<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
COMMISSION FILE NUMBER 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-0550682
(State or jurisdiction of (I.R.S. Employer Identification
Number) incorporation or organization)
ONE NORTH CHARLES STREET, BALTIMORE, MARYLAND 21201
(Address of principal executive offices) (Zip Code)
410-539-7400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
___
The number of shares outstanding at April 30, 2000 of the Registrant's $5
par value Class A and Class B Common Stock was 4,817,394 shares and
5,253,862 shares, respectively.
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
March 31, 2000 and December 31, 1999 1
Consolidated Condensed Statements of Operations
Three months ended March 31, 2000 and 1999 3
Consolidated Condensed Statements of Cash Flows
Three months ended March 31, 2000 and 1999 4
Notes to Unaudited Consolidated Condensed Financial
Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 16
Item 6 - Exhibits and Reports on Form 8-K 17
SIGNATURE 18
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
March 31 December 31
2000 1999
-------- -----------
(Unaudited)
ASSETS
------
CURRENT ASSETS
--------------
Cash and cash equivalents $ 22,663 $ 12,447
Accounts receivable, less
allowance for doubtful
accounts (2000--$493,
1999--$552) 143,113 104,332
Inventories, net of LIFO
reserves (2000 -- $83,215
1999 -- $55,813) 90,896 69,195
Other current assets 4,355 1,428
--------- ---------
TOTAL CURRENT ASSETS 261,027 187,402
INVESTMENTS AND DEFERRED CHARGES 22,577 21,666
PROPERTY, PLANT AND EQUIPMENT 693,666 690,423
Less allowance for depreciation (383,558) (376,383)
--------- ---------
NET PROPERTY, PLANT AND
EQUIPMENT 310,108 314,040
--------- ---------
$ 593,712 $ 523,108
========= =========
See notes to unaudited consolidated condensed financial statements
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
March 31 DECEMBER 31
2000 1999
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES
Accounts payable:
Crude oil and refined products $ 159,611 $ 118,489
Other 40,145 22,307
Accrued liabilities 61,018 60,685
Income tax payable 773 413
Borrowings under Secured Credit Facility 14,783 -
Current portion of long-term debt 625 631
--------- ---------
TOTAL CURRENT LIABILITIES 276,955 202,525
LONG-TERM DEBT 129,035 129,180
DEFERRED INCOME TAXES 7,192 7,384
OTHER DEFERRED LIABILITIES 34,792 34,718
COMMON STOCKHOLDERS' EQUITY
Class A Common Stock--par value $5 per share:
Authorized-15,000,000 shares;
issued and outstanding shares--
4,817,394 in 2000 and in 1999 24,087 24,087
Class B Common Stock--par value $5 per share:
Authorized-15,000,000 shares;
issued and outstanding shares--
5,253,862 in 2000 and in 1999 26,269 26,269
Additional paid-in capital 91,850 91,154
Unearned restricted stock (1,745) (1,049)
Retained earnings 4,848 8,411
Accumulated other comprehensive income 429 429
--------- ---------
TOTAL COMMON STOCKHOLDERS' EQUITY 145,738 149,301
--------- ---------
$ 593,712 $ 523,108
========= =========
See notes to unaudited consolidated condensed financial statements
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
(Unaudited)
Three Months Ended March 31
2000 1999
-------- --------
REVENUES
Sales and operating revenues $ 421,484 $ 225,165
OPERATING COSTS AND EXPENSES
Costs and operating expenses 386,108 204,568
Selling expenses 20,213 22,584
Administrative expenses 5,408 5,562
Depreciation and amortization 9,634 8,789
(Gain) loss on sales, abandonments
and write-down of property,
plant and equipment (623) 363
-------- --------
420,740 241,866
-------- --------
OPERATING INCOME (LOSS) 744 (16,701)
Interest and other income 221 1,846
Interest expense (4,241) (3,495)
-------- --------
(LOSS) BEFORE INCOME TAXES (3,276) (18,350)
INCOME TAX EXPENSE (BENEFIT) 287 (6,520)
-------- --------
NET (LOSS) $ (3,563) $(11,830)
======== ========
NET (LOSS) PER SHARE:
Basic and diluted $ (0.36) $ (1.20)
======== =========
See notes to unaudited consolidated condensed financial statements
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
(Unaudited)
Three Months Ended March 31
2000 1999
---------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net cash from operations before
changes in assets and liabilities $ 6,598 $ 4,468
Net changes in assets and liabilities (4,029) 9,151
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,569 13,619
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,813) (9,210)
Proceeds from sales of property, plant
and equipment 984 29
Capitalization of software costs - (76)
Deferred turnaround maintenance (3,257) (4,630)
Net proceeds from long-term notes receivable 171 504
Other charges to deferred assets (62) (552)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (6,977) (13,935)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt and credit agreement
borrowings 160,747 97,000
(Repayments) of debt and credit agreement
borrowings (146,123) (87,923)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,624 9,077
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 10,216 $ 8,761
======== ========
See notes to unaudited consolidated condensed financial statements
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------
Crown Central Petroleum Corporation and Subsidiaries
March 31, 2000
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Management, all adjustments considered necessary for a fair and
comparable presentation have been included. Operating results for the
three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. The
enclosed financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K, as amended, for the year ended
December 31, 1999.
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 inter-company 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.
INVENTORIES: The Company's crude oil, refined products, and convenience
store merchandise 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.
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO projections must be based on Management's
estimates of expected year-end inventory levels and values.
NOTE B - SUPPLEMENTARY CASH FLOW INFORMATION
- --------------------------------------------
Net changes in assets and liabilities presented in the Unaudited
Consolidated Condensed Statements of Cash Flows are comprised of the
following:
Three Months Ended March 31
2000 1999
---------- ----------
(thousands of dollars)
(Increase) in accounts receivable $ (38,781) $ (10,957)
(Increase) Decrease in inventories (21,701) 18,011
(Increase) in other current assets (2,927) (5,645)
Increase in crude oil and refined products
payable 41,123 17,416
Increase in other accounts payable 17,837 2,376
Increase (Decrease) in accrued liabilities
and other deferred liabilities 351 (10,863)
Increase (Decrease) in recoverable and
deferred income taxes 69 (13,187)
Decrease in restricted cash - 12,000
--------- ---------
$ (4,029) $ 9,151
========= =========
<PAGE>
NOTE C --INVENTORIES
- --------------------
Inventories consisted of the following:
March 31 December 31
2000 1999
--------- ----------
(thousands of dollars)
Crude oil $ 59,917 $ 32,390
Refined products 97,777 75,926
--------- ---------
Total inventories at FIFO
(approximates current cost) 157,694 108,316
LIFO allowance net of lower of cost
or market reserve (80,408) (53,006)
Total crude oil and refined products 77,286 55,310
--------- ---------
Merchandise inventory at FIFO
(approximates current cost) 7,606 7,943
LIFO allowance (2,807) (2,807)
Total merchandise 4,799 5,136
--------- ---------
Materials and supplies inventory at FIFO 8,811 8,749
--------- ---------
TOTAL INVENTORY $ 90,896 $ 69,195
========= =========
NOTE D--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
- ----------------------------------------------
Long-term debt consisted of the following:
March 31 December 31
2000 1999
--------- ---------
(thousands of dollars)
Unsecured 10 7/8% Senior Notes $ 124,849 $ 124,841
Purchase Money Liens 4,696 4,835
Other obligations 115 135
--------- ---------
129,660 129,811
Less current portion 625 631
--------- ---------
LONG-TERM DEBT $ 129,035 $ 129,180
========= =========
The 10 7/8% Senior Notes due 2005 (Notes) were issued under an Indenture,
as amended (Indenture), which includes certain restrictions and
limitations affecting the payment of dividends, repurchase of capital
stock and incurrence of additional debt.
The Purchase Money Liens (Liens) outstanding as of March 31, 2000
represent loans to finance land, buildings and equipment for several
service station and convenience store locations. These borrowings are
repayable over 60 to 72 months at a fixed interest rate. The Liens are
secured by assets having a net book value of $7.0 million. The remaining
principal balance is payable monthly through May 2004.
During March 1999, the Company amended the Loan and Security Agreement
(Secured Credit Facility), to provide for up to $125 million in cash
borrowings and letters of credit. The Secured Credit Facility, which
expires in December 2001, is secured by certain current assets of the
Company, and may be used for general corporate and working capital
requirements. It includes limitations on additional indebtedness and cash
dividends and requires compliance with financial covenants regarding
minimum levels of working capital and net worth. Borrowings under the
Secured Credit Facility bear interest based on the prime rate or LIBOR
based rates. Additionally, the Company pays a fee for unused commitments.
Up to $75 million of the Secured Credit Facility is subject to
availability of eligible collateral after reserves and the application of
advance rates. The remaining $50 million of availability, which is
provided by Rosemore, Inc. (Rosemore), a related party to the Company, is
not subject to the limitation of eligible collateral. As of March 31,
2000, eligible collateral, as related to the first $75 million of
availability under the Secured Credit Facility, was approximately $128.2
million. As of March 31, 2000, the Company had $14.8 million in cash
borrowings and $95.6 million in letters of credit outstanding pursuant to
the Secured Credit Facility. As of May 8, 2000, there were $1.3 million of
cash borrowings and $82.5 million of outstanding letters of credit
pursuant to the Secured Credit Facility.
The Company has obtained additional financial support from Rosemore. As
of March 31, 2000, the Company had $8.1 million in outstanding performance
guarantees from Rosemore relative to the Company's purchase of crude oil,
feedstocks and other petroleum products. As of May 8, 2000, $15.8 million
of guarantees were provided by Rosemore. The Company pays Rosemore a
commitment fee for these outstanding performance guarantees. In addition,
Rosemore has currently made
<PAGE>
available to the Company up to $13.4 million for short-term cash
borrowings at market interest rates, of which none is currently
outstanding. This availability is currently scheduled to expire May 31,
2000. Under the restrictions and limitations of the Notes, the Company is
permitted to borrow up to $13.4 million on an unsecured basis.
NOTE E--CRUDE OIL AND REFINED PRODUCT HEDGING ACTIVITIES
The net deferred gain from futures contracts (excluding forward contracts)
included in crude oil and refined product hedging strategies was
approximately $1.5 million at March 31, 2000. Included in these hedging
strategies are futures contracts maturing through September 2000. The
Company is using these contracts to defer the pricing of approximately
1.6% of its crude oil commitments for the aforementioned period.
NOTE F--CAPITAL STOCK AND CALCULATION OF NET (LOSS) 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. The average
outstanding and equivalent shares excludes 199,825 and 214,325 shares of
Performance Vested Restricted Stock (PVRS) shares registered to
participants in the 1994 Long-Term Incentive Plan (Plan) at March 31, 2000
and 1999, respectively. The PVRS shares are not considered outstanding
for earnings per share calculations until the shares are released to the
Plan participants.
The following table provides a reconciliation of the basic and diluted
earnings per share calculations:
Three Months Ended March 31
2000 1999
--------- ----------
(thousands of dollars,
except per share data)
(LOSS) APPLICABLE TO COMMON SHARES
Net (loss) $ (3,563) $ (11,830)
=========== ===========
Common shares outstanding at January 1,
2000, and 1999, respectively 10,071,256 10,053,611
Restricted shares held by the Company
at January 1, 2000 and 1999, respectively (199,825) (182,180)
---------- ----------
Weighted average number of common shares
outstanding, as adjusted, at March 31, 2000
and 1999,respectively - basic and diluted 9,871,431 9,871,431
========== ==========
EARNINGS PER SHARE:
Net (loss) basic and diluted $ (0.36) $ (1.20)
========== ==========
On February 1, 2000, the Company adopted a one-year Shareholder Rights
Plan (Plan) in which rights to purchase its preferred stock was
distributed to holders of its common stock on February 15, 2000 to ensure
that any strategic transaction undertaken by the Company will be one in
which all stockholders can receive fair and equal treatment, and to guard
against partial tender offers, open market accumulations and other abusive
tactics that might result in unequal treatment of stockholders.
