UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 Identification Number)
incorporation or organization)
ONE NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 539-7400
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
Class A Common Stock - $5 Par Value American Stock Exchange
Class B Common Stock - $5 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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]
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 aggregate market value of the voting stock held by nonaffiliates as of
January 31, 1994 was $112,731,000.
The number of shares outstanding at February 15, 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.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders on April
28, 1994 are incorporated by reference into Items 10 through 13, Part III.
<PAGE>
Crown Central Petroleum Corporation
and subsidiaries
Table of Contents
Page
PART I
Item 1 Business . . . . . . . . . . . . . . . . . . . . . l
Item 2 Properties . . . . . . . . . . . . . . . . . . . . 2
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . 4
Item 4 Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . 4
PART II
Item 5 Market for the Registrant's Common
Equity and Related Stockholder Matters . . . . . . 5
Item 6 Selected Financial Data . . . . . . . . . . . . . 6
Item 7 Management's Discussion and Analysis
of Financial Condition and Results of Operations . 6
Item 8 Financial Statements and Supplementary Data . . . 12
Item 9 Changes in and Disagreements with Auditors on
Accounting and Financial Disclosure . . . . . . . 28
PART III
Item 10 Directors and Executive Officers of the Registrant 29
Item 11 Executive Compensation . . . . . . . . . . . . . . 30
Item 12 Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . 30
Item 13 Certain Relationships and Related Transactions . . 30
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . . . . . . 30
<PAGE>
PART I
Item 1. BUSINESS
General
Crown Central Petroleum Corporation and subsidiaries (the Company) operates
primarily in one business segment as an independent refiner and marketer of
petroleum products, including petrochemical feedstocks. The Company owns and
operates two refineries, one located near Houston, Texas with a rated capacity
of 100,000 barrels per day and the other in Tyler, Texas with a rated capacity
of 50,000 barrels per day. The Company operates 17 product terminals in
strategic locations from Houston, Texas to Elizabeth, New Jersey and through
the Midwestern United States. The Company markets finished petroleum products
in 18 states and the District of Columbia. These marketing activities are
focused primarily in the Mid-Atlantic, Southeastern and Midwestern United
States.
In 1989, the Company acquired all of the stock of La Gloria Oil and Gas Company
(La Gloria). La Gloria's principal asset is the Tyler refinery. La Gloria
also owns a truck rack terminal at the refinery, a wholesale terminal in
Illinois, and a crude oil gathering system that serves the Tyler refinery. La
Gloria leases three other terminal facilities in Arkansas and Indiana. The
addition of La Gloria's crude processing capacity has afforded Crown certain
improved economies of scale in purchasing raw materials, in product
distribution and in marketing. Further, this volume increase directly reduces
the per barrel cost of the Company's selling and administrative expenses.
The Company's marketing strategy has concentrated on the development of high-
volume, multi-pump service stations that are located principally in
neighborhoods rather than on interstate highways. The Company believes that
the stations are distinctive because of their attractive landscaping, high
standards of cleanliness and service and 24 hours-a-day operation. The Company
owns and operates two convenience store chains (Fast Fare and Zippy Mart).
Through the marketing of both merchandise and gasoline, these units have
complemented the Company's traditional retailing activities.
Sales values of the principal classes of products sold by the Company during
the last three years are included in Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 7 of this report.
At December 31, 1993, the Company employed 3,031 employees. The total number
of employees decreased approximately 9% from year-end 1992, due primarily to
reductions in marketing operations as a result of the closing or divestment of
retail units which were not strategic to the Company's future and reductions
due to the consolidation of certain Marketing field operations.
Regulation
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, wastewater discharges, underground storage
tanks, and solid and hazardous waste management activities. The Company
anticipates that substantial capital investments will be required in order to
comply with federal, state and local provisions. A more detailed discussion of
environmental matters is included in Note A and Note G of Notes to Consolidated
Financial Statements on pages 18 and 25 of this report, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations on
pages 6 through 11 of this report.
1
<PAGE>
Competitive Conditions
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 the
Company's sales volumes represent a small portion of the overall products sold
in its 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. The majority of the Company's total crude oil purchases are
transacted on the spot market. The Company selectively enters into forward
hedging and option contracts to minimize price fluctuations for a portion of
its crude oil and refined products.
The Company maintains business interruption insurance to protect itself against
losses resulting from shutdowns to refinery operations for periods in excess of
25 days or $5 million resulting from fire, explosions and certain other insured
casualties.
La Gloria has entered into long-term finished product Exchange Agreements with
Exxon, USA (Exxon) and Chevron, USA (Chevron). The primary term of the Exxon
Agreement extends through December 1999, and requires the exchange of
approximately 297,000 barrels per month. The Chevron Agreement has been
extended through March 1999, and requires the exchange of approximately 256,000
barrels per month.
Merchandise sales and operating revenues of the 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 vary during the year. The seasonality does not, however,
negatively impact the Company's overall ability to sell its refined products.
Item 2. PROPERTIES
Houston Refining
The Company owns and operates a 100,000 Barrel-Per-Day (BPD) refinery located
on approximately 174 acres adjacent to the Houston Ship Channel in Houston,
Texas. The Gulf Coast location offers an advantage because of its access by
tankers, barges and pipelines for the receipt of feedstocks and the shipment of
finished products. The facility has a crude unit with a 100,000 BPD
atmospheric column and a 38,000 BPD vacuum tower. Major downstream units
consist of a 52,000 BPD fluid catalytic cracking (FCC) unit, a 12,000 BPD
delayed coker unit, two alkylation units with a combined capacity of 12,000 BPD
of alkylate production, and two reformers with a combined capacity of 36,000
BPD. Other units include a 5,000 BPD isomerization unit, two depropanizer
units that can produce 5,500 BPD of refinery grade propylene, a liquefied
petroleum gas unit that removes about 1,000 BPD of liquids from the refinery
fuel system and a methyl tertiary butyl ether (MTBE) unit which can produce
about 1,500 BPD of MTBE for gasoline blending. A fully-depreciated petroleum
coke calcining plant is also located at the site, but this unit has not been in
operation during the last several years because of economic conditions and
environmental restrictions.
In 1993, the refinery ran at approximately 91% of rated crude unit capacity
with a product yield that was approximately 54% gasoline (of which 17% was
premium octane grades) and 32% distillates. In addition, propylene, propane,
slurry oil, petroleum coke and sulphur were produced.
The Company owns and operates storage facilities located on approximately 130
acres near its Houston plant which, together with tanks at the refinery site,
provide the Company with a storage capacity of approximately 6.2 million
barrels. In addition, the Company has a third-party agreement for the storage
and handling of crude received from large ocean going vessels.
The Company obtains a continuous supply of crude oil and other feedstocks from
a variety of sources, including major producers, independent domestic
producers, foreign national oil companies, trading companies, and other
refiners. Most of the domestic crude processed by the Company, other than that
from the Alaskan North Slope (ANS), is transported by pipeline. The Company's
purchases of ANS and foreign crude oil are transported primarily by tankers
under spot charters which are arranged by either the seller or by the Company.
The Company is not obligated under any time-charter contracts.
The Company owns an undivided interest in the Rancho Pipeline System, which
connects with gathering and other trunk line systems serving producing fields
in parts of West Texas and New Mexico.
2
<PAGE>
Tyler Refining
The Tyler refinery is a high conversion refinery located on approximately 100
of the 529 acres owned by the Company in Tyler, Texas. The crude unit has a
current capability of processing approximately 52,000 BPD, but could be
expanded to run 60,000 BPD with certain enhancements to downstream units. The
refinery processes light, sweet crude oils delivered by pipeline to the
refinery: about 80% from local East Texas producers and 20% from other
sources. In 1993, the refinery had a crude unit utilization rate of
approximately 94% resulting in a product yield which was approximately 55%
gasoline (of which 33% was premium octane grades) and 34% distillates.
The other major process units at the refinery include a 16,000 BPD vacuum
distillation unit, an 18,000 BPD FCC unit, a 6,000 BPD delayed coker unit, a
20,000 BPD naphtha hydrotreating unit, a 12,000 BPD distillate hydrotreating
unit, two reforming units with a combined capacity of 16,000 BPD, a 5,000 BPD
isomerization unit, and an alkylation unit with a capacity of 4,700 BPD. The
hydrotreating units were significantly modified in 1993 enabling this plant to
produce 100% of its distillate to meet the .05% sulphur requirements under the
Clean Air Act.
In addition to the major process units, the refinery includes a gas recovery
unit, sulfur plant, tankage, boilers, instrument air and plant air systems, and
an API separator.
Most of the refined products are delivered via the refinery truck terminal,
which is equipped for automated blending. The refinery connects to the Texas
Eastern Product Pipeline System which extends into the upper Midwestern States.
The major source of crude supply to the refinery is the McMurrey Pipe Line
Company system. The McMurrey Pipe Line Company, a wholly-owned subsidiary of
La Gloria, owns and operates a crude oil transmission and gathering system in
Smith, Gregg, and Rusk counties in East Texas.
Marketing
While the Company retails and/or wholesales finished petroleum products in
several states, the majority of its 1993 sales were concentrated in Alabama,
Arkansas, Georgia, Illinois, Indiana, Maryland, New Jersey, North Carolina,
South Carolina, Texas and Virginia.
The Company owns or leases 17 terminals in 11 states and has exchange
agreements with other terminals. The Company's terminals are supplied through
a combination of pipelines and barge loading facilities. In addition to
serving the Company's retail requirements, the terminals supply petroleum
products to other refiner/marketers, jobbers and independent distributors. As
discussed in Management's Discussion and Analysis of Financial Condition and
Results of Operations on page 8 of this report, in the third quarter of 1993, a
fire destroyed the loading rack at the Pasadena Texas terminal.
The Company's gasoline products are marketed at retail through Crown branded
multi-pump service stations. At December 31, 1993, there were 298 locations in
operation of which 101 were leased to dealers and 197 were operated by the
Company. Of the Company's 298 service stations, 111 contain Express Marts
which sell a variety of convenience items in an area of approximately 800
square feet and 49 locations operate as traditional convenience stores bearing
the Crown name.
Fast Fare and Zippy Mart convenience stores are currently located in Alabama,
Georgia, North Carolina and South Carolina. The stores average 2,200-2,400
square feet of floor space and generally operate 24 hours a day. They offer a
variety of dairy and bakery products, beer, wine, soft drinks, and other
convenience items. Many outlets include deli counters and carry-out fast food.
The 78 operating Fast Fare and Zippy Mart convenience stores at December 31,
1993 included 53 fee locations, where Fast Fare owns the land, and 25 leased
facilities. Petroleum products are marketed at 75 of these locations.
3
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Company is involved in various matters of litigation, the ultimate
determination of which, in the opinion of management, will not have a material
adverse effect on the Company's financial position. The Company's legal
proceedings are further discussed in Note G of Notes to Consolidated Financial
Statements on page 25 of this report.
In 1991, 1992 and 1993, the Texas Water Commission conducted routine solid
waste investigations of the Company's Pasadena Refinery. The violations that
have been alleged as a result of these inspections have been combined into a
single enforcement action in which the Texas Natural Resource Conservation
Commission (TNRCC) is currently seeking the imposition of approximately
$139,000 in administrative penalties and various corrective measures. In 1992,
the Texas Air Control Board conducted a State Implementation Plan inspection.
The Company is currently negotiating with TNRCC concerning the appropriate
disposition of the alleged violations cited as a result of this inspection. In
May 1993, the United States Environmental Protection Agency (EPA) conducted an
inspection at the Pasadena Refinery, and in February 1994, the Company received
a Notice of Violation (NOV) related to this inspection. Many of the alleged
violations in this NOV are included in the air matters currently under
consideration by TNRCC. The Company is attempting to coordinate the resolution
of these matters which are now before the two agencies. The Pasadena Refinery
and many of the Company's other facilities are involved in a number of other
environmental enforcement actions or are subject to agreements, orders or
permits that require remedial activities. Environmental expenditures,
including these matters, are discussed in the Liquidity and Capital Resources
section of Management's Discussion and Analysis of Financial Conditions and
Results of Operations on pages 9 through 11 of this report, and in Note G of
Notes to Consolidated Financial Statements on page 25 of this report. These
enforcement actions and remedial activities, in the opinion of management, are
not expected to have a material adverse effect on the financial position of the
Company.
In addition, the Company has been named by the EPA and by several state
environmental agencies as a potentially responsible party at various federal
and state Superfund sites. The Company's exposure in these matters has either
been resolved or is de minimis and is not expected to have a material adverse
-- -------
effect on the financial position of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last three
months of the fiscal year covered by this report.
(This space intentionally left blank)
4
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the American Stock Exchange under the
ticker symbols CNP A and CNP B.
Common Stock Market Prices and Cash Dividends
1993 1992
----------------- --------------------------
Cash
Sales Price Sales Price Dividend
High Low High Low Declared
-------- ------- ------- ------- --------
CLASS A COMMON STOCK
First Quarter . . . $18 $13 3/4 $26 1/2 $22 1/2 $.10
Second Quarter . . . 16 7/8 14 1/2 24 1/8 20 3/8 .10
Third Quarter . . . 16 3/4 14 1/2 20 1/2 16
Fourth Quarter . . . 16 1/4 14 5/8 17 1/4 13 5/8
Yearly . . . . . . 18 13 3/4 26 1/2 13 5/8 .20
CLASS B COMMON STOCK
First Quarter . . . $16 1/8 $12 $24 3/8 $21 3/8 $.10
Second Quarter . . . 14 3/4 12 5/8 21 7/8 19 .10
Third Quarter . . . 14 1/4 12 1/4 19 1/4 14 1/2
Fourth Quarter . . . 14 5/8 13 15 1/8 11 1/4
Yearly . . . . . . 16 1/8 12 24 3/8 11 1/4 .20
The Company's policy of paying regular quarterly cash dividends is dependent
upon future earnings, capital requirements, overall financial condition and
restrictions as described in Note C of Notes to Consolidated Financial
Statements on pages 19 and 20 of this report. There were no cash dividends
declared on common stock in 1993.
The approximate number of shareholders of the Company's common stock, based on
the number of record holders on December 31, 1993 was:
Class A Common Stock . . 794
Class B Common Stock . . 953
Transfer Agent & Registrar
Mellon Securities Transfer Services
Ridgefield Park, New Jersey
5
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company set forth below for
the five years ended December 31, 1993 should be read in conjunction with the
Consolidated Financial Statements.
<TABLE> <CAPTION>
1993 1992 1991 1990 1989
----------- ------------ ------------ ------------ ------------
(Thousands of dollars except per share amounts)
<S> <C> <C> <C> <C> <C>
Sales and operating revenues $1,747,411 $1,795,259 $1,857,711 $2,019,960 $1,523,147
(Loss) income before cumulative effect
of changes in accounting principles (4,300) (13,278) (6,026) 26,011 21,005
Cumulative effect of changes in
accounting principles 7,772
Net (loss) income . . . (4,300) (5,506) (6,026) 26,011 21,005
Total assets . . . . . 656,178 675,337 687,816 687,698 623,690
Long-term debt . . . . 65,579 61,220 88,646 2,230 42,655
Per Fully Diluted Share Data:
(Loss) income before cumulative effect
of changes in accounting principles (.44) (1.35) (.61) 2.65 2.09
Net (loss) income . . (.44) (.56) (.61) 2.65 2.09
Cash Dividends Declared:
Class A Common . . . .20 .80 .80 .30
Class B Common . . . .20 .80 .80 .30
Series A Preferred . .92
Series B Preferred . .67
</TABLE>
The above financial information reflects the operations of La Gloria Oil and
Gas Company since the effective date of the acquisition in the fourth quarter
of 1989.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
As discussed in Notes D and F of Notes to Consolidated Financial Statements on
pages 21 and 24 of this report, Crown Central Petroleum Corporation and
subsidiaries (the Company) adopted the provisions of the Financial Accounting
Standards Board's Statements of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), and No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" (SFAS 106), effective January
1, 1992. The 1992 results include the $13,403,000 cumulative effect benefit of
the adoption of SFAS 109 on prior years, and the $5,631,000 net of tax
cumulative effect charge of applying SFAS 106. In 1993, the Company had a net
loss of $4.3 million compared to a net loss before cumulative effect of changes
in accounting principles of $13.3 million in 1992, and a net loss of $6 million
in 1991.
6
<PAGE>
The Company's sales and operating revenues decreased 2.7% in 1993 compared to a
3.4% decrease in 1992. The Company's sales and operating revenues include all
Federal and State Excise Taxes which totalled $296,228,000, $218,944,000, and
$214,716,000 in 1993, 1992 and 1991, respectively. The 1993 decrease in sales
and operating revenues was due to an 8.8% decrease in the average unit selling
price of petroleum products and to decreases in merchandise sales of 19.9%,
which were partially offset by a 2.1% increase in sales volumes and an increase
in excise taxes as previously mentioned. The 1992 decrease was primarily
attributable to a 6.6% decrease in the average unit selling price of petroleum
products and a 12.5% decrease in merchandise sales, which were partially offset
by a 3.4% increase in petroleum product sales volumes. The merchandise sales
decreases resulted principally from the sale or closing throughout 1992 and
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
resulted in increases in the average sales level per store in each of the last
two years. There were 376, 435 and 524 retail units operating at the end of
1993, 1992 and 1991, respectively.
Gasoline sales accounted for 56.4% of total 1993 revenues (excluding excise
taxes), while distillates and merchandise sales represented 30.4% and 6.0%,
respectively. This compares to a dollar mix from sales of 57.1% gasoline,
28.7% distillates and 6.9% merchandise in 1992; and 56.4% gasoline, 29.3%
distillates and 7.6% merchandise in 1991.
The following table depicts the sales values of the principal classes of
products sold by the Company, which individually contributed more than ten
percent of consolidated sales and operating revenues (excluding excise taxes)
during the last three years:
Sales of Principal Products
millions of dollars 1993 1992 1991
------ ------ --------
Gasoline $817.6 $900.1 $926.1
No. 2 Fuel & Diesel 369.7 379.9 384.5
Costs and operating expenses decreased 3.3% in 1993, after decreasing 3.4% in
1992. The 1993 decrease was attributable to a decrease in the average cost per
barrel consumed of crude oil and feedstocks of $2.29 or 11.2%, which was
partially offset by increases in volumes sold and excise taxes as previously
mentioned. The 1992 decrease was due primarily to a decrease in the average
cost per barrel consumed of $1.45 or 6.6% which was partially offset by higher
sales volumes.
The results of operations were affected by the Company's use of the last-in,
first-out (LIFO) method to value inventory which results in a better matching
of current revenues and costs. The impact of LIFO was to increase the
Company's gross margins in 1993, 1992 and 1991 by $.48 per barrel ($27.7
million), $.10 per barrel ($5.8 million) and $.86 per barrel ($45.9 million),
respectively. The 1992 LIFO impact is net of a $2.3 million gross margin
decrease resulting from a liquidation of LIFO inventory quantities as discussed
in Note B of Notes to Consolidated Financial Statements on page 19 of this
report.
Total refinery throughput was: 158,000 barrels per day (bpd) in 1993, yielding
86,000 bpd of gasoline (54.5%) and 52,000 bpd of distillates (32.6%); 154,000
barrels per day (bpd) in 1992, yielding 86,000 bpd of gasoline (56.2%) and
49,000 bpd of distillates (31.9%); and 147,000 bpd in 1991, yielding 78,000 bpd
of gasoline (53.1%) and 47,300 bpd of distillates (32.2%). Refinery production
was slightly impacted in 1993 by a scheduled maintenance turnaround in the
second quarter at the Tyler refinery, while Refinery production was more
dramatically reduced in 1992 by scheduled first quarter maintenance turnarounds
at both the Houston and Tyler refineries. Due to poor refining margins late in
the fourth quarter of 1993, the Company announced that it had reduced runs at
its Pasadena Refinery by 20%. In 1991, overall refinery production and
gasoline yields were reduced by the first quarter's scheduled turnaround and
extensive modification of the Houston refinery's Fluid Catalytic Cracking Unit
(FCCU), which is the primary gasoline facility. The Company's finished product
requirements in excess of its refinery yields and existing inventory levels are
acquired thru its exchange agreements or outright purchases.
7
<PAGE>
On September 28, 1993, a fire destroyed the Red Bluff truck loading rack
located one mile from the Pasadena Refinery. Since the fire, the Company has
supplied its terminal rack customers with refined products at nearby locations.
However, due to its strategic location, the Company has experienced certain
reductions in operating margins in selling the refined product formerly sold
from the Pasadena Terminal rack at these alternative sites or in the bulk
products market. Prior to the fire, refined products sold from the Pasadena
Terminal rack approximated 4% of consolidated 1993 refined product sales
volumes. The Company continues to evaluate its options, but has not made a
final decision concerning the repairs to the facility.
A majority of the Company's total crude oil and related raw material purchases
are transacted on the spot market. The Company selectively enters into forward
hedging and option contracts to minimize price fluctuations for a portion of
its crude oil and refined products.
Selling and administrative expenses decreased 10.8% in 1993 after decreasing
8.3% in 1992. The 1993 decrease resulted primarily from decreased store level
and marketing administrative costs associated with the closing of retail
outlets as previously discussed, and the consolidation of certain marketing
field operations. The 1992 decrease is also attributable to reduced costs
associated with the closing of retail outlets, and reductions resulting from
the reorganization of the Company's administrative functions. At December 31,
1993, the Company operated 249 retail gasoline facilities and 127 convenience
stores compared to 262 retail gasoline facilities and 173 convenience stores at
December 31, 1992 and 275 retail gasoline facilities and 249 convenience stores
at December 31, 1991. Despite the net reduction in 1993 of 59 operating units
(13.6%) from the December 31, 1992 level, the Company experienced a 9.1%
increase in total retail petroleum product margin dollars while total retail
sales volumes decreased less than 1%. The Company believes its extensive
retail unit analysis is now complete and that a minimal number of existing
units will be closed in 1994. Selling and administrative expense costs in 1993
include $.7 million in reorganization and office closure costs, while
reorganization costs of $.4 million and $1.1 million are included in selling
and administrative expenses for 1992 and 1991, respectively.
Operating costs and expenses in 1993, 1992 and 1991 include $8.7 million, $7.6
million and $15.7 million, respectively, related to environmental matters and
retail units that have been closed. Operating costs and expenses in 1993 also
include $1.8 million of accrued non-environmental casualty related costs.
Operating costs and expenses in 1992 include a $1 million reserve for the
write-off of excess refinery equipment and a $1.3 million write-off of refinery
feasibility studies.
Depreciation and amortization in 1993 was comparable to 1992, and is expected
to remain consistent in 1994. Depreciation and amortization increased 24.5% in
1992 resulting from additional depreciation and amortization relating to the
1991 capital modification and turnaround at the Houston refinery which was
completed in March 1991, as well as depreciation associated with other capital
expenditures made in 1991 and amortization of the 1992 turnarounds.
Additionally, $2.4 million of depreciation was recorded as a result of the
step-up in basis of fixed assets as required by the adoption of SFAS 109,
effective January 1, 1992.
The loss of $2.3 million from sales and abandonments in 1993 relates primarily
to the write-down of the Sulphur Unit at the Houston refinery. The loss of
$1.3 million from sales of property plant and equipment in 1992 includes a $.9
million write-off of abandoned equipment related to the capital modification of
the Houston refinery's FCCU.
Interest and other income increased $1.4 million in 1993 and decreased $4.7
million in 1992. The 1992 decrease was due primarily to decreases in the
average daily cash invested of $40.9 million and to decreases in average
interest rates. Interest and other income in 1993 includes income of $.7
million from the Company's wholly-owned insurance subsidiaries compared to a
loss of $1 million in 1992 and income of $.2 million in 1991.
Non-operating gains in 1991 include a favorable $2.4 million litigation
settlement related to the Houston refinery property tax assessments for the
years 1986 to 1989 and a favorable $1.2 million insurance settlement. There
were no material net non-operating gains or losses credited or charged to
income in 1993 or 1992.
8
<PAGE>
Interest expense increased $.6 million in 1993 and decreased $1.1 million in
1992. The 1993 increase related to a decrease in capitalized interest as
disclosed in Note C of Notes to Consolidated Financial Statements on page 20 of
this report. The 1992 decrease was due to decreases in the average effective
rate on cash borrowed reflecting the Company's positive results from its
interest rate swap program. Increases in the average daily cash borrowed of
$5.2 million in 1992 partially offset the decreased expense.
As discussed in Note D of Notes to Consolidated Financial Statements on page 22
of this report, the passage of the Tax Act of 1993 increased the Company's
federal statutory income tax rate from 34% to 35% effective January 1, 1993.
The effect of the change in statutory rate was to increase the Company's 1993
income tax expense and increase the net loss by $2.3 million or $.23 per share.
Liquidity and Capital Resources
The Company's cash and cash equivalents were $3.5 million lower at year-end
1993 than at year-end 1992. The decrease was attributable to $40 million of
net cash outflows from investment activities which was partially offset by cash
provided by operating activities of $31.3 million and cash provided by
financing activities of $5.2 million.
The positive $31.3 million cash generated from operating activities in 1993 is
net of an $11.2 million cash outflow relating to working capital, resulting
primarily from decreases in crude oil and refined products payable and
increases in the value of crude oil and finished products inventories, which
was partially offset by net decreases in accounts receivable. Since the
Company purchases much of its crude oil in bulk, crude oil payables fluctuate
depending on when the cargo is received and when the related payment is made.
Net cash outflows from investment activities in 1993 consisted principally of
capital expenditures of $40.9 million (which includes $19.1 million related to
the Marketing area and $19.5 million for refinery operations) and $4 million of
refinery deferred turnaround costs. The total outflows from investment
activities were partially offset by proceeds from the sale of property, plant
and equipment of $5.6 million.
Net cash provided by financing activities in 1993 relates primarily to the $5.5
million received from the purchase money lien as discussed in Note C of Notes
to Consolidated Financial Statements on page 20 of this report.
The ratio of current assets to current liabilities at December 31, 1993 was
1.29:1 compared to 1.22:1 at December 31, 1992. If FIFO values had been used
for all inventories, assuming an incremental effective income tax rate of 38.5%
at December 31, 1993 and 37.5% at December 31, 1992, the ratio of current
assets to current liabilities would have been 1.36:1 at December 31, 1993 and
1992.
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 $16.8 million as of December 31, 1993 to cover the estimated
costs of compliance with environmental regulations.
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.
9
<PAGE>
Over the next two to three years, 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 testing and inspections, site clean-up, and
monitoring wells.
In the fourth quarter of 1993, the distillate hydrotreater at the Tyler, Texas
refinery, was completed at a cost of approximately $8.2 million. This unit,
which is capable of processing 10,000 barrels per day, has operated near
capacity since start up and enables Crown to meet the on road distillate
sulphur standard as required by the Clean Air Act. Since 1991, the Company has
incurred expenditures of approximately $20.4 million in connection with
engineering and equipment acquisition which would enable the Houston refinery
to manufacture low sulphur distillate. These expenditures are included in
Property, Plant and Equipment on the Company's Balance Sheet at December 31,
1993. This project has been temporarily halted while the Company further
studies the market economics of high sulphur versus low sulphur distillate and
evaluates various options for this project. The Company estimates that,
depending upon the specific design and capacity, additional expenditures in the
range of $50 million to $80 million would be required to complete this project.
