<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 June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___to ____
COMMISSION FILE NUMBER 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified
in its charter)
Maryland 52-0550682
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
One North Charles Street, Baltimore, Maryland 21201
(Address of principal executive offices) (Zip Code)
<PAGE>
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 July 31, 1996
of the Registrant's $5 par value Class A and Class
B Common Stock was 4,817,392 shares and 5,178,736
shares, respectively.
-1-
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
AND SUBSIDIARIES
Table of Contents
PAGE
PART I- FINANCIAL INFORMATION
Item 1- Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
June 30, 1996 and December 31, 1995 ...................3-4
Consolidated Condensed Statements of
Operations three and six months
ended June 30, 1996 and 1995 ..........................5
Consolidated Condensed Statements of
<PAGE>
Cash Flows Six months ended
June 30, 1996 and 1995 ...............................6
Notes to Unaudited Consolidated Condensed
Financial Statements ................................ 7-12
..
Management's Discussion and Analysis of
-
Item 2
Financial Condition and Results of Operations..................12-16
-
PART II OTHER INFORMATION
Legal Proceedings
-
Item 1 ..................................... 17
Exhibits and Reports on Form 8-K
-
Item 6 ...................... 17
Exhibit 4 (a) - Amendment effective as
of April 1, 1996 to the Credit Agreement dated
as of September 25, 1995
Exhibit 11 - Statement re: Computation
of Earnings Per Share
Exhibit 20 - Interim Report to
Stockholders for the three months
ended June 30, 1996
Exhibit 27 - Financial Data Schedule
SIGNATURE .................................................. 18
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
June 30 December 31
1996 1995
---------- -----------
Assets (Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents ........... 32,516
$ $ 42,045
Accounts receivable - net ........... 117,186 105,799
Recoverable income taxes ............ 2,450 4,137
Inventories ......................... 78,621 96,025
<PAGE>
Other current assets ................ 6,103 2,595
---------- ---------
Total Current Assets ............. 236,876 250,601
Investments and Deferred Charges ...... 34,854 30,633
Property, Plant and Equipment ......... 636,389 624,338
ss allowance for depreciation
Le ..... 333,286 322,358
--------- ---------
Net Property, Plant and Equipment . 303,103 301,980
--------- ---------
$ 574,833 583,214
$
========= =========
<FN>
See notes to unaudited consolidated condensed financial
statements.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
June 30 December 31
1996 1995
---------- -----------
Liabilities and Stockholders' Equity (Unaudited)
<S> <C> <C>
Current Liabilities
Accounts Payable:
Crude oil and refined products .... $ 122,477 $ 112,036
Other ............................. 16,459 24,287
Accrued Liabilities ................. 50,429 66,788
<PAGE>
Current portion of long-term debt ... 21,357 1,559
--------- ---------
Total Current Liabilities ....... 210,722 204,670
Long-Term Debt ........................ 127,859 128,506
Deferred Income Taxes ................. 21,435 27,995
Other Deferred Liabilities ............ ,935
34 32,548
Common Stockholders' Equity
Common stock, Class A - par value
$5 per share:
Authorized shares -- 15,000,000;
issued and
outstanding shares -- 4,817,392
in 1996 and 1995 .................. 24,087 24,087
Common stock, Class B - par value
$5 per share:
Authorized shares -- 15,000,000;
issued and
outstanding shares -- 5,171,597
in 1996 and
5,135,558 in 1995 ................. 25,858 25,678
Additional paid-in capital .......... 92,751 92,249
Unearned restricted stock ........... (4,030 (3,733
) )
Retained earnings ................... 41,216 51,214
--------- ---------
Total Common Stockholders' Equity 179,882 189,495
$ 574,833 $ 583,214
========= =========
<FN>
See notes to unaudited consolidated condensed financial
statements.
</TABLE>
-4-
<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 Six Months Ended
<PAGE>
June 30 June 30
1996 1995 1996 1995
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues
Sales and operating revenues $431,208 380,125
$ $802,299 724,958
$
Operating Costs and Expenses
Costs and operating expenses 395,229 337,487 750,367 659,060
Selling and administrative
expenses ..................... 23,355 19,119 46,623 39,124
Depreciation and amortization 8,052 9,492 16,029 18,984
Sales of property, plant and
equipment .................... )
5
(4 )
(416 )
(23 )
(173
------- -------- -------- --------
426,591 365,682 812,996 716,995
------- -------- -------- --------
Operating Income (Loss) ...... 4,617 14,443 )
(10,697 7,963
Interest and other income .... 398 844 1,264 1,592
Interest expense ............. (3,632) )
(3,861 )
(7,194 )
(7,336
------- -------- -------- --------
Income (Loss) Before Income
Taxes 1,383 11,426 )
(16,627 2,219
Income Tax (Benefit) Expense (1,629
. ) 4,396 )
(6,629 2,107
------- -------- -------- -------
Income (Loss) Before
Extraordinary Item ........... 3,012 7,030 )
(9,998 112
Extraordinary (Loss) from Early
Extinguishment of Debt (net
of income
tax benefit of $2,039) ..... )
(3,257
------- -------- -------- -------
Net Income (Loss) ............ $ 3,012 $ $
7,030 (9,998) $ )
(3,145
======= ======== ======== =======
Net Income (Loss) Per Share:
Income (Loss) Before
Extraordinary Item ........... $ $
.31 .72 $ )
(1.03 $ .01
Extraordinary (Loss) from
Early
Extinguishment of Debt ... )
(.33
------- -------- -------- --------
Net Income (Loss) Per Share $ .31 $ .72 $ (1.03) (.32)
$
======= ======== ======== ========
<FN>
<PAGE>
See notes to unaudited consolidated condensed financial
statements.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
(Unaudited)
Six Months Ended June 30
1996 1995
---------- ----------
<S> <C> <C>
Net Cash Flows From Operating Activities
Net cash from operations before
changes in working capital ........ $ 2,200 6,434
$
Net changes in working capital items )
(9,550 (30,643)
--------- ---------
Net Cash (Used in) Operating
Activities ............................ )
(7,350 (24,209)
--------- ---------
Cash Flows From Investment Activities
Capital Expenditures ................ (14,704) (14,773)
Proceeds from sales of property, plant
and equipment ..................... 254 1,480
Deferred turnaround maintenance ..... )
(3,533 (1,150)
Other charges to deferred assets .... )
(3,193 (5,702)
--------- ---------
Net Cash (Used in) Investment (21,176) (20,145)
Activities ............................ --------- ---------
Cash Flows From Financing Activities
Proceeds from debt and credit
agreement borrowings .................. 30,000 143,088
(Repayments) of debt and credit
agreement borrowings .................. (10,857) (118,640)
Net cash flows from long-term notes
receivable ............................ )
(540 163
Issuance of common stock ............ 394
--------- ---------
Net Cash Provided by Financing
Activities ............................ 18,997 24,611
--------- ---------
<PAGE>
Net (Decrease) in Cash and Cash
Equivalents ........................... $ )
(9,529 (19,743
$ )
========= =========
<FN>
See notes to unaudited consolidated condensed financial
statements.
