<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0550682
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One North Charles Street, Baltimore, Maryland 21201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 410-539-7400
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
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, and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
The number of shares outstanding at April 30, 1994 of the Registrant's
$5 par value Class A and Class B Common Stock was 4,817,392 shares and
5,015,206 shares, respectively.
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Crown Central Petroleum Corporation and Subsidiaries
Table of Contents
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
March 31, 1994 and December 31, 1993 3-4
Consolidated Condensed Statements of Operations
Three months ended March 31, 1994 and 1993 5
Consolidated Condensed Statements of Cash Flows
Three months ended March 31, 1994 and 1993 6
Notes to Unaudited Consolidated Condensed
Financial Statements 7-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 13
Exhibit 19 - Previously Unfiled Documents
Exhibit 20 - Interim Report to Stockholders for the three
months ended March 31, 1994
SIGNATURE 14
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
March 31 December 31
Assets 1994 1993
----------- -----------
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 48,613 $ 52,021
Accounts receivable - net 114,430 91,413
Inventories 104,619 86,811
Other current assets 6,980 762
-------- --------
Total Current Assets 274,642 231,007
Investments and Deferred Charges 39,664 42,908
Property, Plant and Equipment 679,167 676,405
Less allowance for depreciation 298,121 294,142
-------- --------
Net Property, Plant and Equipment 381,046 382,263
-------- --------
$695,352 $656,178
======== ========
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
March 31 December 31
Liabilities and Stockholders' Equity 1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities
Accounts payable:
Crude oil and refined products $126,106 $104,166
Other 20,756 20,500
Accrued liabilities 54,029 50,145
Income taxes payable 6,301 3,264
Current portion of long-term debt 10,108 1,094
-------- --------
Total Current Liabilities 217,300 179,169
Long-Term Debt 57,585 65,579
Deferred Income Taxes 81,542 81,217
Other Deferred Liabilities 31,912 31,860
Common Stockholders' Equity
Common stock, Class A - par value $5 per share:
Authorized shares--7,500,000 in 1994 and
8,500,000 in 1993; issued and outstanding
shares--4,817,392 in 1994 and 1993 24,087 24,087
Common stock, Class B - par value $5 per share:
Authorized shares--7,500,000 in 1994 and
6,500,000 in 1993; issued and outstanding
shares--5,015,206 in 1994 and 1993 25,076 25,076
Additional paid-in capital 91,870 91,870
Retained earnings 165,980 157,320
-------- --------
Total Common Stockholders' Equity 307,013 298,353
-------- --------
$695,352 $656,178
======== ========
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars, except per share amounts)
(Unaudited)
Three Months Ended March 31
1994 1993
-------- --------
<S> <C> <C>
Revenues
Sales and operating revenues (including excise taxes
of 1994--$93,556; 1993--$64,889) $393,586 $413,302
Operating Costs and Expenses
Costs and operating expenses 343,415 386,679
Selling and administrative expenses 22,060 22,585
Depreciation and amortization 10,631 10,299
Sales of property, plant and equipment (323) (29)
-------- --------
375,783 419,534
-------- --------
Operating Income (Loss) 17,803 (6,232)
Interest and other income 393 53
Interest expense (1,911) (1,684)
-------- --------
Income (Loss) Before Income Taxes 16,285 (7,863)
Income Tax Expense (Benefit) 7,625 (2,143)
-------- --------
Net Income (Loss) $ 8,660 $ (5,720)
======== ========
Net Income (Loss) Per Share $ .88 $ (.58)
======== ========
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
(Unaudited)
Three Months Ended March 31
1994 1993
-------- --------
<S> <C> <C>
Net Cash Flows From Operating Activities
Net cash from operations before
changes in working capital $ 19,454 $ 4,931
Net changes in working capital items (17,926) (16,494)
-------- --------
Net Cash Provided by (Used in)
Operating Activities 1,528 (11,563)
-------- --------
Cash Flows From Investment Activities
Capital expenditures (7,558) (7,659)
Proceeds from sale of property, plant
and equipment 3,004 181
Deferred turnaround maintenance and other (736) (100)
-------- --------
Net Cash (Used in) Investment Activities (5,290) (7,578)
-------- --------
Cash Flows From Financing Activities
Net cash flows from long-term debt 76 (58)
Net proceeds from purchase money lien 945
Proceeds from interest rate swap terminations 2,403
Net cash flows from long-term
notes receivable (667)
-------- --------
Net Cash Provided by Financing Activities 354 2,345
-------- --------
Net (Decrease) in Cash and Cash Equivalents $(3,408) $(16,796)
======== ========
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
March 31, 1994
Note A - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of Management, all adjustments considered necessary for a
fair and comparable presentation have been included. Operating results
for the three months ended March 31, 1994 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1994. The enclosed financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1993.
Cash and Cash Equivalents - Cash in excess of daily requirements is
invested in marketable securities with maturities of three months or
less. Such investments are deemed to be cash equivalents for purposes
of the statements of cash flows.