If the Company decides to install this unit, long-term capital or alternative
financing arrangements will be required.
As discussed in Note C of Notes to Consolidated Condensed Financial Statements
on page 20 of this report, effective as of May 10, 1993, the Company entered
into a new three year Revolving Credit Facility. Management believes the new
agreement will provide anticipated working capital requirements as well as
support future growth opportunities. 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, the Company had outstanding as of January
31, 1994, irrevocable standby letters of credit in the principal amount of
$25.7 million for purposes in the ordinary course of business. Unused
commitments totaling $99.3 million under the Revolving Credit Agreement were
available for future borrowings and issuance of letters of credit at
January 31, 1994.
As discussed in Note C of Notes to Consolidated Financial Statement, on page 20
of this report, effective December 1, 1993, the Company entered into a Purchase
Money Lien (Money Lien) for the financing of certain service station and
terminal equipment and office furnishings. On January 31, 1994, an additional
$1 million was drawn on the Money Lien for terminal equipment resulting in a
total of $6.5 million outstanding at January 31, 1994.
The $60 million outstanding under the Company's Note Purchase Agreement
requires seven annual repayments of $8.6 million beginning in January 1995.
Under the terms of the existing credit facilities, 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 previously discussed.
In 1993, due to declining interest rates, the Company reduced the discount rate
used to measure obligations for pension and postretirement benefits other than
pensions. This change will increase the Company's 1994 net periodic pension
cost, however, adjustments to other assumptions used in accounting for the
Company's defined benefit plans will likely result in a minimal impact on the
overall cost.
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, marketing store level improvements and to company-wide
environmental requirements. Management anticipates funding these 1994
expenditures principally through funds from operations and existing available
cash.
10
<PAGE>
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.
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.
Effects of Inflation and Changing Prices
The Company's consolidated financial statements are prepared on the historical
cost method of accounting and, as a result, do not reflect changes in the
dollar's purchasing power. Although the level of inflation continued to remain
relatively low in recent years, the Company's results are still affected by the
inflationary trend of earlier years.
In the capital intensive industry in which the Company operates, the
replacement costs for its properties would generally far exceed their
historical costs. Accordingly, depreciation would be greater if it were based
on current replacement costs. However, since replacement facilities would
reflect technological improvements and changes in business strategies, such
facilities would be expected to be more productive and versatile than existing
facilities, thereby increasing profits and mitigating increased depreciation
and operating costs.
The Company's use of LIFO to value inventories understates the value of
inventories on the Company's consolidated Balance Sheet as compared to the
first-in, first-out (FIFO) method.
In recent years, crude oil and refined petroleum product prices have been
falling which has resulted in a net reduction in working capital requirements.
If the prices increase in the future, the Company will expect a related
increase in working capital needs.
(This space intentionally left blank)
11
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
December 31
Assets 1993 1992
-------- --------
Current Assets
Cash and cash equivalents . . . . . . . . . $ 52,021 $ 55,504
Accounts receivable, less allowance for
doubtful accounts (1993--$1,760; 1992--$1,392) 91,413 112,920
Recoverable income taxes . . . . . . . . . 2,690
Inventories . . . . . . . . . . . . . . . . 86,811 73,454
Other current assets . . . . . . . . . . . 762 1,403
---------- --------
Total Current Assets . . . . . . . . . . . 231,007 245,971
Investments and Deferred Charges . . . . . . 42,908 53,616
Property, Plant and Equipment
Land . . . . . . . . . . . . . . . . . . . 44,433 45,251
Petroleum refineries . . . . . . . . . . . 428,567 409,832
Marketing facilities . . . . . . . . . . . 182,473 177,911
Pipelines and other equipment . . . . . . . 20,932 19,247
--------- ---------
676,405 652,241
Less allowance for depreciation . . . . . 294,142 276,491
--------- ---------
. . . . Net Property, Plant and Equipment 382,263 375,750
----------- ----------
$656,178 $675,337
======== ========
See notes to consolidated financial statements
12
<PAGE>
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
December 31
Liabilities and Stockholders' Equity 1993 1992
-------- --------
Current Liabilities
Accounts payable:
Crude oil and refined products . . . . . . $104,166 $134,416
Other . . . . . . . . . . . . . . . . . . 20,500 17,787
Accrued liabilities . . . . . . . . . . . . 50,145 48,522
Income taxes payable . . . . . . . . . . . 3,264
Current portion of long-term debt . . . . . 1,094 357
--------- ---------
. . . . . . . . Total Current Liabilities 179,169 201,082
Long-Term Debt . . . . . . . . . . . . . . . 65,579 61,220
Deferred Income Taxes . . . . . . . . . . . . 81,217 81,588
Other Deferred Liabilities . . . . . . . . . 31,860 28,173
Common Stockholders' Equity
Class A Common Stock--par value $5 per share:
Authorized--8,500,000 shares;
issued and outstanding shares--
4,817,392 in 1993 and 1992 . . . . . . . . 24,087 24,087
Class B Common Stock--par value $5 per share:
Authorized--6,500,000 shares;
issued and outstanding shares--
5,015,206 in 1993 and 1992 . . . . . . . . 25,076 25,076
Additional paid-in capital . . . . . . . . 91,870 91,870
Retained earnings . . . . . . . . . . . . .
157,320 162,241
---------- --------
. . . . Total Common Stockholders' Equity 298,353 303,274
----------- -----------
$656,178 $675,337
======== ========
See notes to consolidated financial statements
13
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Year Ended December 31
1993 1992 1991
---------- ----------- ---------
Revenues
Sales and operating revenues (including
excise taxes of 1993--$296,228;
1992--$218,944; 1991--$214,716) $1,747,411 $1,795,259 $1,857,711
Operating Costs and Expenses
Costs and operating expenses . . 1,604,696 1,659,796 1,718,066
Selling and administrative expenses 91,714 102,805 112,131
Depreciation and amortization . . 41,873 41,526 33,346
Sales of property, plant and equipment 2,331 1,264 (20)
---------- ---------- ----------
1,740,614 1,805,391 1,863,523
---------- ---------- ----------
Operating Income (Loss) . . . . . . 6,797 (10,132) (5,812)
Interest and other income . . . . . 1,461 3 4,713
Non-operating gains . . . . . . . . 3,674
Interest expense . . . . . . . . . (7,451) (6,826) (7,908)
---------- ---------- ----------
Income (Loss) Before Income Taxes and Cumulative
Effect of Changes in Accounting Principles 807 (16,955) (5,333)
Income Tax Expense (Benefit) . . . 5,107 (3,677) 693
---------- ----------- ---------
(Loss) Before Cumulative Effect
of Changes in Accounting Principles (4,300) (13,278) (6,026)
Cumulative Effect to January 1, 1992 of Change
in Accounting for Postretirement Benefits Other
Than Pensions (Net of Tax Benefit of $3,308) (5,631)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Income Taxes
13,403
----------- ----------- -----------
Net (Loss) . . . . . . . . . . . . $ (4,300) $ (5,506) $ (6,026)
=========== ========== =========
Net (Loss) Per Share:
(Loss) Before Cumulative Effect
of Changes in Accounting Principles $ (.44) $ (1.35) $ (.61)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Postretirement
Benefits Other Than Pensions . . (.57)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Income Taxes
1.36
------------ ---------- ------------
Net (Loss) Per Share . . . . . . . $ (.44) $ (.56) $ (.61)
========== =========== ===========
See notes to consolidated financial statements
14
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
<TABLE> <CAPTION>
Class A Class B Additional
Common Stock Common Stock Paid-In Retained
--------------- ------------
Shares Amount Shares Amount Capital Earnings
------ ------ ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1991 4,817,392 $24,087 5,015,206 $25,076 $91,870 $183,606
Net (loss) for 1991 . . . (6,026)
Cash dividends:
Class A Common Stock--$.80 per share (3,854)
Class B Common Stock--$.80 per share (4,012)
Balance at December 31, 1991 4,817,392 24,087 5,015,206 25,076 91,870 169,714
Net (loss) for 1992 . . . (5,506)
Cash dividends:
Class A Common Stock--$.20 per share (964)
Class B Common Stock--$.20 per share (1,003)
------------ ------ --------- ------ ------ -------
Balance at December 31, 1992 4,817,392 24,087 5,015,206 25,076 91,870 162,241
Net (loss) for 1993 . . . (4,300)
Adjustment to record minimum pension liability,
net of deferred income tax benefit of $335
(621)
------------ ------ --------- ------ ------ -------
Balance at December 31, 1993 4,817,392 $24,087 5,015,206 $25,076 $91,870 $157,320
============ ====== ========= ====== ====== =======
</TABLE>
See notes to consolidated financial statements
15
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
Year Ended December 31
1993 1992 1991
---------- ----------- ---------
Cash Flows From Operating Activities
Net (loss) . . . . . . . . . . . . . . $ (4,300) $ (5,506) $ (6,026)
Reconciling items from net (loss) to net
cash provided by operating activities:
Depreciation and amortization . . . 41,873 41,526 33,346
Loss (gain) on sales of property, plant
and equipment . . . . . . . . . . . 2,331 1,264 (20)
Equity (earnings) loss in unconsolidated
subsidiaries (651) 1,028 (237)
Deferred income taxes . . . . . . . (36) (841) 11,125
Other deferred items . . . . . . . . 830 715 5,608
Cumulative effect of changes in accounting
principles (7,772)
Changes in assets and liabilities
Accounts receivable . . . . . . . . 21,507 (1,506) 50,001
Recoverable income taxes . . . . . . 2,690 6,742 (9,432)
Inventories . . . . . . . . . . . . (13,357) 31,953 5,832
Other current assets . . . . . . . . 641 330 (1,130)
Crude oil and refined products payable (30,250) (13,303) (76,562)
Other accounts payable . . . . . . . 2,713 (2,555) 1,335
Accrued liabilities . . . . . . . . 1,623 876 (5,155)
Income taxes payable . . . . . . . . 3,264 (8,156)
--------- ---------- --------
Net Cash Provided by Operating Activities 28,878 52,951 529
-------- ---------- --------
Cash Flows From Investment Activities
Capital expenditures . . . . . . . . (40,860) (38,003) (64,782)
Contract settlement regarding acquisition
of La Gloria Oil and Gas Company . . 8,000
Proceeds from sales of property, plant and
equipment 5,515 4,072 4,619
Investment in subsidiaries . . . . . (4) (177) 742
Deferred turnaround maintenance and other (4,678) (19,675) (21,333)
-------- -------- --------
Net Cash (Used in) Investment Activities (40,027) (45,783) (80,754)
-------- -------- --------
Cash Flows From Financing Activities
Net (repayments) borrowings on loan agreements (376) (27,339) 86,333
Proceeds from purchase money lien . . 5,472
Proceeds from interest rate swap terminations 2,403
Net repayments (issuances) of long-term notes
receivable 167 (499) (2,637)
Cash dividends . . . . . . . . . . . (1,967) (7,866)
-------- ------- --------
Net Cash Provided by (Used in)
Financing Activities . . . . . 7,666 (29,805) 75,830
-------- ------- --------
Net (Decrease) in Cash and Cash Equivalents (3,483) (22,637) (4,395)
Cash and Cash Equivalents at Beginning of Year 55,504 78,141 82,536
-------- ------- --------
Cash and Cash Equivalents at End of Year $ 52,021 $ 55,504 $ 78,141
======== ======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized)
$ 4,249 $ 5,610 $ 3,824
Income taxes . . . . . . . . . . . . 4,329 1,023 5,858
See notes to consolidated financial statements
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
Note A--Description of Business and Summary of Accounting Policies
Description of Business: Crown Central Petroleum Corporation and subsidiaries
- -----------------------
(the Company) operates primarily in one business segment as an independent
refiner and marketer of petroleum products, including petrochemical feedstocks.
The Company operates two refineries, one located near Houston, Texas with a
rated capacity of 100,000 barrels per day and another in Tyler, Texas with a
rated capacity of 50,000 barrels per day. Its principal business is the
wholesale and retail sale of its products in the Mid-Atlantic, Southeastern and
Midwestern United States.
Locot Corporation, a wholly-owned subsidiary of the Company, is the parent
company of La Gloria Oil and Gas Company (La Gloria) which operates the Tyler
refinery, a pipeline gathering system in Texas and product terminals located
along the Texas Eastern Pipeline system.
F Z Corporation, a wholly-owned subsidiary of the Company, is the parent
company of two convenience store chains operating in seven states, retailing
both merchandise and gasoline.
The following summarizes the significant accounting policies and practices
followed by the Company:
Principles of Consolidation: The consolidated financial statements include the
- ---------------------------
accounts of Crown Central Petroleum Corporation and all significant majority-
owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated. Due to immateriality, the Company's investment in
Tongue, Brooks & Company, Inc. and Tiara Insurance Company, two wholly-owned
insurance subsidiaries, are accounted for using the equity method.
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. The carrying amount reported in the balance sheet for cash and
cash equivalents represents its fair value.
Accounts Receivable: The majority of the Company's accounts receivable relate
- -------------------
to sales of petroleum products to third parties operating in the petroleum
industry. The carrying amount reported in the balance sheet for accounts
receivable represents its fair value.
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.
17
<PAGE>
Property, Plant and Equipment: Property, plant and equipment is carried at
- -----------------------------
cost. Costs assigned to property, plant and equipment of acquired businesses
are based on estimated fair value at the date of acquisition. Depreciation and
amortization of plant and equipment are primarily provided using the straight-
line method over estimated useful lives. Construction in progress is recorded
in property, plant and equipment.
Expenditures which materially increase values, change capacities or extend
useful lives are capitalized in property, plant and equipment. Routine
maintenance, repairs and replacement costs are charged against current
operations. At intervals of two or more years, the Company conducts a complete
shutdown and inspection of significant units (turnaround) at its refineries to
perform necessary repairs and replacements. Costs associated with these
turnarounds are deferred and amortized over the period until the next planned
turnaround.
Upon sale or retirement, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and any resulting gain
or loss is included in income.
Environmental Costs: The Company conducts environmental assessments and
- -------------------
remediation efforts at multiple locations, including operating facilities, and
previously owned or operated facilities. The Company accrues 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.
Costs are charged to expense if they relate to the remediation of existing
conditions caused by past operations or if they are not expected to contribute
to future operations. Estimated costs are recorded at undiscounted amounts
based on experience and assessments, and are adjusted periodically as
additional or new information is available.
Sales and Operating Revenues: Sales and operating revenues include excise and
- ----------------------------
other similar taxes. Resales of crude oil are recorded net of the related
crude oil cost (first-in, first-out) in sales and operating revenues.
Income Taxes: As discussed in Note D of Notes to Consolidated Financial
- ------------
Statements, effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a liability approach for measuring deferred taxes
based on temporary differences between the financial statement and tax bases of
assets and liabilities existing at each balance sheet date using enacted tax
rates for years in which taxes are expected to be paid or recovered. In 1993
and 1992, deferred tax liabilities reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Interest Capitalization: Interest costs incurred during the construction and
- -----------------------
preoperating stages of significant construction or development projects is
capitalized and subsequently amortized by charges to earnings over the useful
lives of the related assets.
Amortization of Goodwill: The excess purchase price of acquisitions of
- ------------------------
businesses over the estimated fair value of assets acquired is being
amortized on a straight-line basis over 20 years.
Forward and Option Contracts: The Company selectively enters into forward
- ----------------------------
hedging and option contracts to minimize price fluctuations for a portion of
its crude oil and refined products. All realized and unrealized gains and
losses on such hedging and option contracts are deferred and recognized in the
period when the hedged materials are sold. Cash flows from forward hedging and
option contracts are classified as operating activities for purposes of the
statements of cash flows.
Non-operating Gains and Losses: Non-operating gains and losses include
- ------------------------------
significant transactions that, in the judgement of management, are not directly
related to normal current operations.
18
<PAGE>
Note B--Inventories
Inventories consist of the following:
December 31
1993 1992
-------- --------
(thousands of dollars)
Crude oil . . . . . . . . . . . . . . $ 38,989 $ 40,897
Refined products . . . . . . . . . . 60,519 72,915
--------- ---------
Total inventories at FIFO (approximates current costs) 99,508 113,812
LIFO allowance . . . . . . . . . . . (25,828) (53,298)
--------- ---------
Total crude oil and refined products 73,680 60,514
--------- ---------
Merchandise inventory at FIFO (approximates current cost) 7,200 7,509
LIFO allowance . . . . . . . . . . . (2,387) (2,569)
--------- ---------
Total merchandise . . . . . . . . . 4,813 4,940
--------- ---------
Materials and supplies inventory at FIFO 8,318 8,000
--------- ---------
Total Inventory . . . . . . . . . . $ 86,811 $ 73,454
======== ========
In 1992, inventory quantities were reduced. This reduction resulted in a
liquidation of LIFO inventory quantities carried at higher costs prevailing in
prior years as compared with the cost of 1992 purchases. As a result of this
liquidation in 1992, the net (loss) increased $1,406,000 ($.14 per share).
Note C--Long-Term Debt and Credit Arrangements
Long-term debt consists of the following:
December 31
1993 1992
-------- --------
(thousands of dollars)
Unsecured 10.42% Senior Notes . . . . $60,000 $60,000
Purchase Money Lien . . . . . . . . . 5,472
Other obligations . . . . . . . . . . 1,201 1,577
------- -------
66,673 61,577
Less current portion . . . . . . . . 1,094 357
------- -------
Long-Term Debt . . . . . . . . . . $65,579 $61,220
======= =======
The aggregate maturities of long-term debt through 1998 are as follows (in
thousands):
1994 - $1,094; 1995 - $9,694; 1996 - $9,730; 1997 - $9,798; 1998 - $9,849.
The unsecured 10.42% Senior Notes dated January 3, 1991, as amended (Notes)
limit the payment of cash dividends on common stocks and require the
maintenance of various covenants including minimum working capital, minimum
fixed charge coverage ratio, and minimum consolidated tangible net worth, all
as defined. The principal will be repaid in seven equal annual installments
commencing January 3, 1995. The Notes are repayable, at a premium, in whole or
in part at any time at the option of the Company.
19
<PAGE>
As of December 31, 1993, the Company has entered into interest rate swap
agreements to effectively convert $17,500,000 of its 10.42% Notes to variable
interest rates with maturities ranging from 1996 to 1998. During 1993, the
Company terminated certain interest rate swap agreements associated with its
10.42% Notes resulting in deferred gains of $1.9 million at December 31, 1993,
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 effective interest rate on the Notes for 1993 was
reduced from approximately 10.5% to approximately 9.2% per annum. The Company
is exposed to credit risk to the extent of nonperformance by the counterparties
to the interest rate swap agreements; however, management considers the risk of
default to be remote.
Under the terms of the Unsecured Credit Agreement dated May 10, 1993, (Credit
Agreement) nine banks have committed a maximum of $125,000,000 to the Company
for cash borrowings and letters of credit. There is a limitation of
$50,000,000 for cash borrowings under the agreement. The Credit Agreement,
which expires May 10,1996, but contains a one year renewal option, allows for
interest on outstanding borrowings to be computed under one of three methods
based on the Base Rate, the London Interbank Offered Rate, or the Certificates
of Deposit Rate (all as defined). The Credit Agreement limits the Company's
borrowings outside the Agreement to a maximum of $90,000,000 in unsecured
senior notes. The Credit Agreement limits indebtedness (as defined), cash
dividends on common stocks and capital expenditures and requires the
maintenance of various covenants including, but not limited to, minimum working
capital, minimum consolidated tangible net worth, and a borrowing base, all as
defined. Under the terms of the Notes and Credit Agreement, at December 31,
1993, the Company was limited to paying additional cash dividends of
$9,833,000.
At December 31, 1993, the Company was in compliance with all covenants and
provisions of the Notes and Credit Agreement. The Company expects to continue
to be in compliance with the covenants imposed by the Notes and Credit
Agreement over the next twelve months. Meeting the covenants imposed by the
Notes and Credit Agreement is dependent, among other things, upon the level of
future earnings and the rate of capital spending.
As of December 31, 1993, the Company had outstanding irrevocable standby
letters of credit in the principal amount of $30,709,000 and an outstanding
documentary letter of credit in the principal amount of $12,600,000 for normal
operations. Unused commitments under the terms of the Credit Agreement
totaling $81,691,000 were available for future borrowings (subject to the
$50,000,000 limitation described above) and issuance of letters of credit at
December 31, 1993. The Company pays an annual commitment fee on the unused
portion of the credit line.
Effective December 1, 1993, the Company entered into a Purchase Money Lien
(Money Lien) for the financing of certain service station and terminal
equipment and office furnishings. The effective rate for the Money Lien is
6.65%. Ninety percent of the principal is repayable in 60 monthly installments
and a balloon payment of 10% of the principal is payable in January 1999. The
Money Lien is secured by the service station equipment and office furnishings
having a cost basis of $5,472,000. The Money Lien allows for a maximum
drawdown of $6,500,000 by January 31, 1994 and it is the Company's intention to
draw the remaining balance.
The following interest costs were charged to pretax income:
Year Ended December 31
1993 1992 1991
---------- ----------- ---------
(thousands of dollars)
Total interest costs incurred . . . . . $ 7,712 $7,754 $8,190
Less: Capitalized interest . . . . . . 261 928 282
-------- ------- -------
Interest Expense $ 7,451 $6,826 $7,908
======= ====== ======
The approximate fair value of the Company's Long-term Debt at December 31, 1993
was $65,929,000, which was estimated using a discounted cash flow analysis,
based on the Company's assumed incremental borrowing rates for similar types of
borrowing arrangements. The fair value at December 31, 1993 of the Company's
interest rate swap agreements is estimated to be $207,000 which was estimated
using a discounted cash flow analysis, based on current interest rates.
20
<PAGE>
Note D--Income Taxes
As discussed in Note A of Notes to Consolidated Financial Statements, effective
January 1, 1992, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The 1991
financial statements have not been restated for the effects of applying SFAS
109.
The $13,403,000 cumulative effect benefit of applying SFAS 109 reduced the net
loss for 1992. One of the requirements of SFAS 109 is that deferred taxes be
recorded for the tax effects of differences between assigned values and the tax
bases of assets acquired in purchase business acquisitions. Previously, under
the provisions of Accounting Principles Board Opinion No. 11 "Accounting for
Income Taxes", acquired assets were recorded net of such tax effects. The
adoption of SFAS 109 in 1992 resulted in total increases in inventory and net
property, plant and equipment of $38 million relating to the acquisitions of
the Fast Fare and Zippy Mart convenience store chains and La Gloria Oil and Gas
Company, with related increases in the liability for deferred income taxes.
The write-up of net property, plant and equipment is depreciated over the
remaining life of the related assets and such depreciation is offset by a
credit to the deferred tax provision. The adoption of SFAS 109 resulted in a
decrease of $2,335,000 in the 1993 income before income taxes and cumulative
effect of changes in accounting principles and an increase of $2,388,000 in the
1992 loss before income taxes and cumulative effect of changes in accounting
principles, respectively, due to increased depreciation expense for the write-
up of property, plant and equipment.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
December 31
1993 1992
-------- --------
(thousands of dollars)
Deferred tax liabilities:
Depreciation and amortization . . . . . . $ (58,095) $ (59,015)
Difference between book and tax basis of
property, plant and equipment . . . . . (30,945) (32,499)
Other . . . . . . . . . . . . . . . . . . (16,768) (10,012)
-------- --------
Total deferred tax liabilities . . . . (105,808) (101,526)
Deferred tax assets:
Postretirement and pension obligations . 5,596 4,672
Environmental, litigation and other accruals 9,734 6,982
Tax credits, contribution and net operating
loss carryover 379 1,893
Construction and inventory cost not currently
deductible 1,436 1,344
Other . . . . . . . . . . . . . . . . . . 7,446 5,047
--------- ---------
Total deferred tax assets . . . . . . . 24,591 19,938
--------- ---------
Net deferred tax liabilities . . . . . $(81,217) $(81,588)
======== ========
No valuation allowance is considered necessary for the above deferred tax
assets. The company has tax credit carryforwards of $109,269 which expire in
the year 2005.
21
<PAGE>
Significant components of the income tax provision (benefit) for the years
ended December 31 follows. With the passage of the Tax Act of 1993, the
Company's federal statutory income tax rate increased from 34% to 35% effective
January 1, 1993. The effect of the change in statutory rate was to increase
the 1993 net (loss) for 1993 by $2,252,000 or $.23 per share.
Liability Deferred
Method Method
--------------- ------------
1993 1992 1991
-------------------------------
(thousands of dollars)
Current:
Federal . . . . . . . . . . . . . $ 5,278 $(3,230) $(4,103)
State . . . . . . . . . . . . . . 1,779 872 (462)
-------- ------- -------
Total Current . . . . . . . . . 7,057 (2,358) (4,565)
Deferred:
Federal . . . . . . . . . . . . . (3,642) (1,485) 5,278
State . . . . . . . . . . . . . . (560) 166 (20)
-------- ------- -------
Total Deferred . . . . . . . . (4,202) (1,319) 5,258
Federal tax rate increase . . . . . 2,252
-------- ------- -------
Income Tax Expense (Benefit) . . $ 5,107 $(3,677) $ 693
======= ======= =======
Current state tax provision includes franchise taxes of $1,275,000, $1,300,000
and $1,146,000 for the years 1993, 1992 and 1991, respectively.
The components of the deferred income tax provision for the year ended December
31, 1991 is as follows:
(thousands of dollars)
Refinery turnaround costs . . . . . . . .
$ 4,789
Difference between book and tax
depreciation and amortization 4,342
Gain on disposal . . . . . . . . . . . . 588
State income taxes . . . . . . . . . . .
(20)
Litigation and accruals . . . . . . . . .
(66)
Difference between book and tax basis of
property disposals (478)
Effect of tax leases . . . . . . . . . . (1,427)
Unrealized insurance proceeds . . . . . . (1,540)
Other . . . . . . . . . . . . . . . . . . (930)
-------
Deferred income tax provision . . . . . $ 5,258
=======
The following is a reconciliation of the statutory federal income tax rate to
the actual effective income tax rate for the years ended December 31:
Liability Deferred
Method Method
--------------- ------------
1993 1992 1991
-------------------------------
(thousands of dollars)
Income tax expense (benefit) calculated at the
statutory federal income tax rate $ 282 $(5,765) $(1,813)
Amortization of goodwill and purchase adjustments 330 321 1,927
State taxes (net of federal benefit) 798 685 291
Federal tax rate increase . . . . . 2,252
Other . . . . . . . . . . . . . . . 1,445 1,082 288
------- ------- -------
Income Tax Expense (Benefit) . . $ 5,107 $(3,677) $ 693
======= ======= =======
22
<PAGE>
Note E--Capital Stock and Net Income Per Common Share
Class A Common stockholders are entitled to one vote per share and have the
right to elect all directors other than those to be elected by other classes of
stock. Class B Common stockholders are entitled to one-tenth vote per share
and have the right to elect two directors. Net (loss) per share for 1993, 1992
and 1991 is based upon the 9,832,598 common shares outstanding for all years.