Under the Plan, the Company's Board of Directors has created two new
classes of preferred stock, which are named Series A and Series B Junior
Participating Preferred stock. The Company has declared a dividend
distribution of one preferred stock purchase right on each outstanding
share of its common stock. Each right entitles stockholders to buy one
one-thousandth of a share of preferred stock at an exercise price of
$16.00, with the Company's Class A common stock receiving purchase rights
for the Series A preferred stock and the Company's Class B common stock
receiving purchase rights for the Series B preferred stock.
Generally, the rights become exercisable only if a person or group
acquires a substantial block (i.e., 15% or more) of either class of common
stock or announces a tender offer which may result in any entity becoming
the owner of a substantial block of either class. For entities currently
owning in excess of 14% of any class, however, the rights plan
"grandfathers" their current level of ownership (as indicated on such
entity's federal securities law filings) plus an additional 1% of that
class.
<PAGE>
Under the Plan, the Company's Board of Directors can pre-approve a tender
offer or other transaction which would otherwise trigger the plan. If an
entity acquires a substantial block of either class of the Company's
common stock other than pursuant to an offer or transaction which has been
pre-approved by the Board of Directors, each right then will entitle its
holder to purchase a number of the Company's common shares having a market
value at that time of twice the right's exercise price, except for the
rights held by the entity who acquired the substantial block of stock,
which will become void and will not be exercisable to purchase shares at
the bargain purchase price.
If, after an entity has acquired a substantial block of the Company's
common stock other than pursuant to an offer or transaction which has been
pre-approved by the Board of Directors, the Company is acquired in a
merger or other business combination transaction, each right (other than
the rights held by the owner of the substantial block) will entitle its
holder to purchase a number of the acquiring company's common shares
having a market value at the time of twice the right's exercise price.
The Plan permits the Company to redeem each purchase right at the option
of the Board of Directors for $.001 per right or for one one-thousandth of
a share of common stock, at any time before a person acquires a
substantial block of either class of common stock. Until the rights
become exercisable, no separate rights certificate will be issued to
stockholders. Instead, the rights will be evidenced by the certificates
for the Company's common stock. At the time the rights become exercisable,
rights certificates will be distributed to holders of Crown's common
stock. The Plan will expire on the earlier of close of business on
February 14, 2001 or upon the stockholders' acceptance of the merger with
Rosemore. See Note I for further discussion. Due to the net loss from
operations for the three months ended March 31, 2000, the issuance of the
preferred stock purchase rights has no impact on the dilutive earnings per
share amount presented in the previous table.
NOTE G--LITIGATION AND CONTINGENCIES
As previously disclosed, on January 13, 2000, the Company received a
Notice of Enforcement (NOE) from the Texas Natural Resource Conservation
Commission (TNRCC) regarding alleged state and federal air quality
violations. In a letter dated May 3, 2000 the TNRCC informed the Company
that the agency is proposing to enter an administrative order against the
Company that would assess civil penalties of $1.3 million primarily for
alleged violations of the federal New Source Performance Standards for
hydrogen sulfide and sulfur dioxide and additional violations of other air
regulations at the Pasadena refinery, as reflected in three notices of
violation or enforcement dated February 3, 1999, January 13, 2000 and
April 3, 2000. The time period covered is April 1, 1998 through December
31, 1999. The Company believes it has valid legal defenses for the
majority of the alleged violations and, in any case, the ultimate outcome
of the enforcement action, in the opinion of management, is not expected
to have a material adverse effect on the Company. Furthermore, the
Company does not believe the alleged violations in the proposed
administrative order change the Company's position with respect to the
defense of charges that may be filed by the United States Department of
Justice (DOJ) for alleged sulfur violations that have been subject to
prior TNRCC action or that are contained in the proposed administrative order.
On May 5, 2000, the DOJ proposed orally to settle a number of alleged
violations of environmental regulations (other than alleged sulfur
violations) against the Company for $920,000. The Company believes that
it either has valid defenses to the other alleged violations or that the
alleged violations are DE MINIMIS in nature and, in any case, that the
ultimate outcome of the enforcement action, in the opinion of management,
is not expected to have a material adverse effect on the Company.
The Company continues to be involved as a defendant in various matters of
litigation, some of which are for substantial amounts. There have been no
other changes in the status of litigation and contingencies as discussed
in Note I of the Notes to the Consolidated Financial Statements in the
Annual Report on Form 10-K, as amended for the year ended December 31,
1999 which, in the opinion of management, after consultation with counsel,
are expected to have a material adverse effect on the Company.
NOTE H--SEGMENT INFORMATION
The Company has two reportable segments: refinery operations and retail
marketing. The Company's refinery operations segment consists of two
high-conversion petroleum refineries and related wholesale distribution
networks. One refinery is located in Pasadena, Texas and the other
refinery is located in Tyler, Texas. The Pasadena and Tyler refining
operations sell petroleum products directly to other oil companies,
jobbers, and independent marketers. In addition, the Pasadena refining
operation sells directly into the Gulf Coast spot market as well as to an
independent network of dealer-operated retail units that sell Crown-
branded petroleum products and to the Company's own retail segment. The
Company's retail segment sells petroleum products and convenience store
merchandise directly to retail customers.
The Company evaluates performance and allocates resources based on profit
or loss from operations before income taxes, interest income or expense,
and corporate expenses. The accounting policies of the reportable
segments are the same as those described in the summary of accounting
policies described in Note A of the Notes to Consolidated Financial
Statements in the Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 1999.
Intersegment sales and transfers are recorded at market prices. Income or
loss on intersegment sales is eliminated in consolidation.
<PAGE>
The Company's reportable segments are business divisions that offer
different operating and gross margin characteristics and different
distribution methods. The reportable segments are each managed separately
due to their distinct operating characteristics.
Three Months Ended March 31, 2000:
Refinery Retail
Operations Marketing Totals
---------- --------- --------
(thousands of dollars)
Revenues from external customers $ 287,595 $ 134,531 $ 422,126
Intersegment revenues 117,064 - 117,064
Operating income (loss) 7,326 (58) 7,268
Capital expenditures 2,219 2,339 4,558
Three Months Ended March 31, 1999:
Refinery Retail
Operations Marketing Totals
---------- --------- ---------
(thousands of dollars)
Revenues from external customers $ 134,275 $ 91,552 $ 225,827
Intersegment revenues 84,422 - 84,422
Operating (loss) (9,077) (1,364) (10,441)
Capital expenditures 4,249 4,246 8,495
Sales and operating revenues reconciliation:
Three Months Ended March 31
2000 1999
-------- --------
(thousands of dollars)
Total external revenues for reportable
segments $422,126 $225,827
Intersegment revenues for reportable
segments 117,064 84,422
Other revenues 183 161
Other adjustments (825) (823)
Elimination of intersegment revenues (117,064) (84,422)
-------- --------
Sales and operating revenues $421,484 $225,165
======== ========
Other adjustments includes items that are reported as a component of Sales
and operating revenues for management reporting purposes but are reported
as a component of operating expenses in accordance with generally accepted
accounting principles.
Net (Loss) before income taxes reconciliation:
Three Months Ended March 31
2000 1999
-------- --------
(thousands of dollars)
Total operating income (loss) from
reportable segments $ 7,268 $ (10,441)
Other income 71 1,365
Unallocated amounts:
Corporate (expenses) (6,558) (5,935)
Net interest (expense) (4,057) (3,339)
-------- ---------
Net (Loss) before income taxes $ (3,276) $ (18,350)
======== =========
Capital expenditures reconciliation:
Three Months Ended March 31
2000 1999
-------- --------
(thousands of dollars)
Capital expenditures for reportable
segments $ 4,558 $ 8,495
Other capital expenditures 255 715
------- --------
Total capital expenditures $ 4,813 $ 9,210
======= ========
<PAGE>
NOTE I--SUBSEQUENT EVENT
- ------------------------
The Company engaged Credit Suisse First Boston (CSFB) during 1999 to act
as financial advisor. CSFB is providing the Company with financial advice
and assistance in evaluating strategic alternatives to maximize
stockholder value. The Company has received offers to purchase all of the
outstanding stock of the Company not owned by Rosemore, a Maryland
corporation, and Apex Oil Company, Inc. (Apex), a Missouri corporation.
Rosemore owns approximately 49% of the Company's outstanding Class A
common stock and 11% of the outstanding Class B common stock. Apex owns
approximately 15% of the Company's outstanding Class A common stock and
approximately 4% of the outstanding Class B common stock. On April 7,
2000, Rosemore increased its cash offer to $9.50 per share. The
Independent Committee of the Board of Directors, with the assistance of
CSFB and outside counsel, has unanimously recommended Rosemore's offer to
the Board of Directors. At its April 7, 2000 meeting, the Board
unanimously approved Rosemore's cash offer of $9.50 per share and the
Company entered into a binding merger agreement with Rosemore. The merger
is subject to certain conditions, including, among others, expiration of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, receipt of approval of two-thirds of all the votes
entitled to be cast on the matter by holders of the Company's Class A and
Class B common stock outstanding, voting as a single class, and the
absence of defaults under the Indenture governing the Company's 10 7/8%
senior notes. The merger will not result in a change-in-control under the
10 7/8% senior notes and therefore would not require immediate repayment
to the Noteholders. The merger is expected to be completed in the summer
of 2000.
The Company received an amended proposal dated May 1, 2000 from Apex to
acquire all of the issued and outstanding Class A and Class B common stock
held by the Company's stockholders other than Apex by merger for a price
of $10.00 per share. The amended Apex proposal is subject to Apex's
receipt of an irrevocable commitment from a lender reasonably satisfactory
to Apex to provide financing to the Company (on terms reasonably
satisfactory to Apex) in an amount sufficient to repay the Company's 10
7/8% senior notes in the event one or more of the note holders exercise
their put rights at 101% under the Indenture governing the Notes following
a change of control. The proposal is also conditioned on receiving all
necessary governmental approvals and approval from the Company's board of
directors and stockholders.
Apex has also amended its alternative proposal dated March 29, 2000 to
purchase between 3.5 and 4.5 million shares of Crown's Class A common
stock from Crown in a private placement at a price of $9.50 per share by
increasing the proposed purchase price to $10.00 per share. Apex is also
continuing to advance a stock-for-stock proposal that it made in November
1999, which it asserts would value the existing Company shares at $10.00
per share. Both of these alternative proposals are stated to include a
shortfall distribution if the stock of the merged company or Crown fails
to reach certain trading ranges, and both are conditioned on the
finalization of replacement financing for the Company's 10 7/8% senior
notes. Apex has stated that it is willing to post a letter of credit in
the amount of $30 million to secure the shortfall distribution. A two-
thirds vote for the merger by the stockholders of the Company is required
to approve a merger.
The Company's Independent Committee of the Board of Directors is currently
evaluating the amended Apex proposals.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
CONSOLIDATED RESULTS OF OPERATIONS
- ----------------------------------
Consolidated sales and operating revenues increased $196.3 million or
87.2% for the three months ended March 31, 2000 compared to the same
period of 1999. The 2000 increase was primarily attributable to a 127.0%
increase in the average sales price per gallon of petroleum products.