Inventories - The Company's crude oil, refined products, and
convenience store merchandise and gasoline inventories are valued at
the lower of cost (last-in, first-out) or market with the exception of
crude oil inventory held for resale which is valued at the lower of
cost (first-in, first-out) or market. Materials and supplies
inventories are valued at cost. Incomplete exchanges of crude oil and
refined products due the Company or owing to other companies are
reflected in the inventory accounts.
At March 31, 1994, approximately 1.2 million barrels of crude oil and
refined products, or approximately $20.7 million of inventory, were
held in excess of anticipated year-end quantities and were valued at
the lower of cost (first-in, first-out) or market. An actual valuation
of inventory under the LIFO method can be made only at the end of each
year based on the inventory levels and costs at that time.
Accordingly, interim LIFO projections must be based on Management's
estimates of expected year-end inventory levels and values.
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes." The income tax provision for the three months ended
March 31, 1994 has been computed based upon the Company's estimated
effective tax rate for the year, after recognizing permanent tax
differences, to which the federal statutory rate of 35%, state income
taxes of approximately 4% and state franchise taxes have been applied.
Statements of Cash Flows - Net changes in working capital items
presented in the Consolidated Condensed Statements of Cash Flows
reflects changes in all current assets and current liabilities with the
exception of cash and cash equivalents and the current portion of long-
term debt.
Reclassifications - Deferred gains from interest rate swap terminations
for the three months ended March 31, 1993 have been reclassified on the
Consolidated Condensed Statements of Cash Flows as a cash inflow from
financing activities consistent with the presentation in the
Consolidated Statements of Cash Flows in the Annual Report on Form 10-K
for the fiscal year ended December 31, 1993. These deferred gains had
previously been reported as a cash inflow from operations in the
Company's Form 10-Q for the Quarter ended March 31, 1993. This
reclassification had no effect on the net decrease in cash and cash
equivalents for the three months ended March 31, 1993.
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Note B - Inventories
Inventories consist of the following:
March 31 December 31
1994 1993
---------- -----------
(thousands of dollars)
Crude oil $ 37,723 $ 38,989
Refined products 84,941 60,519
-------- --------
Total inventories at FIFO
(approximates current cost) 122,664 99,508
LIFO allowance (29,872) (25,828)
-------- --------
Total crude oil and refined products 92,792 73,680
-------- --------
Merchandise inventory at FIFO
(approximates current cost) 6,393 7,200
LIFO allowance (2,387) (2,387)
-------- --------
Total merchandise 4,006 4,813
-------- --------
Materials and supplies inventory at FIFO 7,821 8,318
-------- --------
Total Inventory $104,619 $ 86,811
======== ========
Note C - Long-term Debt and Credit Arrangements
As of March 31, 1994, the Company has entered into interest rate swap
agreements with maturities ranging from 1996 to 1998, to effectively
convert $47,500,000 of its unsecured 10.42% Senior Notes (Notes) to
variable interest rates. During 1993, the Company terminated certain
other interest rate swap agreements associated with its 10.42% Notes
resulting in deferred gains of $1.8 million at March 31, 1994, which
will be recognized as a reduction of interest expense over the
remaining swap periods which range from 1996 to 1997. As a result of
its interest rate swap program, the Company's overall effective
interest rate on the Notes for the three months ended March 31, 1994
was reduced from 10.7% to 9.6% per annum.
Note D - Common Stock and Calculation of Net Income (Loss) Per common
share
At its March 31, 1994 meeting, the Board of Directors exercised its
authority to reclassify 1,000,000 shares of authorized, but, unissued
Class A Common Stock of the Company as 1,000,000 shares of authorized,
but, unissued Class B Common Stock of the Company. Net income (loss)
per common share for the three months ended March 31, 1994 and 1993 is
based upon the number of common shares outstanding of 9,832,598.
Note E - Commitments and Contingencies
There have been no material changes in the status of contingencies as
discussed in Note G of Notes to Consolidated Financial Statements in
the Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
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<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The Company's Sales and operating revenues decreased $19.7 million or
4.8% in the first quarter of 1994 from the comparable period in 1993.
The decrease was primarily attributable to a 14.5% decrease in the
average sales price per gallon of petroleum products and a 10.9%
decrease in total merchandise sales. The merchandise sales decrease
resulted primarily from the sale or closing throughout 1993 of retail
marketing outlets which were either not profitable or did not fit with
the Company's strategic direction. The closing of these units was a
principal factor in an increase in the average sales level per store in
1994 compared to 1993. Partially offsetting the 1994 decrease was a
.6% increase in petroleum product sales volumes. The Company's Sales
and operating revenues include all Federal and State Excise Taxes.
These taxes totalled $93.6 million and $64.9 million for the three
months ended March 31, 1994 and March 31, 1993, respectively.
