<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-0550682
(State or other jurisdiction of(I.R.S. Employer 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
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.
YES X NO
The number of shares outstanding at April 30, 1995 of the Registrant's
$5 par value Class A and Class B Common Stock was 4,817,392 shares and
5,135,506 shares, respectively.
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CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
Table of Contents
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994 3-4
Consolidated Condensed Statements of Operations
Three months ended March 31, 1995 and 1994 5
Consolidated Condensed Statements of Cash Flows
Three months ended March 31, 1995 and 1994 6
Notes to Unaudited Consolidated Condensed
Financial Statements 7-11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 15
Item 6 - Exhibits and Reports on Form 8-K 15
Exhibit 10 - Material Contracts
Exhibit 19 - Previously Unfiled Documents
Exhibit 20 - Interim Report to Stockholders for the three
months ended March 31, 1995
Exhibit 27 - Financial Data Schedule
SIGNATURE 15
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
March 31 December 31
Assets
1995 1994
------------------------------
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 52,293 $ 54,868
AAccounts receivable - net 90,019 128,984
Recoverable and current deferred income taxes 19,303 16,075
Inventories 87,074 94,933
Other current assets 8,997 1,264
----------------------
Total Current Assets 257,686 296,124
Investments and Deferred Charges 41,860 40,125
Property, Plant and Equipment 703,988 699,204
Less allowance for depreciation 337,479 331,377
------------------------
Net Property, Plant and Equipment 366,509 367,827
------------------------
$ 666,055 $ 704,076
======= =======
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
March 31 December 31
Liabilities and Stockholders' Equity 1995 1994
---------------------------------
(Unaudited)
<S> <C> <C>
Current Liabilities
Accounts payable:
Crude oil and refined products $ 111,778 $ 150,877
Other 19,367 29,988
Accrued liabilities 50,142 51,500
Current portion of long-term debt 1,701 10,062
------------------------
Total Current Liabilities 182,988 242,427
Long-Term Debt 129,570 96,632
Deferred Income Taxes 72,794 73,402
Other Deferred Liabilities 30,418 31,154
Common Stockholders' Equity
Common stock, Class A - par value $5 per share:
Authorized shares--7,500,000; issued and
outstanding shares--4,817,392 in 1995 and 1994 24,087
24,087 Common stock, Class B - par
value $5 per share:
Authorized shares--7,500,000; issued and
outstanding shares--5,135,506 in 1995 and
4,985,706 in 1994 25,678 24,929
Additional paid-in capital 91,979 90,549
Unearned restricted stock (3,446) (1,266)
Retained earnings 111,987 122,162
------------------------
Total Common Stockholders' Equity 250,285 260,461
------------------------
$ 666,055 $ 704,076
======= =======
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars, except per share amounts)
(Unaudited)
Three Months Ended March 31
1995 1994
----------------------------
<S> <C> <C>
Revenues
Sales and operating revenues (including excise taxes
of 1995--$100,591; 1994--$93,556) $ 445,424 $ 393,586
Operating Costs and Expenses
Costs and operating expenses 422,164 343,415
Selling and administrative expenses 20,005 22,060
Depreciation and amortization 9,492 10,631
Sales of property, plant and equipment 243
(323)
---------------------------
451,904 375,783
---------------------------
Operating (Loss) Income (6,480) 17,803
Interest and other income 748 393
Interest expense (3,475) (1,911)
---------------------------
(Loss) Income Before Income Taxes (9,207) 16,285
Income Tax (Benefit) Expense (2,289) 7,625
---------------------------
(Loss) Income Before Extraordinary Item (6,918) 8,660
Extraordinary (Loss) from Early
Extingiushment of Debt (net of income
tax benefit of $2,039) (3,257)
---------------------------
Net (Loss) Income $ (10,175)$ 8,660
======== ========
Net (Loss) Income Per Share:
(Loss) Income Before Extraordinary Item $ (.71) $ .88
Extraordinary (Loss) from Early
Extingiushment of Debt (.33 )
-------------- ----------
- ---
Net (Loss) Income Per Share $ (1.04 )$
.88
========= ========
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
(Unaudited)
Three Months Ended March 31
1995 1994
-----------------------
<S> <C> <C>
Net Cash Flows From Operating Activities
Net cash from operations before
changes in working capital $ 1,636$ 19,454
Net changes in working capital items (15,215) (17,926)
--------------------------
Net Cash (Used in) Provided by
Operating Activities (13,579) 1,528
--------------------------
Cash Flows From Investment Activities
Capital expenditures (6,602) (7,558) )
Proceeds from sales of property, plant
and equipment 406 3,004
Deferred turnaround maintenance (1,750) (191)
Other charges to deferred assets (2,442) (545)
-------------------------
Net Cash (Used in) Investment Activities (10,388) (5,290)
-------------------------
Cash Flows From Financing Activities
Proceeds from debt and credit agreement borrowings 142,887 1,228 )
(Repayments) of debt and credit agreement borrowings (121,567) (207)
Net cash flows from long-term
notes receivable 72 (667)
------------------------
Net Cash Provided by Financing Activities 21,392 354
------------------------
Net (Decrease) in Cash and Cash Equivalents $ (2,575) $ (3,408)
======== =======
<FN>
See notes to unaudited consolidated condensed financial statements.
</TABLE>
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<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
March 31, 1995
Note A - Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of Management, all adjustments considered necessary for a
fair and comparable presentation have been included. Operating
results for the three months ended March 31, 1995 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1995. The enclosed financial
statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December
31, 1994.
Cash and Cash Equivalents - Cash in excess of daily requirements
is invested in marketable securities with maturities of three
months or less. Such investments are deemed to be cash
equivalents for purposes of the statements of cash flows.
Inventories - The Company's crude oil, refined products, and
convenience store merchandise and gasoline inventories are valued
at the lower of cost (last-in, first-out) or market with the
exception of crude oil inventory held for resale which is valued
at the lower of cost (first-in, first-out) or market. Materials
and supplies inventories are valued at cost. Incomplete
exchanges of crude oil and refined products due the Company or
owing to other companies are reflected in the inventory accounts.
At March 31, 1995, approximately 170,000 barrels of crude oil and
refined products, or approximately $3.4 million of inventory,
were held in excess of anticipated year-end quantities, excluding
crude oil held for resale, and were valued at the lower of cost
(first-in, first-out) or market. An actual valuation of
inventory under the LIFO method can be made only at the end of
each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO projections must be based on
Management's estimates of expected year-end inventory levels and
values.
