UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ____________
Commission File Number 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-0550682
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 539-7400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Class A Common Stock - $5 Par Value American Stock Exchange
Class B Common Stock - $5 Par Value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
The aggregate market value of the voting stock held by nonaffiliates as
of December 31, 1999 was $34,322,322.
The number of shares outstanding at January 31, 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.
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CROWN CENTRAL PETROLEUM CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE
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PART I
Item 1 Business l
Item 2 Properties 2
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security Holders 8
PART II
Item 5 Market for the Registrant's Common
Equity and Related Stockholder Matters 9
Item 6 Selected Financial Data 10
Item 7 Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Item 7a Qualitative and Quantitative Disclosures
About Market Risk 18
Item 8 Financial Statements and Supplementary Data 19
Item 9 Changes in and Disagreements with Auditors on
Accounting and Financial Disclosure 41
PART III
Item 10 Directors and Executive Officers of the
Registrant 42
Item 11 Executive Compensation 44
Item 12 Security Ownership of Certain
Beneficial Owners and Management 48
Item 13 Certain Relationships and Related Transactions 50
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 51
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PART I
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
This Annual Report contains certain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts included in this
Annual Report on Form 10-K, including without limitation those under
"Liquidity and Capital Resources", "Additional Factors that May Affect
Future Results" and "Impact of Year 2000" under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding
the Company's financial position and results of operations, are forward-
looking statements. Such statements are subject to certain risks and
uncertainties, such as changes in prices or demand for the Company's
products as a result of competitive actions or economic factors, changes
in the cost of crude oil, changes in operating costs resulting from new
refining technologies, increased regulatory burdens or inflation, and the
Company's ability to continue to have access to capital markets and
commercial bank financing on favorable terms. Should one or more of
these risks or uncertainties, among others as set forth in this Annual
Report on Form 10-K for the year ended December 31, 1999, materialize,
actual results may vary materially from those estimated, anticipated or
projected. Although the Company believes that the expectations reflected
by such forward-looking statements are reasonable based on information
currently available to the Company, no assurances can be given that such
expectations will prove to have been correct. Cautionary statements
identifying important factors that could cause actual results to differ
materially from the Company's expectations are set forth in this Annual
Report on Form 10-K for the year ended December 31, 1999, including
without limitation in conjunction with the forward-looking statements
included in this Annual Report on Form 10-K that are referred to above.
All forward-looking statements included in this Annual Report on Form 10-
K and all subsequent oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements.
ITEM 1. BUSINESS
GENERAL
Crown Central Petroleum Corporation and subsidiaries (the Company), which
traces its origins to 1917, is a large independent refiner and marketer
of petroleum products in the United States. The Company owns and
operates two high-conversion refineries with a combined capacity of
152,000 barrels per day of crude oil - a 100,000 barrel per day facility
located in Pasadena, Texas, near Houston (the Pasadena refinery) and a
52,000 barrel per day facility located in Tyler, Texas (the Tyler
refinery, and together with the Pasadena refinery, the Refineries). The
Company is also a leading independent marketer of refined petroleum
products and merchandise through a network of 331 gasoline stations and
convenience stores located in the Mid-Atlantic and Southeastern United
States. In support of these businesses, the Company operates 13 product
terminals located on three major product pipelines along the Gulf Coast
and the Eastern Seaboard and in the Central United States.
The Refineries are strategically located and have direct access to crude
oil supplies from major and independent producers and trading companies,
thus enabling the Company to select a crude oil mix to optimize refining
margins and minimize transportation costs. The Pasadena refinery's Gulf
Coast location provides access to tankers, barges and pipelines for the
delivery of foreign and domestic crude oil and other feedstocks. The
Tyler refinery benefits from its location in East Texas due to its
ability to purchase high quality crude oil directly from nearby suppliers
at a favorable cost and from its status as the only supplier of a full
range of refined petroleum products in its local market area. The
Refineries are operated to generate a product mix of over 88% higher
margin fuels, primarily transportation fuels such as gasoline, highway
diesel and jet fuel as well as home heating oil. During the past five
years, the Company has invested over $38 million for environmental
compliance, upgrading, expansion and process improvements at its two
refineries. As a result of these expenditures, the Refineries have a
high rate of conversion to higher margin fuels.
The Company is one of the largest independent retail marketers in its
core retail market areas within Maryland, Virginia and North Carolina.
The Company has a geographic concentration of retail locations in high
growth areas such as Baltimore, Maryland and the Washington, D.C.
metropolitan areas, Tidewater and Richmond, Virginia, Charlotte and
Raleigh, North Carolina and Columbus, Georgia. Over the past several
years, the Company has rationalized and refocused its retail operations.
This has resulted in significant improvements in average unit performance
and has positioned these operations for growth from a profitable base.
For the year ended December 31, 1999, average merchandise sales per unit
increased approximately 4.5% on a same store basis when compared with
1998.
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Sales values of the principal classes of products sold by the Company
during the last three years are included in Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 11 of
this report.
At December 31, 1999, the Company employed 2,695 employees. The total
number of employees decreased approximately 11% from year-end 1998.
REGULATION
Like other companies in the petroleum refining and marketing industries,
the Company's operations are subject to extensive regulation and the
Company has responsibility for the investigation and clean-up of
contamination resulting from past operations. Current compliance
activities relate to air emissions limitations, waste water and storm
water discharges and solid and hazardous waste management activities. In
connection with certain of these compliance activities and for other
reasons, the Company is engaged in various investigations and, where
necessary, remediation of soils and ground water relating to past spills,
discharges and other releases of petroleum, petroleum products and
wastes. The Company's environmental activities are different with
respect to each of its principal business activities: refining and retail
marketing operations. The Company is not currently aware of any
information that would suggest that the costs related to the air, water
or solid waste compliance and clean-up matters discussed herein will have
a material adverse effect on the Company. The Company anticipates that
substantial capital investments will be required in order to maintain
compliance with federal, state and local regulations, including an
approximately $25 million for the EPA's new regulations regarding low
sulfur gasoline. A more detailed discussion of environmental matters is
included in Note A and Note I of the Notes to Consolidated Financial
Statements on pages 25 and 35, respectively, of this report, and in
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 11 through 18 of this report.
COMPETITIVE CONDITIONS
Oil industry refining and marketing is highly competitive. Many of the
Company's principal competitors are integrated multinational oil
companies that are substantially larger and better known than the
Company. Because of their diversity, integration of operations, larger
capitalization and greater resources, these major oil companies may be
better able to withstand volatile market conditions, compete on the basis
of price and more readily obtain crude oil in times of shortages.
The principal competitive factors affecting the Company's refining
operations are crude oil and other feedstock costs, refinery product
margins, refinery efficiency, refinery product mix and product
distribution and transportation costs. Certain of the Company's larger
competitors have refineries which are larger and more complex and, as a
result, could have lower per barrel costs or higher margins per barrel of
throughput. The Company has no crude oil reserves and is not engaged in
exploration. The majority of the Company's total crude oil purchases are
transacted on the spot market. The Company believes that it will be able
to obtain adequate crude oil and other feedstocks at generally
competitive prices for the foreseeable future.
The principal competitive factors affecting the Company's retail
marketing operations are locations of stores, product price, the quality,
appearance and cleanliness of stores and brand identification.
Competition from large integrated oil companies, as well as from
convenience stores which sell motor fuel, is expected to continue. The
principal competitive factors affecting the Company's wholesale marketing
business are product price and quality, reliability and availability of
supply and location of distribution points.
The Company maintains business interruption insurance to protect itself
against losses resulting from shutdowns to refinery operations from fire,
explosions and certain other insured casualties. Business interruption
coverage begins for such losses in excess of $2 million.
ITEM 2. PROPERTIES
REFINING OPERATIONS
OVERVIEW
The Company owns and operates two strategically located, high conversion
refineries with a combined capacity of 152,000 barrels of crude oil per
day--a 100,000 barrel per day facility located in Pasadena, Texas, near
Houston, and a 52,000 barrel per day facility located in Tyler, Texas.
Both refineries are operated to generate a product mix of over 88% higher
margin fuels, primarily transportation fuels such as gasoline, highway
diesel and jet fuel, as well as home heating oil. When operating to
maximize the production of light products, the product mix at both of the
Refineries is approximately 55% gasoline, 33% distillates (such as
diesel, home heating oil, jet fuel, and kerosene), 6% petrochemical
feedstocks and 6% slurry oil and petroleum coke.
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The Pasadena refinery and Tyler refinery averaged production output of
93,052 barrels per day and 48,408 barrels per day, respectively, during
1999. While both refineries primarily run sweet (low sulphur content)
crude oil, they can process up to 20% of certain sour (high sulphur
content) crude oil in their mix.
The Company's access to extensive pipeline networks provides it with the
ability to acquire crude oil directly from major integrated and
independent domestic producers, foreign producers, or trading companies,
and to transport this crude to the refineries at a competitive cost. The
Pasadena refinery has docking facilities which provide direct access to
tankers and barges for the delivery of crude oil and other feedstocks.
The Company also has agreements with terminal operators for the storage
and handling of the crude oil it receives from large ocean-going vessels
and which the Company transports to the refineries by pipeline. The Tyler
refinery benefits from its location in East Texas since the Company can
purchase high quality crude oil at favorable prices directly from nearby
producers. In addition, the Tyler refinery is the only supplier of a full
range of petroleum products in its local market area. See "Supply,
Transportation and Wholesale Marketing."
PASADENA REFINERY
The Pasadena refinery is located on approximately 174 acres in Pasadena,
Texas and was the first refinery built on the Houston Ship Channel. The
refinery has been substantially modernized and today has a rated crude
capacity of 100,000 barrels per day. During the past five years, the
Company has invested approximately $23 million in capital projects at
Pasadena.
The Company's refining strategy includes several initiatives to enhance
productivity. For example, the Pasadena refinery has an extensive plant-
wide distributed control system which is designed to improve product
yields, make more efficient use of personnel and optimize process
operations. The distributed control system uses technology that is fast,
accurate and provides increased information to both operators and
supervisors. This equipment also allows the use of modern advanced
control techniques for optimizing unit operations.
The Pasadena refinery has a crude unit with a 100,000 barrels per day
atmospheric column and a 38,000 barrels per day vacuum tower. Major
downstream units consist of a 52,000 barrels per day fluid catalytic
cracking unit, a 12,000 barrels per day delayed coking unit, two
alkylation units with a combined capacity of 10,000 barrels per day of
alkylate production, and a continuous regeneration reformer with a
capacity of 24,000 barrels per day. Other units include two depropanizers
that can produce 5,500 barrels per day of refinery grade propylene, a
liquified petroleum gas recovery unit that removes approximately 1,000
barrels per day of liquids from the refinery fuel system, a reformate
splitter, and a compression facility capable of transporting up to 14
million standard cubic feet per day of process gas to a neighboring
petrochemical plant.
The Clean Air Act mandated that only reformulated gasoline ("RFG") may be
sold in certain ozone non-attainment areas, including some metropolitan
areas where the Company sells gasoline. RFG standards became more
stringent with the implementation of the Complex Model Phase 1 in 1997,
and again in 2000 with the Complex Model Phase 2. The Pasadena refinery
can produce up to 30,000 barrels per day of winter grade Phase 2 RFG with
purchases of MTBE, ethanol, or other oxygenates. The Pasadena refinery
directly supplies premium unleaded RFG to nearby truck rack facilities
with the remainder of RFG production being shipped in the Colonial
pipeline. Company retail RFG requirements above production capabilities
are met with gasoline grade exchanges and spot market purchases.
Crude unit operation at the Pasadena refinery was at lower rates in 1999
primarily due to the planned reduction in refinery production volumes as
a result of poor industry-wide refining margins during the year. To
counter the low margins on light sweet crude, the Company purchased
substantially more heavy crude at discounts to light sweet grades. With
the heavier crude, the refinery capacity is effectively reduced because
of constraints in downstream units which process the heavier fractions.
In 1999, the Pasadena refinery operated at 93,052 BPD yielding
approximately 57% gasoline and 29% distillates. Of the total gasoline
production, approximately 34% was premium octane grades. In addition,
the Pasadena refinery produced and sold other products including
propylene, propane, slurry oil, petroleum coke and sulfur.
The Company owns and operates storage facilities located on approximately
130 acres near its Pasadena refinery which, together with tanks on the
refinery site, provide the Company with a storage capacity of
approximately 6.2 million barrels (2.8 million barrels for crude oil and
3.4 million barrels for refined petroleum products and intermediate
stocks).
The Pasadena refinery's refined petroleum products are delivered to both
wholesale and retail customers. Approximately one-half of the gasoline
and distillate production is sold at wholesale into the Gulf Coast spot
market and one-half is shipped by the Company on the Colonial and
Plantation pipelines for sale in East Coast wholesale and retail markets.
The Company's retail gasoline requirements represent approximately 56% of
the Pasadena refinery's total gasoline production capability.