Costs and operating expenses decreased $43.3 million or 11.2% in the
first quarter of 1994 compared to the same period in 1993. The
decrease was due to a 25.3% decrease in the average cost per barrel
consumed of crude oil and feedstocks which was partially offset by
increases in excise taxes and volumes sold as previously mentioned.
The results of operations were affected by the Company's use of the
LIFO method to value inventory which decreased the Company's gross
margin $.28 per barrel ($4 million) in 1994, and $.28 per barrel ($3.9
million) in 1993.
Total refinery throughput averaged 158,000 barrels per day (bpd) for
the first quarter of 1994 compared to 151,000 bpd for the first quarter
of 1993. Yields of gasoline and distillates were 88,000 bpd (56.9%)
and 54,000 bpd (33.6%), respectively, in the first quarter of 1994 and
83,000 bpd (54.8%) and 48,000 bpd (32%), respectively for the first
quarter of 1993.
A majority of the Company's total crude oil and related raw material
purchases are transacted on the spot market. The Company continues to
selectively enter into forward hedging contracts to minimize price
fluctuations for a portion of its crude oil and refined products.
Selling and administrative expenses decreased $.5 million or 2.3% for
the three months ended March 31, 1994 as compared to the same period in
1993. The decrease is principally due to decreased costs associated
with the closing of retail marketing outlets, as previously discussed,
and reductions related to the Company's administrative functions. As
of March 31, 1994, the Company operated 252 retail gasoline facilities
and 110 convenience stores compared to 258 retail gasoline facilities
and 163 convenience stores at March 31, 1993.
In the first quarter of 1994, Operating costs and expenses included $.9
million related to environmental matters and to retail outlet closings.
This compares to $1.6 million for the first quarter of 1993.
Depreciation and amortization increased $.3 million or 3.2% in the
first quarter of 1994 compared to the same 1993 period. The 1994
increase was the result of additional depreciation relating to 1993
capital expenditures.
Liquidity and Capital Resources
Net cash provided by operating activities (including changes in working
capital) totalled $1.5 million for the three months ended March 31,
1994 compared to cash used in operating activities of $11.6 million for
the three months ended March 31, 1993. The 1994 inflows consist of
$19.4 million in cash provided by operations which were partially
offset by cash outflows of $17.9 million related to working capital
requirements resulting from increases in accounts receivable and
increases in the value of crude oil and finished product inventories
and prepaid operating expenses. These working capital outflows were
partially offset by increases in crude oil and refined products
payables and in accrued income and excise tax liabilities. In 1993,
the outflows resulted primarily from increases in the value of crude
oil and finished product inventories, prepaid operating expenses and
recoverable income taxes; and a decrease in crude oil and refined
products payable.
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Net cash outflows from investment activities were $5.3 million for the
first quarter of 1994 compared to a net outflow of $7.6 million for the
same 1993 period. The 1994 amount consists principally of capital
expenditures of $7.6 million (which includes $4.4 million relating to
the refineries and $2.2 million relating to marketing). These cash
outflows were partially offset by proceeds from the sale of property,
plant and equipment of $3 million. The 1993 activity relates primarily
to $7.7 million of capital expenditures ($3.6 million relating to the
marketing area and $3.3 million for refinery operations).
Net cash provided by financing activities was $.4 million for the three
months ended March 31, 1994 compared to $2.3 million for the three
months ended March 31, 1993. The 1994 cash inflows relate primarily to
$.9 million in net proceeds received from the purchase money lien which
was offset by net issuances of long-term notes receivable of $.7
million. The 1993 inflows are the result of proceeds from the
termination of interest rate swap contracts.
Cash and cash equivalents at March 31, 1994 were $9.9 million higher
than at March 31, 1993. This increase resulted primarily from cash
provided by operating activities of $42 million for the period April 1,
1993 to March 31, 1994. Additionally, cash provided by financing
activities aggregated $5.7 million which includes net proceeds from the
purchase money lien of $6.4 million These cash inflows were partially
offset by cash used in investment activities of $37.7 million, which
includes capital expenditures of $40.8 million and deferred turnaround
costs of $4 million, net of $8.3 million of proceeds received from the
sale of property plant and equipment.
The ratio of current assets to current liabilities at March 31, 1994
was 1.26:1 compared to 1.29:1 at March 31, 1993 and 1.29:1 at December
31, 1993. If FIFO values had been used for all inventories, assuming
an incremental effective income tax rate of 38.5%, the ratio of current
assets to current liabilities would have been 1.34:1 at March 31, 1994,
1.36:1 at March 31, 1993 and 1.36:1 at December 31, 1993.
Like other petroleum refiners and marketers, the Company's operations
are subject to extensive and rapidly changing federal and state
environmental regulations governing air emissions, waste water
discharges, and solid and hazardous waste management activities. The
Company's policy is to accrue environmental and clean-up related costs
of a non-capital nature when it is both probable that a liability has
been incurred and that the amount can be reasonably estimated. While
it is often extremely difficult to reasonably quantify future
environmental related expenditures, the Company anticipates that a
substantial capital investment will be required over the next several
years to comply with existing regulations. The Company had recorded a
liability of approximately $16.9 million as of March 31, 1994 to cover
the estimated costs of compliance with environmental regulations which
are not anticipated to be of a capital nature.