Note F--Employee Benefit Obligations
In 1993, the Company merged its two defined benefit pension plans covering the
majority of full-time employees into one plan. The Company also has several
defined benefit plans covering only certain senior executives. Plan benefits
are generally based on years of service and employees' average compensation.
The Company's policy is to fund the pension plans in amounts which comply with
contribution limits imposed by law. Plan assets consist principally of fixed
income securities and stocks.
Net periodic pension costs consisted of the following components:
Year Ended December 31
1993 1992 1991
---------- ----------- ---------
(thousands of dollars)
Service cost - benefit earned during the year $ 4,002 $ 3,672 $ 3,221
Interest cost on projected benefit obligations 6,326 5,895 5,595
Actual (return) loss on plan assets (11,738) (10,217) (10,626)
Total amortization and deferral . . 5,324 4,875 6,376
-------- --------- ------
Net periodic pension costs . . . $ 3,914 $ 4,225 $ 4,566
======== ======== =======
Assumptions used in the accounting for the defined benefit plans as of December
31 were:
1993 1992 1991
-----------------------
Weighted average discount rates . . 7.25% 8.25% 8.25%
Rates of increase in compensation levels 4.00% 5.00% 5.00%
Expected long-term rate of return on assets 9.50% 9.50% 9.50%
The following table sets forth the funded status of the plans in which assets
exceed accumulated benefits:
December 31
1993 1992
-------- --------
(thousands of dollars)
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . $68,817 $58,064
------- -------
Accumulated benefit obligation . $71,552 $60,226
------- -------
Projected benefit obligation . . $86,728 $73,863
Plan assets at fair value . . . . . 78,573 69,081
------- -------
Projected benefit obligation (in excess of) plan assets (8,155) (4,782)
Unrecognized net loss . . . . . . . 9,532 2,872
Prior service (benefit) cost not yet recognized
in net periodic pension cost . . (1,081) 2,132
Unrecognized net (asset) at
beginning of year, net of amortization (2,495) (2,762)
------- -------
Net pension liability . . . . . . . $(2,199) $(2,540)
======= =======
23
<PAGE>
The following table sets forth the funded status of the plans in which
accumulated benefits exceed assets:
December 31
1993 1992
-------- --------
(thousands of dollars)
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . $ 5,339 $ 4,146
------- -------
Accumulated benefit obligation . $ 5,339 $ 4,154
------- -------
Projected benefit obligation . . $ 5,376 $ 4,300
Plan assets at fair value . . . . . 0 0
-------- --------
Projected benefit obligation (in excess of) plan assets (5,376) (4,300)
Unrecognized net loss . . . . . . . 1,224 335
Prior service (benefit) cost not yet recognized
in net periodic pension cost . . (231) (248)
Unrecognized net obligation at
beginning of year, net of amortization 1,834 2,064
Adjustment required to recognize minimum liability (2,790) (2,004)
------- -------
Net pension liability . . . . . . . $(5,339) $(4,153)
======= =======
In addition to the defined benefit pension plan, the Company provides certain
health care and life insurance benefits for eligible employees who retire from
active service. The postretirement health care plan is contributory, with
retiree contributions consisting of copayment of premiums and other cost
sharing features such as deductibles and coinsurance. Beginning in 1998, the
Company will "cap" the amount of premiums that it will contribute to the
medical plans. Should costs exceed this cap, retiree premiums would increase
to cover the additional cost. Effective January 1, 1992, the Company adopted
Statement of Financial Accounting Standards No. 106 "Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106). SFAS 106 requires the
accrual of the expected costs of providing these postretirement benefits during
the years that the employee renders the necessary service. Prior year
financial statements have not been restated for the effects of applying SFAS
106.
The $5,631,000 cumulative effect charge of adoption of SFAS 106 on prior years
(after reduction for the income tax benefit of $3,308,000) is included in the
net loss for 1992. The adoption of SFAS 106 resulted in increases in the 1993
and 1992 loss before cumulative effect of changes in accounting principles of
$167,000 ($.02 per share) and $300,000 ($.03 per share), respectively, and
increases in the 1993 and 1992 net loss of $167,000 ($.02 per share) and
$5,931,000 ($.60 per share), respectively.
The following table sets forth the accrued postretirement benefit cost of these
plans recognized in the Company's Balance Sheet:
December 31
1993 1992
-------- --------
(thousands of dollars)
Accumulated postretirement benefit obligation (APBO):
Retirees . . . . . . . . . . . . $5,491 $6,076
Fully eligible active plan participants 1,460 1,419
Other active plan participants . 2,186 1,836
Unrecognized net loss (gain) . . 4 (109)
Unrecognized prior service cost . 353
-------- -------
Accrued postretirement benefit cost $9,494 $9,222
====== ======
The weighted average discount rate used in determining the APBO was 7.25% and
8.5% in 1993 and 1992, respectively.
24
<PAGE>
Net periodic postretirement benefit cost include the following components:
Year Ended December 31
1993 1992
-------- --------
(thousands of dollars)
Service cost . . . . . . . . . . . $161 $161
Interest cost on accumulated postretirement
benefit obligation 765 756
---- ----
Net periodic postretirement benefit cost $926 $917
==== ====
For 1991, the expense for postretirement benefits, which was recorded on a pay-
as-you-go basis and has not been restated, was approximately $631,000. The
Company's policy is to fund postretirement costs on a pay-as-you-go basis as in
prior years.
A 13% increase in the cost of medical care was assumed for 1993. This medical
trend rate is assumed to decrease 1% annually to 9% in 1997, and decrease to 0%
thereafter as a result of the expense cap in 1998. The medical trend rate
assumption affects the amounts reported. For example, a 1% increase in the
medical trend rate would increase the APBO by $674,000, and the net periodic
cost by $72,000 for 1993.
In 1993, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits" (SFAS 112). SFAS 112 requires the accrual of the expected costs of
providing certain benefits after employment, but before retirement, such as
health care continuation coverage. The adoption of SFAS 112 did not materially
affect the 1993 net loss.
Note G--Litigation and Contingencies
The Company has been named as a defendant in various matters of litigation,
some of which are for substantial amounts, and involve alleged personal injury
and property damage from prolonged exposure to petroleum, petroleum related
products and substances used at its refinery or in the petroleum refining
process. The Company is a co-defendant with numerous other defendants in a
number of these suits. The Company is vigorously defending these actions,
however, the process of resolving these matters could take several years. The
liability, if any, associated with these cases was either accrued in accordance
with generally accepted accounting principles or was not determinable at
December 31, 1993. The Company has consulted with counsel with respect to each
such preceding or large claim which is pending or threatened. While litigation
can contain a high degree of uncertainty and the risk of an unfavorable
outcome, in the opinion of management, there is no reasonable basis to believe
that the eventual outcome of any such matter or group of related matters will
have a material adverse effect on the Company's consolidated financial
position.
The Company's income tax returns for the 1988 and 1989 fiscal years are
currently under examination by the Internal Revenue Service. The Company's
income tax returns for the 1984 to 1987 fiscal years have been examined by the
Internal Revenue Service and a Revenue Agent's Report has been received. The
Company has filed a written protest in response to certain proposed adjustments
with the Office of Regional Director of Appeals relating to these proposed
adjustments. In management's opinion, the ultimate disposition of the Report
will not have a material adverse effect on the financial position or results of
operations of the Company.
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 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 $16.8 million as of December 31, 1993 relative to the estimated
costs of compliance with environmental regulations.
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
25
<PAGE>
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.
Note H--Noncancellable Lease Commitments
The Company has noncancellable operating lease commitments for refinery
equipment, service station and convenience store properties, autos, trucks, an
airplane, office and other equipment. Lease terms range from 60 to 96 months
for automotive and transportation equipment. Property leases typically have a
five-year term with renewal options for additional periods. Certain other
leases also carry renewal provisions. The Corporate Headquarters office
building lease which commenced in 1993 has a lease term of 10 years. The
airplane lease which commenced in 1992 has a lease term of 7 years. The
majority of service station properties have a lease term of 20 years. The
average lease term of convenience stores is approximately 12 years.
Future minimum rental payments under noncancellable operating lease agreements
as of December 31, 1993 are as follows (in thousands):
1994 . . . . . . . . . . . . . . $10,799
1995 . . . . . . . . . . . . . . 9,835
1996 . . . . . . . . . . . . . . 9,547
1997 . . . . . . . . . . . . . . 8,407
1998 . . . . . . . . . . . . . . 8,062
After 1998 . . . . . . . . . . . 48,644
-------
Total Minimum Rental Payments $95,294
=======
Rental expense for the years ended December 31, 1993, 1992 and 1991 was
$14,620,000, $16,487,000 and $16,438,000, respectively.
Note I--Investments and Deferred Charges
Investments and deferred charges consist of the following:
December 31
1993 1992
-------- --------
(thousands of dollars)
Deferred turnarounds . . . . . . $15,844 $24,454
Goodwill . . . . . . . . . . . . 10,883 11,859
Investments in subsidiaries . . 6,601 5,976
Long-term notes receivable . . . 2,969 3,136
Intangible pension asset . . . . 1,834 2,004
Deferred financing costs . . . . 1,121 1,324
Deferred proceeds - tax exchanges 1,067 2,428
Other . . . . . . . . . . . . . 2,589 2,435
-------- --------
Investments and Deferred Charges $42,908 $53,616
======= =======
Accumulated amortization of goodwill was $5,974,000 and $4,998,000 at December
31, 1993 and 1992, respectively. The fair value of the Company's long-term
notes receivable at December 31, 1993 was $2,913,000, which was estimated using
a discounted cash flow analysis, based on the assumed interest rates for
similar types of arrangements.
Note J--Non-Operating Gains
Non-operating gains in 1991 consist of litigation and insurance settlements.
There were no material net non-operating gains or losses which impacted income
in 1993 and 1992.
26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
Crown Central Petroleum Corporation
We have audited the accompanying consolidated balance sheets of Crown Central
Petroleum Corporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of operations, changes in common
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1993. Our audits also included the financial statement
schedules listed in the index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Crown
Central Petroleum Corporation and subsidiaries at December 31, 1993 and 1992,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in Notes D and F of the consolidated financial statements,
effective January 1, 1992, the Company changed its method of accounting for
income taxes and postretirement benefits other than pensions.
Ernst & Young
Baltimore, Maryland
February 24, 1994
27
<PAGE>
(This page intentionally left blank)
<PAGE>
UNAUDITED
QUARTERLY RESULTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter Yearly
------- ------- ------- ------- ------
1993
Sales and operating
revenues $413,302 $447,777 $455,691 $430,641 $1,747,411
Gross profit . . . . . 26,623 33,799 33,977 48,316 142,715
Net (loss) income . . . (5,720) (2,266) (3,256) 6,942 (4,300)
Net (loss) income per
share (.58) (.23) (.33) .70 (.44)
1992
Sales and operating
revenues $371,886 $458,546 $475,299 $489,528 $1,795,259
Gross profit . . . . 23,312 41,877 33,471 36,803 135,463
(Loss) income before
cumulative effect
of changes in
accounting principles (6,570) 2,560 (3,754) (5,514) (13,278)
Net income (loss) . . . . 1,202 2,560 (3,754) (5,514) (5,506)
(Loss) income per share
before cumulative
effect of changes in
accounting principles (.67) .26 (.38) (.56) (1.35)
Net income (loss) per share .12 .26 (.38) (.56) (.56)
Gross profit is defined as sales and operating revenues less costs and
operating expenses (including applicable property and other operating taxes).
Per share amounts are based upon the actual number of common shares outstanding
each quarter.
The net (loss) in the fourth quarter of 1992 was unfavorably impacted by
$1,406,000 due to reductions in physical inventory (see Note B of Notes to
Consolidated Financial Statements on page 19 of this report). Net (loss) in
the fourth quarter of 1992 was unfavorably impacted by a pre-tax $1,264,000
write-off of refinery feasibility studies, a pre-tax $1,000,000 reserve for the
write-off of excess refinery equipment and a pre-tax $893,000 write-off of
abandoned equipment related to the capital modification of the Houston
refinery's Fluid Catalytic Cracking Unit.
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not filed a Form 8-K within the last twenty-four (24) months
reporting a change of independent auditors or any disagreement with the
independent auditors.
28
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Following is a list of Crown Central Petroleum Corporation's executive
officers, their ages and their positions and offices as of March 1, 1994:
Henry A. Rosenberg, Jr. (64)
Director since 1955 and Chairman of the Board and Chief Executive Officer since
May 1975. Also a director of Signet Banking Corporation and USF&G Corporation.
Charles L. Dunlap (50)
Director and President and Chief Operating Officer since December 1991. Served
as a Director and Executive Vice President of Pacific Resources, Inc. from 1985
until employment by the Company.
Edward L. Rosenberg (38)
Senior Vice President - Finance and Administration since December 1991; Vice
President - Supply & Transportation from October 1990 to December 1991; Vice
President - Corporate Development from August 1989 to October 1990; Assistant
to the President from March 1988 to August 1989. Edward L. Rosenberg is the son
of Henry A. Rosenberg, Jr., and the brother of Frank B. Rosenberg.
Thomas L. Owsley (53)
Vice President - Legal since April 1983.
John E. Wheeler, Jr. (41)
Vice President - Treasurer and Controller since December 1991; Vice President -
Controller from March 1984 to December 1991.
Randall M. Trembly (47)
Vice President - Refining since December 1991; Vice President-Treasurer from
October 1987 to December 1991.
Paul J. Ebner (36)
Vice President - Marketing Support Services since December 1991; General
Manager - Marketing Support Services from November 1988 to December 1991.
J. Michael Mims (44)
Vice President - Human Resources since June 1992. Vice President - Internal
Auditing and Consulting Services from December 1991 to June 1992; Director of
Internal Auditing from September 1983 to December 1991.
George R. Sutherland, Jr. (49)
Vice President - Supply and Transportation since July 1992. Senior Vice
President - Trading of Pacific Resources, Inc. from 1989 until employment by
the Company; Vice President - Crude Oil and Product Supply for Pacific
Resources, Inc. from 1986 to 1989.
Frank B. Rosenberg (35)
Vice President - Marketing since January 1993; Southern Marketing Division
Manager from January 1992 to January 1993; Vice President - Wholesale Marketing
- - La Gloria Oil and Gas Company from October 1990 to January 1992; Manager -
Economics, Planning and Scheduling from October 1989 to October 1990;
Manager - Refinery Sales from November 1988 to October 1989. Frank B.
Rosenberg is the son of Henry A. Rosenberg, Jr. and the brother of Edward L.
Rosenberg.
29
<PAGE>
Dolores B. Rawlings (56)
Secretary since November 1990; Assistant to the Chairman and Assistant
Secretary from April 1988 to November 1990.
There have been no events under any bankruptcy act, no criminal proceedings and
no judgments or injunctions material to the evaluation of the ability and
integrity of any Director or Executive Officer during the past five years. The
information required in this Item 10 regarding Directors of the Company and all
persons nominated or chosen to become directors is hereby incorporated by
reference to the definitive Proxy Statement which will be filed with the
Commission pursuant to Regulation 14A on or about March 23, 1994.
Item 11. EXECUTIVE COMPENSATION
The information required in this Item 11 regarding executive compensation is
hereby incorporated by reference to the definitive Proxy Statement which will
be filed with the Commission pursuant to Regulation 14A on or about March 23,
1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required in this Item 12 regarding security ownership of
certain beneficial owners and management is hereby incorporated by reference to
the definitive Proxy Statement which will be filed with the Commission pursuant
to Regulation 14A on or about March 23, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in this Item 13 regarding certain relationships and
related transactions is hereby incorporated by reference to the definitive
Proxy Statement which will be filed with the Commission pursuant to Regulation
14A on or about March 23, 1994.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) LIST OF FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Crown Central Petroleum
Corporation and subsidiaries, are included in Item 8 on pages 12 through 27 of
this report:
- Consolidated Statements of Operations -- Years ended December 31, 1993,
1992 and 1991
- Consolidated Balance Sheets -- December 31, 1993 and 1992
- Consolidated Statements of Changes in Common Stockholders' Equity --
Years ended December 31, 1993, 1992 and 1991
- Consolidated Statements of Cash Flows -- Years ended December 31, 1993,
1992 and 1991
- Notes to Consolidated Financial Statements -- December 31, 1993
30
<PAGE>
(a) (2) LIST OF FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of Crown Central
Petroleum Corporation and its subsidiaries are included in item 14 (d) on pages
33 through 36 of this report:
- Schedule I - Marketable Securities - Other Investments
- Schedule V - Property, Plant and Equipment
- Schedule VI - Accumulated Depreciation and Amortization of Property,
Plant and Equipment
- Schedule X - Supplementary Income Statement Information
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a) (3) and (c) LIST OF EXHIBITS
EXHIBIT
NUMBER
3 Articles of Incorporation and By-Laws
(a) Agreement of Consolidation as amended through August 28, 1988 (Articles of
Incorporation) was previously filed with the Registrant's Form 10-K for
the year ended December 31, 1992, herein incorporated by reference.
(b) By-Laws of Crown Central Petroleum Corporation as currently in effect to
reflect amendment dated February 25, 1988 were previously filed with the
Registrant's Form 10-K for the year ended December 31, 1987, herein
incorporated by reference.
4 Instruments Defining the Rights of Security Holders, Including Indentures
(a) Credit Agreement dated as of May 10, 1993 between the Registrant and
various banks was previously filed with the Registrant's Form 8-K dated
May 19, 1993, herein incorporated by reference. Certain portions of the
Agreement have been omitted because of their confidential nature, and have
been filed separately with the Securities and Exchange Commission marked
"Confidential Treatment".
(b) Amendment dated December 20, 1993 to the Credit Agreement dated as of May
10, 1993 is filed with the Securities and Exchange Commission as part of
this Annual Report on Form 10-K.
(c) Note Purchase Agreement dated January 3, 1991 between the Registrant and a
group of institutional lenders was previously filed with the Registrants
Form 8-K dated January 3, 1991, herein incorporated by reference.
(d) Amendment dated as of February 14, 1992 to the Note Purchase Agreement
dated January 3, 1991 was previously filed with the Registrants Form 10-K
for the year ended December 31, 1991 as Exhibit 19 (c), herein
incorporated by reference. Certain portions of the Amendment have been
omitted because of their confidential nature, and have been filed
separately with the Securities and Exchange Commission marked
"Confidential Treatment".
(e) Amendment dated as of November 10, 1992 to the Note Purchase Agreement
dated January 3, 1991 was previously filed with the Registrants Form 10-Q
for the quarter ended September 30, 1992 as Exhibit 19 (d), herein
incorporated by reference.
10 Material Contracts
(a) Crown Central Petroleum Retirement Plan effective as of July 1, 1993, is
filed with the Securities and Exchange Commission as part of this Annual
Report on Form 10-K.
31
<PAGE>
(b) Supplemental Retirement Income Plan for Senior Executives - As amended
through October 27, 1983 and all subsequent amendments through May 30,
1991 were previously filed with the Registrant's Form 10-K for the year
ended December 31, 1992 as Exhibit 10 (a) (3), herein incorporated by
reference.
(c) Employee Savings Plan (as in effect on April 1, 1984), and all subsequent
amendments through December 19, 1991 were previously filed with the
Registrant's Form 10-K for the year ended December 31, 1992 as Exhibit 10
(a) (4), herein incorporated by reference.
(d) Directors' Deferred Compensation Plan adopted on August 25, 1983 was
previously filed with the Registrant's Form 10-Q for the quarter ended
September 30, 1983 as Exhibit 19(b), herein incorporated by reference.
(e) The Long-Term Performance Reward Plan as in effect for the seventh
performance cycle (1991/1992/1993) was previously filed with the
Registrant's Form 10-K for the year ended December 31, 1990, as Exhibit
19(d), herein incorporated by reference.
(f) The Long-Term Performance Reward Plan as in effect for the eighth
performance cycle (1992/1993/1994) was previously filed with the
Registrant's Form 10-K for the year ended December 31, 1991, as Exhibit
19(e), herein incorporated by reference.
(g) The Long-Term Performance Reward Plan as in effect for the ninth
performance cycle (1993/1994/1995) was previously filed with the
Registrant's Form 10-Q for the quarter ended March 31, 1993, as Exhibit
19(a), herein incorporated by reference.
(h) The following documents were previously filed with the Registrant's Form
10-Q for the quarter ended March 31, 1993, as Exhibits 19(b) and (c),
herein incorporated by reference:
(1) Crown Central Petroleum Corporation Annual Incentive Plan as in effect
for fiscal 1993.
(2) La Gloria Oil and Gas Company Annual Incentive Plan as in effect for
fiscal 1993.
(i) The Employment Agreement between Charles L. Dunlap, President and Crown
Central Petroleum Corporation, dated October 29, 1991 was previously filed
with the Registrant's Form 10-Q for the quarter ended September 30, 1991
as Exhibit 19(a), herein incorporated by reference.
13 Annual Report to Security Holders, Form 10-Q or Quarterly Report to
Security Holders
(a) Shareholders' Letter dated February 28, 1994.
(b) Financial Summary, Operating Summary and Key Financial Statistics.
(c) Directors and Officers of the Company.
(d) Corporate Information.
21 Subsidiaries of the Registrant
Exhibit 21 is included on page 37 of this report.
23 Consent of Independent Auditors
24 Power of Attorney
Exhibit 24 is included on page 38 of this report.
99 Form 11-K will be filed under cover of Form 10-KA on or about May 15,
1994.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the three months ended
December 31, 1993.
NOTE: Certain exhibits listed on pages 31 and 32 of this report and filed
with the Securities and Exchange Commission, have been omitted.
Copies of such exhibits may be obtained from the Company upon written
request, for a prepaid fee of 25 cents per page.
32
<PAGE>
(This page intentionally left blank)
<PAGE>
Item 14(d)
Crown Central Petroleum Corporation and consolidated subsidiaries
Schedule I - Marketable Securities - Other Investments
December 31, 1993
(thousands of dollars)
Number of Market Amount
shares or value of
units - of each issue
principal issue at carried
amount of Cost of balance on
Name of Issuer and bonds each sheet balance
Title of each issue and notes issue date sheet(1)
- ------------------- --------- ------- ------- -------
Repurchase Agreements(2) $30,254 $30,254 $30,254 $30,254
Eurodollar Time Deposits:
The Yasuda Trust & Banking
Co., LTD. 10,000 10,000 10,000 10,000
Commercial Paper:
John Hancock Capital
Corporation 7,498 7,498 7,498 7,498
------- ------- ------- -------
$47,752 $47,752 $47,752 $47,752
======= ======= ======= =======
(1) 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 statement of cash flows, and are
classified on the balance sheet with cash and cash equivalents of $52,021.
(2) Repurchase Agreements are comprised of securities of the United States
Government and its agencies.
33
<PAGE>
Item 14(d)
Crown Central Petroleum Corporation and consolidated subsidiaries
Schedule V - Property, Plant and Equipment
(thousands of dollars)
Balance Other
at changes- Balance
beginning add at
of Additions Retire- (deduct) end of
Classification A period at cost ments describe period
- -------------- --------- --------- ---------------- -------
Year Ended December 31, 1993
Land $ 45,251 $ 1,616 $ 2,411 $ (23) B $ 44,433
Petroleum refineries:
Houston 297,643 5,392 780 302,255
Tyler 112,189 14,123 126,312
-------- --------- ------- --------
409,832 19,515 780 428,567
Marketing facilities:
Convenience stores 52,147 4,682 6,326 (317) C,D 50,186
Service stations and
other 125,764 12,841 6,639 321 B,D 132,287
-------- ------- ------- ------- --------
177,911 17,523 12,965 4 182,473
Pipelines and other
equipment 19,247 2,206 539 18 D 20,932
-------- ------- ------- ------- --------
$652,241 $40,860 $16,695 $ (1) $676,405
======== ======= ======= ======= ========
Year Ended December 31, 1992
Land $ 46,301 $ 1,631 $ 2,681 $ 45,251
Petroleum refineries:
Houston 275,589 22,947 893 297,643
Tyler 72,743 3,276 $36,170 E,F 112,189
-------- -------- ------- ------- --------
348,332 26,223 893 36,170 409,832
Marketing facilities:
Convenience stores 58,642 4,873 13,341 1,973 C,D,E 52,147
Service stations and
other 123,657 3,717 2,352 742 D 125,764
-------- ------- ------- ------- --------
182,299 8,590 15,693 2,715 177,911
Pipelines and other
equipment 18,390 1,559 654 (48) D,E,F 19,247
-------- ------- ------- ------- --------
$595,322 $38,003 $19,921 $38,837 $652,241
======== ======= ======= ======= ========
Year Ended December 31, 1991
Land $ 36,737 $11,578 $ 2,014 $ 46,301
Petroleum refineries:
Houston 264,892 24,281 13,218 $ (366) F 275,589
Tyler 70,795 2,027 79 72,743
-------- ------- ------- ------- --------
335,687 26,308 13,297 (366) 348,332
Marketing facilities:
Convenience stores 45,940 14,455 11,018 9,265 D,G 58,642
Service stations and
other 114,889 11,346 2,484 (94) D 123,657
-------- ------- ------- ------- --------
160,829 25,801 13,502 9,171 182,299
Pipelines and other
equipment 17,714 1,095 681 262 D,F 18,390
-------- ------- ------- ------- --------
$550,967 $64,782 $29,494 $ 9,067 $595,322
======== ======= ======= ======= ========
A Reference is made to Note A of the Consolidated Financial Statements in the
1993 Annual Report to Stockholders for a description of the accounting
policies for property, plant and equipment.
B Includes reclassification between Land' and Marketing facilities'.
C Includes purchase accounting adjustments in connection with the acquisition
of Fast Fare and Zippy Mart.
D Includes assets transferred between Marketing facilities' and Pipelines
and other equipment', as well as Convenience stores' and Service stations
and other'.
E Includes increases related to the step-up in basis of assets due to the
adoption of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", as described in Note D of Notes to Consolidated Financial
Statements on page 21 of this report.
F Includes reclassification between Petroleum refineries' and Pipelines and
other equipment'.
G Includes purchase accounting adjustments of $9,047 in connection with the
1983 acquisition of Fast Fare and Zippy Mart.