</TABLE>
-6-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and
Subsidiaries
June 30, 1996
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 and six months ended June 30, 1996
are not necessarily indicative of the
results that may be expected for the year
ending December 31, 1996. 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, 1995.
<PAGE>
Use of Estimates: The preparation of
financial statements in conformity with
generally accepted accounting principles
requires Management to make estimates and
assumptions that affect the amounts
reported in the financial statements and
accompanying notes. Actual results could
differ from those estimates.
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 June 30, 1996, crude oil and refined
product inventory aggregating
approximately $12.7 million was held in
excess of anticipated year-end
quantities, excluding crude oil held for
resale, and was 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
<PAGE>
decision for closure is made. Estimated
closure and post-closure costs for active
operating 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 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.
-7-
<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.
<PAGE>
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. The
Company's hedging activities are intended
to reduce volatility while providing an
acceptable profit margin on a portion of
production. However, the use of such a
program can limit the Company's ability
to participate in an improvement in
related refined product profit margins.
Credit Risk - The Company is potentially
subjected to concentrations of credit
risk with accounts receivable, interest
rate swaps, and futures, forwards and
exchange traded options for crude oil and
finished products. Because the Company
has a large and diverse customer base
with no single customer accounting for a
significant percentage of accounts
receivable, there was no material
concentration of credit risk in these
accounts at June 30, 1996. The Company
evaluates the credit worthiness of the
counterparties to interest rate swaps,
<PAGE>
and futures, forwards and exchange traded
options and considers non-performance
credit risk to be remote. The amount of
exposure with such counterparties is
generally limited to unrealized gains on
outstanding 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.
Reclassifications - To conform to the
1996 presentation, Sales and operating
revenues and Costs and operating expenses
for the three and six months ended June
30, 1995 have been adjusted to exclude
all federal and state excise taxes. As a
result, Sales and operating revenues and
Costs and operating expenses decreased
$103,187,000 and $203,778,000,
respectively, for the three and six
months ended June 30, 1995 from the
numbers originally reported. This
adjustment had no effect on net income or
loss for either period.
-8-
<PAGE>
<TABLE>
<CAPTION>
Note B - Inventories
Inventories consist of the following:
June 30 December 31
1996 1995
---------- -----------
(thousands of dollars)
<S> <C> <C>
Crude oil $ 40,297 58,047
$
Refined products ......................... 86,024 77,342
-------- --------
Total inventories at FIFO (approximates
current cost) ............................ 126,321 135,389
LIFO allowance ........................... (61,249 (52,301
) )
-------- --------
Total crude oil and refined products... 65,072 83,088
-------- --------
<PAGE>
Merchandise inventory at FIFO (approximates
current cost) ............................ 6,932 6,453
LIFO allowance ........................... (1,674 (1,674
) )
-------- --------
Total merchandise...................... 5,258 4,779
-------- --------
Materials and supplies inventory at FIFO . 8,291 8,158
-------- --------
Total Inventory........................ 78,621
$ 96,025
$
======== ========
</TABLE>
<TABLE>
<CAPTION>
Note C - Long-term Debt and Credit Arrangements
Long-term debt consists of the following:
June 30 December 31
1996 1995
---------- -----------
(thousands of dollars)
<S> >
<C <C>
Unsecured 10 7/8% Senior Notes ........... 124,732
$ 124,716
$
Credit Agreement ......................... 20,000
Purchase Money Lien ...................... 3,921 4,492
Other obligations ........................ 563 857
-------- --------
149,216 130,065
Less current portion 21,357 1,559
-------- --------
Long-Term Debt......................... 127,859
$ $ 128,506
======== ========
</TABLE>
Effective as of April 1, 1996, the
Company executed an amendment to the
unsecured revolving Credit Agreement
dated as of September 25, 1995 (Credit
Agreement), which is used solely for the
purpose of financing the working capital
requirements of the Company. This
amendment, which is included as Exhibit
4(a) of this filing, established new
financial covenants which became
appropriate due to decreased refining
margins in the fourth quarter of 1995 and
in early 1996. As of June 30, 1996,
under the terms of the Credit Agreement,
the Company had outstanding irrevocable
<PAGE>
standby letters of credit in the
principal amount of $20.4 million for
performance obligations related to
environmental and insurance matters, cash
borrowings of $20 million and unused
commitments available for future cash
borrowings and letters of credit totaling
$89.6 million. As of June 30, 1996, the
Company was in compliance with all
covenants and provisions of the Credit
Agreement, as amended, and forecasts
that, but there can be no assurance that,
it will remain in compliance for the
remainder of the year.
-9-
<PAGE>
The $125 million unsecured 10.875% Senior
Notes (Notes), which were issued under an
Indenture (Indenture) are used
principally to finance the permanent
capital requirements of the Company. As
of June 30, 1996, the Company was in
compliance with the terms of the
Indenture. The Indenture includes
certain restrictions and limitations
customary with senior indebtedness of
this type which limit the amount of
additional indebtedness the Company may
incur outside of the Credit Agreement and
under certain circumstances, restrict the
Company from declaring dividends. As of
June 30, 1996, the Indenture
substantially restricted the Company from
effecting borrowings outside of the
Credit Agreement and precluded the
payment of dividends. The Company has not
paid a dividend on its shares of common
stock since the first quarter, 1992. The
Company expects that, but there can be no
assurance that, by the second quarter of
1997, due to improved operating results,
the Indenture will no longer
substantially restrict the Company from
effecting borrowings outside of the
Credit Agreement.
Note D - Derivative Financial Instruments
There were no interest rate swap
agreements outstanding during the first
six months of 1996. At June 30, 1996,
the Company has recorded a deferred gain
of $.9 million related to canceled
<PAGE>
interest rate swap agreements which will
be amortized into income over the
remaining terms of the original swap
agreements ranging from 1996 to 1998. The
Company may utilize interest rate swaps
in the future to further manage the cost
of funds.