This increase was partially offset by a 3.3% decrease in the volume of
petroleum products sold and a 2.5% decrease in merchandise sales due
primarily to the sale in the fourth quarter of 1999 of 14 non-strategic
retail stores and to The Company's margin improvement strategy.
Merchandise sales on a same store basis increased when comparing the three
months ended March 31, 2000 with the same period in 1999. See Retail
Results of Operations below for further discussion.
Consolidated costs and operating expenses increased $181.5 million or
88.7% for the three months ended March 31, 2000 compared to the same
period of 1999. This increase was primarily due to an increase in the
costs of crude oil and purchased feedstocks compared with the prior year.
The price of West Texas Intermediate crude oil, an industry benchmark,
increased from a low of $24.18 per barrel on January 7, 2000, to a high of
$33.93 per barrel on March 7, 2000 when in the first quarter of 1999 it
increased from $12.15 per barrel at the beginning of the quarter to $16.80
per barrel by quarter end. The Company's use of the last-in, first-out
(LIFO) method of valuing its inventory was significantly affected by these
price increases, resulting in increases of the Company's costs and
operating expenses of approximately $27.4 million in 2000 and $9.1 million
in 1999. The first quarter 1999 costs and operating expenses were
partially offset by a recovery of the lower of cost or market reserve
established in 1998 due to an industry-wide decline in the market prices
of crude oil and refined products of approximately $7.1 million. The
Company's use of the LIFO method to value its inventory results in better
matching of costs to revenues by
<PAGE>
including the most recent costs of products in costs and operating
expenses. In periods of rising prices, the LIFO method may cause reported
operating income to be lower than the use of the first-in, first-out,
(FIFO) method. Conversely, in periods of falling prices the LIFO method
may cause reported operating income to be higher than the use of the FIFO
method.
Selling expenses decreased 10.5% comparing the same periods ended March
31, 2000 and 1999. The 2000 decrease is principally due to decreases in
personnel, maintenance and advertising costs related to the Company's
retail segment. A portion of the decrease is the result of 4.1% fewer
retail units in 2000 than in 1999.
Administrative expenses decreased 2.8% in 2000 compared to 1999. The
decrease in 2000 is due primarily to a decrease in salary costs as a
result of the completion of the company-wide business process
reengineering project in December 1999, which included a computer system
upgrade, which also provided year 2000 conformance of the Company's
computer systems.
Depreciation and amortization increased 9.6% in 2000 compared to 1999.
The 2000 increases were primarily attributable to the increases in the
depreciable base of the Company's computer systems as a result of the
company-wide information systems upgrade mentioned above.
Earnings Before Interest, Taxes, Depreciation, Amortization, Abandonments
of property, plant and equipment, and LIFO inventory adjustments
(EBITDAAL), which measures the Company's cash flow from operations on a
FIFO inventory basis increased $33.9 million from $3.3 million in 1999 to
$37.2 million in 2000. The increase principally reflects improved
industry margins and the Company's demonstrated ability to realize
available industry margins. The Company used this increase in EBITDAAL
primarily to fund increased working capital requirements attributable to
the rise in crude oil and refined product prices during 2000.
REFINING RESULTS OF OPERATIONS
- ------------------------------
Refining sales and operating revenues for the three months ended March 31,
2000 increased $153.3 million to $287.6 million. The increase in 2000 was
due primarily to a significant increase in selling prices of refined
petroleum products offset by a slight decrease in volumes sold.
Refining gross margin before LIFO increased $34.9 million (114.2%) from
$30.6 million in 1999 to $65.5 million in 2000. The Company's refining
gross margin per barrel of $4.39 for the quarter ended March 31, 2000 was
slightly lower than the 30-day delayed Gulf Coast 3-2-1 benchmark of $4.76
per barrel due partially to the fixed processing fee received on
approximately 35,000 barrels per day related to the Company's crude oil
based processing agreement with Statoil Marketing and Trading (US) Inc.
The Company's first quarter 1999 refining gross margin was $2.13 per
barrel, slightly lower than the 1999 first quarter 30-day delayed Gulf
Coast 3-2-1 benchmark of $2.48 per barrel. The Company's use of the LIFO
method to value its inventories had a significant impact on its refining
gross margin. The effect of LIFO, in these periods of rising prices,
decreased the Company's refining gross margin by $27.1 million in 2000 and
$9.1 million in 1999. The 1999 refinery operating income reflects the
lower of cost or market recovery of $7.1 million previously discussed.
Refining operating expenses increased $.5 million or 1.7% for the three
months ended March 31, 2000 compared to the same period ended 1999. This
increase was primarily due to higher utility expenses partially offset by
lower refinery operating costs due to reduced personnel costs and lower
maintenance costs when compared to the same period of 1999.
As a result of the Company's significant increase in refining margin,
partially offset by its increase in refining operating expenses, EBITDAAL
from refining operations improved $34.3 million to $39.8 million in 2000
from $5.5 million for the same three months ended in 1999.
RETAIL RESULTS OF OPERATIONS
- ----------------------------
Retail sales and operating revenues increased from $91.6 million for the
three months ended March 31, 1999 to $134.5 million for the same period
ended in 2000. The 2000 increase is due primarily to increases in the
retail prices of refined petroleum products offset slightly by decreases
in retail petroleum product volumes and merchandise sales. Total retail
petroleum product volumes sold decreased approximately 5.4% and total
merchandise sales decreased approximately 2.5% due primarily to the sale
of 14 non-strategic stores in late 1999. The retail petroleum product
volumes sold on a same store basis decreased 1.5% and merchandise sales on
a same store basis increased approximately 2.2% for the three months ended
March 31, 2000 compared to the same period in 1999. The decrease in
retail petroleum product volumes sold on a same store basis is primarily a
result of severe weather conditions in January 2000 and extraordinary
consumer purchases of gasoline in late December 1999, in reaction to the
threat of the year 2000 computer related concerns. The Company has not
been able to attribute any specific decline in retail gasoline volumes to
the orchestrated corporate campaign sponsored by the union. See the last
paragraph of the Liquidity and Capital Resources section of this report
for a further discussion of the campaign. Retail petroleum product
volumes on a same store basis increased by 2.6% during February and March
2000 when compared to the
<PAGE>
same months in 1999. The increase in merchandise sales on a same store
basis is primarily due to increases in the selling prices of tobacco
products, beer and wine.
The Company's retail gasoline gross margin decreased from $.085 per gallon
for the three months ended March 31, 1999 to $.081 per gallon for the same
period in 2000. The decrease in the retail gasoline gross margin per
gallon in 2000 was primarily the result of retail price increases lagging
behind the rapid run-up of wholesale gasoline prices during the quarter
when compared to the same period in 1999. The Company's merchandise gross
margin percentage increased to 31.5% for the three months ended March 31,
2000 from 30.7% for the same period ended in 1999. This increase is a
result of the Company's margin focused pricing strategy on certain high
volume products sold.
Retail operating expenses decreased 12.8% for the three months ended March
31, 2000 compared to the same period ended in 1999. This decrease is
primarily the result of the Company's sale of the 14 non-strategic stores
and also cost savings initiatives that reduced retail support related
personnel costs and as well as advertising and maintenance costs. These
decreases were partially offset by an increase in depreciation and
amortization expenses related to the completion of the Company's retail
point-of-sale (POS) system in December 1999.
First quarter retail EBITDAAL improved slightly to $2.8 million in 2000
from $1.6 million in 1999, as the reduction in cash operating expenses
offset the aforementioned decrease in retail gross margin.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operating activities (including changes in assets and
liabilities) was $2.6 million for the three months ended March 31, 2000
compared to $13.6 million for the three months ended March 31, 1999. Net
cash outflows from changes in assets and liabilities for the three months
ended March 31, 2000 consisted primarily of increases in accounts
receivable and inventories offset by smaller increases in crude oil and
other accounts payable. These changes were primarily due to the increase
in selling prices of refined products and the increase in purchase prices
of crude oil and other purchased feedstocks, respectively. Operating cash
flow before changes in assets and liabilities was $6.6 million, as non-
cash charges offset the loss for the period. The 1999 inflows consisted
primarily of net cash inflows from changes in assets and liabilities of
$9.1 million due primarily to a decrease in inventory and increases in
crude oil and refined products payable, resulting from increases in the
purchase price of crude oil and other purchased feedstocks. Additional
cash inflows from changes in assets and liabilities included the return of
collateral deposits associated with the Company's financing facilities.
These working capital inflows were partially offset by increases in
accounts receivable, increases in prepaid insurance and decreases in
federal excise tax accruals. Additionally, the 1999 inflows include $4.5
million provided by operations before changes in assets and liabilities.
Net cash outflows from investment activities were $7.0 million for the
three months ended March 31, 2000 compared to a net outflow of $13.9
million for the same 1999 period. The 2000 outflows consisted primarily
of capital expenditures of $4.8 million (which includes $2.2 million for
refinery operations, $2.3 million relating to the marketing area and $.3
million for corporate and other areas) and deferred turnaround maintenance
expenditures of $3.3 million offset by $.9 million in proceeds from the
sales of property, plant and equipment. The 1999 outflows consisted
primarily of capital expenditures of $9.2 million (which includes $4.2
million for refinery operations, $4.2 million relating to the marketing
area and $.8 million for corporate and other areas). Additionally, there
were $4.6 million of deferred refinery turnaround expenditures and $.6
million of other charges to deferred assets.
Net cash provided by financing activities was $14.6 million for the three
months ended March 31, 2000 compared to $9.1 million for the three months
ended March 31, 1999. These cash inflows consisted of net proceeds
received from borrowings from the Company's Secured Credit Facility.
The ratio of current assets to current liabilities at March 31, 2000 was
.94:1 compared to .97:1 at March 31, 1999 and .93:1 at December 31, 1999.
If FIFO values had been used for all inventories, assuming an incremental
effective income tax rate of 38.5%, the ratio of current assets to current
liabilities would have been 1.24:1 at March 31, 2000, 1.04:1 at March 31,
1999 and 1.20:1 at December 31, 1999.
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 significant capital investments will continue to be
required over the next year 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 of approximately
$7.1 million as of March 31, 2000 to cover the estimated costs of
compliance with environmental regulations that are not anticipated to be
of a capital nature. The $7.1 million liability includes accruals for
issues extending beyond the year 2000.
<PAGE>
Environmental liabilities are subject to considerable uncertainties that
affect the Company's ability to estimate the ultimate cost of its
remediation efforts. These uncertainties include the exact nature and
extent of the contamination at each site, the extent of required clean-up
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 environmental matters that would be reasonably expected to have a
material adverse effect on the Company.
During 2000, the Company estimates environmental expenditures at the
Pasadena and Tyler refineries, of at least $2.5 million and $0.4 million,
respectively. Of these amounts, it is anticipated that $0.8 million for
Pasadena and $0.1 million for Tyler will be of a capital nature, while
$1.7 million and $0.3 million, respectively, has been budgeted for non-
capital remediation efforts. At the Company's marketing facilities,
environmental expenditures relating to previously accrued non-capital
compliance efforts are planned for 2000 totaling approximately $3.3
million.
The Company's principal purchases (crude oil and convenience store
merchandise) are transacted under open lines of credit with its major
suppliers, through credit enhancements pursuant to the Secured Credit
Facility, or through financial performance guarantees provided by
Rosemore. The Company maintains its Secured Credit Facility to finance
its working capital requirements and supplement internally generated
sources of cash for corporate requirements.
During March 1999, the Company amended the Secured Credit Facility, to
provide for up to $125 million in cash borrowings and letters of credit.