Environmental Costs: The Company conducts environmental
assessments and remediation efforts at multiple locations,
including operating facilities, and previously owned or operated
facilities. Estimated closure and post-closure costs for active,
refinery and finished product terminal facilities are not
recognized until a decision for closure is made. Estimated
closure and post-closure costs for active and operated retail
marketing facilities and costs of environmental matters related
to ongoing refinery, terminal and retail marketing operations are
recognized as described below. Expenditures for equipment
necessary for environmental issues relating to ongoing operations
are capitalized. 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. Accruals for losses from environmental
remediation obligations generally are recognized no later than
completion of the remediation feasibility study. Estimated
costs, which are based upon experience and assessments, are
recorded at undiscounted amounts without considering the impact
of inflation, and are adjusted periodically as additional or new
information is available.
Income Taxes - The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes." The income tax provision for
the three months ended March 31, 1995 has been computed based
upon the Company's estimated effective tax rate for the year,
after recognizing permanent tax differences.
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<PAGE>
Financial Instruments and Hedging Activities - The Company
periodically enters into interest rate swap agreements to
effectively manage the cost of borrowings. All interest rate
swaps are subject to market risk as interest rates fluctuate.
Interest rate swaps are designated to the Company's long-term
debt and are accounted for as a hedge, the net amounts payable or
receivable from periodic settlements under outstanding interest
rate swaps are included in interest expense. Realized gains and
losses from terminated interest rate swaps are deferred and
amortized into interest expense over the shorter of the term of
the underlying debt or the remaining term of the original swap
agreement. Settlement of interest rate swaps involves the
receipt or payment of cash on a periodic basis during the
duration of the contract, or upon the Company's termination of
the contract, for the differential of the interest rates swapped
over the term of the contract.
Other instruments are used to minimize the exposure of the
Company's refining margins to crude oil and refined product price
fluctuations. Hedging strategies used to minimize this exposure
include fixing a future margin between crude oil and certain
finished products and also hedging fixed price purchase and sales
commitments of crude oil and refined products. Futures, forwards
and exchange traded options entered into with commodities brokers
and other integrated oil and gas companies are utilized to
execute the Company's strategies. These instruments generally
allow for settlement at the end of their term in either cash or
product.
Net realized gains and losses from these hedging strategies are
recognized in costs and operating expenses when the associated
refined products are sold. Unrealized gains and losses represent
the difference between the market price of refined products and
the price of the derivative financial instrument, inclusive of
refining costs. Individual transaction unrealized gains and
losses are deferred in inventory and other current assets and
liabilities to the extent that the associated refined products
have not been sold. A hedging strategy position generating an
overall net unrealized loss is recognized in costs and operating
expenses. While the Company's hedging activities are intended to
reduce volatility while providing an acceptable profit margin on
a portion of production, the use of such a program can limit the
Company's ability to participate in an improvement in related
refined product profit margins.
The Company is exposed to credit risk in the event of non-
performance by counterparties on interest rate swaps, and
futures, forwards and exchange traded options for crude and
finished products, but the Company does not anticipate non-
performance by any of these counterparties. The amount of such
exposure is generally the unrealized gains in such contracts.
Statements of Cash Flows - Net changes in working capital items
presented in the Unaudited Consolidated Condensed Statements of
Cash Flows reflects changes in all current assets and current
liabilities with the exception of cash and cash equivalents and
the current portion of long-term debt.
Note B - Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
March 31 December 31
1995 1994
----------- -----------
(thousands of dollars)
<S> <C>
<C>
Crude oil $ 44,357
$ 53,359
Refined products 76,998 74,299
----------- -----------
Total inventories at FIFO (approximates current cost)
121,355 127,658
LIFO allowance (46,458) (45,125)
----------------------
Total crude oil and refined products 74,897 82,533
----------- -----------
Merchandise inventory at FIFO (approximates current cost)
6,650 7,150
LIFO allowance (2,110 ) (2,110 )
----------- -----------
Total merchandise 4,540 5,040
----------- -----------
Materials and supplies inventory at FIFO 7,637 7,360
----------- -----------
Total Inventory $ 87,074 $ 94,933
======= =======
</TABLE>
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<PAGE>
Note C - Long-term Debt and Credit Arrangements
On January 24, 1995, the Company completed the sale of $125
million of Unsecured 10 7/8% Senior Notes due February 1, 2005
priced at 99.75% (Notes). Approximately $55 million of the net
proceeds from the sale was used to retire the Company's
outstanding 10.42% Senior Notes, including a prepayment premium
of $3.4 million and $8 million was used to reduce amounts
outstanding under the Company's unsecured bank lines. The
remaining portion of the outstanding 10.42% Senior Notes had been
paid on January 3, 1995 as part of the regularly scheduled debt
service. The Notes were issued under an Indenture which includes
certain restrictions and limitations customary with senior
indebtedness of this type including, but not limited to, the
payment of dividends and the repurchase of capital stock. The
retirement of the Company's outstanding 10.42% Senior Notes
resulted in a net extraordinary loss in the first quarter of 1995
of $3.3 million.
<TABLE>
<CAPTION>
Long-term debt consists of the following:
March 31 December 31
1995 1994
---------- ---------------
(thousands of dollars)
<S> <C> <C>
Unsecured 10 7/8% Senior Notes $124,687
Unsecured 10.42% Senior Notes $ 60,000
Unsecured Credit Agreement 35,000
Purchase Money Lien 5,314 5,579
Other obligations 1,270 6,115
-----------------------
131,271 103,694
Less current portion 1,701 10,062
-----------------------
Long-Term Debt $129,570 $ 96,632
======= =======
</TABLE>
Note D--Crude Oil and Refined Product Hedging Activities and
Other Derivative Financial Instruments
The net deferred gain from crude oil and refined product hedging
strategies at March 31, 1995 was $3.5 million. Included in these
hedging strategies are contracts maturing from May 1995 to
January 1996. The Company is using these contracts to fix the
purchase price of approximately 15% of its crude requirements,
and the selling price of approximately 4% of its refined
products, for the aforementioned period, at current related
market prices. The Company is exposed to credit risk to the
extent of counterparty non-performance on forward contracts.
Management monitors this credit risk by evaluating counterparties
prior to and during their contractual obligation. Management
considers non-performance credit risk to be remote.
