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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FORM 10-K
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended
December 31, 1996
December 31, 1996
December 31, 1996
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ____________
Commission File Number 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
CROWN CENTRAL PETROLEUM CORPORATION
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND
MARYLAND
MARYLAND 52-0550682
52-0550682
52-0550682
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
ONE NORTH CHARLES STREET
ONE NORTH CHARLES STREET
ONE NORTH CHARLES STREET
BALTIMORE, MARYLAND
BALTIMORE, MARYLAND
BALTIMORE, MARYLAND 21201
21201
21201
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (410)
539-7400
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Name of Each Exchange
Name of Each Exchange
Title of Each Class
Title of Each Class
Title of Each Class on which Registered
on which Registered
on which Registered
<PAGE>
Class A Common Stock - $5 Par Value American Stock Exchange
Class B Common Stock - $5 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
None
None
None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days. YES ___
X NO ___
The aggregate market value of the voting stock held by
nonaffiliates as of December 31, 1995 was
$81,532,000.
The number of shares outstanding at January 31, 1997 of the
registrant's $5 par value Class A and Class B Common Stock
was 4,817,394 shares and 5,165,786 shares, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of
Stockholders on April 24, 1997 are incorporated by reference
into Items 10 through 13, Part III.
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Crown Central Petroleum Corporation
Crown Central Petroleum Corporation
Crown Central Petroleum Corporation
and subsidiaries
and subsidiaries
and subsidiaries
Table of Contents
Table of Contents
Table of Contents
Page
Page
Page
PART I
PART I
PART I
Item 1 Business l
Item 2 Properties 4
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of
Security Holders 9
PART II
PART II
PART II
Item 5 Market for the Registrant's Common
Equity and Related Stockholder Matters 10
Item 6 Selected Financial Data 11
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Item 7 Management's Discussion and Analysis
of Financial Condition and Results of
Operations 12
Item 8 Financial Statements and Supplementary Data19
Item 9 Changes in and Disagreements with Auditors on
Accounting and Financial Disclosure 37
PART III
PART III
PART III
Item 10 Directors and Executive Officers of the
Registrant 38
Item 11 Executive Compensation 39
Item 12 Security Ownership of Certain
Beneficial Owners and Management 39
Item 13 Certain Relationships and Related Transactions....39
PART IV
PART IV
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 39
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PART I
Factors Affecting Forward-Looking Statements
This Annual Report contains certain ``
forward-looking
statements''
within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts
included in this Annual Report on Form 10-K, including
without limitation those under ``
Liquidity and Capital
Resources''
and ``Additional Factors that May Affect
Future Results''
under ``Management's Discussion and
Analysis of Financial Condition and Results of
Operations''
regarding the Company's financial position
and results of operations, are forward-looking
statements. Such statements are subject to certain
risks and uncertainties, such as changes in prices or
demand for the Company's products as a result of
competitive actions or economic factors, changes in the
cost of crude oil, changes in operating costs resulting
from new refining technologies, increased regulatory
burdens or inflation, and the Company's ability to
continue to have access to capital markets and
commercial bank financing on favorable terms. Should
one or more of these risks or uncertainties, among
others as set forth in this Annual Report on Form 10-K
for the year ended December 31, 1996, materialize,
actual results may vary materially from those
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estimated, anticipated or projected. Although the
Company believes that the expectations reflected by
such forward-looking statements are reasonable based on
information currently available to the Company, no
assurances can be given that such expectations will
prove to have been correct. Cautionary statements
identifying important factors that could cause actual
results to differ materially from the Company's
expectations are set forth in this Annual Report on
Form 10-K for the year ended December 31, 1996,
including without limitation in conjunction with the
forward-looking statements included in this Annual
Report on Form 10-K that are referred to above. All
forward-looking statements included in this Annual
Report on Form 10-K and all subsequent oral forward-
looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in
their entirety by these cautionary statements.
Item 1. BUSINESS
General
Crown Central Petroleum Corporation and subsidiaries
(the Company), which traces its origins to 1917, is one
of the largest independent refiners and marketers of
petroleum products in the United States. The Company
owns and operates two high-conversion refineries with a
combined capacity of 152,000 barrels per day of crude
oil - a 100,000 barrel per day facility located in
Pasadena, Texas, near Houston (the Pasadena refinery)
and a 52,000 barrel per day facility located in Tyler,
Texas (the Tyler refinery, and together with the
Pasadena refinery, the refineries). The Company is
also a leading independent marketer of refined
petroleum products and merchandise through a network of
343 gasoline stations and convenience stores located in
the Mid-Atlantic and Southeastern United States. In
support of these businesses, the Company operates 16
product terminals located on three major product
pipelines along the Gulf Coast and the Eastern Seaboard
and in the Central United States.
The refineries are strategically located and have
direct access to crude oil supplies from major and
independent producers and trading companies, thus
enabling the Company to select a crude oil mix to
optimize refining margins and minimize transportation
costs. The Pasadena refinery's Gulf Coast location
provides access to tankers, barges and pipelines for
the delivery of foreign and domestic crude oil and
other feedstocks. The Tyler refinery benefits from its
location in East Texas due to its ability to purchase
high quality crude oil directly from nearby suppliers
at a favorable cost and its status as the only supplier
of a full range of refined petroleum products in its
local market area. The refineries are operated to
generate a product mix of over 85% higher margin fuels,
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primarily transportation fuels such as gasoline,
highway diesel and jet fuel as well as home heating
oil. During the past five years, the Company has
invested over $91 million for environmental compliance,
upgrading, expansion and process improvements at its
two refineries. As a result of these expenditures, the
Pasadena refinery has one of the highest rates of
conversion to higher margin fuels, according to a
recent industry study. The Tyler refinery enjoys
essentially the same product yield characteristics as
the Pasadena refinery.
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The Company is the largest independent retail marketer
in its core retail market areas within Maryland,
Virginia and North Carolina. In the Company's primary
retail marketing region of Baltimore, Maryland, the
Company is the leading independent gasoline retailer,
with a 1996 market share of approximately 13%. In
addition to its leading market position in Baltimore,
the Company has a geographic concentration of retail
locations in high growth areas such as Charlotte and
Raleigh, North Carolina and Atlanta, Georgia. Over the
past several years, the Company has rationalized and
refocused its retail operations, resulting in
significant improvements in average unit performance
and positioning these operations for growth from a
profitable base. For the year ended December 31, 1996,
average merchandise sales per unit increased 6.3% on a
same store basis when compared with 1995. The Company
has made substantial investments of approximately $26
million at its retail locations pursuant to
environmental requirements from 1989 to 1996 and
believes that over 73% of its retail units are
currently in full or substantial compliance with the
1998 underground storage tank environmental standards.
Sales values of the principal classes of products sold
by the Company during the last three years are included
in Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 12 of this
report.
At December 31, 1996, the Company employed 2,904
employees. The total number of employees decreased
approximately 4% from year-end 1995.
Regulation
Like other companies in the petroleum refining and
marketing industries, the Company's operations are
subject to extensive regulation and the Company has
responsibility for the investigation and cleanup of
contamination resulting from past operations. Current
compliance activities relate to air emissions
limitations, waste water and storm water discharges and
solid and hazardous waste management activities. In
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connection with certain of these compliance activities
and for other reasons, the Company is engaged in
various investigations and, where necessary,
remediation of soils and ground water relating to past
spills, discharges and other releases of petroleum,
petroleum products and wastes. The Company's
environmental activities are different with respect to
each of its principal business activities: refining,
terminal operations and retail marketing. The Company
is not currently aware of any information that would
suggest that the costs related to the air, water or
solid waste compliance and clean-up matters discussed
herein will have a material adverse effect on the
Company. The Company anticipates that substantial
capital investments will be required in order to comply
with federal, state and local provisions. A more
detailed discussion of environmental matters is
included in Note A and Note I of Notes to Consolidated
Financial Statements on pages 24 and 33 of this report,
and in Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages
12 through 18 of this report.
Competitive Conditions
Oil industry refining and marketing is highly
competitive. Many of the Company's principal
competitors are integrated multinational oil companies
that are substantially larger and better known than the
Company. Because of their diversity, integration of
operations, larger capitalization and greater
resources, these major oil companies may be better able
to withstand volatile market conditions, compete on the
basis of price and more readily obtain crude oil in
times of shortages.
The principal competitive factors affecting the
Company's refining operations are crude oil and other
feedstock costs, refinery efficiency, refinery product
mix and product distribution and transportation costs.
Certain of the Company's larger competitors have
refineries which are larger and more complex and, as a
result, could have lower per barrel costs or higher
margins per barrel of throughput. The Company has no
crude oil reserves and is not engaged in exploration.
The majority of the Company's total crude oil purchases
are transacted on the spot market. The Company
believes that it will be able to obtain adequate crude
oil and other feedstocks at generally competitive
prices for the foreseeable future.
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The principal competitive factors affecting the
Company's retail marketing operations are locations of
stores, product price and quality, appearance and
cleanliness of stores and brand identification.
Competition from large integrated oil companies, as
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well as from convenience stores which sell motor fuel,
is expected to continue. The principal competitive
factors affecting the Company's wholesale marketing
business are product price and quality, reliability and
availability of supply and location of distribution
points.
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.
(This space intentionally left blank)
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Item 2. PROPERTIES
Refining Operation
Overview
The Company owns and operates two strategically
located, high conversion refineries with a combined
capacity of 152,000 barrels of crude oil per day--a
100,000 barrel per day facility located in Pasadena,
Texas, near Houston, and a 52,000 barrel per day
facility located in Tyler, Texas. Both refineries are
operated to generate a product mix of over 85% higher
margin fuels, primarily transportation fuels such as
gasoline, highway diesel and jet fuel, as well as home
heating oil. When operating to maximize the production
of light products, the product mix at both of the
Refineries is approximately 55% gasoline, 33%
distillates (such as diesel, home heating oil, jet
fuel, and kerosene), 6% petrochemical feedstocks and 6%
slurry oil and petroleum coke.
The Pasadena refinery and Tyler refinery averaged
production of 102,925 barrels per day and 50,335
barrels per day, respectively, during 1996. While both
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refineries primarily run sweet (low sulphur content)
crude oil, they can process up to 20% of sour (high
sulphur content) crude oil in their mix.
The Company's access to extensive pipeline networks
provides it with the ability to acquire crude oil
directly from major integrated and independent domestic
producers, foreign producers, or trading companies, and
to transport this crude to the refineries at a
competitive cost. The Pasadena refinery has docking
facilities which provide direct access to tankers and
barges for the delivery of crude oil and other
feedstocks. The Company also has agreements with
terminal operators for the storage and handling of the
crude oil it receives from large ocean-going vessels
and which the Company transports to the refineries by
pipeline. The Tyler refinery benefits from its location
in East Texas since the Company can purchase high
quality crude oil at favorable prices directly from
nearby producers. In addition, the Tyler Refinery is
the only supplier of a full range of petroleum products
in its local market area. See "-- Supply,
Transportation and Wholesale Marketing."
Over the past several years, the Company has made
significant capital investments to upgrade its refining
facilities and improve operational efficiency. Three
new process units were placed in service at the
Pasadena refinery in 1996. These three units include a
compression facility which transports gas from the
fluid catalytic cracking unit (FCCU) to a petrochemical
plant where the ethylene is recovered, a reformate
splitter which increases the refinery's capacity to
manufacture reformulated gasoline, and a vapor
destructor which allows for expanded product loading at
the refinery dock. At the Tyler refinery, the FCCU and
sulfur recovery units were modified, enabling the
refinery to increase production of gasoline and low
sulfur diesel.
Pasadena Refinery
The Pasadena refinery is located on approximately 174
acres in Pasadena, Texas and was the first refinery
built on the Houston Ship Channel. The refinery has
been substantially modernized since 1969 and today has
a rated crude capacity of 100,000 barrels per day.
During the past five years, the Company has invested
approximately $110 million in major upgrades and
maintenance projects.
The Company's refining strategy includes several
initiatives to enhance productivity. For example, the
Company has completed an extensive plant-wide
distributed control system at the Pasadena refinery
which is designed to improve product yields, make more
efficient use of personnel and optimize process
operations. The distributed control system uses
technology that is fast, accurate and provides
<PAGE>
increased information to both operators and
supervisors. This equipment also allows the use of
modern advanced control techniques for optimizing unit
operations.
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The Pasadena refinery has a crude unit with a 100,000
barrels per day atmospheric column and a 38,000 barrels
per day vacuum tower. Major downstream units consist of
a 52,000 barrels per day fluid catalytic cracking unit,
a 12,000 barrels per day delayed coking unit, two
alkylation units with a combined capacity of 10,000
barrels per day of alkylate production, and a
continuous regeneration reformer with a capacity of
24,000 barrels per day. Other units include two
depropanizers that can produce 5,500 barrels per day of
refinery grade propylene, a liquefied petroleum gas
recovery unit that removes approximately 1,000 barrels
per day of liquids from the refinery fuel system and a
methyl tertiary butyl ether ("MTBE") process which can
produce approximately 1,500 barrels per day of MTBE for
gasoline blending, a reformate splitter, and a
compression facility capable of transporting up to 14
million standard cubic feed per day of process gas to
a neighboring petrochemical plant.
The Clean Air Act mandates that after January 1, 1995
only reformulated gasoline ("RFG") may be sold in
certain ozone non-attainment areas, including some
metropolitan areas where the Company sells gasoline.
Using production from its MTBE unit, the Pasadena
refinery can currently produce 12,000 barrels per day
of winter grade RFG. With additional purchases of MTBE,
ethanol or other oxygenates, all of the Pasadena
refinery's current gasoline production could meet
winter grade RFG standards. In 1996, the Company
completed the construction of a reformate splitter at
its Pasadena refinery. This process unit enables the
refinery to make 12,000 barrels per day of summer grade
RFG using its own MTBE, and up to 100% of its Pasadena
refinery gasoline production as summer grade RFG with
the purchase of additional oxygenates. This project
enables the Company to satisfy all of its retail RFG
requirements.
In 1996, the Pasadena refinery operated at
approximately 90% of rated crude unit capacity with
production yielding approximately 57% gasoline and 32%
distillates. Of the total gasoline production,
approximately 23% was premium octane grades. In
addition, the Pasadena refinery produced and sold by-
products including propylene, propane, slurry oil,
petroleum coke and sulphur.
The Company owns and operates storage facilities
located on approximately 130 acres near its Pasadena
refinery which, together with tanks on the refinery
site, provide the Company with a storage capacity of
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approximately 6.2 million barrels (2.8 million barrels
for crude oil and 3.4 million barrels for refined
petroleum products and intermediate stocks).
The Pasadena refinery's refined petroleum products are
delivered to both wholesale and retail customers.
Approximately one-half of the gasoline and distillate
production is sold wholesale into the Gulf Coast spot
market and one-half is shipped by the Company on the
Colonial and Plantation pipelines for sale in East
Coast wholesale and retail markets. The Company's
retail gasoline requirements represent approximately
60% of the Pasadena refinery's total gasoline
production capability.
Tyler Refinery
The Tyler refinery is located on approximately 100 of
the 529 acres owned by the Company in Tyler, Texas and
has a rated crude capacity of 52,000 barrels per day.
This refinery, which was acquired from Texas Eastern
Corporation in the fourth quarter of 1989, had been
substantially modernized between 1977 and 1980. The
Tyler refinery's location provides access to nearby
high quality East Texas crude oil which accounts for
approximately 70% of its crude supply. This crude oil
is transported to the refinery on the McMurrey and
Scurlock pipeline systems. The Company owns the
McMurrey system and has a long-term contract for use of
the Scurlock system with Scurlock Permian Pipe Line
Corporation. The Company also has the ability to ship
crude oil to the Tyler refinery by pipeline from the
Gulf Coast and does so when market conditions are
favorable. Storage capacity at the Tyler refinery
exceeds 2.7 millions barrels (1.2 million barrels for
crude oil and 1.5 million barrels for refined petroleum
products and intermediate stocks), including tankage
along the Company's pipeline system.
The Tyler refinery has a crude unit with a 52,000
barrels per day atmospheric column and a 16,000 barrels
per day vacuum tower. The other major process units at
the Tyler refinery include an 18,000 barrels per day
fluid catalytic cracking unit, a 6,000 barrels per day
delayed coking unit, a 20,000 barrels per day naphtha
hydrotreating unit, a 12,000 barrels per day distillate
hydrotreating unit, two reforming units with a combined
capacity of 16,000 barrels per day, a 5,000 barrels per
day isomerization unit, and an alkylation unit with a
capacity of 4,700 barrels per day.
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In 1996, the Tyler refinery operated at approximately
90% of rated crude unit capacity, with production
yielding approximately 54% gasoline and approximately
36% distillates. Of the total gasoline production,
approximately 29% was premium octane grades. In
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addition, the refinery produced and sold by-products
including propylene, propane, slurry oil, petroleum
coke and sulphur. The Tyler refinery is the principal
supplier of refined petroleum products in the East
Texas market with approximately 60% of production sold
at the refinery's truck terminal. The remaining
production is shipped via the Texas Eastern Products
Pipeline for sale either from the Company's terminals
or from other terminals along the pipeline. Deliveries
under term exchange agreements account for the majority
of the truck terminal sales.
Retail Operations
Overview
The Company traces its retail marketing history to the
early 1930's when it operated a retail network of 30
service stations in the Houston, Texas area. It began
retail operations on the East Coast in 1943. The
Company has been recognized as an innovative industry
leader and, in the early 1960's, pioneered the multi-
pump retailing concept which has since become an
industry standard in the marketing of gasoline. In 1983
the Company significantly expanded its retail presence
with the acquisition of 642 Fast Fare and Zippy Mart
convenience stores located in the Southeastern United
States. In 1986 the Company purchased an additional 50
gasoline stations, expanding the Company's presence in
the Baltimore/Washington, D.C. region, and in 1991, the
Company acquired 48 additional units in Virginia which
doubled its presence in that state. Additionally, in
1995, the Company acquired 13 retail units in North
Carolina and 2 retail units in Georgia.
Beginning in 1989, the Company conducted a facility by
facility review of its retail units. As a result, the
Company disposed of non-strategic, marginal or
unprofitable units as well as certain units which would
have required significant capital improvements to
comply with environmental regulations. During this
period, the Company rebuilt and added individual units
to increase its market share in strategic core markets.
Since 1990, the Company has eliminated 447 retail units
and added 64 retail units. During the same period, the
Company closed a number of district offices and
divisional headquarters. The Company believes it has
substantially completed its retail unit rationalization
program.
As of December 31, 1996, the Company had 343 retail
locations. Of these 343 units (235 owned and 108
leased), the Company directly operated 239 and the
remainder were operated by independent dealers. The
Company conducts its operations in Maryland through an
independent dealer network as a result of legislation
which prohibits refiners from operating gasoline
stations in Maryland. The Company believes that the
high proportion of Company-operated units enables it to
<PAGE>
respond quickly and uniformly to changing market
conditions.
While most of the Company's units are located in or
around major metropolitan areas, its sites are
generally not situated on major interstate highways or
inter-city thoroughfares. These off-highway locations
primarily serve local customers and, as a result, the
Company's retail marketing unit volumes are not as
highly seasonal or dependent on seasonal vacation
traffic as locations operating on major traffic
arteries. The Company is the largest independent retail
marketer of gasoline in its core retail market areas
within Maryland, Virginia and North Carolina. In the
Company's primary retail marketing area of Baltimore,
Maryland, the Company is the leading independent
gasoline retailer, with a 1996 market share of
approximately 13%. In addition to its leading market
position in Baltimore, the Company has a geographic
concentration of retail locations in high growth areas
such as Raleigh and Charlotte, North Carolina and
Atlanta, Georgia. The Company's three highest volume
core markets are Baltimore, the suburban areas of
Maryland and Virginia surrounding Washington, D.C., and
the greater Norfolk, Virginia area.
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Retail Unit Operations
The Company conducts its retail marketing operations
through three basic store formats: convenience stores,
mini-marts and gasoline stations. At December 31, 1996,
the Company had 79 convenience stores, 128 mini-marts
and 136 gasoline stations.
The Company's convenience stores operate primarily
under the names Fast Fare and Zippy Mart. These units
generally contain 1,500 to 2,800 square feet of retail
space and typically provide gasoline and a variety of
convenience store merchandise such as tobacco products,
beer, wine, soft drinks, snacks, dairy products and
baked goods and more recently food service items.
The Company's mini-marts generally contain up to 800
square feet of retail space and typically sell gasoline
and much of the same merchandise as at the Company's
convenience stores. The Company has installed lighted
canopies at most of its locations which extend over
the multi-pump fuel islands and the store itself,
providing added security and protection from the
elements for customers and employees.
The Company's gasoline stations generally contain up to
100 square feet of retail space in an island kiosk and
typically offer gasoline and a limited amount of
merchandise such as tobacco products, candies, snacks
and soft drinks.
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The Company's units are brightly decorated with its
trademark signage to create a consistent appearance and
encourage customer recognition and patronage. The
Company believes that consistency of brand image is
important to the successful operation and expansion of
its retail marketing system. In all aspects of its
retail marketing operations the Company emphasizes
quality, value, cleanliness and friendly and efficient
customer service. The Company has conducted customer
surveys which indicate strong consumer preference for
units which are well-lighted and safe. In response to
such customer preferences, the Company has initiated a
system-wide lighting upgrade and safety enhancement
program which includes the installation of improved
lighting as well as the installation of its proprietary
Coronet Security System, an interactive audio and video
monitoring system, at over 180 of its units.
While the Company derives approximately 79% of its
retail revenue from the sale of gasoline, it also
provides a variety of merchandise and other services
designed to meet the non-fuel needs of its customers.
Sales of these additional products are an important
source of revenue, contribute to increased
profitability and serve to increase customer traffic.
The Company believes that its existing retail sites
present significant additional profit opportunities
based upon their strategic locations in high traffic
areas. The Company also offers ancillary services such
as compressed air service, car washes, vacuums, and
automated teller machines, and management continues to
evaluate the addition of new ancillary services such as
the marketing of fast food from major branded chains.
Dealer Operations
The Company maintains 104 dealer-operated units, 103 of
which are located in Maryland. Under the Maryland
Divorcement Law, refiners are prohibited from operating
gasoline stations. The Maryland units are operated
under a Branded Service Station Lease and Dealer
Agreement (the "Dealer Agreement"), generally with a
term of three years. Pursuant to the Dealer Agreement,
a dealer leases the facility from the Company and
purchases and resells Crown-branded motor fuel and
related products. Dealers also purchase and resell
merchandise from independent third parties. The Dealer
Agreement sets forth certain operating standards;
however, the Company does not control the independent
dealer's personnel, pricing policies or other aspects
of the independent dealer's business. The Company
believes that its relationship with its dealers has
been very favorable as evidenced by a low rate of
dealer turnover.
The Company realizes little direct benefit from the
sale of merchandise or ancillary services at the dealer
operated units, and the revenue from these sales is not
reflected in the Company's Consolidated Financial
<PAGE>
Statements. However, to the extent that the
availability of merchandise and ancillary services
increases customer traffic and gasoline sales at its
units, the Company benefits from higher gasoline sales
volumes.
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<PAGE>
Supply, Transportation and Wholesale Marketing
Supply
The Company's refineries, terminals and retail outlets
are strategically located in close proximity to a
variety of supply and distribution channels. As a
result, the Company has the flexibility to acquire
available domestic and foreign crude oil economically,
and also the ability to cost effectively distribute its
products to its own system and to other domestic
wholesale markets. Purchases of crude oil and
feedstocks are determined by quality, price and general
market conditions.
Transportation
Most of the domestic crude oil processed by the Company
at its Pasadena refinery is transported by pipeline.
The Company's purchases of Alaskan and foreign crude
oil are transported primarily by tankers under spot
charters which are arranged by either the seller or the
Company. The Company is not currently obligated under
any time-charter contracts. The Company has an
approximate 5% interest in the Rancho Pipeline and
generally receives between 20,000 and 25,000 barrels
per day of crude through this system. Foreign crudes
(principally from the North Sea, West Africa and South
America) account for approximately 35% of total crude
supply and are delivered by tanker. Most of the crude
for the Tyler refinery is gathered from local East
Texas fields and delivered by two pipeline systems, one
of which is owned by the Company. Foreign crude also
can be delivered to the Tyler refinery by pipeline from
the Gulf Coast.
Terminals
The Company operates 11 product terminals located along
the Colonial and Plantation pipelines from the Pasadena
refinery to Elizabeth, New Jersey and, in addition to
the terminal at the Tyler refinery, operates four
product terminals located along the Texas Eastern
Products Pipeline system. These terminals have a
combined storage capacity of 2.7 million barrels. The
Company's distribution network is augmented by
agreements with other terminal operators also located
along these pipelines. In addition to serving the
Company's retail requirements, these terminals supply
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products to other refiner/marketers, jobbers and
independent distributors.
Wholesale Marketing
Approximately 16% of the gasoline produced by the
Company's Pasadena refinery is transported by pipeline
for sale at wholesale through Company and other
terminals in the Mid-Atlantic and Southeastern United
States. Heating oil is also regularly sold at wholesale
through these same terminals. Gasoline, heating oil,
diesel fuel and other refined products are also sold at
wholesale in the Gulf Coast market.
The Company has entered into long-term product exchange
agreements for approximately one-third of its Tyler
refinery production with two major oil companies
headquartered in the United States. These agreements
provide for the delivery of refined products at the
Company's terminals in exchange for delivery by these
companies of a similar amount of refined products to
the Company. The terms of these agreements extend
through March 1998 and December 1999, respectively, and
require the exchange of 8,400 barrels per day and 9,800
barrels per day, respectively. These exchange
agreements provide the Company with the ability to
broaden its geographic distribution, supply markets not
connected to the refined products pipeline systems and
reduce transportation costs.
-8-
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Company is involved in various matters of
litigation, the ultimate determination of which, in the
opinion of management, will not have a material adverse
effect on the Company. The Company's legal proceedings
are further discussed in Note I of Notes to
Consolidated Financial Statements on page 33 of this
report.
In December of 1996, the Company received a Notice of
Violation and Administrative Order from the
Environmental Protection Agency (``
EPA'') regarding
exceedances of the Pasadena refinery's Clean Water Act
permit. The Company is negotiating a settlement with
EPA which will include modifications to its wastewater
system; these costs are expected to be less than
$200,000.
The Company's Tyler, Texas refinery received a Notice
of Violation from the Texas Natural Resource
Conservation Commission (``
TNRCC'') in October of 1996
regarding alleged noncompliance of its waste streams
with Clean Air Act requirements. The Company has
submitted a compliance schedule to TNRCC, and does not
<PAGE>
expect the costs of implementation of applicable
measures will exceed $100,000.
The Pasadena and Tyler refineries and many of the
Company's other facilities are involved in a number of
other environmental enforcement actions or are subject
to agreements, orders or permits that require remedial
activities. Environmental expenditures, including
these matters, are discussed in the Liquidity and
Capital Resources section of Management's Discussion
and Analysis of Financial Conditions and Results of
Operations on pages 14 through 16 of this report, and
in Note I of Notes to Consolidated Financial Statements
on page 33 of this report. These enforcement actions
and remedial activities, in the opinion of management,
are not expected to have a material adverse effect on
the Company.
In addition, the Company has been named by the EPA and
by several state environmental agencies as a
potentially responsible party at various federal and
state Superfund sites. The Company's exposure in these
matters has either been resolved, is properly reserved
or is de minimis and is not expected to have a material
adverse effect on the Company.
The foregoing environmental proceedings are not of
material importance to Crown's accounts and are
described in compliance with SEC rules requiring
disclosure of such proceedings although not material.
The Company's collective bargaining agreement with the
Oil Chemical & Atomic Workers Union ("OCAW") covering
employees at the Pasadena refinery expired on February
1, 1996. Following a number of incidents apparently
intended to disrupt normal operations at the refinery
and also as a result of the unsatisfactory status of
the negotiations, on February 5, 1996 the Company
implemented a lock-out of employees in the collective
bargaining unit at the Pasadena facility. OCAW
subsequently filed a number of unfair labor practice
charges with the National Labor Relations Board
("NLRB"). Of those charges that have been decided,
substantially all have been dismissed by the NLRB. The
lock-out and negotiations on a new contract continue.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matters were submitted to a vote of security holders
during the last three months of the fiscal year covered
by this report.
-9-
<PAGE>
PART II
<PAGE>
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the American
Stock Exchange under the ticker symbols CNP A and CNP
B.
<TABLE>
<CAPTION>
Common Stock Market Prices and Cash Dividends
___________
__________
______________
1996 _____________
1995
Sales Price Sales Price
________
High ______
Low __
______
Low
_
___
Hig _
__
h
<S> <C> <C> <C> <C>
CLASS A COMMON STOCK
First Quarter .... 19
$ 14
$ 15
$ 11
$
1/8 3/4 1/8 7/8
Second Quarter ... 20 15 17 13
7/8 1/8 7/8 7/8
Third Qu ....
arter 15 13 16 15
1/2 3/8 7/8 1/8
Fourth Quarter ... 14 12 16 13
3/4 1/4 1/4 5/8
Yearly ...... 20 12 17 11
7/8 1/4 7/8 7/8
CLASS B COMMON STOCK
First Quarter .... 18
$ 14
$ $14 11
$
1/2 3/4 5/8 5/8
Second Quarter ... 20 14 17 13
3/8 5/8 3/4 3/8
Third Quarter .... 15 13 16 14
1/2 1/8 3/4 7/8
Fourth Quarter ... 14 11 16 11
5/8 3/4 5/8
Yearly ...... 20 11 17 11
3/8 3/4 3/4 5/8
<FN>
<PAGE>
The payment of cash dividends is dependent upon future earnings,
capital requirements, overall financial condition and restrictions as
described in Note C of Notes to Consolidated Financial Statements on
page 26 of this report. There were no cash dividends declared on
common stock in 1996 or 1995.