The Secured Credit Facility, which expires in December 2001, is secured by
certain current assets of the Company, and may be used for general
corporate and working capital requirements. It includes limitations on
additional indebtedness and cash dividends and requires compliance with
financial covenants regarding minimum levels of working capital and net
worth. Borrowings under the Secured Credit Facility bear interest based
on the prime rate or LIBOR based rates. Additionally, the Company pays a
fee for unused commitments.
Up to $75 million of the Secured Credit Facility is subject to
availability of eligible collateral after reserves and the application of
advance rates. The remaining $50 million of availability, which is
provided by Rosemore, Inc. (Rosemore), a related party to the Company, is
not subject to the limitation of eligible collateral. As of March 31,
2000, eligible collateral, as related to the first $75 million of
availability under the Secured Credit Facility, was approximately $128.2
million. As of March 31, 2000, the Company had $14.8 million in cash
borrowings and $95.6 million in letters of credit of outstanding pursuant
to the Secured Credit Facility. As of May 8, 2000, there were $1.3
million of cash borrowings and $82.5 million of outstanding letters of
credit pursuant to the Secured Credit Facility.
The Company has obtained additional financial support from Rosemore. As
of March 31, 2000, the Company had $8.1 million in outstanding performance
guarantees from Rosemore relative to the Company's purchase of crude oil,
feedstocks and other petroleum products. As of May 8, 2000, $15.8 million
of guarantees were provided by Rosemore. The Company pays Rosemore a
commitment fee for these outstanding performance guarantees. In addition,
Rosemore has currently made available to the Company up to $13.4 million
for short-term cash borrowings at market interest rates, of which none is
currently outstanding. This availability is currently scheduled to expire
May 31, 2000. Under the restrictions and limitations of the Notes, the
Company is permitted to borrow up to $13.4 million on an unsecured basis.
At the Company's option, the 10 7/8% Senior Notes (Notes) may currently be
redeemed at 105.42% of the principal amount and thereafter at an annually
declining premium over the principal amount until February 1, 2003, when
no premium is required. The Notes were issued under an Indenture, as
amended (Indenture), which includes certain restrictions and limitations
affecting the payment of dividends, repurchase of capital stock and
incurrence of additional debt. The Indenture substantially restricts the
Company's ability to borrow outside of the Secured Credit Facility. The
Notes have no sinking fund requirements.
The Purchase Money Liens outstanding as of March 31, 2000 represent loans
to finance land, buildings and equipment for several service station and
convenience store locations. These borrowings are repayable over 60 to 72
months at a fixed interest rate. The Liens are secured by assets having a
net book value of $7.0 million. The remaining principal balance is
payable monthly through May 2004.
The Company's management is involved in a continual process of evaluating
growth opportunities in its business segments as well as its capital
resource alternatives. Total capital expenditures and deferred turnaround
costs in 2000 are projected to approximate $34 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, but there can be no assurance, that
cash provided from its operating activities, together with other available
sources of liquidity, including the Secured Credit Facility, or a
successor agreement, will be sufficient over the next several quarters to
make required payments of principal and interest on its debt, permit
anticipated capital expenditures and fund the Company's working capital
requirements. The Secured Credit Facility expires on December 10, 2001
but may be extended for additional one-year periods upon agreement between
the Company and the agent of the facility. Any major acquisition or other
substantial expenditure would likely require a combination of additional
debt and equity.
<PAGE>
The Company places its temporary cash investments in high credit quality
financial instruments, which comply with the requirements contained in the
Company's financing agreements. These securities mature within 90 days
and, therefore, bear minimal interest rate risk. The Company has not
experienced any losses on these investments.
The Company faces intense competition in all of the business areas in
which it operates. Many of the Company's competitors are substantially
larger and, therefore, the Company's earnings can be affected by the
marketing and pricing policies of its competitors, as well as changes in
raw material costs.
Merchandise sales and operating revenues from the Company's convenience
stores are seasonal in nature, generally producing higher sales and
earnings in the summer months than at other times of the year. Gasoline
sales, both at the Company's multi-pump stations and convenience stores,
are also somewhat seasonal in nature and, therefore, related revenues may
vary during the year. This 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 in excess of $2 million.
The Company has disclosed in Item 3. Legal Proceedings on page 6 and in
Note I of the Notes to Consolidated Financial Statements on page 35 of the
Annual Report on Form 10-K, as amended for the year ended December 31,
1999, various contingencies which involve litigation and environmental
liabilities. 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, after consultation with
counsel, in the opinion of management, the ultimate resolution of any of
these contingencies is not expected to have a material adverse effect on
the Company. Additionally, as discussed in Item 3. Legal Proceedings on
page 6 of the Annual Report on Form 10-K, as amended for the year ended
December 31, 1999, the Company's collective bargaining agreement at its
Pasadena refinery expired on February 1, 1996. Following a number of
incidents apparently intended to disrupt normal operations and also as a
result of its unsatisfactory status of the negotiations, on February 5,
1996, the Company invoked a lock-out of employees in the collective
bargaining unit at the Pasadena facility. As previously disclosed, since
that time, PACE, the union to which the collective bargaining unit belongs
has waged an orchestrated corporate campaign including sponsoring a
boycott of the Company's retail facilities and supporting various lawsuits
against the Company. The Company has been operating the Pasadena refinery
since the lock-out and intends to continue to do so during the negotiation
period with the collective bargaining unit. Although the impact of the
corporate campaign on the Company is difficult to measure, management does
not believe that the corporate campaign has had a material adverse impact
on the Company's operations. However, it is possible that the corporate
campaign could have a material adverse impact on the Company's future
results of operations. The lock-out and negotiations on a new contract
continue.
EFFECTS OF INFLATION AND CHANGING PRICES
- ----------------------------------------
The Company's financial statements were prepared using the historical cost
method of accounting and, as a result, do not reflect changes in the
purchasing power of the dollar. 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 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 and financial performance capability.
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 supply and demand for crude oil
and refined products, which is largely driven by the condition of local
and worldwide economies and politics, 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.
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 fluctuate significantly from
time to time. Crude oil and refined products are commodities whose price
levels are determined by market forces beyond the control of the
<PAGE>
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 time lag 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 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 profitability and liquidity of 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 including acceptable financial covenants.
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 oil
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. 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 presents the current market value of the Company's
outstanding derivative commodity instruments held at March 31, 2000 based
on crude oil and refined products market prices at that date and the
estimated impact on future earnings before taxes based on the sensitivity
of those instruments to a 10% increase or decrease in market prices.
Anticipated Gain (Loss)
--------------------------------
Current Value 10% Increase in 10% Decrease in
March 31,2000 Market Prices Market Prices
---------------- --------------- ---------------
(in thousands)
Commodity futures $ 1,030 $(1,794) $ 1,794
Commodity forwards (10,909) 6,913 (6,913)
--------- ------- ---------
Total $ (9,879) $ 5,119 $ (5,119)
========= ======= =========
Cash borrowings under the Secured Credit Facility bear interest based on
the prime rate or LIBOR based rates. Changes in these rates could
significantly impact the level of earnings in future periods.
The Company engaged Credit Suisse First Boston (CSFB) during 1999 to act
as financial advisor. CSFB is providing the Company with financial advice
and assistance in evaluating strategic alternatives to maximize
stockholder value. The Company has received offers to purchase all of the
outstanding stock of the Company not owned by Rosemore, a Maryland
corporation, and Apex Oil Company, Inc. (Apex), a Missouri corporation.
Rosemore owns approximately 49% of the Company's outstanding Class A
common stock and 11% of the outstanding Class B common stock. Apex owns
approximately 15% of the Company's outstanding Class A common stock and
approximately 4% of the outstanding Class B common stock. On April 7,
2000, Rosemore increased its cash offer to $9.50 per share. The
Independent Committee of the Board of Directors, with the assistance of
CSFB and outside counsel, has unanimously recommended Rosemore's offer to
the Board of Directors. At its April 7, 2000 meeting, the Board
unanimously approved Rosemore's cash offer of $9.50 per share and the
Company entered into a binding merger agreement with Rosemore. The merger
is subject to certain conditions, including, among others, expiration of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, receipt of approval of two-thirds of all the votes
entitled to be cast on the matter by holders of the Company's Class A and
Class B common stock outstanding, voting as a single class, and the
absence of defaults under the Indenture governing the Company's 10 7/8%
senior notes. The merger will not result in a change-in-control under the
10 7/8% senior notes and
<PAGE>
therefore would not require immediate repayment to the Noteholders. The
merger is expected to be completed in the summer of 2000.
The Company received an amended proposal dated May 1, 2000 from Apex to
acquire all of the issued and outstanding Class A and Class B common stock
held by the Company's stockholders other than Apex by merger for a price
of $10.00 per share. The amended Apex proposal is subject to Apex's
receipt of an irrevocable commitment from a lender reasonably satisfactory
to Apex to provide financing to the Company (on terms reasonably
satisfactory to Apex) in an amount sufficient to repay the Company's 10
7/8% senior notes in the event one or more of the note holders exercise
their put rights at 101% under the Indenture governing the Notes following
a change of control. The proposal is also conditioned on receiving all
necessary governmental approvals and approval from the Company's board of
directors and stockholders.
Apex has also amended its alternative proposal dated March 29, 2000 to
purchase between 3.5 and 4.5 million shares of the Company's Class A
common stock from the Company in a private placement at a price of $9.50
per share by increasing the proposed purchase price to $10.00 per share.
Apex is also continuing to advance a stock-for-stock proposal that it made
in November 1999, which it asserts would value the existing Company shares
at $10.00 per share. Both of these alternative proposals are stated to
include a shortfall distribution if the stock of the merged company or the
Company fails to reach certain trading ranges, and both are conditioned on
the finalization of replacement financing for the Company's 10 7/8% senior
notes. Apex has stated that it is willing to post a letter of credit in
the amount of $30 million to secure the shortfall distribution. A two-
thirds vote for the merger by the stockholders of the Company is required
to approve a merger.
The Company's Independent Committee of the Board of Directors is currently
evaluating the amended Apex proposals.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company's market risk disclosures relating to outstanding derivative
commodity instruments are discussed in Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations (MD&A) on
page 15 of this report. The Company's market risk disclosures relating to
outstanding cash borrowings under the Secured Credit Facility are also
discussed in MD&A on page 15 of this report.
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings
- --------------------------
As previously disclosed, on January 13, 2000, the Company received a
Notice of Enforcement (NOE) from the Texas Natural Resource Conservation
Commission (TNRCC) regarding alleged state and federal air quality
violations. In a letter dated May 3, 2000 the TNRCC informed the Company
that the agency is proposing to enter an administrative order against the
Company that would assess civil penalties of $1.3 million primarily for
alleged violations of the federal New Source Performance Standards for
hydrogen sulfide and sulfur dioxide and additional violations of other air
regulations at the Pasadena refinery, as reflected in three notices of
violation or enforcement dated February 3, 1999, January 13, 2000 and
April 3, 2000. The time period covered is April 1, 1998 through
December 31, 1999. The Company believes it has valid legal defenses for
the majority of the alleged violations and, in any case, the ultimate
outcome of the enforcement action, in the opinion of management, is not
expected to have a material adverse effect on the Company. Furthermore,
the Company does not believe the alleged violations in the proposed
administrative order change the Company's position with respect to the
defense of charges that may be filed by the United States Department of
Justice (DOJ) for alleged sulfur violations that have been subject to
prior TNRCC action or that are contained in the proposed administrative order.