Note E - Income Taxes
During the quarter ended June 30, 1996,
the Company increased its estimated
annual effective income tax rate from
34.6% to 41.0%. The effect of the change
in estimate was to increase net income
for the quarter ended June 30, 1996 by
$1.1 million or $.11 per share.
Note F - Calculation of Net (Loss) Income
Per Common Share
Net income (loss) per common share for
the three and six months ended June 30,
1996 and 1995 is based on the weighted
average of common shares outstanding of
9,711,419 and 9,697,598, respectively.
Note G - 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. 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. Beginning with grants made in
<PAGE>
1996, shares not earned by the attainment
of performance goals will be earned upon
the completion of a 5 year service
requirement. As of June 30, 1996,
263,120 shares of PVRS (net of
cancellations) have been registered in
participants names and are being held by
the Company subject to the attainment of
the related performance goals or the
related service requirement.
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 June 30, 1996, grants of non-
qualified stock options have been awarded
to participants to purchase 526,705
shares of the Company's Class B Common
Stock (net of cancellations).
Under the terms of the 1995 Management
Stock Option Plan, a maximum of 500,000
shares of Class B Common Stock was
available for distribution. The Company
awarded to participants non-qualified
stock options to purchase 452,716 shares
of the Company's Class B Common Stock
(net of cancellations) at a price equal
to 100% of the fair market value of the
stock at 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.
-10-
<PAGE>
Shares of Class B Common Stock available for issuance
under options or awards amounted to 357,459 at June 30,
1996.
<TABLE>
<CAPTION>
Detail of the Company's stock options are as follows:
Common Price Range
Shares per share
--------- -------------
<S> <C> <C>
<PAGE>
_____________________________
1994 Long-Term Incentive Plan
Granted - 1994 ................. 109,800 $16.13 - $16.88
Canceled - 1994 ................ (950 $16.88
)
-------
Outstanding - December 31, 1994 108,850 $16.13 - $16.88
Granted - 1995 ................. 396,150 $12.81 - $13.75
-------
Outstanding - December 31, 1995 505,000 $12.81 - $16.88
Granted - 1996 ................. 103,100 $15.38 - $19.50
Exercised - 1996 ............... $12.81 - $16.88
(19,833)
Canceled - 1996 ................ (81,395 $12.81 - $16.88
)
-------
Outstanding - June 30, 1996 .... 506,872 $12.81 - $19.50
=======
Shares Exercisable at June 30, 79,214 $12.81 - $16.88
.............................
1996 =======
_________________________________
1995 Management Stock Option Plan
Granted - 1995 ................. 461,760 $13.75 - $16.06
-------
Outstanding - December 31, 1995 461,760 $13.75 - $16.06
Exercised - 1996 ............... (6,756) $13.75
Canceled - 1996 ................ (9,044 $13.75
)
-------
Outstanding - June 30, 1996 ... 445,960 $13.75 - $16.06
=======
Shares exercisable at 137,966 $13.75
June 30, 1996 ................. =======
Total outstanding - June 30, 1996 952,832 $12.81 - $19.50
=======
Total exercisable - June 30, 1996 217,180 $12.81 - $16.88
=======
</TABLE>
Note H - Litigation and Contingencies
Except as disclosed in this note, there
have been 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, 1995.
All issues relating to the examination by
the Internal Revenue Service of tax
returns for fiscal years 1988 and 1989
<PAGE>
have now been resolved, with no material
adverse impact to 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 has
recorded a liability of approximately
$16.4 million as of June 30, 1996
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. While certain
recoveries from various state
environmental funds are reasonably
anticipated based upon prior experience,
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 were
environmental remediation costs of $.7
million and $.4 million, respectively,
for the three months ended June 30, 1996
and 1995, and $1 million and $1.1
million, respectively, for the six months
ended June 30, 1996 and 1995.
-11-
<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
<PAGE>
environmental remediation requirements
and processes, 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 $51.1 million or 13.4%
in the second quarter of 1996 and $77.3
million or 10.7% for the six months ended
June 30, 1996 from the comparable periods
in 1995. The second quarter increase in
Sales and operating revenues was
primarily attributable to a 9.7% increase
in the average sales price per gallon of
petroleum products and a 3.8% increase in
petroleum product sales volumes. The
year to date increase was a result
primarily of an 8.5% increase in the
average sales price per gallon of
petroleum products and a 2.2% increase in
petroleum product sales volumes.
Additionally, there were slight increases
in merchandise sales of 4.5% and 2.4% for
the three and six months ended June 30,
1996, respectively, compared to the same
1995 periods.
Merchandise gross margin (merchandise
gross profit as a percent of merchandise
sales) increased from 26.4% to 30.1% for
the second quarter of 1995 and 1996,
respectively and from 25.8% to 28.7% for
the six months ended June 30, 1995 and
1996, respectively. The increases in
gross margin is a result of the Company's
merchandise pricing program designed to
increase per unit customer traffic and
<PAGE>
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 1.7% and 3.5%,
respectively, for the six months ended
June 30, 1996 compared to the same 1995
periods and has contributed to the $1.7
million or 13.7% increase in merchandise
gross profit. Aggregate year to date
merchandise gross profit on a same store
basis increased by 14.3% in 1996
compared to the same 1995 period.
Costs and operating expenses increased
$57.7 million or 17.1% in the second
quarter of 1996 compared to the same
period in 1995. The increase was due to
a 13.8% increase in the average cost per
barrel consumed of crude oil and
feedstocks and to slight increases in
volumes sold as previously mentioned.
Costs and operating expenses increased
$91.3 million or 13.9% for the six months
ended June 30, 1996 compared to the same
period in 1995. This increase was due to
an 11.6% increase in the average cost per
barrel consumed of crude oil and
feedstocks and to slight increases in
volumes sold as previously discussed.
The results of operations were
significantly affected by the Company's
use of the LIFO method to value inventory
which decreased the Company's gross
margin $.33 per barrel ($8.9 million) in
1996, and $.08 per barrel ($2.4 million)
in 1995.
In early 1996, the Company adjusted its
gasoline and distillate production to
take advantage of better distillate
margins compared to gasoline margins.
Correspondingly, yields of distillates
were increased to 49,800 bpd (34.3%) for
the second quarter of 1996 compared to
43,200 bpd (28.3%) in the comparable 1995
period, while gasoline production was
decreased from 92,400 bpd (60.6%) in the
second quarter of 1995 to 89,800 bpd
(61.8%) in the second quarter of 1996.
Similarly, yields of distillates were
increased to 48,000 bpd (33.1%) for the
six months ended June 30, 1996 from
<PAGE>
43,000 bpd (28.2%) for the same period in
1995 while gasoline production was
decreased from 94,700 bpd (62.1%) for the
six months ended June 30, 1995 to 87,600
bpd (60.4%) for the six months ended June
30, 1996.