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TYLER REFINERY
The Tyler refinery is located on approximately 100 of the 529 acres owned
by the Company in Tyler, Texas and has a rated crude capacity of 52,000
barrels per day. The Tyler refinery's location provides access to nearby
high quality East Texas crude oil which accounts for approximately 70% of
its crude supply. This crude oil is transported to the refinery on the
McMurrey and Scurlock pipeline systems. The Company owns the McMurrey
system and has a long-term contract with Scurlock Permian Pipe Line
Corporation for use of the Scurlock system. The Company also has the
ability to ship crude oil to the Tyler refinery by pipeline from the Gulf
Coast and does so when market conditions are favorable. Storage capacity
at the Tyler refinery exceeds 2.7 millions barrels (1.2 million barrels
for crude oil and 1.5 million barrels for refined petroleum products and
intermediate stocks), including tankage along the Company's pipeline
system.
The Tyler refinery has a crude unit with a 52,000 barrels per day
atmospheric column and a 16,000 barrels per day vacuum tower. The other
major process units at the Tyler refinery include an 18,000 barrels per
day fluid catalytic cracking unit, a 6,000 barrels per day delayed coking
unit, a 20,000 barrels per day naphtha hydrotreating unit, a 12,000
barrels per day distillate hydrotreating unit, two reforming units with a
combined capacity of 16,000 barrels per day, a 5,000 barrels per day
isomerization unit, and an alkylation unit with a capacity of 4,700
barrels per day.
The Tyler refinery's 1999 crude unit operating capacity was slightly
below last year's operations of approximately 96% due primarily to
planned reductions in refinery production as a result of poor industry-
wide refining margins. In 1999, the Tyler refinery operated at
approximately 93% of rated crude unit capacity, with production yielding
approximately 57% gasoline and approximately 33% distillates, which
includes the production of 5,069 BPD of aviation fuels. Of the total
gasoline production, approximately 14% was premium octane grades. In
addition, the refinery produced and sold by-products including propylene,
propane, slurry oil, petroleum coke and sulphur. The Tyler refinery is
the principal supplier of refined petroleum products in the East Texas
market with approximately 64% of production distributed at the refinery's
truck terminal. The remaining production is shipped via the Texas Eastern
Products Pipeline for sale either from the Company's terminals or from
other terminals along the pipeline. Deliveries under term exchange
agreements account for the majority of the refinery's truck terminal
sales.
RETAIL OPERATIONS
OVERVIEW
The Company traces its retail marketing history to the early 1930's when
it operated a retail network of 30 service stations in the Houston, Texas
area. It began retail operations on the East Coast in 1943. The Company
has been recognized as an innovative industry leader and, in the early
1960's, pioneered the multi-pump retailing concept which has since become
an industry standard in the marketing of gasoline.
As of December 31, 1999, the Company had 331 retail locations. Of these
331 units (219 owned and 112 leased), the Company directly operated 230
and the remainder were operated by independent dealers. The Company
conducts its operations in Maryland through an independent dealer network
as a result of legislation which prohibits refiners from operating
gasoline stations in Maryland. The Company believes that the high
proportion of Company-operated units enables it to respond quickly and
uniformly to changing market conditions.
While most of the Company's units are located in or around major
metropolitan areas, its sites are generally not situated on major
interstate highways or inter-city thoroughfares. These off-highway
locations primarily serve local customers and, as a result, the Company's
retail marketing unit volumes are not as highly seasonal or dependent on
seasonal vacation traffic as locations operating on major traffic
arteries. The Company is one of the largest independent retail marketers
of gasoline in its core retail market areas within Maryland, Virginia and
North Carolina. The Company has a geographic concentration of retail
locations in high growth areas such as the metropolitan Baltimore,
Maryland and Washington, D.C. area, Tidewater and Richmond, Virginia,
Raleigh and Charlotte, North Carolina and Columbus, Georgia. The
Company's three highest volume core markets are Baltimore, the suburban
areas of Maryland and Virginia surrounding Washington, D.C., and the
greater Norfolk, Virginia area.
RETAIL UNIT OPERATIONS
The Company conducts its retail marketing operations through three basic
store formats: convenience stores, mini-marts and gasoline stations. At
December 31, 1999, the Company had 82 convenience stores, 132 mini-marts
and 117 gasoline stations.
The Company's convenience stores operate primarily under the name Fast
Fare. These units generally contain 1,500 to 2,800 square feet of retail
space and typically provide gasoline and a variety of convenience store
merchandise such as tobacco products, beer, wine, soft drinks, coffee,
snacks, dairy products and baked goods.
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The Company's mini-marts generally contain up to 600 to 1,500 square feet
of retail space and typically sell gasoline and much of the same
merchandise as at the Company's convenience stores. The Company has
installed lighted canopies that extend over the multi-pump fuel islands
at most of its locations. This provides added security and protection
from the elements for customers and employees.
The Company's gasoline stations generally contain up to 100 square feet
of retail space in an island kiosk and typically offer gasoline and a
limited amount of merchandise such as tobacco products, candies, snacks
and soft drinks.
The Company's units are brightly decorated with its trademark signage to
create a consistent appearance and encourage customer recognition and
patronage. The Company believes that consistency of brand image is
important to the successful operation and expansion of its retail
marketing system. In all aspects of its retail marketing operations, the
Company emphasizes quality, value, cleanliness and friendly and efficient
customer service.
While the Company derives approximately 74% of its retail revenue from
the sale of gasoline, it also provides a variety of merchandise and other
services designed to meet the non-fuel needs of its customers. Sales of
these additional products are an important source of revenue, contribute
to increased profitability and serve to increase customer traffic. The
Company believes that its existing retail sites present significant
additional profit opportunities based upon their strategic locations in
high traffic areas. The Company also offers ancillary services such as
compressed air service, car washes, vacuums, and automated teller
machines. Management continues to evaluate the addition of new ancillary
services.
DEALER OPERATIONS
The Company maintains 101 dealer-operated units, all of which are located
in Maryland. Under the Maryland Divorcement Law, refiners are prohibited
from operating gasoline stations. The Maryland units are operated under a
Branded Service Station Lease and Dealer Agreement (the "Dealer
Agreement"), generally with a term of three years. Pursuant to the Dealer
Agreement, a dealer leases the facility from the Company and purchases
and resells Crown-branded motor fuel and related products. Dealers
purchase and resell merchandise from independent third parties. The
Dealer Agreement sets forth certain operating standards; however, the
Company does not control the independent dealer's personnel, pricing
policies or other aspects of the independent dealer's business. The
Company believes that its relationship with its dealers has been very
favorable as evidenced by a low rate of dealer turnover.
The Company realizes little direct benefit from the sale of merchandise
or ancillary services at the dealer operated units, and the revenue from
these sales is not reflected in the Company's Consolidated Financial
Statements. However, to the extent that the availability of merchandise
and ancillary services increases customer traffic and gasoline sales at
its units, the Company benefits from higher gasoline sales volumes.
SUPPLY, TRANSPORTATION AND WHOLESALE MARKETING
SUPPLY
The Company's refineries, terminals and retail outlets are strategically
located in close proximity to a variety of supply and distribution
channels. As a result, the Company has the flexibility to acquire
available domestic and foreign crude oil economically, and also the
ability to cost effectively distribute its products to its own system and
to other domestic wholesale markets. Purchases of crude oil and
feedstocks are determined by quality, price and general market
conditions.
TRANSPORTATION
Most of the domestic crude oil processed by the Company at its Pasadena
refinery is transported by pipeline. The Company's purchases of foreign
crude oil are transported primarily by tankers under spot charters which
are arranged by either the seller or the Company. The Company is not
currently obligated under any time-charter contracts. The Company has an
approximate 5% interest in the Rancho Pipeline and generally receives
between 20,000 and 25,000 barrels per day of crude through this system.
Foreign crudes (principally from the North Sea, West Africa and South
America) account for approximately 64% of total Pasadena crude supply and
are delivered by tanker. Most of the crude for the Tyler refinery is
gathered from local East Texas fields and delivered by two pipeline
systems, one of which is owned by the Company. Foreign crude also can be
delivered to the Tyler refinery by pipeline from the Gulf Coast.
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TERMINALS
The Company operates eight product terminals located along the Colonial
and Plantation pipeline systems and, in addition to the terminal at the
Tyler refinery, operates four product terminals located along the Texas
Eastern Products Pipeline system. These terminals have a combined storage
capacity of 1.7 million barrels. The Company's distribution network is
augmented by agreements with other terminal operators also located along
these pipelines. In addition to serving the Company's retail
requirements, these terminals supply products to other refiner/marketers,
jobbers and independent distributors.
WHOLESALE MARKETING
Approximately 18% of the gasoline produced by the Company's Pasadena
refinery is transported by pipeline for sale at wholesale through Company
and other terminals in the Mid-Atlantic and Southeastern United States.
Heating oil is also regularly sold at wholesale through these same
terminals. Gasoline, heating oil, diesel fuel and other refined products
are also sold at wholesale in the Gulf Coast market.
The Company has entered into product exchange agreements for
approximately one-quarter of its Tyler refinery production with two major
oil companies headquartered in the United States. These agreements
provide for the delivery of refined products at the Company's terminals,
in exchange for delivery by these companies of a similar amount of
refined products to the Company. These exchange agreements provide the
Company with the ability to broaden its geographic distribution, supply
markets not connected to the refined products pipeline systems and reduce
transportation costs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various matters of litigation, which, in the
opinion of management, are not expected to have a material adverse effect
on the Company. The Company's legal proceedings are further discussed in
Note I of the Notes to Consolidated Financial Statements on page 35 of
this report.
The Pasadena and Tyler refineries and many of the Company's other
facilities are involved in a number of environmental enforcement actions
or are subject to agreements, orders or permits that require remedial
activities. These matters and other environmental expenditures are
discussed in the Liquidity and Capital Resources section of Management's
Discussion and Analysis of Financial Conditions and Results of Operations
on pages 14 through 18 of this report, and in Note I of the Notes to
Consolidated Financial Statements on page 35 of this report. These
enforcement actions and remedial activities, in the opinion of
management, are not expected to have a material adverse effect on the
Company.
On July 21, 1997, Texans United for a Safe Economy Education Fund, the
Sierra Club, the Natural Resources Defense Council, Inc. and several
individuals filed a Clean Air Act citizens' suit in the United States
District Court for the Southern District of Texas against the Company,
alleging violations by the Company's Pasadena refinery of certain state
and federal environmental air regulations. TEXANS UNITED FOR A SAFE
ECONOMY EDUCATION FUND, ET AL. VS. CROWN CENTRAL PETROLEUM CORPORATION,
H-97-2427 (S.D. Tex.). On July 31, 1998, United States District Judge
Vanessa Gilmore granted the Company's Motion for Summary Judgment as to
all of the plaintiff's claims. She subsequently rejected the plaintiff's
motion to reconsider her decision. Some of the plaintiffs appealed to
the United States Court of Appeals for the Fifth Circuit which heard oral
arguments on December 7, 1999. No decision has been rendered by the
Court.
On June 25, 1997, a purported class action lawsuit was filed in District
Court for Harris County, Texas by individuals who claim to have suffered
personal injuries and property damage from the operation of the Company's
Pasadena refinery. ALLMAN, ET AL. VS. CROWN CENTRAL PETROLEUM
CORPORATION, ET AL., C.A. No. 97-39455 (District Court of Harris County,
Texas). This suit seeks unspecified compensatory damages and $50 million
in punitive damages. The plaintiffs have now dropped all class action
claims. The matter is in discovery.
In October 1998, the Company was served in a lawsuit naming it as an
additional defendant in an existing lawsuit filed by approximately 5,500
Houston Ship Channel area residents against 11 other refinery and
petrochemical plant operators. CRYE ET AL. VS. REICHHOLD CHEMICALS,
INC., ET AL., 97-24399 (334th Judicial District, Harris Co., Tex.). The
plaintiffs claim they are adversely affected by the noise, light,
emissions and discharges from defendants' operations and seek unspecified
damages and injunctive relief for alleged nuisance, trespass, negligence,
and gross negligence. The Court has indicated that it may grant summary
judgement against a large majority of the plaintiffs.
<PAGE>
Seven employees at the Pasadena refinery and one at the Tyler refinery
have filed a purported class action suit in the United States District
Court for the Eastern District of Texas alleging race and sex
discrimination in violation of Title VII of the Civil Rights Act of 1964,
as amended, and in violation of the Civil Rights Act of 1871, as amended.
LORRETTA BURRELL, ET AL. VS. CROWN CENTRAL PETROLEUM CORPORATION, C.A.
No. 97-CVO-357 (E.D. Tex.). The plaintiffs have now dropped their
efforts to certify company-wide classes and have limited their proposed
class to certain women and African-Americans who have been employed at
the Company's two Texas refineries. The Company is vigorously opposing
certification of even this limited class and has filed Motions for
Partial Summary Judgment against all of the individual claims of all
eight named plaintiffs.