On May 5, 2000, the DOJ proposed orally to settle a number of alleged
violations of environmental regulations (other than alleged sulfur
violations) against the Company for $920,000. The Company believes that
it either has valid defenses to the other alleged violations or that the
alleged violations are DE MINIMIS in nature and, in any case, that the
ultimate outcome of the enforcement action, in the opinion of management,
is not expected to have a material adverse effect on the Company.
The Summary Judgement in the Clean Air Act citizens' suit, TEXANS UNITED
FOR A SAFE ECONOMY EDUCATION FUND, ET AL. VS. CROWN CENTRAL PETROLEUM
CORPORATION, H-97-2427 (S.D. Tex.) was reversed and remanded back to the
District Court by the United States Court of Appeals for the Fifth Circuit
on April 6, 2000. The Company will continue to vigorously defend the case
on its merits.
The Company has reached an agreement in principle to settle the CRYE ET
AL. VS. REICHHOLD CHEMICALS, INC., ET AL., case #97-24399 (334th Judicial
District, Harris Co., Tex.) for an amount which will not have a
material adverse effect on the Company.
<PAGE>
The Company has been advised by the plaintiff's counsel in the MAIDEN V.
CROWN CENTRAL PETROLEUM CORPORATION, ET AL., case #24-C-00-001238 (Circuit
Court for Baltimore City, Maryland) that an Amended Complaint will be
filed in place of the original Complaint. There have been no proceedings
in the case thus far.
There have been no other material changes in the status of legal
proceedings as reported in Item 3 of the Company's Annual Report on Form
10-K, as amended, for the year ended December 31, 1999.
The Company is involved in various matters of litigation, the ultimate
outcome of which, in the opinion of management, is not expected to have a
material adverse effect on the Company.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
3 (i) - Articles Supplementary setting forth the designation,
preferences and rights of the Series A Junior
Participating Preferred Stock and the Series B Junior
Participating Preferred Stock of Crown Central
Petroleum Corporation dated February 1, 2000,
previously filed as Exhibit 1 to the Form 8-A filed
by the Company on February 3, 2000 registering the
Series A Rights and the Series B Rights under the
Exchange Act and incorporated herein by reference, as
amended by Amendment No. 1 on Form 8-A/A filed by
the Company with the Commission on April 11, 2000 and
incorporated herein by reference and Amendment No. 2
on Form 8-A/A filed by the Company with the Commission
on April 19, 2000 and incorporated herein by reference.
3 (ii) - Bylaws of Crown Central Petroleum Corporation, as amended
and restated on April 27, 2000
4 - First Amendment to Rights Agreement dated as of April 10,
2000 between the Company and First Union National Bank,
as Rights Agent, previously filed as Exhibit 4 to the
Current Report on Form 8-K filed with the Commission on
April 10, 2000 and incorporated herein by reference
20 - Interim Report to Stockholders for the three months ended
March 31, 2000
27 (a) - Financial Data Schedule for the three months ended
March 31, 2000
27 (b) - Financial Data Schedule for the three months ended
March 31, 1999 - revised
(b) Reports on Form 8-K:
Reports filed on Form 8-K with the Securities and Exchange Commission from
January 1, 2000 to May 10, 2000 are as follows:
Form 8-K dated February 3, 2000
Item 5. Other Events -- Adoption of Shareholders' Rights Plan
Item 7. Financial Statements and Exhibits - Exhibit No. 3(i)
Articles Supplementary setting forth the designation,
preferences and rights of the Series A and Series B
Junior Participating Preferred stock of Crown Central
Petroleum Corporation dated February 1, 2000; Exhibit
No. 4 Rights Agreement dated as of February 1, 2000;
and Exhibit No. 99 Press Release relating to adoption
of Shareholders' Rights Plan.
Form 8-K dated March 7, 2000
Item 5. Other Events - Proposal Received from Rosemore, Inc.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Proposal received from Rosemore and Exhibit No. 99.2
Press Release relating to the Rosemore proposal.
Form 8-K dated March 10, 2000
Item 5. Other Events - Proposal Received from Apex Oil Company,
Inc.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Proposal received from Apex and Exhibit No. 99.2 Press
Release relating to the Apex proposal.
Form 8-K dated March 13, 2000
Item 5. Other Events - Rosemore's Extension of the expiration
date on its March 6, 2000 proposal.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Proposal received from Rosemore and Exhibit No. 99.2
Press Release relating to the extension of the Rosemore
proposal.
Form 8-K dated March 17, 2000
Item 5. Other Events - Extension of the expiration dates of the,
Apex Oil Company and Rosemore proposals.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Press Release relating to the extension of the Apex
proposal and Exhibit No. 99.2 Press Release relating to
the extension of the Rosemore proposal.
<PAGE>
Form 8-K dated March 31, 2000
Item 5. Other Events - Amended Proposals received by Rosemore,
Inc. and Apex Oil Company.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Proposal letter received from Rosemore, Inc., Exhibit
No. 99.2 Letter from Apex Oil Company, Inc. regarding
certain conditions to proposal set forth in letter of
March 9, 2000 and advancing stock for stock and private
placement proposals. Exhibit No. 99.3 Press Release
regarding amended proposals.
Form 8-K dated April 3, 2000
Item 5. Other Events - Amended Proposal Received from Rosemore,
Inc.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Press Release relating to the Rosemore's amended
proposal.
Form 8-K dated April 10, 2000
Item 5. Other Events - Crown entered into a definitive merger
agreement and plan of action with Rosemore, Inc. dated
April 7, 2000.
Item 7. Financial Statements and Exhibits - Exhibit No. 2 -
Agreement and Plan of Merger, Exhibit No. 4 - First
Amendment to Rights Agreement and Exhibit No. 99.1 Press
Release relating to the Company's definitive merger
agreement and plan of action with Rosemore, Inc.
Form 8-K dated May 2, 2000
Item 5. Other Events - Amended Proposals Received from Apex Oil
Company, Inc.
Item 7. Financial Statements and Exhibits - Exhibit No. 99.1
Letter regarding amended proposals received from Apex Oil
Company and Exhibit No. 99.2 Press Release relating to
the amended proposals.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q for the quarter
ended March 31, 2000 to be signed on its behalf by the undersigned
thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
/s/--Jan L. Ries
-----------------
Jan L. Ries
Controller
Chief Accounting Officer
and Duly Authorized Officer
Date: May 11, 2000
EXHIBIT 3 (ii)
CROWN CENTRAL PETROLEUM CORPORATION
BYLAWS
Adopted February 29, 1996
Amended July 30, 1998
Amended April 7, 2000
Amended April 27, 2000
<PAGE>
Table of Contents
ARTICLE I
STOCKHOLDERS
Section I.1 Meetings of Stockholders 1
Section I.2 Annual Meeting 1
Section I.3 Special Meeting Called by Corporation 2
Section I.4 Special Meeting Called by Stockholders 2
Section I.5 Record Date 3
Section I.6 Quorum 3
Section I.7 Proxies 4
Section I.8 Ballot Vote 4
Section I.9 Inspection of Books 4
ARTICLE II
STOCK AND DIVIDENDS
Section II.1 Certificates of Stock 4
Section II.2 Transfers of Stock 4
Section II.3 Registered Stockholders 4
Section II.4 Lost Certificates 4
Section II.5 Dividends 5
Section II.6 Stock Not Subject to the Control Share Act 5
ARTICLE III
DIRECTORS
Section III.1 Board of Directors 5
Section III.2 Number of Directors 5
Section III.3 Eligibility; Nomination Procedures 6
Section III.4 Vacancies 6
Section III.5 Place and Time of Meeting 7
Section III.6 Annual Meeting 7
Section III.7 Calling of Meeting 7
Section III.8 Notice of Meeting. 7
Section III.9 Quorum 7
Section III.10 Compensation of Directors 7
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section IV.1 Executive Committee 8
Section IV.2 Other Committees 8
Section IV.3 Procedures Applicable to Committees 8
<PAGE>
ARTICLE V
OFFICERS
Section V.1 Appointment and Removal of Officers 8
Section V.2 Chairman of the Board 9
Section V.3 Vice Chairman of the Board 9
Section V.4 President 9
Section V.5 Vice Presidents 9
Section V.6 Secretary 10
Section V.7 Treasurer 10
Section V.8 Controller 10
Section V.9 Assistant Officers 11
Section V.10 Vacancies 11
Section V.11 Duties of Officers May Be Delegated 11
ARTICLE VI
INDEMNITY OF DIRECTORS AND OFFICERS
Section VI.1 Indemnity 11
Section VI.2 Advancement of Expenses 11
Section VI.3 Services in Other Capacities 12
Section VI.4 Rights not Exclusive 12
ARTICLE VII
CERTAIN ADMINISTRATIVE MATTERS
Section VII.1 Checks 12
Section VII.2 Fiscal Year 12
Section VII.3 Annual Statements 12
Section VII.4 Amendment to Bylaws 13
Section VII.5 Offices 13
Section VII.6 Seal 13
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
BYLAWS
ARTICLE I
STOCKHOLDERS
SECTION I.1 MEETINGS OF STOCKHOLDERS All meetings of the
stockholders shall be at the office of the Corporation in Baltimore,
Maryland, or at such other place within the United States as the Board of
Directors may designate.
SECTION I.2 ANNUAL MEETING
(a) The annual meeting of stockholders shall be held at two o'clock
p.m. on a business day during the thirty (30) day period commencing on the
fourth Thursday of April; PROVIDED, HOWEVER, that for the year 2000, the
annual meeting of stockholders shall be held at two o'clock p.m. on a
business day during the thirty (30) day period commencing on the last
Thursday of September. At each annual meeting of stockholders, only such
business shall be conducted as is proper to consider and has been brought
before the meeting (i) pursuant to the Corporation's notice of the
meeting, (ii) by or at the direction of the Board of Directors, or (iii)
by a stockholder who is a stockholder of record of a class of shares
entitled to vote on the business such stockholder is proposing both at the
time of the giving of the stockholder's notice hereinafter described in
this Section 1.2 and on the record date for such annual meeting, and who
complies with the notice procedures set forth in this Section 1.2.
Written notice of each annual meeting shall be given to each stockholder
by leaving the same with the stockholder, or at the stockholder's
residence or usual place of business, or by mailing it postage prepaid and
addressed to the stockholder at his or her address as it appears upon the
books of the Corporation, at least ten days prior to the meeting.
(b) In order to bring before an annual meeting of stockholders any
business which may properly be considered, a stockholder who meets the
requirements set forth in the preceding paragraph must give the
Corporation timely written notice which complies with Section 1.2(c) of
these bylaws. To be timely, a stockholder's notice must be given, by
certified United States mail, with postage thereon prepaid and with return
receipt requested, addressed to the Secretary at the principal office of
the Corporation. Any such notice must be received at the Corporation's
principal office not less than 120 calendar days in advance of the
anniversary of the date on which the Corporation's proxy statement was
released to its stockholders in connection with the previous year's annual
meeting of stockholders, unless the date of the meeting to which such
notice relates has been changed by more than 30 days from the date
contemplated at the time of the previous year's proxy statement, in which
case any such notice must be received not less than 60 days before the
date established for the meeting.
(c) Each such stockholder's notice shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i)
the name and address, as they appear on the Corporation's stock transfer
books, of the stockholder proposing business; (ii) the class and number of
shares of stock of the Corporation beneficially owned by such stockholder;
(iii) a
<PAGE>
representation that such stockholder is a stockholder of record at the
time of the giving of the notice and intends to appear in person or by
proxy at the meeting to present the business specified in the notice; (iv)
a brief description of the business desired to be brought before the
meeting, including the complete text of any resolutions to be presented
and the reasons for wanting to conduct such business; and (v) any interest
which the stockholder may have in such business.