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.
-12-
<PAGE>
Selling and administrative expenses
increased $4.2 million or 22.2% for the
three months ended June 30, 1996 and $7.5
million or 19.2% for the six months ended
June 30, 1996 compared to the same
periods in 1995. These increases are
principally due to increases in store
level operating expenses, primarily
related to additional units and increased
labor costs. Additionally, the Company
recorded approximately $1 million in
corporate administrative expenses
associated with a management
reorganization in early 1996.
Operating costs and expenses for the
three and six months ended June 30, 1996
included $.7 million and $1 million,
respectively, related to environmental
matters and $.2 million and $.3 million,
respectively, related to retail units
that have been closed. This compares to
$.4 million and $1.1 million,
respectively, related to environmental
matters and $.4 million and $1.1 million,
respectively, related to retail units
that have been closed, for the three and
six months ended June 30, 1995.
Additionally, Operating costs and
expenses for the second quarter and year
to date periods of 1996 were reduced by
$3.9 million related to the adjustment of
certain pending litigation and employee
benefit costs.
Depreciation and amortization decreased
$1.4 million or 15.2% in the second
quarter of 1996 and $3 million or 15.6%
for the six months ended June 30, 1996
<PAGE>
compared to the same 1995 periods. These
decreases are primarily the result of a
reduction in the depreciable base of the
Tyler refinery assets due to the adoption
of SFAS No. 121 ``
Accounting for the
Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of''
effective October 1, 1995.
In the first quarter of 1995, the Company
completed the sale of $125 million of
Unsecured 10.875% Senior Notes due
February 1, 2005 priced at 99.75%
(Notes). Approximately $55 million of
the net proceeds from the sale were 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 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)
totaled $7.4 million for the six months
ended June 30, 1996 compared to cash used
in operating activities of $24.2 million
for the six months ended June 30, 1995.
The 1996 outflows consist primarily of
$9.6 million related to working capital
requirements resulting primarily from
decreases in accrued income and excise
tax liabilities and other accounts
payable and to increases in accounts
receivable and prepaid operating
expenses, principally related to
insurance premiums. These working
capital outflows were partially offset by
decreases in the value of crude oil and
finished products inventories and
increases in crude oil and refined
products payables. Partially offsetting
these cash outflows was cash provided by
operations of $2.2 million before changes
in working capital. The 1995 outflows
consist of $30.6 million in cash outflows
related to working capital requirements
<PAGE>
resulting from increases in accounts
receivable, increases in recoverable
income taxes and decreases in crude oil,
refined products and other payables.
These working capital outflows were
partially offset by decreases in the
value of crude oil and finished product
inventories, decreases in prepaid
operating expenses and increases in
accrued liabilities. Partially
offsetting these cash outflows was cash
provided by operations of $6.4 million
before changes in working capital.
Net cash outflows from investment
activities were $21.2 million for the six
months ended June 30, 1996 compared to a
net outflow of $20.1 million for the same
1995 period. The 1996 amount consists
principally of capital expenditures of
$14.7 million (which includes $6.4
million for refinery operations and $5.6
million relating to the marketing area).
Additionally, there were refinery
turnaround expenditures of $3.5 million
and increases in other deferred assets of
$3.2 million. The 1995 activity relates
primarily to $14.8 million of capital
expenditures ($7.9 million relating to
refinery operations and $5.5 relating to
the marketing area). In addition, there
were increases in other deferred assets
of $5.7 million, which consists primarily
of $2.9 million in loan placement fees
related to the sale of $125 million of
unsecured 10.875% Senior Notes in January
1995, and refinery turnaround
expenditures of $1.1 million. The 1995
cash outflows were partially offset by
proceeds from the sale of property, plant
and equipment of $1.5 million.
-13-
<PAGE>
Net cash provided by financing activities
was $19 million for the six months ended
June 30, 1996 compared to cash provided
by financing activities of $24.6 million
for the six months ended June 30, 1995.
The 1996 cash inflow consists principally
of $19.1 million in net proceeds received
from debt and credit agreement borrowings
due primarily to net cash borrowings from
the Company's unsecured revolving Credit
Agreement. Partially offsetting these
<PAGE>
cash inflows were increases of $.5
million in long-term notes receivable.
The 1995 cash inflows relate to $24.4
million in net proceeds received from
debt and credit agreement borrowings due
primarily to the sale in January 1995 of
$125 million of unsecured 10.875% 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.
Cash and cash equivalents at June 30,
1996 were $2.6 million lower than at June
30, 1995. This decrease resulted
primarily from cash used in investment
activities of $38.4 million, which
includes capital expenditures of $35.8
million, net of $5.1 million of proceeds
received from the sale of property, plant
and equipment, and deferred turnaround
charges of $15.3 million. These cash
outflows were partially offset by an
increase in cash of $6.8 million
resulting from the consolidation of the
Company's wholly-owned insurance
subsidiaries in the fourth quarter of
1995 and decreases in other deferred
assets due primarily to the write-off of
Tyler refinery deferred turnaround
charges and goodwill resulting from the
adoption of Statement of Financial
Accounting Standards No. 121 ``
Accounting
for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed
Of''
effective October 1, 1995. These
cash outflows were partially offset by
cash provided by operations of $21
million, including $2.2 million provided
by working capital activities.
Additionally, cash provided by financing
activities amounted to $14.8 million for
the period July 1, 1995 to June 30, 1996
relating primarily to net borrowings from
the Company's debt and credit agreement
facilities of $14.7 million for the
twelve month period ended June 30, 1996.
The ratio of current assets to current
liabilities at June 30, 1996 was 1.12:1
compared to 1.37:1 at June 30, 1995 and
1.22:1 at December 31, 1995. 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
<PAGE>
been 1.28:1 at June 30, 1996, 1.48:1 at
June 30, 1995 and 1.35:1 at December 31,
1995.
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
borrowings under the Credit Agreement,
will be sufficient to fund these costs.
The Company had recorded a liability of
approximately $16.4 million as of June
30, 1996 to cover the estimated costs of
compliance with environmental regulations
which are not anticipated to be of a
capital nature. The liability of $16.4
million includes accruals for issues
extending past 1997.
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
<PAGE>
claims arise. However, management is not
aware of any matters which would be
expected to have a material adverse
effect on the Company.