As of March 31, 1995, the Company has entered into interest rate
swap agreements to effectively convert $47.5 million of its
fixed rate debt to variable interest rate debt with maturities
ranging from 1996 to 1998.
<TABLE>
<CAPTION>
The following is a summary, by year of maturity, of the Company's
outstanding interest rate swap agreements:
Instruments Expected to Mature in
---------------------------------------------------
1996 1997 1998
-------------- --------------------
- -----
(thousands of dollars)
<S> <C> <C> <C>
Interest rate swaps $17,500 $15,000 $
15,000
Average variable pay rates assuming current market conditions 6.50 %6.45 %
6.46 %
Average fixed rate 7.00% 6.81 % 6.81%
</TABLE>
The variable interest rates to be paid by the Company are reset
on various predetermined dates which range from May 1995 to
March 1998 and are based on the London Interbank Offered Rate
(LIBOR).
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<PAGE>
The termination of existing interest rate swap agreements as of
March 31, 1995 would result in a gain of approximately $1
million. 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.
Note E - Calculation of Net (Loss) Income Per Common Share
Net (loss) income per common share for the three months ended
March 31, 1995 and 1994 is based upon the 9,803,098 and the
9,832,598 common shares outstanding, respectively.
Note F--Long-Term Incentive Plan and Stock Option Plan
Under the terms of the 1994 Long-term Incentive Plan (Plan), the
Company may distribute to selected employees restricted shares of
the Company's Class B Common Stock and options to purchase Class
B Common Stock. Up to 1.1 million shares of Class B Common Stock
may be distributed under the Plan over a five year period. The
balance sheet caption "Unearned restricted stock" is charged for
the market value of restricted shares at their grant date and
changes in the market value of shares outstanding until the
vesting date, and is shown as a reduction of stockholders'
equity. The impact is further reflected within Class B Common
Stock and Additional paid-in-capital.
Performance Vested Restricted Stock (PVRS) awards are subject to
the attainment of performance goals and certain restrictions
including the receipt of dividends and transfers of ownership.
As of April 30, 1995, 255,300 shares of PVRS have been registered
in participants names and are being held by the Company subject
to the attainment of the related performance goals.
Under the 1994 Long-term Incentive Plan, non-qualified stock
options are granted to participants at a price not less than 100%
of the fair market value of the stock on the date of grant. The
exercise period is ten years with the options vesting one-third
per year over three years after a one-year waiting period. As of
April 30, 1995, grants of non-qualified stock options have been
awarded to participants to purchase 505,000 shares of the
Company's Class B Common Stock.
Under the terms of the 1995 Management Stock Option Plan, the
Company may award to participants non-qualified stock options to
purchase shares of the Company's Class B Common Stock at a price
equal to 100% of the fair market value of the stock at the date
of grant. Up to 500,000 shares of Class B Common Stock may be
distributed under the Plan. The exercise period is ten years
with the options vesting one-third per year over three years
after a one-year waiting period. As of April 30, 1995, grants of
non-qualified stock options have been awarded to participants to
purchase 456,470 shares of the Company's Class B Common Stock.
Note G - Litigation and Contingencies
There have no material changes in the status of litigation and
contingencies as discussed in Note I of Notes to Consolidated
Financial Statements in the Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
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 million as of March 31, 1995 relative to the
estimated costs of a non-capital nature related to compliance
with environmental regulations. This liability is anticipated to
be expended over the next five years and is included in the
balance sheet as a noncurrent liability. No amounts have been
accrued as receivables for potential reimbursement or recoveries
to offset this liability. Included in costs and operating
expenses in the statements of operations for the three months
ended March 31, 1995 and 1994 were costs related to
environmental remediation in the amount of $.7 million and $.6
million, respectively.
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<PAGE>
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 strength of other
potentially responsible parties at multi-party sites, and the
identification of new environmental sites. It is possible that
the ultimate cost, which cannot be determined at this time, could
exceed the Company's recorded liability. As a result, charges to
income for environmental liabilities could have a material effect
on the 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.
Item 2 -Management's Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations
The Company's Sales and operating revenues increased $51.8
million or 13.2% in the first quarter of 1995 from the
comparable period in 1994. The Company's Sales and operating
revenues and Costs and operating expenses include all Federal and
State excise and other similar taxes which totalled $100.6
million and $93.6 million for the three months ended March 31,
1995 and 1994, respectively. The increase in Sales and operating
revenues was primarily attributable to a 10.1% increase in the
average sales price per gallon of petroleum products and a 3.4%
increase in petroleum product sales volumes. Additionally, there
was a 27.1% or $4.6 million increase in merchandise sales.
As previously mentioned, merchandise sales increased 27.1% or
$4.6 million and merchandise gross profit increased $.6 million
or 13.2% for the three months ended March 31, 1995 compared to
the same period in 1994. The increase in merchandise gross profit
occurred despite a reduction in the number of operating units
during the period. Merchandise gross margin (merchandise gross
profit as a percent of merchandise sales) decreased from 25.4% to
22.6% for the three months ended March 31, 1995 and 1994,
respectively. The decrease in gross margin was due to the
introduction late in the first quarter of 1994 of a new
merchandise pricing program designed to increase per unit
customer traffic and overall merchandise sales and gasoline
volumes. A key element of the program includes the reduction of
prices on certain items such as tobacco products and beverages.
This marketing strategy has resulted in average monthly gasoline
sales volume and merchandise sales increases on a same store
basis of approximately 6.5% and 33.3%, respectively, and has
contributed to the overall $.6 million increase in merchandise
gross profit mentioned above by increasing aggregate merchandise
gross profit on a same store basis by 17.5% in 1995 as compared
to 1994.
Costs and operating expenses increased $78.7 million or 22.9% in
the first quarter of 1995 compared to the same period in 1994.
The increase was due to a 25.4% increase in the average cost per
barrel consumed of crude oil and feedstocks and to increases in
excise taxes and volumes sold as previously mentioned. The
results of operations were affected by the Company's use of the
LIFO method to value inventory which decreased the Company's
gross margin $.10 per barrel ($1.3 million) in 1995, and $.28 per
barrel ($4 million) in 1994.
Due to better gasoline margins compared to distillate margins,
yields of gasoline improved to 97,000 bpd (63.6%) compared to
88,400 bpd (56.0%) in 1994. Correspondingly, distillate
production decreased from 53,900 bpd (34.2%) in 1994 to 42,700
bpd (28.0%) this year.