(d) The Secretary or Assistant Secretary shall deliver each
stockholder's notice that has been timely received to the Chairman and to
the President for review.
(e) Notwithstanding the foregoing provisions of this Section 1.2, a
stockholder seeking to have a proposal included in the Corporation's proxy
statement for an annual meeting of stockholders shall comply with the
requirements of Regulation 14A under the Securities Exchange Act of 1934,
as amended from time to time, or with any successor regulation.
SECTION I.3 SPECIAL MEETING CALLED BY CORPORATION At any time in
the interval between regular meetings, special meetings of the
stockholders may be called by the Chairman of the Board, the Vice Chairman
of the Board, the President, or by a majority of the Board of Directors,
stating the place, day, and hour of such special meeting, and the business
proposed to be transacted thereat. Such notice shall be given to each
stockholder entitled to vote thereat by leaving the same with the
stockholder, or at the stockholder's residence or usual place of business,
or by mailing it postage prepaid and addressed to the stockholder at his
or her address as it appears upon the books of the Corporation. No
business shall be transacted at such meetings except for the business set
forth in the notice.
SECTION I.4 SPECIAL MEETING CALLED BY STOCKHOLDERS
(a) A special meeting may also be called by stockholders entitled
to cast twenty-five percent (25%) of all votes entitled to be cast at the
meeting, upon the request in writing signed by such stockholders and
delivered to the Chairman of the Board, the Vice Chairman of the Board,
the President, or the Secretary. Such request shall set forth: (i) the
names and addresses, as they appear on the Corporation's stock transfer
books, of the stockholders making the request; (ii) the class and number
of shares of stock of the Corporation beneficially owned by such
stockholders; (iii) a representation that such stockholders are
stockholders of record at the record date for determining whether the
requisite number of stockholders have signed and delivered the written
request demanding a special meeting of stockholders and a representation
as to the date on which the first such stockholder signed such request;
(iv) a representation that each such stockholder intends to appear in
person or by proxy at the meeting to present the business specified in the
notice; (v) as to each matter or business the requesting stockholders
propose to bring before the special meeting, a brief description of the
matter or business including the complete text of any resolutions to be
presented and the reasons for wanting to conduct such business; and (iv)
any interest which any of the requesting stockholders may have in such
business.
(b) The record date for determining whether the requisite number of
stockholders have signed and delivered the written request demanding a
special meeting of stockholders is the date the first such stockholder
signs such request.
<PAGE>
(c) A special meeting may not be called to consider any matter
which is substantially the same as a matter voted on at any special
meeting of the stockholders held during the preceding twelve (12) months,
unless the meeting is requested by stockholders entitled to cast a
majority of all of the votes entitled to be cast at the meeting. The
twelve month period shall be determined from the date of the previous
special meeting to the date of the stockholder request.
(d) The Secretary or Assistant Secretary shall inform the
stockholders who make the request of the reasonably estimated cost of
preparing and mailing a notice of the meeting, and only upon payment of
these costs to the Corporation, notify each stockholder entitled to notice
of the meeting. If the officer of the Corporation to whom such request in
writing shall have been delivered pursuant to Section 1.4(a) shall fail to
issue a call for such meeting within ten (10) business days after payment
to the Corporation of the reasonably estimated cost of preparing and
mailing a notice of the meeting, then the stockholders who made the
request may do so by giving fifteen (15) business days' notice of the
time, place and object of the meeting by advertisement inserted in a daily
newspaper of general circulation in the City of Baltimore, Maryland.
(e) Only business within the purpose or purposes described in the
notice for a special meeting of stockholders may be conducted at the
meeting.
SECTION I.4 RECORD DATE
(a) The Board of Directors shall fix, in advance, a record date to
make a determination of stockholders for an annual meeting, or for any
special meeting, such date to be not more than ninety (90) nor less than
ten (10) days before the meeting or action requiring a determination of
stockholders. If no such record date is set the record date shall be the
close of business on the day before the date on which the first notice is
given.
(b) When a determination of stockholders entitled to notice of or
to vote at any meeting of stockholders has been made, such determination
shall be effective for any adjournment of the meeting unless the Board of
Directors fixes a new record date, which it shall do if the meeting is
adjourned to a date more than ninety (90) days after the date fixed for
the original meeting.
SECTION I.6 QUORUM. The presence in person or by proxy of
stockholders entitled to cast a majority of all votes entitled to be cast
at the meeting shall be requisite and shall constitute a quorum for the
transaction of business at all meetings of the stockholders except as
otherwise provided by law or by the charter. If at any annual or special
meeting of stockholders a quorum shall fail to attend, a majority in
interest attending in person or by proxy shall have power to adjourn the
meeting from time to time without notice other than announcement at the
meeting until the requisite amount of voting stock shall be present. At
any such adjourned meeting, at which the requisite amount of voting stock
shall be present in person or by proxy, any business may be transacted
which might have been transacted at the meeting originally called, had the
same been held at the time so called.
SECTION I.7 PROXIES. At any meeting stockholders may vote either
in person or by proxy. Such proxy shall be in writing and dated, but no
proxy which is dated more than three (3)
<PAGE>
months before the meeting at which it is offered shall be accepted unless
such proxy shall, on its face, name a longer period for which it is to
remain in force.
SECTION I.8 VOTE BY BALLOT The vote for Directors, and, upon demand
of any stockholder, the vote upon any question before the meeting, shall
be by ballot.
SECTION I.9 INSPECTION OF BOOKS Except as otherwise provided by
statute the Board of Directors shall determine from time to time whether,
and if allowed, when and under what conditions and regulations the
accounts and books of the Corporation or any of them shall be open to
inspection of the stockholders, and the stockholders' rights in this
respect are and shall be restricted and limited accordingly.
ARTICLE II
STOCK AND DIVIDENDS
SECTION II.1 CERTIFICATES OF STOCK Each stockholder shall be
entitled to a certificate of stock of the Corporation which shall be
signed by the Chairman of the Board, President or a Vice President and by
the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer of the Corporation, and sealed with its seal; which shall
exhibit the holder's name and certify the number of shares owned by the
stockholder. A certificate shall be deemed to be so signed and sealed
whether the signatures be manual or facsimile signatures and whether the
seal be a facsimile seal or any other form of seal. Each certificate
shall be counter-signed by the transfer agent and registered by the
Registrar duly appointed by the Board of Directors of the Corporation, the
Board of Directors being hereby given the power and authority to appoint
one or more Transfer Agents and one or more Registrars.
SECTION II.2 TRANSFERS OF STOCK Transfers of stock shall be made
on the books of the Corporation only by the person named in the
certificate, or by his or her attorney, lawfully constituted in writing,
upon surrender and cancellation of certificates for a like number of
share.
SECTION II.3 REGISTERED STOCKHOLDERS The Corporation shall be
entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends and to vote as such
owner, and for any other purpose, and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any
other person, whether or not it shall have express or other notice
thereof, save as expressly provided for by the laws of Maryland.
SECTION II.4 LOST CERTIFICATES Any person claiming a certificate
of stock to be lost, stolen, destroyed, or mutilated shall make an
affidavit or affirmation to that fact and advertise the same in such
manner as the Board of Directors may require, and shall, if the Directors
so require, give the Corporation a bond of indemnity in form and with one
or more sureties satisfactory to the Board in at least double the value of
the stock represented by said certificate, whereupon a new certificate may
be issued of the same tenor and for the same number of shares as the one
alleged to be lost, stolen, destroyed or mutilated.
SECTION II.5 DIVIDENDS Dividends upon the capital stock of the
Corporation when earned may be declared by the Board of Directors at any
regular or special meeting. The Board of Directors shall have power from
time to time to fix and determine and to vary the amount of
<PAGE>
working capital of the Corporation, and to direct and determine the use
and disposition of any surplus or net profits; and the amount of the
surplus and the net profits of the Corporation to be reserved before the
payment of any dividend shall rest wholly in the discretion of the Board
of Directors.
SECTION II.6 STOCK NOT SUBJECT TO THE CONTROL SHARE ACT. Any
stock of the Corporation acquired by any of the following (each a
"Rosenberg Stockholder"):
(a) the lineal descendants of Ruth Blaustein Rosenberg;
(b) their respective spouses or children, including stepchildren and
adopted children;
(c) any trust for the benefit of any of the foregoing individuals;
(d) any fiduciary acting for the benefit of any of the foregoing
individuals in the event of their incompetence or acting for
their estate in the event of their death; or
(e) any corporation, partnership or unincorporated association or
other entity or affiliate controlled by any of the foregoing
individuals, trusts or fiduciaries;
shall not be subject to the Control Shares Act of the Maryland General
Corporation Law, Section 3-701-709 of the Corporations and Associations
Article of the Annotated Code of Maryland (the "Control Shares Act"),
and in the event of the disposition by any Rosenberg Stockholder of any
stock of this Corporation to a person, corporation, partnership,
unincorporated association or other entity that is not a Rosenberg
Stockholder (a "Non-Rosenberg Purchaser") that acquisition of stock of
this Corporation by the Non-Rosenberg Purchaser shall not be subject
to the Control Shares Act.
ARTICLE III
DIRECTORS
SECTION III.1 BOARD OF DIRECTORS The business and affairs of
this Corporation shall be managed under the direction of the Board of
Directors, and all of the powers of the Corporation, except such as are by
law, or by the charter, or by these bylaws conferred upon or reserved to
the stockholders may be exercised by the Board of Directors.
SECTION III.2 NUMBER OF DIRECTORS The Board of Directors shall
consist of ten (10) persons which number from time to time may be
increased to not greater than twenty or decreased to not less than three
by vote of a majority of the entire Board of Directors. Each Director
shall hold office until his or her death, resignation, or removal or until
his or her successor is elected and qualified.
SECTION III.3 ELIGIBILITY; NOMINATION PROCEDURES
(a) No person shall be eligible for election as a Director at a
meeting of stockholders unless nominated (i) by the Board of Directors or
(ii) by a stockholder who is a stockholder of record of a class of shares
entitled to vote for the election of Directors, both at the time of the
giving of the stockholder's notice described in this Section 3.3 and on
the record date for the meeting at which Directors will be elected, and
who complies with the notice procedures set forth in this Section 3.3.
<PAGE>
(b) In order to nominate any persons, a stockholder who meets the
requirements set forth in the preceding paragraph must give the
Corporation timely written notice. To be timely, a stockholder's notice
must be given either by personal delivery to the Secretary at the
principal office of the Corporation or by first class United States mail,
with postage thereon prepaid, addressed to the Secretary at the principal
office of the Corporation. Any such notice must be received, in the case
of an annual meeting of stockholders, on or after January 1st and before
February 1st of the year in which the meeting will be held if the meeting
is to be an annual meeting held within the period specified for the annual
meeting by Section 1.2, unless the annual meeting has not been held within
such period, in which case any such notice must be received not less than
sixty (60) days before the date established for the annual meeting. In
the case of a special meeting of stockholders, any such notice must be
received not later than the close of business on the tenth (10th) day
following the day on which notice of the special meeting of stockholders
called for the purpose of electing Directors is first given to
stockholders.