On December 15, 1998, five shareholders filed a derivative lawsuit in
District Court for Harris County, Texas against each of the Company's
then-current directors and three of its non-director officers, one of
whom was subsequently dismissed. KNOX, ET AL. V. ROSENBERG, ET AL., C.A.
No. 1998-58870. Three of the plaintiff shareholders are locked-out union
employees and the remaining two are retired union employees. The
defendants removed the case to the United States District Court for the
Southern District of Texas, H-99-0123. The suit alleges that the
defendants breached their fiduciary duties, committed "constructive
fraud", "abuse of control", and were unjustly enriched. On September
27, 1999 the Court dismissed the action for Plaintiffs' failure to make
presuit demand on the Company's Board of Directors or to allege with
particularity facts sufficient to demonstrate why demand would have been
futile. Plaintiffs were granted leave to amend and on November 29, 1999
they filed a Second Amended Complaint. Defendants filed a Motion to
Dismiss the Second Amended Complaint based on Plaintiffs continuing
failure to allege with particularity facts sufficient to excuse presuit
demand. The Second Amended Complaint subsequently was withdrawn and
refiled as a purported "Restated" Second Amended Complaint. Defendants
have filed a Motion to Dismiss the Second Amended Complaint and the
"Restated" Second Amended Complaint for Plaintiffs' continuing failure
to comply with the Federal Rules of Civil Procedure. Pursuant to
undertakings received from the individual defendants, the Company is
advancing the defense costs and expects to indemnify the defendants to
the extent permitted by law and the Company's charter and by-laws.
On March 9, 2000, a purported class action lawsuit was filed in the
Circuit Court for Baltimore City, Maryland by an individual who purports
to represent certain shareholders of the Company against the Company,
each of its Directors, and Rosemore, Inc. MAIDEN V. CROWN CENTRAL
PETROLEUM CORPORATION, ET AL. #24-C-00-001238 (Circuit Court for
Baltimore City, Maryland). The Complaint alleges that the defendants
breached their fiduciary duty to the Company's shareholders in connection
with a merger proposal made by Rosemore, Inc. The case seeks declaratory
and injunctive relief or, alternatively, compensatory and/or
"rescissory" damages. The Company expects to defend and indemnify the
defendants to the extent permitted by law and the Company's charter and
by-laws. There have been no proceedings in the case thus far.
A review of the ALLMAN, BURRELL, CRYE, KNOX and MAIDEN cases suggests
that the Company, and in the KNOX and MAIDEN cases the individual
defendants, have meritorious defenses. The Company intends to vigorously
defend these cases and, in the opinion of management, the eventual
outcome of any of these cases is not expected to have a material adverse
effect on the Company.
On January 8, 1999, five named plaintiffs filed a purported class action
lawsuit against the Company and 12 other named defendants in Superior
Court for New Hanover County, NC, claiming that the defendants are liable
for damages caused by MTBE contamination of groundwater. Atlas Alan
Maynard, III, et al. vs. Amerada Hess Corporation et al., 99-CV-00068,
Superior Court of New Hanover County, North Carolina. MTBE is a gasoline
additive that is used by the petroleum industry principally to formulate
gasolines that comply with the federal Clean Air Act Amendments of 1990.
The plaintiffs seek to certify two sub-classes - all owners of drinking
water wells in the state who wish to have their wells tested at the
defendants' expense and all owners of such wells which are contaminated
by certain levels of MTBE. On January 20, 2000, the Court held hearings
on the plaintiffs' motion for class certification and the defendants'
motions to dismiss. The Court has not issued a ruling on those motions
but has ordered the parties to participate in nonbinding mediation.
In February 1998, the Company and thirteen other companies, including
several major oil companies, were sued on behalf of the United States
Environmental Protection Agency (EPA) and the Texas Natural Resource
Conservation Commission (TNRCC) under the Comprehensive Environmental
Response Compensation, and Liability Act of 1980 (the "Superfund
Statute") to recover the costs of removal and remediation at the Sikes
Disposal Pits Site (the "Sikes Site") in Harris County, Texas. The
Company does not believe that it sent any waste material to the Sikes
Site or that there is any credible evidence to support the government's
claim that it did so. In fact, the Company has developed considerable
evidence to support its position that it should not have been named as a
Potentially Responsible Party ("PRP"). The EPA and TNRCC allege that
they incurred costs in excess of $125 million in completing the
remediation at the Sikes Site, and they seek to recover these costs plus
interest. Since the Superfund Statute permits joint and several
liability and any PRP is theoretically at risk for the entire judgment,
the Company intends to vigorously defend this action. Based upon the
information currently available, the Company expects that it will
eventually prevail in this matter. In addition, the Company has been
named by the EPA and by several state environmental agencies as a PRP at
various other federal and state Superfund sites. The Company's exposure
in these matters has either been resolved, is properly reserved or is de
minimis and is not expected to have a material adverse effect on the
Company.
On January 13, 2000, the Company received a Notice of Enforcement (NOE)
from the TNRCC regarding alleged state and federal air quality
violations, some of which include sulfur exceedances, arising out of a
June and July 1999 state
<PAGE>
inspection. The Company believes it has valid legal defenses to 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.
During the first quarter of 2000, the Company received notice from the
United States Department of Justice that the government is again
considering filing a civil action against the Company for the alleged
sulfur violations already addressed by an August 31, 1998 TNRCC Agreed
Order and for additional alleged violations not covered by that Order.
The Company does not believe that the government will prevail if it files
such a complaint as the Company already has paid a $1.05 million fine for
most of the sulfur violations. Additionally, the Company believes it has
valid defenses to the other alleged violations, that the alleged
violations are DE MINIMIS in nature, or 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.
In May 1999, the Company received a notice that the United States
Department of Justice planned to bring a civil action against the Company
for a Clean Water Act violation arising out of a June 1998 oil spill at a
Wyoming exploration and production property. The Company has shut-in all
of the wells on the Wyoming leases and no longer operates those
properties. The Department of Justice demanded payment of a penalty in
the amount of $262,000. The Company has been negotiating with the EPA
and the Department of Justice. Environmental remediation of the leases
is being completed and the Department of Justice has not yet filed suit.
On October 14, 1999, the Company received a notice of violation from the
United States Environmental Protection Agency for alleged noncompliance
in 1998 with Clean Air Act reformulated gasoline specifications at the
Company's Newington and Richmond, Virginia terminals. EPA proposed a
penalty of $282,600. The Company believes the allegations have little or
no merit and is vigorously defending this enforcement action.
The foregoing environmental proceedings are not of material importance to
Crown's accounts and are described in compliance with SEC rules requiring
disclosure of such proceedings.
The Company's collective bargaining agreement with the Paper, Allied-
Industrial, Chemical and Energy Workers Union ("PACE"), formerly the Oil
Chemical & Atomic Workers Union covering employees at the Pasadena
refinery expired on February 1, 1996. Following a number of incidents
apparently intended to disrupt normal operations at the refinery and also
as a result of the unsatisfactory status of the negotiations, on
February 5, 1996 the Company implemented a lock out of employees in the
collective bargaining unit at the Pasadena facility. PACE subsequently
filed a number of unfair labor practice charges with the National Labor
Relations Board ("NLRB") and all of these charges have been dismissed by
the NLRB. As previously disclosed, since the lock-out, 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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
three months of the fiscal year covered by this report.
[This space intentionally left blank]
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the American Stock Exchange under
the ticker symbols CNP A and CNP B.
COMMON STOCK MARKET PRICES AND CASH DIVIDENDS
<TABLE>
<CAPTION>
1999 1998
Sales Price Sales Price
High Low High Low
------ ------- ------ -------
<S> <C> <C> <C> <C>
CLASS A COMMON STOCK
First Quarter $ 9 $ 7 1/16 $ 22 $ 18 1/4
Second Quarter 12 1/8 7 1/4 19 12 1/2
Third Quarter 12 6 13 1/16 9
Fourth Quarter 8 5/8 4 3/4 10 1/4 7 1/16
Yearly 12 1/8 4 3/4 22 7 1/16
CLASS B COMMON STOCK
First Quarter $ 9 $ 6 7/8 $ 20 3/4 $ 18
Second Quarter 11 1/4 7 1/8 18 3/4 11 3/4
Third Quarter 11 6 13 1/16 9
Fourth Quarter 7 1/4 4 9/16 10 7/16 6 3/4
Yearly 11 1/4 4 9/16 20 3/4 6 3/4
</TABLE>
The payment of cash dividends is dependent upon future earnings, capital
requirements, overall financial condition and restrictions as described
in Note C of the Notes to Consolidated Financial Statements on page 26 of
this report. There were no cash dividends declared on common stock in
1999 or 1998.
The number of shareholders of the Company's common stock based on the
number of record holders on December 31, 1999 was:
Class A Common Stock 502
Class B Common Stock 563
TRANSFER AGENT & REGISTRAR
Boston EquiServe
Boston, Massachusetts
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company set forth below
for the five years ended December 31, 1999 should be read in conjunction
with the Consolidated Financial Statements.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(Thousands of dollars except per share amounts)
<S> <C> <C> <C> <C> <C>
Sales and operating
revenues $1,270,181 $1,264,317 $1,609,083 $1,641,875 $1,456,990
(Loss) income
before extraordinary
item (30,026) (29,380) 19,235 (2,767) (67,367)
Extraordinary item (3,257)
Net (loss) income (30,026) (29,380) 19,235 (2,767) (70,624)
Total assets 523,108 518,010 597,394 566,955 579,257
Long-term debt 129,180 129,899 127,506 127,196 128,506
PER SHARE DATA - BASIC:
(Loss) income
before extraordinary
item (3.04) (2.99) 1.97 (.28) (6.95)
Net (loss) income (3.04) (2.99) 1.97 (.28) (7.28)
PER SHARE DATA -
ASSUMING DILUTION:
(Loss) income before
extraordinary item (3.04) (2.99) 1.94 (.28) (6.95)
Net (loss) income (3.04) (2.99) 1.94 (.28) (7.28)
</TABLE>
To conform to the 1999 and 1998 presentation, Sales and operating
revenues for the years ended December 31, 1997, 1996, and 1995,
respectively, have been restated. These restatements had no effect
on the Net income (loss) and the Net income (loss) per share
amounts previously reported. See Note A to the accompanying
financial statements.
To conform to the 1999 presentation, Total assets at December 31,
1998, 1997, 1996, and 1995, respectively, have been restated. See
Note A to the accompanying financial statements.
The net loss in 1998 included a $7.1 million reserve to reflect the
decline in inventory values of crude oil and petroleum products
when valuing inventories at the lower of cost of market. Due to
the increase in refined products prices, the reserve of $7.1
million recorded as of December 31, 1998 to reflect valuing
inventories at lower of cost or market was recovered during the
first quarter of 1999.
The extraordinary loss recorded in the first quarter of 1995
resulted from the early retirement of the remaining principal
balance of the Company's 10.42% Senior Notes with the proceeds from
the sale of $125 million of Unsecured Senior Notes due February 1,
2005.
The net loss in 1995 was increased by a pre-tax write-down of
certain refinery assets of $80.5 million in the fourth quarter
relating to the adoption of Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of".
There were no cash dividends declared in 1999, 1998, 1997, 1996 or
1995.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Consolidated sales and operating revenues increased 0.5% for the year
ended December 31, 1999 compared to a decrease of 21.4% for the year
ended December 31, 1998. The 1999 increase was primarily attributable to
a 21.9% increase in the average sales price per gallon of petroleum
products and an increase in merchandise sales of $1.2 million or 3.4%.
These increases were partially offset by a 17.8% decrease in volumes of
refined petroleum products sold. The 1999 decreases in sales volumes are
primarily due to the Company's crude oil based processing agreement
executed in the fourth quarter of 1998 with Statoil Marketing and Trading
(US) Inc. (Statoil), discussed below (Processing Agreement). The Company
processes an average of 35,000 barrels per day (bpd) of crude oil
supplied and owned by Statoil and returns to Statoil an average of 35,000
bpd of refined petroleum products, which effectively decreased the
Company's refined products available for sale. Excluding the effects of
the Processing Agreement, sales volumes for the year ended December 31,
1999 increased 0.3% compared to the year ended December 31, 1998.
Merchandise sales increased primarily due to the increases in the selling
price of tobacco-related products, beer and wine. The decrease in sales
and operating revenues in 1998 was primarily due to a 25.2% decrease in
the average unit selling price of petroleum products offset by a 2.5%
increase in petroleum product sales volumes and an $8.7 million or 8.4%
increase in merchandise sales.
Gasoline sales accounted for 57.7% of total 1999 revenues, while
distillates and merchandise sales represented 26.5% and 9.8%,
respectively. This compares to a dollar mix from sales of 56.2%
gasoline, 27.0% distillates and 8.9% merchandise in 1998; and 55.4%
gasoline, 28.9% distillates and 6.4% merchandise in 1997.