A majority of the Company's total crude oil and related raw
material purchases are transacted on the spot market. The
Company continues to selectively enter into forward hedging
contracts to minimize price fluctuations for a portion of its
crude oil and refined products.
Selling and administrative expenses decreased $2.1 million or
9.3% for the three months ended March 31, 1995 as compared to the
same period in 1994. The decrease is principally due to
decreased accruals associated with the Company's incentive plans.
-11-
<PAGE>
Operating costs and expenses in the first quarter of 1995 and
1994 included $.7 million and $.6 million, respectively, related
to environmental matters and $.6 million and $.3 million,
respectively related to retail units that have been closed.
Depreciation and amortization decreased $1.1 million or 10.7% in
the first quarter of 1995 compared to the same 1994 period. The
1995 decrease was primarily the result of a $10.4 million
decrease in the underlying value of the Pasadena Refinery Fluid
Catalytic Cracking Unit (FCC) turnaround being amortized in first
quarter of 1995 compared to the underlying value of the FCC
turnaround that was amortized in the same 1994 period.
Interest and other income increased $.4 million or 90.3% for the
three months ended March 31, 1995 as compared to the same 1994
period. The 1995 increase is primarily due to an increase in the
average daily rate on cash invested of 265 basis points.
Interest expense increased $1.6 million or 81.8% in the first
quarter of 1995 compared to the same 1994 period. The increase
was due to a $46.3 million increase in the average daily cash
borrowed as a result of additional outstanding borrowings of $63
million at March 31, 1995 as compared to March 31, 1994. The
additional outstanding borrowings are due to the sale of $125
million of Unsecured 10 7/8% Senior Notes in January 1995 net of
the repayment of the outstanding balance of the 10.42% Senior
Notes as previously discussed.
On January 24, 1995, the Company completed the sale of $125
million of Unsecured 10 7/8% Senior Notes due February 1, 2005
priced at 99.75% (Notes). Approximately $55 million of the net
proceeds from the sale was used to retire the Company's
outstanding 10.42% Senior Notes, including a prepayment premium
of $3.4 million. The remaining portion of the outstanding 10.42%
Senior Notes had been paid on January 3, 1995 as part of the
regularly scheduled debt service. In the first quarter of 1995,
the Company has recorded an extraordinary loss of $3.3 million
(net of income tax benefits of $2 million) consisting of
redemption related premiums and the write-off of deferred
financing costs associated with the 10.42% Senior Notes.
Liquidity and Capital Resources
Net cash used in operating activities (including changes in
working capital) totalled $13.6 million for the three months
ended March 31, 1995 compared to cash provided by operating
activities of $1.5 million for the three months ended March 31,
1994. The 1995 outflows consist of $15.2 million in cash
outflows related to working capital requirements resulting from
decreases in crude oil, refined products and other payables.
Additionally, there were increases in prepaid operating expenses
and in the current income tax asset. These working capital
outflows were partially offset by decreases in accounts
receivable and in the value of crude oil and finished product
inventories. Partially offsetting these cash outflows was cash
provided by operations of $1.6 million. The 1994 inflows consist
of $19.4 million in cash provided by operations which were
partially offset by cash outflows of $17.9 million related to
working capital requirements resulting from increases in accounts
receivable and increases in the value of crude oil and finished
product inventories and prepaid operating expenses. The 1994
working capital outflows were partially offset by increases in
crude oil and refined products payables and in accrued income and
excise tax liabilities.
Net cash outflows from investment activities were $10.4 million
for the first quarter of 1995 compared to a net outflow of $5.3
million for the same 1994 period. The 1995 amount consists
principally of capital expenditures of $6.6 million (which
includes $3.4 million from refinery operations and $3.2 million
relating to the marketing area). Additionally, there were
increases in other deferred assets of $2.4 million, which
consists primarily of $2.9 million in loan placement fees related
to the sale of $125 million of Unsecured 10 7/8% Senior Notes in
January 1995, and refinery turnaround expenditures of $1.8
million. These cash outflows were partially offset by proceeds
from the sale of property, plant and equipment of $.4 million.
The 1994 activity relates primarily to $7.6 million of capital
expenditures ($4.4 million relating to refinery operations and
$2.2 relating to the marketing area). The 1994 cash outflows
were partially offset by proceeds from the sale of property,
plant and equipment of $3 million.
-12-
<PAGE>
Net cash provided by financing activities was $21.4 million for
the three months ended March 31, 1995 compared to $.4 million for
the three months ended March 31, 1994. The 1995 cash inflows
relate to $24.6 million in net proceeds received from debt and
credit agreement borrowings due primarily to the sale in January
1995 of $125 million of Unsecured 10 7/8% Senior Notes net of
amounts used to repay outstanding balances relating to the 10.42%
Senior Notes (including a prepayment premium) and credit
agreement borrowings. The 1994 cash inflows relate primarily to
$.9 million in net proceeds received from the purchase money lien
which was offset by net issuances of long-term notes receivable
of $.7 million.
Cash and cash equivalents at March 31, 1995 were $3.7 million
higher than at March 31, 1994. This increase resulted primarily
from cash provided by financing activities of $58.3 million for
the period April 1, 1994 to March 31, 1995 relating primarily to
the sale in January 1995 of $125 million of Unsecured 10 7/8%
Senior Notes as previously discussed. These cash inflows were
partially offset by cash used in investment activities of $48.1
million, which includes capital expenditures of $33.4 million,
deferred turnaround costs of $13.9 million and increases in
deferred loan costs of $2.9 million., net of $2.3 million of
proceeds received from the sale of property plant and equipment.
Cash outflows also include $6.5 million of cash used in
operations for the twelve month period ended March 31, 1995.
The ratio of current assets to current liabilities at March 31,
1995 was 1.41:1 compared to 1.26:1 at March 31, 1994 and 1.22:1
at December 31, 1994. If FIFO values had been used for all
inventories, assuming an incremental effective income tax rate of
38.5%, the ratio of current assets to current liabilities would
have been 1.52:1 at March 31, 1995, 1.34:1 at March 31, 1994 and
1.32:1 at December 31, 1994.