The number of shareholders of the Company's common stock based on the
number of record holders on December 31, 1996 was:
Class A Common Stock 559
Class B Common Stock 696
Transfer Agent & Registrar
The First National Bank of Boston
Boston, Massachusetts
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Item 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company set forth
below for the five years ended December 31, 1996 should be read in
conjunction with the Consolidated Financial Statements.
_______
1996
___
__
_______
1992
__
______
1995
_
______
1994 _____
1993 _
(Thousands of dollars except per share
amounts)
<S> <C> <C> <C> <C> <C>
Sales and operating $1,635,2 $1,451, $1,318, $1,451, $1,576,
revenues.............. 76 349 558 183 315
(Loss) before
extraordinary item and
cumulative effect of
changes in
accounting (2,767 (67,367
) (35,406 (4,300 (13,278
)
principles............ ) ) )
Extraordinary item.... (3,257)
Cumulative effect of
changes in
accounting principles 7,772
Net (loss)............ (2,767) (70,624 (35,406 (4,300) (5,506)
) )
Total assets.......... 565,233 583,214 704,076 656,178 675,337
Long-term debt........ 127,196 128,506 96,632 65,579 61,220
Per Share Data:
<PAGE>
(Loss) before
extraordinary
item and cumulative
effect of
changes in accounting )
(.28 (3.63
)
(6.95 (.44
) ) (1.35)
principles............
Net (loss)............ )
(.28 (3.63
)
(7.28 (.44
) (.56
) )
Cash Dividends
Declared:
Class A Common........ .20
Class B Common........ .20
<FN>
The extraordinary loss in 1995, which was recorded in the first
quarter, resulted from the early retirement of the remaining
principal balance of the Company's 10.42% Senior Notes with the
proceeds from the sale of $125 million of Unsecured Senior Notes due
February 1, 2005.
The net loss in 1995 was unfavorably impacted by a pre-tax write-down
of certain refinery assets of $80.5 million in the fourth quarter
relating to 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 .
''
The net loss in 1994 was unfavorably impacted by a pre-tax write-down
of $16.8 million in the third quarter relating to the abandonment of
plans to construct a hydrodesulphurization unit at the Pasadena
refinery.
To conform to the 1996 presentation, Sales and operating revenues for
the years 1992 through 1995 have been adjusted to exclude all federal
and state excise taxes as discussed in Note A of Notes to Consolidated
Financial Statements on page 23 of this report.
</TABLE>
-11-
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's Sales and operating revenues increased
12.7% in 1996 compared to a 10.1% increase in 1995.
The 1996 increase in Sales and operating revenues was
primarily due to a 16.7% increase in the average unit
selling price of petroleum products and a $3.4 million
or 3.5% increase in merchandise sales. These increases
were partially offset by a 3.8% decrease in petroleum
product sales volumes principally attributable to the
processing contract with Statoil wherein the Company
processed 20,000 barrels per day for Statoil during the
last five months of 1996. The 1995 increase in Sales
and operating revenues was due to a 5.8% increase in
the average unit selling price of petroleum products
<PAGE>
and a 4.5% increase in petroleum product sales volumes.
Additionally, there was a $4.4 million or 5% increase
in merchandise sales.
As previously mentioned, merchandise sales increased
$3.4 million or 3.5% to $102 million for the year ended
December 31, 1996 compared to the same period in 1995,
while merchandise gross profit increased $2.6 million
or 9.8% for the year ended December 31, 1996 compared
to the same period in 1995. Merchandise gross margin
(merchandise gross profit as a percent of merchandise
sales) was 26.9% and 28.5% for the years ended December
31, 1995 and 1996, respectively. These aggregate
increases occurred despite a slight reduction in the
number of operating units during the period, and are
attributable to the Company's merchandise pricing
program which has selectively increased margins on
targeted merchandise yet still maintains an everyday
low pricing policy which is competitive with major
retail providers in the applicable market area. As a
result of the strategy, aggregate merchandise gross
profit, on a same store basis, increased 13.7% in 1996
as compared to 1995. Same store average monthly
gasoline volumes and merchandise sales increased
approximately 5% and 6%, respectively, in 1996 as
compared to 1995.
Gasoline sales accounted for 54.3% of total 1996
revenues, while distillates and merchandise sales
represented 31.2% and 6.2%, respectively. This
compares to a dollar mix from sales of 57.8% gasoline,
24.2% distillates and 6.8% merchandise in 1995; and
55.2% gasoline, 28.6% distillates and 7.2% merchandise
in 1994.
The following table depicts the sales values of the
principal classes of products sold by the Company,
which individually contributed more than ten percent of
consolidated Sales and operating revenues during the
last three years:
Sales of Principal Products
millions of dollars 1996 1995 1994
Gasoline $888.1 $839.4 $728.6
No. 2 Fuel & Diesel 436.4 335.7 296.6
Costs and operating expenses increased 11.8% in 1996
compared to a 9.8% increase in 1995. The 1996 increase
was attributable to an increase in the average
production cost per barrel of crude oil and feedstocks
of 20.5%. This increase was partially offset by
slight decreases in petroleum products sales volumes as
mentioned above. Additional decreases offsetting the
increase in average production per barrel mentioned
above result from the Company's use of the last-in,
first-out (LIFO) method to value inventory which
results in a better matching of current revenues and
costs. The impact of LIFO was to increase the
<PAGE>
Company's Costs and operating expenses by approximately
$.9 million and $6.7 million in 1996 and 1995,
respectively. The 1995 increase was attributable to an
increase in the average production cost per barrel of
crude oil and feedstocks of $1.62 or 9.54% and to a
4.5% increase in petroleum products sales volumes.
The impact of the Company's use of the LIFO method was
to decrease the Company's gross margins in 1996, 1995
and 1994 by $.02 per barrel ($.9 million), $.12 per
barrel ($6.7 million) and $.35 per barrel ($19
million), respectively. The 1996 LIFO impact is net of
gross margin increases of $5.9 million resulting from a
change in base year values for a portion of the
Company's LIFO inventories and reductions in LIFO
inventories of $15.2 million, which were carried at
lower costs prevailing in prior years. The 1995 LIFO
impact is net of a $4.9 million gross margin increase
resulting from a reduction in LIFO inventories.
-12-
<PAGE>
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 51,700 barrels per day (bpd) (33.9%) in 1996 from
46,200 bpd (29.8%) in 1995, while gasoline production
was decreased from 90,700 bpd (58.6%) in 1995 to 85,500
bpd (56%) in 1996. Due to deteriorating refinery gross
margins which occurred during the third quarter of
1994, the Company reduced fourth quarter 1994 operating
runs at its Pasadena refinery. Additionally, in 1994,
overall refinery production was reduced by the fourth
quarter's maintenance turnaround of the Pasadena
refinery's Fluid Catalytic Cracking Unit (FCCU) and
related units. The FCCU is the primary gasoline
facility. As a result, yields of gasoline increased
from 79,800 bpd (54%) in 1994 to 90,700 bpd (58.6%) in
1995. Distillate yields decreased slightly from 48,200
bpd (32.6%) in 1994 to 46,200 bpd (29.8%) in 1995.
Total refinery production was: 152,600 bpd in 1996,
154,800 bpd in 1995 and 147,700 bpd in 1994.
Selling and administrative expenses increased 16.1% in
1996 after decreasing 2.3% in 1995. The 1996 increase
was primarily due to increases in store level operating
expenses principally related to additional retail
outlets acquired in the third quarter of 1995 which
operated for a full year in 1996 and to a same price
cash or credit gasoline marketing strategy that
increased credit card processing fees. Also included
in 1996 were increased labor costs resulting from the
installation of branded fast food operations in certain
retail outlets. Additionally the Company recorded
approximately $1 million in corporate administrative
expenses associated with a management reorganization,
$.8 million associated with certain long-range
strategic initiatives and $1 million in employee
<PAGE>
incentive payments due to improved Company performance.
The 1995 decrease was primarily due to decreased
corporate level administrative costs as a result of
certain cost cutting programs initiated by the Company.
At December 31, 1996, the Company operated 264 retail
gasoline facilities and 79 convenience stores compared
to 267 retail gasoline facilities and 81 convenience
stores at December 31, 1995 and 258 retail gasoline
facilities and 99 convenience stores at December 31,
1994. Selling and administrative expenses in 1994
include $.5 million in reorganization costs.
Operating costs and expenses in 1996, 1995 and 1994
include $1.9 million, $3.2 million and $1.9 million,
respectively, related to environmental matters and $.5
million, $.1 million and $1.6 million, respectively, of
accrued non-environmental casualty related costs.
Operating costs and expenses in 1996 have been reduced
by $4.8 million relating to adjustments in certain
liability reserves. Additionally, 1995 and 1994
expenses also include $3.7 million and $3 million,
respectively, related to retail units that have been
closed.
Depreciation and amortization decreased 13.3% in 1996
after decreasing 14.1% in 1995. The 1996 decreases
were primarily the result of the implementation 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''
(SFAS
121), effective October 1, 1995, which decreased 1996
depreciation and amortization by approximately $3.9
million. The 1995 decreases were primarily the result
of decreases in refinery turnaround amortization due to
a $10.4 million decrease in the total underlying value
of the Pasadena Refinery FCCU turnaround being
amortized in 1995 compared to the total underlying
value of the FCCU turnaround that was being amortized
in 1994.
The loss from Write-down of property, plant and
equipment of $80.5 million in 1995 is due to the
initial adoption of SFAS 121 effective October 1, 1995.
While all of the Company's long-lived assets are
subject to the provisions of SFAS 121, circumstances
indicated the carrying amount of assets used in the
operation of the Tyler refinery would not be
recoverable. As such, a write-down to estimated fair
value was recorded. The estimated fair value of these
assets was determined by an independent appraisal.
There were no indications of possible impairment
relating to the remainder of the Company's long-lived
assets. The loss of $16.8 million from Write-downs of
property, plant and equipment in 1994 resulted from the
abandonment of a project to construct a
hydrodesulphurization unit at the Pasadena refinery.
Interest and other income in 1996 decreased $3.4
million after increasing $3.8 million in 1995. The
1996 decrease is due primarily to the consolidation in
<PAGE>
the fourth quarter of 1995 of the Company's wholly-
owned insurance subsidiaries which reported $2.3
million in equity earnings (and recorded as ''
other
income''
) in 1995. The 1996 income of the Company's
wholly-owned insurance subsidiaries of approximately
$.8 million is reported as part of the Company's
consolidated gross margin. Additionally, interest
income decreased $1.2 million due to a decrease in the
average daily cash invested of $25.7 million. The 1995
increase was primarily the result of increases in other
income of $2.3 million from the Company's wholly-owned
insurance subsidiaries. Further, interest income
increased $1.4 million due to an increase in the
average daily cash invested of $9.5 million and to an
increase in the average daily rate on cash invested of
196 basis points.
-13-
<PAGE>
Interest expense in 1996 was comparable to 1995.
Interest expense increased $6.9 million in 1995
compared to 1994 due primarily to an increase in the
average daily cash borrowed of $59.4 million . At
December 31, 1995, there were additional outstanding
borrowings of $31.9 million compared to December 31,
1994. The additional outstanding borrowings were due
to the sale of $125 million of Unsecured 10.875% Senior
Notes in January 1995 net of the repayment of the
outstanding balance of the unsecured 10.42% Senior
Notes and Unsecured Credit Agreement outstanding on
December 31, 1994.
As previously discussed, in January 1995, the Company
retired the remaining outstanding principal balance of
the unsecured 10.42% Senior Notes (including a
prepayment premium of $3.4 million) with the proceeds
from the sale of $125 million of Unsecured 10.875%
Senior Notes due February 1, 2005 which resulted in a
net extraordinary loss in the first quarter of 1995 of
$3.3 million (after reduction for the income benefit of
$2 million).
Liquidity and Capital Resources
The Company's cash and cash equivalents were $6 million
lower at year-end 1996 than at year-end 1995. The
decrease was attributable to $32.5 million of net cash
outflows from investment activities and $1.2 million of
net cash outflows from financing activities. These
outflows were principally offset by cash provided by
operating activities of $27.7 million.
Net cash outflows from investment activities in 1996
consisted principally of capital expenditures of $24.1
million (which includes $11 million related to the
marketing area and $10.3 million for refinery
operations) and $6.1 million in capitalized costs of
<PAGE>
software and related business processes developed for
the Company's own use. Additionally, cash outflows
from investing activities include $4.8 million of
refinery deferred turnaround costs. The total outflows
from investment activities were partially offset by
proceeds from the sale of property, plant and equipment
of $2.5 million.
Net cash outflows from financing activities in 1996
relates primarily to net repayments of long-term debt
of $1.5 million.
Net cash inflows from operating activities in 1996 is
net of $1.9 million in net outflows relating to other
assets and liabilities. These outflows were primarily
the result of decreases in accrued income and excise
tax liabilities and in other accounts payable and to
increases in prepaid insurance premiums and in accounts
receivable. Partially offsetting these cash outflows
were decreases in crude oil and finished products
inventories due primarily to a reduction in crude oil
requirements at the Pasadena refinery, and decreases in
recoverable and deferred income taxes. The timing of
collection of the Company's receivables is impacted by
the specific type of sale and associated terms. Bulk
sales of finished products are typically sold in
25,000 barrel increments with three day payment terms.
Rack sales at the Company's product terminals are sold
by truckload (approximately 8,000 gallons) with seven
to ten day payment terms. While the Company's overall
sales are aligned to its refining capability,
receivables can vary between periods depending upon the
specific type of sale and associated payment terms for
sales near the end of a reporting period
The ratio of current assets to current liabilities was
1.29:1 and 1:22 to 1, respectively, at December 31,
1996 and 1995. If FIFO values had been used for all
inventories, the ratio of current assets to current
liabilities would have been 1.60:1 at December 31, 1996
and 1.49:1 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
significant 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 will be sufficient to
fund these costs. The Company had recorded a liability
<PAGE>
of approximately $15.7 million as of December 31, 1996
to cover the estimated costs of compliance with
environmental regulations which are not anticipated to
be of a capital nature. The liability of $15.7 million
includes accruals for issues extending past 1997.
-14-
<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 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 1997-1998, the Company estimates
environmental expenditures at the Pasadena and Tyler
refineries, of at least $3.8 million and $2 million,
respectively. Of these expenditures, it is anticipated
that $2.8 million for Pasadena and $1.5 million for
Tyler will be of a capital nature, while $1 million and
$.5 million, respectively, will be related to
previously accrued non-capital remediation efforts. At
the Company's marketing facilities, environmental
expenditures relating to previously accrued non-capital
compliance efforts are planned totaling approximately
$2.8 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
effective September 25, 1995, as amended (Credit
Agreement), the Company had outstanding as of March 14,
1997, irrevocable standby letters of credit in the
principal amount of $38.2 million for purposes in the
ordinary course of business. At December 31, 1996, 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.
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.
At the Company's option, up to $37.5 million of the
Unsecured 10.875% Senior Notes (Notes) may be redeemed
<PAGE>
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.
The Purchase Money Lien (Money Lien) discussed in Note
C of Notes to Consolidated Financial Statements on page
27 of this report, is secured by certain service
station and terminal equipment and office furnishings
having a cost basis of $6.5 million. The effective
rate for the Money Lien is 6.65%. Ninety percent of
the principal is payable in 60 equal monthly
installments which commenced in February 1994 with a
balloon payment of 10% of the principal payable in
January 1999.
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 1997 are projected to approximate $43 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 the Unsecured
Credit Agreement or a successor agreement, will be
sufficient over the next several years to make required
payments of principal and interest on its debt, permit
anticipated capital expenditures and fund the Company's
working capital requirements. The Unsecured Credit
Agreement expires on September 30, 1997 and the Company
intends to renew or replace the existing facility. Any
major acquisition would likely require a combination of
additional debt and equity.
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.
<PAGE>
-15-
<PAGE>
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.
The Company has disclosed in Note I of Notes to
Consolidated Financial Statements on page 33 of this
report, various contingencies which involve litigation,
environmental liabilities and examinations by the
Internal Revenue Service. Depending on the occurrence,
amount and timing of an unfavorable resolution of these
contingencies, the outcome of which cannot reasonably
be determined at this time, it is possible that the
Company's future results of operations and cash flows
could be materially affected in a particular quarter or
year. However, the Company has concluded, after
consultation with counsel, that there is no reasonable
basis to believe that the ultimate resolution of any of
these contingencies will have a material adverse effect
on the Company. Additionally, as discussed in Item 3.
Legal Proceedings on page 9 of this report, 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.
Effects of Inflation and Changing Prices
The Company's Consolidated Financial Statements are
prepared on the historical cost method of accounting
and, as a result, do not reflect changes in the
dollar's purchasing power. In the capital intensive
industry in which the Company operates, the replacement
costs for its properties would generally far exceed
their historical costs. As a result, depreciation
would be greater if it were based on current
replacement costs. However, since the replacement
<PAGE>
facilities would reflect technological improvements and
changes in business strategies, such facilities would
be expected to be more productive and versatile than
existing facilities, thereby increasing profits and
mitigating increased depreciation and operating costs.
In recent years, crude oil and refined petroleum
product prices have been volatile which has impacted
working capital requirements. If the prices increase
in the future, the Company would expect a related
increase in working capital needs.
Additional Factors That May Affect Future Results
The Company's operating results have been, and will
continue to be, affected by a wide variety of factors
that could have an adverse effect on profitability
during any particular period, many of which are beyond
the Company's control. Among these are the demand for
crude oil and refined products, which is largely driven
by the condition of local and worldwide economies,
although seasonality and weather patterns also play a
significant part. Governmental regulations and
policies, particularly in the areas of energy and the
environment, also have a significant impact on the
Company's activities. Operating results can be
affected by these industry factors, by competition in
the particular geographic markets that the Company
serves and by Company-specific factors, such as the
success of particular marketing programs and refinery
operations.
-16-
<PAGE>
In addition, the Company's profitability depends
largely on the difference between market prices for
refined petroleum products and crude oil prices. This
margin is continually changing and may significantly
fluctuate from time to time. Crude oil and refined
products are commodities whose price levels are
determined by market forces beyond the control of the
Company. Additionally, due to the seasonality of
refined products and refinery maintenance schedules,
results of operations for any particular quarter of a
fiscal year are not necessarily indicative of results
for the full year. In general, prices for refined
products are significantly influenced by the price of
crude oil. Although an increase or decrease in the
price for crude oil generally results in a
corresponding increase or decrease in prices for
refined products, often there is a lag time in the
realization of the corresponding increase or decrease
in prices for refined products. The effect of changes
in crude oil prices on operating results therefore
depends in part on how quickly refined product prices
adjust to reflect these changes. A substantial or
prolonged increase in crude oil prices without a
<PAGE>
corresponding increase in refined product prices, a
substantial or prolonged decrease in refined product
prices without a corresponding decrease in crude oil
prices, or a substantial or prolonged decrease in
demand for refined products could have a significant
negative effect on the Company's earnings and cash
flows.
The Company is dependent on refining and selling
quantities of refined products at margins sufficient to
cover operating costs, including any future
inflationary pressures. The refining business is
characterized by high fixed costs resulting from the
significant capital outlays associated with refineries,
terminals and related facilities. Furthermore, future
regulatory requirements or competitive pressures could
result in additional capital expenditures, which may or
may not produce desired results. Such capital
expenditures may require significant financial
resources that may be contingent on the Company's
continued access to capital markets and commercial bank
financing on favorable terms.
Purchases of crude oil supply are typically made
pursuant to relatively short-term, renewable contracts
with numerous foreign and domestic major and
independent oil producers, generally containing market-
responsive pricing provisions. Futures, forwards and
exchange traded options are used to minimize the
exposure of the Company's refining margins to crude oil
and refined product fluctuations. The Company also
uses the futures market to help manage the price risk
inherent in purchasing crude oil in advance of the
delivery date, and in maintaining the inventories
contained within its refinery and pipeline system.
Hedging strategies used to minimize this exposure
include fixing a future margin between crude and
certain finished products and also hedging fixed price
purchase and sales commitments of crude oil and refined
products. 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 effect the Company's
ability to participate in an improvement in related
product profit margins. Although the Company's net
sales and operating revenues fluctuate significantly
with movements in industry crude oil prices, such
prices do not have a direct relationship to net
earnings, which are subject to the impact of the
Company's LIFO method of accounting discussed below.
The effect of changes in crude oil prices on the
Company's operating results is determined more by the
rate at which the prices of refined products adjust to
reflect such changes.
The following table estimates the sensitivity of the
Company's income before taxes to price changes which
impact its refining and retail margins based on a
representative production rate for the Refineries and a
<PAGE>
representative amount of total gasoline sold at the
Company's retail units:
Earnings Sensitivity Change Annual
Impact
Refining margin $0.10/bbl $ 5.6
million
Retail margin $0.01/gal $ 5.4
million
The Company conducts environmental assessments and
remediation efforts at multiple locations, including
operating facilities and previously owned or operated
facilities. The Company accrues environmental and
clean-up related costs of a non-capital nature when it
is both probable that a liability has been incurred and
the amount can be reasonably estimated. Accruals for
losses from environmental remediation obligations
generally are recognized no later than completion of
the remedial 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.
Expenditures for equipment necessary for environmental
issues relating to ongoing operations are capitalized.
-17-
<PAGE>
The Company's crude oil, refined products and
convenience store merchandise and gasoline inventories
are valued at the lower of cost (based on the last-in,
first-out or LIFO method of accounting) or market, with
the exception of crude oil inventory held for resale
which is valued at the lower of cost (based on the
first-in first-out or FIFO method of accounting) or
market. Under the LIFO method, the effects of price
increases and decreases in crude oil and other
feedstocks are charged directly to the cost of refined
products sold in the period that such price changes
occur. In periods of rising prices, the LIFO method
may cause reported operating income to be lower than
would otherwise result from the use of the FIFO method.
Conversely, in periods of falling prices the LIFO
method may cause reported operating income to be
higher than would otherwise result from the use of the
FIFO method. In addition, the Company's use of the
LIFO method understates the value of inventories on the
Company's consolidated balance sheet as compared to the
value of inventories under the FIFO method.
<PAGE>
(This space intentionally left blank)
-18-
<PAGE>
<TABLE>
<CAPTION>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
December 31
_____
_____
________
1996 ________
1995
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents ........ $ 42,045
$
36,031
Accounts receivable, less allowance
for
doubtful accounts (1996--$1,079; 105,799
1995--$1,531)...................... 113,44
7
Recoverable income taxes ......... 4,820 4,137
Inventories ...................... 66,004 96,025
Other current assets ............. ______
13,207 _
_____
2,595
Total Current Assets ............ 250,601
233,50
9
Investments and Deferred Charges... 33,807 30,633
Property, Plant and Equipment
Land ............................. 44,438 45,856
Petroleum refineries ............. 364,806
374,49
0
Marketing facilities ............. 189,272
195,36
<PAGE>
6
Pipelines and other equipment .... ______
25,944 ______
24,404
624,338
640,23
8
Less allowance for depreciation . _______
322,358
______
342,32
___
_
1
Net Property, Plant and 301,980
Equipment.......................... 297,91
7
_____
______
_
_
$ _
$
_
_
______
565,23
___
___
_______
583,214
________
_________
_
3
_
<FN>
See notes to consolidated financial statements
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars)
December 31
<PAGE>
Liabilities and Stockholders' Equity __________
1996 __________
1995
____
____
<S> <C> <C>
Current Liabilities
Accounts payable:
Crude oil and refined products .. $ $112,036
112,532
Other ........................... 17,130 24,287
Accrued liabilities ............... 49,594 66,788
Current portion of long-term debt _____
1,379
__
. _____
1,559
__
Total Current Liabilities ......... 180,635 204,670
Long-Term Debt...................... 127,196 128,506
Deferred Income Taxes............... 30,535 27,995
Other Deferred Liabilities.......... 39,492 32,548
Common Stockholders' Equity
Class A Common Stock--par value $5
per share:
Authorized--7,500,000 shares;
issued and outstanding shares--
4,817,394 in 1996 and 4,817,392 in 24,087 24,087
................................
1995
Class B Common Stock--par value $5
per share:
Authorized--7,500,000 shares;
issued and outstanding shares--
5,165,786 in 1996 and 5,135,558 in 25,829 25,678
................................
1995
Additional paid-in capital ........ 91,817 92,249
Unearned restricted stock ......... (2,951) (3,733)
Retained Earnings ................. ______
48,593
_
_
______
51,214
Total Common Stockholders' Equity . 187,375 189,495
______
______
_
_
_
$ _
$_______
583,214
_
________
___
_______
565,233
_________
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
-20-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Year Ended December 31
______
______
______
________
1996 ________
1995 ________
1994
_
<S> <C> <C> <C>
Revenues
Revenues
Revenues
Sales and operating revenues ......... $ $ $
1,635,27 1,451,34 1,318,55
6 9 8
Operating Costs and Expenses
Operating Costs and Expenses
Operating Costs and Expenses
Costs and operating expenses .........
1,498,64 1,340,59 1,221,49
7 6 4
Selling and administrative expenses 96,098
.. 82,792 84,754
Depreciation and amortization ........ 31,756 36,640 42,644
Sales, abandonments and write-down of
property, plant
and equipment:
Write-down of property, plant 80,524 16,841
and equipment ........................
Sales and abandonments of _____
___
___
217 ___
)
____
(311 )
____
(840
property, plant and equipment ........
________
1,626,71
_
________
1,540,24
__
__
________
1,364,89
_
8 _
1 _
3
Operating Income (Loss)
Operating Income (Loss)
Operating Income (Loss)................ 8,558 (88,892 (46,335
) )
Interest and other income ............ 2,001 5,351 1,502
Interest expense ..................... _
_______
(13,982) _______
(14,948)
__
______
(8,003)
(Loss) Before Income Taxes and
(Loss) Before Income Taxes and
(Loss) Before Income Taxes and (3,423) (98,489 (52,836
) )
Extraordinary Item
Extraordinary Item
Extraordinary Item.....................
Income Tax (Benefit)
Income Tax (Benefit)
Income Tax (Benefit) .................. ____
____
(656 _______
(31,122
) )
_______
(17,430
__
)
(Loss) Before Extraordinary Item
(Loss) Before Extraordinary Item
(Loss) Before Extraordinary Item....... (2,767) (67,367 (35,406
) )
Extraordinary (Loss) from Early
Extraordinary (Loss) from Early
Extraordinary (Loss) from Early
Extinguishment
Extinguishment
Extinguishment
<PAGE>
of Debt (net of income tax benefit of
of Debt (net of income tax benefit of
of Debt (net of income tax benefit of _______
_______
_______
_______
( 3,257
_
_
_
) ______
______
______
_
_
_
$2,039)
$2,039)
$2,039)................................
Net (Loss)
Net (Loss)
Net (Loss)............................. ______
(2,767
_
_
$ _______
(70,624
_
$
) _
$_______
(35,406
_______
________
________
__
__
)
_
_
)
_
_
Net (Loss) Per Share:
Net (Loss) Per Share:
Net (Loss) Per Share:
(Loss) Before Extraordinary Item
(Loss) Before Extraordinary Item
(Loss) Before Extraordinary Item....... $ $
)
(.28 $
)
(6.95 )
(3.63
Extraordinary (Loss) from Early
Extraordinary (Loss) from Early
Extraordinary (Loss) from Early
Extinguishment of Debt
Extinguishment of Debt
Extinguishment of Debt ............... _______
___
_
______
)
____
(.33 _
Net (Loss) Per Share
Net (Loss) Per Share
Net (Loss) Per Share................... ___
_
$ _
_
$
)
____
(.28 _____
(7.28 _
$
) )
_____
(3.63
_
_______
______
______
<FN>
See notes to consolidated financial statements
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Class A Class B Additio Unearne
nal d
Common Stock Common Stock Paid-In Restric Reta
ted d
__
___
______
Amount __
__
______
Shares ______
Amount ______
Shares _______
Capital ______
Stock ____
Earn
_
_
_
s
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
Balance at January 1,
Balance at January 1, 4,817,3 $ 5,015,2 $ $91,870
1994
1994
1994 $
92 24,087 06 25,076 157,
<PAGE>
Net (loss) for 1994 (35,
Adjustment to minimum
pension liability,
net of
deferred income tax
benefit of $133
Purchases of Common 24
(135,00 )
(675 )
(2,059
Stock 0 )
Stock registered to
participants of
stock
incentive plans 105,500 528 1,282 (1,810
$
)
Market value
adjustments to
Unearned Restricted ______
_____
______
_
_
____
_
)
____
(544
___
___
544
____
____
Stock
Balance at December
Balance at December
Balance at December 4,817,3 24,087 4,985,7 24,929 90,549 )
(1,266 122,
31, 1994
31, 1994
31, 1994 92 06
Net (loss) for 1995 (70,
Adjustment to minimum
pension liability,
net of
deferred income
taxes
of $133
Stock registered to (32
participants of
stock
incentive plans 149,800 749 1,273 (2,022)
Market value
adjustments to
Unearned Restricted 445 )
(445
Stock
Other ______
_____
__
52
_____
_
_
____
____
___
(18) _
______
____
Balance at December
Balance at December
Balance at December 4,817,3 24,087 5,135,5 25,678 92,249 (3,733) 51,2
31, 1995
31, 1995
31, 1995 92 58
Net (loss) for 1996 (2,7
Adjustment to minimum
pension liability,
net of
deferred income tax
benefit of $133 14
Stock registered to
participants of
stock
incentive plans 45,450 227 466 (693)
Cancellation of non-
vested stock
registered to
<PAGE>
participants of
stock incentive (51,050 (255) )
(591 846
plans )
Stock option 35,828 179 337
exercises
Market value
adjustments to
Unearned Restricted )
(629 629
Stock
Other ______
_____
_
2 ______
_
_
____
_
)
___
(15
____
_
______
____
Balance at December
Balance at December
Balance at December _______
4,817,3 _
$ _______
5,165,7 _
$ ______
91,817
_
$ ______
(2,951
_
$
31, 1996
31, 1996
31, 1996 ___
48,
_
$
of $133 _______
_
_______
_
_______
_______
__
94 ______
24,087 __
86 ______
25,829 )
__
______
__
______
<FN>
See notes to consolidated financial statements
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
Year Ended December 31
_______
1996 _______
1995 _______
1994
__
__
_
<S> <C> <C> <C>
Cash Flows From Operating
Cash Flows From Operating
Cash Flows From Operating
Activities
Activities
Activities
Net (loss)......................... (2,767
$ $ $
) (70,624 (35,406
) )
Reconciling items from net (loss)
to net
cash provided by operating
activities:
Depreciation and amortization .... 31,756 36,640 42,644
Loss (Gain) on sales of property,
plant
and equipment ................... 217 (311) (840)
Write-down from implementation of 80,524
SFAS No. 121 .....................