34
<PAGE>
Item 14(d)
Crown Central Petroleum Corporation and consolidated subsidiaries
Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and
Equipment
(thousands of dollars)
Balance Additions Other
at charged changes- Balance
beginning to add at
of costs and Retire- (deduct) end of
Classification period expenses ments describe period
- -------------- --------- --------- ------- -------- --------
Year Ended December 31, 1993
Petroleum refineries:
Houston $150,356 $11,075 $ 768 $160,663
Tyler 14,351 6,444 20,795
-------- ------- ------- --------
164,707 17,519 768 181,458
Marketing facilities:
Convenience stores 25,703 3,294 5,096 $ 175 A,B 24,076
Service stations and other 72,120 8,097 6,098 (175) A 73,944
-------- ------- ------- ------ --------
97,823 11,391 11,194 0 98,020
Pipelines and other
equipment 13,961 1,154 456 5 A 14,664
-------- ------- ------- ------ --------
$276,491 $30,064 $12,418 $ 5 $294,142
======== ======= ======= ====== ========
Year Ended December 31, 1992
Petroleum refineries:
Houston $141,751 $ 9,002 $ 397 $150,356
Tyler 8,131 6,186 $ 34 C 14,351
-------- ------- ------- ------ --------
149,882 15,188 397 34 164,707
Marketing facilities:
Convenience stores 30,842 3,718 10,594 1,737 A,B 25,703
Service stations and other 65,599 7,742 1,719 498 A 72,120
-------- ------- ------- ------ --------
96,441 11,460 12,313 2,235 97,823
Pipelines and other
equipment 13,344 1,150 490 (43) A,C 13,961
-------- ------- ------- ------ --------
$259,667 $27,798 $13,200 $2,226 $276,491
======== ======= ======= ====== ========
Year Ended December 31, 1991
Petroleum refineries:
Houston $146,697 $ 8,437 $13,193 $ (190) C $141,751
Tyler 4,380 3,807 56 8,131
-------- ------- ------- ------ --------
151,077 12,244 13,249 (190) 149,882
Marketing facilities:
Convenience stores 27,247 3,561 8,964 8,998 A,D 30,842
Service stations and other 59,876 7,641 2,052 134 A 65,599
-------- ------- ------- ------ --------
87,123 11,202 11,016 9,132 96,441
Pipelines and other
equipment 12,599 1,135 557 167 A,C 13,344
-------- ------- ------- ------ --------
$250,799 $24,581 $24,822 $9,109 $259,667
======== ======= ======= ====== ========
A Includes assets transferred between Marketing facilities' and Pipelines
and other equipment', as well as Convenience stores' and Service stations
and other'.
B Includes purchase accounting adjustments in connection with the acquisition
of Fast Fare and Zippy Mart.
C Includes reclassification between Petroleum refineries' and Pipelines and
other equipment'.
D Includes purchase accounting adjustments of $9,047 in connection with the
acquisition of Fast Fare and Zippy Mart.
35
<PAGE>
Item 14(d)
Crown Central Petroleum Corporation and consolidated subsidiaries
Schedule X - Supplementary Income Statement Information
(thousands of dollars)
Charged to Costs and Expenses
Year ended December 31
-------------------------------
Item 1993 1992 1991
- ---- ------- --------------
1. Maintenance and repairs $27,257 $32,322 $33,877
2. Depreciation and amortization (A) 41,873 41,526 33,346
(A) Includes Refinery Maintenance Turnaround Amortization
Note: None of the other items called for on this statement exceed 1% of total
sales and operating revenues as reported in the related income statements
for any year.
36
<PAGE>
EXHIBIT 21
SUBSIDIARIES
1. Subsidiaries as of December 31, 1993, which are consolidated in the
financial statements of the Registrant; each subsidiary is 100% owned and
doing business under its own name.
Nation or State
Subsidiary of Incorporation
Continental American Corporation Delaware
Coronet Security Systems, Inc. Delaware
Coronet Software, Inc. Delaware
Crown Central Holding Corporation Maryland
Crown Central International (U.K.), Limited United Kingdom
Crown Central Pipe Line Company Texas
Crown Gold, Inc. Maryland
Crown Nigeria, Inc. Maryland
Crown-Rancho Pipe Line Corporation Texas
Crown Stations, Inc. Maryland
Crowncen International N.V. Netherlands Antilles
Fast Fare, Inc. Delaware
F Z Corporation Maryland
La Gloria Oil and Gas Company Delaware
Locot, Inc. Maryland
McMurrey Pipe Line Company Texas
The Crown Oil and Gas Company Maryland
2. Subsidiaries as of December 31, 1993, which are included in the
Consolidated Financial Statements of the Registrant on an equity basis;
each subsidiary is 100% owned and doing business under its own name.
Nation or State
Subsidiary of Incorporation
Tiara Insurance Company Vermont
Tongue Brooks (Bermuda, Ltd.) Bermuda
Tongue, Brooks & Company, Inc. Maryland
Health Plan Administrators, Inc. Maryland
37
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Crown Central Petroleum
Corporation hereby severally constitute Henry A. Rosenberg, Jr., Charles L.
Dunlap, Edward L. Rosenberg, John E. Wheeler, Jr. and Thomas L. Owsley, and
each of them singly, our true and lawful attorneys with full power to them and
each of them to sign for us in our names and in the capacities indicated below
this Report on Form 10-K for the fiscal year ended December 31, 1993 pursuant
to the requirements of Section 13 or 15(d) of the Securities and Exchange Act
of 1934 and all amendments thereto.
Signature Title Date
- --------- ----- -----
Henry A. Rosenberg, Jr. Chairman of the Board and 2/24/94
Henry A. Rosenberg, Jr. Chief Executive Officer
(Principal Executive Officer)
C. L. Dunlap Director, President and 2/24/94
Charles L. Dunlap Chief Operating Officer
Jack Africk Director 2/24/94
Jack Africk
George L. Bunting, Jr. Director 2/24/94
George L. Bunting, Jr.
Michael F. Dacey Director 2/24/94
Michael F. Dacey
Robert M. Freeman Director 2/24/94
Robert M. Freeman
Thomas M. Gibbons Director 2/24/94
Thomas M. Gibbons
Patricia A. Goldman Director 2/28/94
Patricia A. Goldman
William L. Jews Director 2/28/94
William L. Jews
Malcolm McNair Director 2/24/94
Malcolm McNair
Phillip W. Taff Director 2/24/94
Phillip W. Taff
Bailey A. Thomas Director 2/24/94
Bailey A. Thomas
Edward L. Rosenberg Senior Vice President-Finance 2/24/94
Edward L. Rosenberg and Administration
(Principal Financial Officer)
John E. Wheeler, Jr. Vice President - Treasurer and 2/24/94
John E. Wheeler, Jr. Controller
(Principal Accounting Officer)
38
<PAGE>
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.
CROWN CENTRAL PETROLEUM CORPORATION
By *
--------------------------------
Henry A. Rosenberg, Jr.
Chairman of the Board and Chief
Executive Officer
By *
--------------------------------
Edward L. Rosenberg
Senior Vice President - Finance
and Administration
By John E. Wheeler, Jr.
--------------------------------
John E. Wheeler, Jr.
Vice President - Treasurer and
Controller
Date: March 2, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 2, 1994 by the following persons on
behalf of the registrant and in the capacities indicated:
* *
- ------------------------------------- ----------------------------------
Jack Africk, Director Patricia A. Goldman, Director
* *
- ------------------------------------- ----------------------------------
George L. Bunting, Jr., Director William L. Jews, Director
* *
- ------------------------------------- ----------------------------------
Michael F. Dacey, Director Malcolm McNair, Director
* *
- ------------------------------------- ----------------------------------
Charles L. Dunlap, Director Henry A. Rosenberg, Jr. Director
President and Chief Operating Officer Chairman of the Board and Chief
Executive Officer
* *
- ------------------------------------- ----------------------------------
Robert M. Freeman, Director Phillip W. Taff, Director
* *
- ------------------------------------- ----------------------------------
Thomas M. Gibbons, Director Bailey A. Thomas, Director
*By Power of Attorney (John E.
Wheeler, Jr.)
39
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
- -------
3 Articles of Incorporation and By-Laws
(a) Agreement of Consolidation as amended through August 28, 1988 (Articles of
Incorporation) was previously filed with the Registrant's Form 10-K for
the year ended December 31, 1992, herein incorporated by reference.
(b) By-Laws of Crown Central Petroleum Corporation as currently in effect to
reflect amendment dated February 25, 1988 were previously filed with the
Registrant's Form 10-K for the year ended December 31, 1987, herein
incorporated by reference.
4 Instruments Defining the Rights of Security Holders, Including Indentures
(a) Credit Agreement dated as of May 10, 1993 between the Registrant and
various banks was previously filed with the Registrant's Form 8-K dated
May 19, 1993, herein incorporated by reference. Certain portions of the
Agreement have been omitted because of their confidential nature, and have
been filed separately with the Securities and Exchange Commission marked
"Confidential Treatment".
(b) Amendment dated December 20, 1993 to the Credit Agreement dated as of May
10, 1993 is filed with the Securities and Exchange Commission as part of
this Annual Report on Form 10-K.
(c) Note Purchase Agreement dated January 3, 1991 between the Registrant and a
group of institutional lenders was previously filed with the Registrants
Form 8-K dated January 3, 1991, herein incorporated by reference.
(d) Amendment dated as of February 14, 1992 to the Note Purchase Agreement
dated January 3, 1991 was previously filed with the Registrants Form 10-K
for the year ended December 31, 1991 as Exhibit 19 (c), herein
incorporated by reference. Certain portions of the Amendment have been
omitted because of their confidential nature, and have been filed
separately with the Securities and Exchange Commission marked
"Confidential Treatment".
(e) Amendment dated as of November 10, 1992 to the Note Purchase Agreement
dated January 3, 1991 was previously filed with the Registrants Form 10-Q
for the quarter ended September 30, 1992 as Exhibit 19 (d), herein
incorporated by reference.
10 Material Contracts
(a) Crown Central Petroleum Retirement Plan effective as of July 1, 1993, is
filed with the Securities and Exchange Commission as part of this Annual
Report on Form 10-K.
<PAGE>
(b) Supplemental Retirement Income Plan for Senior Executives - As amended
through October 27, 1983 and all subsequent amendments through May 30,
1991 were previously filed with the Registrant's Form 10-K for the year
ended December 31, 1992 as Exhibit 10 (a) (3), herein incorporated by
reference.
(c) Employee Savings Plan (as in effect on April 1, 1984), and all subsequent
amendments through December 19, 1991 were previously filed with the
Registrant's Form 10-K for the year ended December 31, 1992 as Exhibit 10
(a) (4), herein incorporated by reference.
(d) Directors' Deferred Compensation Plan adopted on August 25, 1983 was
previously filed with the Registrant's Form 10-Q for the quarter ended
September 30, 1983 as Exhibit 19(b), herein incorporated by reference.
(e) The Long-Term Performance Reward Plan as in effect for the seventh
performance cycle (1991/1992/1993) was previously filed with the
Registrant's Form 10-K for the year ended December 31, 1990, as Exhibit
19(d), herein incorporated by reference.
(f) The Long-Term Performance Reward Plan as in effect for the eighth
performance cycle (1992/1993/1994) was previously filed with the
Registrant's Form 10-K for the year ended December 31, 1991, as Exhibit
19(e), herein incorporated by reference.
(g) The Long-Term Performance Reward Plan as in effect for the ninth
performance cycle (1993/1994/1995) was previously filed with the
Registrant's Form 10-Q for the quarter ended March 31, 1993, as Exhibit
19(a), herein incorporated by reference.
(h) The following documents were previously filed with the Registrant's Form
10-Q for the quarter ended March 31, 1993, as Exhibits 19(b) and (c),
herein incorporated by reference:
(1) Crown Central Petroleum Corporation Annual Incentive Plan as in effect
for fiscal 1993.
(2) La Gloria Oil and Gas Company Annual Incentive Plan as in effect for
fiscal 1993.
(i) The Employment Agreement between Charles L. Dunlap, President and Crown
Central Petroleum Corporation, dated October 29, 1991 was previously filed
with the Registrant's Form 10-Q for the quarter ended September 30, 1991
as Exhibit 19(a), herein incorporated by reference.
13 Annual Report to Security Holders, Form 10-Q or Quarterly Report to
Security Holders
(a) Shareholders' Letter dated February 28, 1994.
(b) Financial Summary, Operating Summary and Key Financial Statistics.
(c) Directors and Officers of the Company.
(d) Corporate Information.
21 Subsidiaries of the Registrant
Exhibit 21 is included on page 37 of this report.
23 Consent of Independent Auditors
24 Power of Attorney
Exhibit 24 is included on page 38 of this report.
99 Form 11-K will be filed under cover of Form 10-KA on or about May 15,
1994.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the three months ended
December 31, 1993.
Exhibit 4 (b)
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of December 20, 1993 between
CROWN CENTRAL PETROLEUM CORPORATION, a corporation duly organized
and validly existing under the laws of the State of Maryland (the
"Company"); each of the lenders that is a signatory hereto
-------
(individually, a "Bank" and, collectively, the "Banks"); and THE
---- -----
CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking
association, as agent and letter of credit agent for the Banks
(in such capacity, together with its successors in such capacity,
the (Agent").
-----
The Company, the Banks and the Agent are parties to a
Credit Agreement dated as of May 10, 1993 (as heretofore modified
and supplemented and in effect on the date hereof, the "Credit
------
Agreement"), providing, subject to the terms and conditions
- ---------
thereof, for extensions of credit (by making loans and issuing
letters of credit) to be made by said Banks to the Company in an
aggregate principal or face amount not exceeding $125,000,000.
The Company, the Banks and the Agent wish to amend the Credit
Agreement in certain respects and, accordingly, the parties
hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined
-----------
in the Amendment No. 1, terms defined in the Credit Agreement are
used herein as defined therein.
Section 2. Amendment. Subject to the satisfaction of
---------
the conditions precedent specified in Section 3 below, but
effective as of the date hereof, Section 8.10(h) of the Credit
Agreement shall be amended by deleting the words "purchase money"
therefrom.
Section 3. Conditions Precedent. As provided in
--------------------
Section 2 above, the amendment to the Credit Agreement set forth
in said Section 2 shall become effective, as of the date hereof,
upon the execution and delivery of this Amendment No. 1 by the
Company, the Majority Banks and the Agent.
Section 4. Miscellaneous. Except as herein provided,
-------------
the Credit Agreement shall remain unchanged and in full force and
effect. This Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same amendatory instrument and any of the parties hereto
may execute this Amendment No. 1 by signing any such
counterpart. This Amendment No. 1 shall be governed by, and
construed in accordance with, the law of the State of New York.
Amendment No. 1
---------------
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day
and year first above written.
CROWN CENTRAL PETROLEUM CORPORATION
By s/ --- Edward L. Rosenberg
---------------------------------
Senior Vice President
Finance and Administration
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By /s/ --- Caryn E. Cosentini
----------------------------------
Vice President
THE FIRST NATIONAL BANK OF MARYLAND
By /s/--- Theodore K. Oswald
---------------------------------
Vice President
SIGNET BANK/MARYLAND
By /s/ --- Janice E. Godwin
---------------------------------
Vice President
<PAGE>
FIRST NATIONAL BANK OF BOSTON
By /s/ --- Stefen Breuer
----------------------------------
Vice President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By /s/ --- Martha Gerwit
----------------------------------
Vice President
YASUDA BANK AND TRUST COMPANY (U.S.A.)
By /s/--- Rohn Laudenschlager
---------------------------------
First Vice President
BANK OF NOVA SCOTIA
By /s/ --- J. Alan Edwards
----------------------------------
Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ --- Beverly J. Anderson
---------------------------------
Vice President
MARYLAND NATIONAL BANK
By /s/ --- Michael Heredia
----------------------------------
Vice President
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent and Letter of Credit Agent
By /s/ --- Caryn E. Cosentini
----------------------------------
Vice President
EXHIBIT 10.a
CROWN CENTRAL PETROLEUM
RETIREMENT PLAN
Effective as of
July 1, 1993
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
SECTION I
DEFINITIONS
-----------
1.1 Accrued Benefit . . . . . . . . . . . . . . . . . . 1
1.2 Actuarial Equivalent . . . . . . . . . . . . . . . 1
1.3 Beneficiary . . . . . . . . . . . . . . . . . . . . 1
1.4 Benefit Accrual Date . . . . . . . . . . . . . . . 2
1.5 Benefit Service . . . . . . . . . . . . . . . . . . 2
1.6 Code . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Company . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Compensation . . . . . . . . . . . . . . . . . . . 2
1.9 Early Retirement Date . . . . . . . . . . . . . . . 3
1.10 Early Retirement Pension . . . . . . . . . . . . . 3
1.11 Effective Date . . . . . . . . . . . . . . . . . . 3
1.12 Eligibility Computation Period . . . . . . . . . . 3
1.13 Employee . . . . . . . . . . . . . . . . . . . . . 3
1.14 Employer . . . . . . . . . . . . . . . . . . . . . 3
1.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Hour of Service . . . . . . . . . . . . . . . . . . 3
1.17 Merger Date . . . . . . . . . . . . . . . . . . . . 4
1.18 Normal Retirement Date . . . . . . . . . . . . . . 4
1.19 Normal Retirement Pension . . . . . . . . . . . . . 5
1.20 One-Year Break in Service . . . . . . . . . . . . . 5
1.21 Participant . . . . . . . . . . . . . . . . . . . . 5
1.22 Pension . . . . . . . . . . . . . . . . . . . . . . 5
1.23 Plan . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 Plan Administrator or Administrator . . . . . . . . 5
1.25 Plan Year . . . . . . . . . . . . . . . . . . . . . 5
1.26 Prior Plan . . . . . . . . . . . . . . . . . . . . 5
1.27 Qualified Joint and Survivor Annuity . . . . . . . 5
1.28 Qualified Pre-Retirement Survivor Annuity . . . . . 5
1.29 Related Company . . . . . . . . . . . . . . . . . . 5
1.30 Section 415 Compensation . . . . . . . . . . . . . 5
1.31 Spouse . . . . . . . . . . . . . . . . . . . . . . 6
1.32 Trust, Trust Fund, or Fund . . . . . . . . . . . . 6
1.33 Trust Agreement . . . . . . . . . . . . . . . . . . 6
1.34 Trustee . . . . . . . . . . . . . . . . . . . . . . 6
1.35 Vested Pension . . . . . . . . . . . . . . . . . . 6
1.36 Vesting Service . . . . . . . . . . . . . . . . . . 6
SECTION II
PARTICIPATION
-------------
2.1 Eligibility Requirements . . . . . . . . . . . . . 7
2.2 Reemployment . . . . . . . . . . . . . . . . . . . 7
2.3 Loss of Eligibility with Continued Employment . . . 8
SECTION III
CONTRIBUTIONS
-------------
3.1 Contributions by the Employer . . . . . . . . . . . 9
3.2 Time of Payment of Contributions . . . . . . . . . 9
3.3 No Right or Duty of Inquiry . . . . . . . . . . . . 9
3.4 Non-Reversion . . . . . . . . . . . . . . . . . . . 9
3.5 Participant Contributions . . . . . . . . . . . . 10
SECTION IV
VESTING
-------
4.1 Vesting . . . . . . . . . . . . . . . . . . . . . 12
4.2 Service Rules . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
SECTION V
ENTITLEMENT TO AND AMOUNT OF RETIREMENT BENEFITS
------------------------------------------------
5.1 Normal Retirement . . . . . . . . . . . . . . . . 13
5.2 Early Retirement . . . . . . . . . . . . . . . . 14
5.3 Vested Pension . . . . . . . . . . . . . . . . . 14
5.4 Minimum Pension . . . . . . . . . . . . . . . . . 14
5.5 Qualified Pre-Retirement Survivor Annuity . . . . 15
5.6 Commencement of Benefits . . . . . . . . . . . . 16
5.7 No Duplication of Benefits . . . . . . . . . . . 17
5.8 Benefit Limitations - Single Plan . . . . . . . . 17
5.9 Benefit Limitations - Multiple Plans . . . . . . 19
5.10 Suspension of Benefits . . . . . . . . . . . . . 20
SECTION VI
FORMS OF RETIREMENT BENEFITS
----------------------------
6.1 Forms of Retirement Benefits . . . . . . . . . . 23
6.2 Elections: Qualified Joint and Survivor Annuity,
Qualified Pre-Retirement Survivor Annuity, and
Five-Year Certain and
Life Annuity . . . . . . . . . . . . . . . . . . 25
6.3 Location of Missing Participants . . . . . . . . 27
6.4 Benefits to Minors and Incompetents . . . . . . . 27
6.5 Eligible Rollover Distributions . . . . . . . . . 28
SECTION VII
ADMINISTRATION
--------------
7.1 Plan Administrator . . . . . . . . . . . . . . . 29
7.2 Responsibilities . . . . . . . . . . . . . . . . 29
7.3 Delegation of Duties . . . . . . . . . . . . . . 30
7.4 Expenses . . . . . . . . . . . . . . . . . . . . 30
7.5 Compensation . . . . . . . . . . . . . . . . . . 31
7.6 Benefit Claims Procedure . . . . . . . . . . . . 31
7.7 Domestic Relations Orders . . . . . . . . . . . . 32
SECTION VIII
DUTIES AND POWERS OF THE TRUSTEE
--------------------------------
8.1 General . . . . . . . . . . . . . . . . . . . . . 34
8.2 Trust Agreement . . . . . . . . . . . . . . . . . 34
8.3 Limitation of Liability . . . . . . . . . . . . . 34
8.4 Power of Trustee to Carry Out the Plan . . . . . 34
SECTION IX
SPECIAL PROVISION TO PREVENT DISCRIMINATION
-------------------------------------------
9.1 General . . . . . . . . . . . . . . . . . . . . . 35
9.2 Restrictions . . . . . . . . . . . . . . . . . . 35
9.3 Restrictions on Benefits to Highly Compensated
Employees . . . . . . . . . . . . . . . . . . . . 36
9.4 Restrictions for a Substantial Owner . . . . . . 37
9.5 Exceptions . . . . . . . . . . . . . . . . . . . 37
9.6 Automatic Repeal . . . . . . . . . . . . . . . . 38
SECTION X
AMENDMENT AND TERMINATION
-------------------------
10.1 Amendment . . . . . . . . . . . . . . . . . . . 39
10.2 Right to Terminate . . . . . . . . . . . . . . . 39
10.3 Merger . . . . . . . . . . . . . . . . . . . . . 39
10.4 Liquidation of Trust Fund . . . . . . . . . . . 39
10.5 Allocation of Trust Assets Upon Plan Termination 39
ii
<PAGE>
10.6 Manner of Distribution . . . . . . . . . . . . . 40
10.7 Residual Amounts . . . . . . . . . . . . . . . . 40
SECTION XI
ADOPTION OF THE PLAN BY RELATED COMPANIES
-----------------------------------------
11.1 Adoption of the Plan . . . . . . . . . . . . . . 41
11.2 Withdrawal . . . . . . . . . . . . . . . . . . . 41
11.3 Sale of Employer or Business Unit . . . . . . . 41
SECTION XII
TOP HEAVY
---------
12.1 Top Heavy . . . . . . . . . . . . . . . . . . . 42
12.2 Minimum Accrued Benefit . . . . . . . . . . . . 43
12.3 Vesting of Accrued Benefits . . . . . . . . . . 43
12.4 Benefit and Contribution Limitations . . . . . . 43
SECTION XIII
PROVISIONS RELATING TO FORMER PARTICIPANTS
------------------------------------------
OF THE TEXAS EASTERN RETIREMENT PLAN
------------------------------------
13.1 Accrued Benefit . . . . . . . . . . . . . . . . 45
13.2 Benefit Service . . . . . . . . . . . . . . . . 45
13.3 Vesting Service . . . . . . . . . . . . . . . . 45
13.4 Early Retirement . . . . . . . . . . . . . . . . 45
13.5 Normal Retirement . . . . . . . . . . . . . . . 46
13.6 Vested Retirement . . . . . . . . . . . . . . . 46
13.7 Preservation of Benefits . . . . . . . . . . . . 47
SECTION XIV
MISCELLANEOUS
-------------
14.1 Indemnification . . . . . . . . . . . . . . . . 48
14.2 Exclusive Benefit Rule . . . . . . . . . . . . . 48
14.3 No Right to the Fund . . . . . . . . . . . . . . 48
14.4 Rights of the Employer . . . . . . . . . . . . . 48
14.5 Non-Alienation of Benefits . . . . . . . . . . . 48
14.6 Construction and Severability . . . . . . . . . 48
14.7 Delegation of Authority . . . . . . . . . . . . 49
14.8 Request for Tax Ruling . . . . . . . . . . . . . 49
iii
<PAGE>
CROWN CENTRAL PETROLEUM
RETIREMENT PLAN
BACKGROUND
----------
Crown Central Petroleum Corporation (the "Company")
maintains the Crown Central Petroleum Corporation Pension Plan
Trust Agreement (the "Pension Trust"), effective as of January 1,
1950 and as subsequently amended, and the Crown Central Petroleum
Corporation Retirement Income Plan (the "Retirement Income
Plan"), effective as of May 26, 1982 and as subsequently amended,
(the "Prior Plans") for the benefit of its eligible employees.
The Plans provide retirement benefits for eligible employees
of Crown and its related companies. The Company is the Plans'
administrator with the power to amend the Plans. Signet Bank of
Maryland serves as the Plans' trustee. The Company believes it
to be in the best interest of participants to merge the
Retirement Income Plan into the Pension Trust and to rename the
merged plan as the Crown Central Petroleum Retirement Plan,
effective as of July 1, 1993. In order to accomplish this
purpose, the assets and liabilities of the Retirement Income Plan
have been transferred to the renamed Crown Central Petroleum
Retirement Plan (the "Plan") on July 1, 1993. The Plan accepts
the assets and liabilities of the Retirement Income Plan.
The Plan is intended to meet the requirements of Section
401(a) of the Internal Revenue Code.
<PAGE>
SECTION I
---------
DEFINITIONS
-----------
Where indicated by initial capital letters, the following
terms shall have the following meanings:
1.1 Accrued Benefit:
---------------
(a) An annual benefit equal to the amount determined
under Section 5.1, based on a Participant's Benefit Service as of
the date of computation and the benefit formula in effect on such
date. If a Participant terminates employment before his Normal
Retirement Date, his Accrued Benefit shall be equal to his Normal
Retirement Pension computed as of his date of termination of
employment using the actuarial factors in effect at his date of
termination of employment, and the Accrued Benefit shall not be
affected by any later change in the actuarial factors.
(b) Notwithstanding the foregoing, each Prior Plan
Participant's Accrued Benefit under this Plan immediately after
the Merger Date shall be equal to his accrued benefit under the
applicable Prior Plan immediately before the Merger Date. For
any Prior Plan Participant who was a Participant in both Prior
Plans, the Participant's Accrued Benefit under this Plan
immediately after the Merger Date shall be equal to the sum of
his accrued benefit under both Prior Plans. The actuarial
factors in the Prior Plans shall be used for purposes of
determining the accrued benefit under the Prior Plans.