The following table depicts the sales values of the principal classes of
products sold by the Company, which individually contributed more than
ten percent of consolidated Sales and operating revenues during the last
three years:
<TABLE>
<CAPTION>
SALES OF PRINCIPAL PRODUCTS
MILLIONS OF DOLLARS 1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Gasoline $732.6 $711.1 $892.2
No. 2 Fuel & Diesel 295.4 315.9 419.4
</TABLE>
Consolidated costs and operating expenses increased 0.8% in 1999 compared
to a decrease of 19.5% in 1998. The 1999 increase was due primarily to
the increased cost of petroleum products offset by the 17.8% decrease in
refining sales volumes, as previously discussed. The Company utilizes
the last-in, first-out (LIFO) method to value inventory resulting in a
better matching of current revenues and costs. The impact of using LIFO
as compared with using the first-in first-out method to value inventory
was to increase the Company's costs and operating expenses by
approximately $53.1 million in 1999 while decreasing costs and operating
expenses by $24.8 million in 1998. There was an increase in the 1999
average consumed cost per barrel of crude oil and feedstocks of 25.9%
compared to a decrease of 29.9% in 1998. The increase in 1999 Costs and
operating expenses was 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 $7.1 million lower of cost or market
reserve was recovered in the first quarter of 1999 due to increases in
market values of refined product prices during the period. The 1998
decrease was primarily attributable to the decrease in the price of crude
oil partially offset by a slight increase in sales volumes and the
recording of the $7.1 million lower of cost or market reserve, previously
discussed. The average consumed cost per barrel includes only those
costs directly associated with the purchase and processing of crude oil
and feedstocks. Accordingly, refinery operating expenses are not
included in the average consumed cost per barrel of crude oil and
feedstocks.
Consolidated costs and operating expenses in 1999, 1998, and 1997 include
$10.0 million, $2.6 million, and $.8 million, respectively, of litigation
costs. Additionally, 1999 and 1998 expenses include reductions of $2.1
million and $2.9 million, respectively, related to favorable resolution
of certain litigation and insurance claims. Also included in the 1997
expenses is $1.7 million relating to the closure or sale of several
marketing terminal locations and certain other corporate strategic
initiatives.
The Company's results of operations were significantly affected by its
use of the LIFO method to value inventory, which in a period of rising
prices, decreased the Company's gross margin by $53.1 million in 1999,
whereas the Company's gross margin increased $24.8 million in 1998 when
prices were falling. Increases in the cost of the Company's crude oil
and purchased feedstocks reflect industry-wide increases in the prices of
these products, which prevailed for most of the year. West Texas
Intermediate (WTI) crude oil prices increased from a low of $12.14 per
barrel at the beginning of the year to $25.69 per barrel by the end of
the year. These crude oil price increases significantly impacted the
LIFO inventory provision in 1999 as previously discussed.
<PAGE>
On October 15, 1998, the Company executed a Processing Agreement with
Statoil whereby the Company processes a monthly average of 35,000 barrels
per day of crude oil owned and supplied by Statoil at the Company's
Pasadena, Texas refinery. The Company receives a specified fee per
barrel processed and returns to Statoil a specified mix of finished
petroleum products. This Processing Agreement is scheduled to expire on
October 14, 2000.
The Company utilizes the last-in, first-out (LIFO) method to value its
inventory. The LIFO method attempts to achieve a better matching of
costs to revenues by including the most recent costs of products in Costs
and operating expenses. The impact of the Company's use of the LIFO
method was to decrease the Company's gross margin over what it would have
been had the first-in, first-out (FIFO) method of inventory valuation
been utilized in 1999 by $1.03 per barrel ($53.1 million) while
increasing the Company's gross margin by $.44 per barrel ($24.8 million)
and $.51 per barrel ($27.3 million), respectively, in 1998 and 1997. The
LIFO impact for 1999 and 1998 is net of the $14.3 million and $0.5
million decreases in gross margin attributable to lower inventory levels
resulting from the liquidation of LIFO layers, which were carried at
higher costs prevailing in prior years. There was no LIFO layer
liquidation in 1997.
Selling expenses increased 0.4% in 1999 and 11.9% in 1998. The 1999
increase is principally due to increases in labor and maintenance costs
at the Company's retail sites. Additionally, prior year selling expenses
were reduced by environmental refunds received. No such refunds were
received in 1999. The 1998 increase was primarily due to increases in
store level operating expenses and marketing support costs attributable
to the 2.1% increase in the number of retail operating units and
increases in labor rates, advertising and maintenance costs. These
increases were partially offset by the environmental refunds previously
mentioned.
Administrative expenses decreased 6.1% in 1999 compared to 1998 and
increased 9.0% in 1998 compared to 1997. The decrease in 1999 is due
primarily to a decrease in labor costs as a result of the completion of
the company-wide business process reengineering project which included a
company-wide computer system upgrade which added year 2000 capability to
the Company's computer systems. The 1998 increase was primarily due to
increases in expenses associated with the company-wide business process
reengineering project previously mentioned.
Depreciation and amortization increased 8.8% in 1999 compared to 1998 and
7.6% in 1998 compared to 1997. The 1999 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 completed in 1999. The 1998 increases were primarily
attributable to the amortization of refinery deferred turnaround expenses
related to the turnarounds performed in the second and fourth quarters of
1997 and in the first quarter of 1998. Additionally, there were
increases in amortization related to the systems development and
associated company-wide information system upgrades in 1998.
Sales, abandonments and write-downs of property, plant and equipment
increased $6.8 million in 1999. This increase is due primarily to the
sale of certain non-strategic operating retail locations near Atlanta,
Georgia. Sales, abandonments and write-downs of property, plant and
equipment for 1998 were comparable to 1997.
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 dramatically from a cash flow deficit of
$24.6 million in 1998 to a positive cash flow of $52.8 million in 1999.
The increase principally reflects improved industry margins and the
Company's demonstrated performance of realizing 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 1999. EBITDAAL decreased in 1998
from a positive $47.5 million in 1997 primarily due to poor industry-wide
margins that prevailed during the year.
REFINING RESULTS OF OPERATIONS
Refining sales and operating revenues decreased from $831.1 million in
1998 to $806.3 million in 1999. The decrease in 1999 is due primarily to
the decrease in sales volumes resulting from the Company's crude oil
based processing agreement executed in the fourth quarter of 1998 offset
by an increase in average selling price of refined products per barrel.
If the crude oil processed under the Processing Agreement had been sold
at the market price of the refined products returned to Statoil, refining
sales and operating revenues for 1999 would have been approximately
$225.0 million higher than those currently reported.
Refining gross margin before LIFO increased $77.6 million (88.6%) from
$87.6 million in 1998 to $165.2 million in 1999. The 1998 refining gross
margin before LIFO decreased $68.8 million (44.0%) from $156.4 million in
1997. 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 a period of rising prices, decreased the Company's refining gross
margin by $53.1 million in 1999 and increased the Company's gross margin
by $24.8 million in 1998 and $27.3 million in 1997 when prices were
falling. Additionally, the refining margins in 1999 and 1998 were
positively impacted by the liquidation of LIFO layers previously
discussed.
<PAGE>
Total refinery yields of distillates decreased slightly to approximately
42,800 barrels per day (bpd) (30.2%) in 1999 from 48,700 bpd (31.4%) in
1998 from 52,800 bpd (33.2%) in 1997 while total production of finished
gasoline decreased to approximately 81,200 bpd (57.4%) from 87,500 bpd
(56.5%) in 1998 from 89,000 bpd (56.5%) in 1997. Total refinery
production was approximately 141,500 bpd in 1999, 155,000 bpd in 1998,
and 159,000 bpd in 1997. These decreases in refinery production volumes
and yields are due primarily to the planned reduction in refinery
production volumes as a result of poor industry-wide refining margins
during the periods. During these periods of low refining margins, the
Company successfully optimized refining gross margin at reduced run
levels. The 1999 Pasadena refining operations were also impacted
significantly by weather related incidents in the second quarter. High
winds damaged the main cooling tower, resulting in substantially reduced
throughputs in May and an electrical storm in June damaged the FCC unit,
resulting in a two week shut down.
Refining operating expenses decreased $1.8 million or 1.4% in 1999 and
$2.2 million or 1.6% in 1998. Refining operating expenses were favorably
impacted by cost reduction initiatives at the refineries resulting in a
reduction in 1999 expenses when compared to 1998 of approximately $9.2
million. These savings were primarily driven by reductions in refinery
operating supplies, professional fees and maintenance costs. The 1999
refinery operating cost savings were partially offset by an increase in
legal expenses, primarily relating to various matters associated with the
locked-out collective bargaining unit employees at the Pasadena refinery.
The decrease in 1998 was primarily the result of a decrease in terminal
and wholesale operating expenses.
EBITDAAL from refining operations decreased from a positive cash flow of
$43.8 million in 1997 to a cash flow deficit of $24.2 million in 1998 and
increased in 1999 to a positive cash flow of $54.8 million. The trend in
the Company's refining EBITDAAL mirrors the trend in the average
industry-wide refining margins available during the three-year period.
The average annual 30-day delayed industry-wide refining margin decreased
approximately 30% from 1997 to 1998 and increased approximately 60% from
1998 to 1999.
RETAIL RESULTS OF OPERATIONS
Retail sales and operating revenues increased from $434.3 million in 1998
to $465.3 million in 1999. Retail sales and operating revenues decreased
in 1998 from $511.5 million in 1997. The 1999 increase is due primarily
to increases in the retail prices of refined petroleum products, tobacco-
related products and beer and wine while offset by a decrease in retail
gasoline sales volumes due to increased competition and aggressive
pricing strategies. The decrease in 1998 is due primarily to decreases
in the retail prices of refined petroleum products and sales volumes
offset by an increase in merchandise sales. Merchandise sales on a same
store basis increased 6.8% in 1999 and 6.6% in 1998. The merchandise
sales increases are primarily due to the increases in the selling prices
of tobacco-related products, beer and wine.
The Company's retail gasoline gross margin decreased from $.106 per
gallon in 1998 to $.092 per gallon in 1999. The retail gasoline margin
increased in 1998 by 9.2% from $.097 per gallon in 1997. The decrease in
1999 was primarily the result of retail price increases lagging behind
the rapid run-up of wholesale gasoline prices during the year.
Additionally, retail gasoline sales volumes in 1999 declined 4.6%
compared to 1998. This decrease in volume is principally the result of a
less competitive, margin focused pricing strategy coupled with increased
competition. The 1998 increase in retail gasoline margins per gallon is
primarily the result of declining wholesale prices throughout 1998 with
prices at the pump declining at a slower rate. Petroleum product sales
volumes in 1998 were comparable to 1997. 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 for further
discussion. The Company's merchandise gross margin percentage increased
slightly from 30.8% in 1998 to 31.7% in 1999. The merchandise gross
margin percentage in 1998 decreased from 31.1% in 1997. Merchandise
gross profit on a same store basis increased by 12.9% in 1999 and 4.4% in
1998. The increases in merchandise gross margin are a result of selective
merchandise margin increases as previously discussed.
Retail operating expenses increased 4.3% in 1999 and 11.8% in 1998. The
increase in retail operating expenses in 1999 was primarily due to
increases in store salaries, wages and benefits and depreciation and
amortization expenses offset by a decrease in promotional expenses.
Additionally, retail operating expenses were positively impacted in 1998
by environmental refunds that were not available to the Company in 1999.
The 1998 increase was primarily due to increases in store level operating
expenses and marketing support costs attributable to the 2.1% increase in
the number of retail operating units and increases in labor rates,
advertising and maintenance costs. At December 31, 1999, the Company
operated 249 retail gasoline facilities and 82 convenience stores
compared to 267 retail gasoline facilities and 76 convenience stores at
December 31, 1998 and 266 retail gasoline facilities and 70 convenience
stores at December 31, 1997.
EBITDAAL from retail operations decreased from a $24.0 million in 1998 to
a $16.8 million in 1999. EBITDAAL in 1998 decreased from $25.1 million
in 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents declined $2.0 million during
1999, as $17.8 million in cash flows used in investment activities and
$11.4 million in net debt repayments offset $27.2 million in net cash
provided by operating activities. The operating cash flow amount
included the January 1999 receipt of the $12 million in restricted cash
recorded as of December 31, 1998. This cash served as collateral for an
outstanding letter of credit during the implementation period for the
Company's new credit facility.
The Company generated net cash inflows from operating activities during
1999 of $27.2 million, primarily as a result of a $40.9 million cash
generation from changes in assets and liabilities, including the receipt
of restricted cash noted earlier. Rising raw material costs and product
prices resulted in higher accounts receivable and pre-LIFO adjusted
inventory balances, offset by a substantial increase in crude oil and
refined products payables. The December 31, 1999 LIFO reserve reduced
the Company's inventory balance by $55.8 million.
Net cash outflows from investment activities during 1999 consisted
principally of capital expenditures of $25.9 million (with $11.4 million
related to refining operations, $10.1 million for retail operations and
$4.3 million related to corporate and other strategic projects) and $5.8
million for refinery deferred turnaround costs and $2.2 million in
capitalized costs of software developed for the Company's own use. These
outflows from investment activities were partially offset by proceeds
from the sale of 14 non-strategic retail properties in Georgia, the sale
of a majority-owned security monitoring company and the reduction of
other long-term assets.