Environmental liabilities are subject to considerable uncertainties
which affect the Company's ability to estimate its ultimate cost of
remediation efforts. These uncertainties include the exact nature and
extent of the contamination at each site, the extent of required
cleanup efforts, varying costs of alternative remediation strategies,
changes in environmental remediation requirements, the number and
financial strength of other potentially responsible parties at multi-
party sites, and the identification of new environmental sites. As a
result, charges to income for environmental liabilities could have a
material effect on results of operations in a particular quarter or
year as assessments and remediation efforts proceed or as new claims
arise. However, management is not aware of any matters which would be
expected to have a material adverse effect on the Company's
consolidated financial position, cash flow or liquidity.
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During the years 1994 - 1996, the Company estimates environmental
expenditures at the Houston and Tyler refineries, of at least $4.9
million and $16.8 million, respectively. Of these expenditures, it is
anticipated that $3.5 million for Houston and $15.8 million for Tyler
will be of a capital nature, while $1.4 million and $1 million,
respectively, will be related to previously accrued non-capital
remediation efforts. At the Company's marketing facilities,
environmental related expenditures (capital and non-capital) of at
least $10.5 million are planned for 1994 and 1995, which includes $5.1
million previously accrued relating to site testings and inspections,
site clean-up, and monitoring wells.
As a result of a strong balance sheet and overall favorable credit
relationships, the Company has been able to maintain open lines of
credit with its major suppliers. Under the Revolving Credit Agreement
(Credit Agreement), effective as of May 10, 1993, the Company had
outstanding as of April 30, 1994, irrevocable standby letters of credit
in the principal amount of $25.3 million for purposes in the ordinary
course of business.
The $60 million outstanding under the Company's Note Purchase Agreement
requires seven annual repayments of $8.6 million beginning in January
1995. The Company has various options available to either repay or
refinance this debt including short-term borrowings, long-term
borrowings, lease financing and structures such as the Purchase Money
Lien.
As discussed in Note C of Notes to Unaudited Consolidated Condensed
Financial Statements, the Company has entered into interest rate swap
agreements to effectively convert $47,500,000 of its unsecured 10.42%
Senior Notes to variable interest rates with maturities ranging from
1996 to 1998. According to the terms of these swap agreements,
interest rates are reset on various predetermined dates which range
from May 1994 to March 1998. Due to recent increases in market
interest rates, it is possible the Company's effective interest rate
will increase from current levels.
At March 31, 1994, the Company was in compliance with all covenants and
provisions of the Note Purchase and Credit Agreement. Meeting the
covenants imposed by the Note Purchase and Credit Agreement is
dependent, among other things, upon the level of future earnings and
the rate of capital spending.
The Company's management is involved in a continual process of
evaluating growth opportunities in its core business as well as its
capital resource alternatives. Total capital expenditures and deferred
turnaround costs in 1994 are projected to approximate the 1993
expenditures of $44.9 million. The capital expenditures relate
primarily to planned enhancements at the Company's refineries, retail
unit improvements and to company-wide environmental requirements.
Management anticipates funding these 1994 expenditures principally
through funds from operations and existing available cash.
The Company places its temporary cash investments in high credit
quality financial instruments which are in accordance with the
covenants of the Company's financing agreements. These securities
mature within ninety days, and, therefore, bear minimal risk. The
Company has not experienced any losses on its investments.
The Company faces intense competition in all of the business areas in
which it operates. Many of the Company's competitors are substantially
larger and Crown's sales volumes generally represent a small portion of
the overall products sold in the Company's marketing areas. Therefore,
the Company's earnings are affected by the marketing and pricing
policies of its competitors, as well as changes in raw material costs.
Merchandise sales and operating revenues from the Company's convenience
stores are seasonal in nature, generally producing higher sales and net
income in the summer months than at other times of the year. Gasoline
sales, both at the Crown multi-pumps and convenience stores, are also
somewhat seasonal in nature and, therefore, related revenues may vary
during the year. The seasonality does not, however, negatively impact
the Company's overall ability to sell its refined products.
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The Company maintains business interruption insurance to protect itself
against losses resulting from shutdowns to refinery operations from
fire, explosions and certain other insured casualties. Business
interruption coverage begins for such losses at the greater of $5
million or shutdowns for periods in excess of 25 days.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material changes in the status of legal proceedings
as reported in Item 3 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.
The Company is involved in various matters of litigation, the ultimate
determination of which, in the opinion of management, is not expected
to have a material adverse effect on the Company's financial position.