Write-down of Pasadena Refinery 16,841
HDS equipment......................
Equity (earnings) loss in )
(2,369 880
<PAGE>
unconsolidated subsidiaries........
Deferred income taxes ............ (1,406 (25,986 )
(2,303
) )
Other deferred items ............. 1,837 1,880 412
Extraordinary loss ............... 3,257
Changes in assets and liabilities
Accounts receivable .............. (7,648 23,185 (37,571
) )
Inventories ...................... 30,021 )
(1,092 )
(8,122
Other current assets ............. )
(1,331 )
(502
(10,61
)
2
Crude oil and refined products 496 (38,841 46,711
payable............................ )
Other accounts payable ........... (7,157 )
(5,701 9,488
)
Accrued liabilities and other 15,288 1,355
deferred liabilities............... (10,25
)
0
Income taxes payable ............ )
(3,264
Recoverable and deferred income 3,263 )
(6,245 (21,721
taxes.............................. )
Deferred financing costs ......... _
_____
)
______
(4,102 ______
Net Cash Provided by Operating
Net Cash Provided by Operating
Net Cash Provided by Operating ______
27,750 _____
4,172
_
_____
8,602
_
Activities
Activities
Activities.........................
Cash Flows From Investment
Cash Flows From Investment
Cash Flows From Investment
Activities
Activities
Activities
Capital expenditures ............. (41,010 (34,359
(24,10 ) )
)
1
Proceeds from sales of property, 2,494 6,359 4,868
plant and equipment................
Investment in subsidiaries ....... 6,778 )
(101
Capitalization of software costs (6,077 (6,908)
and )
related business processes ......
Deferred turnaround maintenance ______
(4,846 )
______
(2,637 _______
(13,390
and other..........................
) )
_
Net Cash (Used in) Investment
Net Cash (Used in) Investment
Net Cash (Used in) Investment _______
(37,418 ____
(42,___
982
Activities
Activities
Activities.........................
______
(32,53
__
) )
_
)
_
0
Cash Flows From Financing
Cash Flows From Financing
Cash Flows From Financing
Activities
Activities
Activities
Proceeds from debt and credit 142,711 64,220
agreement borrowings............... 108,00
0
Repayments of debt and credit (24,199
agreement borrowings............... (109,5 (122,75 )
22 ) )
5
Net (issuances) repayments of (228) 467 )
(60
long-term notes receivable.........
<PAGE>
Issuances (purchases) of common ___
___
516 ______
stock..............................
)
______
(2,734
_
Net Cash (Used in) Provided by
Net Cash (Used in) Provided by
Net Cash (Used in) Provided by ______
(1,234 ______
20,423
Financing Activities
Financing Activities
Financing Activities .............
) ______
37,227
_
Net (Decrease) Increase in Cash
Net (Decrease) Increase in Cash
Net (Decrease) Increase in Cash (6,014 (12,823 2,847
and Cash Equivalents
and Cash Equivalents
and Cash Equivalents............... ) )
Cash and Cash Equivalents at
Cash and Cash Equivalents at
Cash and Cash Equivalents at ______
42,045 ______
54,868
Beginning of Year
Beginning of Year
Beginning of Year..................
______
52,021
_
Cash and Cash Equivalents at End of
Cash and Cash Equivalents at End of
Cash and Cash Equivalents at End of _
$ ______
42,045
_
$ ______
54,868
_
$
Year
Year
Year
_
_______
_______
______
36,031
__
_______
Supplemental Disclosures of Cash
Supplemental Disclosures of Cash
Supplemental Disclosures of Cash
Flow Information
Flow Information
Flow Information
Cash paid during the year for:
Interest (net of amount $ 19,670
$ $6,608
capitalized)....................... 13,007
Income taxes .................... 904 9,490 6,124
<FN>
See notes to consolidated financial statements
</TABLE>
-23-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
Note A--Description of Business and Summary of
Accounting Policies
Description of Business: Crown Central Petroleum
Corporation and subsidiaries (the Company) operates
primarily in one business segment as an independent
refiner and marketer of petroleum products, including
petrochemical feedstocks. The Company operates two
refineries, one located near Houston, Texas with a
rated capacity of 100,000 barrels per day of crude oil
and another in Tyler, Texas with a rated capacity of
52,000 barrels per day of crude oil. Its principal
business is the wholesale and retail sale of its
<PAGE>
products through 15 product terminals located on three
major product pipelines along the Gulf Coast and the
Eastern Seaboard and in the Central United States and
through a network of 343 gasoline stations, convenience
stores and mini-marts located in the Mid-Atlantic and
Southeastern United States.
Crude oil and refined products are the Company's
principal raw materials and finished goods,
respectively. The price of crude oil and refined
products are subject to worldwide market forces of
supply and demand. Prices can be volatile and
fluctuations influence the Company's financial results.
Employment at the Company's Pasadena and Tyler
refineries represent approximately 12% and 8%,
respectively, of the Company's total employment at
December 31, 1996. Additionally, approximately 68% of
the Pasadena refinery employees and approximately 69%
of the Tyler refinery employees are subject to
collective bargaining agreements. The Company's
collective bargaining agreement with the Oil Chemical &
Atomic Workers Union (OCAW) covering employees at the
Pasadena refinery expired on February 1, 1996. The
Pasadena refinery employees subject to the OCAW
agreement were locked out by the Company on February 5,
1996. Negotiations for a new agreement are ongoing.
Locot Corporation, a wholly-owned subsidiary of the
Company, is the parent company of La Gloria Oil and Gas
Company (La Gloria) which operates the Tyler refinery,
a pipeline gathering system in Texas and product
terminals located along the Texas Eastern Products
Pipeline system.
F Z Corporation, a wholly-owned subsidiary of the
Company, is the parent company of Fast Fare, Inc. which
operates two convenience store chains in six states,
retailing both merchandise and gasoline.
The following summarizes the significant accounting
policies and practices followed by the Company:
Principles of Consolidation: The consolidated
financial statements include the accounts of Crown
Central Petroleum Corporation and all majority-owned
subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
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
<PAGE>
are deemed to be cash equivalents for purposes of the
statements of cash flows.
Accounts Receivable: The majority of the Company's
accounts receivable relate to sales of petroleum
products to third parties operating in the petroleum
industry.
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.
-24-
<PAGE>
Property, Plant and Equipment: Property, plant and
equipment is carried at cost. Costs assigned to
property, plant and equipment of acquired businesses
are based on estimated fair value at the date of
acquisition. Depreciation and amortization of plant
and equipment are primarily provided using the
straight-line method over estimated useful lives.
Construction in progress is recorded in property, plant
and equipment.
Expenditures which materially increase values, change
capacities or extend useful lives are capitalized in
property, plant and equipment. Routine maintenance,
repairs and replacement costs are charged against
current operations. At intervals of two or more years,
the Company conducts a complete shutdown and inspection
of significant units (turnaround) at its refineries to
perform necessary repairs and replacements. Costs
associated with these turnarounds are deferred and
amortized over the period until the next planned
turnaround, which generally ranges from 24 to 48
months.
Upon sale or retirement, the costs and related
accumulated depreciation or amortization are eliminated
from the respective accounts and any resulting gain or
loss is included in income.
Software Capitalization: Costs of developing and
implementing software and related business processes
designed for the Company's own use are capitalized as
incurred. Amortization is provided using the straight-
line method over the estimated remaining useful lives
of the related software.
Environmental Costs: The Company conducts
environmental assessments and remediation efforts at
multiple locations, including operating facilities, and
<PAGE>
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 follows.
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.
Sales and Operating Revenues: Resales of crude oil are
recorded net of the related crude oil cost (first-in,
first-out) in sales and operating revenues.
Interest Capitalization: Interest costs incurred
during the construction and preoperating stages of
significant construction or development projects is
capitalized and subsequently amortized by charges to
earnings over the useful lives of the related assets.
Amortization of Goodwill: The excess purchase price of
acquisitions of businesses over the estimated fair
value of assets acquired is being amortized on a
straight-line basis over 20 years.
Derivative Financial Instruments: Futures, forwards
and exchange traded options are used to minimize the
exposure of the Company's refining margins to crude oil
and refined product price fluctuations. The Company
also uses the futures market to manage the price risk
inherent in purchasing crude oil in advance of the
delivery date, and in maintaining the inventories
contained within its refinery and pipeline system.
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
<PAGE>
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 other current assets
and liabilities to the extent that the associated
refined products have not been sold. 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 effect the Company's ability to participate in an
improvement in related refined product profit margins.
-25-
<PAGE>
Credit Risk - The Company is potentially subjected to
concentrations of credit risk with accounts receivable
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
December 31, 1996. The Company evaluates the credit
worthiness of the counterparties to 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.
Stock Based Compensation - Effective January 1, 1996,
the Company has adopted Statement of Financial
Accounting Standards No. 123 ``
Accounting for Stock-
Based Compensation,''
(SFAS 123). The new standard
establishes a fair value based method of measuring
stock-based compensation. The Company has adopted the
disclosure provisions prescribed by SFAS 123 which
permit companies to continue to value their stock-based
compensation using the intrinsic value method
prescribed by Accounting Principles Board Opinion No.
25 while providing proforma disclosures of net income
and earnings per share calculated using the fair value
based method.
Reclassifications - To conform to the 1996
presentation, Sales and operating revenues and Costs
and operating expenses for 1995 and 1994 have been
adjusted to exclude all federal and state excise taxes.
As a result, Sales and operating revenues and Costs
and operating expenses decreased $413,290,000 in 1995
and $380,610,000 in 1994, respectively. This
adjustment had no effect on net (loss) for either
period.
Note B--Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
<PAGE>
December 31
_______
1996 _______
1995
(thousands of
dollars)
<S> <C> <C>
Crude oil............................ 22,150
$ $58,047
Refined products..................... _____
______
77,342
______
84,516
__
Total inventories at FIFO 135,389
(approximates current cost).......... 106,666
LIFO allowance....................... _______
(52,988 _______
(52,301
) )
Total crude oil and refined products ______
53,678 ______
83,088
Merchandise inventory at FIFO 6,001 6,453
(approximates current cost)..........
LIFO allowance....................... ______
(1,861 ______
(1,674
) )
Total merchandise .................. _____
4,140
_
_____
4,779
_
Materials and supplies inventory at _____
8,186
_
_
_____
8,158
................................
FIFO .
Total Inventory
Total Inventory
Total Inventory .................... _
$______
66,004 ______
96,025
_
$
_______
_______
<FN>
As a result of a change in base year values for a
portion of LIFO inventories, the net loss for 1996
decreased by approximately $3.7 million ($.38 per
share). Additionally, as a result of a reduction in
LIFO inventories, which were carried at lower costs
prevailing in prior years, the net loss for 1996 and
1995 decreased by approximately $9.4 million ($.96 per
share) and $3 million ($.31 per share), respectively.
</TABLE>
-26-
<PAGE>
Note C--Long-Term Debt and Credit Arrangements
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31
_____
____
<PAGE>
_______
1996 _______
1995
_
(thousands of
dollars)
<S> <C> <C>
Unsecured 10.875% Senior Notes.. $ $
124,748 124,71
6
Purchase Money Lien............. 3,330 4,492
Other obligations............... ___
497
___
___
857
___
128,575
130,06
5
Less current portion............ _____
1,379
_
_____
1,559
_
Long-Term Debt
Long-Term Debt
Long-Term Debt ................ _
$ _
$
_
_
_______
127,196
__
__
______
128,50
________
_______
_
6
_
<FN>
The aggregate maturities of long-term debt through 2001
are as follows (in thousands):
1997 - $1,379; 1998 - $1,455; 1999 - $866; 2000 -
$72; 2001 - $47.
</TABLE>
On January 24, 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 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 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.
<PAGE>
Effective as of September 25, 1995, the Company entered
into a two year Unsecured Revolving Credit Agreement
(Agreement) with NationsBank of Texas, N.A., as
administrative agent and letter of credit agent, and
The First National Bank of Boston and Texas Commerce
Bank National Association, as agents. Additionally,
there are six other participant banks. Under the
Agreement, the banks have committed a maximum of $130
million to the Company for cash borrowings and letters
of credit. The Agreement allows for interest on
outstanding borrowings to be computed under one of
three methods based on the Base Rate, the London
Interbank Offered Rate, or the Certificates of Deposit
Rate (all as defined). The Agreement limits
indebtedness (as defined) and cash dividends and
requires the maintenance of various covenants
including, but not limited to, minimum consolidated
tangible net worth, minimum working capital and minimum
FIFO net income or (loss) (all as defined). The
Company intends to use the Agreement for general
corporate and working capital purposes.
As of December 31, 1996, the Company had outstanding
irrevocable standby letters of credit in the principal
amount of $59.6 million. Unused commitments under the
terms of the Credit Agreement totaling $70.4 million
were available for future borrowings and issuance of
letters of credit at December 31, 1996. The Company
pays an annual commitment fee on the unused portion of
the credit line.
The Purchase Money Lien is secured by certain service
station equipment and office furnishings having a cost
basis of $6.5 million. The effective rate for the
Money Lien is 6.65%. Ninety percent of the principal
is repayable in 60 monthly installments with a balloon
payment of 10% of the principal payable in January
1999.
<TABLE>
<CAPTION>
The following interest costs were charged to pre-tax income:
Year Ended December 31
_______
1996 ______
1995 _______
1994
(thousands of dollars)
<S> <C> <C> <C>
Total interest costs incurred.... $15,822 15,234
$ 8,288
$
Less: Capitalized interest....... _____
1,840 ___
286
__
___
285
__
Interest Expense ______
13,982
_
$ _
$______
14,948 _
$_____
8,003
_______
_______
______
</TABLE>
-27
<PAGE>
<PAGE>
Note D--Crude Oil and Refined Product Hedging
Activities
The net deferred loss from crude oil and refined
product hedging strategies was $3.4 million and $1.6
million at December 31, 1996 and 1995, respectively.
Included in these hedging strategies are contracts
maturing from January 1997 to March 1997. The Company
is using these contracts to defer the pricing of
approximately 14% of its crude oil commitments and to
fix the margin on approximately 2% of its refined
products, for the aforementioned period.
<TABLE>
<CAPTION>
Note E--Income Taxes
Significant components of the Company's deferred tax liabilities and
assets are as follows:
________
1996 ________
1995
__
__
(thousands of
dollars)
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization ..... $ $
(63,661 (57,660
) )
Other ............................. _______
(26,066 _______
(22,264
) )
Total deferred tax liabilities .. (89,727 (79,924
) )
Deferred tax assets:
Postretirement and pension 7,427 5,919
obligations.........................
Environmental, litigation and other 9,796 9,552
accruals............................
Construction and inventory cost not 11,765 8,156
currently deductible.................
Benefit of future tax NOL carry 14,869 10,659
forwards............................
Other ............................. ______
15,335 _
______
17,643
Total deferred tax assets ....... ______
59,192 ______
51,929
_
Net deferred tax liabilities .... _
$ _
$
_
_
<PAGE>
___
_______
(30,535 ___
_______
(27,995
_________
_________
__
)
_
__
)
</TABLE>
No valuation allowance is considered necessary for the
above deferred tax assets. The company has tax credit
carryforwards of $303,000 which expire in the years
2008 through 2010, along with net operating loss
carryforwards of $44.4 million which expire in the
years 2009 through 2011.
Recoverable income taxes include an income tax
receivable for the anticipated refund from the current
use of net operating losses and the estimated benefit
from net operating loss carryforwards that will be used
in 1997.
Significant components of the income tax (benefit) for
the years ended December 31 follows.
<TABLE>
<CAPTION
________
1996 ________
1995 ________
1994
__
__
__
(thousands of dollars)
<S> <C> <C> <C>
Current:
Federal ..................... $ 0 $
$
(14,541
(5,372
)
)
State ....................... ___
___
750 __
___
236
__
)
____
(586
Total Current ............. 750 (5,136 (15,127
) )
Deferred:
Federal ..................... (911) (2,188)
(25,17
8 )
State ....................... __
)
____
(495 ____
(808)
_
__
)
____
(115
Total Deferred ............ ______
(1,406) ______
(2,303)
__
______
(25,98
_
6 )
<PAGE>
Income Tax (Benefit) ........ _
$ ____
(656
_
) _
$ _
$
_____
_
_
__
______
(31,12 _______
(17,430
__
________
________
_
_
2 )
)
__
<FN>
Current state tax provision includes franchise taxes of $750,000,
$750,000 and $1,000,000 for the years 1996, 1995 and 1994,
respectively.
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
The following is a reconciliation of the statutory federal income tax
rate to the actual effective income tax rate for the years ended
December 31:
________
1996 ________
1995 ____
__
_______
1994
___
(thousands of dollars)
<S> <C> <C> <C>
Income tax (benefit) calculated
at the
statutory federal income tax $
$ $
............................
rate (1,198 (34,472
) (18,492
) )
Amortization of goodwill and 145 2,726 330
purchase adjustment.............
State taxes (net of federal 166 )
(572 (700)
benefit)........................
Other........................... ___
___
231 _
_
_____
1,196 _____
1,432
Income Tax (Benefit) .......... _
$_
) _
$
____
(656 _
$
_____
_
_
__
_______
(31,122 _______
(17,430
__
________
________
) )
<PAGE>
</TABLE>
Note F--Capital Stock and Net Income Per Common Share
Class A Common stockholders are entitled to one vote
per share and have the right to elect all directors
other than those to be elected by other classes of
stock. Class B Common stockholders are entitled to
one-tenth vote per share and have the right to elect
two directors. Net (loss) per share for 1996, 1995 and
1994 is based upon the weighted average of common
shares outstanding of 9,721,693, 9,697,611 and
9,742,598, respectively, in each year. The average
outstanding and equivalent shares excludes 249,700,
255,300 and 105,500 shares of Performance Vested
Restricted Stock (PVRS) shares registered to
participants in the 1994 Long-Term Incentive Plan
(Plan) at December 31, 1996, 1995 and 1994,
respectively. The PVRS shares are not considered
outstanding for net income (loss) per share
calculations until the shares are released to the Plan
participants.
Note G--Long-Term Incentive 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. As of December 31, 1996,
249,700 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. PVRS awards to employees who have left the
Company are canceled.
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
Under the terms of the 1995 Management Stock Option
Plan, the Company may award to participants non-
<PAGE>
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.
Shares of Class B Common Stock available for issuance
under options or awards amounted to 399,536 and 377,940
at December 31, 1996 and 1995, respectively.
-29-
<PAGE>
<TABLE>
<CAPTION>
Detail of the Company's stock options are as follows:
Common Price Range Weighted
___
_______
Per Average
_________
Price Per
________
Shares _________
Share
_____
Share
_
<S> <C> <C> <C>
_____________________________
1994 Long-Term Incentive Plan
Granted - 1994
.............. 109,800 $16.13 - $16.84
$16.88
Canceled - 1994
............. __
$16.13 -
)
____
(950 $16.84
$16.88
Outstanding - December 31, 108,850 $16.13 - $16.84
............................
1994 $16.88
Granted - 1995
.............. _______
396,150 $12.81 - $13.37
$13.75
Outstanding - December 31, _______
505,000 $12.81 - $14.11
1995............................ $16.88
Shares Exercisable at ______
36,283 $16.13 - $16.84
December 31, 1995............... $16.88
______
Granted - 1996.............. 106,500 $13.75 - $17.01
$19.50
Exercised - 1996............ (29,072 $12.81 - $14.60
) $16.88
Canceled - 1996............. _______
(97,872 $12.81 - $14.26
$17.69
_
)
_
Outstanding - December 31, _______
484,556 $12.81 - $14.69
1996............................ $19.50
_______
Shares Exercisable at _______
156,756 $12.81 - $14.59
December 31, 1996............... $16.88
_______
<PAGE>
______________________________
1995 Management Stock Option
____
Plan
Granted - 1995.............. _______
461,760 $13.75 - $13.77
$16.06
Outstanding - December 31, 461,760 $13.75 - $13.77
............................
1995 $16.06
Exercised - 1996............ (6,756 $13.75
) $13.75
Canceled - 1996............. _______
(24,524 $13.75 $13.75
)
_
_
Outstanding - December 31, _______
430,480 $13.75 - $13.77
1996 $16.06
_______
Shares exercisable at _______
143,493 $13.75 - $13.77
December 31, 1996............... $16.06
_______
Total outstanding - December _______
915,036 $12.81 - $14.26
31, 1996........................ $19.50
_______
Total exercisable - December _______
300,249 $12.81 - $14.20
31, 1996........................ $16.88
_______
</TABLE>
The weighted average remaining life for options
outstanding at December 31, 1996 was nine years for
the Long Term Incentive Plan and also nine years for
the Management Stock Plan.
All options were granted at an exercise price equal to
the fair market value of the common stock at the date
of grant. The weighted average fair value at the date
of grant for options granted under the Long Term
Incentive Plan was $3.36and $3.88 for 1996 and 1995,
respectively. The fair value at the date of grant for
options granted under the Management Stock Option Plan
was $4.00 for 1995. There were no grants under the
Management Stock Option Plan in 1996. The fair value
of options at date of grant was estimated using the
Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
________________________
Long Term Incentive Plan ____
1996 ____
1995
<S> <C> <C>
Expected life (years) 3 3
Risk Free Interest Rate 6.04% 6.04%
Volatility 26.0% 26.0%
<PAGE>
Dividend Yield 0.0% 0.0%
____________________________
Management Stock Option Plan
Expected life (years) - 3
Risk Free Interest Rate - 6.04%
Volatility - 26.0%
Dividend Yield - 0.0%
</TABLE>
The Company granted 45,450 and 149,800 of shares of
Performance Vested Restricted Stock Awards during 1996
and 1995, respectively. The weighted average fair
value at date of grant for Performance Vested
Restricted Stock Awards granted in 1996 and 1995 was
$17.05 and $12.81, respectively, which in each case
represents the market value of the Company's Class B
Common Stock at the date of grant. The amount of
compensation expense recognized for Performance Vested
Stock Awards was not significant for 1996. There was no
compensation expense recognized in 1995 for these
awards.
-30-
<PAGE>
Stock-based compensation costs would have increased the
pretax loss by $1,320,000 ($805,000 after tax or $.08
per share) and $1,530,000 ($939,000 after tax or $.10
per share) for the years ended 1996 and 1995,
respectively, had the fair values of options and the
Performance Vested Restricted Stock granted since 1995
been recognized as compensation expense on a straight
line basis over the vesting period of the grant giving
consideration to achievement of performance objectives
where applicable. The proforma effect on net income
for 1996 and 1995 is not representative of the proforma
effect on net income in future years as it does not
consider the proforma compensation expense related to
grants made prior to 1995.
Note H--Employee Benefit Obligations
The Company has a defined benefit pension plan covering
the majority of full-time employees. The Company also
has several defined benefit plans covering only certain
senior executives. Plan benefits are generally based
on years of service and employees' average
compensation. The Company's policy is to fund the
pension plans in amounts which comply with contribution
limits imposed by law. Plan assets consist principally
of fixed income securities and stocks.
<TABLE>
<CAPTION>
Net periodic pension costs consisted of the following components:
<PAGE>
Year Ended December 31
1995
1996 1994
(thousands of dollars)
<S> <C> <C> <C>
Service cost - benefit earned $ $ 4,666
$
4,015
during the year.................. 4,737
Interest cost on projected 8,175 6,566
7,322
benefit obligations..............
Actual (return) loss on plan 1,455
assets........................... (13,75 (22,34
)
6 6 )
Total amortization and deferral.. _____
5,202 ______
(8,733
______
15,086
)
Net periodic pension costs .... _____
4,358
_
$ _____
3,954
_
$
_____
4,077
_
$
______
______
______
</TABLE>
<TABLE>
<CAPTION>
Assumptions used in the accounting for the defined benefit plans as of
December 31 were:
1996 1995 1994
<S> <C>
<C> <C>
Weighted average discount rates.. 7.50% 8.75%
7.25%
Rates of increase in compensation 4.00% 4.00%
4.00%
levels...........................
Expected long-term rate of return 9.75% 9.75% 9.50%
on assets........................
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth the funded status of the plans in which
assets exceed accumulated benefits:
December 31
________
1996 ________
1995
__
__
(thousands of
dollars)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation ...... _
$______
91,948 _
$______
84,992
Accumulated benefit obligation . _
$______
94,928 _
$______
87,889
<PAGE>
Projected benefit obligation ... $ $
113,567 107,022
Plan assets at fair value........ _______
104,651 ______
93,494
Projected benefit obligation (in (8,916) (13,528
excess of) plan assets........... )
Unrecognized net loss............ 7,593 12,934
Prior service (benefit) not yet
recognized
in net periodic pension cost ... )
(1,182
)
(1,162
Unrecognized net (asset) at
beginning of year, net of )
______
(1,693 )
______
(1,960
amortization.....................
Net pension liability............ ______
(4,198
_
$ ______
(3,716
_
$
_______
_______
) )
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth the funded status of the plans in which
accumulated benefits exceed assets:
December 31
________
1996 ________
1995
__
__
(thousands of
dollars)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation ...... _____
5,258
_
$ _
$_____
5,891
Accumulated benefit obligation . _
$_____
5,400 _____
5,891
_
$
Projected benefit obligation ... 5,871
$ 6,056
$
Plan assets at fair value........ ____
_
0 ____
_
0
Projected benefit obligation (in (5,871 (6,056
excess of) plan assets........... ) )
Unrecognized net loss............ 1,320 1,307
Prior service cost (benefit) not
yet recognized
net periodic pension cost
in ... 404 )
(70
Unrecognized net obligation at
beginning of year, net of 1,146 1,376
amortization.....................
<PAGE>
Minimum liability recognized..... ______
(2,399 ______
(2,448
) )
Net pension liability............ _
$ _
$
_
_
______
(5,400
__
______
(5,891
__
_______
_______
) )
</TABLE>
In addition to the defined benefit pension plan, the
Company provides certain health care and life insurance
benefits for eligible employees who retire from active
service. The postretirement health care plan is
contributory, with retiree contributions consisting of
copayment of premiums and other cost sharing features
such as deductibles and coinsurance. Beginning in
1998, the Company will "cap" the amount of premiums
that it will contribute to the medical plans. Should
costs exceed this cap, retiree premiums would increase
to cover the additional cost.
<TABLE>
<CAPTION>
The following table sets forth the accrued cost of the Company's
postretirement benefit plans recognized in the Company's Balance
Sheet:
December 31
________
1996 ________
1995
__
__
(thousands of
dollars)
<S> <C> <C>
Accumulated postretirement
benefit obligation (APBO):
Retirees ........................ 6,011
$ 6,671
$
Fully eligible active plan 1,727 1,884
participants.......................
Other active plan participants ... 4,564 3,384
Unrecognized net (loss) .......... (3,730 (3,657
) )
Unrecognized prior service cost .. _____
1,157 _____
1,275
Accrued postretirement benefit _____
9,729
_
$ _____
9,557
_
$
...............................
cost
______
______
</TABLE>
<PAGE>
The weighted average discount rate used in determining the APBO was
7.5% and 7.25% in 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost include the following
components:
December 31
1996 1995 1994
(thousands of dollars)
<S> <C> <C> <C>
Service cost......................... 354
$ 184
$ 193
$
Interest cost on accumulated 856 815 680
postretirement benefit obligation....
Total amortization and deferral...... __
55
___
)
___
(72
__
)
___
(29
__
Net periodic postretirement benefit _
$ ___
927
_
_
$ ____
844
_
$
................................
cost .
_
____
_____
_____
1,265
_
______
</TABLE>
The Company's policy is to fund postretirement costs other than
pensions on a pay-as-you-go basis.
-32-
<PAGE>
A 10% increase in the cost of medical care was assumed
for 1996. This medical trend rate is assumed to
decrease 1% annually to 9% in 1997, and decrease to 0%
thereafter as a result of the expense cap in 1998. The
medical trend rate assumption affects the amounts
reported. For example, a 1% increase in the medical
trend rate would increase the APBO by $394,000, and the
net periodic cost by $71,000 for 1996.
Note I--Litigation and Contingencies
The Company has been named as a defendant in various
matters of litigation, some of which are for
substantial amounts, and involve alleged personal
injury and property damage from prolonged exposure to
petroleum, petroleum related products and substances
used at its refinery or in the petroleum refining
process. The Company is a co-defendant with numerous
other defendants in a number of these suits. The
Company is vigorously defending these actions, however,
<PAGE>
the process of resolving these matters could take
several years. The liability, if any, associated with
these cases was either accrued in accordance with
generally accepted accounting principles or was not
determinable at December 31, 1996. The Company has
consulted with counsel with respect to each such
proceeding or large claim which is pending or
threatened. While litigation can contain a high degree
of uncertainty and the risk of an unfavorable outcome,
in the opinion of management, there is no reasonable
basis to believe that the eventual outcome of any such
matter or group of related matters will have a material
adverse effect on the Company.
The Company's federal income tax returns for the fiscal
years 1990 through 1995 are currently under examination
by the Internal Revenue Service. The Company has not
received any Notices of Proposed Adjustments and is not
aware of any such matters which will have a material
adverse effect on 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 that the amount can be
reasonably estimated. While it is often extremely
difficult to reasonably quantify future environmental
related expenditures, the Company anticipates that
continuing capital investments will be required over
the next several years to comply with existing
regulations. The Company had recorded a liability of
approximately $15.7 million as of December 31, 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 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 Consolidated Statements
of Operations for the years ended December 31, 1996,
1995 and 1994 were costs related to environmental
remediation in the amount of $1.6 million, $3.2 million
and $1.9 million, respectively.