(c) Each Prior Plan Participant's Accrued Benefit
shall be the greater of (i) his Accrued Benefit determined under
Section 1.1(a) at the time of the determination or (ii) his
Accrued Benefit determined under Section 1.1(b) immediately after
the Merger Date and shall include the value of the death benefits
payable under Article IX of the Crown Central Petroleum Pension
Plan Trust Agreement.
1.2 Actuarial Equivalent: An equivalent value determined
--------------------
on the basis of the 1984 Unisex Pension Mortality Table at 6%
interest.
1.3 Beneficiary: The person or entity who is to receive
-----------
any benefits payable from the Plan on account of a Participant's
death. If the Participant is not married, the Beneficiary is the
person designated by the Participant to receive such benefits.
If the Participant is married, the Beneficiary is automatically
the Participant's Spouse and no written designation is required.
If the Participant is married, and the Participant wishes to
designate a Beneficiary other than his Spouse, the Spouse must
consent to the designation of another person who will become the
designated Beneficiary to receive benefits under the Plan. If at
the time of his death, the Participant has no Spouse or
designated Beneficiary, the Beneficiary is the personal
representative of the Participant's estate. A Participant may
designate a person or entity to be his Beneficiary by filing a
properly completed and executed form provided by the Plan
Administrator. If a married Participant wishes to designate a
Beneficiary other than his Spouse, the Beneficiary designation
and spousal consent must be witnessed by a Plan representative or
a notary public and the Spouse must (a) consent to the
designation in writing and (b) acknowledge the effect of such
designation. A Participant's Beneficiary is bound by the terms
of the Plan.
1.4 Benefit Accrual Date: The first day of the month
--------------------
coincident with or next following the first date on which a
Participant is credited with Benefit Service under the Plan or a
Prior Plan.
1.5 Benefit Service: A Participant shall be credited with
---------------
Benefit Service for each Hour of Service credited to the
<PAGE>
Participant while an Employee. All Benefit Service will be
calculated beginning with the date on which the Employee first
completes an Hour of Service for the Employer. A Prior Plan
Participant shall be credited with all Benefit Service as of the
Merger Date was credited to the Participant under the Prior Plan
in which the Participant had the most Benefit Service.
1.6 Code: The Internal Revenue Code of 1986, as amended,
----
or any subsequently enacted Federal revenue law. A reference to
a particular section of the Code shall include a reference to any
regulations issued under the section and to the corresponding
section of any subsequently enacted federal revenue law.
1.7 Company: Crown Central Petroleum Corporation and any
-------
successor by merger, purchase, consolidation or otherwise.
1.8 Compensation:
------------
(a) The total compensation paid to an Employee by the
Employer during the Plan Year as reported on Internal Revenue
Service Form W-2 plus any amount contributed pursuant to a salary
reduction agreement and which is not includible in gross income
under Code Sections 125 or 402(a)(8), reduced by the following
items:
(1) moving expenses paid to the Employee,
(2) union signing bonuses or similar payments
(3) car allowances,
(4) imputed income from life insurance or other
welfare benefit plans,
(5) educational assistance payments by the
Employer, and
(6) dues paid to country clubs and similar
organizations.
(b) The amount of a Participant's annual Compensation
that may be taken into account under the Plan shall not exceed
$200,000, or an adjusted amount determined pursuant to Code
sections 401(a)(17) and 415(d). For purposes of applying the
$200,000 limit on Compensation of a Participant who is a "highly
compensated employee" (within the meaning of Code section
414(q)), the Participant's "family unit" will be treated as a
single Employee with one Compensation, and the $200,000 limit
will be allocated among the members of the family unit in
proportion to each member's Compensation to the extent required
by Code section 401(a)(17). For this purpose, a family unit is
the highly compensated employee's Spouse and lineal descendants
who have not attained age 19 before the end of the Plan Year.
1.9 Early Retirement Date: The first day of the calendar
---------------------
month coincident with or next following the date on which a
Participant has both completed 15 years of Vesting Service and
attained age 55.
1.10 Early Retirement Pension: A series of monthly amounts
------------------------
that are payable to a Participant who meets the requirements of
Section 5.2.
1.11 Effective Date: The effective date is July 1, 1993 for
--------------
the Plan.
1.12 Eligibility Computation Period: The Initial
------------------------------
Eligibility Computation Period is the 12 consecutive month period
beginning with the date on which an Employee first completes an
Hour of Service. All subsequent Eligibility Computation Periods
2
<PAGE>
are the Plan Year beginning with the Plan Year which includes the
first anniversary of the date on which the Employee first
completes an Hour of Service.
1.13 Employee: Any person employed by the Employer. The
--------
term "Employee" shall not include leased employees.
1.14 Employer: The Company and any Related Company that
--------
adopts the Plan as provided in Section XI.
1.15 ERISA: The Employee Retirement Income Security Act of
-----
1974, as amended from time to time and as construed, interpreted
and modified by regulations or rulings.
1.16 Hour of Service: An Employee shall be credited with
---------------
one Hour of Service for:
(a) Each hour for which he is directly or indirectly
paid, or entitled to payment, by the Employer or by a Related
Company for the performance of duties during a computation
period. These hours shall be credited to the Employee for the
computation period in which such duties are performed. Each
overtime hour shall be credited as a single hour regardless of
any increase in the rate of pay for such hour.
(b) Each hour (up to a maximum of 501 hours during a
single continuous period) for which the Employee is paid, or
entitled to payment, by the Employer or a Related Company for a
period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) because of
vacation, holiday, illness, incapacity, layoff, jury duty or
leave of absence (including disability). These hours shall be
credited to the Employee for the computation period in which the
duties would have been performed. Hours under this subparagraph
shall be calculated and credited pursuant to Section 2530.200b-
2(b) of the Department of Labor Regulations, which are
incorporated in the Plan by this reference. In addition, to the
extent required by Federal law, if an Employee leaves the employ
of the Employer or a Related Company to enter the military
service of the United States and upon his discharge from service,
is reemployed by the Employer or a Related Company at a time when
his reemployment rights are protected by Federal law, the
Employee shall be considered to have been employed by the
Employer or a Related Company during his period of military
service and shall be credited with Hours of Service to the extent
required by law.
(c) Each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by
the Employer or a Related Company. The same Hours of Service
shall not be credited both under subparagraphs (a), (b) or (d),
as the case may be, and under this subparagraph (c). These hours
shall be credited to the Employee for the computation period to
which the award or agreement pertains, rather than to the
computation period in which the award, agreement or payment was
made.
(d) For purposes of determining whether an Employee
has incurred a One-Year Break in Service, each hour (up to a
maximum of 501 hours in a single continuous period) for which the
Employee is absent because of (i) the pregnancy of the Employee,
(ii) the birth of a child of the Employee, (iii) the placement of
a child with the Employee in connection with the Employee's
adoption of the child, or (iv) the Employee's caring for a child
immediately following the birth or placement of that child.
These hours shall be credited to the Employee for the computation
period in which the absence begins only if the Employee would
otherwise incur a One-Year Break in Service in that computation
period. In all other cases, these hours shall be credited to the
next following computation period.
3
<PAGE>
(e) If the Employer leases employees, Hours of Service
with the Employer and Related Companies shall be credited for any
leased employee who is to be considered an Employee for purposes
of the Plan under Code sections 414(n) and 414(o). In any case
for which employment records do not accurately reflect hours
worked, Hours of Service shall be credited at the rate of 45
hours per calendar week.
1.17 Merger Date: July 1, 1993.
-----------
1.18 Normal Retirement Date: The first day of the calendar
----------------------
month coincident with or next following the later of (a) a
Participant's 65th birthday, or (b) the fifth anniversary of the
date on which an Employee first completes an Hour of Service.
1.19 Normal Retirement Pension: A series of monthly amounts
-------------------------
that are payable to a Participant who meets the requirements of
Section 5.1.
1.20 One-Year Break in Service: A Plan Year during which an
-------------------------
Employee does not perform more than 500 Hours of Service.
1.21 Participant: An Employee who meets the requirements of
-----------
Section II.
1.22 Pension: A series of monthly amounts that are payable
-------
to a Participant or a Spouse who is entitled to receive benefits
hereunder.
1.23 Plan: The "Crown Central Petroleum Retirement Plan",
----
as set forth herein, and as amended from time to time.
1.24 Plan Administrator or Administrator: Crown Central
-----------------------------------
Petroleum Corporation, and any successor by merger, purchase or
otherwise.
1.25 Plan Year: The 12 consecutive month period beginning
---------
on January 1 and ending on December 31 of each year.
1.26 Prior Plan: Either the Crown Central Petroleum Pension
----------
Plan Trust Agreement or the Crown Central Petroleum Corporation
Retirement Income Plan, as in effect immediately before July 1,
1993.
1.27 Qualified Joint and Survivor Annuity: An immediate
------------------------------------
annuity payable to a Participant and his surviving Spouse, as
described in Section 6.1(a).
1.28 Qualified Pre-Retirement Survivor Annuity: An annuity
-----------------------------------------
payable to a deceased Participant's surviving Spouse for life, as
described in Section 5.5.
1.29 Related Company: Any corporation or business
---------------
organization that is under common control with the Company (as
determined under Code section 414(b) or (c)), that is a member of
an affiliated service group with the Company (as determined under
Code section 414(m)) or that is an entity required to be
aggregated with the Company pursuant to Code section 414(o) and
the regulations thereunder. For the purpose of applying the
limitations set forth in Sections 5.8 and 5.9, Code sections
414(b), 414(c) and 414(m) shall be applied as modified by Code
section 415(h).
1.30 Section 415 Compensation: An Employee's total annual
------------------------
compensation received from the Employer and Related Companies
during a Plan Year, as defined in the Treasury Regulations issued
under Code section 415. Under this definition, "Section 415
Compensation" includes an Employee's wages, salaries, fees for
professional services and other amounts received for personal
services actually rendered in the course of employment with the
4
<PAGE>
Employer and Related Companies (including, but not limited to,
commissions paid to salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). "Section 415 Compensation" does not
include:
(a) Contributions made by the Employer or a Related
Company to a plan of deferred compensation to the extent that the
contributions are not includible in the Employee's gross income
for the taxable year in which they are contributed.
(b) Amounts received from the exercise of a non-
qualified stock option or from restricted property.
(c) Amounts realized from the sale, exchange or other
disposition of stock acquired under a statutory stock option.
(d) Other amounts that receive special tax benefits,
such as premiums for group term life insurance (but only to the
extent that the premiums are not includible in the gross income
of the Employee).
1.31 Spouse: The person to whom a Participant is legally
------
married for state law purposes. The person who is the Spouse at
the earlier of (a) the date of the Participant's death or (b) the
Participant's annuity starting date shall be deemed to be the
Participant's Spouse under the Plan regardless of future events.
A former spouse of a Participant shall be treated as a Spouse to
the extent provided in a Qualified Domestic Relations Order, as
defined in Section 7.7.
1.32 Trust, Trust Fund, or Fund: The trust implementing the
----- ---------- ----
Plan and the Plan assets held in the trust.
1.33 Trust Agreement: The Trust Agreement, as in effect
---------------
from time to time, between Crown Central Petroleum Corporation
and Signet Trust Company, as trustee, or any subsequent trust
agreement entered into to facilitate administration of the Trust
Fund.
1.34 Trustee: Signet Trust Company and any successor
-------
trustee appointed by the Plan Administrator and accepting the
trust.
1.35 Vested Pension: A series of monthly amounts that are
--------------
payable to a Participant who meets the requirements of Section
5.4.
1.36 Vesting Service: A Participant shall be credited with
---------------
one year of Vesting Service for each Plan Year in which the
Participant completes 1,000 Hours of Service. All Vesting
Service shall be calculated beginning with the date on which the
Employee first completes an Hour of Service for the Employer.
5
<PAGE>
SECTION II
----------
PARTICIPATION
-------------
2.1 Eligibility Requirements:
------------------------
(a) All Employees who were participants in the Prior
Plans immediately before the Merger Date shall become
Participants in the Plan as of the Merger Date.
(b) Subject to Section 2.4, each Employee who is not a
Participant pursuant to subsection (a) and who has attained age
21 will become a Participant on the earlier of the following
dates:
(i) the first day of the calendar month coincident
with or next following the end of his Initial Eligibility
Computation Period if he completes 1,000 or more Hours of Service
during that Eligibility Computation Period, or
(ii) the first day of the Plan Year next
following the end of the next subsequent Eligibility Computation
Period during which he completes 1,000 or more Hours of Service.
(c) An Employee who has completed 1,000 or more Hours
of Service in an Eligiblity Computation Period prior to age 21
shall become a Participant on the first day of the calendar month
coincident with or next following the attainment of age 21.
(d) An Employee who becomes a Participant shall remain
a Participant until he retires, dies, or otherwise terminates
employment and all benefits to which he is entitled under the
Plan have been distributed to him.
2.2 Reemployment:
------------
(a) If a Participant terminates employment, is
reemployed by the Employer, and meets the eligibility
requirements of Section 2.1(b), he will requalify as an active
Participant as of the first day of the calendar month coincident
with or next following the date he again becomes an Employee.
(b) A reemployed Participant who terminated employment
before he had a vested interest in his Accrued Benefit shall have
his prior Benefit Service disregarded if the Participant had a
series of consecutive One-Year Breaks in Service that equals or
exceeds the greater of (i) five or (ii) the number of his years
of Vesting Service before his termination of employment. In all
other cases, a reemployed Employee shall receive credit for
Benefit Service for the period before his termination of
employment unless all benefits to which he was entitled for the
prior Benefit Service under the Plan have been distributed to
him.
2.3 Loss of Eligibility with Continued Employment:
---------------------------------------------
(a) If the Plan Administrator determines that a
Participant who is continuing in the employ of the Employer has
ceased to be an eligible Employee, he shall be credited with no
additional Benefit Service. If the Plan Administrator determines
that the Participant again meets the requirements of Section 2.1,
the Participant shall again be eligible to participate actively
as of the first day of the calendar month coincident with or next
following the date he again becomes an Eligible Employee, and his
Benefit Service shall be the sum of his Benefit Service before
his loss of eligibility and his Benefit Service after he again
becomes an active Participant. For purposes of vesting only, the
Participant's Vesting Service shall include his Vesting Service
while not an eligible Employee, to the extent otherwise
creditable under the Plan.
6
<PAGE>
(b) An Employee who transfers employment from a
Related Company to the Employer shall be eligible to participate
in the Plan in accordance with Section 2.1.
7
<PAGE>
SECTION III
-----------
CONTRIBUTIONS
-------------
3.1 Contributions by the Employer: The Employer shall make
-----------------------------
contributions in such amounts and at such times as it shall
determine, upon the advice of the actuary for the Plan. The
Employer's contribution shall be conditioned upon its
deductibility under Code section 404 and shall not exceed the
amount deductible under Code section 404. Contributions made by
the Employer to the Trust Fund shall be used to pay benefits
under the Plan or to pay expenses of the Plan and Trust Fund.
Forfeitures arising under this Plan because of termination of
employment before an Employee becomes eligible for a Pension, or
for any other reason, shall be applied to reduce the cost of the
Plan and not to increase the benefits otherwise payable to
Participants.
3.2 Time of Payment of Contributions: The contributions
--------------------------------
made by the Employer for any Plan Year may be made in one or more
payments at any time, provided that the total amount of the
contribution for any Plan Year shall be paid to the Trustee not
later than the first to occur of (a) the date by which
contributions are required to be made to meet the funding
standards of Code section 412, or (b) the date on which the
Employer's tax return is required to be filed, including any
extensions for filing.
3.3 No Right or Duty of Inquiry: Neither the Trustee, the
---------------------------
Plan Administrative Committee, the Plan Administrator nor any
Participant shall have any right or duty to inquire into the
amount of the Employer's annual contribution or the method used
in determining the amount of the Employer's contribution, and the
Trustee shall be accountable only for funds actually received by
it.
3.4 Non-Reversion: It shall be impossible, at any time
-------------
before satisfaction of all liabilities with respect to
Participants and their Beneficiaries, for any part of the
principal or income of the Trust Fund to be used for, or diverted
to, purposes other than for the exclusive benefit of such
Participants and their Beneficiaries. However, the Employer's
contributions under the Plan for any particular Plan Year shall
be conditioned upon (i) the Plan initially being a qualified plan
under Code section 401(a) for the Plan Year, and (ii) the
contribution being deductible under Code section 404. If, after
the Employer's contribution has been made, it is determined that
a condition described in (i) or (ii) was not satisfied with
respect to such contribution, or that all or a portion of such
contribution was made under a mistake of fact, then the Trustee
shall refund to the Employer within one year of the date the
contribution is remitted to the Trustee, if such contribution is
made by reason of a mistake of fact, or within one year of the
denial of qualification or disallowance of the deduction, the
amount of the contribution that was affected by the mistake of
fact, or by a condition described in (i) or (ii) not being
satisfied, subject to the following rules:
(a) The Trustee shall be under no obligation to make
such refund unless a written direction of the refund signed by an
authorized representative of the Employer, is submitted to the Trustee.
(b) Earnings attributable to the refundable amount
shall not be refunded, but the refundable amount shall be reduced
by a proportionate share of any losses of the Trust from the date
of crediting by the Trustee to the date of segregation.
8
<PAGE>
(c) The Trustee shall be under no obligation to verify
that the refund is allowable or timely and shall be entitled to
rely on the Employer's written direction.
3.5 Participant Contributions: The Participants affected
-------------------------
by the provisions of this Section 3.5 are those who made
contributions to the Pension Trust.
(a) Participant contributions are the total
contributions made by a Participant to the Pension Trust before
January 1, 1971. Effective January 1, 1971, the Pension Trust no
longer accepted Participant contributions.
(b) A Participant's "accumulated contributions" are a
Participant's contributions plus interest as described below
compounded annually from the end of the Plan Year in which the
contributions were made to the determination date. For purposes
of this Section, interest shall be credited at the following
rates:
(1) For the period before January 1, 1976, the
interest rate is 2% per annum;
(2) For the period beginning on and after
January 1, 1976 and ending on December 31, 1987, the
interest rate is 5% per annum; and
(3) For the period beginning on and after
January 1, 1988 and ending on the determination date,
interest shall be computed at the rate of 120% of the
Federal mid-term rate (as in effect under Code section
1274 for the first month of a Plan Year).
(c) A Participant's Accrued Benefit derived from his
Participant contributions is the amount of his "accumulated
contributions" expressed as an annual benefit beginning at the
Participant's Normal Retirement Date, with interest that would be
used under Section 6.1(d) as of the determination date. A
Participant is fully vested in his Accrued Benefit derived from
his Participant contributions.
(d) A Participant may request a withdrawal of his
Accrued Benefit derived from his Participant Contributions at any
time. The Participant shall receive a lump sum payment equal to
the Participant's accumulated contributions as soon as
practicable after the withdrawal request is processed. The
Participant's Accrued Benefit will be reduced by the
Participant's Accrued Benefit derived from the Participant's
contributions, if any. If the Participant's Accrued Benefit has
ever exceeded $3,500, (i) the Participant's Spouse, if any, must
consent to the distribution before it may be made and (ii) the
distribution must be payable in the form of an immediate annuity
pursuant to Section 6.1, unless the Participant elects otherwise
with the consent of his Spouse. A Participant's withdrawal of
accumulated contributions before Normal or Early Retirement shall
result in a forfeiture of the Participant's Employer - derived
Accrued Benefit that accrued before September 2, 1974 in the
proportion that the amount withdrawn bears to the Participant's
total accumulated contributions.
(e) If a Participant dies at a time when (i) he is not
receiving a Pension under the Plan, (ii) no survivor benefit is
payable on account of his death pursuant to Section 5.5 or
Section 6.1, and (iii) the Participant has Participant
accumulated contributions remaining in the Plan, then the
Participant's accumulated contributions, less any withdrawals
pursuant to (d) above, shall be paid to the Participant's
Beneficiary in a lump sum payment. Except as may otherwise be
provided in the Plan, no other benefits will be payable under the
Plan with respect to such a Participant.
9
<PAGE>
SECTION IV
----------
VESTING
-------
4.1 Vesting:
-------
(a) A Participant will become vested in his Accrued
Benefit according to the following schedule:
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 5 years 0%
5 or more years 100%
(b) Notwithstanding the foregoing, a Participant's
Accrued Benefit shall become fully vested on the later of his
65th birthday or the fifth anniversary of the date on which the
Participant first completes an Hour of Service, if he is then an
Employee.
4.2 Service Rules: If an Employee terminates employment
-------------
before he has a vested interest in his Accrued Benefit and then
is reemployed, his Vesting Service performed before his
termination of employment shall be disregarded in applying the
vesting schedule to his post-reemployment Accrued Benefit if the
Employee has a series of consecutive One-Year Breaks in Service
that equals or exceeds the greater of (i) five or (ii) the number
of his years of Vesting Service before his termination of
employment. In all other cases, if an Employee terminates
employment and is reemployed, all of his Vesting Service shall be
counted for purposes of applying the vesting schedule to his
post-reemployment Accrued Benefit.
10
<PAGE>
SECTION V
---------
ENTITLEMENT TO AND AMOUNT OF RETIREMENT BENEFITS
------------------------------------------------
5.1 Normal Retirement: Except as stated on a Separate
-----------------
Schedule for a particular group of Participants, a Participant
shall be eligible to receive a Normal Retirement Pension if his
employment terminates on or after his Normal Retirement Date.
(a) The Normal Retirement Pension payable at a
Participant's Normal Retirement Date on or after the Merger Date
will be an annual benefit, payable in monthly installments for
the Participant's lifetime, equal to:
(i) The Participant's Accrued Benefit as of June
30, 1993; plus
(ii) For Benefit Service performed after June
30, 1993, 2.4% of the Participant's Compensation for
Benefit Service for the first 20 years after his
Benefit Accrual Date, plus, 3% of the Participant's
Compensation for Benefit Service more than 20 years
after his Benefit Accrual Date. For the Plan Year in
which a Participant completes 20 years after his
Benefit Accrual Date, a Participant's Compensation
shall be pro-rated based on the number of months before
and after the anniversary of the Benefit Accrual Date.
The foregoing benefit formula shall only apply to
Participants who accrue benefits under the Plan on or after July
1, 1993. The benefit formula set forth in the applicable Prior
Plan shall apply to former Participants who ceased accruing
benefits before July 1, 1993 and who do not accrue additional
benefits under the Plan on or after July 1, 1993.
(b) Except as otherwise provided in Section VI, a
Participant's Normal Retirement Pension will be payable in the
form of a five-year certain and life annuity with 60 monthly
payments guaranteed. The Pension will commence as of the first
day of the calendar month coinciding with or next following the
Participant's termination of employment.
(c) In no event shall the benefits payable under this
Section 5.1 (or determined with reference to Section 5.l) exceed
the maximum benefit provided in Sections 5.8 and 5.9.
(d) For purposes of subsection (a) as applied to
Former Texas Eastern Employees as defined in Section XIII who
accrue benefits under Plan on or after July 1, 1993, Benefit
Service shall include service credited for benefit accrual
purposes under the Texas Eastern Retirement Plan before October
1, 1989.
5.2 Early Retirement:
----------------
(a) A Participant shall be eligible to receive an
Early Retirement Pension if his employment terminates on or after
his Early Retirement Date and before his Normal Retirement Date.
(b) A Participant's Early Retirement Pension will be
equal to his Accrued Benefit as of the date of his actual
retirement, actuarially reduced by five percent per year prorated
monthly for each month by which his Early Retirement Pension
commences before the first of the month coincident with or next
following the Participant reaching age 60. An Early Retirement
Pension that commences on or after the first of the month
coincident with or next following a Participant's 60th birthday
will not be actuarially reduced for Early Retirement.
11
<PAGE>
5.3 Vested Pension:
--------------
(a) A Participant shall be eligible to receive a
Vested Pension if his employment terminates after he has a vested
interest in his Accrued Benefit, other than on account of his
death or retirement on or after his Early Retirement Date or
Normal Retirement Date. The Vested Pension will be equal to the
Participant's vested interest in his Accrued Benefit as of the
date on which he terminates employment, reduced as required by
subsection (b). If a Participant's vested interest in his
Accrued Benefit is zero, the vested percentage (0%) shall be
deemed to be distributed as of the date of the Participant's
termination of employment and the non-vested interest shall be
forfeited as of that date.
(b) A Participant's Vested Pension will be payable as
of his Normal Retirement Date. However, a Participant may elect
to receive a reduced Vested Pension commencing as of his Early
Retirement Date in which case his Vested Pension will be payable
under Section 5.2(b).
(c) Except as otherwise provided in Section VI, a
Vested Pension will be payable in the form provided in Section
5.1(b).
5.4 Minimum Pension:
---------------
(a) Notwithstanding the provisions of Sections 5.1,
5.2 or 5.3, the annual Normal Retirement Pension, Early
Retirement Pension or Vested Pension of a Participant who begins
receiving benefits on or after January 1, 1989 shall be not less
than the product of:
(i) $144, times
(ii) one-twelfth of the number of months in which
a Participant has Benefit Service from his
Benefit Accrual Date to his termination of
employment.
(b) An Early Retirement Pension under Section 5.4(a)
shall be actuarially reduced by five percent per year prorated
monthly for each month by which the Early Retirement Pension
commences before the first of the month coincident with or next
following the Participant reaching age 60.
5.5 Qualified Pre-Retirement Survivor Annuity:
-----------------------------------------
(a) Except as provided below, if a Participant who has
a vested interest in his Accrued Benefit dies with a surviving
Spouse before his annuity starting date (defined below), his
surviving Spouse shall be eligible to receive a Qualified Pre-
Retirement Survivor Annuity. The "annuity starting date" is the
first day of the first period for which an amount is payable as
an annuity. The Qualified Pre-Retirement Survivor Annuity shall
be equal to the survivor annuity that the Spouse would have
received under the Qualified Joint and Survivor Annuity as
follows:
(i) If the Participant dies before his Early
Retirement Date or his Normal Retirement Date, the
survivor annuity will be determined as if:
(x) In the case of a Participant who is an
Employee at the time of his death, the Participant
separated from service on the date of his death;
(y) The Participant survived until the
earliest date on which he could have retired under
the Plan and then elected to begin receiving
retirement benefits under the Qualified Joint and
Survivor Annuity form of benefit payments; and
12
<PAGE>
(z) The Participant died immediately after
making the election.
(ii) If the Participant dies after his Early
Retirement Date or his Normal Retirement Date, then the
survivor annuity will be determined as if the
Participant had retired on the day before his death,
with the Qualified Joint and Survivor Annuity form of
benefit payment in effect.
The Qualified Pre-Retirement Survivor Annuity will be based on
the Participant's years of Benefit Service and the benefit
formula in effect as of the earlier of the Participant's
termination of employment or death. Payments to the surviving
Spouse shall normally begin on the first day of the month
following the earliest date on which the deceased Participant
could have retired, or the date of his death, whichever is later.