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 believes that cash
provided from its operating activities, together with other
available sources of liquidity, including the remaining proceeds
of the $125 million of Unsecured 10 7/8% Senior Notes and
borrowings under the Credit Facility, will be sufficient to fund
these costs. The Company had recorded a liability of
approximately $16 million as of March 31, 1995 to cover the
estimated costs of compliance with environmental regulations
which are not anticipated to be of a capital nature. The
liability of $16 million includes accruals for issues extending
past 1996.
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.
During the years 1995-1997, the Company estimates environmental
expenditures at the Pasadena and Tyler refineries, of at least
$4.3 million and $18.2 million, respectively. Of these
expenditures, it is anticipated that $3.2 million for Pasadena
and $16.7 million for Tyler will be of a capital nature, while
$1.1 million and $1.5 million, respectively, will be related to
previously accrued non-capital remediation efforts. At the
Company's marketing facilities, capital expenditures relating to
environmental improvements are planned totaling approximately $23
million through 1998.
As a result of a strong balance sheet and overall favorable
credit relationships, the Company has been able to maintain open
lines of credit with its major suppliers. Under the Revolving
Credit Agreement (Credit Agreement), effective as of May 10,
1993, the Company had outstanding as of April 30, 1995,
irrevocable standby letters of credit in the principal amount of
$19.5 million for purposes in the ordinary course of business.
-13-
<PAGE>
At the Company's option, up to $37.5 million of the Unsecured 10
7/8% Senior Notes (Notes) may be redeemed at 110.875% of the
principal amount at any time prior to February 1, 1998. After
such date, they may not be redeemed until February 1, 2000 when
they are redeemable at 105.438% of the principal amount, and
thereafter at an annually declining premium over par until
February 1, 2003 when they are redeemable at par. The Notes were
issued under an Indenture which includes certain restrictions and
limitations customary with senior indebtedness of this type
including, but not limited to, the payment of dividends and the
repurchase of capital stock. There are no sinking fund
requirements on the Notes.
As discussed in Note C of Notes to Unaudited Consolidated
Condensed Financial Statements, the Company has entered into
interest rate swap agreements to effectively convert $47.5
million of its fixed rate debt to variable interest rate debt
with maturities ranging from 1996 to 1998. According to the
terms of these swap agreements, the variable interest rates to be
paid by the Company are reset on various predetermined dates
which range from May 1995 to March 1998. The Company may utilize
interest rate swaps in the future to manage the cost of funds.
At March 31, 1995, the Company was in compliance with all
covenants and provisions of the Credit Agreement. Meeting the
covenants imposed by the Credit Agreement is dependent, among
other things, upon the level of future earnings and the rate of
capital spending. The Company reasonably expects to continue to
be in compliance with the covenants imposed by the Credit
agreement, or a successor agreement, over the next twelve months.
The existing credit facility expires on May 10, 1996. The
Company is currently evaluating various options which include
renegotiating the existing credit facility or entering into
alternative financing facilities to meet its letter of credit and
working capital requirements.
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. Non-discretionary capital
expenditures related primarily to company wide environmental
requirements and deferred turnaround costs in 1995 are projected
to approximate $31.4 million. In addition, the Company has
identified projects at its refineries and retail unit
improvements which are projected to provide attractive returns.
The Company is prudently proceeding with the most attractive
projects but is likely to have total capital expenditures
slightly less than the $56.6 million originally forecasted and
included in Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Form 10-K
for 1994. The Company believes that cash provided from its
operating activities, together with other available sources of
liquidity, including the remaining proceeds of the $125 million
of Unsecured 10 7/8% Senior Notes (Notes) and borrowings under
the existing Credit Facility or a successor agreement, will be
sufficient over the next several years to make required payments
of principal and interest on its debt, including interest
payments due on the Notes, permit anticipated capital
expenditures and fund the Company's working capital requirements.
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 therefore, the Company's earnings
can be 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.
-14-
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material changes in the status of legal
proceedings as reported in Item 3 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
The Company is involved in various matters of litigation, the
ultimate determination of which, in the opinion of management, is
not expected to have a material adverse effect on the Company.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit:
10 - Material Contracts
(a) Crown Central Petroleum Corporation 1995
Management Stock Option Plan filed on
April 28, 1995 as Exhibit 4 of Registration
Statement on Form S-8, Registration
No. 33-58927, herein incorporated by reference.
19 - Previously Unfiled Documents
(a) Crown Central Petroleum Corporation 1995
Annual Incentive Plan.
20 - Interim Report to Stockholders for the three months
ended March 31, 1995
27 - Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed with the
Securities and Exchange Commission during the three months
ended March 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report on Form 10-Q
for the quarter ended March 31, 1995 to be signed on its behalf
by the undersigned thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
John E. Wheeler, Jr.
John E. Wheeler, Jr.,
Senior Vice President -
Treasurer and Controller,
Chief Accounting Officer
and Duly Authorized Officer
Date: May 12, 1995
-15-
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
1995 ANNUAL INCENTIVE PLAN
Section 1: Purpose
The purpose of the Crown Central Petroleum Corporation 1995
Annual Incentive Plan (the "Plan") is to provide an annual
performance-based incentive for executives and other key
employees who are in a position to contribute materially to the
success of the Corporation and its Subsidiaries.
Section 2: Definitions
The following terms, as used herein, will have the meaning
specified:
a. "Award" means an award made pursuant to the Plan.
b. "Award Schedule" means the Award Schedule established
pursuant to Section 3(d)(i).
c. "Board of Directors" means the Board of Directors of
the Corporation as it may be comprised from time to
time.
d. "Code" means the Internal Revenue Code of 1986, and any
successor statute, and the regulations promulgated
thereunder, as it or they may be amended from time to
time.
e. "Committee" means the Committee as defined in Section
4.
f. "Corporation" means Crown Central Petroleum Corporation
and any successor corporation.
g. "Employee" means executive officers and other key
employees of the Corporation or a Subsidiary, but
excludes directors who are not also officers or
employees of the Corporation.
h. "Exchange Act" means the Securities Exchange Act of
1934, and any successor statute, as it may be amended
from time to time.
i. "Participant" means an Employee selected from time to
time by the Committee to participate in the Plan.
j. "Performance Adjustment" means the percentage(s), as
set forth in the Award Schedule, that will, when
multiplied by a Participant's Target Award, determine
the amount of a Participant's Award.