Item 4 - Submission of Matters to a vote of Security Holders
(a) Security holders voted upon a recommendation of the Board of
Directors to approve the Long-Term Incentive Plan (Plan) for
fiscal 1994. The Plan provides for awards of Performance
Vested Restricted Stock (as defined) and non-qualified stock
options to officers and key employees of the Company for the
purchase of the Company's Class B Common Stock. The
recommendation was approved by the security holders at the
Annual Meeting of Security Holders held on April 28, 1994 by a
vote of 3,710,246 shares in the affirmative against 340,913
shares in the negative with 46,888 abstentions and 435,157
broker non-votes.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit:
19 - Previously Unfiled Documents
(a) Crown Central Petroleum Corporation Annual Incentive Plan
as in effect for fiscal 1994.
20 - Interim Report to Stockholders for the three months ended
March 31, 1994
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed with the Securities and
Exchange Commission during the three months ended March 31,
1994.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report on Form 10-Q for the
quarter ended March 31, 1994 to be signed on its behalf by the
undersigned thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
John E. Wheeler, Jr.
John E. Wheeler, Jr.,
Vice President - Treasurer and Controller, Chief
Accounting Officer and Duly Authorized Officer
Date: May 11, 1994
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EXHIBIT 19.a
CROWN CENTRAL PETROLEUM CORPORATION
1994 ANNUAL INCENTIVE PLAN
Section 1: Purpose
The purpose of the Crown Central Petroleum Corporation 1994 Annual
Incentive Plan (the "Plan") is to provide an annual performance-based
incentive for executives and other key employees who are in a position
to contribute materially to the success of the Corporation and its
Subsidiaries.
Section 2: Definitions
The following terms, as used herein, will have the meaning specified:
a. "Award" means an award made pursuant to the Plan.
b. "Award Agreement" means the agreement entered into between the
Corporation and a Participant, setting forth the terms and
conditions applicable to an Award granted to the Participant.
c. "Award Schedule" means the Award Schedule established pursuant
to Section 4(c)(i).
d. "Board of Directors" means the Board of Directors of the
Corporation as it may be comprised from time to time.
e. "Code" means the Internal Revenue Code of 1986, and any
successor statute, and the regulations promulgated thereunder,
as it or they may be amended from time to time.
f. "Committee" means the Committee as defined in Section 5.
g. "Corporation" means Crown Central Petroleum Corporation and any
successor corporation.
h. "Employee" means executive officers and other key employees of
the Corporation or a Subsidiary, but excludes directors who are
not also officers or employees of the Corporation.
i. "Exchange Act" means the Securities Exchange Act of 1934, and
any successor statute, as it may be amended from time to time.
j. "Participant" means an Employee selected from time to time by
the Committee to participate in the Plan.
k. "Performance Adjustment" means the percentage(s), as set forth
in the Award Schedule, that will, when multiplied by a
Participant's Target Award, determine the amount of a
Participant's Award.
<PAGE>
l. "Performance Criteria" means the criteria selected by the
Committee to measure performance for a Plan Year from among one
or more of the following:
i. Income before income taxes, as shown in the Corporation's
annual report to shareholders, but excluding extraordinary
items, discontinued operations, and the cumulative effect of
accounting changes, in accordance with generally accepted
accounting principles consistently applied by the
Corporation;
ii. Any other criteria related to Corporate performance,
Subsidiary, division or unit performance, individual
performance or any other category of performance selected by
the Committee.
m. "Performance Goal" means the level of performance as to each
Performance Criteria, as established by the Committee, that will
result in a 100 percent Performance Adjustment.
n. "Plan Year" means the calendar year.
o. "Retirement" means retirement at or after age 65 or, with the
advance consent of the Committee, at or after age 55.
p. "Subsidiary" means any corporation in which the Corporation,
directly or indirectly, controls 50% or more of the total
combined voting power of all classes of such corporation's
stock.
q. "Target Award" means the Target Award established pursuant to
Section 4(a).
Section 3: Eligibility
The Committee shall from time to time determine those Employees
eligible for Awards.
Section 4: Awards
a. Awards. Target Awards will be established by the Committee for
each Award made to each Participant. Each Award shall be
evidenced by an Award Agreement setting forth the Award Schedule
and such other terms and conditions applicable to the Award, as
determined by the Committee, not inconsistent with the terms of
the Plan. In the event of any conflict between an Award
Agreement and the Plan, the terms of the Plan shall govern.
b. Performance Criteria and Performance Goals. Performance
Criteria and Performance Goals will be established by the
Committee for the Corporation and/or its Subsidiaries each Plan
Year. The Committee shall also determine the extent to which
each Performance Criteria shall be weighted in determining
Awards. The Committee may vary the Performance Criteria,
Performance Goals and weightings from Participant to
Participant, Award to Award and Plan Year to Plan Year.
