs and one co-defendant
opposed the Company's motion to dismiss. On April 19, 1996, the District
Court denied the Company's Motion to Dismiss holding that at this early
procedural stage of the case and prior to gathering facts regarding the
plaintiffs opportunity to participate in the bankruptcy case which issued the
free and clear order, the Court would not dismiss the case. No estimate of
any liability with respect to this case can be made at this time.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.0 - Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CLARK REFINING & MARKETING, INC.
(Registrant)
/s/ Dennis R. Eichholz
--------------------------
Dennis R. Eichholz
Controller and Treasurer
(Authorized Officer and
Chief Accounting Officer)
May 13, 1996
<PAGE> 14
[ARTICLE] 5
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] MAR-31-1996
[CASH] 90,790
[SECURITIES] 41,902
[RECEIVABLES] 188,353
[ALLOWANCES] 1,664
[INVENTORY] 311,348
[CURRENT-ASSETS] 649,207
[PP&E] 702,832
[DEPRECIATION] 156,058
[TOTAL-ASSETS] 1,238,929
[CURRENT-LIABILITIES] 442,094
[BONDS] 419,094
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 1,238,929
[SALES] 1,137,961
[TOTAL-REVENUES] 1,142,473
[CGS] 1,025,208
[TOTAL-COSTS] 1,139,667
[OTHER-EXPENSES] 12,424
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 10,737
[INCOME-PRETAX] (21,970)
[INCOME-TAX] (8,349)
[INCOME-CONTINUING] (13,621)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (13,621)
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
</TABLE>