<PAGE>
k. "Performance Criteria" means the criteria selected by
the Committee to measure performance for a Plan Year
from among one or more of the following:
i. Income before income taxes, as shown in
the Corporation's annual report to shareholders,
but excluding extraordinary items, discontinued
operations, and the cumulative effect of
accounting changes, in accordance with generally
accepted accounting principles consistently
applied by the Corporation;
ii. Any other criteria related to Corporate
performance, Subsidiary, division or unit
performance, individual performance or any other
category of performance selected by the Committee.
l. "Performance Goal" means the level of performance as to
each Performance Criteria, as established by the
Committee, that will result in a 100 percent
Performance Adjustment.
m. "Plan Year" means the calendar year.
n. "Retirement" means retirement at or after age 65 or,
with the advance consent of the Committee, at or after
age 55.
o. "Subsidiary" means any corporation in which the
Corporation, directly or indirectly, controls 50% or
more of the total combined voting power of all classes
of such corporation's stock.
p. "Target Award" means the Target Award established
pursuant to Section 4(a).
Section 3: Eligibility
The Committee shall from time to time determine those Employees
eligible for Awards.
Section 4: Awards
a. Awards. Target Awards will be established by the
Committee for each Award made to each Participant.
b. Performance Criteria and Performance Goals.
Performance Criteria and Performance Goals will be
established by the Committee for the Corporation and/or
its Subsidiaries each Plan Year. The Committee shall
also determine the extent to which each Performance
Criteria shall be weighted in determining Awards. The
Committee may vary the Performance Criteria,
Performance Goals and weightings from Participant to
Participant, Award to Award and Plan Year to Plan Year.
<PAGE>
c. Performance Adjustment. The Award payable to any
Participant may range from zero (0) to 150 percent of
the Participant's Target Award, depending upon whether,
or the extent to which, the Performance Goals have been
achieved. All such determinations regarding the
achievement of any Performance Goals will be made by
the Committee; provided, however, that the Committee
may not increase the amount of the Award that would
otherwise be payable upon achievement of the
Performance Goal or Goals.
i. Award Schedules. The Committee will
establish an Award Schedule for each Award to each
Participant setting forth the percentage of the
Target Award for such Participant payable at
specified levels of performance, based on the
Performance Goal for each Performance Criteria and
the weighting established for such criteria.
ii. Award Determination. Actual Awards will
be derived from the Award Schedule based on the
level of performance. The actual Award for a
Participant will be calculated by multiplying the
Participant's Target Award by the Performance
Adjustments in accordance with the Award Schedule.
d. Payment of Awards. Awards will be paid, in a lump
sum cash payment, as soon as practicable after the
close of the Plan Year for which they are made;
provided, however, that no Awards shall be paid except
to the extent that the Committee has certified in
writing that the Performance Goals have been met. No
Award will be payable to any Participant who is not an
Employee on the last day of the year, except that if,
during the last six months of the Plan Year, the
Participant dies, or becomes disabled, the Participant
may be entitled to a prorated Award as and to the
extent determined by the Committee. If a Participant
terminates employment due to Retirement, the
Participant shall be entitled to a prorated Award but
only as and to the extent that the Performance Goals
have been met. Notwithstanding the foregoing
provisions of this Section 4(d), the Committee shall
have the right to defer, or to allow Participants to
elect to defer, the payment of Awards subject to such
terms and conditions as it may determine.
<PAGE>
Section 5: Administration
a. Committee. The Plan and all Awards will be
administered by a Committee of the Board of Directors,
which Committee shall consist of not less than three
members of such Board of Directors. The members of the
Committee shall be designated by the Board and, unless
the Board provides otherwise, the Committee shall be
the Executive Compensation and Bonus Committee of the
Board of Directors. A majority of the members of the
Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the
Committee.
b. Authority. The Committee will have full and
complete authority, in its sole absolute discretion,
(i) to exercise all of the powers granted to it under
the Plan, (ii) to construe, interpret and implement the
Plan and any related document, (iii) to prescribe,
amend and rescind rules relating to the Plan, (iv) to
make all determinations necessary or advisable in
administering the Plan, and (v) to correct any defect,
supply any omission and reconcile any inconsistency in
the Plan.
c. Determinations. The actions and determinations of
the Committee on all matters relating to the Plan and
any Awards will be final and conclusive.
d. Liability. No member of the Committee or the
Board will be liable for any action taken or
determination made in good faith with respect to the
Plan or any Award thereunder, and the Corporation will
defend Committee and Board members for any actions
taken or decisions made in good faith under the Plan.
e. Awards. Subject to the terms of the Plan, the
Committee will have full and complete authority, to
determine, among other things, the Employees to whom,
and the time or times at which, Awards will be made and
the requisite conditions thereof.
f. Delegation. The Committee may delegate to the
officers or employees of the Corporation and/or a
Subsidiary the authority to execute and deliver such
instruments and documents, to do all such acts and
things, and to take all such other steps deemed
necessary, advisable or convenient for the effective
administration of the Plan in accordance with its terms
and purpose.
<PAGE>
Section 6: Change of Control
a. Effect of Change of Control. In the event of a
change in control of the Corporation, the Committee
may, in its sole discretion, take any of the following
actions as a result, or in anticipation, of any such
event to assure fair and equitable treatment of
Participants:
i. accelerate time periods for purposes of
vesting in, or receiving any payment with regard
to, any outstanding Award, or
ii. make adjustments or modifications to
outstanding Awards as the Committee deems
appropriate to maintain and protect the rights and
interests of Participants following such change of
control.
Any such action approved by the Committee shall be
conclusive and binding on the Corporation and all
Participants.
b. Change of Control Defined. For purposes of this
Section, a change of control shall means the following:
i. A tender offer or exchange offer is made
whereby the effect of such offer is to take over
and control the affairs of the Corporation, and
such offer is consummated for the ownership of
securities of the Corporation representing twenty
percent (20%) or more of the combined voting power
of the Corporation's then outstanding voting
securities.
ii. The Corporation is merged or
consolidated with another corporation and, as a
result of such merger or consolidation, less than
seventy-five percent (75%) of the outstanding
voting securities of the surviving or resulting
corporation shall then be owned in the aggregate
by the former stockholders of the Corporation,
other than affiliates within the meaning of the
Exchange Act or any party to such merger or
consolidation.
iii. The Corporation transfers substantially
all of its assets to another corporation or entity
that is not a wholly owned subsidiary of the
Corporation.
iv. Any person (as such term is used in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act)
is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation
representing twenty percent (20%) or more of the
combined voting power of the Corporation's then
outstanding securities, and the effect of such
ownership is to take over and control the affairs
of the Corporation.