-14-
<PAGE>
During the years 1996-1998, the Company
estimates environmental expenditures at
the Pasadena and Tyler refineries of at
least $6.9 million and $13.5 million,
respectively. Of these expenditures, it
is anticipated that $4.4 million for
Pasadena and $8.1 million for Tyler will
be of a capital nature, while $2.5
million and $5.4 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 $25.5 million through 1998.
The Company's principle purchases (crude
oil and convenience store merchandise)
are transacted primarily under open lines
of credit with its major suppliers. The
Company maintains two credit facilities
to finance its business requirements and
supplement internally generated sources
of cash.
As discussed in Note C of Notes to
Unaudited Consolidated Condensed
Financial Statements, effective as of
April 1, 1996, the Company executed an
amendment to the $130 million unsecured
revolving Credit Agreement dated as of
September 25, 1995 (Credit Agreement).
This amendment, which is included as
Exhibit 4(a) of this filing, established
new financial covenants which became
appropriate due to decreased refining
margins in the fourth quarter of 1995 and
in early 1996.
The Credit Agreement is used solely for
the purpose of financing the working
capital requirements of the Company. As
of June 30, 1996, the Company had
outstanding irrevocable standby letters
of credit in the principal amount of
$20.4 million for performance obligations
related to environmental and insurance
matters, cash borrowings of $20 million
<PAGE>
and unused commitments available for
future cash borrowings and letters of
credit totaling $89.6 million. As of
June 30, 1996, the Company was in
compliance with all covenants and
provisions of the Credit Agreement as
amended and forecasts that, but there can
be no assurance that, it will remain in
compliance for the remainder of the year.
The $125 million unsecured 10.875% Senior
Notes (Notes) due January 25, 2005
require semi-annual interest payments.
There are no sinking fund requirements on
the Notes. This facility is principally
used to finance the permanent capital
requirements of the Company and, to the
extent required, working capital. At the
Company's option, up to $37.5 million of
the 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. These
restrictions and limitations include, but
are not limited to, restrictions on the
incurrence of additional indebtedness, on
the payment of dividends and on the
repurchase of capital stock. These
restrictions and limitations are not
applicable to letter of credit
availability and up to $50 million of
cash borrowings provided by the Credit
Agreement. As of June 30, 1996, the
Indenture substantially restricted the
Company from effecting borrowings outside
of the Credit Agreement and precluded the
Company from paying any dividends. The
Company has not paid a dividend on its
shares of common stock since the first
quarter of 1992. The Company expects
that, but there can be no assurance that,
by the second quarter of 1997, due to
improved operating results, the Indenture
will no longer substantially restrict the
Company from effecting borrowings outside
of the Credit Agreement. As outlined in
the Company's planned capital
requirements described below, while the
Company is limited by the Indenture from
<PAGE>
effecting borrowings outside of the
Credit Agreement, it does not currently
plan to effect any borrowings outside of
the Credit Agreement.
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 1996 are
projected to approximate $41.5 million.
The capital expenditures relate primarily
to planned enhancements at the Company's
refineries, retail unit improvements and
to company-wide environmental
requirements. The Company believes that
cash provided from its operating
activities, together with other available
sources of liquidity, including
availability from the Credit Agreement,
will be sufficient over the next year 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.
-15-
<PAGE>
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.
<PAGE>
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.
As discussed in Item 3. Legal Proceedings
of the Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, the
Company's collective bargaining agreement
at its Pasadena refinery expired on
February 1, 1996, and on February 5,
1996, the Company invoked a lock-out of
employees in the collective bargaining
unit. The Company has been operating the
Pasadena refinery without interruption
since the lock-out with management and
supervisory personnel and intends to
continue full operations until an
agreement is reached with the collective
bargaining unit. The Oil, Chemical &
Atomic Workers Union (OCAW) filed unfair
labor practice charges against the
Company in connection with the lock-out.
The Regional Office of the National
Labor Relations Board (NLRB) has
dismissed the charges; and; accordingly,
no accruals related to back wages have
been recorded. The union appealed this
ruling, and the General Counsel remanded
the case to the Regional Director for
additional investigation. In July, the
union filed additional unfair labor
practice charges which are, in the
Company's opinion, totally without merit.
The Company intends to continue to
vigorously contest these matters.
-16-
<PAGE>
PART II - OTHER INFORMATION
<PAGE>
Item 1 - Legal Proceedings
There has been no material change 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, 1995.
The unfair labor practice charges filed
by the Oil, Chemical & Atomic Workers
Union in connection with the lock-out of
employees in the collective bargaining
unit at the Pasadena refinery, which were
previously reported in the Annual Report
on Form 10-K for the year ended December
31, 1995, were dismissed by the Regional
Office of the National Labor Relations
Board. The union appealed this ruling,
and the General Counsel remanded the case
to the Regional Director for additional
investigation. In July, the union filed
additional unfair labor practice charges
which are, in the Company's opinion,
totally without merit. The Company
intends to continue to vigorously contest
these matters.
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:
4(a) - Amendment effective as of
April 1, 1996
to the Credit Agreement
dated as of
September 25, 1995
11 -Statement re: Computation
of Earnings Per
Share
20 -Interim Report to
Stockholders for the
three and six months ended
June 30, 1996
27 -Financial Data Schedule
(b) Reports on Form 8-K:
<PAGE>
There were no reports on
Form 8-K filed with the Securities and
Exchange Commission during the three
months ended June 30, 1996.
-17-
<PAGE>
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 June 30,
1996 to be signed on its behalf by the
undersigned thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
/s/---Patrick D. McCafferty
Patrick D. McCafferty
Controller
Chief Accounting Officer
and Duly Authorized Officer
Date: August 13, 1996
-18-
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT
AGREEMENT (herein called this
"Amendment") is made as of the 25th day
of June, 1996 by and among Crown Central
Petroleum Corporation, a Maryland
corporation (the "Company"), The First
National Bank of Boston and Texas
Commerce Bank National Association, as
agents for the Banks ("Agents"),
NationsBank of Texas, N.A., as
administrative agent and as letter of
credit agent for the Banks (in such
<PAGE>
respective capacities, "Administrative
Agent" and "Letter of Credit Agent"), and
each of the banks that is a signatory to
the Original Agreement (the "Banks")(the
Administrative Agent, the Letter of
Credit Agent, the Agents, and the Banks
are collectively referred to herein as
the "Bank Parties").
RECITALS
1. The Company and the Bank Parties
have entered into that certain Credit
Agreement dated as of September 25, 1995,
as amended by that certain First
Amendment to Credit Agreement dated as of
February 1, 1996 (as so amended the
"Original Agreement"), for the purpose
and consideration therein expressed.
2. The Company and the Bank Parties
desire to amend the Original Agreement as
expressly set forth herein.