The cash used in financing activities during 1999 consisted of $11.4
million in net repayments of borrowings under the Secured Credit Facility
and the repayment of long-term debt.
The ratio of current assets to current liabilities was .93 to 1 and 1.12
to 1, respectively, at December 31, 1999 and 1998. If FIFO values had
been used for all inventories, the ratio of current assets to current
liabilities would have been 1.20 to 1 and 1.14 to 1 at December 31, 1999
and 1998, respectively.
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 December 31,
1999 and 1998 to cover the estimated costs of compliance with
environmental regulations which are not anticipated to be of a capital
nature. The $7.1 million liability includes accruals for issues
extending beyond the year 2000.
Environmental liabilities are subject to considerable uncertainties which
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 which would be reasonably
expected to have a material adverse effect on the Company. See ITEM 3.
LEGAL PROCEEDINGS on page 6 and Note I of the Notes to Consolidated
Financial Statements on page 35 of this report.
During 2000, the Company estimates environmental expenditures at the
Pasadena and Tyler refineries, of at least $2.5 million and $0.5 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 $0.4 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 $3.1
million.
During 1998, the Company entered into an $80 million Loan and Security
Agreement (Secured Credit Facility) to provide cash borrowings and
letters of credit. The Secured Credit Facility, which has a three-year
term beginning December 10, 1998 and is secured by certain current assets
of the Company, is to be used for general corporate and working capital
requirements. It includes limitations on additional indebtedness and
cash dividends and requires compliance with financial covenants dealing
with minimum levels of working capital and net worth.
<PAGE>
During March 1999, the Company amended the Secured Credit Facility to
provide up to $125 million of availability for cash borrowings and
letters of credit. Up to $75 million of the Secured Credit Facility is
subject to the availability of eligible collateral. As of December 31,
1999, such collateral, after reserves and the application of advance
rates, was approximately $86.1 million. The remaining $50 million of
availability, which is provided by a related party to the Company, is not
subject to the limitation of eligible collateral.
As of December 31, 1999, there were $31.7 million of available
commitments used for letters of credit and no cash borrowings outstanding
pursuant to the Secured Credit Facility. The unused commitments under
the terms of the Secured Credit Facility were $93.3 million of which $50
million was available for cash borrowings at year end. The Company pays
a fee for unused commitments under the Secured Credit Facility.
At the Company's option, the 10 7/8% Senior Notes (Notes) may be redeemed
at 105.42% of the principal amount beginning February 1, 2000 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. As of
December 31, 1999, the Indenture substantially restricted 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 December 31, 1999, 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 Purchase Money Liens
are secured by assets having a cost basis of $7.1 million and $14.4
million at December 31, 1999 and 1998, respectively. The scheduled
repayment of one of the Purchase Money Lien obligations in January 1999
resulted in the release of assets with a cost basis of approximately $6.5
million from security. The remaining principal balance is payable
monthly through May 2004.
During the first quarter of 2000, the Company negotiated agreements with
Rosemore whereby Rosemore will provide up to $66 million in performance
guarantees relative to the Company's purchase of crude oil, feedstock and
other petroleum products and up to $10 million in cash borrowing
availability. Rosemore will be compensated at competitive rates for its
performance guarantees and cash borrowing availability.
The Company's management is involved in a continual process of evaluating
growth opportunities in its core business as well as its capital resource
alternatives. Total capital expenditures and deferred turnaround costs
in 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 year 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.
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 Crown 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
this report, 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 this report, 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. (Also, see ITEM 3. LEGAL PROCEEDINGS).
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 Consolidated 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.
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 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
<PAGE>
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 estimates the sensitivity of the Company's income
before taxes to price changes which impact its refining and retail
margins based on a representative production rate for the Refineries (net
of the Statoil contract which provides a fixed margin) and a
representative amount of total gasoline sold at the Company's retail
units:
<TABLE>
<CAPTION>
EARNINGS SENSITIVITY CHANGE ANNUAL IMPACT
-------------------- ------ -------------
<S> <C> <C>
Refining margin $0.10/bbl $3.9 million
Retail margin $0.01/gal $5.0 million
</TABLE>
Based on December 31, 1999 crude oil and refined products market prices
(market prices), the Company's outstanding derivative commodity
instruments held at December 31, 1999 are anticipated to result in a
decrease in future earnings of approximately $4.2 million. If market
prices were to increase by 10%, the anticipated decrease in future
earnings would approximate $1.6 million. Similarly, if market prices
were to decrease by 10%, the anticipated decrease in futures earnings
would approximate $6.7 million.
Cash borrowings under the Secured Credit Facility bear interest based on
the prime rate or LIBOR based rates. As such, changes in these floating
interest rates could significantly impact the level of earnings in future
periods.
The Company conducts environmental assessments and remediation efforts at
multiple locations, including operating facilities and previously owned
or operated facilities. The Company accrues environmental and clean-up
related costs of a non-capital nature when it is both probable that a
liability has been incurred and the amount can be reasonably estimated.
Accruals for losses from environmental remediation obligations generally
are recognized no later than completion of the remedial feasibility
study. Estimated costs, which are based upon experience and assessments,
are recorded at undiscounted amounts without considering the impact of
inflation, and are adjusted periodically as additional or new information
is available. Expenditures for equipment necessary for environmental
issues relating to ongoing operations are capitalized.
The Company's crude oil, refined products and convenience store
merchandise and gasoline inventories are valued at the lower of cost
(based on the last-in, first-out or LIFO method of accounting) or market,
with the exception of crude oil inventory held for resale which is valued
at the lower of cost (based on the first-in first-out or FIFO method of
accounting) or market. Under the LIFO method, the effects of price
increases and decreases in crude oil and other feedstocks are charged
directly to the cost of refined products sold in the period that such
price changes occur. In periods of rising prices, the LIFO method may
cause reported operating income to be lower than would otherwise result
from the use of the FIFO method. Conversely, in periods of falling
prices the LIFO method may cause reported operating income to be higher
than would otherwise result from the use of the FIFO method.
During 1999, the Company engaged Credit Suisse First Boston (CSFB) to act
as financial advisor. CSFB is providing the Company with financial
advice and assistance in evaluating strategic alternatives to maximize
the Company's assets in both the refining and retail businesses. The
primary objective is to assure that Crown pursues those opportunities
which best enhance shareholder value. CSFB is actively engaged in the
project and meets regularly with the Company's Board of Directors. On
March 6, 2000, the Company received a letter from Rosemore, Inc.
(Rosemore), a Maryland corporation that owns approximately 49% of the
Company's outstanding Class A common stock and 11% of the Class B common
stock, proposing that Rosemore would acquire all of the outstanding
common stock not owned by Rosemore for $8.35 per share, payable in cash.
Rosemore is controlled by the family of Henry A. Rosenberg, Jr., the
Company's Chairman, President and Chief Executive Officer. The Board of
the Company established a committee of the its independent directors (the
Independent Committee) to review all strategic alternatives. During the
Independent Committee's consideration of Rosemore's offer, the Company
received an offer from Apex Oil Company, Inc., (Apex Oil) on March 9,
2000 to acquire all of the outstanding common stock of the Company not
owned by Apex Oil for $9.20 per share, payable in cash, subject to the
satisfactory completion of certain terms and conditions. Apex Oil owns
approximately 15% of the Company's outstanding Class A common stock and
approximately 4% of Class B common stock. The Independent Committee,
with the assistance of CSFB and outside counsel, is considering all
offers received in the course of its review of strategic alternatives to
enhance shareholder value. Both offers are currently scheduled to expire
on April 17, 2000 unless either an offer is otherwise accepted or
rejected prior to that date.
<PAGE>
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and non-
information technology systems and believes those systems successfully
responded to the Year 2000 date change. The Company expended $1.3
million to upgrade or replace its systems for year 2000 compliance. This
amount does not include costs to replace or upgrade systems that were
previously planned and not accelerated due to the year 2000 issue. The
Company is not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or the products
and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and
vendors throughout the year 2000 to ensure that any latent Year 2000
matters that may arise are addressed promptly.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk disclosures relating to outstanding derivative
commodity instruments are discussed in Item 7 Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 11
through 18 of this report.
[This space intentionally left blank]
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
<TABLE>
<CAPTION>
December 31
1999 1998
-------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,447 $ 14,470
Restricted cash - 12,000
Accounts receivable, less allowance
for doubtful accounts
(1999--$552, 1998--$739) 104,332 60,227
Recoverable income taxes - 616
Inventories, net of LIFO reserves
(1999 -- $55,813, 1998 -- $2,699) 69,195 80,104
Other current assets 1,428 1,411
-------- --------
TOTAL CURRENT ASSETS 187,402 168,828
INVESTMENTS AND DEFERRED CHARGES 21,666 28,634
PROPERTY, PLANT AND EQUIPMENT
Land 46,650 48,651
Petroleum refineries 389,331 379,292
Marketing facilities 214,418 213,634
Furniture and other equipment 40,024 42,687
-------- --------
690,423 684,263
Less allowance for depreciation 376,383 363,716
-------- --------
NET PROPERTY, PLANT AND
EQUIPMENT 314,040 320,548
-------- --------
$523,108 $518,010
======== ========
</TABLE>
[FN]
See notes to consolidated financial statements
</FN>
<PAGE>
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
<TABLE>
<CAPTION>
December 31
1999 1998
-------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable:
Crude oil and refined products $118,489 $ 48,466
Other 22,307 36,750
Accrued liabilities 60,685 53,730
Income tax payable 413 -
Borrowings Under Secured Credit Facility - 10,000
Current portion of long-term debt 631 1,307
TOTAL CURRENT LIABILITIES 202,525 150,253
LONG-TERM DEBT 129,180 129,899
DEFERRED INCOME TAXES 7,384 23,948
OTHER DEFERRED LIABILITIES 34,718 35,137
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 1999and in 1998 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 1999 and 5,236,217 in 1998 26,269 26,181
Additional paid-in capital 91,154 91,466
Unearned restricted stock (1,049) (1,500)
Retained Earnings 8,840 38,539
-------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY 149,301 178,773
-------- --------
$523,108 $518,010
======== ========
</TABLE>
[FN]
See notes to consolidated financial statements
</FN>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Sales and operating revenues $1,270,181 $1,264,317 $1,609,083
OPERATING COSTS AND EXPENSES
Costs and operating expenses 1,164,299 1,155,194 1,435,707
Selling expenses 87,431 87,121 77,864
Administrative expenses 21,058 22,427 20,578
Depreciation and amortization 36,995 34,017 31,623
Sales, abandonments and write-down
of property, plant and equipment (7,181) (408) 402
---------- ---------- ----------
1,302,602 1,298,351 1,566,174
---------- ---------- ----------
OPERATING (LOSS) INCOME (32,421) (34,034) 42,909
Interest and other income 2,735 3,029 2,617
Interest expense (15,015) (14,740) (14,168)
---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES (44,701) (45,745) 31,358
INCOME TAX (BENEFIT) EXPENSE (14,675) (16,365) 12,123
---------- ---------- ----------
NET (LOSS) INCOME $ (30,026) $ (29,380) $ 19,235
========== ========== ==========
EARNINGS PER COMMON SHARE:
Net (Loss) Income $ (3.04) $ (2.99) $ 1.97
========== ========== ==========
EARNINGS PER COMMON SHARE -
ASSUMING DILUTION:
Net (Loss) Income $ (3.04) $ (2.99) $ 1.94
========== ========== ==========
</TABLE>
[FN]
See notes to consolidated financial statements
</FN>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Class A Class B
Common Common
Additional
Total Stock Stock Paid-In
Shares Amount Amount Capital
--------- -------- -------- --------
- -
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 9,983,180 $ 24,087 $ 25,829 $
91,817
Comprehensive income:
Net income for 1997
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $69
Comprehensive income
Stock registered to
Participants of stock
Incentive plans 92,700 464
736
Cancellation of non-vested stock
Registered to participants of
stock incentive plans (81,700) (409)
(571)
Stock option exercises 63,988 320
557
Market value adjustments to
Unearned Restricted Stock
2,120
Other
(4)
----------- ------- ------- ------
- -
BALANCE AT DECEMBER 31, 1997 10,058,168 24,087 26,204
94,655
Comprehensive income:
Net (loss) for 1998
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $117
Comprehensive income
Stock registered to
Participants of stock
Incentive plans 85,415 427
645
Cancellation of non-vested stock
Registered to participants of
stock incentive plans (114,140) (571)
(1,649)
Stock option exercises 41,814 209
387
Market value adjustments to
Unearned Restricted Stock
(2,530)
Other (17,646) (88)
(42)
----------- ------- ------- ------
- -
BALANCE AT DECEMBER 31, 1998 10,053,611 24,087 26,181
91,466
Comprehensive income:
Net (loss) for 1999
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $175
Comprehensive income