<PAGE>
v. As the result of a tender offer, merger,
consolidation, sale of assets, or contested
election, or any combination of such transactions,
the persons who were members of the Board of
Directors immediately before the transaction,
cease to constitute at least a majority thereof.
Section 7: Miscellaneous
a. Nonassignability. No Award will be assignable or
transferable except by will or by the laws of descent
and distribution.
b. Withholding Taxes. Whenever payments under the
Plan are to be made, the Corporation and/or the
Subsidiary will withhold therefrom an amount sufficient
to satisfy any applicable governmental withholding tax
requirements related thereto.
c. Amendment or Termination of the Plan. The Board
of Directors may at any time amend, suspend or
discontinue the Plan, in whole or in part.
d. Non-Uniform Determinations. The Committee's
determinations under the Plan need not be uniform and
may be made by it selectively among persons who
receive, or are eligible to receive, Awards under the
Plan, whether or not such persons are similarly
situated. Without limiting the generality of the
foregoing, the Committee will be entitled, among other
things, to make non-uniform and selective
determinations and to establish non-uniform and
selective Performance Criteria, Performance Goals, the
weightings thereof, and Target Awards.
e. Other Payments or Awards. Nothing contained in
the Plan will be deemed in any way to limit or restrict
the Corporation, its Subsidiaries, or the Committee
from making any award or payment to any person under
any other plan, arrangement or understanding, whether
now existing or hereafter in effect.
f. Payments to Other Persons. If payments are
legally required to be made to any person other than
the person to whom any amount is available under the
Plan, payments will be made accordingly. Any such
payment will be a complete discharge of the liability
of the Committee.
<PAGE>
g. Unfunded Plan. The Plan shall be unfunded. No
provision of the Plan will require the Corporation or
its Subsidiaries, for the purpose of satisfying any
obligations under the Plan, to purchase assets or place
any assets in a trust or other entity to which
contributions are made or otherwise to segregate any
assets, nor will the Corporation or its Subsidiaries
maintain separate bank accounts, books, records or
other evidence of the existence of a segregated or
separately maintained or administered fund for such
purposes. Participants will have no rights under the
Plan other than as unsecured general creditors of the
Corporation and its Subsidiaries, except that insofar
as they may have become entitled to payment of
additional compensation by performance of services,
they will have the same rights as other employees under
generally applicable law.
h. Limits of Liability.
i. Any liability of the Corporation or a
Subsidiary to any Participant with respect to an
Award shall be based solely upon contractual
obligations created by the Plan.
ii. Neither the Corporation nor a
Subsidiary, nor any member of the Board of
Directors or of the Committee, nor any other
person participating in any determination of any
question under the Plan, or in the interpretation,
administration or application of the Plan, shall
have any liability to any party for any action
taken or not taken in good faith under the Plan.
i. Rights of Employees.
i. Status as an eligible Employee shall not
be construed as a commitment that any Award will
be made under this Plan to such eligible Employee
or to eligible Employees generally.
ii. Nothing contained in this Plan (or in
any other documents related to this Plan) shall
confer upon any Employee or Participant any right
to continue in the employ or other service of the
Corporation or a Subsidiary or constitute any
contract or limit in any way the right of the
Corporation or a Subsidiary to change such
person's compensation or other benefits or to
terminate the employment or other service of such
person with or without cause.
<PAGE>
j. Section Headings. The section headings contained
herein are for the purposes of convenience only, and in
the event of any conflict, the text of the Plan, rather
than the section headings, will control.
k. Invalidity. If any term or provision contained
herein will to any extent be invalid or unenforceable,
such term or provision will be reformed so that it is
valid, and such invalidity or unenforceability will not
affect any other provision or part hereof.
l. Applicable Law. The Plan and all actions taken
hereunder or thereunder shall be governed by, and
construed in accordance with, the laws of the state of
Maryland without regard to the conflict of law
principles thereof.
m. Effective Date. The Plan shall be effective as of
January 1, 1995.
IN WITNESS WHEREOF, Crown Central Petroleum Corporation has
caused this Plan to be executed.
CROWN CENTRAL PETROLEUM CORPORATION
By: J. Michael Mims
J. Michael Mims
<PAGE>
EXHIBIT 20
CROWN
(registered trademark)
Crown Central Petroleum Corporation
Refiners / marketers of petroleum products & petrochemicals
One North Charles Street, P.O. Box 1168, Baltimore, Maryland
21203, (410) 539-7400
April 27, 1995
Results First Quarter 1995
--------------------
- -----------------
Dear Shareholders:
Crown Central Petroleum Corporation announced today a net
loss before extraordinary charges of $6.9 million ($.71 per
share) in the first quarter of 1995 on revenues of $445.5
million. This compares to a net profit from operations of $8.7
million ($.88 per share) in the first quarter of 1994 on revenues
of $393.6 million. Including the extraordinary charge of $3.3
million ($.33 per share) due to the early extinguishment of debt,
the total net loss for the first quarter amounted to $10.2
million ($1.04 per share).
Due to the warmest weather conditions in the Eastern United
States in 30 years, which resulted in depressed distillate
prices, the refining industry experienced its worst margins since
1987. While the Company's gross refining margins of $1.79 per
barrel in the first quarter were well below the $3.63 per barrel
experienced last year, the margins realized were actually better
than those achieved by similarly configured refiners located on
the Gulf Coast. Factors contributing to this result include the
disciplined pursuit of the Company's margin management strategies
coupled with ratably purchasing crude below the average daily
price. Important, also, was the improved yield performance at
both refineries which allowed the Company to produce a higher mix
of gasoline and reduce the over-all production of less profitable
distillates. This was particularly gratifying at the Houston
refinery, where, after having completed a major turnaround in
December 1994, gasoline production was up 14% over last year.
Additionally, total refining operating expenses were down 6% from
last year.
Crown retail marketing produced very positive results for
the quarter. Retail gasoline volumes increased 6% for the
quarter to over 32,000 barrels per day, while merchandise sales
increased 27% to $21.4 million. The strong retail gasoline and
merchandise net margin improvement somewhat offset the depressed
refining gross margins. Selling and administrative expenses were
also down 9% for the quarter versus the same period last year.