However, the Spouse may elect to postpone commencement until the
date that would have been the Participant's Normal Retirement
Date (but not later than age 70-1/2).
(b) Notwithstanding the foregoing, a Qualified Pre-
Retirement Survivor Annuity shall not be payable if, before the
date of his death, the Participant rejected that form of benefit
in writing as described in Section 6.2, with his Spouse's written
consent, on forms provided by and filed with the Plan
Administrator and the rejection has not been revoked. If at the
time of the Participant's death, the Qualified Pre-Retirement
Survivor Annuity has been rejected and the rejection has not been
revoked, then the Qualified Pre-Retirement Survivor Annuity will
not be payable upon the Participant's death.
A Participant who has reached his Early Retirement Date
but who has rejected a Qualified Pre-Retirement Survivor Annuity
with his Spouse's consent may elect that the Actuarial Equivalent
of the Qualified Pre-Retirement Survivor Annuity be paid to the
surviving Spouse in the form of a joint and 100% survivor annuity
based on the lives of the Participant and the surviving Spouse
and under the same other terms and conditions as the Qualified
Pre-Retirement Survivor Annuity.
(c) If the Qualified Pre-Retirement Survivor Annuity
is not rejected, it shall automatically be in effect. When a
Participant retires, terminates employment or dies, the amount of
his Pension (determined under whichever Section of the Plan shall
apply) shall be reduced to take into account the actuarial risk
factor for the period of time during which a 100% Survivor
Annuity election under Section 5.5(b) was in effect. The
actuarial risk factor shall be 3/8% per year. The reduction for
the 100% Survivor Annuity election shall be in addition to any
other reductions that may apply under the Plan.
(d) In lieu of a Qualified Pre-Retirement Survivor
Annuity, a surviving Spouse may elect to receive a single-sum
payment that is the Actuarial Equivalent of the Qualified Pre-
Retirement Survivor Annuity. The election to receive a single-
sum payment must be made by the surviving Spouse within a
reasonable time after the death of the Participant and prior to
the commencement of any benefit payments. If elected, the
single-sum payment shall be made as soon as practicable after the
election is made by the surviving Spouse.
5.6 Commencement of Benefits:
------------------------
(a) Subject to the provisions of Section VI and except
as provided below, payment of a Participant's Pension shall
commence as of the date specified in the appropriate Section of
this Section V.
13
<PAGE>
(b) Each Participant's Pension, if any, must begin to
be distributed not later than the April 1 following the calendar
year in which the Participant reaches age 70-1/2 (the "Required
Beginning Date"), to the extent required by law. As of the
Required Beginning Date, a Participant will begin receiving
benefits in the form provided under Section 6.1(a) or (b), unless
the Participant elects an optional form of benefit under Section
6.1(c) or (d). The form of benefit may not be changed after the
Required Beginning Date and the benefit will be actuarially
adjusted for later increases in the Accrued Benefit of the
Participant. All distributions required under this Section shall
be determined and made in accordance with Code section 401(a)(9)
and the regulations thereunder, including the minimum
distribution incidental benefit requirement of proposed
Regulations section 1.401(a)(9)-2.
(c) In addition, unless the Participant elects
otherwise subject to Section 6.1(d), his Pension must commence no
later than 60 days following the close of the Plan Year in which
occurs the latest of:
(i) The date the Participant attains age 65,
(ii) The 10th anniversary of the date on which
the Participant first commenced participation in the
Plan, or
(iii) The Participant's date of termination of
employment.
5.7 No Duplication of Benefits: If a Participant is
--------------------------
entitled to receive benefits from another defined benefit pension
plan qualified under Code section 401(a) to which the Employer or
a Related Company has contributed on his behalf, his Pension
under this Plan shall be reduced by the amount of any accrued
benefit that he is entitled to receive under such other plan and
that is attributable to contributions made by the Employer or by
a Related Company to the other plan for any period for which he
received credit for his service for benefit accrual purposes
under this Plan.
5.8 Benefit Limitations - Single Plan:
---------------------------------
(a) Notwithstanding anything in the Plan to the
contrary, the annual retirement benefit provided under this Plan
and under all other qualified defined benefit plans maintained by
the Employer shall not exceed an annual benefit that is equal to
the largest of the annual benefit computed under (i), (ii) or
(iii), as follows:
(i) An annual benefit equal to the lesser of (x)
$90,000 or (y) 100% of the Participant's average annual
Section 415 Compensation from the Employer for the
three consecutive calendar years that will produce the
highest average. The term "annual benefit" means a
benefit payable annually in the form of a straight life
annuity (with no ancillary benefits) under a plan to
which Employees do not contribute and under which no
rollover contributions are made. The $90,000 amount
referred to in the first sentence of this paragraph
shall be adjusted in accordance with regulations
prescribed by the Secretary of the Treasury or his
delegate. Each such adjustment shall be effective for
the Limitation Year (defined below) in which falls the
January 1 as of which the cost of living adjustment is
effective.
(ii) In the case of a person who was a
Participant in a Prior Plan on December 31, 1982, an
annual benefit equal to his current Accrued Benefit as
14
<PAGE>
of the close of the Limitation Year ending December 31,
1982, expressed as an annual benefit and determined
without regard to changes in the Prior Plan or cost of
living adjustments made after July 1, 1982.
(iii) In the case of a person who was a
Participant in a Prior Plan on January 1, 1987, an
annual benefit equal to his current Accrued Benefit as
of the close of the Limitation Year ending December 31,
1986, expressed as an annual benefit and determined
without regard to changes in the Prior Plan or cost of
living adjustments made after May 5, 1986.
(b) For purposes of this Section and Section 5.9, the
"Limitation Year" is the Plan Year and the term "Employer"
includes Related Companies.
(c) The limitations in subsection (a)(i) shall not
apply where the total projected benefits payable to a Participant
under this Plan and all other defined benefit plans maintained by
the Employer do not exceed $10,000 and the Participant has not at
any time participated in a defined contribution plan maintained
by the Employer.
(d) If a Participant has fewer than ten years of
participation in the Plan at his date of retirement, the dollar
limitation under subsection (a)(i)(x) above shall be the amount
determined by multiplying the limitation otherwise applicable by
a fraction, the numerator of which is the number of years of
participation in the Plan that the Participant has at the date of
retirement and the denominator of which is ten. If a Participant
has fewer than ten years of service at his date of retirement,
the compensation limitation under subsection (a)(i)(y) above and
the $10,000 limitation under subsection (c) above shall be the
amount determined by multiplying the limitation otherwise
applicable by a fraction, the numerator of which is the number of
years of service that the Participant has at the date of
retirement and the denominator of which is ten. The limitation
described in this subsection shall apply only to the extent
required by Code section 415.
(e) Only to the extent required by Code section
415(b)(5)(D), the limitations imposed by Code section
415(b)(5)(A) shall be applied separately with respect to each
change in the Plan's benefit structure.
(f) For Plan Years beginning on or after January 1,
1987, if a Participant receives a benefit under this Plan that is
payable in a form other than a straight life annuity, the
determination of whether the benefit limitations described in
this Section have been met shall be made after adjusting the
benefit so that it is equal to the Actuarial Equivalent of a
straight life annuity. For purposes of determining the Actuarial
Equivalent of a straight life annuity, the interest rate
assumption shall not be less than the greater of 5 percent or the
rate set forth in Section 1.2. If a Participant's retirement
benefit begins before his Social Security Retirement Age, the
$90,000 limitation described in subsection (a)(i)(x) above shall
be reduced to equal the Actuarial Equivalent of a $90,000 annual
benefit (as adjusted for cost of living adjustments) beginning at
Social Security Retirement Age. If a Participant's retirement
benefit begins after the Participant reaches Social Security
Retirement Age, the $90,000 limitation described in subsection
(a)(i)(x) above shall be increased to equal the Actuarial
Equivalent of a $90,000 annual benefit (as adjusted for cost of
living adjustments) beginning at Social Security Retirement Age.
The adjustments provided for in this subsection shall be made in
a manner consistent with the reduction for old-age insurance
benefits commencing before the Social Security Retirement Age
under the Social Security Act until age 62 is reached. For
15
<PAGE>
purposes of adjusting the age 62 limitation before a Participant
attains age 62, the interest rate assumption shall not be less
than the greater of 5 percent or the rate set forth in Section
1.2. For purposes of adjusting the limitation after a
Participant attains Social Security Retirement Age, the interest
rate assumption shall not be greater than the lesser of 5 percent
or the rate set forth in Section 1.2.
(g) For an Employee who is a Participant in a Prior
Plan on January 1, 1987, if the Accrued Benefit of the Employee
as of December 31, 1986 exceeds the limitations of Code section
415(b), as modified by subsections (d) and (e) of this Section,
the dollar limitation described in subsection (a)(i) will be the
Participant's Accrued Benefit as of December 31, 1986.
5.9 Benefit Limitations - Multiple Plans: If an Employee
------------------------------------
is a Participant in one or more defined benefit plans and one or
more defined contribution plans maintained by the Employer, then
the sum of his "defined benefit plan fraction" and his "defined
contribution plan fraction" for any Limitation Year as applied to
the plans shall not exceed 1.0. The benefits provided under this
Plan shall be reduced to the extent necessary to comply with this
limitation. For purposes of this Section:
(a) The "defined benefit plan fraction" for any
Limitation Year is a fraction, the numerator of which is the
Participant's projected annual benefit under this Plan and all
other defined benefit plans of the Employer (determined as of the
close of the Limitation Year), and the denominator of which is
the lesser of:
(i) The product of 1.25 multiplied by the dollar
limitation in effect pursuant to Section 5.8(a)(i)(x)
(or under Section 5.8(a)(ii) or (iii), if that Section
is controlling); or
(ii) The product of 1.4 multiplied by 100% of
the Participant's average Section 415 Compensation from
the Employer for the three consecutive years that will
produce the highest average.
(b) The "defined contribution plan fraction" for any
Limitation Year is a fraction, the numerator of which is the sum
of the "annual additions" to the Participant's accounts as of the
close of the Limitation Year under all defined contribution plans
of the Employer and the denominator of which is the sum of the
lesser of the following amounts determined for the Limitation
Year and for each previous year of service with the Employer:
(i) The product of 1.25 multiplied by the dollar
limitation in effect under Code section 415(c)(1)(A);
or
(ii) The product of 1.4 multiplied by 25% of
the Participant's Section 415 Compensation for the
year.
(c) "Annual additions" means the following allocations
to a Participant's account in a defined contribution plan:
(i) Employer contributions;
(ii) forfeitures;
(iii) 100% of the Participant's voluntary
contributions, if any;
(iv) Amounts allocated, after March 31, 1984, to
an individual medical account, as defined in Code
section 415(l)(2), which is a part of a pension or
16
<PAGE>
annuity plan maintained by the Employer and are treated
as annual additions to a defined contribution plan;
(v) Amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to post-
retirement medical benefits, allocated to the separate
account of a Key Employee, as defined in Code section
416(i)(1), under a welfare benefit fund, as defined in
Code section 419(e), maintained by the Employer.
(d) The denominator of the "defined benefit plan
fraction" shall not be less than 125% of the Participant's
accrued benefit under all defined benefit plans maintained by the
Employer determined as of the last day of the Limitation Year
beginning in 1982. If the Participant was a participant in one
or more defined contribution plans maintained by the Employer
which were in existence on July 1, 1982 and the sum of the
"defined benefit plan fraction" and the "defined contribution
plan fraction" for the Participant exceeded 1.0 as of the end of
Limitation Year beginning in 1982, the Plan Administrator shall
make a determination as of the end of that Limitation Year and
subtract permanently from the numerator of the defined
contribution fraction an amount equal to the product of (i) the
excess of the sum of the two fractions over 1.0, times (ii) the
denominator of the defined contribution fraction.
(e) As an alternative to the foregoing, in determining
the limits of this Section, the Plan Administrator may use any
method permissible under Code section 415.
5.10 Suspension of Benefits:
----------------------
(a) If a Participant continues in the service (as
defined in subsection (c)) of the Employer or a Related Company
after reaching his Normal Retirement Date, his Pension will not
be paid until he actually retires. If a Participant retires or
terminates employment and begins receiving a Normal Retirement
Pension, Early Retirement Pension or Vested Pension and then
returns to the service (as defined in subsection (c)) of the
Employer or a Related Company, payment of his Pension will be
suspended until he again retires or terminates employment.
(b) Each Participant whose Pension is suspended
pursuant to subsection (a) shall be notified of the suspension.
The notification shall be made by personal delivery or first
class mail during the first calendar month or payroll period in
which the Participant's Pension is suspended. The notification
shall contain the following information (either expressly or by
reference to the Plan's summary plan description):
(i) A description of the specific reasons why
Pension payments are being suspended;
(ii) A general description and a copy of the
Plan provisions relating to the suspension of Pension
payments;
(iii) A statement that applicable Department of
Labor Regulations may be found in section 2530.203-3 of
the Code of Federal Regulations; and
(iv) A description of the Plan Administrator's
procedure for affording a review of the suspension of
benefits.
(c) A Participant's Pension may be suspended under
subsection (a) only if the Participant completes 40 or more hours
of service as defined in section 2530.200b-2 of the Department of
Labor Regulations (without regard to hours of service for which
17
<PAGE>
back pay is awarded or agreed to by the Employer or a Related
Company) during a calendar month period. Such a Participant will
be considered in the "service" of the Employer or a Related
Company for purposes of this Section. A Participant who does not
complete the requisite hours of service described above shall be
considered not to be in the service of the Employer or a Related
Company for purposes of this Section. The Pension of such a
Participant shall not be suspended as described in this Section.
(d) Payment of a Pension that has been suspended under
subsection (a) shall begin no later than the first day of the
third calendar month following the calendar month during which
the Participant terminates his service (as defined in subsection
(c) above) with the Employer or a Related Company. The first
payment shall include any benefits that were suspended during the
time between the date on which the Participant terminated his
service and the date on which his Pension commences.
(e) Following the procedure described in Section 7.6,
a Participant may request, and the Plan Administrator shall
render, a determination whether specific contemplated employment
will result in a suspension of benefits.
(f) The Pension payable at his subsequent retirement
to a Participant whose Pension has been suspended pursuant to
subsection (a) shall be equal to his Pension determined pursuant
to Section 5.1 or 5.2, taking into account his Benefit Service
and the benefit formula in effect as of the date he actually
retires.
(g) If the Participant received retirement benefits
before his reemployment, when he retires again, his benefit shall
be actuarially reduced to reflect the amount of the payments
before reemployment.
(h) If a Participant terminates employment on or after
his Normal Retirement Date and is reemployed by the Employer,
upon his subsequent retirement or termination of employment, his
Pension shall be his benefit determined pursuant to Section 5.1.
18
<PAGE>
SECTION VI
----------
FORMS OF RETIREMENT BENEFITS
----------------------------
6.1 Forms of Retirement Benefits:
----------------------------
(a) Qualified Joint and Survivor Annuity. Unless a
------------------------------------
Participant files a written rejection with the Administrator
before the end of the election period described in Section 6.2,
the form of Pension payable to a Participant whose Spouse is
living at the time the Pension becomes payable shall be a
Qualified Joint and Survivor Annuity. A Qualified Joint and
Survivor Annuity is an annuity payable for the lifetime of the
Participant, with a survivor annuity for the lifetime of his
surviving Spouse that is equal to 50% of the amount of the
annuity that is payable during the joint lifetimes of the
Participant and his Spouse. The annuity shall be the Actuarial
Equivalent of the Participant's Pension computed under Section V
of the Plan. If the Participant's Spouse dies after Pension
payments begin but before the Participant dies, the Pension will
continue to be paid to the Participant in the same amount that
was payable before the death of his Spouse.
(b) Five-Year Certain Annuity. Unless the Participant
-------------------------
elects an optional form of payment under subsection (c), the form
of Pension payable to a Participant who is unmarried at the time
his Pension becomes payable shall be a five-year certain and life
annuity with 60 monthly payments guaranteed in an amount equal to
the Participant's Pension computed under Section V.
(c) Optional Forms. A Participant who is eligible to
--------------
receive a Pension may elect not to receive his Pension in the
normal form described in subsection (a) or (b) and may elect,
instead, to receive his Pension in any form of annuity that
provides for payments continuing for the life of the Participant,
including one of the following forms:
(i) The Actuarial Equivalent of the Pension may
be paid in the form of a single life annuity, payable
in equal monthly amounts for the life of the
Participant.
(ii) The Actuarial Equivalent of the Pension
may be paid in the form of a joint and 100% survivor
annuity for the lives of the Participant and his
Spouse. Under this form of payment, the Participant
will receive reduced payments for his lifetime and,
after his death, a survivor annuity will be payable for
the lifetime of his Spouse equal to 100% of the amount
of the annuity payments that were payable to the
Participant. If the Participant's Spouse dies after
Pension payments begin but before the Participant dies,
the Pension shall continue to be paid to the
Participant in the same amount that was payable before
the death of his Spouse.
(iii) The Actuarial Equivalent of the Pension
may be paid in a five-year or ten-year certain and
continuous form. Under this form of payment, the
Participant will receive equal monthly installments for
his lifetime and, in the event of his death prior to
receipt of 60 or 120 payments, whichever is applicable,
payments will continue for the balance of such 60 or
120 payments to his Beneficiary.
Any optional form of annuity shall comply with Code
section 401(a)(9) and the regulations thereunder, including the
minimum distribution incidental benefit requirement of proposed
Regulations section 1.401(a)(9)-2.
19
<PAGE>
(d) Cash Outs and Small Pensions. The following rules
----------------------------
apply to payments of all Pensions under the Plan:
(i) Except as provided in subsection (d)(ii), if
the present value of a Pension payable under the Plan,
including Pensions payable to Beneficiaries, is $3,500
or less on the commencement date of the Participant's
or Beneficiary's benefit, the Actuarial Equivalent
present value shall be paid in a single-sum payment.
However, in the case of distributions to Participants
and Spouses, if the present value of a benefit has ever
exceeded $3,500, the Participant and his Spouse, if
any, must consent in writing to the distribution before
it may be made. Payment shall be made as soon as
practicable following the Participant's last day of
service or as soon as practicable after an election is
made by a Beneficiary.
(ii) Subsection (d)(i) shall not apply to payment
to a Participant of a Normal Retirement Pension or an
Early Retirement Pension or to payments to a surviving
Beneficiary under a Normal Retirement Pension or an
Early Retirement Pension.
(iii) If the Pension of a Participant or
Beneficiary would be less than $50 if paid on a monthly
basis, the Pension shall be paid in a single annual
payment. In the initial year of payment, a payment
shall be made in a single sum representing the period
from the commencement of payments until the end of that
calendar year. Subsequent payments shall be made in
January representing the benefit for the next twelve
months. In the year of the Participant's or
Beneficiary's death, the Plan shall not have a right to
recover any portion of the amount paid for that year.
This subsection (d)(iii) shall apply to Pensions that
become payable on or after August 1, 1993.
(iv) The interest rate used to determine the
present value of a Participant's Pension or the
Actuarial Equivalent under this Section 6.1(d) shall be
determined by using the "applicable interest rate" (as
defined below), if the Participant's Pension does not
exceed $25,000, and 120% of the "applicable interest
rate" if the retirement benefit exceeds $25,000. From
July 1, 1993 to June 30, 1994, the "applicable interest
rate" is the lesser of (A) the interest rate that would
be used by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of a lump sum
distribution on Plan terminations as of the first day
of the Plan Year in which the distribution occurs or
(B) such interest rate as of the date of the
distribution. After June 30, 1994, the "applicable
interest rate" is the interest rate as of the first day
of the Plan Year in which the distribution occurs that
would be used by the Pension Benefit Guaranty
Corporation for purposes of determining the present
value of a lump sum distribution on Plan terminations.
The interest rate for purposes of this Section shall be
determined in accordance with Code section 411(a)(11).
(e) Payments after Death. The following rules apply
---------------------
to payments after a Participant's death:
(i) If a Participant dies after payments have
begun, then his Pension must be paid to his Beneficiary
at least as rapidly as under the method of distribution
elected by the Participant; and
20
<PAGE>
(ii) If a Participant dies before his Pension
has begun to be paid, then, except as provided below,
his Pension must be distributed within five years after
the Participant's death. If the Participant's Pension
is paid in annuity payments to (or for the benefit of)
an individual Beneficiary, then the Participant's
Pension may be paid over the life of the Beneficiary or
over a period not extending beyond the Beneficiary's
life expectancy, and the payments must begin not later
than one year after the Participant's death (or such
other date as may be prescribed by Treasury Department
regulations such as provisions postponing payments to
surviving Spouses).
(iii) A married Participant may make a written
election to permit his surviving Spouse to elect any
form of benefit permitted under Section 6.1(c). This
election by a surviving Spouse shall only be effective
if the Participant dies before beginning to receive
benefits. The benefit payable to the Surviving Spouse
shall be the Actuarial Equivalent of the survivor
portion of the Qualified Pre-retirement Survivor
Annuity or the Qualified Joint and Survivor Annuity.
6.2 Elections: Qualified Joint and Survivor Annuity,
-------------------------------------------------
Qualified Pre-Retirement Survivor Annuity, and Five-Year Certain
- ----------------------------------------------------------------
and Life Annuity: Sections 5.5 and 6.1 provide that the normal
- ----------------
form of Pension payable upon the retirement, termination of
employment or death of a married Participant will be a Qualified
Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor
Annuity, unless the Participant rejects that form of payment,
with the consent of his Spouse. Section 6.1(b) provides that the
normal form of benefits payable upon retirement or termination of
employment of an unmarried Participant will be a five-year
certain and life annuity, unless the Participant rejects that
form of payment. A Participant who rejects the Qualified Joint
and Survivor Annuity or the five-year certain and life annuity
must elect one of the other forms of payment that are permitted
under Section 6.1. In order to reject the Qualified Joint and
Survivor Annuity, the Qualified Pre-Retirement Survivor Annuity
or the five-year certain and life annuity, the Participant and
his Spouse, if any, must execute a written election in the manner
and form described below:
(a) Notice to Participants. The Administrator shall
----------------------
provide a written explanation to each Participant of (i) the
terms and conditions of the Qualified Joint and Survivor Annuity,
single life annuity, or the Qualified Pre-Retirement Survivor
Annuity, whichever is applicable, (ii) the Participant's right to
make and revoke elections under this Section and the method by
which he may do so, (iii) the effect of such an election or
rejection on the Participant's retirement benefits, and (iv) the
rights of the Participant's Spouse regarding the election. The
written explanation of the Qualified Pre-Retirement Survivor
Annuity will be provided before the latest of the following
periods:
(i) The period beginning with the first day of
the Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year preceding
the Plan Year in which the Participant attains age 35,
(ii) A reasonable period after the individual
becomes a Participant,
(iii) A reasonable period after the provisions
of Code section 401(a)(11) apply, or
21
<PAGE>
(iv) A reasonable period after separation from
service in the case of a Participant who separates from
service before attaining age 35.
The written explanation of the Qualified Joint and Survivor
Annuity and five-year certain and life annuity will be provided
within a reasonable period of time before the commencement of the
election period set forth in paragraph (b)(i).
(b) Election Periods. The election periods shall be
----------------
established as follows:
(i) The period during which a Participant may
elect not to receive the Qualified Joint and Survivor
Annuity or five-year certain and life annuity shall be
the period beginning 90 days before the date on which
his Pension begins to be paid (the "annuity starting
date") and ending on the annuity starting date.
(ii) The period during which a Participant may
elect not to receive the Qualified Pre-Retirement
Survivor Annuity shall be the period beginning on the
first day of the Plan Year during which the Participant
attains age 35 and ending on the date of the
Participant's death. However, if a Participant
terminates employment before age 35, his election
period shall begin on his termination date.
Each of the elections described in this paragraph (b)
may be made or revoked by the Participant with his Spouse's
consent at any time during the applicable election period;
however, spousal consent to an election shall be irrevocable
after it has been given.
(c) Manner of Making Election. The Administrator
-------------------------
shall provide suitable forms and shall establish reasonable
procedures for the making of elections. In order to be valid, an
election or revocation of an election (i) must be signed by the
Participant and his Spouse, if any, (ii) must designate a
specific alternate Beneficiary or form of benefits that cannot be
changed without the Spouse's consent, (iii) must acknowledge the
effect of the election or revocation, and (iv) must be notarized
or witnessed by the Administrator (or a person authorized by the
Administrator). If it is established, to the satisfaction of the
Administrator, that the Spouse cannot be located or is otherwise
unable to sign, the Spouse's signature shall not be required.
Any consent by a Spouse (or establishment that such consent
cannot be obtained) under the foregoing provisions shall be
effective only with respect to that Spouse. The Administrator
may require a married Participant or his Spouse to supply such
information as the Administrator deems necessary to verify the
Participant's marital status and the identification of the
Participant's Spouse. The Beneficiary or form of benefits
designated in an election cannot be changed without the consent
of the Spouse, unless the Spouse's consent expressly permits the
Participant to make other designations.
6.3 Location of Missing Participants: If a Participant who
--------------------------------
is entitled to a distribution cannot be located and the Plan
Administrator has made reasonable efforts to locate the
Participant, then the Participant's vested interest shall be
forfeited. The Plan Administrator will be deemed to have made
reasonable efforts to locate the Participant (or, in the case of
a deceased Participant, his Beneficiary) after having made two
successive certified or similar mailings to the last address on
file with the Plan Administrator. The Participant's Accrued
Benefit shall be forfeited as of the last day of the Plan Year in
which occurs the close of the 12 consecutive calendar month
period following the last of the two successive mailings. If the
Participant or his Beneficiary makes a written claim for the
22
<PAGE>
vested interest after it has been forfeited, the Employer shall
cause the vested interest to be reinstated.
6.4 Benefits to Minors and Incompetents:
-----------------------------------
(a) If any person entitled to receive payment under
the Plan is a minor, the Plan Administrator may pay the amount in
a lump sum directly to the minor, or to a guardian of the minor
or to a custodian selected by the Trustee under the appropriate
Uniform Transfers to Minors Act.
(b) If a person who is entitled to receive payment
under the Plan is physically or mentally incapable of personally
receiving and giving a valid receipt for any payment due (unless
a previous claim has been made by a duly qualified committee or
other legal representative), the payment may be made to the
person's Spouse, son, daughter, parent, brother, sister or other
person deemed by the Plan Administrator to have incurred expense
for the person otherwise entitled to payment.
6.5 Eligible Rollover Distributions:
-------------------------------
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election
under this Section, a distributee may elect, at the time and in
the manner prescribed by the Plan Administrative Committee, to
have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(b) Definitions.
-----------
(i) Eligible rollover distribution: An eligible
------------------------------
rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated
Beneficiary, or for a specified period of ten years or more;
any distribution to the extent such distribution is required
under Code section 401(a)(9); and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to Employer
securities). Only distributions under Section 6.1(d) of the
Plan qualify as eligible rollover distributions.