(c) Each such stockholder's notice shall set forth the following:
(i) as to the stockholder giving the notice, (1) the name and address of
such stockholder as they appear on the Corporation's stock transfer books,
(2) the class and number of shares of stock of the Corporation
beneficially owned by such stockholder, (3) a representation that such
stockholder is a stockholder of record at the time of giving the notice
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice, and (4) a description of all
arrangements or understandings, if any, between such stockholder and each
nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made; and (ii)
as to each person whom the stockholder wishes to nominate for election as
a Director, (1) the name, age, business address and residence address of
such person, (2) the principal occupation or employment of such person,
(3) the class and number of shares of stock of the Corporation which are
beneficially owned by such person, and (4) all other information that is
required to be disclosed about nominees for election as Directors in
solicitations of proxies for the election of Directors under the rules and
regulations of the Securities and Exchange Commission. In addition, each
such notice shall be accompanied by the written consent of each proposed
nominee to serve as a Director if elected and such consent shall contain a
statement from the proposed nominee to the effect that the information
about the nominee contained in the notice is correct.
SECTION III.5 VACANCIES Whenever there is a vacancy on the Board
of Directors (other than a vacancy resulting from the removal of a
Director by vote of the stockholders which vacancy is immediately
thereafter filled by the stockholders), then the vacancy shall be filled
by a majority of the remaining Directors elected by the stockholders of
the class or series entitled to fill such vacancy or by the sole remaining
Director elected by that class or series if there is only one such
Director.
SECTION III.6 PLACE AND TIME OF MEETING Meetings of the Board of
Directors may be held within, or without the State of Maryland, as the
Board may from time to time determine. The time and place of meetings may
be fixed by the party or parties making the call.
SECTION III.6 ANNUAL MEETING The Board of Directors shall meet
for the purpose of organization and the transaction of other business
immediately following the annual meeting of
<PAGE>
stockholders at which the Board was elected. Such meeting shall be held
at the principal office of the Corporation in the State of Maryland, or at
such other place within the United States as the Board of Directors may
have designated for the immediately preceding annual meeting of
stockholders, or as may be designated by the consent in writing of all of
the Directors. No notice of such meeting shall be necessary.
SECTION III.7 CALLING OF MEETING Meetings of the Board of
Directors may be called by the Chairman of the Board, the Vice Chairman of
the Board, the President, or a majority of the Board. At least twenty-
four (24) hours' notice shall be given of all meetings of the Board; with
the consent of the majority of the Directors, a shorter notice may be
given.
SECTION III.8 NOTICE OF MEETING. Notices of all meetings of
Directors may be left at their usual places of business, or may be sent by
mail or electronic means, and such notices by mail or electronic means
shall be deemed to have been given when sent or mailed at Baltimore.
SECTION III.9 QUORUM At all meetings of the Board, a majority of
the entire Board of Directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, except that a lesser
number may adjourn any meeting from time to time.
SECTION III.10 COMPENSATION OF DIRECTORS
(a) By resolution of the Board all Directors, other than salaried
officers of the Corporation or a subsidiary of the Corporation, may be
allowed a fixed sum and expenses of attendance, if any, for attendance at
each meeting of the Board and in addition may be allowed for their
services as Directors such annual or other compensation as may be fixed by
resolution of the Board from time to time. The preceding provisions shall
not be construed to preclude any Directors, including salaried officers,
from serving the Corporation in any other capacity, including service as a
member of a standing or special committee, and receiving compensation
therefor or to preclude reimbursement of salaried officers who are
Directors for expenses of attendance at meetings of the Board.
(b) For their services as members of special and standing
committees, Directors may be allowed such annual or other compensation as
may be fixed by resolution of the Board of Directors from time to time.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
SECTION IV.1 EXECUTIVE COMMITTEE There may be an executive committee
of three or more Directors designated by resolution passed by a majority
of the whole Board. Said committee may meet at stated times, or on notice
to all by any of their own number. During the intervals between meetings
of the Board, such committee shall advise with and aid the officers of the
Corporation in all matters concerning its interests and the management of
its business, and generally perform such duties and exercise such powers
as may be directed or delegated by the Board of Directors from time to
time. To such Committee may be delegated any or all of the powers of the
Board of Directors in the management of the business and affairs of the
<PAGE>
Corporation while the Board is not in session, excepting such powers as
the Board of Directors by statute may not delegate.
SECTION IV.2 OTHER COMMITTEES There may be such other standing
and special committees as may be established from time to time by
resolution passed by a majority of the whole Board of Directors. Such
committees shall be composed of such Directors as may be designated by the
Board of Directors and shall perform such duties and exercise such powers
as may be directed by the Board of Directors.
SECTION IV.3 PROCEDURES APPLICABLE TO COMMITTEES The provisions
of these bylaws which govern meetings, notice and waiver of notice, and
quorum and voting requirements of the Board shall apply to committees of
Directors and their members as well. Vacancies in the membership of any
committee shall be filled by the Board of Directors at any meeting
thereof. In the absence of a member or members of a committee, the
members thereof present at any meeting (whether or not they constitute a
quorum) may appoint a member or members of the Board of Directors to act
in the place or places of such absent member or members. Committees shall
keep regular minutes of their proceedings, and report the same to the
Board when required.
ARTICLE V
OFFICERS
SECTION V.1 APPOINTMENT AND REMOVAL OF OFFICERS
(a) The officers of the Corporation shall be chosen by the Board of
Directors at its first meeting after each annual meeting of stockholders;
and shall consist of a Chairman of the Board of Directors, a President,
one or more Vice Presidents, a Secretary, a Treasurer, a Controller, an
Assistant Secretary, an Assistant Treasurer, and whenever deemed advisable
by the Board of Directors, a Vice Chairman of the Board and one or more
additional Vice Presidents (including, without limitation, one or more
Executive, Group, and Senior Vice Presidents), Assistant Vice Presidents,
Assistant Secretaries, or Assistant Treasurers. Any two of the offices
hereinbefore mentioned except those of President and Vice President, may
be held by the same person.
(b) The Board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms, and
shall exercise such powers and perform such duties as shall be determined
from time to time by the Board. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors or by any committee
or superior officer upon whom such power may be conferred from time to
time by the Board of Directors.
(c) The officers of the Corporation shall hold office until their
successors are chosen and qualified.
(d) Any officer or employee of the Corporation may be removed at
any time with or without cause, by the affirmative vote of a majority of
the whole Board of Directors, or by any committee or superior officer upon
whom such power of removal may be conferred by the Board of Directors, and
such action shall be conclusive on the officer or employee so removed.
<PAGE>
SECTION V.2 CHAIRMAN OF THE BOARD The Chairman of the Board
shall be the chief executive officer of the Corporation. The Chairman of
the Board shall preside at all meetings of the stockholders and Directors
and shall exercise, subject to control of the Board of Directors, such
general supervision over the affairs of the Corporation and its employees
as may be appropriate to carry out the policies of the Corporation. The
Chairman of the Board shall have such other functions as may be determined
by the Board of Directors.
SECTION V.3 VICE CHAIRMAN OF THE BOARD The Vice Chairman of the
Board, if elected, shall be the chief administrative officer of the
Corporation, and, subject to control of the Board of Directors and the
general supervision of the Chairman of the Board, shall, in cooperation
with the President, be responsible for the administration of the
Corporation's activities. The Vice Chairman of the Board shall preside at
all meetings of the stockholders and Directors at which the Chairman of
the Board is not present. The Vice Chairman of the Board shall have such
other functions as may be determined by the Board of Directors.
SECTION V.4 PRESIDENT The President shall be the chief operating
officer of the Corporation and, subject to control of the Board of
Directors and the general supervision of the Chairman of the Board, shall
have general and active management of the Corporation's operations. The
President shall have all of the powers and perform all of the duties of
the Chairman of the Board in case of his or her absence or inability to
act, or if a Chairman of the Board has not been elected, other than
presiding at meetings of the stockholders and Directors at which the Vice
Chairman of the Board, if elected, shall preside. The President shall
also have all of the powers and perform all of the duties of the Vice
Chairman of the Board in case of his or her absence or inability to act,
or if a Vice Chairman of the Board is not elected, other than such powers
and duties as the Chairman of the Board shall either elect to exercise and
perform or to delegate to another officer. The President shall perform
such other duties as may be determined by the Board of Directors.
SECTION V.5 VICE PRESIDENTS The Vice Presidents shall perform
such duties as the Chairman of the Board, Vice Chairman of the Board,
President, or Board of Directors shall from time to time prescribe. In
the order of seniority prescribed, the most senior Vice President shall,
in the absence or inability of the President to act, perform the duties
and exercise the powers of the President. The order of seniority of Vice
Presidents shall be prescribed from time to time by the Board of Directors
or, in the absence of prescription by the Board of Directors, by the
Chairman of the Board.
SECTION V.6 SECRETARY The Secretary shall attend all sessions of
the Board and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors; shall have custody of the seal
of the Corporation and whenever authorized by the Board shall affix the
seal to any instrument requiring the same; and shall perform such other
duties and have custody of such other books and papers as may from time to
time be prescribed by the Board of Directors, the Chairman of the Board,
the Vice Chairman of the Board, or the President.
<PAGE>
SECTION V.7 TREASURER The Treasurer shall be the chief financial
officer of the Corporation, unless the Board of Directors shall designate
a Vice President as such officer, and have the custody of the corporate
funds and securities and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be authorized by the Board of Directors. The
Treasurer shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render
to the Chairman of the Board, the Vice Chairman of the Board, the
President and the Board of Directors, whenever they may respectively
require it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. The Treasurer shall give the
Corporation a bond if required by the Board of Directors in the sum, and
with one or more sureties satisfactory to the Board, for the faithful
performance of the duties of his or her office, and for the restoration to
the Corporation in case of his or her death, resignation, retirement, or
removal from office, of all books, papers, vouchers, moneys, and other
property of whatever kind in his or her possession or under his or her
control belonging to the Corporation. If a Controller has not been
elected, the Treasurer shall also have all of the powers and perform all
of the duties of that office. The Treasurer shall perform such other
duties as the Chairman of the Board, Vice Chairman of the Board,
President, or Board of Directors may from time to time prescribe.
SECTION V.8 CONTROLLER The Controller shall be the chief
accounting officer of the Corporation. The Controller shall see that
adequate and correct records of all assets, liabilities and transactions
of the Corporation and its subsidiaries are maintained; that efficient
procedures and systems are installed and followed; that adequate audits
are currently and regularly made; and, in conjunction with other officers,
that measures and procedures are initiated and followed whereby the
business of the Corporation and its subsidiaries shall be conducted with
maximum efficiency and economy. The Controller shall perform such other
duties as may be assigned to him or her from time to time by the Chairman
of the Board, Vice Chairman of the Board, President, or Board of
Directors.
SECTION V.9 ASSISTANT OFFICERS Each Assistant Vice President,
each Assistant Secretary, and each Assistant Treasurer shall have the
usual powers and duties pertaining to his or her office, together with
such other powers and duties as may be assigned to him or her by the
Chairman of the Board, Vice Chairman of the Board, President, or the Board
of Directors.
SECTION V.10 VACANCIES If the office of any officer or agent
becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, the Directors then in
office, although less than a quorum, by a majority vote, may choose a
successor or successors, who shall hold office for the unexpired term in
respect of which said vacancy occurred.
SECTION V.11 DUTIES OF OFFICERS MAY BE DELEGATED In case of the
absence of any Officer of the Corporation, or for any other reason that
the Board of Directors may deem sufficient, the Board may delegate, for
the time being, the powers or duties, or any of them of such officer to
any other officer, or to any Director, providing a majority of the entire
Board concur therein.