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
<PAGE>
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.
-33-
<PAGE>
Note J--Noncancellable Lease Commitments
The Company has noncancellable operating lease
commitments for refinery, computer, office and other
equipment, transportation equipment, an airplane,
service station and convenience store properties, and
office space. Lease terms range from three to ten
years for refinery, computer, office and other
equipment and four to eight years for transportation
equipment. The airplane lease commenced in 1992 and
has a term of seven years. The majority of service
station properties have lease terms of 20 years. The
average lease term for convenience stores is
approximately 13 years. The Corporate Headquarters
office lease commenced in 1993 and has a ten year term
beginning in 1993. Certain of these leases have
renewal provisions.
<TABLE>
<CAPTION>
Future minimum rental payments under noncancellable operating lease
agreements as of December 31, 1996 are as follows (in thousands):
<S> <C>
......................
1997 $10,799
......................
1998 10,325
1999...................... 10,405
......................
2000 8,857
......................
2001 8,232
After 2001............... ______
30,384
Total Minimum Rental ______
79,002
_
$
Payments..................
_______
</TABLE>
Rental expense for the years ended December 31, 1996,
1995 and 1994 was $12,935,000, $12,955,000 and
$13,658,000, respectively.
<TABLE>
<CAPTION>
<PAGE>
Note K--Investments and Deferred Charges
Investments and deferred charges consist of the following:
December 31
________
1996 ________
1995
__
__
(thousands of
dollars)
<S> <C> <C>
System development costs.......... $12,656 6,908
$
Deferred turnarounds.............. 9,679 10,603
Loan expense...................... 3,208 3,700
Long-term notes receivable........ 2,791 2,563
Goodwill.......................... 2,541 3,081
Investments....................... 1,185 1,185
Intangible pension asset.......... 1,147 1,376
Other............................. ___
600
___
_____
1,217
_
Investments and Deferred Charges ______
33,807
_
$ ______
30,633
_
$
_______
_______
</TABLE>
Accumulated amortization of goodwill was $4,809,000 and
$4,395,000 at December 31, 1996 and 1995, respectively.
-34-
<PAGE>
Note L--Fair Value of Financial Instruments
The Company considers cash and cash equivalents,
accounts receivable, investments in subsidiaries, long-
term notes receivable, accounts payable, long-term debt
and interest rate swap agreements to be its financial
instruments. The carrying amount reported in the
balance sheet for cash and cash equivalents, accounts
receivable and accounts payable, represent their fair
values. The fair value of the Company's long-term
notes receivable at December 31, 1996 was estimated
using a discounted cash flow analysis, based on the
assumed interest rates for similar types of
arrangements. The approximate fair value of the
Company's Long-Term Debt at December 31, 1996 was
estimated using a discounted cash flow analysis, based
on the Company's assumed incremental borrowing rates
for similar types of borrowing arrangements. The fair
value of its investments in subsidiaries is considered
to be their carrying amount since these investments do
not have quoted market prices.
The following summarizes the carrying amounts and
related approximate fair values as of December 31, 1996
<PAGE>
of the Company's financial instruments whose carrying
amounts do not equal its fair value:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Approxima Carrying Approximate
___
te ___
_______
Fair
_______
Fair
________
Amount ________
Amount _______
Value
_______
Value
(thousands of (thousands of
dollars) dollars)
<S> <C> <C> <C> <C>
Assets
Long-Term Notes $ $
2,791 2,667 2,563
$ 2,294
$
Receivable............
Liabilities
Long-Term Debt $
..... $127,285 $ 128,181
$
127,196 128,506
</TABLE>
-35-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
Crown Central Petroleum Corporation
We have audited the accompanying consolidated balance
sheets of Crown Central Petroleum Corporation and
subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, changes
in common stockholders' equity, and cash flows for each
of the three years in the period ended December 31,
1996. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
<PAGE>
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the consolidated financial position of Crown
Central Petroleum Corporation and subsidiaries at
December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for
each of the three years in the period ended December
31, 1996, in conformity with generally accepted
accounting principles.
As discussed in Note A of the consolidated financial
statements, in the fourth quarter of 1995, the Company
changed its method of accounting for impairment of
long-lived assets in accordance with the adoption of
SFAS No. 121.
/s/---Ernst & Young LLP
Baltimore, Maryland
February 27, 1997
-36-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
QUARTERLY RESULTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
First Second Third Fourth
_
_
_
_
__
_______
Quarter _______
Quarter _______
Quarter _______
Quarter
_______
Yearly
S>
<
<
< <C> <C> <C> <C> <C>
1996
Sales and operating 371,091
$ $ $ $ $1,635,2
revenues............... 431,20 397,88 435,08 76
8 9 8
Gross profit........... 15,953 35,979 29,821 54,876 136,629
Net (loss) income .....(13,010 3,012 (3,636 10,867 (2,767)
) )
Net (loss) income per )
(1.34 (.37
.31 ) 1.12 (.28)
share..................
1995
Sales and operating $344,833 $ $ $ $1,451,3
revenues............... 380,12 367,12 359,27 49
5 0 1
Gross profit........... 23,260 42,638 33,232 11,623 110,753
<PAGE>
(Loss) income before
extraordinary item... (6,918 7,03
) 0 (67,78
304 (67,367
3 )
)
Net (loss) income .....(10,175 7,030 304 (70,624
) (67,78 )
3 )
(Loss) income per
share before
extraordinary item... )
(.71 .72 (6.99
.03 (6.95
) )
Net (loss) income per )
(1.04 .72 (6.99
.03 (7.28
) )
share..................
<FN>
Gross profit is defined as sales and operating revenues less costs and
operating expenses (including applicable property and other operating
taxes).
Per share amounts are based upon the weighted average number of common
shares outstanding at the end of each quarter.
The net loss in the fourth quarter of 1995 was unfavorably impacted by
a pre-tax write-down of $80.5 million relating to the implementation
of Statement of Financial Accounting Standard No. 121 ``
Accounting for
the Impairment of Long-Lived assets and for Long-Lived Assets to be
Disposed Of .
''
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not filed a Form 8-K within the last
twenty-four (24) months reporting a change of
independent auditors or any disagreement with the
independent auditors.
-37
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Following is a list of Crown Central Petroleum
Corporation's executive officers, their ages and their
positions and offices as of March 1, 1997:
Henry A. Rosenberg, Jr. (67)
Director since 1955, Chairman of the Board and Chief
Executive Officer since May 1975 and also President
since March 1, 1996. Also a director of Signet Banking
Corporation and USF&G Corporation.
Phillip W. Taff (55)
Executive Vice President and Chief Financial Officer
since April 1996; Senior Vice President - Finance and
Chief Financial Officer from June 1994 to March 1996.
Director of the Company from 1992 until his employment
<PAGE>
by the Company. Executive Vice President, Chief
Financial Officer and Chief Administrative Officer of
Greyhound Lines, Inc. from April 1993 to May 1994.
Senior Vice President and Chief Financial Officer of
American Trading and Production Corporation from May
1991 to April 1993.
Randall M. Trembly (50)
Executive Vice President since April 1996; Senior Vice
President - Refining from July 1995 to March 1996; Vice
President - Refining from December 1991 to June 1995.
Edward L. Rosenberg (41)
Senior Vice President - Supply and Transportation since
April 1996. Senior Vice President - Administration -
Corporate Development and Long Range Planning from June
1994 to March 1996; Senior Vice President - Finance and
Administration from December 1991 to June 1994. Edward
L. Rosenberg is the son of Henry A. Rosenberg, Jr., and
the brother of Frank B. Rosenberg.
John E. Wheeler, Jr. (44)
Senior Vice President - Finance and Treasurer since
October 1996; Senior Vice President - Finance from
April 1996 to September 1996; Senior Vice President -
Treasurer and Controller from June 1994 to March 1996;
Vice President - Treasurer and Controller from December
1991 to June 1994.
Frank B. Rosenberg (38)
Senior Vice President - Marketing since April 1996;
Vice President - Marketing from January 1993 to March
1996; Southern Marketing Division Manager from January
1992 to January 1993. Frank B. Rosenberg is the son of
Henry A. Rosenberg, Jr. and the brother of Edward L.
Rosenberg.
Thomas L. Owsley (56)
Vice President - Legal since April 1983.
Paul J. Ebner (39)
Vice President - Shared Services since April 1996; Vice
President - Marketing Support Services from December
1991 to March 1996.
J. Michael Mims (47)
Vice President - Human Resources since June 1992. Vice
President - Internal Auditing and Consulting Services
from December 1991 to June 1992.
Dennis W. Marple (48)
Vice President - Wholesale Sales and Terminals since
January 1996. General Manager - Wholesale Sales from
February 1995 to December 1995. Vice President -
LaGloria Supply, Trading and Transportation from
October 1989 to January 1995.
Dolores B. Rawlings (59)
Vice President - Secretary since April 1996; Secretary
from November 1990 to March 1996.
<PAGE>
James R. Evans (50)
Vice President - Retail Marketing since June 1996;
General Manager of Retail Operations from February 1995
to May 1996; General Manager of Direct Operations from
November 1993 to January 1995; Division Manager -
Retail from October 1990 to October 1993.
Jan L. Ries (48)
Corporate Controller since November 1996; Marketing
Division Controller from January 1992 to October 1996.
-38-
<PAGE>
There have been no events under any bankruptcy act, no
criminal proceedings and no judgments or injunctions
material to the evaluation of the ability and integrity
of any Director or Executive Officer during the past
five years. The information required in this Item 10
regarding Directors of the Company and all persons
nominated or chosen to become directors is hereby
incorporated by reference to the definitive Proxy
Statement which will be filed with the Commission
pursuant to Regulation 14A on or about March 28, 1997.
Item 11. EXECUTIVE COMPENSATION
The information required in this Item 11 regarding
executive compensation is hereby incorporated by
reference to the definitive Proxy Statement which will
be filed with the Commission pursuant to Regulation 14A
on or about March 28, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required in this Item 12 regarding
security ownership of certain beneficial owners and
management is hereby incorporated by reference to the
definitive Proxy Statement which will be filed with the
Commission pursuant to Regulation 14A on or about March
28, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information required in this Item 13 regarding
certain relationships and related transactions is
hereby incorporated by reference to the definitive
Proxy Statement which will be filed with the Commission
pursuant to Regulation 14A on or about March 28, 1997.
PART IV
<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) (1) LIST OF FINANCIAL STATEMENTS
The following Consolidated Financial Statements of
Crown Central Petroleum Corporation and Subsidiaries,
are included in Item 8 on pages 19 through 35 of this
report:
o Consolidated Statements of Operations -- Years ended
December 31, 1996, 1995 and 1994
o Consolidated Balance Sheets -- December 31, 1996 and
1995
o Consolidated Statements of Changes in Common
Stockholders' Equity -- Years ended December 31, 1996,
1995 and 1994
o Consolidated Statements of Cash Flows -- Years ended
December 31, 1996, 1995 and 1994
o Notes to Consolidated Financial Statements --
December 31, 1996
(a) (2) LIST OF FINANCIAL STATEMENT SCHEDULES
The schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have
been omitted.
-39-
<PAGE>
(a) (3) and (c) LIST OF EXHIBITS
EXHIBIT
NUMBER
3 Articles of Incorporation and Bylaws
(a) Amended and Restated Charter of Crown Central
Petroleum Corporation was previously filed with the
Registrants' Proxy Statement dated March 15, 1996 for
the Annual Meeting of Shareholders held on April 25,
1996 as Exhibit A of Appendix A, herein incorporated by
reference.
(b) Bylaws of Crown Central Petroleum Corporation as
amended and restated a February 29, 1996 was previously
filed with the Registrant's Form 10-K for the year
ended December 31, 1995 as Exhibit 3(b), herin
incorporated by reference.
4 Instruments Defining the Rights of Security Holders,
Including Indentures
<PAGE>
(a) Credit Agreement dated as of September 25, 1995
between the Registrant and various banks was previously
filed with the Registrant's Form 10-Q for the quarter
ended September 30, 1995 as Exhibit 4(a), herein
incorporated by reference.
(b) Amendment effective as of October 1, 1995 to the
Credit Agreement dated as of September 25, 1995 was
previously filed with the Registrant's Form 10-K for
the year ended December 31, 1995 as Exhibit 4(b),
herein incorporated by reference.
(c) Amendment effective as of April 1, 1996 to the
Credit Agreement dated as of September 25, 1995 was
previously filed with the Registrant's Form 10-Q for
the quarter ended June 30, 1996 as Exhibit 4(a), herein
incorporated by reference.
(d) Form of Indenture for the Registrant's 10 7/8%
Senior Notes due 2005 filed on January 17, 1995 as
Exhibit 4.1 of Amendment No. 3 to Registration
Statement on Form S-3, Registration No. 33-56429,
herein incorporated by reference.
10 Material Contracts
(a) Crude oil processing agreement between the
Registrant and Statoil North America, Inc.is filed as
part of this Annual Report on Form 10-K. Certain
portions of the Agreement have been omitted because of
their confidential nature, and have been filed
separately with the Securities and Exchange Commission
marked ``
Confidential Treatment''.
(b) Crown Central Petroleum Retirement Plan effective
as of July 1, 1993, was previously filed with the
Registrant's Form 10-K for the year ended December 31,
1993 as Exhibit 10(a), herein incorporated by
reference.
(c) Supplemental Retirement Income Plan for Senior
Executives as Restated effective September 26, 1996 was
previously filed with the Registrant's Form 10-Q for
the quarter ended September 30, 1996 as Exhibit 10(b),
herein incorporated by reference.
(d) Employee Savings Plan as amended and restated
effective January 1, 1987 9cwas previously filed with
the Registrant's Form 10-K for the year ended December
31, 1995 as Exhibit 10(c), herin incorporated by
reference., 1987.
(e) Amendment effective as of September 26, 1996 to
the Crown Central Petroleum Employees Savings Plan was
previously filed with the Registrant's Form 10-Q for
the quarter ended September 30, 1996 as Exhibit 10(c),
herein incorporated by reference.
<PAGE>
(f) Directors' Deferred Compensation Plan adopted on
August 25, 1983 was previously filed with the
Registrant's Form 10-Q for the quarter ended September
30, 1983 as Exhibit 19(b), herein incorporated by
reference.
(g) The 1994 Long-Term Incentive Plan was previously
filed as an exhibit to the Registrant's Proxy Statement
dated March 24, 1994, herein incorporated by reference.
-40-
<PAGE>
(h) Amendment effective as of September 26, 1996 to
the Crown Central Petroleum Corporation 1994 Long-Term
Incentive Plan was previously filed with the
Registrant's Form 10-Q for the quarter ended September
30, 1996 as Exhibit 10(d), herein incorporated by
reference.
(i) Annual Performance Incentive Plan for the year
ended December 31, 1997.
(j) Executive Severance Plan effective as of September
26, 1996 was previously filed with the Registrant's
Form 10-Q for the quarter ended September 30, 1996 as
Exhibit 10(a), herein incorporated by reference.
(k) The 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.
(l) Advisory and Consultancy Agreement dated October
28, 1993 between Jack Africk, Director and Crown
Central Petroleum Corporation was previously filed with
the Registrant's Form 10-Q for the quarter ended
September 30, 1994 as Exhibit 99, herein incorporated
by reference.
(m) Employees Supplementary Savings Plan filed on
February 27, 1995 as Exhibit 4 of Registration
Statement on Form S-8, Registration No. 33-57847,
herein incorporated by reference.
11 Statement re: Computation of Earnings Per Share
Exhibit 11 is included on page 42 of this report.
13 Annual Report to Security Holders, Form 10-Q or
Quarterly Report to Security Holders Annual Report
Exhibits:
(a) Shareholders' Letter dated February 27, 1997
(b) Operating Results and Key Financial Statistics
(c) Directors and Officers of the Company
(d) Corporate Information
(e) Supplement to the Annual Report - Operating
Statistics
21 Subsidiaries of the Registrant
<PAGE>
Exhibit 21 is included on page 43 of this
report.
23 Consent of Independent Auditors
Exhibit 23 is included on page 44 of this
report.
24 Power of Attorney
Exhibit 24 is included on page 45 of this
report.
27 Financial Data Schedule
99 Form 11-K will be filed under cover of Form 10-K/A
by June 30, 1997.
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the
three months ended December 31, 1996.
NOTE: Certain exhibits listed on pages 40 and 41 of
this report and filed with the Securities and Exchange
Commission, have been omitted. Copies of such exhibits
may be obtained from the Company upon written request,
for a prepaid fee of 25 cents per page.
-41-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(thousands of dollars except per share amounts)
_____________________________
Year Ended December 31
_______
1996 _______
1995 ______
1994
<S> <C> <C> <C>
Primary and Fully Diluted Earnings
Per Share
Net (loss) applicable to common _
$______
(2,767 _
$ _
$
shares.......................
_______
_
_
)
<PAGE>
__
_______
(70,624 _______
(35,406
__
_________
________
__
) )
_
_
Shares outstanding as reported at
December 31,
1995, 1994 and 1993, respectively
9,952,9 9,803,0 9,832,5
50 98 98
Restricted shares held by the
Company at
December 31, 1995, 1994 and 1993,
respectively................. (255,30 (105,50
)
0 )
0
Weighted average effect of 35,828
shares of common
stock issued in 1996 for stock 24,043
option exercises.............
Weighted average effect of 52 shares
of common
stock issued in October 1995 13
Weighted average effect of 135,000
shares
of common stock purchased in May ______
______
_
_______
(90,000
.........................
1994
)
_
_
Weighted average number of common
shares
outstanding, as adj usted at
December 31..................
_______
9,721,6
__
_______
9,697,6
__
__
_______
9,742,5
________
_________
________
__
93 __
11 __
98
__
__
__
Net (loss) per common share.. __
____
(.28
_
$ ) _
$_____
(7.28) _____
(3.63
_
_
$ )
______
______
______
</TABLE>
-42-
<PAGE>
EXHIBIT 21
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES
Subsidiaries as of December 31, 1996, which are consolidated in
1.
the financial statements of the Registrant; each subsidiary is
100% owned and doing business under its own name.
Nation or State
Subsidiary of Incorporation
<S> <C>
Continental American Corporation Delaware
Coronet Security Systems, Inc. Delaware
Coronet Software, Inc. Delaware
Crown Central Holding Corporation Maryland
Crown Central International (U.K.), United Kingdom
Limited
Crown Central Pipe Line Company Texas
Crown Gold, Inc. Maryland
The Crown Oil and Gas Company Maryland
Crown-Rancho Pipe Line Corporation Texas
Crown Stations, Inc. Maryland
Crowncen International N.V. Netherlands
Antilles
Fast Fare, Inc. Delaware
F Z Corporation Maryland
Health Plan Administrators, Inc. Maryland
La Gloria Oil and Gas Company Delaware
Locot, Inc. Maryland
McMurrey Pipe Line Company Texas
Tiara Insurance Company Vermont
Tiara Properties, Inc. Maryland
T. B. & Company, Inc. Maryland
</TABLE>
-43-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-53457)
pertaining to the 1994 Long Term Incentive Plan and
Employees Savings Plan and the Registration Statement
(Form S-8 No. 33-57847) pertaining to the Employees
Supplemental Savings Plan of Crown Central Petroleum
Corporation and Subsidiaries of our report dated
February 27, 1997, with respect to the consolidated
financial statements of Crown Central Petroleum
Corporation and Subsidiaries included in the Annual
Report (Form 10-K) for the year ended December 31,
1996.
ERNST & YOUNG LLP
Baltimore, Maryland
March 20, 1997
-44-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Crown Central Petroleum
Corporation hereby severally constitute Henry A. Rosenberg, Jr.,
Phillip W. Taff, John E. Wheeler, Jr., Jan L. Ries and Thomas L.
Owsley, and each of them singly, our true and lawful attorneys with
full power to them and each of them to sign for us in our names and in
the capacities indicated below this Report on Form 10-K for the fiscal
year ended December 31, 1996 pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934 and all amendments
thereto.
<S> <C> <C>
_________
Signature _____
Title ____
Date
/s/---Henry A, Rosenberg, Jr. Chairman
of the Board, President 2/27/97
Henry A. Rosenberg, Jr. and Chief
Executive Officer
(Principal Executive Officer)
/s/---Jack Africk Director
2/27/97
Jack Africk
/s/---George L. Bunting, Jr. Director
2/27/97
<PAGE>
George L. Bunting, Jr.
/s/---Michael F. Dacey Director
2/27/97
Michael F. Dacey
/s/---Thomas M. Gibbons Director
2/27/97
Thomas M. Gibbons
/s/---Patricia A. Goldman Director
2/27/97
Patricia A. Goldman
/s/---William L. Jews Director
2/27/97
William L. Jews
/s/---Harold E. Ridley, Jr. Director
2/27/97
Reverend Harold E. Ridley, Jr., S.J.
/s/---Sanford V. Schmidt Director
2/27/97
Sanford V. Schmidt
/s/---Phillip W. Taff Executive
Vice President and 2/27/97
Phillip W. Taff Chief Financial Officer
(Principal Financial Officer)
/s/---John E. Wheeler, Jr. Senior
Vice President - Finance and Treasurer 2/27/97
John E. Wheeler, Jr.
/s/---Jan L. Ries Controller 2/27/97
Jan L. Ries (Chief Accounting Officer)
</TABLE>
-45-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
By ____________
*_______________
__
_
Henry A. Rosenberg, Jr.
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
By _________________
/s/---Jan L. Ries__________
__
_
Jan L. Ries
Controller
Date: March 24, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below on March
24, 1997 by the following persons on behalf of the
registrant and in the capacities indicated:
____________________________________________________
*
___________________________________________________
*
Jack Africk, Director William L. Jews, Director
___________________________________________________
*
___________________________________________________
*
George L. Bunting, Jr., Director Rev. Harold E.
Ridley, Jr., S.J., Director
___________________________________________________
*
___________________________________________________
*
Michael F. Dacey, DirectorHenry A. Rosenberg, Jr.,
Director
Chairman of the Board,
President
and Chief Executive Officer
___________________________________________________
*
___________________________________________________
*
Thomas M. Gibbons, Director Sanford V. Schmidt,
Director
__________________________________________________
*
Patricia A. Goldman, Director
*By Power of Attorney (Jan L. Ries)
-46-
<PAGE>
<PAGE>
CRUDE OIL PROCESSING AGREEMENT
between
STATOIL NORTH AMERICA, INC.
and
CROWN CENTRAL PETROLEUM CORPORATION
<PAGE>
<TABLE>
<CAPTION>
<PAGE>
TABLE OF CONTENTS
<S> <C>
PAGE
PROCESSING AGREEMENT 1
ARTICLES
1. DEFINITIONS 2
2. DURATION 5
3. PROCESSING LEVELS 6
4. TYPE AND QUALITY OF CRUDE OIL 9
5. PRODUCT YIELDS 10
6. PRODUCT SPECIFICATION 11
7. PROCESSING FEES AND PENALTIES 12
8. TAXES AND OTHER CHARGES 14
9. PAYMENT 15
10.CRUDE OIL SUPPLY AND NOMINATION PROCEDURE 16
11.PRODUCT LIFTING SCHEDULE 18
12.BERTH, DISCHARGE AND LOADING CONDITIONS, AND DEMURRAGE 20
13.STORAGE RIGHTS AND OBLIGATIONS 23
14.FINAL SETTLEMENT 24
15.TITLE, RISK OF LOSS AND CUSTODY 25
16.QUANTITY AND QUALITY DETERMINATION 27
17.AUDITING 33
18.SUSPENSION AND TERMINATION 34
19.CREDIT CONDITIONS 36
20.INDEMNITY 37
21.REFINERY CLOSURE 38
22.FORCE MAJEURE 40
23.LAW AND ARBITRATION 42
24.REPRESENTATIONS, WARRANTIES, AND COVENANTS OF STATOIL 43
25.REPRESENTATIONS, WARRANTIES, ABD COVENANTS OF CROWN 45
<PAGE>
26.SAFETY AND HEALTH 47
ASSIGNMENT
27. 48
28.STATEMENTS 49
CONPLIANCE WITH EPA REFORMULATED GASOLINE &
29. 50
ANTI-DUMPING REGULATIONS
30.LIABILITIES 51
MISCELLANEOUS
31. 52
ADDENDUM ONE 55
ADDENDUM TWO 62
</TABLE>
<PAGE>
<PAGE>
____________________
PROCESSING AGREEMENT
th
This Agreement is made as of the 15 day of July, 1996,
between Statoil North America, Inc. of Stamford,
Connecticut,
(hereinunder called Statoil
`` )
''
and Crown Central Petroleum Corporation of Baltimore,
Maryland,
(hereinunder called ``
Crown ).
''
Whereas Statoil agrees to supply Crude Oil to Crown at the
Pasadena Refinery, located at 111 Red Bluff Road, Pasadena,
TX 77506, herein referred to as the Refinery,
`` and Crown
''
agrees to process such Crude Oil as defined and make
available Products to Statoil at the Refinery.
Now, therefore, in consideration of the premises and the
mutual promises herein contained, Crown and Statoil agree as
follows
<PAGE>
_________
ARTICLE 1
___________
DEFINITIONS
Where used in this Agreement, except as otherwise required
by the context, the words defined in the following sections
of this Article 1 shall have the meanings respectively
ascribed thereto.
(i) ''
Affiliate shall mean a person which owns a Party
''
(Parent), which is owned by a Party (Subsidiary), or
which is owned by a person which owns a Party.
Ownership means the ownership, directly or indirectly,
through one or more intermediaries, of fifty (50)
percent or more of the issued shares or voting rights
in a company, partnership, or legal entity.
(ii) API
'' '' shall mean the American Petroleum Institute.
(iii) ''
ASTM shall mean the American Society for
''
Testing and Materials.
<PAGE>
(iv) ''
Barrel'' shall mean a barrel of forty-two U.S.
gallons measured at 60 degrees Fahrenheit, and
``
B/CD'', shall mean Barrels per calendar day.
(v) ''
Crude Oil'' shall mean the Crude Oil specified
in Article 4 hereof, or raw materials which can be
considered technically and commercially as Crude Oil.
(vi) ''
Dollar'', ``USD'' and the symbol ``
$'' shall refer to
the United States Dollar.
(vii) ''
Environmental Laws'' shall mean all Laws and
Regulations, as defined in this Article, which involve,
relate to, or affect the environment in any way,
including, but not limited to, any of which purport to
govern air emissions, water discharges, spills,
hazardous or toxic substances, solid or hazardous
waste, and occupational health and safety, as may be
amended from time to time, and including all
Environmental Laws applicable in the State of Texas.
(viii) ''
Gallon'' shall mean a U.S. standard gallon of
231 cubic inches at 60 degrees Fahrenheit.
(ix) ''
Governmental Authority'' shall mean any federal,
state, or local governmental body or agency or
subdivision thereof, including, but not limited to, any
legislative, administrative, or judicial body which has
jurisdiction to exercise authority or control over
Statoil and Crown; over all or any part of the Refinery
Facilities; or over all or any part of the transactions
and services to be performed under this Agreement.
``
Independent Inspector'' shall mean a licensed person
or entity which will perform sampling, quality
analysis, and quantity determination of Crude Oil
and/or Products, either at loading or at the discharge
as described in this Agreement.
(x) ``
Independent Inspector'' shall mean a licensed person
or entity which will perform sampling, quality
analysis, and quantity determination of Crude Oil and /
or Products, either at loading or at the discharge as
described in this Agreement.
<PAGE>
(xi) ``
Laws and Regulations'' shall mean all applicable
treaties, statutes, regulations, codes, laws,
<PAGE>
ordinances, licenses, decisions, orders, directives,
decrees, agreements, concessions and arrangements with
Governmental Authorities, interpretations, or license,
permit or compliance requirements (a) which apply to
the Refinery Facilities or to the performance of either
Party of any obligation under this Agreement, or (b)
which may be enforced or issued by any Governmental
Authority with jurisdiction over the operation of the
Refinery Facility.
(xii) ``
Liabilities'' shall mean losses, claims,
charges, damages, deficiencies, assessments, interests,
penalties, costs, and expenses of any kind (including,
without limitation, related attorneys' fees and other
fees, court costs, and other disbursements), whether or
not liquidateddirectly or indirectly arising out of or
related to any suit, proceeding, judgment, settlement
or judicial or administrative order, includin
including without limitation, any liabilities with
respect to the Environmental Laws.
(xiii) ``
NSV'' shall mean the Net Standard Volume of oil
reduced to a standard temperature of 60 Fahrenheit and
expressed in Barrels. The Net Standard Volume is the
volume of oil after all Free Water, Water in
suspension, and sediments have been deducted.
(xiv) ``
Part Cargo'' shall mean when a Cargo is
discharged in more than one Discharge Port, or received
by more than one receiver at the Discharge Port.
(xv) ``
Party'' shall mean Statoil or Crown.
(xvi) ``
Processing Period'' shall mean the period of
duration of the processing contract as set forth in
Article 2.
(xvii) ``
Product(s)'' shall mean any finished petroleum
Products (liquid or gas) of the general type that can
be manufactured at the Refinery, including petroleum
Products described in Article 6 hereto and any
petroleum material which at any time is determined to
be a Product pursuant to the provision
of Article 6 hereto.
(xviii) ``
Refinery'' shall mean the petroleum Refinery of
Crown Central Petroleum, located at Pasadena, Texas.
(xix) ''
Refinery Facilities'' shall mean all the
facilities of Crown located at the Refinery in
Pasadena, Texas, or any associated or adjacent facility
owned or operated by Crown, which shall be used by
Crown to carry out the terms of this Agreement.
Refinery Facilities shall include, but not be limited
to, the Refinery, Crude Oil receiving, and Products
delivery facilities, pipelines, and storage tanks .(xx)
``
Refinery Stock'' shall mean Heidrun Crude Oil in
tank and available for Processing at the Refinery, or
such other, type of Crude Oil as may be agreed upon by
the Parties.