Stock registered to
Participants of stock
Incentive plans 40,200 201
111
Stock released to participants of
stock incentive plans
227
Cancellation of non-vested stock
Registered to participants of
stock incentive plans (22,555) (113)
(56)
Market value adjustments to
Unearned Restricted Stock
(594)
----------- ------- ------- ------
- -
BALANCE AT DECEMBER 31, 1999 10,071,256 $24,087 $26,269
$91,154
=========== ======= =======
=======
</TABLE>
[FN]
See notes to consolidated financial statements
</FN>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY - CONTINUED
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Accumulated
Unearned Other
Restricted Retained Comprehensive
Stock Earnings Income
Total
--------- -------- ----------- -----
- ----
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ (2,951) $ 48,582 $ 11 $
187,375
Comprehensive income:
Net income for 1997 19,235
19,235
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $69 (128)
(128)
----
- ----
Comprehensive income
(19,107)
----
- ----
Stock registered to
Participants of stock
Incentive plans (1,200)
Cancellation of non-vested stock
Registered to participants of
stock incentive plans 980
Stock option exercises
877
Market value adjustments to
Unearned Restricted Stock (2,120)
Other
(4)
--------- ------- ------- ---
- ----
BALANCE AT DECEMBER 31, 1997 (5,291) 67,817 (117)
207,355
Comprehensive income:
Net (loss) for 1998 (29,380)
(29,380)
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $117 219
219
----
- ----
Comprehensive income
(29,161)
----
- ----
Stock registered to
Participants of stock
Incentive plans (1,072)
Cancellation of non-vested stock
Registered to participants of
stock incentive plans 2,220
Stock option exercises
596
Market value adjustments to
Unearned Restricted Stock 2,530
Other 113
(17)
--------- ------- ------- ----
- ----
BALANCE AT DECEMBER 31, 1998 (1,500) 38,437 102
178,773
Comprehensive income:
Net (loss) for 1999 (30,026)
(30,026)
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $175 327
327
----
- ----
Comprehensive income
(29,699)
----
- ----
Stock registered to
Participants of stock
Incentive plans (312)
Stock released to participants of
stock incentive plans
227
Cancellation of non-vested stock
Registered to participants of
stock incentive plans 169
Market value adjustments to
Unearned Restricted Stock 594
--------- ------- ------- ----
- ----
BALANCE AT DECEMBER 31, 1999 $ (1,049) $ 8,411 $ 429
$149,301
========= ======= =======
========
</TABLE>
[FN]
See notes to consolidated financial statements
</FN>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
<TABLE>
<CAPTION>
Year Ended December
31
1999 1998
1997
---------- ---------
- --------
<S> <C> <C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (30,026) $ (29,380)
$ 19,235
Reconciling items from net (loss)
income to net
Cash provided by operating activities:
Depreciation and amortization 36,995 34,017
31,623
(Gain) loss on sales of property, plant
and equipment (7,180) (408)
402
Gain on sale of equity investment (1,224) -
- -
Equity loss in unconsolidated subsidiaries 839 1,042
500
Deferred income taxes (15,425) (16,874)
10,310
Other deferred items 2,315 2,219
(1,446)
Changes in assets and liabilities
Accounts receivable (44,105) 42,302
10,918
Inventories 10,910 29,175
(43,275)
Other current assets (18) 686
11,110
Crude oil and refined products payable 70,023 (55,925)
(8,141)
Other accounts payable (14,443) 9,420
4,905
Accrued liabilities and other deferred
liabilities 6,657 3,447
2,443
Income tax payable 413 -
- -
Recoverable and deferred income taxes (522) 170
4,010
Restricted cash 12,000 (12,000)
- -
Deferred financing costs - (6,430)
- -
-------- --------
- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 27,209 1,461
42,594
-------- --------
- --------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Capital expenditures (25,922) (36,161)
(31,924)
Proceeds from sales of property,
plant and equipment 13,002 786
7,337
Proceeds from sale of equity investment 1,224 -
- -
Investment in affiliates - 959
136
Capitalization of software costs (2,233) (3,898)
(3,946)
Deferred turnaround maintenance (5,837) (3,461)
(14,054)
Net proceeds from long-term notes receivable 436 461
376
Other credits (charges) to deferred assets 1,523 (2,030)
466
-------- --------
- --------
NET CASH (USED IN) INVESTMENT
ACTIVITIES (17,807) (43,344)
(41,609)
-------- --------
- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt and credit agreement
borrowings 588,181 79,770
27,776
Repayments of debt and credit agreement
borrowings (599,606) (67,600)
(27,378)
Issuances of common stock - 597
877
NET CASH PROVIDED BY (USED IN) FINANCING -------- --------
- --------
ACTIVITIES (11,425) 12,767
1,275
-------- --------
- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (2,023) (29,116)
2,260
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,470 43,586
41,326
-------- --------
- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,447 $ 14,470
$ 43,586
======== ========
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized) $ 16,086 $ 21,442
$ 13,232
Income taxes 1,671 1,328
2,746
</TABLE>
[FN]
See notes to consolidated financial statements
</FN>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
NOTE A--DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS: Crown Central Petroleum Corporation and
subsidiaries (the Company) operates primarily in two business segments
as an independent refiner and marketer of petroleum products,
including petrochemical feedstocks. The Company operates two
refineries, one located near Houston, Texas with a rated capacity of
100,000 barrels per day of crude oil and another in Tyler, Texas with
a rated capacity of 52,000 barrels per day of crude oil. Its
principal business is the wholesale and retail sale of its products
through 13 product terminals located on three major product pipelines
along the Gulf Coast and the Eastern Seaboard and in the Central
United States and through a network of 331 gasoline stations,
convenience stores and mini-marts located in the Mid-Atlantic and
Southeastern United States.
Employment at the Company's Pasadena and Tyler refineries represent
11% and 7%, respectively, of the Company's total employment at
December 31, 1999. Additionally, 60% of the Pasadena refinery
employees and 72% of the Tyler refinery employees are subject to
collective bargaining agreements. The Company's collective bargaining
agreement with the Paper, Allied-Industrial, Chemical and Energy
Workers International Union (PACE), formerly the Oil Chemical & Atomic
Workers Union, covering employees at the Pasadena refinery expired on
February 1, 1996. The Pasadena refinery employees subject to the PACE
agreement were locked out by the Company on February 5, 1996. The
Company has been operating the Pasadena refinery without interruption
since the lock out and intends to continue full operations in this
manner until an agreement is reached with the collective bargaining
unit. Negotiations for a new agreement are ongoing.
The Company has a contract to process 35,000 barrels per day of crude
oil into refined product for one customer at its Pasadena refinery.
The customer retains ownership of the crude oil and the refined
products. The Company receives a fixed processing fee per barrel.
This current contract runs through October 14, 2000.
Locot Corporation, a wholly-owned subsidiary of the Company, is the
parent company of La Gloria Oil and Gas Company (La Gloria) which owns
and operates the Tyler refinery, product terminals located along the
Texas Eastern Products Pipeline system and through a subsidiary, a
pipeline gathering system in Texas.
F Z Corporation, a wholly owned subsidiary of the Company, is the
parent company of Fast Fare, Inc., which operates two convenience
store chains in six states, retailing both merchandise and gasoline.
The following summarizes the significant accounting policies and
practices followed by the Company:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of Crown Central Petroleum Corporation and all
majority-owned subsidiaries. All significant 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.
CASH AND CASH EQUIVALENTS: Cash in excess of daily requirements is
invested in marketable securities with maturities of three months or
less. Such investments are deemed to be cash equivalents for purposes
of the Statements of Cash Flows. Cash with restrictions on usage are
not deemed to be cash equivalents for purposes of the Balance Sheets
and the Statements of Cash Flows. Temporary cash overdrafts are
included in accounts payable.
ACCOUNTS RECEIVABLE: The majority of the Company's accounts receivable
relate to sales of petroleum products to third parties operating in
the petroleum industry.
INVENTORIES: The Company's crude oil, refined products, and
convenience store merchandise and gasoline inventories are valued at
the lower of cost (last-in, first-out) or market with the exception of
crude oil inventory held for resale which is valued at the lower of
cost (first-in, first-out) or market. Materials and supplies
inventories are valued at cost. Incomplete exchanges of crude oil and
refined products due the Company or owing to other companies are
reflected in the inventory accounts.
<PAGE>
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is
carried at cost. Depreciation and amortization of plant and equipment
are primarily provided using the straight-line method over estimated
useful lives. Construction in progress is recorded in property, plant
and equipment.
Expenditures which materially increase values, change capacities or
extend useful lives are capitalized in property, plant and equipment.
Routine maintenance, repairs and replacement costs are charged against
current operations. At intervals of two or more years, the Company
conducts a complete shutdown and inspection of significant units
(turnaround) at its refineries to perform necessary repairs and
replacements. Costs associated with these turnarounds are deferred
and amortized over the period until the next planned turnaround.
Upon sale or retirement, the costs and related accumulated
depreciation or amortization are eliminated from the respective
accounts and any resulting gain or loss is included in operating
results.
Depreciation of property, plant and equipment was approximately
$26,386,000, $24,288,000 and $24,307,000 in the years ended December
31, 1999, 1998 and 1997, respectively.
SOFTWARE CAPITALIZATION: Costs of developing and implementing software
designed for the Company's own use are capitalized in Property, Plant
and Equipment as incurred. Amortization is provided using the
straight-line method over the estimated remaining useful lives of the
related software.
ENVIRONMENTAL COSTS: The Company conducts environmental assessments
and remediation efforts at multiple locations, including operating
facilities, and previously owned or operated facilities. Estimated
closure and post-closure costs for active, refinery and finished
product terminal facilities are not recognized until a decision for
closure is made. Estimated closure and post-closure costs for active
and operated retail marketing facilities and costs of environmental
matters related to ongoing refinery, terminal and retail marketing
operations are recognized as follows. Expenditures for equipment
necessary for environmental issues relating to ongoing operations are
capitalized. The Company accrues environmental and clean-up related
costs of a non-capital nature when it is both probable that a
liability has been incurred and that the amount can be reasonably
estimated. Accruals for losses from environmental remediation
obligations generally are recognized no later than completion of the
remediation feasibility study. Estimated costs, which are based upon
experience and assessments, are recorded at undiscounted amounts
without considering the impact of inflation, and are adjusted
periodically as additional or new information is available.
SALES AND OPERATING REVENUES: Resales of crude oil are recorded net of
the related crude oil cost (first-in, first-out) in sales and
operating revenues. Revenues are recognized net of excise and other
taxes when products are sold, delivered and collectibility is
reasonably assured.
INTEREST CAPITALIZATION: Interest costs incurred during the
construction and preoperating stages of significant construction or
development projects is capitalized and subsequently amortized by
charges to earnings over the useful lives of the related assets.
AMORTIZATION OF GOODWILL: The excess purchase price over the estimated
fair value of assets of businesses acquired is being amortized on a
straight-line basis over 20 years.
DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses futures, forwards,
and exchange traded options to manage the price risk inherent in
purchasing crude oil in advance of the delivery date, and in
maintaining the value of 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. These instruments generally allow
for settlement at the end of their term in either cash or product.
Net realized gains and losses from these hedging strategies are
recognized in costs and operating expenses when the associated refined
products are sold. Unrealized gains and losses are deferred in other
current assets and liabilities to the extent that the associated
refined products have not been sold. While the Company's hedging
activities are intended to reduce volatility and provide an acceptable
profit margin on a portion of production, the use of such a program
can effect the Company's ability to participate in an improvement in
related refined product profit margins.
CREDIT RISK - Because the Company has a large and diverse customer
base with no single customer accounting for a significant percentage
of accounts receivable, there was no material concentration of credit
risk in these accounts at December 31, 1999. The Company evaluates
the credit worthiness of counterparties to futures, forwards and
exchange traded options and considers non-performance credit risk to
be remote. The amount of exposure with such counterparties is
generally limited to unrealized gains on outstanding contracts.
STOCK BASED COMPENSATION - The Company has adopted the disclosure
provisions prescribed by SFAS 123 which permit companies to continue
to value their stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25 while
providing pro-forma disclosures of net income and earnings per share
calculated using the fair value based method.
<PAGE>
RECLASSIFICATIONS - To conform to the 1999 presentation, the
Consolidated Statements of Operations for the year ended December 31,
1997 has been restated. Service station rental income and certain
other retail marketing recoveries, which had previously been reported
as a reduction of Selling and administrative expenses, have been
reclassified and are now reported as components of Sales and operating
revenues, and Costs and operating expenses, respectively.
Additionally, beginning with the three months ended March 31, 1998,
the Company began reporting Selling expenses and Administrative
expenses as separate amounts in the Consolidated Condensed Statements
of Operations. Selling and administrative expenses as originally
reported in the Company's Form 10-K for the year ending December 31,
1997 has been restated to reflect this change. These
reclassifications had no effect on the net income or net income per
share amounts as originally reported.