NOW, THEREFORE, in consideration of the
premises and the mutual covenants and
agreements contained herein and in the
Original Agreement and in consideration
of the credit which may hereafter be
extended by the Banks to the Company, and
for other good and valuable
consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties hereto agree as
follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the
Original Agreement. Unless the context
otherwise requires or unless otherwise
expressly defined herein, the terms
defined in the Original Agreement shall
have the same meanings whenever used in
this Amendment.
Section 1.2. Other Defined Terms.
Unless the context otherwise requires,
the following terms when used in this
Amendment shall have the meanings
assigned to them in this Section 1.2.
"Amendment" shall mean this Second
Amendment to Credit Agreement.
<PAGE>
-1-
<PAGE>
"Credit Agreement" shall mean the
Original Agreement as amended hereby.
ARTICLE II.
Amendments to Original Agreement
Section 2.1. Amendments to Defined
Terms. The definition of "Adjusted
Current Ratio" in Section 1.1 of the
Original Agreement is hereby amended in
its entirety to read as follows:
"Adjusted Current Ratio" shall
mean, as of June 30, 1995 and as of the
end of each calendar month thereafter,
the ratio of Adjusted Current Assets to
Adjusted Liabilities, provided that for
the purpose of determining Adjusted
Current Ratio after April 1, 1996, clause
(b) in the definition of "Adjusted
Current Assets" shall be deemed to read
as follows: "(b) an amount equal to the
Company's Consolidated inventory LIFO
reserve at such Determination Date."
Section 2.2. Covenants of the Company.
Section 8.23 of the Credit Agreement is
hereby amended in its entirety to read as
follows:
For each short-term measurement period
set forth in the following table, the
Company shall cause FIFO Net Income
(Loss) to be greater than the amount set
out opposite such period in such period:
Amount
Period
($20,000,000) July 1995
($20,000,000) July 1995 through
August 1995
($20,000,000) July 1995 through
September 1995
($19,600,000) July 1995 through
October 1995
($19,200,000) July 1995 through
November 1995
($18,800,000) July 1995 through
December 1995
($18,400,000) July 1995 through
January 1996
<PAGE>
($18,000,000) July 1995 through
February 1996
($17,600,000) July 1995 through
March 1996
($22,200,000) July 1995 through
April 1996
($21,800,000) July 1995 through
May 1996
($21,400,000) July 1995 through
June 1996
($21,000,000) August 1995 through
July 1996
($21,600,000) September 1995
through August 1996
($21,200,000) October 1995 through
September 1996
($21,200,000) November 1995
through October 1996
($21,200,000) December 1995
through November 1996
($15,200,000) January 1996 through
December 1996
($15,200,000) each short-term
measurement period
ending after
December 1996
-2-
<PAGE>
As used in this Section 8.23, "short-
term measurement period" means any period
of twelve consecutive calendar months,
provided that until June 30, 1996, a
short-term measurement period shall be
any period (from one to eleven months in
length) beginning on July 1, 1995 and
ending on the last day of a calendar
month prior to June 30, 1996.
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. This
Amendment shall become effective when,
and only when, (i) Administrative Agent
shall have received, at Administrative
Agent's office, a counterpart of this
Amendment executed and delivered by the
Company, the Administrative Agent, the
Letter of Credit Agent and the Majority
Banks and (ii) Administrative Agent shall
have additionally received such
<PAGE>
supporting documents as Administrative
Agent may reasonably request.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and
Warranties of the Company. In order to
induce each Bank to enter into this
Amendment, the Company represents and
warrants to each Bank that:
(a) The representations and
warranties contained in Section 7 of the
Original Agreement [(excluding Section
7.16)] are true and correct [(except as
disclosed in the letter dated June 25,
1996 from the Company to the Banks)] and
no Default or Event of Default exists at
and as of the time of the effectiveness
hereof, in each case after giving effect
to the amendments herein made.
(b) The Company is duly authorized
to execute and deliver this Amendment and
is and will continue to be duly
authorized to borrow monies and to
perform its obligations under the Credit
Agreement. The Company has duly taken all
corporate action necessary to authorize
the execution and delivery of this
Amendment and to authorize the
performance of the obligations of the
Company hereunder.
(c) The execution and delivery by
the Company of this Amendment, the
performance by the Company of its
obligations hereunder and the
consummation of the transactions
contemplated hereby do not and will not
conflict with any provision of law,
statute, rule or regulation or of the
articles or certificate of incorporation
and bylaws of the Company, or of any
material agreement, judgment, license,
order or permit applicable to or binding
upon the Company, or result in the
creation of any lien, charge or
encumbrance upon any assets or properties
of the Company. Except for
-3-
<PAGE>
<PAGE>
those which have been obtained, no
consent, approval, authorization or order
of any court or governmental authority or
third party is required in connection
with the execution and delivery by the
Company of this Amendment or to
consummate the transactions contemplated
hereby.
(d) When duly executed and
delivered, each of this Amendment and the
Credit Agreement will be a legal and
binding obligation of the Company,
enforceable in accordance with its terms,
except as limited by bankruptcy,
insolvency or similar laws of general
application relating to the enforcement
of creditors' rights and by equitable
principles of general application.
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of
Agreements. The Original Agreement as
hereby amended, together with all of the
other Loan Documents, are hereby ratified
and confirmed in all respects. Any
reference to the Credit Agreement in any
Loan Document shall be deemed to be a
reference to the Original Agreement as
hereby amended. The execution, delivery
and effectiveness of this Amendment shall
not, except as expressly provided herein,
operate as a waiver of any right, power
or remedy of the Banks under the Credit
Agreement, the Notes, or any other Loan
Document nor constitute a waiver of any
provision of the Credit Agreement, the
Notes or any other Loan Document.
Section 5.2. Survival of Agreements.
All representations, warranties,
covenants and agreements of the Company
herein shall survive the execution and
delivery of this Amendment and the
performance hereof, including without
limitation the making or granting of the
Loans, and shall further survive until
all of the Obligations are paid in full.
All statements and agreements contained
in any certificate or instrument
delivered by the Company hereunder or
under the Credit Agreement to any Bank
shall be deemed to constitute
representations and warranties by, and/or
<PAGE>
agreements and covenants of, the Company
under this Amendment and under the Credit
Agreement.
Section 5.3. Loan Documents. This
Amendment is a Loan Document, and all
provisions in the Credit Agreement
pertaining to Loan Documents apply
hereto.
Section 5.4. Governing Law. This
Amendment shall be governed by and
construed in accordance the laws of the
State of New York and any applicable laws
of the United States of America in all
respects, including construction,
validity and performance.