<PAGE>
(xx) ``
Refinery Stock'' shall mean Heidrun Crude Oil in tank
and available for Processing at the Refinery, or such
other type of Crude Oil as may be agreed upon by the
Parties.
<PAGE>
(xxi) ``
Taxes'' shall mean any and all federal, state,
and local taxes, duties, fees, charges, and dues of
every description on or applicable to Crude Oil and
Products owned by Statoil, including without
limitation, all motor fuels, special fuels, excise,
businessand occupation, gross receipts, environmental
or spill taxes, coastal protection fees, Superfund
taxes, loading fees, sales and use taxes, ad valorem
taxes, payments in lieu of ad valorem property taxes,
however designated, except for taxes on income.
(xxii) ``
TCV'' shall mean the Total Calculated Volume of
oil reduced to a standard temperature of 60</p>
Fahrenheit and expressed in Barrels. The Total
Calculated Volume is inclusive of all Free Water, Water
in suspension, and sediments.
(xxiii) ``
Vessel'' shall mean any craft designed for the
waterborne transportation of oil including, but not
limited to, ships and barges.
<PAGE>
_________
ARTICLE 2
________
DURATION
This Agreement shall be in effect from July 15, 1996, until
September 30, 1997, in accordance with the provisions
described below.
Statoil shall supply Crown with a minimum quantity of six
million Barrels of Crude Oil prior to July 31,
1997,provided, however, that Statoil shall be relieved of
the obligation to deliver the minimum quantity in the event
of an early termination of this Agreement pursuant to the
terms of Articles 3, or 22, or if the Parties shall agree
to a reduction in the minimum quantity.
Subject to Article 11 (Products Lifting Schedule), Statoil
shall lift all Products to which it is entitled under
this''
Agreement by September 30, 1997, or within two (2)
<PAGE>
months from the date of the last Crude Oil
delivery,whichever is earlier.
<PAGE>
_________
ARTICLE 3
_________________
PROCESSING LEVELS
(i) The quantity of Crude Oil to be processed by
Crown for Statoil in the Refinery under this
Agreement shall be deemed to be 20,000 B/CD,
Refinery Stock permitting. Should the Refinery
Stock be deemed to be drawn down to zero, before
the arrival of the next cargo from Statoil,
subject to Article 10 (iv), then the deemed
processing shall be suspended until the next cargo
arrives at the Refinery. Products deemed produced
from previous Crude Oil cargoes supplied by
Statoil and held in Stock may still be lifted by
Statoil during this period of suspension.
Notwithstanding the above, the quantity of Crude
Oil to be actually processed by Crown for Statoil
in the Refinery during the period shall average
20,000 B/CD over the course of each month. Actual
daily run rates may be lower or higher at Crown's
discretion. Crown must provide Statoil a weekly
inventory schedule showing actual and deemed
Heidrun Crude Oil inventory and actual and deemed
Products inventory. Crown may advise Statoil's
actual Products inventory as volumes of unfinished
components.
(ii) Statoil shall always have title to Crude Oil
inventories and to Products as they are deemed to have been
processed for Statoil under this Processing Agreement;
provided, however, that:
a) Statoil shall not have, or assert any claim
to, title over, or any other interest in, any
inventory with which the Crude Oil inventories
owned by Statoil are commingled in storage or
processing, and
b) The Products to which Statoil shall have
title shall be limited to the Products which
Statoil is, pursuant to this Contract, entitled
<PAGE>
to receive with respect to the Crude Oil
processed or deemed to have been processed, and
when such Crude Oil has been processed or
deemed to have been processed, Statoil shall
cease to have any title or interest therein,
and shall only have title to the Products
processed or deemed to have been processed from
such Crude Oil, and
c) Nothing in the Processing Agreement shall be
deemed to grant title to, or create a security
interest in, any asset of Crown (including
without limitation any inventory, partially
refined Products, or refined Products) in
violation of any of the undertakings,
covenants, or obligations of Crown or its
subsidiaries set forth in:
A) Crown's Indenture, dated as of January
24, 1995, with respect to $125,000,000
in principal amount of 10-7/8% Senior
Notes due 2005, as such indenture may be
amended, renewed, extended, substituted,
refinanced, restructured, replaced,
supplemented, or otherwise modified from
time to time, including, without
limitation, any successive amendments,
renewals, extensions, substitutions,
refinancings, restructurings,
replacements, supplementations, or other
modifications of the foregoing
(hereinafter the ``
Indenture''), or
<PAGE>
B) Crown's $130,000,000 Credit Agreement,
dated as of September 25, 1995, with
NationsBank of Texas, N.A., as
Administrative Agent and Letter of
Credit Agent, and with The First
National Bank of Boston and Texas
Commerce Bank NationalAssociation as
Agents, as such credit agreement may be
amended, renewed, extended, substituted,
refinanced, restructured, replaced,
supplemented, orotherwise modified from
time to time, including, without
limitation, any successive amendments,
renewals, extensions, substitutions,
refinancings, restructurings,
replacements, supplementations, or other
modifications of the foregoing
(hereinafter the''
Credit Agreement''),
provided, however, that Crown shall not make
or effect any amendment, supplement, or other
<PAGE>
modification to either the Indenture or the
Credit Agreement which adversely affects the
rights or interests of Statoil hereunder,
without giving Statoil a minimum of ten (10)
business days prior written notice thereof.
Should Crown make or effect any such
amendment, supplement, or other modification
which in Statoil's sole judgement adversely
affects its rights or interests, Statoil may,
at its sole discretion, suspend or terminate
this Agreement in accordance with Article 18.
(iii) Crude Oil shall be processed for Statoil at
the deemed yields specified in Article 5.
(iv) Crown shall not be required to process Crude Oil
during thirty-five (35) day Refinery turnaround currently
planned for the fourthquarter of 1996 or the first
quarter of 1997, subject to following conditions:
a) Crown shall notify Statoil, as early as reasonably
possible, when the dates of turnaround are known.
Notwithstanding this, Crown must give Statoil a
minimum notice ofsixty (60) days prior to
commencement of turnaround, if such turnaround is
to commence prior to January 15, 1997. Otherwise
if the turnaround is to commence after January 15,
1997, then Crown must give Statoil a minimum
notice of forty-five (45) days prior to
commencement of such turnaround
b) It is the intention of the parties for all Crude
Oil in storage at the Refinery to be processed
prior to commencement of the turnaround.
c) Statoil shall be permitted to supply Crude Oil
into the Refinery during the turnaround period, in
readiness for resumption of Processing.
d) Statoil shall be permitted to lift Products from
the Refinery,deemed to be produced prior to
commencement of turnaround, during the turnaround
period.
<PAGE>
(v) Crown shall not be required to process 20,000
Barrels per day of Heidrun Crude Oil, if thirty (30) days
written notice is given to Statoil that, for technical
reasons, the Refinery can no longer continue to process
Heidrun Crude Oil at a rate of 20,000 Barrels per day,
which fact is verified to Statoil by a qualified
independent third party. If such notice is given to
Statoil, then Statoil have the following options:
<PAGE>
a) Statoil may elect to continue to deliver the
quantity of Heidrun Crude Oil that the Refinery
can process. In the event the quantity of Heidrun
Crude Oil deemed to be processed is between 15,000
Barrels per day and 20,000 Barrels per day, then
the terms in Articles 10, 11, and 13 of this
Agreement remain unchanged. In the event the
quantity of Heidrun Crude Oil deemed to be
processed is less than 15,000 Barrels per day,
then Statoil shall have the right to deliver
parcels of Heidrun up to 550,000 New Barrels as
per Article 10 (ii). Statoil must then wait until
this quantity has been ratably processed to a
remaining inventory level of approximately 100,000
Barrels, or less, before delivering another
parcel. Statoil's right to build up Products
inventory as per Article 13 (ii) shall be ratably
reduced (i.e., if Statoil is entitled to 325,000
Barrels of inventory when processing 20,000
Barrels per day, then Statoil would be entitled to
162,500 Barrels of inventory if the processing
rate is 10,000 Barrels per day).
b) Statoil may elect to deliver a basket of Crude
Oils (Brent, Gullfaks, Troll, Statfjord,
orOseberg), in addition to the Heidrun Crude Oil,
up to the 20,000 Barrels per day processing level.
The quantity and quality of each grade may vary
from time to time a Statoil's option. The deemed
processing yield will remain the same for all
grades, however, the processing fee will be
adjusted for each grade representing the net
actual yield change between Heidrun and the
substitute grade. Crown will give Statoil the
actual yields for the above referenced grades
when giving Statoil notice of technical problems,
so that Statoil will have time to evaluate the
yields.
c) Statoil may elect to terminate this
Agreement.
<PAGE>
_________
ARTICLE 4
TYPE AND QUALITY OF CRUDE OIL
The Crude Oil to be supplied to the Refinery under this
Agreement shall be Heidrun Crude Oil. Statoil may
substitute alternate Crude Oils upon mutual agreement of
Crown.
<PAGE>
<PAGE>
ARTICLE 5
______________
PRODUCT YIELDS
Regardless of actual Refinery yields at the Refinery, the
deemed Refinery yields of Products (expressed as volume
percentage per Barrel of Crude Oil supplied), for the Crude
Oil processed for Statoil by Crown under this Agreement,
shall be the following:
<TABLE>
<CAPTION>
__________________________
##CONFIDENTIAL TREATMENT##
__________________________
##CONFIDENTIAL TREATMENT##
__________________________
##CONFIDENTIAL TREATMENT## __________________________
##CONFIDENTIAL TREATMENT##
__________________________
##CONFIDENTIAL TREATMENT##
__________________________
##CONFIDENTIAL TREATMENT##
<S> <C> <C>
Premium ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT## ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
Gasoline
Regular ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT## ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
Gasoline
No. 2 Fuel ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT## ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
Oil
#
</TABLE>
<PAGE>
_________
ARTICLE 6
______________________
PRODUCT SPECIFICATION
(i) The quality of the Products shall be in
accordance with the Colonial Pipeline
ProductsSpecifications latest issue.
Premium Gasoline V grade *
Regular Gasoline M grade *
<PAGE>
No. 2 Fuel Oil 75 grade (or 85 grade as proposed
by Colonial Pipeline as of August 01, 1996)
(Crown shall make best efforts to deliver the 75
grade Product, dyed or undyed, on a case by case
basis, at Statoil's request).*Gasoline RVP is to
be as per Colonial Pipeline ``
southern'' grade and
to change on a seasonal basis as required by the
Colonial Pipeline VOC (Volatile Organic Compounds)
control schedule for RVP (Reid Vapor Pressure), in
conjunction with the Colonial Pipeline scheduling
constraints as published and notified by Colonial
Pipeline.
(ii) The specifications referred to in this Article may
be revised, bymutual agreement at Statoil's
request, if technically possible for the Refinery
and feasible in that specific period of time,
taking into consideration possible operational
limits.
(iii) Any additional cost involved in the supply of a
revised specification, as per paragraph (ii)
above, will be debited to Statoil according to a
formula later to be agreed upon by the Parties.
(iv) Any possible saving s involved in the supply
of a revised specification, as per paragraph (ii)
above, will be credited to Statoil according to a
formula later to be agreed upon by the Parties.
<PAGE>
_________
ARTICLE 7
_____________________________
PROCESSING FEES AND PENALTIES
(i) During the term of this Agreement, Statoil will pay
Crown a fee of USD ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT## per
Barrel of Crude Oil processed for Statoil by Crown
(the ``
Processing Fee''), except as provided for
in Article 3 (v) (b). The Processing Fee will be
calculated based upon the net Barrels of Crude Oil
supplied to Crown's tankage as measured in
accordance with Article 16.
(ii) The Processing Fee is based upon the Products yield
tables specified in Article 5, the Products
lifting provisions specified in Article 11, and
the payment provisions specified in Article 9. In
<PAGE>
addition, the Processing Fee shall cover the cost
of the following:
a)
Receipt, handling, and storage of Crude Oil at
the Refinery Facilities.
b)
Supply of linefill to maintain all Crude Oil
and Products pipelines in a full condition,
both within Crown's facilities, as well as
between Crown's facilities and the GATX,
Pasadena facility (``GATX'') and the Oil
Tanking Houston (``Oil Tanking'') storage
facility.
c)
Processing of Crude Oil.
d)
Handling, storage as provided in Article 13,
and delivery of Products from the Refinery
Facilities to the locations and at the costs
identified in Article 11(ii), except for the
costs identified in paragraph (iii) below.
e)
Use of Crown's vapor recovery system when
loading Products at Crown's dock.
f)
Supplying sufficient Products in Refinery shore
tanks to ensure that Statoil can lift all
Products due, in accordance with this
Agreement, and without having to leave Products
in storage at the Refinery in the form of
inaccessible ``tank heels.''
g)
Any cleaning/removal/handling of Crude Oil
``dead bottoms'' resulting from the storage of
Refinery Stock.
h)
All other applicable costs related to the
processing of Crude Oil and delivery of
Products.
i)
Cost of certification according to Article 29.
(iii) The Processing Fee does not include and Statoil
shall be responsible for the following other costs:
a) Importation of Crude Oil from Vessel to Refinery.
b) Cost of accessing Explorer, Texas Eastern, or any
pipelines other than Colonial through third party
storage.
<PAGE>
c) Throughput costs for finished Products at third
party terminals other than GATX.
<PAGE>
d) Cost of regrading 75 grade (or 85 grade) No. 2
Fuel Oil as defined in paragraph (iv)below.
e) Ad valorem property taxes, and payments in lieu of
ad valorem property taxes, on Crude Oil owned by
Statoil that is not yet deemed to be processed on
the assessment date, and of Products owned by
Statoil that have been deemed to be processed as
of the assessment date.
(iv) At Statoil's request, and if available to Crown, Crown
will substitute 76 grade No. 2 Fuel Oil (Heating Oil)
for 75 grade at Crown's actual cost. Crown will advise
Statoil of the cost prior to any regrading and provide
documentation to support the cost.
(v) Statoil has the option to utilize Crown's throughput
agreement for Crude Oil and other feedstocks with Oil
Tanking, under the same terms and conditions as such
throughput is available to Crown, as part of this
Agreement. Crown will charge Statoil at the rate
Crown pays to Oil Tanking, which is USD ##CONFIDENTIAL
##CONFIDENTIAL
##CONFIDENTIAL
TREATMENT##
TREATMENT##
TREATMENT## per Barrel, through January 31, 1997.
Crown will advise Statoil of the rate after January
31, 1997, once it has been agreed to between Crown and
Oil Tanking.
<PAGE>
_________
ARTICLE 8
_______________________
TAXES AND OTHER CHARGES
(i) The Processing Fee does not include either port
expenses such as, for example, ships agent fees, tug
expenses, and Taxes, or any other similar charges
levied on Crude Oil at the time of import or that are
due on the Products delivered from the Refinery.
(ii) All Taxes on the import of the Crude Oil owned by
Statoil and received at the Refinery, and Products
delivered by Crown that are owned by Statoil, shall be
Statoil's responsibility. Statoil shall reimburse
Crown for the amount of any Taxes, for which Crown is
required to pay or for which Crown may be legally
liable, and interest on such taxes, provided Statoil is
<PAGE>
notified immediately when such taxes are due, and that
such taxes are always paid as and when instructed by
Statoil. Statoil shall reimburse Crown, for such taxes
and interest on taxes, only against proper presentation
of supporting documents, whether determined during the
duration of this Agreement or on audit after
termination, provided, however, that Statoil's
obligation to reimburse Crown forTaxes shall expire on
a date that is three years from the date the liability
for a specific tax arose. Statoil shall, at its
expense, have the right to cause Crown to appeal any
amounts determined under audit. Statoil shall pay
Crown, upon presentation of Crown's invoice, for any
Taxes and interest arising from audit, provided Statoil
is always notified immediately when any taxes are due
and that such taxes are always paid as and when
instructed by Statoil. Statoil shall file all returns
and pay all Taxes for which it is directly liable.
(iii) Statoil represents that it has a federal 637
number, 06-91-0097S-H, issued by the IRS District at
New Haven, Connecticut, and will provide Crown with
proper notification certificates. Statoil represents
that it currently has Texas gasoline and diesel fuel
supplier certificates, Taxpayer number 1-13-3415760-6.
At any time, collection of the Texas Coastal
Protection fee has not been suspended, Statoil
represents that it will reimburse Crown, or any marine
terminal operator who is registered with the
Comptroller to remit the Texas Coastal Protection Fee,
for such Fees that may be imposed upon Crude Oil owned
by Statoil which is transferred to or from a marine
terminal in Texas. Statoil agrees to provide Crown
with a resale certificate for the period covered by the
Agreement as may be provided by law.
(iv) Statoil represents that it is the position holder of
all Products covered by the Agreement, and that in all
cases Statoil will take the necessary steps to be
identified as the owner of any Crude Oil or Products on
the books and records of any third party storage
facility.
<PAGE>
_________
ARTICLE 9
_______
PAYMENT
(i) The Processing Fee for each parcel of Crude Oil
supplied by Statoil to the Refinery, as described in
Article 7, shall be payable by Statoil to Crown on the
th
and on the last day of each month, against Crown's
15
<PAGE>
invoice for such Processing Fee. Crown's invoice shall
be calculated based on a process rate of 20,000 B/CD,
Refinery Stocks permitting. The first invoice, and any
invoice submitted following a suspension of processing
as provided for in Article 3 (i), shall include a
Processing Fee for the day on which the first cargo or
the next cargo, as the case may be, arrives at the
Refinery, and shall include a Processing Fee for every
day from that day forward, to and Including the invoice
date, Refining Stocks permitting. The invoice shall not
include a Processing Fee for any day on which
processing shall be deemed to be suspended pursuant to
Article 3 (i), but may include a Processing Fee for
those Barrels deemed to be processed on the day that
the Refining Stock is deemed to be drawn down to zero,
even if the number of Barrels is less than 20,000.
Payment shall be by wire transfer, and payment will be
due two (2) business days following receipt of invoice
from Crown as submitted above. In the event the
payment due date falls on a non-banking day, then
payment shall be made on the first banking day
immediately after the due date.
(ii) In the event that Statoil utilizes Crown's throughput
agreement with Oil Tanking in order to supply Crude Oil
to the Refinery, as provided for in Article 7 (v), then
Statoil shall reimburse Crown for actual throughput
fees. Payment for such throughput fees shall be due
two (2) business days following receipt of the invoice
from Crown, providing such invoice is accompanied by
supporting documentation and the invoice from Oil
Tanking to Crown.
(iii) If payment is not made on the due date, the Party
who is in default of payment shall pay the other Party
interest on any sum which is overdue. Interest shall
be calculated based on the Prime Rate in effect on the
date the payment was due, as quoted by The Chase
Manhattan Bank, N.A., plus two (2) percent. In the
event The Chase Manhattan Bank, N.A., does not quote a
Prime Rate in effect on the date payment was due, then
the date immediately preceding the payment due date
shall be used. The overdue amount plus interest shall
be paid immediately by the appropriate Party.
<PAGE>
__________
ARTICLE 10
CRUDE OIL SUPPLY AND NOMINATION PROCEDURE
(i) Statoil shall nominate and supply Crude Oil to the
Refinery. The quantity of Crude Oil supplied by
Statoil under this Agreement shall be determined
as specified in Article 16.
<PAGE>
(ii) The Crude Oil shall be supplied to the Refinery either
through Crown's dock facilities or through a third
party storage terminal at Statoil's option. Crude
Oil deliveries to Crown's dock will be made either
by ship or by single ``
Ocean Going'' barge. Crude
Oil shall be supplied to the efinery in parcels of
between 100,000 Barrels and 550,000 Barrels. The
size of parcels supplied shall be at the option of
Statoil.
(iii) The first parcel of Crude Oil shall be supplied by
Statoil during the second half of July 1996.
(iv) For planning purposes, Statoil shall endeavor to inform
Crown by the 15TH day of the month, prior to the
month of lifting in Norway, of an estimated ten
(10) day arrival window at Crown's dock or arrival
at third party terminal facilities. Crown shall
promptly confirm Statoil's estimated delivery
window or advise of any problems they envision as
follows: At this stage of the nomination
procedure, Crown shall be able to alert Statoil
that, due to previous minor Refinery problems
(technical problems which last less than ten (10)
days), Crown has been unable to process Heidrun
Crude Oil as expected, and requests Statoil to
delay, or reduce, a future delivery (either the
cargo currently being planned or the next cargo
after that, at Statoil's option). Statoil agrees
that, in this situation, they will make their best
effort to formulate a plan for the upcoming
deliveries that is acceptable to both parties.
Statoil shall have the option to either receive,
or not receive, Products during any period when
Statoil's deemed Heidrun inventory is reduced to
zero (0), as a result of Crown's request to delay
the delivery of a Heidrun cargo. If Statoil so
elects to receive Products when Statoil's deemed
Heidrun inventory is zero (0), Crown shall
continue to show that Statoil has processed
Heidrun at a rate of 20,000 B/CD, even though the
deemed inventory may indicate that Statoil has
zero (0) Heidrun available for processing. If
Statoil does not elect to receive Products when
Statoil's deemed Heidrun inventory is zero (0),
then the Crude Oil processing shall be suspended
until the next actual delivery of Heidrun.
Statoil shall have the option to terminate this
Agreement if Crown asks to delay Heidrun
deliveries, due to minor Refinery problems, more
than twice. If the minor Refinery problems cause
Statoil to be unable to deliver the minimum
quantity of Heidrun by July 31, 1997, then Statoil
shall be able to deliver the Heidrun after July
31, 1997.
(v) Statoil shall firmly nominate a cargo size of
between 100,000 Barrels and 550,000 Barrels
(planned as per paragraph (iv) above or as
<PAGE>
unplanned deliveries) at least fifteen (15) days
prior to the first day of a five (5) day window of
arrival at Crown's dock, or arrival at a third
party storage terminal facility. Following this
nomination, but no later than eight (8) days prior
to the first dayof the delivery window, Statoil
can reduce (not increase) the nominated parcel
size to as low as 100,000 Barrels. Also, no later
than eight (8) days prior to the first day of the
delivery window, Statoil will narrow the delivery
window to three (3) days. This three (3) day
delivery window can be up to two (2) days outside
the original five (5) day window (i.e., if the
original window was October 16-21, then the three
(3) day window could be anywhere between and
including October 14-23).
<PAGE>
(vi) In the event a third party terminal is used, Crude
Oil shall, to the extent operational conditions
permit, be pumped to the Refinery immediately upon
completion of discharge and determination of
quantity and quality shall be carried out at this
time. Statoil shall keep Crown advised of which
third party facility is being used, and Crown,
with Statoil's prior approval on each parcel,
shall make the arrangements with such third party
terminal to promptly facilitate the transfer of
Crude Oil to the Refinery. Crown shall keep
Statoil informed of all scheduling changes, so
Statoil can arrange for inspections and any other
requirements. In the event the Crude Oil is not
completely transferred to the Refinery prior to
any storage costs being incurred, or within 120
hours from the time the third party terminal
facility starts the clock on arrival of Statoil's
Vessel, whichever is later, and the reasons or
fault are due to Crown, then Crown shall be
responsible and pay for any additional storage
costs Statoil may incur. If the reasons or fault
are due to Statoil including arrival of Statoil's
Vessel outside of the nominated window specified
in paragraph (v) above, then Crown shall make best
efforts to facilitate the transfer of the Crude
Oil as expediently as possible, and Statoil shall
be responsible for any additional costs. If the
reasons or fault are due to the third party
terminal facility, then neither Statoil nor Crown
shall be responsible.
(vii) Crude Oil supplied to the Refinery shall be deemed
to be in Crown's custody under the following
circumstances:
<PAGE>
a) If the Crude Oil is shipped through Oil
Tanking, Crown takes custody when the Crude Oil
passes through Oil Tanking's outbound pipeline
meter.
b) If the Crude Oil is shipped through Seaway,
Crown takes custody when the Crude Oil passes
through Crown's meter from Rancho Pipeline into
Crown's Refinery tankage.
c) If the Crude Oil is delivered to Crown's
Refinery Dock, Crown takes custody when the
Crude Oil passes the delivery Vessel's
discharge manifold flange and the Refining
Dock's receiving manifold flange.
d) If a connection is made between HFOTI and
Crown's Refinery, Crown and Statoil will
mutually agree on a custody transfer point.
(viii) Statoil shall advise Crown promptly in writing of
any significant change in the estimated time of
arrival of a parcel of Crude Oil nominated under
this Agreement.
(ix) Scheduling of Crude Oil Vessels nominated to
discharge Crude Oil at third party storage
terminals, prior to the Crude Oil being supplied
to the Refinery, will be done by Statoil, unless
such third party terminal is Oil Tanking, and
Statoil is exercising their option to use Crown's
throughput agreement as per Article 7 (v), in
which case, the scheduling will be done between
Crown and Oil Tanking.
<PAGE>
__________
ARTICLE 11
_________________________
PRODUCTS LIFTING SCHEDULE
(i) Statoil will be entitled to lift Products beginning
with the fifth calendar day after a parcel of Crude Oil
has been received at the Refinery, and then at the
rate of the deemed Products yields specified in Article
5 for the processing levels specified in Article 3
(20,000 B/CD). However, if Statoil supplies a parcel
of Crude Oil five (5) days or more prior to the
depletion of existing Refinery Stock, then such Crude
Oil will not be processed concurrently with existing
Refinery Stock. Statoil's entitlement to lift the
Products processed from this later Crude Oil supply
will commence, without interruption, immediately
following depletion of existing Refinery Stock.
<PAGE>
(ii) Crown will make all Products available to Statoil into
the following facilities on the basis specified for
each facility:
a) Third party pipeline accessed at Crown
Refinery - FOB pipeline at Crown Refinery.
b) Third party pipeline accessed at GATX - FOB GATX.
c) Third party pipeline accessed at Oil Tanking - FOB
Crown Refinery.
d) Crown's dock - FOB Vessel at Crown's dock.
e) GATX terminal - FOB GATX.
f) Oil Tanking terminal - FOB Crown Refinery.
In Article 11 (ii) (b) and (e) above, the costs of
delivery to GATX are for the account of Crown, but if
storage at GATX is at Statoil's option, then the cost
of storage at GATX is for the account of Statoil.
The costs for such delivery to Colonial, Crown's Dock,
and GATX are part of the Processing Fee, but the costs
set forth in Article 7 (iii) (b) and (c) are not.
(iii) Statoil will schedule all Products liftings on a
mutually agreed basis. Crown will not unreasonably
reject any Statoil nomination. For planning purposes,
Statoil will give notice to Crown of a proposed lifting
schedule (not fixed or final) on the first working day
of each month for the period beginning with the
fifteenth day of the same month, through the end of
that month, and on the fifteenth day of each month for
the period beginning with the first day of the next
month, through the fifteenth day of the next month.
Crown will make best efforts to accommodate all short
notice liftings and changes. Statoil's nomination
shall state:
a) Whether it will lift to pipeline or ship.
b) If pipeline: (i) which pipeline and
(ii) which cycle.
c) If waterborne, Statoil will nominate a five (5)
day loading window, to be narrowed to a three (3)
day laycan, at least five (5) days prior to the
first day of the original five (5) day window.
<PAGE>
(iv) For waterborne Products liftings, Crown will provide
all the necessary shipping documentation according to
instructions which must be given with adequate notice
by Statoil.
<PAGE>
(v) For pipeline Products liftings, Crown will provide all
relevant documentation, including pipeline meter
tickets from Colonial and Texas Eastern.
(vi) Irrespective of the location and method of how and
where Statoil elects to lift Products, Crown shall
provide all applicable Material Safety Data Sheets
(MSDS) for Products lifted from and delivered from
Crown's Refinery.
(vii) Crown shall be responsible for all applicable
Environmental Protection Agency anti-dumping and
reformulated gasoline program reporting requirements,
as outlined under 40-CFR Part 80 (regulation of fuels
and fuel additives; Standards for reformulated and
conventional gasoline; Final rule) in its latest
version, with respect to the refining of Products for
Statoil and the transfer of Products from Crown to
Statoil only.
<PAGE>
__________
ARTICLE 12
______________________________________________________
BERTH, DISCHARGE AND LOADING CONDITIONS, AND DEMURRAGE
For the discharge of Crude Oil at the Refinery or loading of
the Products at the Refinery, as the case may be:
(i) Crown shall provide a berth which a nominated Vessel,
accepted in accordance with Articles 10 and 11, can
safely reach, discharge Crude Oil, or load Products and
leave, and at which such Vessel can always lie safely
afloat.
(ii) Vessel shall tender notice of readiness (``
NOR'') for
discharge or loading , as the case may be, to Crown or
its representatives (as the case may be), on arrival at
the customary anchorage or at the pilot station,
whichever is applicable. The NOR can be tendered at
any time by letter, telegraph, wireless, or telephone,
either directly or through the Vessels agents; but for
daylight restricted Vessels the NOR will not be deemed
to be effective until the pilot boards the Vessel,
provided that any delay in such pilot boarding is
expressly and solely as a result of said daylight
berthing restriction.
(iii) An allowance of six (6) continuous hours shall be
given to the Refinery before loading or
discharging, starting from the time the NOR becomes
effective.
(iv) For Vessels tendering the NOR within their nominated
date ranges, laytime shall commence, berth or no berth,
<PAGE>
upon the expiration of the six (6) hours under
paragraph (iii) above or when a Vessel is securely
moored, whichever is the earlier.
(v) Delays caused because passage in the Houston Ship
Channel is prevented by adverse weather or prohibited
by Governmental Authority shall not be included in the
six (6) hours allowed under paragraph (iii) above, or
in the laytime provided for in paragraph (vi) below, or
in time on demurrage, as long as the occurrence of the
above mentioned delays did not begin while a Vessel was
waiting at a customary anchorage due to Crown's fault.
(vi) The laytime allowed to Crown (Sundays and holidays
included) for the discharging or loading of each cargo
shall be the following :
___________
Discharging-
Crude Oil 48 hours running hours (prorata for a Part
Cargo) when discharging at Crown's dock.