(ii) Eligible retirement plan: An eligible
------------------------
retirement plan is an individual retirement account
described in Code section 408(a), an individual retirement
annuity described in Code section 408(b), an annuity plan
described in Code section 403(a), or a qualified trust
described in Code section 401(a), that accepts the
distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(iii) Distributee: A distributee includes an
-----------
Employee or former Employee. In addition, the Employee's or
former Employee's surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the
alternate payee under a qualified domestic relations order,
as defined in Code section 414(p), are distributees with
regard to the interest of the Spouse or former Spouse.
(iv) Direct rollover: A direct rollover is a
---------------
payment by the Plan to the eligible retirement plan
specified by the distributee.
23
<PAGE>
SECTION VII
-----------
ADMINISTRATION
--------------
7.1 Plan Administrator:
------------------
(a) The Plan Administrator shall have the
responsibility for administering the Plan and carrying out its
provisions. The Plan Administrator may delegate any or all of
its duties, powers, and responsibilities with respect to the
Plan, to an administrative committee (designated the Plan
Administrative Committee), which shall consist of not fewer than
three persons and which shall be appointed by the Plan
Administrator. Any member of the Plan Administrative Committee
may be removed and new members may be appointed by the Plan
Administrator at any time.
(b) Any person appointed to be a member of the Plan
Administrative Committee shall give his acceptance in writing to
the Plan Administrator. Any member of the Plan Administrative
Committee may resign by delivering his written resignation to the
Plan Administrator, and such resignation shall become effective
upon such delivery or upon any date specified therein.
(c) The Plan Administrative Committee may delegate any
or all of its duties, powers, and responsibilities to one or more
individuals or subcommittees, whose members may or may not be
members of the Plan Administrative Committee.
7.2 Responsibilities: The Plan Administrator shall have
----------------
the responsibility to take all action and to make all decisions
necessary or proper to carry out the Plan. The determination of
the Plan Administrator as to any question involving the general
administration and interpretation of the Plan shall be final,
conclusive and binding. Any discretionary actions to be taken
under the Plan by the Plan Administrator with respect to the
classification of Employees, Participants, Beneficiaries,
contributions, or benefits shall be uniform in nature and
applicable to all persons similarly situated. Without limiting
the generality of the foregoing, the Plan Administrator shall
have the following express discretionary powers and duties:
(a) To require any person to furnish such information
as it may request for the purpose of the proper administration of
the Plan as a condition of receiving any benefits under the Plan;
(b) To make and enforce such rules and regulations and
prescribe the use of such forms as it shall deem necessary for
the efficient administration of the Plan;
(c) To interpret the Plan, and to resolve any
ambiguity, inconsistency or omission;
(d) To decide questions concerning the Plan and the
eligibility of any Employee to become a Participant in the Plan,
in accordance with the provisions of the Plan;
(e) To decide the amount of benefits that shall be
payable to any person in accordance with the provisions of the
Plan; and
(f) Subject to the provisions of the Plan and Trust
Agreement, to determine the manner in which the funds of the Plan
shall be disbursed.
7.3 Delegation of Duties:
--------------------
(a) The Plan Administrator shall engage an actuary to
make valuations of the liabilities under the Plan, to recommend
to it the mortality or other tables and the interest rates to be
24
<PAGE>
used from time to time in actuarial and other computations for
purposes of the Plan, to compute the amounts of contributions to
be made by the Employer in order to satisfy the funding policy
established for the Plan, and to perform such other services as
the Plan Administrator shall deem necessary or advisable in
connection with the administration of the Plan. The Plan
Administrator may employ counsel and agents and such clerical,
medical and accounting services as it may require in carrying out
the provisions of the Plan.
(b) To the extent permitted by law, the Plan
Administrator and any person to whom it may delegate any duty or
power in connection with the Plan and the Employer and its
officers and directors shall be entitled to rely conclusively
upon, and shall be fully protected in any action taken or
suffered by them in good faith in the reliance upon, any actuary,
counsel, accountant, other specialist or other person selected by
the Plan Administrator, or in reliance upon any tables,
valuations, certificates, opinions or reports that shall be
furnished by any of them or by the Trustee. To the extent
permitted by law, no member of the Plan Administrative Committee
or any subcommittee, nor the Employer or its officers and
directors, shall be liable for any neglect, omission or
wrongdoing of the Trustee or of any other person to whom powers,
duties or responsibilities with respect to the Plan have been
delegated.
(c) The Plan Administrator may authorize one or more
persons to make any payment in its behalf, or to execute or
deliver any instrument.
7.4 Expenses: All expenses incurred before termination of
--------
the Plan that shall arise in connection with the administration
of the Plan, including, but not limited to, the compensation of
the Trustee, administrative expenses and other proper charges and
disbursements of the Trustee and compensation and other expenses
and charges of any actuary, counsel, accountant, specialist or
other person who shall be employed by the Plan Administrator in
connection with the administration thereof, shall be paid by and
charged against the Trust Fund unless paid by the Employer or the
Plan Administrator. Any such payments from the Trust Fund shall
be deemed to be for the exclusive benefit of Participants.
7.5 Compensation: Unless otherwise agreed to by the Plan
------------
Administrator, the members of the Plan Administrative Committee
and any subcommittee shall serve without compensation for
services as such, but all reasonable expenses incurred in the
performance of their duties shall be paid from the Trust Fund.
Unless otherwise determined by the Plan Administrator or required
by law, no officer of the Plan Administrator and no member of the
Plan Administrative Committee or any subcommittee shall be
required to give any bond or other security in any jurisdiction.
7.6 Benefit Claims Procedure:
------------------------
(a) If any person makes a claim regarding the amount
of any distribution or its method of payment, such person shall
present the reason for the claim in writing to the Plan
Administrator. The Plan Administrator, in its discretion, may
request a meeting to clarify any matters that it deems pertinent.
A claimant who is denied a claim will, within 90 days of the Plan
Administrator's receipt of the claim, be given notice by the Plan
Administrator that describes:
(i) The specific reason or reasons for the
denial;
(ii) The specific reference to the Plan
provisions on which the denial is based;
25
<PAGE>
(iii) A list of additional material or
information (if any) that is necessary for the claimant
to perfect the claim, with an explanation of why the
additional information is needed;
(iv) An explanation of the Plan's claim review
procedure; and
(v) An explanation that the claimant may
request a review of his claim denial by the Plan
Administrator by filing a written request with the Plan
Administrator not more than 60 days after receiving
written notice of the denial and that the claimant, or
his representative, before such review, may review
pertinent documents and submit issues and comments in
writing.
The 90-day period may be extended to 180 days if special
circumstances require such an extension and the claimant is
notified of the extension within 90 days of the Plan
Administrator's receipt of the claim.
(b) If a review of the initial denial is requested and
the claim is again denied, the Plan Administrator shall again
give written notice within 60 days of its decision to deny the
claim to the claimant setting forth items (i) and (ii) above.
However, the 60-day period may be extended to 120 days if special
circumstances require such an extension and the claimant is
notified of the extension within 60 days of the Plan
Administrator's receipt of the request for review. All final
interpretations, determinations and decisions of the Plan
Administrator with respect to any matter hereunder shall be
conclusive and binding upon the Employer, Participants,
Employees, and all other persons claiming interest under the
Plan, except as otherwise provided by ERISA.
7.7 Domestic Relations Orders.
-------------------------
(a) If the Trustee or Plan Administrator receives an
order that purports to require the payment of benefits to a
person other than the Participant, the Plan Administrator shall
take the following steps:
(i) If the benefits are in pay status, the Plan
Administrator shall direct the Trustee to account
separately for the amounts that would be payable to the
Alternate Payee (defined below) if the order were to be
determined to be a Qualified Domestic Relations Order
(as defined below);
(ii) The Plan Administrator shall promptly
notify the named Participant and any Alternate Payees
of the receipt of the domestic relations order and of
the Plan Administrator's procedures for determining if
the order is a Qualified Domestic Relations Order;
(iii) The Plan Administrator shall determine
whether the order is a Qualified Domestic Relations
Order under the provision of Code section 414(p); and
(iv) The Plan Administrator shall notify the
named Participant and any Alternate Payees of its
determination as to whether the order meets the
requirements of a Qualified Domestic Relations Order.
(b) If, within 18 months beginning on the date the
first payment would be made under the domestic relations order
(the "18-Month Period"), the order is determined to be a
Qualified Domestic Relations Order, the Plan Administrator shall
direct the Trustee to pay the specified amounts to the persons
entitled to receive the amounts pursuant to the order.
26
<PAGE>
(c) If, within the 18-Month Period, (i) the order is
determined not to be a Qualified Domestic Relations Order, or
(ii) the issue as to whether the order is a Qualified Domestic
Relations Order has not been resolved, the Plan Administrator
shall direct the Trustee to pay the amounts (and any interest
thereon) to the Participant or other person who would have been
entitled to such amounts if there had been no order.
(d) If an order is determined to be a Qualified
Domestic Relations Order after the close of the 18-Month Period,
the determination shall be applied prospectively only.
(e) A Qualified Domestic Relations Order may not
require any payment to an Alternate Payee before payment would
otherwise be made to the Participant under the Plan, except as
provided in Code section 414(p)(4) or as provided in subsection
(g).
(f) For the purposes of this Section, the following
terms shall have the following definitions:
Alternate Payee - Any Spouse, former Spouse, child or
---------------
other dependent of a Participant who is recognized by a
Qualified Domestic Relations Order as having a right to all
or a portion of the benefits payable under the Plan to the
Participant.
Qualified Domestic Relations Order - Any domestic
----------------------------------
relations order or judgment that meets the requirements set
forth in Code section 414(p).
(g) This provision shall apply to orders received
after the Merger Date. If the present value of payments payable
to an Alternate Payee under a Qualified Domestic Relations Order
is $3,500 or less on the date of receipt of the order, the
Actuarial Equivalent present value of the payments shall be paid
to the Alternate Payee in a single-sum payment. The interest
rate used to determine the present value shall be determined as
provided in Section 6.1(d)(iv). Payment shall be made as soon as
practicable following the determination that the order is a
Qualified Domestic Relations Order.
(h) Any order determined to be a Qualified Domestic
Relations Order under a Prior Plan shall be honored under this
Plan in accordance with the terms of the order.
27
<PAGE>
SECTION VIII
------------
DUTIES AND POWERS OF THE TRUSTEE
--------------------------------
8.1 General: The Trustee shall receive, hold, manage,
-------
convert, sell, exchange, invest, disburse and otherwise deal with
such contributions as may from time to time be made to the Trust
Fund and the income and profits therefrom, in the manner and for
the uses and purposes of the Plan as provided in the Plan and in
the trust agreement described in Section 8.2. If an Investment
Manager is appointed, the Investment Manager shall manage all or
a portion of the assets of the Trust in accordance with
instructions given by the Plan Administrator.
8.2 Trust Agreement: The Plan Administrator has entered
---------------
into a trust agreement with the Trustee under which the Trustee
will receive, invest and administer the Trust Fund. The trust
agreement is incorporated by reference as a part of the Plan, and
the rights of all persons under the Plan are subject to the terms
of the trust agreement. The trust agreement provides for the
investment and reinvestment of the Trust Fund, the management of
the Trust Fund, the responsibilities and immunities of the
Trustee, the resignation or removal of the Trustee and
appointment of a successor, the accounting by the Trustee and the
disbursement of the Trust Fund.
8.3 Limitation of Liability: The Trustee shall hold in
-----------------------
trust and administer the Trust Fund subject to all the terms and
conditions of this Plan and of the trust agreement described in
Section 8.2. The Trustee shall not be responsible for the
administration of the Plan unless employed by the Plan
Administrator to serve in such capacity. The Trustee's
responsibility shall be limited to holding, investing and
reinvesting the assets of the Trust Fund from time to time in its
possession or under its control as Trustee and to disbursing
funds as shall be directed by the Plan Administrator. The
Trustee shall not be responsible for the correctness of any
payment or disbursement or action if made in accordance with the
instructions of the Plan Administrator. If an Investment Manager
is appointed, the Trustee's liability and responsibility with
regard to holding, investing and reinvesting the assets shall be
limited as provided in the trust agreement.
8.4 Power of Trustee to Carry Out the Plan: If, at any
--------------------------------------
time, the Employer, the Plan Administrative Committee or the Plan
Administrator shall be incapable, for any reason, of giving
directions, instructions or authorizations to the Trustee, as
herein provided, the Trustee may act, without such directions,
instructions or authorizations, as it, in its discretion, shall
deem appropriate and advisable under the circumstances for
carrying out the provisions of the Plan.
28
<PAGE>
SECTION IX
----------
SPECIAL PROVISION TO PREVENT DISCRIMINATION
-------------------------------------------
9.1 General: This Section shall apply to Plan Years
-------
beginning before January 1, 1994. A Participant shall be subject
to the limitations of this Section if his anticipated annual
Pension under the Plan exceeds $1,500 and if he is or was among
the 25 highest paid Employees of the Employer or a Related
Company as of the later of the Effective Date of the adoption of
the Plan by the Employer, or the date of any amendment that
substantially increased Pension benefits payable under the Plan
(referred to as a "substantive amendment date") for such a
Participant. The limitations set forth in this Section shall
become applicable if:
(a) The Plan is terminated within ten years after the
Effective Date of the Employer's adoption of the Plan or, if
applicable, within ten years after a substantive amendment date
(referred to as a "Limitation Period");
(b) The Pension of such a Participant becomes payable
within an applicable Limitation Period; or
(c) The Pension of such a Participant becomes payable
after the Limitation Period, and the full current costs of the
Plan (as defined in Regulations section 1.404(a)-6) for the
Limitation Period have not been funded.
If subparagraph (b) is applicable, the restrictions shall remain
in effect until the expiration of the Limitation Period, and then
shall cease to apply if the full current costs have been funded
at such time. If subparagraph (b) or (c) is applicable, and the
full current costs are not funded at the end of the Limitation
Period, the restrictions shall continue to apply until the full
current costs are funded for the first time.
9.2 Restrictions: Except as provided in Section 9.4, if a
------------
Participant is subject to the provisions of Section 9.1, the
Pension payable to him from Employer contributions shall not
exceed the Pension that can be provided from the greater of (a)
or (b), as follows:
(a) An amount equal to the greatest of the following:
(i) Employer contributions (or funds attributable
to Employer contributions) that would have been applied
to provide benefits for the Participant if the Plan had
not been amended on the applicable substantive
amendment date and had continued without change;
(ii) $20,000; or
(iii) The sum of (x) the Employer contributions
(or funds attributable to Employer contributions) that
would have been applied to provide the Participant's
Accrued Benefit under the Plan as in effect on the day
before the applicable substantive amendment date, and
(y) an amount computed by multiplying the number of
years for which the current costs of the Plan have been
met after either--
(A) the effective date of the Employer's
adoption of the Plan, or
(B) the applicable substantive amendment
date,
29
<PAGE>
by 20% of the first $50,000 of the Participant's
average annual compensation during his last five years
of employment; or
(b) A dollar amount that is equal to the present value
of the benefit guaranteed under ERISA section 4022 for the
Participant, or, if the Plan has not terminated, a dollar amount
that is equal to the present value of the benefit that would be
guaranteed if the Plan terminated on the date the benefit
commences, determined in accordance with regulations of the
Pension Benefit Guaranty Corporation.
9.3 Restrictions on Benefits to Highly Compensated
----------------------------------------------
Employees:
- ---------
(a) This Section shall apply to Plan Years beginning
on or after January 1, 1994. In the event of termination of the
Plan, the Pension payable to any highly compensated employee (as
defined in Code section 414(q)) or highly compensated former
employee (as defined in Code section 414(q)(9)) shall be limited
to a Pension that is nondiscriminatory under Code section
401(a)(4) and the regulations thereunder.
(b) Notwithstanding any other provision of the Plan to
the contrary, the annual payments to a Participant in the
Restricted Group (as defined below) shall not exceed an amount
equal in each year to the payments that would be made to the
Participant under (i) a straight life annuity that is the
Actuarial Equivalent of the Accrued Benefit and other benefits
(as defined in Regulations section 1.401(a)(4)-5(b)(3)(iii)) that
the Participant is entitled to under the Plan (other than a
social security supplement), and (ii) the amount of any social
security supplement payable to the Participant under the Plan.
(c) Subsection (b) shall not apply if any of the
following requirements are satisfied:
(i) After payment to the Participant of all
benefits under the Plan, the value of Plan assets
equals or exceeds 110% of the value of current
liabilities, as defined in Code section 412(1)(7);
(ii) The value of the benefits payable to the
Participant is less than 1% of the value of the Plan's
current liabilities before the payment; or
(iii) The value of the benefits payable to the
Participant does not exceed the amount described in
Code section 411(a)(11)(A).
(d) For purposes of this Section, the term "Restricted
Group" shall mean the group of highly compensated employees (as
defined in Code section 414(q) and highly compensated former
employees (as defined in Code section 414(q)(9)). If there are
more than 25 individuals in this group, the Restricted Group
shall be limited to the 25 individuals with the greatest Earnings
in the current or any prior year.
9.4 Restrictions for a Substantial Owner: If a Participant
------------------------------------
is a "Substantial Owner" (as described in ERISA section
4022(b)(5)) and is subject to the provisions of Section 9.1 or
Section 9.3, the Pension payable to him from Employer
contributions shall not exceed a Pension that can be provided
from the greater of (a) or (b), as follows:
(a) The amount that is determined under Section 9.2(a)
or Section 9.3 above, whichever is applicable; or
(b) A dollar amount that is equal to the present value
of the maximum benefit described in ERISA section 4022(b)(3),
30
<PAGE>
determined without regard to any other limitations under ERISA
section 4022. The amount under this subsection shall be
determined as of the earlier of (i) the date the Plan terminates,
or (ii) the date as of which benefit payments commence, and in
accordance with regulations issued by the Pension Benefit
Guaranty Corporation.
9.5 Exceptions: The limitation in Section 9.4 may be
----------
exceeded for the purpose of making current benefit payments to
Participants who would otherwise be subject to such restrictions,
provided that:
(a) The contributions which may be used for any such
Participant in accordance with the restrictions of this Section
are applied to provide either a level amount of Pension in the
normal form of benefit provided for under the Plan for the
Participant, or a level amount of Pension in an optional form of
benefit;
(b) The Pension so provided is supplemented by monthly
payments to the extent necessary to provide the full Pension in
the normal form provided for by the Plan; and
(c) The supplemental payments are made only if the
full current costs of the Plan have been met or if the aggregate
of the supplemental payments for all such retired Participants
does not exceed the aggregate of the Employer contributions
already made under the Plan in the current year.
9.6 Automatic Repeal: The limitations in Section 9.1 shall
----------------
automatically become inoperative and of no effect at the end of
the time period determined under Section 9.1, or if sooner, upon
a ruling by the Internal Revenue Service that such provisions are
not required.
31
<PAGE>
SECTION X
---------
AMENDMENT AND TERMINATION
-------------------------
10.1 Amendment: This Plan shall be irrevocable and binding
---------
as to all contributions made by the Employer to the Trust, but
this Plan may be amended from time to time by the Company. No
amendment shall be made to the Plan that (a) would prevent the
allowance as a deduction for Federal income tax purposes, and
particularly under Code section 404, of any contribution made by
the Employer to the Trust, (b) would take the Plan and Trust out
of the scope of Code sections 401, 402 and 501(a), (c) would
increase the duties of the Trustee without its consent, or (d)
would eliminate an optional form of benefit in violation of Code
section 411(d)(6). No part of the Trust Fund shall be diverted
to or used for any purpose other than for the exclusive benefit
of Participants and Beneficiaries under the Plan, except as
provided in Sections 3.4 or 10.7.
10.2 Right to Terminate: The Company may, by resolution of
------------------
its Board of Directors, at any time terminate the Plan. In the
event that the Company shall cease to exist, the Plan shall be
terminated, unless a successor organization adopts the Plan and
thereby continues participation.
10.3 Merger: In the event of merger or consolidation with,
------
or transfer of assets or liabilities to, any other plan, each
Participant shall be entitled to a benefit under such other plan
immediately after the merger, consolidation, or transfer that is
equal to or greater than his Accrued Benefit determined under
this Plan immediately before the merger, consolidation or
transfer.
10.4 Liquidation of Trust Fund:
-------------------------
(a) Upon termination or partial termination of the
Plan, each affected Participant's Accrued Benefit shall become
fully vested and nonforfeitable; provided, however, that a
Participant shall not have any recourse towards satisfaction of
his nonforfeitable benefits from other than the Plan assets or
the Pension Benefit Guaranty Corporation.
(b) The assets of the Trust Fund shall be liquidated
by first making provision for the expenses of liquidation and
second, by making payment or provision for the payment of
benefits as described in Section 10.5.
(c) In the event of a termination or partial
termination of the Plan, the notice and other requirements of
ERISA shall apply.
10.5 Allocation of Trust Assets Upon Plan Termination: The
------------------------------------------------
assets of the Trust Fund available for the payment of benefits as
determined in Section 10.4 shall be allocated in accordance with
ERISA Section 4044, to the extent the assets are available to
provide benefits to Participants and their Beneficiaries.
10.6 Manner of Distribution: Any distribution after
----------------------
termination of the Plan shall be made in the form and manner
provided under the Plan.
10.7 Residual Amounts: Upon termination of the Plan and
----------------
notwithstanding any other provision of the Plan, the Employer may
receive such amount, if any, as may be attributable to its
contributions and as may remain after the satisfaction of all
liabilities of the Plan to Participants.
32
<PAGE>
SECTION XI
----------
ADOPTION OF THE PLAN BY RELATED COMPANIES
-----------------------------------------
11.1 Adoption of the Plan: A Related Company may become an
--------------------
Employer with the approval of the Plan Administrator by adopting
the Plan for its Employees. A Related Company that becomes a
party to the Plan shall promptly deliver to the Trustee a
certified copy of the resolutions or other documents evidencing
its adoption of the Plan. Notwithstanding anything in the Plan
to the contrary, a Related Company adopting the Plan may
determine whether and to what extent periods of employment with
the Related Company before the Related Company adopted the Plan
shall be included as service under the Plan.
11.2 Withdrawal: A Related Company may withdraw from the
----------
Plan at any time by giving advance notice in writing of its
intention to withdraw to the Plan Administrator. Upon the
receipt of notice of any such withdrawal, the Plan Administrator
shall certify to the Trustee the equitable share of the
withdrawing Related Company in the Trust Fund, and the Trustee
shall thereupon set aside from the Trust Fund such securities and
other property as it shall, in its sole discretion, deem to be
equal in value to the Related Company's equitable share. If the
Plan is to be terminated with respect to the Related Company, the
amount set aside shall be administered according to Section 10.4.
If the Plan is not to be terminated with respect to the Related
Company, the Trustee shall turn over the Related Company's
equitable share to a trustee designated by the Related Company,
and the securities and other property shall thereafter be held
and invested as a separate trust of the Related Company and shall
be used and applied according to the terms of a new trust
agreement between the Related Company and the trustee so
designated. Neither the segregation of the Trust Fund assets
upon the withdrawal of a Related Company, nor the execution of a
new trust agreement shall operate to permit any part of the
corpus or income of the Trust Fund to be used for or diverted to
purposes other than for the exclusive benefit of Participants and
Beneficiaries.
11.3 Sale of Employer or Business Unit: If the stock or
---------------------------------
assets of an Employer or a subsidiary or a business unit of an
Employer are sold, the Accrued Benefits of Plan Participants who
are Employees of the affected Employer, subsidiary or business
unit may be transferred to a tax-qualified retirement plan of the
purchaser. If such a transfer is made, an amount equal to the
present value of the Accrued Benefits of the affected Plan
Participants shall be transferred to a tax-qualified retirement
plan of the purchaser, and the affected Plan Participants shall
no longer be entitled to any benefits under this Plan. The
transfer of assets shall be in full satisfaction of this Plan's
obligation to provide benefits to the affected Participants and
their Beneficiaries.
33
<PAGE>
SECTION XII
-----------
TOP HEAVY
---------
12.1 Top Heavy: If the Plan is Top Heavy for any Plan
---------
Year, then the provisions of this Section shall apply,
notwithstanding anything in the Plan to the contrary. The Plan
Administrator will determine whether the Plan is Top Heavy. The
determination of Top Heavy status shall be made as follows:
(a) The Plan and any other plan maintained by the
Employer will be Top Heavy if the sum of the present value of the
Accrued Benefits and the account balances of Key Employees
exceeds 60% of the sum of the present value of the Accrued
Benefits and the account balances of all Employees, former
Employees (except for former Employees who perform no services
for the Employer for the five-year period ending on the
determination date) and Beneficiaries in the plans. The deter-
mination whether this Plan is Top Heavy for a Plan Year shall be
made as of the last day of the immediately preceding Plan Year,
or in the case of the first Plan Year, the last day of such year.
The determination shall be made in accordance with Code section
416(g). If the Employer and Related Companies maintain more than
one plan qualified under Code section 401(a), then (i) each such
plan in which a Key Employee is a participant, and (ii) each such
plan that must be taken into account in order for a plan
described in the preceding clause to meet the requirements of
Code section 401(a)(4) or 410 shall be aggregated with this Plan
to determine whether the plans, as a group, are Top Heavy. For
purposes of the preceding sentence, a Plan includes a terminated
plan which was maintained by the Employer within the last five
years ending on the determination date and would otherwise be
required to be aggregated with this Plan. The Employer and
Related Companies may, in their discretion, aggregate any other
qualified plans with this Plan to the extent that such
aggregation is permitted by Code section 416(g). The Plan
Administrator shall determine whether this Plan is Top Heavy.
(b) A Key Employee is an Employee, former Employee, or
Beneficiary who, at any time during the Plan Year or during any
of the four preceding Plan Years, is or was (i) an officer of the
Employer or a Related Company whose annual Section 415
Compensation from the Employer and Related Companies exceeds 50%
of the amount in effect under Code section 415(b)(1)(A) for the
Plan Year, (ii) one of the ten Employees who own (or are
considered as owning, within the meaning of Code section 318) at
least 0.5% and the largest interests in the Employer or a Related
Company and whose annual Section 415 Compensation from the
Employer and Related Companies exceeds $30,000 (or the amount in
effect under Code section 415(c)(1)(A) for the Plan Year), (iii)
a 5% Owner, or (iv) a 1% owner of the Employer or a Related
Company whose annual Section 415 Compensation exceeds $150,000.
"Key Employee" shall also include the Beneficiary of a deceased
Key Employee, as described above. The determination of Key
Employee status shall be made in accordance with Code section
416(i), and the number of persons who are considered Key
Employees shall be limited as provided under that Section. A
"non-Key Employee" is an Employee or former Employee who is not a
Key Employee.