Section 5.5. Counterparts. This
Amendment may be separately executed in
counterparts and by the different parties
-4-
<PAGE>
hereto in separate counterparts, each of
which when so executed shall be deemed to
constitute one and the same Amendment.
IN WITNESS WHEREOF, this Amendment is
executed as of the date first above
written.
CROWN CENTRAL PETROLEUM CORPORATION
By: /s/-- John E. Wheeler, Jr.
Name: John E. Wheeler, Jr.
Title: Sr. Vice President -
Finance
NATIONSBANK OF TEXAS, N.A., as
Administrative Agent, Letter of Credit
Agent and a Bank
By: /s/-- Timothy S. Proffitt
Name: Vice President
Title:
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON, as an
Agent and a Bank
By: /s/-- Michael Kane
Name: Michael Kane
Title: Managing Director
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as an Agent and a Bank
By: /s/-- Mary C. Arnold
Name: Mary C. Arnold
Title: Vice President
FIRST NATIONAL BANK OF MARYLAND, as a
Bank
By: /s/-- Kellie M. Mathews
Name: Kellie M. Mathews
Title: Vice President
SIGNET BANK
By: /s/-- Kevin Mahon
Name: Kevin Mahon
Title: Vice President
THE BANK OF NOVA SCOTIA,
as a Bank
By: /s/-- J. Alan Edwards
Name: J. Alan Edwards
Title: Authorized Signatory
DEN NORSKE BANK AS,
as a Bank
By: /s/-- Byron L. Cooley
Name: Byron L. Cooley
Title: First Vice President
<PAGE>
By: /s/-- Charles E. Hall
Name: Charles E. Hall
Title: First Vice President
SOCIETE GENERALE,
as a Bank
By: /s/-- Gordon Saint-Denis
Name: Gordon Saint-Denis
Title: Vice President
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED, New York Branch,
as a Bank
By: /s/-- Gerald T. Gill
Name: Gerald T. Gill
-5-
<PAGE>
<TABLE>
<CAPTION>
<PAGE>
EXHIBIT 11
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(thousands of dollars except per share amounts)
Six Months Ended
June 30
<PAGE>
1996 1995
--------- ---------
<S> <C> <C>
Primary and Fully Diluted Earnings
Per Share
Net (loss) (9,998
$ (3,145
$
) )
Shares outstanding as reported at
January 1,
1996 and 1995, respectively 9,952,950 9,803,098
Restricted shares held by the
Company at
January 1 (255,300 (105,500
) )
Weighted average effect of 26,589
shares of common
stock issued in 1996 13,390
Weighted average effect of partial
vesting of 1996
Performance Vested Restricted
Stock grants 379
--------- ---------
Weighted average number of common
shares
outstanding, as adjusted at June
30 1,419
9,71 9,697,598
========= =========
Net (loss) per common share (1.03
$ $
) )
(.32
========= ========
</TABLE>
<PAGE>
CROWN
<PAGE>
(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
RESULTS SECOND QUARTER 1996
July 25, 1996
Dear Shareholders:
Crown Central Petroleum Corporation announced today a
net profit of $3.0 million ($.31 per share) in the
second quarter of 1996, compared to a net profit of $7.0
million ($.72 per share) in the second quarter of 1995.
Sales and operating revenues for the second quarter were
$431 million compared to revenues of $380 million in the
second quarter of 1995.
For the first six months of 1996, the Company had a net
loss of $10.0 million ($1.03 per share) on revenues of
$802 million compared to a net loss of $3.1 million
($.32 per share) on revenues of $725 million in the
first half of 1995.
While the benchmark West Texas Intermediate crude oil
averaged 11% higher for the second quarter compared with
the same 1995 period, Gulf Coast refining margins did
not keep pace and declined $.80/BBL for the period,
directly impacting the company's refining margins.
During the quarter, Crown announced the Pasadena, Texas
refinery will process 20,000 barrels per day, for a 12
month period, of crude oil supplied by Statoil North
America Inc. In return, Crown will provide refined
products to Statoil on a formula basis. This mutually
beneficial agreement provides a predictable source of
crude and a fixed market for a portion of Crown's
refining output.
Retail marketing operations recovered significantly
during the quarter as the $.16/gallon gasoline margin
was double that of the first quarter. Net retail profit
before income tax totaled $10.5 million compared to $3.4
million for the same 1995 period and is up 18% for the
first six months from $6.2 million to $7.3 million.
Retail same store gasoline volumes increased 2% for the
quarter while overall gasoline volumes were up 6% with
the additional units. Merchandise gross margins
improved 14% compared to the same period last year on a
same store basis. Overall merchandise sales showed a 3%
gain.
<PAGE>
As a result of the counter cyclical nature of refining
and marketing margins, one of Crown's strategic goals
has been to integrate these operations so as to reduce
overall margin exposure. I am very pleased with the
increase in our retail gasoline volumes which surpasses
industry growth for the first six months.
During the quarter, Crown's retail marketing division
was renamed CrownCen Marketing Co. This trade name
designation will provide the retail unit with a clear,
distinct identity within the marketing segment of the
industry.
<PAGE>
Results for the quarter and first six months of 1996
reflect a net benefit before income taxes of
approximately $4.1 million and $2.5 million,
respectively, related to the adjustment of reserves
required principally for certain pending litigation and
employee benefit liabilities, which were partially
offset by $1.6 million of certain first quarter 1996
corporate restructuring and benefits charges.
The Pasadena refinery also announced a joint venture
with Shell Chemical Co. This project consists of
compression and pipeline facilities that transport
ethylene rich gas from Crown's (FCC) process unit to
Shell's olefins recovery process in Deer Park, Texas.
Crown thus receives a higher value for its FCC gas
because of the premium received for the ethylene portion
of this major process stream.
The lockout of the Oil, Chemical, and Atomic Workers
Union (OCAW) at Pasadena is into its sixth month. While
discussions continue and proposals are being presented
and some program has been made, regretably the parties
remain far apart on a number of significant issues. The
National Labor Relations Board (NLRB) regional decision
in favor of the company has been appealed by OCAW to the
NLRB general counsel in Washington and a final ruling is
expected shortly. Personnel operating the refinery
deserve great credit for their professionalism,
commitment and superior performance during this period.
On May 15, Crown and First Maryland Bancorp's credit
card subsidiary, First Omni Bank, announced release of
the new Crown MasterCard. This new card represents
additional value and convenience to Crown customers.
Charged purchases earn points towards premiums selected
from a unique gifts catalog.