<PAGE>
c. Performance Adjustment. The Award payable to any Participant
may range from zero (0) to 150 percent of the Participant's
Target Award, depending upon whether, or the extent to which,
the Performance Goals have been achieved. All such
determinations regarding the achievement of any Performance
Goals will be made by the Committee.
i . Award Schedules. The Committee will establish an Award
Schedule for each Award to each Participant setting forth
the percentage of the Target Award for such Participant
payable at specified levels of performance, based on the
Performance Goal for each Performance Criteria and the
weighting established for such criteria.
ii. Award Determination. Actual Awards will be derived from the
Award Schedule based on the level of performance. The
actual Award for a Participant will be calculated by
multiplying the Participant's Target Award by the
Performance Adjustments in accordance with the Award
Schedule.
d. Payment of Awards. Awards will be paid, in a lump sum cash
payment, as soon as practicable after the close of the Plan Year
for which they are made. No Award will be payable to any
Participant who is not an Employee on the last day of the year,
except that if, during the last six months of the Plan Year, the
Participant dies, or becomes disabled, the Participant may be
entitled to a prorated Award as and to the extent determined by
the Committee. If a Participant terminates employment due to
Retirement, the Participant shall be entitled to a prorated
Award but only as and to the extent that the Performance Goals
have been met. Notwithstanding the foregoing provisions of this
Section 4(d), the Committee shall have the right to defer, or to
allow Participants to elect to defer, the payment of Awards
subject to such terms and conditions as it may determine.
Section 5: Administration
a. Committee. The Plan and all Awards will be administered by a
Committee of the Board of Directors, which Committee shall
consist of not less than three members of such Board of
Directors. The members of the Committee shall be designated by
the Board and, unless the Board provides otherwise, the
Committee shall be the Executive Compensation and Bonus
Committee of the Board of Directors. A majority of the members
of the Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the Committee.
<PAGE>
b. Authority. The Committee will have full and complete authority,
in its sole absolute discretion, (i) to exercise all of the
powers granted to it under the Plan, (ii) to construe, interpret
and implement the Plan and any related document, (iii) to
prescribe, amend and rescind rules relating to the Plan, (iv) to
make all determinations necessary or advisable in administering
the Plan, and (v) to correct any defect, supply any omission and
reconcile any inconsistency in the Plan.
c. Determinations. The actions and determinations of the Committee
on all matters relating to the Plan and any Awards will be final
and conclusive.
d. Liability. No member of the Committee or the Board will be
liable for any action taken or determination made in good faith
with respect to the Plan or any Award thereunder, and the
Corporation will defend Committee and Board members for any
actions taken or decisions made in good faith under the Plan.
e. Awards. Subject to the terms of the Plan, the Committee will
have full and complete authority, to determine, among other
things, the Employees to whom, and the time or times at which,
Awards will be made and the requisite conditions thereof.
f. Delegation. The Committee may delegate to the officers or
employees of the Corporation and/or a Subsidiary the authority
to execute and deliver such instruments and documents, to do all
such acts and things, and to take all such other steps deemed
necessary, advisable or convenient for the effective
administration of the Plan in accordance with its terms and
purpose.
Section 6: Change of Control
a. Effect of Change of Control. In the event of a change in
control of the Corporation, in addition to any action required
or authorized by the terms of an Award Agreement, the Committee
may, in its sole discretion, take any of the following actions
as a result, or in anticipation, of any such event to assure
fair and equitable treatment of Participants:
i. accelerate time periods for purposes of vesting in, or
receiving any payment with regard to, any outstanding Award,
or
ii. make adjustments or modifications to outstanding Awards as
the Committee deems appropriate to maintain and protect the
rights and interests of Participants following such change
of control.
Any such action approved by the Committee shall be conclusive and
binding on the Corporation and all Participants.
b. Change of Control Defined. For purposes of this Section, a
change of control shall means the following:
<PAGE>
i. A tender offer or exchange offer is made whereby the effect of
such offer is to take over and control the affairs of the
Corporation, and such offer is consummated for the ownership of
securities of the Corporation representing twenty percent (20%)
or more of the combined voting power of the Corporation's then
outstanding voting securities.
ii. The Corporation is merged or consolidated with another
corporation and, as a result of such merger or
consolidation, less than seventy-five percent (75%) of the
combined voting power of the outstanding voting securities
of the surviving or resulting corporation shall then be
owned in the aggregate by the former stockholders of the
Corporation.
iii. The Corporation transfers substantially all of its assets to
another corporation or entity that is not a wholly owned
subsidiary of the Corporation.
iv. Any person (as such term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the
Corporation representing twenty percent (20%) or more of the
combined voting power of the Corporation's then outstanding
securities, and the effect of such ownership is to take over
and control the affairs of the Corporation.
v. As the result of a tender offer, merger, consolidation, sale of
assets, or contested election, or any combination of such
transactions, the persons who were members of the Board of
Directors immediately before the transaction, cease to
constitute at least a majority thereof.