These savings, combined with the refining operating expense
reductions, reflect the Company's on-going programs to improve
productivity. During 1995, Crown will continue to seek
opportunities to improve the balance between gasoline production
and retail marketing. This action is expected to reduce the
Company's earnings volatility.
The sale of $125 million of unsecured notes due in 2005 was
concluded during the first quarter. The offering brought an
increased focus to the financial stability of the Company by the
investment banking community. We are proud of the Crown teamwork
and personal commitment from those involved. The oversubscribed
debentures reflect well on the Company, provide us with permanent
non-amortizing debt, and position the Company to more effectively
access the public capital markets in the future.
While gasoline stocks are relatively low for this time of
year, which is reason for at least short-term optimism, the past
several years have been challenging to many of us in the refining
industry. As we celebrate over 75 years of Crown refining and
marketing excellence, we have every confidence in the strategies
Crown has adopted to lead our Company to an even more successful
and profitable future.
Sincerely,
HENRY A. ROSENBERG, JR. CHARLES L. DUNLAP
HENRY A. ROSENBERG, JR. CHARLES L. DUNLAP
Chairman and Chief Executive Officer President and Chief
Operating Officer
<PAGE>
<TABLE>
<CAPTION>
Crown Central Petroleum Corporation and Subsidiaries
Dollars in thousands, except per share data
Three Months Ended
March 31
1995 1994
------------ -------------
<S> <C> <C>
Sales and operating revenues $445,424 $
393,586
(Loss) income before income taxes (9,207)
16,285
(Loss) income before extraordinary item (6,918)
8,660
(Loss) from extraordinary item 1/ (3,257)
- ----
Net (loss) income (10,175)
8,660
(Loss) income per share before extraordinary item(.71 )
.88
(Loss) per share from extraordinary item (.33)
- ----
Net (loss) income per share (1.04) .
88
Share used in the computation of (loss) income per share9,80
3,098 9,832,598
<FN>
1/ During the first quarter of 1995, the Company incurred
an extraordinary loss as a result of the early
retirement of its outstanding 10.42% Senior Notes
(Notes). The outstanding Notes were retired
on January 24, 1995 from the proceeds received from
the sale of $125 million of Unsecured 10 7/8%
Senior Notes due February 1, 2005.
2/ Certain corrections have been made to specific lines of
data contained in this table from the original
table presented in the press release and the quarterly letter
to shareholders. The corrections to these items
decreased Retail Gasoline Gross Profit by $3.9 million,
increased Merchandise Gross Margin by $1.5 million,
inrcreased monthly Retail Operating Costs per store by $2.1
thousand, decreased Retail Net Profit by $4.6
million and increased Wholesale / Other by $4.3 million. The
corrections had no impact on Sales and operating
revenues, (Loss) income before income taxes or Net (loss)
income.
This altered format of the quarterly statement represents a
substantial savings in report costs and delivery time.
Should you wish further information on the quarterly results,
please call 1-800-610-1415 or refer to the operating
statistics sheet.
</TABLE>
<TABLE>
<CAPTION>
Crown Central Petroleum Corporation and Subsidiaries
Operating Statistics
Three Months Ended
March 31
1995 1994
------------ -------------
<S> <C> <C>
REFINING
Production (BPD - M) 154 1
61
Production (MMbbl) 13.9 1
4.5
Gross Margin ($/bbl) 1.79 3
.63
Gross Profit ($MM) 24.8 5
2.6
Operating Cost ($/bbl) 2.30 2
.37
Operating Cost ($MM) 31.9 3
4.4
Net Refining Profit ($MM) (7.1) 1
8.2
RETAIL
Number Stores 345 3
62
Volume (pmps - Mgal) 115 1
03
Volume (MMgal) 119 1
12
Gasoline Gross Margin ($/gal) 0.13 0
.12
Gasoline Gross Profit ($MM) 15.4 1
3.9
Merchandise Sales (pmps - $M) 20.7 1
5.5
Merchandise Sales ($MM) 21.4 1
6.8
Merchandise Gross Margin (%) 29.4 3
2.7
Merchandise Gross Margin ($MM) 6.3 5
.5
Retail Gross Profit ($MM) 21.7 1
9.8
Retail Operating Costs (pmps - $M) 17.2
16.8
Retail Net Profit ($MM) 3.9 1
.6
Wholesale / Other (($MM) 0.7 6
.2
Total Net Profit ($MM) (2.5) 2
6.0
Corporate Overhead ($MM) 4.0 8
.2
Depreciation and Amortization ($MM) 9.5
10.6
EBITDA ($MM) 3.0 2
8.4
LIFO Provision (Recovery) ($MM) (1.2)
4.0
(Gain) Loss on Sales and Abandonments of P, P & E ($MM) 0.2
(0.3 )
EBITDAAL ($MM) 2.0
32.1
Net Interest Expense ($MM) 2.7
1.5
Capital Expenditures ($MM) 6.6
7.6
- -------------------------------------------------------------
- -------------------------------------------------------------
- ------
<FN>
BPD = Barrels per day
bbl = barrel or barrels as applicable
gal = gallon or gallons as applicable
pmps = per month per store
M = in thousands
MM = in millions
EBITDAAL = EBITDA on a FIFO basis plus net sales and
abandonments of property, plant and equipment
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<CASH> 5,608
<SECURITIES> 46,685
<RECEIVABLES> 92,003
<ALLOWANCES> 1,984
<INVENTORY> 87,074
<CURRENT-ASSETS> 257,686
<PP&E> 703,988
<DEPRECIATION> 337,479
<TOTAL-ASSETS> 666,055
<CURRENT-LIABILITIES> 182,988
<BONDS> 129,570
0
0
<COMMON> 49,765
<OTHER-SE> 200,520
<TOTAL-LIABILITY-AND-EQUITY> 666,055
<SALES> 445,424
<TOTAL-REVENUES> 445,424
<CGS> 422,164
<TOTAL-COSTS> 422,164
<OTHER-EXPENSES> 29,614
<LOSS-PROVISION> 126
<INTEREST-EXPENSE> 3,475
<INCOME-PRETAX> (9,207 )
<INCOME-TAX> (2,289 )
<INCOME-CONTINUING> (6,918 )
<DISCONTINUED> 0
<EXTRAORDINARY> (3,257 )
<CHANGES> 0
<NET-INCOME> (10,175 )
<EPS-PRIMARY> (1.04 )
<EPS-DILUTED> (1.04 )
</TABLE>