Effective April 1, Crown announced a new senior
management structure from existing personnel designed to
implement the company's strategic plans and to ensure
the long term profitability of the company. Elected
were Randall M. Trembly (49) to Executive Vice President
<PAGE>
and Philip W. Taff (54) as Executive Vice President and
Chief Financial Officer. Other Crown personnel elected
to Senior Vice President or Vice President with new
responsibilities and titles include: Edward L.
Rosenberg (40) Senior Vice President-Supply and
Transportation, Frank B. Rosenberg (37) Senior Vice
President-Marketing, John E. Wheeler, Jr. (43) Senior
Vice President-Finance, Paul J. Ebner (38) Vice
President-Shared Services,and Dolores B. Rawlings (58)
Vice President, Corporate Secretary and Executive
Assistant to the Chairman. Effective June 1, James
Robert (Rick) Evans (50) was elected Vice President-
Retail Marketing.
Thank you for your continuing support during these
challenging times.
Sincerely,
HENRY A. ROSENBERG, JR.
Chairman of the Board, Chief Executive Officer, and
President
<PAGE>
<TABLE>
<CAPTION>
Crown Central Petroleum Corporation ans Subsidiaries
Dollars in thousands, except per share data
Six Months Ended Three Months Ended
June 30 June 30
1996 1995 1996 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Sales and operating
revenues 802,299
$ $ 724,958 431,208
$ 380,125
$
(Loss) income before
income taxes (16,626) 2,219 1,384 11,426
(Loss) income before
extraordinary item (9,998) 112 3,012 7,030
(Loss) from extraordinary
item __
1/
---- )
(3,257 ---- ----
Net (loss) income )
(9,998 )
(3,145 3,012 7,030
(Loss) income per share
before extraordinary item (1.03) .01 .31 .72
<PAGE>
(Loss) per share from
extraordinary item ---- )
(.33 ---- ----
Net (loss) income per
share )
(1.03 )
(.32 .31 .72
Weighted average shares
used in the computation of
(loss) income oer share 9,711,419 9,697,598 9,711,419 9,697,598
<FN>
During the first quarter of 1995, the Company incurred an
__
1/
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 $125 million of unsecured 10 7/8%
Senior Notes due February 1, 2005.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CROWN CENTRAL PETROLEUM CORPORATION
OPERATING STATISTICS
Six Months Ended Three Months Ended
June 30 June 30
1996 1995 1996 1995
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
COMBINED REFINERY
OPERATIONS
-----------------------
Production (BPD - M) 150 154 149 155
Production (MMbbl) 27.4 27.9 13.8 14.1
Sales (MMMbbl) 30.1 25.2 15.6 13.6
Gross Margin ($/bbl) 2.08 3.16 1.89 3.66
Gross Profit ($MM) 62.6 79.6 29.6 49.6
Operating Cost ($/bbl) 2.13 2.66 1.91 2.46
Operating Cost ($MM) 64.2 66.9 29.8 33.4
Net Refining Profit
($MM) (1.6) 12.7 )
(0.2 16.2
RETAIL
-----------------------
Number Stores 350 332 350 332
Volume (pmps - Mgal) 124 124 127 126
Volume (MMgal) 260 248 133 126
Gas Gross Margin
($/gal) 0.12 0.12 0.16 0.11
Gas Gross Profit ($MM) 32.0 28.7 21.6 13.3
Merchandise Sales (pmps
<PAGE>
- $M) 24.0 24.7 25.5 25.8
Merchandise Sales ($MM) 50.3 49.1 26.8 25.7
Merchandise Gross
Margin (%) 28.7 25.8 30.1 26.4
Merchandise Gross
Profit ($MM) 14.4 12.7 8.1 6.8
Retail Gross Profit
($MM) 46.4 41.4 29.7 20.1
Retail Operating Costs
(pmps - $M) (19.0) (17.0) (19.1) (16.3)
Retail Operating Costs
($MM) (39.9) (33.8) (20.1) (16.2)
Retail Non-Operating
Income (Expense) ($MM) 0.8 (1.4) 0.5 (0.5)
Retail Net Profit ($MM) 7.3 6.2 10.1 3.4
Wholesale / Terminal
($MM) 0.0 (0.7) (1.5) (0.6)
LIFO (Provision) ($MM) (8.9) (2.4) (1.2) (1.1)
Corporate Overhead /
Other ($MM) (13.4) (13.5) (5.8) (6.5)
Income Tax Benefit
(Expense) ($MM) 6.6 (2.1) 1.6 (4.4)
(Loss) from
Extraordinary Item
($MM) (3.3)
Total Net (Loss) Income
($MM) (10.0) (3.1) 3.0 7.0
Depreciation &
Amortization ($MM) 16.0 18.9 8.0 9.5
Net Interest Expense
($MM) 6.2 5.5 3.2 3.0
LIFO Provision ($MM) 8.9 2.4 1.2 1.1
(Gain) from Asset
Disposals ($MM) 0.0 (0.2) 0.0 (0.4)
Loss from Extraordinary
Item ($MM) 3.3
EBITDAAL ($MM) 14.5 28.9 13.8 24.6
Capital Expenditures
($MM) 14.7 14.8 7.3 8.2
<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
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<CAPTION>
Crown Central Petroleum Corporation and Subsidiaries
Dollars in thousands, except per share data
Crown Central Petroleum Corporation and Subsidiaries
Financial Data Schedule
(In thousands, except per share amounts)
Six Months Ended
____________________
June 30, 1996
<S> <C>
<CASH> $ 10,315
<SECURITIES> 22,201
<RECEIVABLES> 118,244
<ALLOWANCES> 1,058
<INVENTORY> 78,621
<CURRENT-ASSETS> 236,876
<PP&E> 636,389
<DEPRECIATION> 333,286
<TOTAL-ASSETS> 574,833
<CURRENT-LIABILITIES> 210,722
<BONDS> 127,859
0
0
<COMMON> 49,945
<OTHER-SE> 129,937
<TOTAL-LIABILITY-AND-EQUITY> 574,833
<SALES> 802,299
<TOTAL-REVENUES> 802,299
<CGS> 750,367
<TOTAL-COSTS> 750,367
<OTHER-EXPENSES> 62,480
<LOSS-PROVISION> 149
<INTEREST-EXPENSE> 7,194
<INCOME-PRETAX> (16,627)
<INCOME-TAX> (6,629)
<INCOME-CONTINUING> (9,998)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,998)
<EPS-PRIMARY> (1.03)
<PAGE>
<EPS-DILUTED> (1.03)
</TABLE>