Section 7: Miscellaneous
a. Nonassignability. No Award will be assignable or transferable
except by will or by the laws of descent and distribution.
b. Withholding Taxes. Whenever payments under the Plan are to be
made, the Corporation and/or the Subsidiary will withhold
therefrom an amount sufficient to satisfy any applicable
governmental withholding tax requirements related thereto.
c. Amendment or Termination of the Plan. The Board of Directors
may at any time amend, suspend or discontinue the Plan, in whole
or in part. The Committee may at any time alter or amend any or
all Award Agreements under the Plan to the extent permitted by
law. However, a termination or amendment of the Plan shall not,
without the consent of the Participant, detrimentally affect a
Participant's rights under an Award previously granted to him.
<PAGE>
d. Non-Uniform Determinations. The Committee's determinations
under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to
receive, Awards under the Plan, whether or not such persons are
similarly situated. Without limiting the generality of the
foregoing, the Committee will be entitled, among other things,
to make non-uniform and selective determinations and to
establish non-uniform and selective Performance Criteria,
Performance Goals, the weightings thereof, and Target Awards.
e. Other Payments or Awards. Nothing contained in the Plan will be
deemed in any way to limit or restrict the Corporation, its
Subsidiaries, or the Committee from making any award or payment
to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
f. Payments to Other Persons. If payments are legally required to
be made to any person other than the person to whom any amount
is available under the Plan, payments will be made accordingly.
Any such payment will be a complete discharge of the liability
of the Committee.
g. Unfunded Plan. The Plan shall be unfunded. No provision of the
Plan or any Award Agreement will require the Corporation or its
Subsidiaries, for the purpose of satisfying any obligations
under the Plan, to purchase assets or place any assets in a
trust or other entity to which contributions are made or
otherwise to segregate any assets, nor will the Corporation or
its Subsidiaries maintain separate bank accounts, books, records
or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Participants
will have no rights under the Plan other than as unsecured
general creditors of the Corporation and its Subsidiaries,
except that insofar as they may have become entitled to payment
of additional compensation by performance of services, they will
have the same rights as other employees under generally
applicable law.
h. Limits of Liability.
i. Any liability of the Corporation or a Subsidiary to any
Participant with respect to an Award shall be based solely
upon contractual obligations created by the Plan and the
Award Agreement.
ii. Neither the Corporation nor a Subsidiary, nor any member of
the Board of Directors or of the Committee, nor any other
person participating in any determination of any question
under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability to any
party for any action taken or not taken in good faith under
the Plan.
<PAGE>
i. Rights of Employees.
i. Status as an eligible Employee shall not be construed as a
commitment that any Award will be made under this Plan to
such eligible Employee or to eligible Employees generally.
ii. Nothing contained in this Plan or in any Award Agreement (or
in any other documents related to this Plan or to any Award
or Award Agreement) shall confer upon any Employee or
Participant any right to continue in the employ or other
service of the Corporation or a Subsidiary or constitute any
contract or limit in any way the right of the Corporation or
a Subsidiary to change such person's compensation or other
benefits or to terminate the employment or other service of
such person with or without cause.
j. Section Headings. The section headings contained herein are for
the purposes of convenience only, and in the event of any
conflict, the text of the Plan, rather than the section
headings, will control.
k. Invalidity. If any term or provision contained herein will to
any extent be invalid or unenforceable, such term or provision
will be reformed so that it is valid, and such invalidity or
unenforceability will not affect any other provision or part
hereof.
l. Applicable Law. The Plan, the Award Agreements and all actions
taken hereunder or thereunder shall be governed by, and
construed in accordance with, the laws of the state of Maryland
without regard to the conflict of law principles thereof.
m. Effective Date. The Plan shall be effective as of January 1,
1994.
<PAGE>
<PAGE>
CROWN
(registered trademark)
Crown Central Petroleum Corporation
Interim Report
First Quarter
March 31, 1994
1
<PAGE>
To the Shareholders
Crown Central Petroleum Corporation announced at the Annual Meeting of
Stockholders a net income of $8.7 million ($.88 per share) for the
first quarter of 1994 on revenues of $393.6 million. This compares to
a net loss of $5.7 million ($.58 per share) in the first quarter of
1993 on revenues of $413.3 million, and a net income of $6.9 million
($.70 per share) in the fourth quarter of 1993.
Refinery margins on the Gulf Coast improved during the first quarter.
A general increase in the demand for gasoline, a very cold winter and
maximum utilization of our refineries contributed to these encouraging
results.
Implementation of the Distributed Control System, Crown's major
refining initiative for 1994, proceeded at the Pasadena, Texas refinery
according to plan during the first quarter. Scheduled to begin
operation in the third quarter, the DCS will computerize Crown's
processes to aid in achieving optimum refining production and margin
capture. At the Tyler refinery, the desulfurization unit (HDS)
completed in the fall, operated successfully for the full quarter
supplying 11,000 BPD of low sulfur fuel.
The Company continues to address the requirements of the Clean Air Act
and to prepare for the introduction of Federal Reformulated Gasoline
(RFG) in January 1995. Currently, there are plans to produce RFG at the
Tyler refinery. Pasadena refinery personnel are conducting a cost
benefit analysis study looking into various options available regarding
the production of RFG.