To conform to the 1999 presentation, certain Consolidated Balance
Sheet amounts at December 31, 1998 have been reclassified.
RECENTLY ISSUED PRONOUNCEMENTS - In June 1998, The FASB issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), which
requires that all derivatives be recognized as either assets or
liabilities in the statement of financial position and that those
instruments be measured at fair value. SFAS No. 133 also prescribes
the accounting treatment for changes in the fair value of derivatives
which depends on the intended use of the derivative and the resulting
designation. Designations include hedges of the exposure to changes
in the fair value of a recognized asset or liability, hedges of the
exposure to variable cash flows of a forecasted transaction, hedges of
the exposure to foreign currency translations, and derivatives not
designated as hedging instruments. In June 1999, the FASB deferred
the effective date of SFAS No. 133 for one year until fiscal years
beginning after June 15, 2000. The Company expects to adopt SFAS No.
133 in the first quarter of the year 2001. We are assessing the
impact SFAS No. 133 will have on our Consolidated Financial
Statements.
NOTE B--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
1999 1998
-------- --------
(thousands of dollars)
<S> <C> <C>
Crude oil $ 32,390 $ 26,489
Refined products 75,926 39,776
-------- --------
Total inventories at FIFO
(approximates current cost) 108,316 66,265
LIFO allowance net of lower of
cost or market reserve (53,006) (184)
-------- --------
Total crude oil and refined products 55,310 66,081
-------- --------
Merchandise inventory at FIFO
(approximates current cost) 7,943 7,950
LIFO allowance (2,807) (2,515)
-------- --------
Total merchandise 5,136 5,435
-------- --------
Materials and supplies inventory at FIFO 8,749 8,588
-------- --------
TOTAL INVENTORY $ 69,195 $ 80,104
======== ========
</TABLE>
As a result of a reduction in LIFO inventory quantities, the net loss for
1999 was decreased by approximately $9.3 million ($0.94 per share) and
the net loss for 1998 was increased by approximately $0.5 million ($.05
per share). Due to the increase in refined products prices, the reserve
of approximately $7.1 million recorded as of December 31, 1998 to reflect
valuing inventories at lower of cost or market was recovered during the
first quarter of 1999 and no such reserve was required for inventories at
December 31, 1999.
NOTE C--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consisted of the following:
<TABLE>
December 31
1999 1998
-------- --------
(thousands of dollars)
<S> <C> <C>
Unsecured 10 7/8% Senior Notes $124,841 $124,810
Purchase Money Liens 4,835 6,159
Other obligations 135 237
-------- --------
129,811 131,206
Less current portion 631 1,307
-------- --------
Long-Term Debt $129,180 $129,899
======== ========
</TABLE>
The aggregate maturities of long-term debt through 2004 are as follows
(in thousands):
2000 - $631; 2001 - $623; 2002 - $599; 2003 - $722; 2004 - $2,394.
<PAGE>
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 Indenture also included a
provision limiting liens unless the Note holders were directly secured,
equally and ratably, with any other holder of an obligation secured by a
lien.
Effective as of December 10, 1998, the Company entered into an $80
million Secured Credit Facility (Secured Credit Facility) to provide cash
borrowings and letters of credit. The Secured Credit Facility, which has
a three-year term and is secured by certain current assets of the
Company, is to 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.
During March 1999, the Company amended the Secured Credit Facility to
provide up to $125 million of availability for cash borrowings and
letters of credit. Up to $75 million of the Secured Credit Facility is
subject to availability of eligible collateral. The remaining $50 million
of availability, which is provided by a related party to the Company, is
not subject to the limitation of eligible collateral. As of December 31,
1999, eligible collateral, after reserves and the application of advance
rates, was approximately $86.1 million.
As of December 31, 1999, $31.7 million in available commitments had been
used for letters of credit and there were no cash borrowings outstanding
pursuant to the Secured Credit Facility. Cash borrowings and letters of
credits outstanding at December 31, 1998 were $10 million and $13.2
million, respectively. As of December 31, 1999, the unused commitments
under the terms of the Secured Credit Facility were $93.3 million, of
which $50 million can be borrowed in cash.
The costs associated with obtaining the Secured Credit Facility and
amending the Indenture in 1998 were $5.9 million. These costs were
capitalized and are being amortized over the life of the Secured Credit
Facility or the remaining term of the Indenture, as applicable. Such
amortization is included as a component of interest expense.
The Purchase Money Liens outstanding as of December 31, 1999, represent
loans to finance land and buildings for several service station and
convenience store locations. These borrowings are repayable over 60 to
72 months at a fixed interest rate. The Purchase Money Liens are secured
by assets having a cost basis of $7.1 million and $14.4 million at
December 31, 1999 and 1998, respectively. The scheduled repayment of one
of the Purchase Money Lien obligations in January 1999 resulted in the
release of assets with a cost basis of $6.5 million from security. The
remaining principal balance is payable monthly through May 2004.
The following interest expense amounts are reflected on the Consolidated
Statements of Operations:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997
-------- -------- --------
(thousands of dollars)
<S> <C> <C> <C>
Total interest costs incurred $ 17,212 $ 17,344 $ 16,330
Less: Capitalized interest 2,197 2,604 2,162
-------- -------- --------
INTEREST EXPENSE $ 15,015 $ 14,740 $ 14,168
======== ======== ========
</TABLE>
NOTE D--CRUDE OIL AND REFINED PRODUCT HEDGING ACTIVITIES
The net deferred loss from futures contracts (excluding forward
contracts) included in crude oil and refined product hedging strategies
was approximately $353,000 at December 31, 1999. Included in these
hedging strategies are futures contracts maturing in January, February,
and March 2000. The Company is using these contracts to defer the
pricing of approximately 3.9% of its crude oil commitments for the
aforementioned period.
<PAGE>
NOTE E--INCOME TAXES
Significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(thousands of dollars)
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $(66,357) $(65,240)
Other (35,520) (35,778)
-------- --------
Total deferred tax liabilities (101,877) (101,018)
Deferred tax assets:
Post-retirement and pension
obligations 11,538 10,747
Environmental, litigation and
other accruals 7,440 7,901
Construction and inventory costs
not currently deductible 11,351 2,457
Benefit of future tax NOL
carry forwards 45,339 31,863
Other 18,825 24,103
--------- ---------
Total deferred tax assets 94,493 77,071
--------- ---------
NET DEFERRED TAX LIABILITIES $ (7,384) $ (23,947)
========= =========
</TABLE>
No valuation allowance is considered necessary for the above deferred tax
assets. The Company has tax credit carry-forwards of approximately
$266,000 which expire in the years 2009 through 2019, an alternative
minimum tax credit carry-forward of approximately $833,000 and net
operating loss carry-forwards of approximately $116,520,000 which expire
in the years 2009 through 2019.
Significant components of the income tax (benefit) provision for the
years ended December 31 follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(thousands of dollars)
<S> <C> <C> <C>
Current:
Federal $ - $ - $ 1,062
State 750 509 750
-------- ------- -------
Total Current 750 509 1,812
Deferred:
Federal (14,154) (15,723) 10,062
State (1,271) (1,151) 249
-------- ------- -------
Total Deferred (15,425) (16,874) 10,311
-------- ------- -------
INCOME TAX (BENEFIT) EXPENSE $(14,675) $(16,365) $12,123
======== ======== =======
</TABLE>
Current state tax provision includes $750,000 of franchise taxes for each
of the years ended December 31, 1999, 1998 and 1997. In addition, the
year ended December 31, 1998 includes a franchise tax refund of $241,000
from prior periods.
The following is a reconciliation of the statutory federal income tax
rate to the actual effective income tax rate for the years ended December
31:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(thousands of dollars)
<S> <C> <C> <C>
Income tax (benefit) expense
calculated at the statutory
federal income tax rate $(15,663) $(16,011) $10,975
Amortization of goodwill and
purchase adjustment 145 145 145
State taxes (net of federal
benefit) (451) (252) 650
Other 1,294 (247) 353
-------- -------- -------
Income Tax (Benefit) Expense $(14,675) $(16,365) $12,123
======== ======== =======
</TABLE>
<PAGE>
NOTE F--CAPITAL STOCK AND NET INCOME PER COMMON SHARE
Class A Common stockholders are entitled to one vote per share and have
the right to elect all directors other than those to be elected by other
classes of stock. Class B Common stockholders are entitled to one-tenth
vote per share and have the right to elect two directors. The average
outstanding and equivalent shares excludes 199,825, 214,325 and 260,700
shares of Performance Vested Restricted Stock (PVRS) shares registered to
participants in the 1994 Long-Term Incentive Plan (Plan) at December 31,
1999, 1998 and 1997, 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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------------
- --------
1999 1998
1997
-------- --------
- --------
(dollars in thousands, except
per share data)
<S> <C> <C>
<C>
(LOSS) INCOME APPLICABLE
TO COMMON SHARES
Net (loss) income $ (30,026) $ (29,380) $
19,235
========== ===========
==========
Common shares outstanding at January 1, 1999
1998 and 1997, respectively 10,053,611 10,058,168
9,983,180
Restricted shares held by the Company at January 1,
1999, 1998 and 1997, respectively (214,325) (260,700)
(249,700)
Weighted average effect of shares of common stock
issued for stock option exercises - 35,237
18,531
Weighted average effect of PVRS shares of common stock
released to Plan participants 31,945 -
- -
----------- ---------- ---
- -------
Weighted average number of common shares outstanding,
as adjusted at December 31, 1999, 1998 and
1997, respectively 9,871,231 9,832,705
9,752,011
Effect of Dilutive Securities:
Employee stock options - -
113,060
Restricted stock awards - -
33,833
----------- ---------- ---
- -------
Weighted average number of common shares outstanding,
as adjusted at December 31, 1999, 1998 and
1997, respectively - assuming dilution 9,871,231 9,832,705
9,898,904
========== ===========
==========
EARNINGS PER SHARE:
Net (loss) income $ (3.04) $ (2.99) $
1.97
========== ===========
==========
EARNINGS PER SHARE - ASSUMING DILUTION:
Net (loss) income $ (3.04) $ (2.99) $
1.94
========== ===========
==========
</TABLE>
At December 31, 1999, the Company had non-qualified stock options
outstanding representing 1,032,372 potential common shares. Due to the
net loss from operations for the years ended December 31, 1999 and 1998,
the effect of dilutive securities under stock options and awards were
excluded from the diluted earnings per share calculations.
On February 1, 2000, the Company adopted a one-year Shareholder Rights
Plan in which rights to purchase its preferred stock will be 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, known as 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
<PAGE>
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 person
becoming the owner of a substantial block of either class. For persons
currently owning in excess of 14% of any class, however, the rights plan
"grandfathers" their current level of ownership (as indicated on such
person's federal securities law filings) plus an additional 1% of that
class.
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 a
person 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 person 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 a person 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 rights 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 shareholders. 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 at the close of business on
February 14, 2001. Due to the net loss from operations for the year ended
December 31, 1999, 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--LONG-TERM INCENTIVE PLAN
Under the terms of the 1994 Long-term Incentive Plan (Plan), the Company
may distribute to employees restricted shares of the Company's Class B
Common Stock and options to purchase Class B Common Stock. Up to 1.1
million shares of Class B Common Stock may be distributed under the Plan.
The balance sheet caption "Unearned restricted stock" is charged for the
market value of restricted shares at their grant date and changes in the
market value of shares outstanding until the vesting date, and is shown
as a reduction of stockholders' equity. The impact is further reflected
within Class B Common Stock and Additional Paid-in-Capital.
PVRS awards are subject to minimum years of service requirements from the
date of grant with earlier vesting possible subject to the attainment of
performance goals. Additionally, PVRS awards are subject to certain
other restrictions including the receipt of dividends and transfers of
ownership. As of December 31, 1999, 199,825 shares of PVRS have been
registered in the participants names and are being held by the Company
subject to the attainment of the related performance goals or years of
service. PVRS awards to employees who have left the Company are
canceled. PVRS awards granted prior to 1996 whose related performance
goals have not been achieved were forfeited.
Under the 1994 Long-Term Incentive Plan, non-qualified stock options are
granted to participants at a price not less than 100% of the fair market
value of the stock on the date of grant. The exercise period is ten
years with the options vesting one-third per year over three years after
a one-year waiting period.
Under the terms of the 1995 Management Stock Option Plan, the Company may
award to participants non-qualified stock options to purchase shares of
the Company's Class B Common Stock at a price equal to 100% of the fair
market value of the stock at the date of grant. Up to 500,000 shares of
Class B Common Stock may be distributed under the Plan. The exercise
period is ten years with the options vesting one-third per year over
three years after a one-year waiting period.
Shares of Class B Common Stock available for issuance under options or
awards amounted to 226,173 and 213,189 at December 31, 1999 and 1998,
respectively.