_______
Loading-
Laytime shall be determined using the following minimum
loading rates:
Gasoline Crown shall load Vessels at a minimum rate of
2,500 Barrels per hour.
Heating Oil Crown shall load Vessels at a minimum
rate of 4,000 Barrels per hour.
In addition, Crown shall be able to load Products
Vessels with two grades simultaneously, provided that
the Vessels' gasoline vapor space can be connected to
Crown's vapor recovery equipment.
<PAGE>
(vii) If, at Crown's request, the Vessel anchors/waits,
which results in additional time of shifting from
anchor/waiting place to berth after load/discharge date
range has commenced, such additional shifting time
shall not be deducted from laytime or time on
demurrage.
(viii) For all Vessels such laytime shall cease as
follows:
a) For Products Vessels, laytime shall cease upon
disconnection of hoses. Following the disconnection of
<PAGE>
hoses, Crown has two (2) hours to deliver documentation on
board the Vessel.
b) For Crude Vessels, laytime shall cease upon the
disconnection of hoses (``
Completion of Discharge'').
(ix) In the event that the Laytime is exceeded, Crown shall
pay to Statoil demurrage in respect of the excess time
based on the Vessel's charter party demurrage rate per
Day, or in the case of a lightering Vessel, the
contract overtime rate per Day, or in the absence
thereof, at Worldscale at the Average Freight Rate
Assessment (AFRA) appropriate to the size of the
Vessel, as provided by the London Tanker Brokers Panel,
and current on the date of commencement of Laytime.
Payment for undisputed demurrage shall be made within
thirty (30) days upon receipt of Statoil's invoice.
However, in no event shall Crown's payment to Statoil
exceed demurrage cost incurred by Statoil.
(x) Crown shall not be liable to pay demurrage due to fault
or failure of the Vessel, or if the discharge or
loading is suspended for Vessels purposes, or for
delays due solely to Statoil's reasons (except if there
is an event of force majeure, in which case demurrage
shall be paid at half the charter party demurrage
rate).
(xi) If the Vessel shifts berth for any reason, other
than a reason on the part of Statoil or the Vessel,
then the time taken to shift berth shall count against
Laytime or time on demurrage.
(xii) Any claims resulting from demurrage incurred by
the Vessel must be received with relevant supporting
documents, including claims received from the
shipowners, unless a time chartered Vessel is involved,
to Crown within ninety (90) days from the date of
loading or unloading at Crown's Refinery. If Statoil
is unable to support a demurrage claim within ninety
(90) days of the bill of lading or completion of
discharge date at the Refinery, Crown agrees to accept
a telex notification of a forthcoming claim within
ninety (90) days from these dates.
(xiii) Vessels, which arrive outside the layday period
nominated by Statoil, and confirmed by Crown inaccordance
with Article 10, shall be handled as follows:
a) In the case of a Vessel arriving before the agreed
laydays, Crown undertakes to use their best
endeavors to minimize the delays to the Vessel;
however, Crown shall only be responsible for
having accepted the NOR to load or discharge from
00.01 hours on the first day of the accepted
laydays (unless Crown allows the Vessel to proceed
to berth without protest before this time, in
<PAGE>
which case laytime will start when the Vessel is
all fast).
<PAGE>
b) In the case of a Vessel arriving after the agreed
laydays, Crown shall not be obliged to accept the
NOR, or proceed with loading or discharging, until
a berth becomes available without causing undue
delays to other Vessels. However, Crown
undertakes to use their best endeavors to minimize
the delays to any Vessel.
(xiv) Demurrage shall be payable in U.S. Dollars.
<PAGE>
__________
ARTICLE 13
______________________________
STORAGE RIGHTS AND OBLIGATIONS
(i) D uring the term of this Agreement, deliveries shall be
made in accordance with Article 10 (ii) and Statoil
shall be entitled to storage at the Refinery of 600,000
Barrels of Crude Oil. The cost of such storage shall
be included in the Processing Fee as per Article 7.
Unless the Parties otherwise agree, and exclusive of
storage at the Oil Tanking facility, Statoil shall
restrict the quantity of Crude Oil in storage at the
Refinery to a maximum of 600,000 Barrels at any given
time.
(ii) As per Article 11, Statoil has the option to lift
Products on a ratable basis once such Products are
deemed to be produced and Statoil is entitled to them.
Statoil also has the option to build up inventory of
Products at the Refinery, up to 325,000 total Barrels,
which can be composed of a maximum of 200,000 Barrels
of 75 grade and 125,000 Barrels of regular gasoline.
Until such time Products need to be shipped, they can
be stored as unfinished Products. On a case by case
basis, Products can be stored on exchange with
Statoil's prior approval. If Statoil intends to ship
more than 200,000 Barrels of 75 grade, or 125,000
Barrels of regular gasoline, at any time, Statoil will
accumulate the volume in GATX and such costs will be
for Statoil's account.
<PAGE>
(iii) During the spring gasoline season, for the
transition from high RVP gasoline to low RVP gasoline
(from approximately mid-February to early April),
Statoil must nominate and lift gasoline on a ratable
basis, and will not be able to store gasoline due
Statoil on a ratable basis from a high RVP gasoline
cycle or date range into a lower RVP gasoline pipeline
cycle or date range, without Crown's permission.
<PAGE>
__________
ARTICLE 14
________________
FINAL SETTLEMENT
It shall be assumed at the end of this Agreement, that all
Crude Oil supplied by Statoil to the Refinery shallhave been
processed. Since the Colonial Pipeline requires a minimum
shipment of 25,000 Barrels, the finalofftake of Products
upon expiration of the term of this Agreement shall be
settled as follows:
(i) If Statoil's available volume is 12,499 Barrels or less
for any grade, then Crown shall purchase Statoil's
entitlement for that grade at the price(s) specified
below. Title and ownership of said Products will
transfer from Statoil to Crown at 00.01 hours on the
first day immediately following the day Statoil has
removed the last Products taken under this Agreement.
(ii) If Statoil's available volume is 12,500 Barrels or
more, but under 25,000 Barrels for any grade, then
Statoil shall purchase from Crown the volume taken to
meet the 25,000 Barrels minimum requirement at the
price(s) specified below.
The price to be paid for the balancing quantities specified
above shall be determined based on the mean of the price
quotations for the relevant grade as published in Platts
Oilgram under the heading, ``
Gulf Coast Pipeline for all
grades, except for 75 grade Heating Oil.''
The price for 75
grade Heating Oil shall be based on the low price quotation
in Platts Oilgram under the heading, ``
Gulf Coast Pipeline
for No. 2.''
The price(s) for paragraph (i) above will be determined
using the quotations effective for the published day Statoil
removes the last Products to which it is entitled under this
Agreement. In the event this day is a non-published day,
then the price will be determined using the quotations
effective for the first published day immediately after the
<PAGE>
day Statoil removes the last Products to which it is
entitled under this Agreement.
The price(s) for paragraph (ii) above will be determined
using the quotations effective for the date the Product is
pumped into the Colonial Pipeline, or if this is a non-
published date, then the price(s) will be determinedusing
the first published day immediately following the date the
Product is pumped into the Colonial Pipeline.
Payment for paragraph (i) above shall be made by Crown to
Statoil within two (2) business days after the title has
transferred and upon receipt of Statoil's invoice.
Payment for paragraph (ii) above shall be made by Statoil to
Crown within two (2) business days after the Colonial
Pipeline pump date and upon receipt of an invoice from
Crown.
<PAGE>
__________
ARTICLE 15
________________________________
TITLE, RISK OF LOSS, AND CUSTODY
Statoil shall at all times have title to and ownership of
the Crude Oil supplied by Statoil to Crown, and the Products
delivered by Crown to Statoil, as they are deemed to have
been processed for Statoil under this Processing Agreement,
provided, however, that the foregoing shall be subject to
the provisos set forth in Article 3 (ii). Provided that
Crude Oil is available for processing, Statoil shall be
deemed to acquire title to Products at the Products Yield
set forth in Article 5, at the processing rate of 20,000
B/CD, in accordance with the processing levels set forth in
Article 3. Consistent with the foregoing provisions with
respect to legal and equitable ownership, Crown shall have
custody of the Crude Oil and Products solely as a bailor.
Crown shall bear all risk of loss of all Crude Oil upon
delivery to the Refinery, and shall bear all risk of loss of
all Products until delivery to Statoil, as provided in this
Agreement. In the event of a loss, Crown shall reimburse
Statoil as follows:
(i) In the event of Crude Oil losses, Crown shall always
deliver, and Statoil shall always own, Products
quantities equal to the Products Yields specified in
Article 5 for the quantity of Crude Oil supplied under
this Agreement, or shall promptly reimburse Statoil at
fair market price for the Crude Oil plus freight and
other related costs.
<PAGE>
(ii) In the event of Products losses or contamination, Crown
shall immediately make up the loss or contamination
by transferring Products equal in quantity and quality
to Statoil. In the event of a large Products loss or
contamination, Crown shall also have the option to
promptly reimburse Statoil for the Products at the
prices established in Article 14.
Crown shall carry and maintain in force the following
insurance(s) with companies satisfactory to Statoil:
a) Crown shall carry and maintain in force Worker's
Compensation and Employer's LiabilityInsurance for all
its employees engaged in performing work hereunder.
b) Crown shall carry and maintain in force its normal and
customary comprehensive general liability insurance
coverage for injury, death, or property damage,
including any Liabilities under any Environmental Laws
or for any environmental damages. Crown advises that
the following coverages are in force, and will remain
in force, throughout the duration of this Agreement:
Oil Insurance Ltd. (OIL) ##CONFIDENTAIL TREATMENT##
##CONFIDENTAIL TREATMENT##
##CONFIDENTAIL TREATMENT##
OCIL ##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
##CONFIDENTIAL TREATMENT##
___________________
commercial carriers __________________________
##CONFIDENTIAL TREATMENT##
__________________________
##CONFIDENTIAL TREATMENT##
__________________________
##CONFIDENTIAL TREATMENT##
Total pollution insurance ##CONFIDENTIAL
##CONFIDENTIAL
##CONFIDENTIAL
TREATMENT##
TREATMENT##
TREATMENT##
c) Crown shall carry and maintain in force insurance
covering Crown's legal liability for the Crude Oil and
Products of Statoil, while such Crude Oil and Products
are in the care, custody, and control of Crown.
<PAGE>
d) Crown shall indemnify Statoil for all Liabilities
relating to the condition or operations of the Refinery
Facilities, as well as all claims and damages resulting
from, but not limited to, a spill of Statoil's Crude
Oil and Product(s), fire, explosion, or other hazard,
while such Crude Oil and Product(s) are in Crown's
custody and care. Crown will clean up and mitigate,
and will pay for the clean up and mitigation of any
spill, fire, explosion, or other hazard which occurs to
Statoil's Crude Oil and/or Product(s) while in Crown's
custody at the Refinery Facilities. Crown warrants
that it possesses adequate insurance to cover all such
claims and Liabilities, and will maintain this
insurance for the term of this Agreement.
e) Upon request by Statoil, Crown shall have its insurance
carrier(s) furnish to Statoil certified copies of their
insurance policies and/or insurance certificates
specifying that noinsurance will be canceled, or its
<PAGE>
terms materially changed, during the term of this
Agreement, unless Statoil is given at least thirty (30)
days notice prior to cancellation or prior to a
material change becoming effective.
<PAGE>
__________
ARTICLE 16
__________________________________
QUANTITY AND QUALITY DETERMINATION
Part I. ``
_________
Crude Oil''
Determination of quantity and quality of the Crude Oil
supplied to the Refinery, pursuant to the provisions of this
Agreement, shall be in accordance with the latest API and
ASTM standards and principles in effect at the time of
supply.
All measurements of Crude Oil quantity and quality shall be
determined by a mutually acceptable Independent Inspector,
appointed by Statoil. The costs of this inspection shall be
borne equally between Statoil and Crown.
I. Quantity
The net quantity of Crude Oil supplied by Statoil for
Processing, and upon which Statoil'sentitlement of refined
Products is to be evaluated, will be determined by measuring
the TCV quantity supplied to the Refinery and reducing this
quantity to NSV as detailed below:
A) __________________________________________________
Crude Oil being supplied via Third Party Terminal:
1) The TCV quantity of the Crude Oil supplied shall
be determined by proven meters at the Third Party
Terminal. In the event that the third party
terminal is not Oil Tanking Terminal, the location
of the proven meters and the method of quantity
determination will be discussed between Statoil and
Crown, and agreed to on a case by case basis.
2) If meters are unavailable, not functioning
correctly, or determined by the Independent
Inspector to be inaccurate, THEN the supplied
quantity shall be based upon static shore tank up
gauge measurements at the Refinery (subject to
Article 16, Part I, (I) (A) (4) below), in full
accordance with API Chapters 17.1, 17.2, and 3.1A,
with all receiving shore tanks complying with the
following:
<PAGE>
(i) All receiving shore tanks shall, if
possible, contain sufficient Crude Oil, prior
to receipt, to ensure that the floating roofs
are afloat and clear of the critical zone by a
minimum of twelve (12) inches. If this
situation is not practical, then the receiving
shore tanks shall contain sufficient Crude
Oil, prior to receipt, to ensure that the
liquid level can be accurately measured in the
main body of the tank and clear of the tank
bottom calibrations.
(ii) All receiving shore tanks shall be
calibrated for critical measurement as set
forth by API 2.2 ASTM designation 1220.
3) If the receiving shore tank(s) at the Refinery are
active, do not meet the requirements specified
above, the Independent Inspector cannot verify the
measurements prior to or after receipt, or the
Independent Inspector determines that these shore
tank measurements are not representative of the
volume delivered from the Third Party Terminal, THEN
the supplied quantity shall be based upon static
shore tank down gauges at Third Party Terminal, as
calculated by the Independent Inspector.
<PAGE>
4) If the TCV quantity of the Crude Oil supplied to
the Refinery is to be determined by shore tank up
gauge measurements at the Refinery (as detailed in
Article 16, Part I, (I) (A) (2) above), THEN it
shall be recognized that it is not practical to
verify the fullness of the pipeline, between the
third party terminal and the Crown Refinery, prior
to commencement of transfer, nor is it practical to
verify the integrity of this pipeline. Such lack of
line verification, prior to the transfer, shall be
considered by the Independent Inspector when
determining whether the shore tank measurements at
the Refinery are representative of the volume
delivered from the Third Party Terminal. The shore
tank down gauges at the third party terminal shall
always be manually taken, and the volumes delivered
shall be compared to the volume received at the
Refinery. Such a comparison shall be taken into
account by the Independent Inspector in determining
whether or not these Refinery up gauges shall be
deemed representative.
B) ___________________________________________________
Crude Oil being supplied via dock at Crown Refinery
1) The TCV quantity of the Crude Oil supplied shall
be determined by proven meters at the Refinery.
2) If meters are unavailable, not functioning
correctly, or determined by the Independent
<PAGE>
Inspector to be inaccurate, THEN the supplied
quantity shall be based upon shore tank up gauge
measurements at the Refinery, in full accordance
with API Chapters 17.1, 17.2, and 3.1A, with all
receiving shore tanks complying with the following:
(i) All receiving shore tanks shall, if possible,
contain sufficient Crude Oil, prior to
receipt, to ensure that the floating roofs
are afloat and clear of the critical zone by
a minimum of twelve (12) inches. If this
situation is not practical, then the
receiving shore tanks shall contain
sufficient Crude Oil, prior to receipt, to
ensure that the liquid level can be
accurately measured in the main body of the
tank and clear of the tank bottom
calibrations.
(ii) All receiving shore tanks shall be calibrated
for critical measurement as set forth by API 2.2 ASTM
designation 1220.
3) If the receiving shore tank(s) are active, do not
meet the requirements specified above, the
Independent Inspector cannot verify the measurements
prior to or after receipt, or the Independent
Inspector determines that the shore tank
measurements are not representative, THEN the
Vessel's arrival figures, less Remaining On Board
(``ROB''), adjusted by the Vessel's experience factor
(``VEF''), as calculated by the Independent
Inspector, shall be used. The Independent
Inspector's determination of quantity, including the
results of the line displacement detailed below,
shall be binding upon both parties and used for
invoicing purposes.
4) If the TCV quantity of the Crude Oil supplied to
the Refinery is to be determined by shore tank
measurements at the Refinery (as detailed in Article
16, Part I, (I) (B) (2) above) then:
In the event that the Crude Oil is being supplied
via Crown's dock at the commencement of discharge,
after the opening shore tanks gauges have been
established, the mutually appointed Independent
Inspector shall monitor the performance of a line
displacement consisting of the delivering Vessel
pumping to the furthest receiving shore tank. The
line displacement is to be carried out in accordance
with API Chapter 17.6.10.3. The quantity to be
displaced shall be 120 percent of the combined
capacity of all designated Vessel and shore transfer
lines (API Chapter 17.6.10.3.5).
<PAGE>
<PAGE>
In accordance with API Chapter 17.6.10.1.4, the
volume tolerance for the line displacement will be
derived from the ``precision of measurement''
indicated in Chapter 17.6.11, that is 1/8 inch (or 3
mm). Therefore, the accepted tolerance for a line
displacement shall be the total of the volume
equating to / inch in the receiving shore tank
calibrations, plus the volume equating to / inch in
the delivering Vessel tank calibrations. This
tolerance represents the measurement precision limit
(1/8 inch) for the opening and closing gauges, for
both the receiving shore tank and the delivering
Vessel tank.
If the difference between the volume that the shore
tank received, and the volume that the Vessel
delivered, is within the accepted tolerance stated
above, or if the volume that the shore tank received
is in excess of the volume that the Vessel
delivered, then the shore line is to be considered
full.
If the volume that the shore tank received is less
than the volume that the Vessel delivered by an
amount greater than the accepted tolerance described
above, then the line shall be considered slack. In
cases when the line is found to be slack, then
entire difference between the shore tank received
volume and the Vessel delivered volume shall be
credited to the final outturn volume.
If the shore and Vessel volumes differ by more than
the accepted tolerance described above, the
receivers may exercise the option of carrying out a
second line displacement (as detailed in API Chapter
17.6.10.3.7, step 4). If the Vessel delivered/shore
received volume difference for the second
displacement is within the accepted tolerance, then
only the entire difference resulting from the first
displacement shall be credited to the final outturn
volume. If, in the second displacement, the volume
that the shore tank received is less than the volume
that the Vessel delivered by an amount greater than
the accepted tolerance, then the entire differences
resulting from the first displacement, plus the
second displacement, shall be credited to the final
outturn volume.
5) The Refinery personnel present at the discharge
are required to have the necessary authority to
agree to all measurements mentioned above. Any
delays incurred resulting from a dispute after the
first line displacement, including the carrying out
<PAGE>
of a second displacement, and until discharge has
resumed, is for Crown's account.
II. Quality:
The net quantity of Crude Oil supplied to the Refinery shall
be calculated by deducting, from the TCV quantity measured
supplied to the Refinery, sediment and water as detailed
below:
1) The sediment and water of the Crude Oil supplied to the
Refinery will be as determined by analysis, carried out
by the Independent Inspector, on a representative
sample of the Crude Oil being supplied.
The representative sample used shall be taken by an
automatic inline sampler. Such a sampler shall be
located at the third party storage facility or at the
Refinery. In the event that the inline sampler is
located at the Refinery, then provisions must be made
to ensure that the shore line contents, in the case
when the Crude Oil is being supplied via a third party
terminal, are not sampled as part of the supplied Crude
Oil.
<PAGE>
2) However, in the event that an inline sampler is not
fitted, is out of order, malfunctions during the
transfer, or the Independent Inspector deems that the
samples drawn by said inline sampler are not
representative of the Crude Oil supplied (by making
comparisons to free water and sediment and water (S&W)
content of Crude Oil delivered by Vessel), then the
sediment and water deduction shall be determined by:
(i) In the event that the Crude Oil is being
supplied via Crown's dock, then the sediment and
water deduction shall be determined from a
representative Vessel composite sample, taken from
the Vessel prior to discharge, plus quantity of
free water delivered by the Vessel, as measured on
board the Vessel before starting and after
completing unloading operations.
(ii) In the event that the Crude Oil is being
supplied via a third party terminal, then the
sediment and water deduction shall be determined
from a representative sample based on a composite
of the third party terminal delivering shore
tank(s), prior to commencement of delivery.
Certificates of quality and quantity countersigned by an
Independent Inspector will be final and binding on both
parties.
<PAGE>
Part II. ``
________
Products''
Determination of quantity and quality of the Products lifted
by Statoil, pursuant to the provisions of this Agreement,
shall be in accordance with the latest API and ASTM
standards and principles in effect at the time of lifting.
Whenever it is necessary for measurements of Products
quantity to be determined by a mutually acceptable
Independent Inspector, such inspector shall be appointed by
Statoil. The costs of any such inspection shall be borne
equally between Statoil and Crown.
I. Quantity:
The net quantity of the Products lifted shall be determined
on the following basis, depending upon the method of
lifting:
1) If the Product is being lifted via a third party
pipeline, and the pipeline can be accessed directly
from the Refinery, the quantity lifted shall be
determined by the proven meters applicable to the
intake of that pipeline.
2) If the Product is being lifted by Vessel at the Crown
dock, then the quantity lifted shall be based upon
static shore tank down gauges at the Refinery. In this
case, the delivering shore tanks shall be in the
following condition for both opening and closing
gauges:
(i) Floating roof tanks: the tank shall contain
sufficient Products, open and close gauges, to
ensure that the floating roof is floating and
clear of the critical zone by a minimum of six
(6)inches.
<PAGE>
(ii) Non-floating roof tanks: the tank shall
contain sufficient Products, open and close
gauges, to ensure that the Products level is
above the tank fill line.
All shore tank gauging should be carried out in full
accordance with API Chapters 17.1 and 17.2, guidelines
for marine cargo inspection, and API Chapter 3.1A.
<PAGE>
If the quantity lifted is to be based upon shore tank
down gauges at the Refinery, then Crown shall provide a
method, acceptable to Statoil and the mutually accepted
Independent Inspector, to verify that all pipelines are
full, prior to the commencement of transfer, in
accordance with API Chapter 17.6.
3) If the Products is being stored at a third party
storage facility, at Statoil's option, whether for
subsequent shipment by pipeline or Vessel, the quantity
supplied shall be based on the static shore tank
upgauge at the third party storage facility which has
received the delivery from Crown. The measurement will
be made at the time of delivery.
4) If the Product is being stored at a third party storage
facility, at Crown's option, the quantity lifted shall
be based as follows:
(i) If the Product is eventually lifted via a
third party pipeline, the quantity supplied
shall be determined by the proven meters
applicable to the intake of that pipeline.
(ii) If the Product is eventually lifted by
Vessel, the quantity supplied shall be based on
static shore tank down gauges at the third party
terminal. In this case the delivering shore
tanks shall be in the following condition for
both opening and closing gauges:
a) Floating roof tanks: the tank shall
contain sufficient Products, open and close
gauges, to ensure that the floating roof is
floating and clear of the critical zone by
a minimum of six (6) inches.
b) Non-floating roof tanks: the tank shall
contain sufficient Products, open and close
gauges, to ensure that the Products level
is above the tank fill line.
If the quantity lifted is to be based upon shore tank
down gauges at the third party terminal, then a method
shall be employed, acceptable to Statoil and the
mutually accepted Independent Inspector, to verify that
all pipelines are full, prior to the commencement of
transfer, in accordance with API Chapter 17.6.
5) If Product lifted is being delivered directly into
a third party's tanks at either GATX or Oil Tanking,
<PAGE>
then the quantity lifted shall be based on the static
shore tank up gauge measurements at these facilities.
In the event that the intended receiving shore tanks at
either GATX or Oil Tanking are active, or cannot be
accurately measured due to some other event or reason,
then the quantity lifted shall be based on the
delivering shore tank down gauge measurements at the
Refinery.
If Products were to be delivered directly into a
terminal other than GATX or Oil Tanking, then the
lifted quantity can be determined (as detailed in
Article 16, Part II, (I) (5) above), if both Statoil
and Crown are in agreement.
<PAGE>
II. Quality:
The quality of the Products supplied by the Refinery will be
as determined by:
1) In the case where the Product is being lifted by
pipeline, and the pipeline can be accessed directly
from the Refinery, the quality will be determined by
analysis, carried out at the Refinery laboratory, of a
representative sample of the Products being lifted, as
drawn from the delivering storage tanks at the
Refinery.
2) In the case where the Product is being lifted by Vessel
at Crown's dock, the quality will be determined by
analysis, carried out at the Independent Inspector's
laboratory, on a representative sample of the Products
being lifted, as drawn from the delivering storage
tanks at the Refinery.
3) In the case where the Product is stored at a third
party storage facility, at Statoil's option, whether
for subsequent shipment by pipeline or Vessel, the
quality will be determined by analysis, carriedout at
the Independent Inspector's laboratory, on a
representative sample of the Products being supplied,
as drawn from the delivering storage tanks at the
Refinery.
4) In the case where the Product is stored at a third
party storage facility, at Crown's option, the quality
will be determined by analysis, carried out at the
Independent Inspector's laboratory, on a representative
sample of the Products being lifted, as drawn from the
delivering storage tanks at the third party terminal.
5) In the case where the Product is delivered directly
into a third party's tanks at either GATX or Oil
<PAGE>
Tanking, the quality will be determined by analysis,
carried out at the Independent Inspector's laboratory,
on a representative sample of the Products being
lifted, as drawn from the delivering storage tanks at
the Refinery.
The representative sample used shall be taken from the
shore tanks prior to lifting, and the subsequent
analysis carried out, in accordance with the latest
API/ASTM standards in effect at the time.
The costs of this analysis shall be borne equally between
Statoil and Crown.
Certificates of quality and quantity, countersigned by an
Independent Inspector, will be final and binding on both
parties.
Samples of Crude Oil supplied and Products lifted will be
retained, by the party carrying out the sampling and
analysis, for a period of forty-five (45) days from the
completion of supply date, in respect of Crude Oil being
supplied, and from Bill of Lading date in respect of
Products being lifted
<PAGE>
___________
ARTICLE 17
________
AUDITING
Statoil, and its duly authorized representatives, shall have
access to the accounting records and other documents
maintained by Crown, or any subcontractors, which relate to
this Processing Agreement, and shall have the right to
inspect or audit such records at any reasonable time or
times during the term of this Agreement, or within one (1)
year after the termination of this Agreement. Crown shall
preserve, and shall cause all subcontractors to preserve,
all of the aforesaid documents for a period of at least one
(1) year after completion of contract supplies under this
Agreement.
Upon request by Crown, Statoil shall provide Crown with all
documents and records in Statoil's possession that relate to
performance under this Agreement.
<PAGE>
<PAGE>
__________
ARTICLE 18
__________________________
SUSPENSION AND TERMINATION
In addition to any rights of termination or suspension
granted in Articles 3, 19, 21, and 22 of this Agreement,
this Agreement may be terminated at any time as follows:
Either Party may, at its sole discretion, and in addition to
any other legal remedies it may have, in law or equity,
forthwith upon giving notice to the other Party, suspend or
require the suspension of deliveries of the Crude Oil and/or
terminate the Agreement, and/or stop, or direct Crown to
stop, processing Crude Oil owned by Statoil being in the
custody of Crown, and/or direct Crown, subject to the right
of Crown to offset any invoiced, unpaid, and overdue
Processing Fees or other payment due to Crown at the market
prices established in Article 21, to make all Product(s)
owned by Statoil, available for immediate lifting if:
18.1 by mutual written consent of the parties;
18.2 by either Statoil or Crown, within thirty (30) days
after receipt of notice from the other that any
representation or warranty made by the other Party is
untrue in any material respect, or any condition to
such Party's obligations cannot be satisfied;
18.3 by either Statoil or Crown, should the other Party
commit a material breach in prompt performance of any
of the terms or conditions of this Agreement, and
should such material breach continue for thirty (30)
days after written notice thereof by Statoil to Crown
or Crown to Statoil;
18.4 by either Party, if the other files a petition or
otherwise commences or authorizes the commencement of a
proceeding or case under any bankruptcy,
reorganization, or similar law, for the protection
against creditors, or has any such petition filed or
proceeding commencedagainst the Party;
18.5 by either Party, if the other Party becomes bankrupt or
insolvent, or makes an assignment for the benefit of
its creditors (however evidenced);
18.6 by either Party, if the other Party is unable, or in
the other Party's reasonable opinion is
expected to be unable or unwilling, to pay its debts as
the same become due;
<PAGE>
18.7 by either Party, if there is a major change in the
direct or indirect ownership of the other Party;
18.8 a receiver is appointed or an encumbrancer takes
possession of the whole or a significant part of the
assets or undertaking of the other Party;
18.9 by either Party, if the other Party fails to give
adequate assurances of its ability to perform within
five (5) business days upon a reasonable request
therefore;
<PAGE>
18.10 by either Party, if the other Party ceases, or
threatens to cease, to carry on its business or a major
part thereof ,or a distress, execution, or other
process is levied or enforced or sued out upon or
against any significant part of the property of the
other Party, and is not discharged within fourteen (14)
days;
18.11 by either Party, acting as a reasonable and
prudent company anticipates that the other company will
come into such situation as described above.
18.12 by Statoil, if thirty (30) days written notice is
given to Crown that the facilities required for
performance under this Agreement fail to perform up to
the standards required by this Agreement. This may
include, but not be limited to, the ability to meet
waterborne lifting schedules in a timely and economic
fashion;
18.13 by Statoil, should the enactment and
implementation of changes in U.S. import or export
Taxes, duties, or other governmental action, in its
effects or consequences, result in materially reduced
economic incentives for Statoil, associated with or
related to the Crude Oil processing hereunder (which
shall be documented by Statoil), then the parties shall
at Statoil's written request meet in order to agree on
adjustment of the Agreement, which will eliminate such
materially reduced incentives. If the parties fail to
agree within ninety (90) days after the request for a
meeting is received, this Agreement will terminate
immediately;
18.14 If the transactions contemplated by this Agreement
are terminated as provided herein:
a) all confidential information received by any Party
hereto, with respect to the other Party or any of its
affiliates, shall be treated in accordance with this
Agreement; and
<PAGE>
b) notwithstanding the foregoing, termination of this
Agreement, pursuant to Article 18.2, 18.3, 18.4,
18.5, 18.6, 18.8, 18.9, 18.10, and 18.11, hereof
shall not in any way limit or restrict the rights and
remedies of any Party hereto, against any Party
hereto, which has violated or breached any of the
representations, warranties, covenants, and
agreements or other provisions of this Agreement
prior to termination hereof.