Marketing retail margins showed a 7.1% improvement over the same
quarter of 1993. On a comparable unit basis, 1994 first-quarter retail
gallonage was up by 6.5% versus the same period in 1993 and merchandise
sales reported an impressive 11.7% gain. While total retail volume
only increased 6/10ths of 1%, this was accomplished despite 59 fewer
units in the system.
<PAGE>
Environmentally, the second phase of the Stage II Vapor Recovery System
requirement for lower volume stations is currently being implemented.
As a follow-up to the successful Crown/Merchant's Frequent Fill-Up
Program that concluded in January 1994, several new promotions aimed at
building customer loyalty and continuity will be announced during the
second quarter. These popular programs are aimed not just at repeat
customers, but also to encourage multiple sales once a consumer visits
one of our sites.
Government affairs personnel continue to monitor and participate in the
public comment phase of the Clean Water Act and OSHA reauthorization
legislation. Both proposals could possibly contain additional
regulations that would impact Crown's operations.
Crown employees and shareholders should be pleased with the continuing
refining, marketing and administrative progress during the first
quarter.
Respectfully submitted,
Henry A. Rosenberg, Jr.
Henry A. Rosenberg, Jr.
Chairman and Chief Executive Officer
Charles L. Dunlap
Charles L. Dunlap
President and Chief Operating Officer
April 28, 1994
<PAGE>
<TABLE>
<CAPTION>
Crown Central Petroleum Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
Dollars in thousands, except amounts per share 1994 1993
-------- --------
<S> <C> <C>
Revenues:
Sales and operating revenues - Note 1 $393,586 $413,302
-------- --------
Operating Costs and Expenses:
Costs and operating expenses - Note 1 343,415 386,679
Selling and administrative expenses 22,060 22,585
Depreciation and amortization 10,631 10,299
Sales of property, plant and equipment (323) (29)
-------- --------
375,783 419,534
-------- --------
Operating Income (Loss) 17,803 (6,232)
Interest and other income 393 53
Interest expense (1,911) (1,684)
-------- --------
Income (Loss) Before Income Taxes 16,285 (7,863)
Income Tax Expense (Benefit) 7,625 (2,143)
-------- --------
Net Income (Loss) $ 8,660 $ (5,720)
======== ========
Net Income (Loss) Per Share $ .88 $ (.58)
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Crown Central Petroleum Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
March 31 December 31
Dollars in thousands 1994 1993
--------- ----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 48,613 $ 52,021
Accounts receivable (net) 114,430 91,413
Inventories - Notes 2 and 3 104,619 86,811
Other current assets 6,980 762
-------- --------
Total Current Assets 274,642 231,007
Property, Plant and Equipment (net) 381,046 382,263
Investments and Deferred Charges 39,664 42,908
-------- --------
$695,352 $656,178
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $146,862 $124,666
Accrued liabilities 54,029 50,145
Income taxes payable 6,301 3,264
Current portion of long-term debt 10,108 1,094
-------- --------
Total Current Liabilities 217,300 179,169
Long-Term Debt 57,585 65,579
Deferred Income Taxes 81,542 81,217
Other Deferred Liabilities 31,912 31,860
Common Stockholders' Equity 307,013 298,353
-------- --------
$695,352 $656,178
======== ========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
1. Sales and operating revenues and Costs and operating expenses
include excise taxes of $93,556 and $64,889 for the three months
ended March 31, 1994 and March 31, 1993, respectively.
2. The Company values the majority of its inventories of crude oil
and refined products at the lower of annual average cost (last-in,
first-out) or market. Convenience store inventories are also
valued under the LIFO method. The use of LIFO in valuing
inventories has a significant impact on the Company's reported
working capital. If inventories were valued using current
acquisition costs (first-in, first-out) the March 31, 1994 current
ratio would increase from 1.26 to 1 on a LIFO cost basis to 1.34
to 1 on a FIFO cost basis. With inventories valued on a LIFO cost
basis, working capital is $57,342 whereas on a FIFO cost basis,
working capital increases to $77,181 assuming the same effective
tax rate as used in computing the value of inventories under the
LIFO method.
3. Inventories are presented net of the LIFO allowance of $32,259 and
$28,215 at March 31, 1994 and December 31, 1993, respectively.
4. The financial information is compiled from the books of the
Company and its subsidiaries without audit, but the Company
believes that all adjustments and reclassifications necessary for
a fair and comparable presentation of the results of operations
for the unaudited periods have been made. Form 10-Q dated March
31, 1994 will be filed with the Securities and Exchange Commission
by May 16, 1994.
<PAGE>
CROWN
(registered trademark)
General Offices
The Blaustein Building
One North Charles Street
P.O. Box 1168
Baltimore, Maryland 21203
(410) 539-7400
Crown Central Petroleum Corporation
Refiners/Marketers of Petroleum Products