ARTICLE VI
INDEMNITY OF DIRECTORS AND OFFICERS
<PAGE>
SECTION VI.1 INDEMNITY Each person who is now, or who shall
hereafter become, a Director, officer, employee or agent of the
Corporation, whether or not serving in one or more of such capacities at
the time indemnification is sought or paid, and who is made a party
defendant to any proceeding by reason of service in any one or more of
such capacities shall be indemnified in the manner and to the maximum
extent authorized by law against judgments, penalties, fines, settlements
(approved by the Corporation) and reasonable expenses actually incurred in
connection with such proceeding unless it is proved that the act or
omission of such person was material to the cause of action adjudicated in
the proceeding or, in the case of a settlement, to be adjudicated in the
proceeding, and that (a) such act or omission (i) was committed in bad
faith or (ii) was the result of active and deliberate dishonesty or (b)
such person actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, such
person had reasonable cause to believe the act or omission was unlawful.
Such indemnification shall not be made unless authorized for a specific
proceeding after a determination in accordance with Maryland law that the
Director, officer, employee or agent has met the standard of conduct set
forth in this paragraph. Additionally, any such person who was not a
Director or officer of the Corporation at the time of the commission of
the act or the omission to act which is a subject of such proceeding may
be indemnified to such further extent, if any, consistent with law, as may
be provided in any contract between the Corporation and such person and
may be indemnified, but shall not be entitled to be indemnified, to such
further extent, if any, consistent with law, as may be authorized,
prospectively or retroactively, by the Board of Directors, the Chairman of
the Board, the President or any other officer to whom such authority is
delegated by the Board of Directors, the Chairman of the Board or the
President.
SECTION VI.2 ADVANCEMENT OF EXPENSES Payment or reimbursement in
advance of the final disposition of any proceeding described in Section
6.1 of reasonable expenses incurred by any such person in defending such
proceeding may be authorized by the Board of Directors or in the case of
any such person who is not a Director, by the Chairman of the Board, the
President or any other officer to whom such authority is delegated by the
Board of Directors, the Chairman of the Board or the President; provided,
however, that the Corporation shall have received:
(a) a written affirmation by such person of such person's good faith
belief that the standard of conduct necessary for indemnification by the
Corporation as authorized by law has been met; and
(b) a written undertaking by or on behalf of such person to repay all
amounts so paid or reimbursed if it shall ultimately be determined that
such standard of conduct has not been met.
Nothing contained in this Section 6.2 shall be construed to require the
Corporation to pay or reimburse any expenses incurred by any such person
prior to the ultimate disposition of such proceeding or to require the
Corporation to pay or reimburse subsequent to the ultimate disposition of
such proceeding any expenses incurred by any such person, except as
provided in Section 6.1.
SECTION VI.3 SERVICES IN OTHER CAPACITIES. Service in the
capacity of a Director, officer, employee or agent of the Corporation
shall include service at the request of the
<PAGE>
Corporation as a director, officer, partner, trustee, fiduciary, employee
or agent of any other corporation or of any partnership, joint venture,
trust, other enterprise, or employee benefit plan. Any approval of any
settlement may be made by the Board of Directors or, in the case of a
settlement by any such person who is not a Director, by the Chairman of
the Board, the President or any other officer to whom such authority is
delegated by the Board of Directors, the Chairman of the Board or the
President. Except where reimbursement of expenses is ordered by a court,
all determinations as to the reasonableness of any expenses shall be made
by the persons authorizing reimbursement or payment thereof.
SECTION VI.4 RIGHTS NOT EXCLUSIVE The preceding rights to
indemnification shall not be exclusive of and shall be in addition to any
other rights to which such person would be entitled as a matter of law in
the absence of the preceding provisions.
ARTICLE VII
CERTAIN ADMINISTRATIVE MATTERS
SECTION VII.1 CHECKS All checks or demands for money or notes of
the Corporation shall be signed by such officer or officers as the Board
of Directors may from time to time designate.
SECTION VII.2 FISCAL YEAR The fiscal year shall begin the first
day of January of each year.
SECTION VII.3 ANNUAL STATEMENTS The Chairman of the Board or
such other officer or officers of the Corporation as he or she may direct,
shall annually prepare a full and true statement of the affairs of the
Corporation, which shall be submitted at the annual meeting of the
stockholders and filed within 20 days thereafter at the principal office
of the Corporation in Baltimore, State of Maryland.
SECTION VII.4 AMENDMENT TO BYLAWS Any and all provisions of
these bylaws may be altered, amended, or repealed and new bylaws be
adopted only by the stockholders at a duly constituted meeting or by the
vote of a majority of the entire Board of Directors at any meeting of the
Board of Directors.
SECTION VII.5 OFFICES The Principal office of the Corporation
shall be in the City of Baltimore, State of Maryland. The Corporation may
also have a place of business in such other places as the Board of
Directors may from time to time appoint or the business of the Corporation
may require.
SECTION VII.6 SEAL The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization, and the
words, "Corporate Seal, Maryland."
- -----------------------------------------------------------------------
EXHIBIT 20
April 28, 2000
RESULTS OF FIRST QUARTER 2000
-----------------------------
Dear Shareholders:
Crown Central Petroleum Corporation today announced a net loss of
$3.6 million ($.36 per share) on revenues of $421.5 million in the first
quarter of 2000 compared to a net loss of $11.8 million ($1.20 per share)
on revenues of $225.2 million in the first quarter of 1999.
The results reflect the impact of the volatile crude oil and petroleum
product markets during the quarter. West Texas Intermediate, the industry
benchmark, increased from a low of $24.18 per barrel on January 7, 2000, to
a high of $33.93 per barrel on March 7, 2000. This 40% increase in the
range of crude oil prices was greater than the price increase realized for
finished products.
The Company's refinery operations performed quite well during a
period of significant market volatility. For the quarter, the gross
margin realized of $4.39 per barrel compared favorably to the 20-day
delayed Gulf Coast 3-2-1 benchmark of $4.10 per barrel.
Crown's retail marketing segment experienced a 4% increase in
merchandise sales during the quarter, as well as a 7% reduction in retail
operating costs on a per month per store basis, when compared with the same
period in 1999. Overall, gasoline gross margins and gasoline volumes on a
per month per store basis were flat for the first quarter 2000 when compared
to the first quarter 1999. Volumes recovered during the quarter despite a
slow start in January, likely due to consumers filling up in late December
1999 in light of Y2K concerns.
During the quarter, Crown announced that it had reached a labor accord
with the Paper, Allied-Industrial, Chemical and Energy Workers Union (PACE)
Local 4-202 at the Company's Tyler, Texas refinery. The new three year
agreement incorporates oil refining wage and contract terms similar to other
extension agreements negotiated at refineries represented by PACE. An
agreement has yet to be reached with PACE Local 4-227 at the Company's
Pasadena, Texas refinery, where a lockout was instituted in 1996 after
contract negotiations failed and acts of sabotage were discovered inside the
refinery.
On April 10, 2000 Crown announced that it had entered into a definitive
merger agreement that would result in the Company becoming a wholly-owned
subsidiary of Rosemore, Inc., a Maryland corporation that owns 49% of
Crown's Class A common
<PAGE>
stock and 11% of Crown's Class B common stock. The merger is subject to
certain conditions, including, among others, expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, receipt of approval of two-thirds of the outstanding voting shares,
as required under Maryland law and Crown's Charter, and the absence of
defaults under the indenture governing the Company's 10 7/8% Senior Notes
Due 2005. The Company intends to call a special meeting of its
stockholders to seek approval of the merger, and has postponed its annual
meeting until later in the year to facilitate the holding of the special
meeting.
Leading up to the Organization of Petroleum Exporting Countries
(OPEC) agreement in late March, market prices were rising for most of the
first quarter. Since that time, crude prices have fallen to as low as
$23.85 per barrel, reflecting the instability of the market and the
difficulty in realizing an acceptable margin.
The Form 10-K for the fiscal year ended December 31, 1999 is enclosed
for your review.
Sincerely,
/s/--Henry A. Rosenberg, Jr.
HENRY A. ROSENBERG, JR.
Chairman of the Board,
Chief Executive Officer and President
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
OPERATING STATISTICS
Three Months Ended
March 31
2000 1999
-------- -------
COMBINED REFINERY OPERATIONS
- ----------------------------
Production (BPD - M) 138 134
Production (MMbbl) 12.6 12.0
Sales (MMbbl) 12.5 11.8
Gross Margin ($/bbl) 4.39 2.13
Gross Profit ($MM) 54.9 25.2
Operating Cost ($/bbl) (2.50) (2.58)
Operating Cost ($MM) (31.2) (30.6)
Refining Operating Profit (Loss)($MM) 23.7 (5.4)
RETAIL
- ------
Total Stores 330 344
Volume (pmps - Mgal) 117 118
Volume (MMgal) 116 122
Gasoline Gross Margin ($/gal) 0.081 0.085
Gasoline Gross Profit ($MM) 9.4 10.4
Company-Operated Stores 228 243
Merchandise Sales (pmps-$M) 34.8 33.5
Merchandise Sales ($MM) 23.8 24.4
Merchandise Gross Margin (%) 31.5 30.7
Merchandise Gross Profit ($MM) 7.5 7.5
Ancillary Income, Net ($MM) 3.2 3.4
Retail Gross Profit ($MM) 20.1 21.3
Retail Operating Costs (pmps - $M) (20.4) (21.9)
Retail Operating Costs ($MM) (20.2) (22.6)
Retail Non-Operating Income ($MM) 0.4 0.0
Retail Operating Profit (Loss) ($MM) 0.3 (1.3)
WHOLESALE/TERMINAL
OPERATING PROFIT ($MM) 10.7 5.3
OTHER
- -----
LIFO (Provision) ($MM) (27.4) (9.1)
Corporate Overhead ($MM) (6.6) (6.3)
Net Interest (Expense) ($MM) (4.2) (3.3)
Other Income ($MM) 0.1 1.8
Income Tax (Expense) Benefit ($MM) (0.2) 6.5
Total Net (Loss)($MM) (3.6) (11.8)
Depreciation & Amortization ($MM) 9.6 8.8
Net Interest Expense ($MM) 4.2 3.3
LIFO Provision ($MM) 27.4 9.1
Loss from Asset Disposals ($MM) (0.6) 0.4
Income Tax Expense (Benefit) ($MM) 0.2 (6.5)
EBITDAAL ($MM) 37.2 3.3
Capital Expenditures ($MM) 4.3 9.2
- -----------------------------------------------------------
BPD = Barrels Per Day
bbl = barrel or barrels as applicable
gal = gallon or gallons as applicable
pmps = per month per store
M = in thousands
MM = in millions
Note: Merchandise sales consist of sales generated by Company-operated
stores, therefore, the per month per store (pmps) amounts are calculated
using Company-operating stores only.
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
Three Months Ended
March 31
2000 1999
---------- ----------
Sales and operating revenues $ 421,484 $ 225,165
(Loss) before income taxes (3,276) (18,350)
Net (loss) (3,563) (11,830)
Net (loss) per share:
Basic and diluted $ (0.36) $ (1.20)
Weighted average shares used in the
computation of net (loss) per
share:
Basic and Dilutive 9,871,431 9,871,431
- ---------------------------------------------------------------------
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<PAGE>
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<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> $ 6,207
<SECURITIES> 16,456
<RECEIVABLES> 143,606
<ALLOWANCES> (493)
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<PP&E> 693,666
<DEPRECIATION> 383,558
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<CURRENT-LIABILITIES> 276,955
<BONDS> 129,035
0
0
<COMMON> 50,356
<OTHER-SE> 95,382
<TOTAL-LIABILITY-AND-EQUITY> 593,712
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> (3,276)
<INCOME-TAX> 287
<INCOME-CONTINUING> (3,563)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,563)
<EPS-BASIC> (0.36)
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<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> $ 7,783
<SECURITIES> 15,448
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<ALLOWANCES> (716)
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0
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<COMMON> 50,268
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