18.15 In the event of termination under this Article,
Crown has an obligation to purchase any Crude Oil which
has not been processed, or deemed to be processed, at a
price determined in accordance with Article 21 (vii).
Statoil shall have the right to immediately take
delivery of all Product(s) owned by Statoil and in
accordance with Article 14, Final Settlement.
<PAGE>
__________
ARTICLE 19
_________________
CREDIT CONDITIONS
The then current value of Crude Oil and Products held in
storage by Crown on Statoil's behalf, pursuant to this
Agreement, shall be debited against any credit facility
which Statoil shall make available to Crown for this and/or
any other business purpose. At Statoil's request, and upon
reasonable notice, Crown shall provide to Statoil
information sufficient to enable Statoil to ascertain
Crown's current financial condition, and for Statoil to
assure itself of the security of Crude Oil and Products
owned by Statoil which is in Crown's custody.
Statoil reserves the right, immediately and without prior
notice, to terminate or suspend any credit facility, and any
other credit arrangements, which Statoil shall make
available to Crown for this and/or any other business
purpose, whenever, in its sole judgment, Statoil considers
Crown's financial condition to present an undue risk to the
security of Statoil's assets in Crown's custody, or should
Statoil conclude that it has not or cannot obtain sufficient
information to ascertain the security of such assets. In
the event that such termination or suspension is initiated,
then Statoil shall immediately notify Crown, and Crown shall
then have the option of opening an irrevocable, stand-by
Letter of Credit, in the format and wording stated in
Addendum Two, with a financial institution acceptable to
Statoil, and for a duration specified by Statoil, to cover a
value as determined by Statoil, up to the full value of
Statoil's assets as may be held by Crown during the course
of this Agreement.
<PAGE>
If Crown elects not to open such a letter of credit, or if
such letter of credit, acceptable to Statoil, is not opened
within one (1) business day of notification by Statoil, or
if Statoil has not received written notification (in the
form of a telex or telefax) from the issuing financial
institution within one (1) business day of notification by
Statoil, confirming that said financial institution is in
the process of opening such letter of credit (under which
circumstance such letter of credit shall be opened within
two (2) business days of original notification by Statoil),
then Statoil reserves the right to terminate or suspend this
Agreement. Upon suspension or termination of this
Agreement, in accordance with this Article, Crown
immediately shall purchase from Statoil all Crude Oil owned
by Statoil, and not yet processed, at a price computed
according to the formula set forth in Article 21. Crown
shall pay Statoil for such Crude Oil within one (1) business
day from receipt of Statoil's invoice. Crown also shall
make available to Statoil for immediate lifting, all
Products owned by Statoil that remains in Crown's custody in
accordance with Article 14, Final Settlement.
For the purposes of this agreement such letter of credit
shall only be considered opened at such time as a telex is
received, by both Den Norske Bank and Statoil, from the
issuing financial institution, stating that they have opened
a letter of credit with Statoil as the beneficiary.
In the event that Crown opts to open an irrevocable, stand-
by Letter of Credit, pursuant to this Article, then such
Letter of Credit shall be in the exact format and wording as
detailed in Addendum Two to this Agreement.
In the event that Crown elects to open a letter of credit,
as detailed above, then all bank charges, and any additional
costs, related to the opening of such letter of credit,
shall be strictly for the account of Crown.
<PAGE>
__________
ARTICLE 20
_________
INDEMNITY
(i) Crown agrees to protect, defend, indemnify, and hold
harmless, Statoil and its Affiliates, from and against
any Liabilities arising out of this Agreement, or in
connection with the receipt, storage, custody,
processing, or transfer of Crude Oil within the
Refinery Facilities, or storage, custody, processing,
transfer, or delivery of Product(s) at any time,
including, without limitation, any Liabilities directly
or indirectly arising out of or related to: (a) any
loss, spill, discharge, or release of Crude Oil and/or
<PAGE>
Products, irrespective of such cause; (b) any act or
omission on the part of Crown, including Crown's
employees, nominees, agents, or any other individual or
entity acting on behalf of Crown, in connection with or
related to this Agreement; c Liabilities arising out
of or in connection with the operation of the Refinery
Facilities by Crown, including Crown's employees,
nominees, agents, or any other individual or entity
acting on behalf of Crown, or with any discharge or any
emissions from the Refinery, or the delivery, custody,
or storage of the Crude Oil and Products, or Crude Oil
or Products of any other Party; or (d) any breach or
violation of Environmental Laws. This indemnification
obligation shall survive the term of this Agreement,
irrespective of any permitted assignment pursuant to
this Agreement.
(ii) Statoil agrees to protect, defend, indemnify, and hold
harmless, Crown and its Affiliates, from and against
any Liabilities arising out of this Agreement, or in
connection with the receipt, storage, custody, or
transfer of Crude Oil, prior to the Crude Oil being
deemed to be in Crown's custody, pursuant to Article 10
(vii), or storage, custody, use, transfer, or delivery
of Product(s), subsequent to the delivery of Products
to Statoil, pursuant to Article 11(ii), including,
without limitation, any Liabilities directly or
indirectly arising out of or related to: (a) any loss,
spill, discharge, or release of Crude Oil and/or
Products, irrespective of such cause; (b) any act or
omission on the part of Statoil, including Statoil's
employees, nominees, agents, or any other individual or
entity acting on behalf of Statoil, in connection with
or related to this Agreement; or (c) any breach or
violation of Environmental Laws. This indemnification
obligation shall survive the term of this Agreement,
irrespective of any permitted assignment pursuant to
this Agreement
<PAGE>
__________
ARTICLE 21
________________
REFINERY CLOSURE
(i) Should Crown be forced to cease processing under the
terms of this Agreement, as a consequence of Labor
Disputes (as defined in Article 22), but only with
respect to Crown employees at the Refinery, and
therefore be unable to provide the Products supply
obligations under this Agreement, and the situation
continues for a period of five (5) days, then Crown
shall either:
<PAGE>
a) supply Statoil with Products that Statoil is
deemed to be the owner of under this Agreement, or
b) purchase from Statoil the Products entitlement at
a price(s) specified in paragraph (v) below.
(ii) Crown shall continue to supply Statoil with Products,
or purchase from Statoil the Products entitlement, for
up to twenty (20) consecutive days of a Refinery
shutdown due to labor disputes, but only with respect
to Crown employees at the Refinery. If Crown elects to
purchase Statoil's Products entitlement, the price(s)
will determined as specified in paragraph (v) below.
(iii) Notwithstanding paragraphs (i) and (ii) above,
Crown will keep Statoil updated on all labor
negotiations, and the best estimate of the settlement
date and restart of this processing Agreement.
(iv) In the event the Refinery is unable to process under
the terms of this Agreement, for a period of twenty
(20) consecutive days, then Statoil shall have the
option to:
a) terminate this Agreement, or
b) suspend supplies of Crude Oil, until such time as
the Refinery has settled the labor dispute, but
only with respect to Crown employees at the
Refinery, and restarted Refinery operations, or
c) suspend supplies of Crude Oil, until such time as
the Refinery has restarted operations,and extend
the end of the contract period, such that the
volumes not processed during the suspension of
deliveries, can be made up at the end of the
current agreement period.
In the event of Article 21 (iv) (a) and (iv) (b) above,
the minimum supply of Crude Oil as specified in Article
3 shall not apply.
(v) The price to be paid by Crown in paragraphs (i) and
(ii) above, if Crown elects to purchase Statoil's
Products entitlement, shall be as follows:
a) For all grades, except 75 grade Heating Oil, the
mean quotation for the relevant Products, as
quoted in Platts Oilgram under the heading, ``
Gulf
Coast Pipeline,''
effective for the date of
entitlement shall be used. In the case of
weekends and non-published days, the ished
immediately following the date of entitlement
shall be used.
<PAGE>
<PAGE>
b) For 75 grade Heating Oil, the mean quotation, as
published in Platts Oilgram under the heading,
``
Gulf Coast Pipeline,'' effective for the date of
entitlement for No. 2 shall be used.
In the case of weekends and non-published days, the
quotation published immediately following the date of
entitlement shall be used.
(vi) Products purchased by Crown under this Article, Statoil
shall invoice Crown on a weekly basis, and payment
shall be made by Crown within two (2) business days
upon receipt of invoice.
(vii) In any of the above options, Crown has an
obligation to purchase any Crude Oil which has not been
processed, or deemed to be processed, during the first
twenty (20) days of shutdown, at a price equal to the
value of the Products, determined in accordance with
Article 21 (v), for the Products yields set forth in
Article 5, minus the Processing Fee for the Crude Oil
subject to the purchase obligation. Payment for the
Crude Oil shall be made within two (2) business days,
upon receipt of invoice from Statoil.
<PAGE>
__________
ARTICLE 22
_____________
FORCE MAJEURE
For purposes of this Agreement, the term Force Majeure Event
shall mean, and include, any of the following,that
materially and adversely affect Crown's or Statoil's ability
to perform under this Agreement:
(i) Fire, earthquake, explosion, lightning, epidemic,
hurricane, flood, drought, hazardous weather,
landslide, collisions, strandings, storms, disease,
pestilence, and other actions of the elements, natural
calamity, or Acts of God;
(ii) Subject to Article 21 of this Agreement, strikes,
grievances or actions by and among workers, lockout,
labor dispute, or any other labor difficulties, for
whatever reason, by any labor group orindividuals,
whether or not involving employees of Crown or Statoil,
the Refinery Facilities, Vessels, third party storage
facilities, or subcontractor; and whether or not such
labor difficulty could be settled by acceding to any
demands of any such labor group or individuals (``
Labor
Disputes''
);
<PAGE>
(iii) War, hostilities, whether declared or undeclared,
revolution or insurrection, civil commotion, unrest,
riots or disorders, acts of the public enemy, pirates,
or other belligerents, terrorism, sabotage, blockade or
embargo;
(iv) Any act of any international, national, port,
transportation, local government, or other Governmental
Authority, which prohibits or restricts the use of the
Refinery Facilities, Vessels, third party storage
facilities, or which prohibits or restricts the
delivery of the Crude Oil;
(v) Any other acts, whatsoever, whether similar or
dissimilar to those above enumerated, and whether
foreseeable or unforeseeable, beyond the reasonable
control of a Party (each a ``
Force Majeure Event'').
If the performance of this Agreement, or any obligation
thereunder, is materially and adversely prevented,delayed,
restricted, or interfered with, in whole or in part, by a
Force Majeure Event, the Party so affected, upon giving
prompt notice of the other Party, subject to Article 21,
shall be excused from such performance of their obligations
to the extent of such prevention, delay, restriction, or
interference (and the other Party shall likewise be excused
from performance so prevented, delayed, restricted or
interfered with); provided that the Party so affected shall
use its reasonable efforts to avoid or remove such causes of
nonperformance, and all the parties shall continue
performance hereunder with the utmost dispatch whenever such
causes are removed; provided further that nothing herein
contained shall be construed or interpreted as: (a)
requiring any Party to accede to any demands of employees or
labor unions, which such Party, in its sole discretion,
shall consider unreasonable; or (b) relieving any Party
from its obligations to pay, when due, any amount owed by
such Party for a period prior to the occurrence of the Force
Majeure Event.
During the period of a Force Majeure Event, whether declared
by Crown or Statoil, Statoil shall not beobligated to make
any Processing Fee payments for Crude Oil not delivered or
processed during the ForceMajeure Event.
<PAGE>
In the event of any delay or nonperformance caused by any
Force Majeure Event, the Party affected shall provide verbal
notice of the Force Majeure Event as soon as possible, but
no later than twelve (12) hoursfollowing the time at which
such Party had knowledge of the Force Majeure Event, and
<PAGE>
shall, within two (2)business days after the time at which
such Party had knowledge of the Force Majeure Event, provide
the other Party with notice of the nature, cause, date of
commencement, and anticipated extent of such delay or
nonperformance.
If performance of this Agreement is suspended due to a Force
Majeure Event that is a Labor Dispute at theRefinery, which
continues for a period of five (5) days or more, the
Parties' performance obligations and options as to
termination, shall be as proved in Article 21.
If performance, by either Party of its obligations under
this Agreement, is suspended due to a Force Majeure Event
which is not within Article 21, the Parties' respective
options are as follows:
a) If performance is suspended by a Force Majeure Event
for less than thirty (30) consecutive calendar days
from the date notice is given, the time, within which
either Party is obligated to perform under this
Agreement, shall be extended for a period equal to such
period of suspension;
b) If performance is suspended by a Force Majeure Event
for thirty (30) consecutive calendar days or more from
the date notice is given, either Party may terminate
this Agreement by giving written notice to the other
Party, and neither Party shall have any further
liability to the other, except for rights and remedies
previously accrued under this Agreement, and
obligations to pay sums then due and owing.
Any Crude Oil, not processed by the date of notice of
such termination, shall be deemed to have been
processed into Products which Statoil is entitled to
lift, and shall be made available to Statoil. Crown
shall deliver all Products to Statoil, including those
deemed processed from Refinery Stock existing at the
time of termination, in accordance with Article 14.
c) If this Agreement is not terminated pursuant to Article
22 (b) above, performance shall resume to the extent
made possible by the end or amelioration of the Force
Majeure Event, in accordance with the terms of
this Agreement, except that: (i) the time, within
which the Parties are obligated to perform under this
Agreement, shall not be extended; and (ii) the
quantities of Crude Oil to be supplied, and the
Products to be delivered, under this Agreement shall be
ratably reduced, by the quantity of Crude Oil not
supplied or Products not delivered, during the duration
of the Force Majeure Event.
<PAGE>
<PAGE>
__________
ARTICLE 23
___________________
LAW AND ARBITRATION
This Agreement shall be construed in accordance with, and
governed by, the Laws of the State of New York.
The Parties to a dispute under this Agreement shall make
every effort to solve, promptly and in good faith,such
dispute. Disputes or controversies arising hereunder, which
cannot be resolved by the parties, shall beexclusively and
definitively resolved by arbitration, and conducted by three
arbitrators in accordance with thearbitration rules of the
International Chamber of Commerce (ICC), from time to time
in force, which rules aredeemed for that purpose to be
incorporated by reference herein. The place of arbitration
shall be New York,New York, USA. The costs of any
arbitration shall be borne equally by each Party, except
that each Partyshall be responsible for its own legal fees
and expenses. Judgment may be obtained upon any arbitration
decision by any court of competent jurisdiction, or
application may be made to such court for a judicial
acceptance to the award or an order of enforcement, as the
case may be.
<PAGE>
__________
ARTICLE 24
_____________________________________________________
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF STATOIL
Statoil represents and warrants as follows:
24.1 Statoil is a corporation duly organized, and
validly existing, in good standing under the Laws
of the State of Delaware, and has full corporate
power and authority to enter into this Agreement,
and to carry out the transactions contemplated
hereby. The execution and delivery of this
Agreement, and the consummation of the
transactions contemplated hereby, have been duly
and validly authorized by all necessary corporate
action of Statoil.
<PAGE>
24.2 This Agreement as been duly and validly executed
and delivered by Statoil, and, assuming the due
authorization, execution, and delivery hereof by
Crown, constitutes a valid and binding obligation
of Statoil, enforceable against it in accordance
with its terms.
24.3 Neither the execution and delivery of this
Agreement by Statoil, nor the consummation by
Statoil of the transactions contemplated hereby:
a) violates any provision of its charter
documents;
b) constitutes a breach or default (or an event
which, with the giving of notice or passage
of time, or both, would constitute a default)
under, or will result in the termination of,
or accelerate the performance required by, or
result in the creation or imposition of any
security interest, lien, charge, or other
encumbrance upon any assets of, or any
materialcontract, commitment, understanding,
agreement, arrangement, or restriction of any
kindor character, to which Statoil is Party,
or by which Statoil or any of its assets is
bound, or
c) violates any statute, Laws, regulation, or
rule, or any judgment, decree, order, writ,
orinjunction of any court or Governmental
Authority, applicable to Statoil, or to its
businessand operations.
24.4 On the date of this Agreement: (a) there are no
judgments, orders, writs, or injunctions of
anycourt or Governmental Authority, or other
regulatory or administrative agency, commission,
or arbitration panel, domestic or foreign,
presently in effect or pending or threatened
against Statoil; and (b) there are no claims,
actions, suits or proceedings, or investigations
by or before any court or Governmental
Authority, or other regulatory or administrative
agency, commission, or arbitration panel, pending
or threatened by or against Statoil, which, in the
case of either Article 24.4 (a) or 24.4 (b) above,
would interfere with the consummation of the
transactions contemplated by this Agreement, or
would materially adversely affect its business or
operations, or for which Crown would be liable
with respect to such business and operations.
<PAGE>
24.5 Statoil is in compliance with all material Laws
and Regulations applicable to its operations, and
has not received any notification that it is not
presently so in compliance.
<PAGE>
24.6 Statoil shall maintain all licenses identified in
Article 8, as may be required by law. Statoil
shall promptly notify Crown of any change in
status, with respect to the licenses identified in
Article 8. Should such taxes be refundable due to
exportation from either the United States or
Texas, Statoil shall seek such refunds for its own
account, without offset to Crown when payment is
due to the taxing authority.
<PAGE>
__________
ARTICLE 25
___________________________________________________
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF CROWN
Crown represents and warrants as follows:
25.1 Crown is a corporation duly organized, and validly
existing, in good standing under the Laws of the
State of Maryland, and has full corporate power and
authority to enter into this Agreement, and to carry
out the transactions contemplated hereby. The
execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby,
have been duly and validly authorized by all
necessary corporate action of Crown.
25.2 This Agreement as been duly and validly executed
and delivered by Crown, and, assuming the due
authorization, execution, and delivery hereof by
Statoil, constitutes a valid and binding obligation
of Crown, enforceable against it in accordance with
its terms.
25.3 Neither the execution and delivery of this
Agreement by Crown, nor the consummation by Crown of
the transactions contemplated hereby:
a) violates any provision of its charter documents;
b) constitutes a breach or default (or an event
which, with the giving of notice or passage of
time, or both, would constitute a default) under,
or will result in the termination of, or
accelerate the performance required by, or result
in the creation or imposition of any security
interest, lien, charge, or other encumbrance upon
any assets of, or any material contract,
commitment, understanding, agreement, arrangement,
or restriction of any kind or character, to which
Crown is Party, or by which Crown or any of its
assets is bound, or
<PAGE>
c) violates any statute, Laws, regulation, or rule,
or any judgment, decree, order, writ, or
injunction of any court or Governmental Authority,
applicable to Crown, or to its business and
operations.
25.4 On the date of this Agreement: (a) there are no
judgments, orders, writs, or injunctions of anycourt
or Governmental Authority, or other regulatory or
administrative agency, commission, or arbitration
panel, domestic or foreign, presently in effect or
pending or threatened against Crown; and (b) there
are no claims, actions, suits or proceedings, or
investigations by or before any court or
Governmental Authority, or other regulatory or
administrative agency, commission, or arbitration
panel, pending or threatened by or against Crown,
which, in the case of either Article 25.4 (a) or 25.4
(b) above, would interfere with the consummation of
the transactions contemplated by this Agreement, or
would materially adversely affect its business or
operations, or for which Statoil would be liable with
respect to such business and operations.
<PAGE>
25.5 Crown is in compliance with all material Laws and
Regulations applicable to its operations, and has not
received any notification that it is not presently so
in compliance.
25.6 Crown warrants the Refinery Facilities are
structurally sound and safe, and that Crown does not
know, and has no reason to know, of any problems
which could cause environmental danger, or be
detrimental in any material way, to the environment
or to Statoil's interests.
25.7 Crown warrants and represents that, for the
duration of this Agreement, Crown shall maintainand
operate the Refinery Facilities, in a manner which
fully complies in all material respects with all
applicable Laws and Regulations, including all
Environmental Laws, and the Reformulated Gasoline and
Anti-Dumping Regulations, referenced in Article 29.
25.8 Crown warrants they have operational and safety
manuals, and that all appropriate personnel are
familiar with the procedures in these manuals. Crown
further represents that all appropriate personnel are
routinely trained on safety and disaster procedures.
<PAGE>
25.9 Crown warrants there are no liens on any property
that is necessary for Crown's performance of this
Agreement. In addition, Crown warrants there is no
litigation pending that could reasonably be expected to
adversely affect Crown's ability to perform its
obligations under this Agreement
<PAGE>
__________
ARTICLE 26
_________________
SAFETY AND HEALTH
Statoil has furnished to Crown (Addendum One hereto) an MSDS
for the Crude Oil that Statoil may supply to Crown
hereunder, including safety and health warnings. Crown
acknowledges receipt of such information, and agrees to
furnish such warnings and information to all persons whom
Crown can reasonably foresee, may be exposed to or may
handle such Crude Oil, including, but not limited to,
Crown's employees, agents, contractors, and customers.
Crown will furnish to Statoil, MSDS information on the
Products to be supplied under this Agreement.
<PAGE>
__________
ARTICLE 27
__________
ASSIGNMENT
Neither Crown, nor Statoil, may assign this Agreement in
whole or in part, except if such assignment is madeto an
Affiliate, without written consent of the other Party, and
providing that the assigning Party shall alwaysremain
jointly and severally liable with the assignee for the
performance of this Agreement. This Agreementshall be
binding on the respective successors and permitted assigns
of the Parties.
<PAGE>
<PAGE>
__________
ARTICLE 28
__________
STATEMENTS
Crown will provide all necessary statements, required by
Statoil, in connection with this Agreement.
Crown is required to provide Statoil, as frequently as
possible, but in no case less than a weekly schedule, with
detailed inventory records reflecting the volume of Crude
Oil held for processing, and volume of Products stored and
deemed processed for Statoil's account, as well as the
ownership and volumes of all parties who share commingled
storage.
Crown is required to notify any person who holds a security
interest in Crown's inventory, or in any Crude Oil processed
by Crown, or Products sold by Crown to other parties, or to
any assets of Crown which could include Crude Oil and/or
Products inventories, of the existence of this Agreement,
and Statoil's title and ownership in the Crude Oil and
Products under this Agreement, and is required to provide
Statoil with evidence of such notice(s).
<PAGE>
__________
ARTICLE 29
__________________________________________________________
COMPLIANCE WITH EPA REFORMULATED GASOLINE AND ANTI-DUMPING
___________
REGULATIONS
Crown shall have exclusive responsibility for certification
of all gasoline refined under this Agreement, pursuant to
the United States Environmental Protection Agency's
(``
EPA'') Reformulated Gasoline and Anti-Dumping
regulations, and shall be responsible for all refiner
reports to the EPA, pursuant to such regulations. In the
event that Statoil shall be found to have violated the EPA
Reformulated Gasoline and Anti-Dumping regulations, on
account of any transaction relating to or arising from this
Agreement, and that violation is the result of a mistake,
error, or omission on the part of Crown, then Crown shall
indemnify Statoil in accordance with the provisions of
Article 20.
<PAGE>
<PAGE>
__________
ARTICLE 30
____________
LIABILITIES
Except as elsewhere provided in this Agreement, neither
Party shall be liable for any indirect, incidental, special,
or consequential damages, specific performance, or lost
profits sustained by the other Party as a result of anything
relating to this Agreement.
<PAGE>
__________
ARTICLE 31
_____________
MISCELLANEOUS
31.1 Unless otherwise agreed in writing, any notices,
statements, requests, or other communications to be
given by either Party, pursuant to this Agreement,
shall be made in writing, and unless otherwise
provided herein, be sufficiently made if sent by
prepaid first class post, facsimile, or by telex, to
the address of the other Party specified for this
purpose below, and shall, unless otherwise provided
herein, be deemed to have been made on the day on
which such communication is sent to Statoil and to
Crown at the addresses and telex numbers specified
below:
<TABLE>
<S> <C>
Statoil North America, Inc. Crown Central Petroleum
Corporation
225 High Ridge Road P.O. Box 1759
Stamford, CT 06905 Houston, Texas 77251-1759
Attn: Mr. Jens Grondahl Attn: Mr. Randall M. Trembly
Executive Vice
President
Telephone: (203) 978-6900 Telephone: (713) 920-4103
Telex: MCI 6819522 STATOIL Facsimile: (713) 920-3916
Facsimile: (203) 978-6952
With a copy to:
Crown Central Petroleum
Corporation
4747 Bellaire Boulevard
Bellaire, Texas 77401
Attn: Mr. Edward L. Rosenberg
Senior Vice President
<PAGE>
- Supply and
Transportation
Telephone: (713) 660-4555
Facsimile: (713) 660-4550
</TABLE>
31.2 This Agreement, including the Addenda, contains
the entire understanding of the Parties with respect
to its subject matter. There are no restrictions,
agreements, promises, representations, warranties,
covenants, or undertakings other than those expressly
set forth herein. This Agreement supersedes all
prior agreements, including Agreement in Principle,
and undertakings between the Parties with respect to
its subject matter, except to the extent any such
prior agreement is specifically incorporated herein.
This Agreement may be amended or modified only by a
written agreement duly executed by each of the
Parties hereto.
31.3 In the case any one or more of the provisions
contained herein shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability
shall not affect any other provision of this
Agreement.
<PAGE>
31.4 The Article headings contained herein are for
reference purposes only, and shall not affect in any
way the meaning or interpretation of this Agreement.
31.5 This Agreement may be executed in several
counterparts, each of which shall be deemed to be an
original, but all of which together constitute one
and the same instrument.
31.6 Waiver of performance of any obligation by either
Party shall not be deemed a waiver of performance of
other obligations or future waivers of the same
obligation.
31.7 Nothing in this Agreement shall be construed to
establish any agency or partnership relationship
among the Parties, and the Parties specifically
disclaim any intention to create such a relationship.
<PAGE>
<PAGE>
In witness whereof the parties have made up this Agreement
in duplicate and signed
at ________
Stamford_________________________________
on ________________
January 14, 1997__________________________
By: /s/---_______________________________________
Sigurd Jansen__________________________
Statoil North America, Inc.
Name: Sigurd Jansen
Title: President
Crown Central Petroleum Corporation
Name: Henry A. Rosenberg, Jr.
Title: Chairman of the Board
<PAGE>
ADDENDUM ONE
MATERIAL SAFETY DATA SHEET
CRUDE OIL SWEET
Trade Name and Synonymes:
Crude Oil, Earth Oil
Chemical Name and/or Family or Discription:
Petroleum Hydrocarbons
Importer's Name:
Statoil North America Inc.
Address: Telphone Number for Information:
225 High Ridge Road (203) 978-6900 (during normal
business
<PAGE>
Stamford, Connecticut 06905 hrs. 8:30 a.m.-4:30 p.m.)
24 hr. pager: 1-800-759-7243, Pin #35619
Chemical Composition:
Petroleum Hydrocarbons
Traces of organic metallic compounds and inorganic gases.
This product is classified by OSHA Hazard Communication
Standards, 29 CFR 1910.1200 as:
-Carcinogenic
-Hazardous
-Flammable
HAZARD SUMMARY
Danger!
May release gases.
Hydrogen sulfide (H S) may be fatal if inhaled.
2
Flammable.
Gases may cause irritation to eyes.
May be harmful to skin.
<PAGE>
PHYSICAL DATA
Appearance: Usually greenish-black liquid
3
Density: 0.8-1.0 g/cm
Boiling point: From ambient temperature to approximately
C
.
700
Viscosity: Variable
Evaporation Rate: Variable
Vapor Pressure (RVP, psi): Variable; Typical range: 4.0-11.5
Solubility in water: Negligible
PH of undiluted product: Not determined
OCCUPATIONAL SAFETY REGULATIONS
Permissible consentrations, air: none established.
Recommend Benzene: TLV/TWA 10 ppm
C4:
`` TLV 800 ppm
H2S:
`` TLV/TWA 10 ppm
OSHA H2S Ceiling Limit 20 ppm
OCCUPATIONAL CONTROL PROCEDURES
Respiratory Protection: Select appropriate respiratory
protection where necessary to maintain
exposures below acceptable limits.
Ventilation: Mechanical ventilation required
only in emergency or extreme conditions,
such as confined spaces
Protective Gloves: Gloves resistant to chemicals and
petroleum distillates recommended.
<PAGE>
Eyes: Use safety glasses with side
shields and/or face shield where spashing is
present.
Other Protective Equipment:
Coveralls if spashing is present.
<PAGE>
ENVIRONMENTAL DATA
____________________
Chemical/Common Name _______
CAS No. __________
Range in #
*Petroleum - Crude Oil 8002-05-09 100
*Hazardous according to OSHA (1910.1200) or one or more
state Right-to-Know lists.
SARA TITLE III
__________________________________________
Section 313 - Toxic Chemicals (40 CFR 372)
The material contains the following compontent(s) at a level
of 1.0% or greater (0.1% for carcinogens) on the list of
Toxic Chemicas and is subject to toxic chemical release
reporting requirements.
_________
Component _______________
CAS Register No. Approx.
Concentration
_____________
(Upper Bound)
Benzene 71-43-2 1.0%
Tolune 108-88-3 2.0%
Xylenes (mixed isomers) 1330-20-7 2.0%
____________________________________________
Section 311 - Hazard Categories (40 CFR 370)
Immediate (Acute) Health Hazard
Delayed (Chronic) Health Hazard Fire Hazard
<PAGE>
Eyes: In case of contact, immediately
flush eyes with
<PAGE>
plenty of water for at least 15 minutes.
Call a
physician.
Ingestion: If swallowed, do not induce
vomiting. Give large
quantities of water. Never give
anything by
mouth to an unconscious person. Call a
physician.
NOTES TO PHYSICIAN
Gastric lavage by qualified medical personnel may be
considered, depending on quantity of material ingested.