12.2 Minimum Accrued Benefit: If the Plan is Top Heavy, a
-----------------------
minimum Accrued Benefit will be provided for each Participant who
is not a Key Employee and whose employment is not covered by a
collective bargaining agreement under which retirement benefits
are the subject of good faith bargaining. The minimum Accrued
Benefit for each Participant will be at least equal to an annual
benefit for the Participant's lifetime, commencing at his Normal
Retirement Date, equal to the lesser of (a) 2% of the
Participant's average Section 415 Compensation for the five
consecutive Plan Years in which the Participant has the highest
34
<PAGE>
aggregate Section 415 Compensation, multiplied by the
Participant's years of Benefit Service described below, or (b)
20% of the Participant's average Section 415 Compensation for the
five consecutive Plan Years in which the Participant has the
highest aggregate Section 415 Compensation. For purposes of this
Section, years of Benefit Service shall mean Plan Years during
which the Participant performs at least 1,000 Hours of Service;
provided that years of Benefit Service shall not include years of
Benefit Service in which ends a Plan Year for which this Plan is
not Top Heavy. For purposes of determining Section 415
Compensation, compensation earned in Plan Years after the close
of the last Plan Year in which the Plan is Top Heavy shall be
disregarded and, unless the Administrator directs otherwise,
compensation earned in Plan Years beginning before January 1,
1984 shall be disregarded.
12.3 Vesting of Accrued Benefits: If the Plan is Top
---------------------------
Heavy, with respect to Participants whose employment is not
covered by a collective bargaining agreement under which
retirement benefits are the subject of good faith bargaining, the
following vesting schedule shall be substituted for the vesting
schedule described in Section 4.1:
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years or more 100%
This change in the vesting schedule shall apply to those
Participants who perform an Hour of Service on or after the first
day of the first Plan Year in which the Plan is Top Heavy. If
the Plan becomes Top Heavy and then ceases to be Top Heavy, all
Participants who have then completed at least three years of
Vesting Service (whether or not consecutive) shall be given the
option of having the nonforfeitable percentage of their Accrued
Benefit computed under the Top Heavy vesting schedule, and the
vesting of Section 4.1 shall apply to all other Participants.
However, no Participant's vested interest in his Accrued Benefit
may be reduced as a result of the change in vesting.
12.4 Benefit and Contribution Limitations: For any Plan
------------------------------------
Year in which the Plan is Top Heavy, the 1.25 amount described in
Section 5.9 of this Plan shall be changed to 1.0 unless:
(a) The sum of the present value of accrued benefits
and account balances of Key Employees under all plans aggregated
pursuant to Section 12.1 does not exceed 90% of the sum of the
total present value of accrued benefits and account balances of
all Employees, former Employees and Beneficiaries in the plans;
and
(b) The minimum benefit described in Section 12.2 is
increased to the amount required by Code section 416(h).
35
<PAGE>
SECTION XIII
------------
PROVISIONS RELATING TO FORMER PARTICIPANTS
------------------------------------------
OF THE TEXAS EASTERN RETIREMENT PLAN
------------------------------------
The following provisions are applicable to Participants in
the Plan who were formerly participants in the Texas Eastern
Retirement Plan (the "TER Plan"). These participants are
referred as "Former Texas Eastern Employees."
13.1 Accrued Benefit: Section 1.1 of the Plan is modified
---------------
to provide that a Participant's Accrued Benefit is equal to the
greater of (a) the Participant's Accrued Benefit determined under
the Plan or (b) the Participant's accrued benefit determined as
of September 30, 1989 under the terms of the TER Plan then in
effect (the "TER Plan Benefit").
13.2 Benefit Service: Section 1.4 of the Plan is modified
---------------
to provide that a Participant's Benefit Service includes his
service credited for benefit accrual purposes under the TER Plan
before October 1, 1989 under the terms of the TER Plan then in
effect.
13.3 Vesting Service: Section 1.37 of the Plan is modified
---------------
to provide that a Participant's Vesting Service includes his
service credited for purposes of vesting under the TER Plan
before October 1, 1989 under the terms of the TER Plan then in
effect.
13.4 Early Retirement:
----------------
(a) Section 1.9 of the Plan is modified to provide
that a Participant's Early Retirement Date with respect to his
TER Plan Benefit is as defined in the TER Plan then in effect.
(b) Section 5.2 is modified by adding the following
subsection (c):
"(c) In lieu of a Early Retirement Pension provided in
Section 5.2(a) and (b), a Participant who has a TER Plan
Benefit shall receive an Early Retirement Pension equal to
the sum of
(1) The Participant's TER Plan Benefit, plus
(2) The excess, if any, of the Participant's
Early Retirement Pension determined under Section
5.2(b) over the Participant's TER Plan Benefit.
For purposes of Section 5.2(c)(2), the TER Plan Benefit
shall be valued using the actuarial factors under the TER Plan
and the Early Retirement Pension under Section 5.2(b) shall be
valued using the actuarial factors in this Plan. The valuation
shall be made on the basis of a five-year certain and life
annuity. The Participant's TER Plan Benefit shall be payable in
such form as the Participant shall elect in accordance with the
provisions of the TER Plan as in effect on September 30, 1989 and
the excess, if any, of the Participant's Early Retirement Pension
under Section 5.2(c)(2) shall be payable in accordance with the
provisions of this Plan."
13.5 Normal Retirement:
-----------------
(a) Section 5.1 is modified by adding the following
subsection (d):
"(d) In lieu of a Normal Retirement Pension under
Section 5.1(a) and (b), a Participant who has a TER Plan
Benefit shall receive a Normal Retirement Pension equal to
the sum of
36
<PAGE>
(1) The Participant's TER Plan Benefit, plus
(2) The excess, if any, of the Participant's
Normal Retirement Pension determined under Section
5.1(a) over the Participant's TER Plan Benefit.
For purposes of Section 5.1(d)(2), the TER Plan Benefit
shall be valued using the actuarial factors under the TER Plan
and the Normal Retirement Pension under Section 5.1(a) shall be
valued using the actuarial factors in this Plan. The valuation
shall be made on the basis of a five-year certain and life
annuity. The Participant's TER Plan Benefit shall be payable in
such form as the Participant shall elect in accordance with the
provisions of the TER Plan as in effect on September 30, 1989 and
the excess, if any, of the Participant's Normal Retirement
Pension under Section 5.1(d)(2) shall be payable in accordance
with the provisions of this Plan."
13.6 Vested Retirement:
-----------------
(a) Section 5.4(b) is modified to provide that a
Participant's Early Retirement Date and Normal Retirement Date
with respect to TER Plan Benefit is as defined in the TER Plan
then in effect.
(b) Section 5.4 is modified by adding the following
subsection (d):
"(d) In lieu of a Vested Pension under Section 5.4(a)
and (b), a Participant who has a TER Plan Benefit shall
receive a Vested Pension equal to the sum of
(1) The Participant's TER Plan Benefit, plus
(2) The excess, if any, of the Participant's
Vested Pension determined under Section 5.4(a) over the
Participant's TER Plan Benefit.
For purposes of Section 5.4(d)(2), the TER Plan Benefit
shall be valued using the actuarial factors under the TER Plan
and the Vested Pension under Section 5.4(a) shall be valued using
the actuarial factors in this Plan. The valuation shall be made
on the basis of a five-year certain and life annuity. The
Participant's TER Plan Benefit shall be payable in such form as
the Participant shall elect in accordance with the provisions of
the TER Plan as in effect on September 30, 1989 and the excess,
if any, of the Participant's Vested Pension under Section
5.1(d)(2) shall be payable in accordance with the provisions of
this Plan."
13.7 Preservation of Benefits: To the extent that the TER
------------------------
Plan gave a Former Texas Eastern Employee an early retirement
benefit, retirement-type subsidy or optional form of benefit that
is not otherwise provided for in this Plan, such early retirement
benefit, retirement-type subsidy or optional form of benefit
pension shall continue to apply to the portion of the
Participant's Pension that is attributable to the benefits
accrued under the TER Plan as of September 30, 1989, as required
by Code section 411(d)(6). Any form of death benefit payable
under the TER Plan shall also continue to apply to a
Participant's TER Plan Benefit. The provisions of the TER Plan
shall continue to apply with respect to participant contributions
made to the TER Plan. The benefits attributable to the TER Plan
shall in all respects be administered in accordance with
applicable law, and, to the extent required by law, in accordance
with the provisions of the TER Plan in effect on September 30,
1989.
37
<PAGE>
SECTION XIV
-----------
MISCELLANEOUS
-------------
14.1 Indemnification: The Plan Administrator shall
---------------
indemnify each member of the Plan Administrative Committee and
each other Employee who is involved in the administration of the
Plan against all costs, expenses and liabilities, including
attorney's fees, incurred in connection with any action, suit or
proceeding instituted against any of them alleging any act of
omission or commission performed while acting in good faith in
discharging their duties with respect to the Plan. Promptly
after receipt by an indemnified party of notice of the
commencement of any action, the indemnified party shall notify
the Plan Administrator of the action. The Plan Administrator
shall be entitled to participate at its own expense in the
defense or to assume the defense of any action brought against
any indemnified party. If the Plan Administrator elects to
assume the defense of any such suit, the defense shall be
conducted by counsel chosen by the Plan Administrator, and the
indemnified party shall bear the fees and expenses of any
additional counsel retained by him.
14.2 Exclusive Benefit Rule: This Plan shall be
----------------------
administered for the exclusive benefit of the Employees of the
Employer and for the payment to Participants out of the income
and principal of the Trust Fund of the benefits provided under
the Plan. No part of the income or principal of the Trust Fund
shall be used for or diverted to purposes other than the
exclusive benefit of the Participants or their Beneficiaries, as
provided in the Plan.
14.3 No Right to the Fund: No person shall have any
--------------------
interest in, or right to, any part of the assets of the Trust
Fund or any rights under the Plan, except as to the extent
expressly provided in the Plan.
14.4 Rights of the Employer: The establishment of this
----------------------
Plan shall not be construed as conferring any legal or other
rights upon any Employee or any other person for continuation of
employment, nor shall it interfere with the right of the Employer
to discharge any Employee or to deal with him without regard to
the effect thereof under the Plan.
14.5 Non-Alienation of Benefits: No amount payable to or
--------------------------
held under the Plan for the account of any Participant or
Beneficiary of a Participant or former Participant shall be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any
attempt so to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void. No amount
payable to or held under the Plan for the account of any
Participant or Beneficiary may be in any manner liable for his
debts, contracts, liabilities, engagements or torts, or be
subject to any legal process, levy or attachment. The provisions
of this Section shall not preclude distributions made by the
Trustee in accordance with a Qualified Domestic Relations Order.
14.6 Construction and Severability: Except as otherwise
-----------------------------
provided by Federal law, the provisions of this Plan shall be
construed and enforced according to Maryland laws, and all of the
provisions of the Plan shall be administered in accordance with
the laws of the State of Maryland. For simplicity of expression,
pronouns and other terms are sometimes expressed in a particular
number and gender; however, where appropriate to the context,
such terms shall be deemed to include each of the other numbers
and the other gender. Each provision of this Plan shall be
considered to be severable from all other provisions so that if
any provision or any part of a provision shall be declared void,
38
<PAGE>
then the remaining provisions of the Plan that are not declared
void shall continue to be effective.
14.7 Delegation of Authority: Whenever the Employer or
-----------------------
Plan Administrator, under the terms of this Plan, is permitted or
required to do or perform any act, the act may be done or
performed by any officer of the Employer or Plan Administrator,
and such officer shall be presumed to be duly authorized by the
Board of Directors of the Employer or Plan Administrator.
14.8 Request for Tax Ruling: This Plan is based upon the
----------------------
condition precedent that it shall meet the requirements of the
Code with respect to qualified employees' trusts so as to permit
the Employer to deduct for Federal income tax purposes the
amounts of its contributions and so that its contributions will
not be taxable to the Participants as income in the year in which
the contributions are made. The Employer shall apply for a
determination by the Internal Revenue Service that this Plan is
so qualified. If the Internal Revenue Service rules that this
Plan is not so qualified, the then current value of all
contributions made by the Employer before the initial
determination as to qualification shall be returned to the
Employer, and this Plan shall be of no further force or effect.
* * * * *
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed the 16 day of December, 1993.
CROWN CENTRAL PETROLEUM CORPORATION
By:Henry A. Rosenberg, Jr.
Henry A. Rosenberg, Jr.
39
EXHIBIT 13.a
CROWN CENTRAL PETROLEUM CORPORATION
Shareholders' Letter
To Our Shareholders:
The Company had a net loss of $4.3 million ($.44 per share) in
1993 compared to a net loss of $5.5 million ($.56 per share) in
1992. Sales and operating revenues were $1.747 billion in 1993
compared to $1.795 billion in 1992. For the fourth quarter, the
Company reported a net income of $6.9 million ($.70 per share),
compared to a net loss of $3.26 million ($.33 per share) in the
third quarter of 1993 and a net loss of $5.5 million ($.56 per
share) in the fourth quarter of 1992. Although full year results
were again disappointing, 1993 provided some long anticipated
indications, especially in the fourth quarter, that general
economic conditions have stabilized.
This past year also marked the twentieth anniversary of the OPEC
oil embargo. A review of key statistics over the past two
decades reflects the volatile nature of the petroleum industry.
For those who accept the realities of this business and who are
equally resourceful in adopting successful strategies to profit
from the opportunities presented, the future is brighter and more
promising.
Since the embargo, although U.S. GNP has grown by 60%, total
petroleum energy consumption has remained constant at 17.2
million barrels per day. In fact, Americans are driving 50% more
now than in 1973, yet gasoline use is up only 12%. Because of
the sharp decline in oil prices in 1986, gasoline has been very
much of a bargain for the American consumer. Regrettably, these
lower prices have caused less domestic production which has
increased our foreign crude exposure from 36% to nearly a 50%
dependency. In addition, domestic refining is under pressure
from foreign product imports which enjoy a significant price
advantage as a result of our higher level of domestic health,
safety and environmental costs.
In 1993, Crown initiated additional internal management programs
to promote efficiency and to achieve maximum advantage from
available technologies. The Business Process Improvement Program
is being implemented as each business segment is reviewed with
Supply & Transportation recently completed, Marketing currently
in progress, and all others scheduled. This effort will help in
selecting the correct software applications and in forming the
basis for restructuring workflows and improving efficiency. The
Crown Management System challenges employees with the opportunity
to efficiently direct individual efforts towards meaningful and
measurable corporate objectives which can be used to document
successful performance.
With additional environmental regulations constantly being
imposed on all of our facilities, products, personnel and
markets, compliance is clearly a most difficult and challenging
task. Recently, the Ozone Transportation Commission (OTC)
petitioned EPA to require northeastern states from Maine to
Virginia to adopt the California LEV program. This action was
taken despite independent studies that show that the CAL LEV
program to be far less cost effective than numerous other ozone
control strategies. Reauthorization of the Clean Water Act and
the Occupational Safety and Health Act (OSHA), currently being
considered by Congress, again requires us to be actively involved
in the legislative and regulatory process.
Refining:
- --------
Both refineries initiated projects in 1993 that will result in
higher efficiencies and increased yields of higher valued
products. At Tyler, total hydrodesulfurization capacity was
expanded by 60%. The ingenuity and commitment of the Tyler
employees enabled them to complete this project on schedule at a
cost of $10 million. A new installation of this type of facility
would have cost an estimated $25 million. As a result of this
project, the refinery can produce 12,000 barrels per day of low
<PAGE>
sulfur diesel which complies with regulations which went into
effect in October of 1993. The unit has been on-stream since
November and has performed up to expectations.
At Pasadena, engineering and construction on a new refinery
control center began in 1993. The development of this project
has involved the cooperation of several refinery groups because
of the significant changes that will come with the new control
system. As an example of this cooperation, the Company
negotiated staffing changes with the labor union which will
permit the operation to obtain the benefits of flexibility and
improved yields available with the new control technology. The
first phase of this project is expected to commence operation in
mid-1994.
Total capital spending in refining in 1993 was $19.5 million.
Capital spending at Tyler totaled $14.1 million with most of the
funds spent on the desulfurization unit. Capital expenses at
Pasadena totaled $5.4 million with the funds being spread over
several small projects.
The Pasadena refinery continued efforts throughout 1993 to
improve efficiencies and succeeded by reducing expenses by $6
million compared to 1992. Most of the process units at Pasadena
operated at record rates during 1993. It is expected that these
efficiencies will continue in 1994 as the Company further
improves on the utilization of maintenance, operating and support
groups.
At the Pasadena refinery, total gasoline and distillate
production averaged 93,600 barrels per day versus 91,000 in 1992.
While refinery utilization was approximately 90% for the year,
production was scaled back at certain periods due to extremely
weak margins. This was particularly true in the first quarter
and again, at the end of the year. We were, nevertheless, able
to optimize production of the most highly valued products. In
periods of weak margins, the refinery will reduce total crude
runs while utilizing a greater percentage of heavier crudes in
order to lower costs.
Crude oil prices continued to be weak for the year, dropping from
$19.50 to a low of $14 towards the end of December. While in the
longer term lower crude prices spur gasoline demand and make
other alternate fuel sources less attractive, current margins
have been adversely impacted by the high levels of finished
product inventories.
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
Shareholders' Letter
(Photographs of Henry A. Rosenberg, Jr. Chairman of the Board and
Chief Executive Officer, and Charles L. Dunlap, President and
Chief Operating Officer)
(Photographs' Captions: Henry A. Rosenberg, Jr. Chairman of the
Board and Chief Executive Officer; Charles L. Dunlap, President
and Chief Operating Officer)
By capturing more of the available margin than in prior years and
by successfully keeping operating expenses down, our refining
losses were minimized for the year.
In Supply and Transportation, the Margin Management System, or
hedging strategy, is being used effectively. Over time, return
on capital is expected to be improved, and volatility reduced, by
more actively managing inventory exposure and capturing margins
when opportunities permit. This program provides the Company
with downside protection in the international oil markets.
Results were favorably impacted as a result of 1993's hedging
program.
Marketing:
- ---------
In 1993, Crown Marketing firmly established its profitability and
made a significant contribution to corporate operating results.
While the total volume of petroleum products sold through retail
outlets compared to 1992 remained nearly constant, sales volumes
at locations which were open during both periods increased by 7%.
These results came in spite of substantial business disruptions
during the installation of Stage II vapor recovery facilities at
some of our highest volume units.
Retail margins continued to show gains of 9% over the prior
period. A contributing factor was that premium retail volume, as
a percentage of total gasoline sales, showed a 14% gain over last
year. This reflects emphasis on increasing sales of higher
margin products. Wholesale volumes at the Company's East Coast
terminals posted an impressive 8% improvement. The increase was
partially attributable to the acquisition of the Selma, North
Carolina terminal in August of 1993. Acquired to serve the
retail and wholesale operations in the Raleigh/Durham area, the
Selma terminal is a 21 acre facility, served by the Colonial
Pipeline. It is fully automated and has a 168,000 barrel storage
capacity.
Sixty-three (63) retail units that failed to meet our strict
criteria for volume and profitability were closed or sold in
1993. At the end of the year, our total retail outlet count
stood at 376. During the year, five new facilities were opened.
Crown continues to seek suitable new locations that offer the
margin opportunities that we require. In July, the Company also
opened in Annapolis, Maryland, the state's first public natural
gas fueling facility. This received wide public and political
recognition.
Marketing's reorganization continued by consolidating the
Atlanta, Georgia and Richmond, Virginia retail divisions.
Significant savings will be achieved as a result. An expanded
Richmond headquarters will now oversee the administration of all
of Crown's company operated stations and stores.
Stage II compliance, as required by the Clean Air Act of 1990,
was fully completed for designated non-attainment areas by the
November 15 deadline. This represents a significant monetary
investment on the part of the Company, whose capital spending on
marketing environmental compliance projects amounted to nearly $9
million in 1993. Total marketing capital expenditures for 1993
were $19.1 million.
Coronet Security Systems, Inc., which is a wholly owned
subsidiary of Crown that markets a unique interactive audio/video
security/management system, successfully completed its first full
year of operation. Coronet has sold security systems to other
petroleum marketers and commercial retailers.
Unfortunately, in September, a fire destroyed the Company's
<PAGE>
Pasadena, Texas, loading rack marketing facility one mile from
the Company's refinery. Although there were several injuries,
the courageous efforts of Crown employees prevented any loss of
life and damage was confined to the rack area.
Much of the success enjoyed by the marketing division during this
recovery period can be attributed to the loyal and faithful
service of R.D. McMullen, Senior Vice President of Marketing who
retired in 1993. His services will be missed.
At the annual meeting in April 1993, Robert M. Freeman, Chairman
of the Board and CEO of Signet Banking Corporation and Bailey A.
Thomas, Chairman of the Board and CEO of McCormick & Company,
Inc., were elected Directors.
In conclusion, we are pleased to report that Crown is
experiencing a growing sense of accomplishment and progress
throughout the Company's operating and marketing areas. This has
confirmed the validity of the refining and marketing strategies
Crown has instituted during the past several years to restore and
maintain profitability.
On behalf of all the employees of the Company, thank you for your
continued interest and support.
Henry A. Rosenberg, Jr. Charles L. Dunlap
Henry A. Rosenberg, Jr. Charles L. Dunlap
Chairman of the Board President
February 28, 1994
EXHIBIT 13.b
Financial Summary, Operating Summary and Key Financial Statistics
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
Year in Review
Thousand of dollars, except per share amounts 1993 1992 1991
---------- ----------- ---------
Financial Summary
- --------------------
Sales and operating revenues $1,747,411 $1,795,259 $1,857,711
Income (loss) before income taxes and
cumulative effect of changes in
accounting principles 807 (16,955) (5,333)
Net (loss) (4,300) (5,506) (6,026)
Net (loss) per share (.44) (.56) (.61)
Cash flow from operating activities 28,878 52,951 529
Total capital expenditures 40,860 38,003 64,782
Common stockholders' Equity 298,353 303,274 310,747
In Thousands 1993 1992 1991
------ ------ ------
Operating Summary
- --------------------
Barrels per day processed 158 154 147
Gasoline barrels produced per day 86 86 78
Distillate barrels produced per day 52 49 47
Gasoline barrels sold per day 91 90 86
1993 1992 1991
------ ------ ------
Key Financial Statistics
- -------------------------
Working capital (in millions) $ 51.8 $ 44.9 $ 90.2
Working capital ratio 1.29 :1 1.22 : 1 1.42 : 1
Liquid assets as a percentage of current
liabilities (1) 80.1% 83.8% 87.8%
Long term debt as a percentage of total
capitalization (2) 18.3% 16.9% 22.3%
Equity ratio (3) 45.5% 44.9% 45.2%
Return on average shareholders' equity (1.4%) (1.8%) (1.9%)
Gross profit margin 8.2% 7.5% 7.5%
(1) Liquid assets defined as cash, cash equivalents and trade accounts
receivable.
(2) Total capitalization defined as long-term debt and common stockholders'
equity.
(3) Common stockholders' equity divided by total assets.
EXHIBIT 13.c
Crown Central Petroleum Corporation
Directors and Officers
Board of Directors
(as of January 31, 1994)
Jack Africk #
Retired Vice Chairman
UST Inc.
George L. Bunting, Jr. #
President and CEO
Bunting Management Group
Michael F. Dacey +
Executive Vice President
The Chase Manhattan Bank, N.A.
Charles L. Dunlap *
President and Chief Operating
Officer of the Corporation
Robert M Freeman #
Chairman of the Board and
Chief Executive Officer
Signet Banking Corporation
Thomas M. Gibbons +
Retired Chairman of the Board
The Chesapeake and Potomac
Telephone Companies (part of
Bell Atlantic Corporation)
Patricia A. Goldman +
Senior Vice President
Corporate Communications
USAir
William L. Jews+
President and Chief
Executive Officer
Blue Cross and Blue Shield
of Maryland
Malcolm McNair #+
Retired Executive Vice
President
European American Bank &
Trust Company
Henry A. Rosenberg, Jr. *
Chairman of the Board and
Chief Executive Officer of the
Corporation
Phillip W. Taff #
Executive Vice President and
Chief Financial Officer and
Chief Administrative Officer
Greyhound Lines, Inc.
Bailey A. Thomas
Chairman of the Board and
Chief Executive Officer
McCormick & Company
Executive Committee
Jack Africk
Charles L. Dunlap
Henry A. Rosenberg, Jr.
Chairman
<PAGE>
Officers
- --------
Henry A. Rosenberg, Jr.
Chairman of the Board and
Chief Executive Officer
Charles L. Dunlap
President and Chief
Operating Officer
Edward L. Rosenberg
Senior Vice President-
Finance and Administration
Thomas L. Owsley
Vice President-Legal
John E. Wheeler, Jr.
Vice President-Treasurer and
Controller
Randall M. Trembly
Vice President-Refining
George R. Sutherland, Jr.
Vice President-Supply and
Transportation
Frank B. Rosenberg
Vice President-Marketing
J. Michael Mims
Vice President-Human
Resources
Paul J. Ebner
Vice President-Marketing
Support Services
Dolores B. Rawlings
Secretary
William A. Wolters
Assistant Secretary
Peter G. Wolfhagan
Assistant Secretary
Phillip F. Hodges
Assistant Secretary
Kajal Roy
Assistant Secretary
Andrew Lapayowker
Assistant Secretary
Stephen A. Noll
Assistant Treasurer
David J. Shade
Assistant Treasurer
Coronet Security Systems, Inc.
Edward L. Rosenberg
Chairman of the Board
Fast Fare, Inc.
Frank B. Rosenberg
President
<PAGE>
La Gloria Oil & Gas Company
Charles L. Dunlap
President
Tongue, Brooks &
Company, Inc.
R. Peter Urquhart
Chairman of the Board
+ Members of Executive
Compensation and Bonus
Committee
# Members of Audit
Committee
* Members of Executive
Committee
CORPORATE INFORMATION EXHIBIT 13.d
Crown Central Petroleum Corporation is ranked among the 300
largest industrial companies in the United States. An
independent refiner and marketer of petroleum products, Crown and
its La Gloria Oil and Gas Company subsidiary operate two
refineries in Texas with a combined capacity of 150,000 barrels
per day. Crown markets its refined products at more than 376
retail gasoline stations and convenience stores in seven Mid-
Atlantic and Southeastern states. Crown's wholesale operations
extend from its Texas refineries into the Southeastern, Mid-
Atlantic and Midwestern regions of the United States.
By concentrating on its core business and maintaining a strong
financial position, Crown is able to offer quality products to
its customers and long-term value to its shareholders.
<PAGE>
CROWN
(registered trademark)
General Offices
The Blaustein Building
One North Charles Street
P.O. Box 1168
Baltimore, Maryland 21203
(410) 539-7400
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Post-Effective Amendment No. 1 to Form S-8 No. 33-
37630) pertaining to the Employees Savings Plan of Crown Central
Petroleum Corporation and Subsidiaries of our report dated
February 24, 1994, with respect to the consolidated financial
statements and schedules of Crown Central Petroleum Corporation
and Subsidiaries included in this Annual Report (Form 10-K) for
the year ended December 31, 1993.
Ernst & Young
Baltimore, Maryland
March 1, 1994