PHYSIOLOGICAL EFFECTS
Effects of Exposure (Acute)
Eyes: Liquid is believed to be minimally
irritating, however H2S gas may cause
tearing and burining and in
severe cases corneal blistering.
Skin: Believed to be slightly irritating
with possible
redness, edema or drying of the skin.
May
cause dermatitis on prolonged or
repeated
contact.
Respiratory H2S gas can cuase irritation to the
throat and lungs,
nausea and System: dizziness. Death by
suffocation
may also occur. See Other below.
Effect of Exposure
(Chronic): Based on compositoinal analysis,
this product may
cause skin cancer in laboratory animals
when
repeatedly applied for most of the
lifetime of the
animal with no effort made to remove the
oil
between applications.
<PAGE>
Other: CAUTION! H2S has poor warning
properties,
fatigues sense of smell.
<PAGE>
FIRE AND EXPLOSION HAZARD DATA
Flammable Liquid Lower explosion limit (LEL) = 1%
Upper explosion limit (UEL) = 10%
Flash point: Less than ambient (variable).
Extinguishing Medial: Use dry chemical, CO2, foam.
Special Fire Fighting Procedures: Water should only be used
to keep fire-exposed containers cool. If a leak or spill
has not ignited, use water spray to disperse the vaports and
to protect personnel attemptiong to stop a leak. Water
spray may be used to flush spills away from areas of
potential ignition.
Unusual Fire and Explosion Hazards: Products of combustion
may contain carbon monoxide, carbon dioxide and other toxic
materials. Do no enter enclosed or confined space without
proper protective equipment including respiratory
protection.
SPILL, LEAK AND DISPOSAL INFORMATION
General: Constrain spill immediately in smallest possible
area. Recover as much of hte product as possible by
mechanical means, followed by recovering residual fluids by
usine abosrbent materials.
Nonrecoverable product, contaminated soil, debris and other
materials should be placed in proper containers for ultimate
disposal. Avoid washing, drawing or directing material to
strom or sanitary severs. NOTE: REVIEW FIRE AND EXPLOSION
HAZARDS before proceeding with clean up. Use appropriate
personal protective equipment during clean up.
<PAGE>
Waste Disposal Method: Recycle as much of the recoverable
product as possible. Treatment, storage transportation and
disposal must be in accordance with applicable Federal
State/Provincial, and local regulations.
TRANSPORTATION AND STORAGE
Storage conditions: Store in accordance with National
Fire Protection
Association regulations
Shipping Information: IATA/IMO
Proper Shipping Name: Petroleum Crude Oil
Hazard Class: 2 (3.2 IMO)
UN NO.: UN 1267
IMO/ICAO Label: Flammable Liquid
ADDITIONAL INFORMATION
CAUTION: Misuse of empty containers can be hazardous if
used to store toxic, flammable, or reactive materials.
Cutting or welding of empty containers might cause fire,
<PAGE>
explosion or toxic fumes from residues. Do no pressurize or
expose to open flame or heat. Keep container closed and
drum bungs in place.
DATE OF LATEST REVISION/REVIEW
3 July 1990
All Statements, information and data provided in this
material safety data sheet are believed to be accurate and
relaible, but are presented without guarantee,
representation, warranty or responsibility of any kind,
expressed or implied. any and all representations and/or
warranties of merchantibility or fitness for a particular
purpose are specifically disclaimed. Users should make
their own investigations to determine the suitability of the
information or porducts for their particular purpose.
Nothing contained herein is intended as permission,
inducement or recommendation to violate any laws or to
practice any invention convered by existing patents,
copyrights or inventions.
<PAGE>
ADDENDUM TWO
Stand-By Letter of Credit:
At the request of Crown Central Petroleum Corporation of
Baltimore,
Maryland (hereinafter referred to as ``
Crown''),
we ______________________________ , hereby open our
irrevocable stand-by Letter of Credit,
No. _____________________________ ,
in favor of Statoil North America, Inc., of 225 High Ridge
Road,
Stamford, Connecticut 06905 (hereinafter referred to as
``
Statoil''), covering the Crude Oil and Products owned by
Statoil which is in ``
Crown's'' custody.
We hereby irrevocably and unconditionally undertake to make
payment of
USD ____________________________ ,
<PAGE>
(plus or minus 10%)
in favor of ``Statoil's'' Account No. 23276001 with Den
Norske Bank, New York, NY, ABA # 026-005-694, upon
``Statoil's'' first written request, and on the
presentation of the following documentation:
a) A copy of ``
Statoil's'' Commercial Invoice showing all
or part of the quantity and value of Statoil-owned
Products in ``Crown's'' custody.
b) ``
Statoil's'' signed statement, stating that payment of
the above mentioned invoice is due, and that payment
has not been made by ``
Crown,'' and/or the amount due
to ''
Statoil'' in the account of ``Crown's''
nonperformance of the Processing Agreement,dated
_________________________ , is due and has not been
paid.
We hereby agree that all requests for payment in
accordance with the terms stipulated herein will be
duly honored upon presentation of the documentation, as
set out in paragraphs (a) and (b) above, if presentedto
bank ____________________________________ , on or
before ____________________________.
Partial drawings are allowed.
In addition to any payment made according to the above
paragraph (a), we will honor claims for interest at the
prime rate, as published by the ``
Wall Street
Journal''
, calculated from the due date according to
the invoice, to the actual date of payment to the
beneficiary.
All related banking charges and commissions, whether
for ``
Statoil'' or ``Crown'', shall be for the account
of ``
Crown.''
This stand-by Letter of Credit is subject to the uniform
customs and practice for documentary credit (1993 Revision,
International Chamber of Commerce, Paris Publication No.
500).
This telex is the instrument of utilization. No mail
confirmation follows.
<PAGE>
<PAGE>
1997 Performance Incentive Plan
PURPOSE
The 1997 PERFORMANCE INCENTIVE PLAN is an incentive
plan designed to recognize and reward eligible
employees by sharing in the financial achievements of
the Company. The program forges a stronger link
between pay and Company performance and sharpens the
Company's focus on business goals. It provides a
chance for all salaried employees to share in the added
value they create by superior group effort. The Plan
Year for measuring financial and operational results is
calendar year 1997.
PARTICIPATION
Employees are eligible to participate in the 1997
PERFORMANCE INCENTIVE PLAN if they meet all of the
following criteria:
1. They are a regular full-time or part-time salaried
employee in an eligible position for 90 days prior to
December 31, 1997.
2. They receive at least a ``
Proficient'' performance
appraisal rating.
Full Award
In addition to employees who participate in the Plan
for a full Plan Year, certain employees who meet any of
the following criteria, will not receive a reduction in
award, provided they have no other deductible time.
1. Employees who receive Accident and Sickness Benefits
for less than 90 days during the Plan Year.
2. Employees promoted to or hired into an eligible
position before April 1, 1997.
3. Employees called to active military duty during the
Plan Year.
<PAGE>
<PAGE>
Prorated Awards
The 1997 PERFORMANCE INCENTIVE PLAN award may be
prorated for certain employees who first meet the basic
eligibility requirements above. Awards are prorated
for:
1. Employees who retire during the Plan Year.
2. Employees who die during the Plan Year.
3. Employees who leave the Company due to long-term
disability prior to December 31, 1997.
4. Employees who receive Accident and Sickness benefits
for more than 90 days or who are on paid or unpaid
leave of absence for any other reason for more than 90
days during the Plan Year.
5. Part time employees. Awards are calculated on
scheduled hours.
Ineligibility
The 1997 PERFORMANCE INCENTIVE PLAN is not available
to:
1. Employees whose employment is terminated during the
Plan Year for any reason other than retirement, death
or disability.
2. Employees on disciplinary probation for any portion
of the Plan year.
3. Employees must be in an active status on the date
incentive payments are made to receive a payment.
Plan Award Description
The 1997 PERFORMANCE INCENTIVE PLAN provides
participants with annual incentive pay based upon the
attainment of specific Corporate financial performance
measures. No incentive is earned for performance below
threshold. Awards are dependent upon the achieved level
of Corporate performance against its financial
objectives, and each employees' individual award
opportunity percentage. The award opportunity
percentage that applies is based on an employees'
permanent position and is expressed as a percentage of
annualized base salary. Employees who hold more than
one eligible position during the year, you will be
entitled to an award based on the eligible position
they hold for at least seven months.
<PAGE>
Key Elements
<PAGE>
1. There are two levels of participation within the
Plan: Corporate and Business Unit.
2. Awards for participants of the Plan at the Business
Unit level will be determined 30% by Corporate results
and 70% by Business Unit results as measured by each
applicable scorecard. No bonus pool is created at the
Corporate or Business Unit level until the Corporate
Threshold target is met.
3. In view of the practical difficulties involved in
setting and monitoring performance measures for
Corporate support staffs, including Shared Services,
which are uniform and equitable, Corporate performance
measures will be used as the sole determinant of award
allocations to those groups.
4. Interpolation will be used to determine actual
awards when performance on any objective falls between
Threshold, Target and Maximum levels.
Inclusion of Overtime Pay
Award payments will be used in determining an eligible
employee's equivalent overtime rate of pay for overtime
hours worked during the Plan Year. Such incremental
overtime payment will be paid as soon as practical
after the incentive award payment and is subject to
appropriate tax withholding.
Effect On Benefits
Award payments will be included in the calculation of
pension accruals under the Pension Plan. Award
payments are not eligible for contribution to the
Savings Plan nor will they be included in the
calculation of insurance benefits or payments under any
other benefit plan.
Tax Treatment of Incentive Payments
All incentive earnings are considered taxable income in
the year in which they are paid. Appropriate federal,
state and local taxes will be withheld at the rates in
effect at the time of payment.
<PAGE>
Approvals
1. Corporate performance measures, targets and award
levels for all officers are subject to approval by the
Executive Compensation and Bonus Committee of the Board
of Directors.
2. The Chief Executive Officer approves Business Unit
performance measures and targets.
<PAGE>
Adjustments
To avoid distortion in the operation of the Plan and to
assure the incentive features of the Plan, the Company
reserves the right to adjust the level of payment to
compensate for or reflect in any extraordinary changes
which may have occurred during the Plan Year which
significantly alter the basis upon which performance
levels were determined.
Administration, Amendments and Termination
1. The Company has the full power to administer and
interpret the Plan and to establish rules for its
operation. The Company may also modify, amend or
terminate the Plan at any time without prior notice.
2. Nothing contained in this Plan or in any other
documents relating to the Plan is intended to confer
any right to continue in the employ of the Company or
to constitute a contract or in any way limit the right
of the Company to change an individual's compensation
or to terminate the employment of any person with or
without cause.
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
L
L
LETTER TO THE
ETTER TO THE
ETTER TO THE S
S
SHAREHOLDERS
HAREHOLDERS
HAREHOLDERS
To the Shareholders:
To the Shareholders:
To the Shareholders:
Crown Central's results for 1996 reflect improved
operating performance. For the full year, Crown
reported a net loss of $3.0 million ($.31 per share) on
revenues of $1.64 billion versus a net loss of $70.6
million ($7.28 per share) on revenues of $1.45 billion
in 1995.
Crown Central Petroleum Corporation announced a net
profit of $10.7 million ($1.09 per share) on revenues
of $435 million for the fourth quarter of 1996 compared
to a net loss of $67.8 million ($6.99 per share) on
revenues of $359 million for the fourth quarter of
1995.
<PAGE>
The fourth quarter and full year 1995 included the
effects of a one time non-cash write-down of $52.3
million ($80.5 million pre-tax) in connection with the
accounting for the impairment of long-lived assets
(SFAS 121). Excluding the effects of this one-time
write-down, the fourth quarter 1996 results represent
an improvement in net income of $23.8 million ($2.69
per share) as compared to the fourth quarter 1995 and
an improvement of $15.4 million in net income ($1.57
per share) for the full year.
Operating cash flow (net income before taxes, interest,
non-cash charges and LIFO accounting provisions,
referred to as EBITDAAL) amounted to $41.6 million for
the full year 1996 compared to $35.9 million in 1995
for an increase of 15.9%. The cash position at the end
of 1996 remained strong at $36.0 million with no
outstanding borrowings under the Company's credit
facility.
________
Refining
________
Refining
________
Refining
Several factors contributed to the improved operating
results in the fourth quarter of 1996. Stronger prices
for distillates led to improved Gulf Coast refining
margins, and wholesale product margins were strong for
products refined and sold in the La Gloria system.
Both refineries experienced lower maintenance and
manpower costs, continuing a trend that has been
underway since 1993.
(Photograph of Henry A. Rosenberg, Jr. Chairman of the
Board, President and Chief Executive Officer)
(Photograph's Caption: Henry A. Rosenberg, Jr. Chairman
of the Board and Chief Executive Officer)
In July, Crown and Statoil North America Inc., a
subsidiary of the national oil company of Norway,
entered into an agreement for processing crude oil at
the Houston refinery. Under the terms of this
agreement, Statoil supplies 20,000 barrels per day of
crude oil and Crown in return provides refined products
to Statoil. This agreement has enabled Crown to more
efficiently utilize and manage its production
facilities. Due to this arrangement and as a result of
tighter inventory controls, crude oil and petroleum
inventories were reduced significantly below 1995
levels.
Two new process units were placed in operation at the
Houston refinery in 1996. One of these units permits
the sale of the FCC lean gas, allowing Crown to receive
a premium over fuel gas value for the ethylene in this
stream. A new reformate splitter was also placed in
service, increasing the company's ability to
manufacture reformulated gasoline. At the Tyler
refinery, the FCC and sulfur recovery units were
<PAGE>
modified, enabling the facility to increase its
production of gasoline and low sulfur diesel.
The refineries operated well during 1996, having met
production targets and operating expense goals, and for
the second consecutive year the Houston refinery will
receive the NPRA Gold Award for safety. We are
optimistic about the future competitiveness of our
refineries. In broad terms, refining industry analysis
points to modest margin improvements over the
intermediate term. Demand for gasoline is strong due
in part to the popularity of sport utility vehicles,
increased summer driving and faster speeds being
permitted on U.S. highways. Although we can expect to
see a modest amount of refinery capacity expansion in
the future, we believe that most of the significant
increases have already been accomplished.
The lockout of the labor union employees represented by
the Oil Chemical and Atomic Workers (OCAW) at Houston
continues as of the date of this letter. The company
has proposed a contract which includes the wage and
benefit patterns established in the 1996 negotiations
with the majority of the refineries in the United
States. Our efforts will continue to restore and
maintain the competitiveness of the Houston facility.
Crown salaried and temporary contract employees are
managing the refinery with reduced operating costs and
have performed to the highest professional standards
under difficult circumstances. The safety record
during this period has been exceptional with the
recordable incident rate approximately 65% below the
rate experienced in 1995. These employees are to be
commended by management, the board of directors and
shareholders for a job well done.
_________
Marketing
_________
Marketing
_________
Marketing
Crown Marketing finished a strong year with increases
in all major categories of comparable store
performance. Merchandise sales were up 3.5%; net
merchandise dollars were up 9.9%. Fuel sale gallonage
increased 3.7% while net fuel margin dollars grew by
4.4%. Total store count dropped from 348 at the end of
1995 to 343 for the year just ended. This was
primarily due to the sale of five marginal units in
Montgomery, Alabama. One new ground-up unit was built
in Easton, Maryland and one complete rebuild was opened
in Columbus, Georgia. In July, the first A&W franchise
unit was opened in one of our Fast Fare locations in
Columbus, Georgia. Commitments have been made for other
sites throughout our service area.
In May, the creation of CrownCen Marketing Co. as the
new retail operating unit of Crown Central Petroleum
<PAGE>
was announced. The CrownCen trade name designation will
give Crown retail marketing operations a distinct
identity within the oil business and to its vendors.
Frank B. Rosenberg, Senior Vice President-Marketing at
Crown Central Petroleum, was named President of
CrownCen Marketing Co.
<PAGE>
Also, in May, the Company and First Maryland Bankcorp
credit subsidiary, First Omni Bank, announced the
public release of the new Crown MasterCard Credit Card.
An innovative marketing approach, the card offers
premiums, based on levels of purchases charged at Crown
stations, to be selected from Crown's ``
SAVE EVERY
MILE''
rewards catalog. While competition is intense in
the credit card market, Crown has been pleased with the
initial customer response.
Crown's Point-of-Sale and Scanning project is nearing
rollout to all of our company operated stores. Once
completed in late 1997, Crown units will be equipped
with the latest in retail marketing technology. This
will allow us to help speed our customers through
checkout, provide quality training systems for our
store employees, and deliver in-depth management
reporting aimed at improving results.
__________________
Regulatory Affairs
__________________
Regulatory Affairs
__________________
Regulatory Affairs
Over the past year, the petroleum industry has been the
focus of several federal environmental initiatives that
could significantly impact the manufacture,
distribution, and sale of petroleum products into the
next century.
The federal Environmental Protection Agency (EPA) has
proposed revising the National Ambient Air Quality
Standards (NAAQS) for ozone and particulate matter. The
proposal designates hundreds of areas across the
country as non-attainment. These non-attainment areas
could require the sale of reformulated gasoline (RFG)
and installation of Stage II control nozzles on fuel
dispensers. In addition, both Crown refineries and most
terminal facilities could be subjected to more
stringent emission controls. Under a court order, EPA
must finalize the NAAQS rule by June 1997.
The EPA is working with state environmental regulators
through the Ozone Transport Assessment Group (OTAG) to
address interstate transport of air pollution. OTAG has
proposed requiring a low-sulfur, reformulated gasoline
in 37 states east of the Rocky Mountains. OTAG is
scheduled to submit its final recommendations to EPA by
March 1997. In addition, EPA will be issuing both a
proposed rule and guidance document this spring that
could significantly expand reformulated gasoline
<PAGE>
markets by allowing all areas of the country to adopt
the federal RFG program. The program is currently
limited to non-attainment areas.
Crown Central, along with other concerned companies and
trade associations, is working to defeat these
additional proposals based on the lack of scientific
data to support a revised NAAQS, and the lack of
evidence that RFG is cost effective in reducing the
transport of ozone. Even the Chairman of EPA's own
Clean Air Scientific Advisory Committee, Dr. George
Wolff, stated on February 5, ``
the new standard was
established on too little evidence and wasn't
scientifically defensible.''
Wolff also stated it would
take an additional 5 year study to accurately determine
the need for further air quality regulations.
The simple fact is that since 1970 when the EPA was
established, the U.S. population is up 27%, twice as
many miles are being driven and the GNP has nearly
doubled, yet six major categories of emission
pollutants have decreased 24%. New cars today have 95%
less tailpipe emissions than those of the mid-1960's.
In April, a new senior comprehensive management
structure was announced. Randall M. Trembly was elected
Executive Vice-President of the Corporation. Phil W.
Taff was elected Executive Vice President and Chief
Financial Officer. Edward L. Rosenberg was named Senior
Vice President-Supply and Transportation. Frank B.
Rosenberg was elected Senior Vice President-Marketing
and John E. Wheeler, Jr. was elected Senior Vice
President-Finance and Treasurer. These and other
appointments were made to consolidate management and
form responsibilities around key business units.
Crown's Business Process Improvement Project (BPIP)
continued in 1996 with successful implementation of new
procurement and accounts payable business processes and
information systems throughout the Company. In 1997,
additional implementations of new financial, sales,
inventory and asset management systems are expected to
be brought on-line. We anticipate that this strategic
initiative will provide key managers with more timely
and accurate information to enhance decision making and
help to lower administrative costs.
On January 30, 1997, Sanford V. Schmidt was elected a
Director of Crown Central. Mr. Schmidt is Senior Vice
President and Chief Administrative Officer of American
Trading and Production Corporation (ATAPCO).
These are challenging times in the refining and
marketing industry and the value of our employees is
shown everyday as we forge ahead with a stronger and
more determined company. Your continued confidence and
support is greatly appreciated.
Sincerely,
<PAGE>
Henry A. Rosenberg, Jr.
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 13.b Crown Central Petroleum Corporation And
Subsidiaries
<TABLE>
<CAPTION>
OPERATING RESULTS
_______________________________
Twelve Months Ended December 31
____
____
____________________________
Dollars in thousands, except ____
1996
___
__
_
___
_
___
____
1995
___
____
1994
____
_
___
______________
per share data
<S> <C> <C> <C>
Sales and operating revenues 1,635,276
$ 1,451,349
$ 1,318,558
$
(1)
SFAS 121 Implementation (2) ---- )
(80,524 ----
(Loss) before income taxes )
(3,423 )
(98,489 (52,836)
(3)
(Loss) before extraordinary )
(2,767 )
(67,367 (35,406)
item
(Loss) from extraordinary ---- )
(3,257 ----
item (4)
Net (loss) )
(2,767 )
(70,624 (35,406)
(Loss) per share before )
(.28 )
(6.95 (3.63)
extraordinary item
(Loss) per share from ---- )
(.33 ----
extraordinary item
Net (loss) per share )
(.28 (7.28) (3.63)
Weighted average shares used
in the
computation of (loss) per 9,721,693 9,697,611 9,742,598
share
________
</TABLE>________________________________
______________________________
<TABLE>
<CAPTION>
KEY FINANCIAL STATISTICS
________________________________
________________________________
_____
_
___
____
1996
__
_
___
___
___
_
____
1995 ____
1994
____
___
_
<S> <C> <C> <C>
Working capital (in millions) $ 52.9 $ 45.9 53.7
$
<PAGE>
Working capital ratio 1.29 : 1 1.22 : 1 1.22 : 1
Liquid assets as a percentage
of
current liabilities (5) 82.8% 72.2% 75.8%
Long-term debt as a
percentage of
total capitalization (6) 40.7% 40.7% 29.1%
Equity ratio (7) 33.2% 32.5% 37.0%
Return on average )
(1.5% )
(31.4% (12.7%)
shareholders' equity
Gross profit margin (1) 8.4% 7.6% 7.4%
________________________________
_
________________________________
____
_
<FN>
(1) Sales and operating revenues and Gross profit margin
for 1995 and 1994 have been adjusted to reflect certain
reclassifications as discussed in Note A of Notes to
Consolidated Financial Statements.
(2) During the fourth quarter of 1995, the Company
implemented Statement of Financial Accounting Standard No.
''
121 Accounting for the Impairment of Long-Lived Assets and
Assets to be disposed Of''
which resulted in a write-down of
$80.5 million related to certain refinery assets.
(3) Includes the impact of implementation of SFAS No. 121.
(4) 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
net proceeds received from the sale of $125 million of
Unsecured 10.875% Senior Notes due February 1, 2005.
(5) Liquid assets defined as cash, cash equivalents and
trade accounts receivable.
(6) Total capitalization defined as long-term debt and
common stockholders' equity.
(7) Common stockholders' equity divided by total assets.
</TABLE>
<PAGE>
Crown Central Petroleum Corporation
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
JACK AFRICK # *
Retired Vice Chairman
<PAGE>
UST Inc.
GEORGE L. BUNTING, JR. # *
President and CEO
Bunting Management Group
MICHAEL F. DACEY #
President
The Evolution Consulting Group, Inc.
THOMAS M. GIBBONS + # *
Retired Chairman of the Board
The Chesapeake and Potomac
Telephone Companies (part of Bell
Atlantic Corporation)
PATRICIA A. GOLDMAN +
Retirement Senior Vice President
Corporate Communications USAir
WILLIAM L. JEWS +
President and Chief Executive Officer
Blue Cross and Blue Shield
of Maryland
REV. HAROLD E. RIDLEY, JR., S.J.
President
Loyola College in Maryland
HENRY A. ROSENBERG, JR.
Chairman of the Board, President and
Chief Executive Officer of the
Corporation
# Members of Audit Committee
+ Members of Executive
Compensation and Bonus
Committee
* Members of Succession Planning Committee
EXECUTIVE COMMITTEE
JACK AFRICK
THOMAS M. GIBBONS
HENRY A. ROSENBERG, JR.
Chairman
OFFICERS
HENRY A. ROSENBERG, JR.
Chairman of the Board,
Chief Executive Officer, President and
Chief Operating Officer
RANDALL M. TREMBLY
Executive Vice President
PHILLIP W. TAFF
<PAGE>
Executive Vice President and
Chief Financial Officer
EDWARD L. ROSENBERG
Senior Vice President - Supply and
Transportation
JOHN E. WHEELER, JR.
Senior Vice President - Finance
and Treasurer
FRANK B. ROSENBERG
Senior Vice President - Marketing
THOMAS L. OWSLEY
Vice President - Legal
J. MICHAEL MIMS
Vice President - Human Resources
PAUL J. EBNER
Vice President - Shared Services
DENNIS W. MARPLE
Vice President - Wholesale Sales
and Terminals
J. RICK EVANS
Vice President - Retail Marketing
DELORES B. RAWLINGS
Vice President - Secretary
JAN L. RIES
Controller
PETER G. WOLFHAGAN
Assistant Secretary
PHILLIP F. HODGES
Assistant Secretary
ANDREW LAPAYOWKER
Assistant Secretary
WILLIAM A. WOLTERS
Assistant Secretary
DAVID J. SHADE
Assistant Treasurer
KURT S. LARSEN
Assistant Treasurer
CORONET SECURITY SYSTEMS, INC.
PHILLIP W. TAFF
Chairman of the Board
FAST FARE, INC.
<PAGE>
FRANK B. ROSENBERG
President
LAGLORIA OIL & GAS COMPANY
RANDALL M. TREMBLY
President
TRANSFER AGENT AND REGISTRAR
THE FIRST NATIONAL BANK OF BOSTON
c/o Equiserve, L. P.
P. O. Box 644
Boston, Massachusetts 02102
800-736-3001
<PAGE>
CORPORATE INFORMATION EXHIBIT 13.d
Crown Central Petroleum Corporation is one of the
largest independent refiners and marketers of
petroleum products in the United States. The Company
operates two high-conversion refineries in Texas with
a combined capacity of 152,000 barrels per day. Crown
markets its refined products at 343 retail gasoline
stations and convenience stores in seven Mid-Atlantic
and Southeastern states. Crown's wholesale operations
extend from its Texas refineries into the Southeastern,
Mid-Atlantic and Midwestern regions of the United
States.
By concentrating on its core business and maintaining a
strong financial position, Crown is able to offer
quality products to its customers and long-term value
to its shareholders.
<PAGE>
<TABLE>
<CAPTION>
Crown Central Petroleum Corporation and Subsidiaries
OPERATING STATISTICS
___________________________
Twelve Months Ended
<PAGE>
___________
December 31__
_
1996 1995
________________________________
________________________________
_____
_
<S> <C> <C>
Combined Refinery Operations
Production (BPD - M) 153 154
Production (Mmbbl) 56.1 56.4
Sales (Mmbbl) 58.4 54.6
oss Margin ($/bbl)
Gr 2.39 2.45
Gross Profit ($MM) 139.5 133.6
Operating Cost ($/bbl) 2.29 2.42
Operating Cost ($MM) 133.7 132.1
Net Refining Profit (Loss) ($MM) 5.8 1.5
Retail
Number Stores 343 348
Volume (pmps - Mgal) 130 123
Volume (MMgal) 535 516
Gasoline Gross Margin ($/gal) 0.120 0.117
Gasoline Gross Profit ($MM) 64.3 60.4
Merchandise Sales (pmps - $M) 24.8 23.6
Merchandise Sales ($MM) 102.0 98.6
Merchandise Gross Margin (%) 28.5 26.9
Merchandise Gross Profit ($MM) 29.1 26.5
Retail Gross Profit ($MM) 93.4 86.9
Retail Operating Costs (pmps - $M) )
(19.9 (17.0)
Retail Operating Costs ($MM) )
(81.9 (71.2)
Retail Non-Operating (Expense) ($MM) 0.0 (4.2)
Retail Net Profit ($MM) 11.5 11.5
Wholesale / Terminal Net Profit (Loss) 5.4 0.5
($MM)
Other
SFAS No. 121 Implementation ($MM) (80.5)
LIFO (Provision) Recovery ($MM) )
(0.9 (6.7)
Corporate Overhead / Other ($MM) (25.3) (24.7)
Income Tax Benefit (Expense) ($MM) 0.7 31.1
(Loss) from Extraordinary Item ($MM) (3.3)
Total Net (Loss) Income ($MM) )
(2.8 (70.6)
Depreciation and Amortization ($MM) 31.8 36.6
Net Interest Expense ($MM) 12.3 12.1
LIFO Provision (Recovery) ($MM) 0.9 6.7
Loss from Asset Disposals ($MM) 0.2 80.2
Loss from Extraordinary Item ($MM) 3.3
Income Tax (Benefit) Expense) ($MM) )
(0.7 (31.1)
EBITDAAL ($MM) 41.7 37.2
Capital Expenditures 24.1 41.0
________________________________
________________________________
_____
_
<FN>
BPD = Barrels per day
<PAGE>
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
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<CAPTION>
FINANCIAL DATA SCHEDULE
Crown Central Petroleum Corporation and Subsidiaries
(Thousands of dollars, except per share amounts)
December 31
1996
-----------------
(Unaudited)
<S> <C>
<CASH> (658 )
<SECURITIES> 36,689
<RECEIVABLES> 114,528
<ALLOWANCES> 1,079
<INVENTORY> 66,004
<CURRENT-ASSETS> 233,509
<PP&E> 640,238
<DEPRECIATION> 342,321
<TOTAL-ASSETS> 565,233
<CURRENT-LIABILITIES> 180,635
<BONDS> 127,196
0
0
<COMMON> 49,916
<OTHER-SE> 137,459
<TOTAL-LIABILITY-AND-EQUITY> 565,233
<SALES> 1,635,276
<TOTAL-REVENUES> 1,635,276
<CGS> 1,498,647
<TOTAL-COSTS> 1,498,647
<OTHER-EXPENSES> 127,631
<LOSS-PROVISION> 440
<INTEREST-EXPENSE> 13,982
<INCOME-PRETAX> (3,423)
<INCOME-TAX> (656)
<PAGE>
<INCOME-CONTINUING> (2,767)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,767)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