<PAGE>
Detail of the Company's stock options are as follows:
<TABLE>
<CAPTION>
Common Price Range
Weighted Average Price
Shares Per Share
Per Share
---------- -------------
- ----------
<S> <C> <C>
<C>
1994 LONG-TERM INCENTIVE PLAN
- -----------------------------
Outstanding - January 1, 1997 484,556 $12.81 - $19.50
$14.69
==========
Granted - 1997 166,600 $11.69
$11.69
Exercised - 1997 (4,963) $12.81 - $16.13
$13.24
Canceled - 1997 (4,536) $12.81 - $17.06
$15.37
----------
Outstanding - December 31, 1997 641,657 $11.69 - $19.50
$13.92
==========
Shares exercisable at December 31, 1997 310,142 $12.81 - $19.50
$14.66
==========
Granted - 1998 165,915 $ 9.38 - $15.00
$14.92
Exercised - 1998 (29,942) $12.81 - $17.69
$14.27
Canceled - 1998 (37,982) $11.69 - $17.69
$13.20
----------
Outstanding - December 31, 1998 739,648 $ 9.38 - $19.50
$14.17
==========
Shares exercisable at December 31, 1998 509,559 $ 9.38 - $19.50
$14.20
==========
Granted - 1999 68,600 $ 7.75
$ 7.75
Canceled - 1999 (74,610) $ 7.75 - $17.69
$13.68
----------
Outstanding - December 31, 1999 733,638 $ 7.75 - $19.50
$13.62
==========
Shares exercisable at December 31, 1999 557,713 $ 7.75 - $19.50
$14.20
==========
</TABLE>
<TABLE>
<CAPTION>
Common Price Range
Weighted Average Price
Shares Per Share
Per Share
---------- -------------
- ----------
<S> <C> <C>
<C>
1995 MANAGEMENT STOCK OPTION PLAN
- ---------------------------------
Outstanding - January 1, 1997 430,480 $13.75 - $16.06
$13.77
==========
Exercised - 1997 (59,025) $13.75
$13.75
Canceled - 1997 (32,704) $13.75
$13.75
----------
Outstanding - December 31, 1997 338,751 $13.75 - $16.06
$13.78
==========
Shares exercisable at December 31, 1997 207,388 $13.75 - $16.06
$13.78
==========
Exercised -1998 (11,872) $13.75 - $16.06
$14.27
Canceled - 1998 (1,500) $13.75
$13.75
----------
Outstanding - December 31, 1998 325,379 $13.75 - $16.06
$13.76
==========
Shares exercisable at December 31, 1998 325,379 $13.75 - $16.06
$13.76
==========
Canceled - 1999 (26,645) $13.75 - $16.06
$13.87
----------
Outstanding - December 31, 1999 298,734 $13.75 - $16.06
$13.75
----------
Shares exercisable at December 31, 1999 298,734 $13.75 - $16.06
$13.75
==========
Total outstanding - December 31, 1999 1,032,372 $ 7.75 - $19.50
$13.66
==========
Total exercisable - December 21, 1999 856,447 $ 7.75 - $19.50
$14.04
==========
</TABLE>
The weighted average remaining life for options outstanding at December
31, 1999 was approximately seven years for the 1994 Long-Term Incentive
Plan and approximately five years for the 1995 Management Stock Option
Plan.
All options were granted at an exercise price equal to the fair market
value of the common stock at the date of grant. The weighted average fair
value at the date of grant for options granted under the Long-Term
Incentive Plan was $2.15, $3.57 and $2.31 for 1999, 1998 and 1997,
respectively. There were no grants under the Management Stock Option
Plan in 1999, 1998, or 1997. The fair value of options at date of grant
was estimated using the Black-Scholes model with the following
assumptions:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN 1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Expected life (years) 3 3 3
Risk Free Interest Rate 5.50% 5.63% 5.67%
Volatility 36.6% 27.5% 27.0%
Dividend Yield 0.0% 0.0% 0.0%
</TABLE>
<PAGE>
The Company granted 40,200, 85,415 and 92,700 of shares of PVRS Awards
during 1999, 1998 and 1997, respectively. The weighted average fair value
at date of grant for PVRS Awards granted in 1999, 1998 and 1997 was
$7.75, $14.94 and $11.69, respectively, which in each case represents the
market value of the Company's Class B Common Stock at the date of grant.
The amount of compensation expense recognized for PVRS Awards was not
significant for 1999, 1998, or 1997.
Stock-based compensation costs would have increased the pretax loss by
approximately $728,000 ($455,000 after tax or $.05 per basic and diluted
share) for the year ended December 31, 1999, increased the pretax loss by
approximately $864,000 ($540,000 after tax or $.05 per basic and diluted
share) for the year ended December 31, 1998, and decreased the pretax
income by approximately $1,610,000 ($1,007,000 after tax or $.10 per
basic and diluted share) for the year ended December 31, 1997 had the
fair values of options and the PVRS granted since 1996 been recognized as
compensation expense on a straight line basis over the vesting period of
the grant giving consideration to achievement of performance objectives
where applicable. The pro-forma effect on net income for 1998 and 1997
is not representative of the pro-forma effect on net income in future
years as it does not consider the pro-forma compensation expense related
to grants made prior to 1996.
NOTE H--EMPLOYEE BENEFIT OBLIGATIONS
The Company has a defined benefit pension plan covering the majority of
full-time employees. The Company also has several defined benefit plans
covering only certain senior executives. Plan benefits are generally
based on years of service and employees' average compensation. The
Company's policy is to fund the pension plans in amounts which comply with
contribution limits imposed by law. Plan assets consist principally of
fixed income securities and stocks.
The following table sets forth the changes in the benefit obligation and
plan assets of the Company's pension plans for the years ended December
31, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
December 31
1999 1998
--------- ---------
(thousands of dollars)
<S> <C> <C>
CHANGE IN PENSION PLANS' BENEFIT OBLIGATION
Pension plans' benefit
obligation - beginning of year $ 141,701 $ 132,652
Service cost 5,379 4,913
Interest cost 9,711 8,882
Benefits paid (6,310) (5,984)
Administrative expenses (865) (843)
Actuarial (gain) or loss (17,830) 2,081
--------- ---------
Pension plans' benefit
obligation - end of year 131,786 141,701
--------- ---------
CHANGE IN PENSION PLAN ASSETS
Fair value of plan assets -
beginning of year 125,495 115,402
Actual return on plan assets 12,503 16,563
Benefits paid (5,973) (5,627)
Administrative expenses (865) (843)
--------- ---------
Fair value of plan assets -
end of year 131,160 125,495
--------- ---------
RECONCILIATION OF FUNDED STATUS
Funded status (626) (16,206)
Unrecognized actuarial (gain) or loss (13,902) 4,665
Unrecognized net (asset) at transition (433) (471)
Unrecognized prior service cost (743) (794)
--------- ---------
Net amounts recognized at end of year $ (15,704) $ (12,806)
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amounts recognized in the Balance Sheets consist of:
Year Ended December 31
1999 1998
--------- ---------
(thousands of dollars)
<S> <C> <C>
Accrued pension liability $ (16,636) $ (14,516)
Intangible asset 726 1,001
Accumulated other comprehensive income 206 709
--------- ---------
Net amounts recognized at end of year $ (15,704) $ (12,806)
========= =========
Other comprehensive income attributable
to change in additional minimum
liability recognition $ (503) $ (336)
========= =========
</TABLE>
Net periodic pension costs consist of the following components:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997
------- ------- -------
(thousands of dollars)
<S> <C> <C> <C>
Service cost - benefit earned
during the year $ 5,379 $ 4,913 $ 4,500
Interest cost on projected
benefit obligations 9,711 8,882 8,787
Expected (return) on plan assets (11,824) (10,951) (9,864)
Amortization of prior service cost (51) (51) 66
Recognized actuarial loss 58 76 53
Amortization of transition (asset)
obligation (38) (38) (38)
------- ------- -------
Net periodic pension cost $ 3,235 $ 2,831 $ 3,504
======= ======= =======
</TABLE>
Assumptions used in the accounting for the defined benefit plans as of
December 31 were:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Weighted average discount rates 8.00% 6.75% 7.00%
Rates of increase in compensation
levels 4.00% 4.00% 4.00%
Expected long-term rate of return
on assets 9.75% 9.75% 9.75%
</TABLE>
The Company's defined benefit pension plans which cover only certain
senior executives are unfunded plans. The projected benefit obligation
and accumulated benefit obligation were $6,019,000 and $5,423,000,
respectively, as of December 31, 1999, and $6,374,000 and $5,715,000,
respectively, as of December 31, 1998.
In addition to the defined benefit pension plan, the Company provides
certain health care and life insurance benefits for eligible employees
who retire from active service. The post-retirement health care plan is
contributory, with retiree contributions consisting of co-payment of
premiums and other cost sharing features such as deductibles and
coinsurance. Beginning in 1998, the Company "capped" the amount of
premiums that it will contribute to the medical plans. Should costs
exceed this cap, retiree premiums would increase to cover the additional
cost.
<PAGE>
The following table sets forth changes in the accrued cost of the
Company's post-retirement benefit plans recognized in the Company's
Balance Sheets:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998
--------- ---------
(thousands of dollars)
<S> <C> <C>
Accumulated post-retirement benefit
obligation (APBO):
Benefit obligation - beginning of year $ 16,359 $ 12,624
Service cost 429 390
Interest cost 1,132 1,058
Benefits and estimated administrative
expenses paid (1,036) (1,112)
Actuarial (gain) or loss (1,299) 3,399
--------- ---------
Benefit obligation - end of year $ 15,585 $ 16,359
========= =========
RECONCILIATION OF FUNDED STATUS
Funded status $ (15,585) $ (16,359)
Unrecognized actuarial loss 5,084 6,775
Unrecognized prior service cost (803) (921)
--------- ---------
Net amount recognized at end of year $ (11,304) $ (10,505)
========= =========
Amounts recognized in the Balance Sheets
consist of:
Accrued benefit liability $ (11,304) $ (10,505)
========= =========
</TABLE>
The weighted average discount rate used in determining the APBO was 8.00%
in 1999, 6.75% in 1998, and 7.00% in 1997.
The Company's policy is to fund postretirement costs other than pensions
on a pay-as-you-go basis.
Net periodic postretirement benefit costs include the following
components:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997
------- ------- -------
(thousands of dollars)
<S> <C> <C> <C>
Service cost $ 429 $ 390 $ 326
Interest cost on accumulated
postretirement benefit obligation 1,132 1,058 859
Amortization of prior service cost (118) (118) (118)
Recognized actuarial loss 392 332 212
------- ------- -------
Net periodic postretirement benefit
cost $ 1,835 $ 1,662 $ 1,279
======= ======= =======
</TABLE>
As a result of the expense cap implemented in 1998, no further increase
in the cost of medical care has been assumed for years subsequent to
1998. The medical trend rate assumption affects the amounts reported.
For example, a one-percentage-point change in the medical trend rate
would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
(thousands of dollars)
<S> <C> <C>
Effect on total of service
and interest cost components $ 55 $ (45)
Effect on accumulated postretirement
benefit obligation 531 (457)
</TABLE>
<PAGE>
NOTE I--LITIGATION AND CONTINGENCIES
The Company has been named as a defendant in various matters of
litigation, some of which are for substantial amounts, and involve
alleged personal injury and property damage from prolonged exposure to
petroleum, petroleum related products and substances used at its refinery
or in the petroleum refining process. The Company is a co-defendant with
numerous other defendants in a number of these suits. The Company is
vigorously defending these actions, however, the process of resolving
these matters could take several years. The liability, if any,
associated with these cases was either accrued in accordance with
generally accepted accounting principles or was not determinable at
December 31, 1999. The Company has consulted with counsel with respect
to each such proceeding or large claim which is pending or threatened.
While litigation can contain a high degree of uncertainty and the risk of
an unfavorable outcome, the eventual outcome of any such matter or group
of related matters, in the opinion of management, is not expected to have
a material adverse effect on the Company.
Like other petroleum refiners and marketers, the Company's operations are
subject to extensive and rapidly changing federal and state environmental
regulations governing air emissions, waste water discharges, and solid
and hazardous waste management activities. The Company's policy is to
accrue environmental and clean-up related costs of a non-capital nature
when it is both probable that a liability has been incurred and that the
amount can be reasonably estimated. While it is often extremely
difficult to reasonably quantify future environmental related
expenditures, the Company anticipates that continuing capital investments
will be required over the next several years to comply with existing
regulations. The Company has recorded a liability of $7.1 million as of
December 31, 1999 and 1998 relative to the estimated costs of
environmental issues of a non-capital nature. The liability is not
discounted, it is expected to be expended over the next five years and is
included in the balance sheet as a noncurrent liability. No amounts have
been accrued as receivables for potential reimbursement or as recoveries
to offset this liability.
Environmental liabilities are subject to considerable uncertainties which
affect the Company's ability to estimate its ultimate cost of remediation
efforts. These uncertainties include the exact nature and extent of the
contamination at each site, the extent of required clean-up efforts,
varying costs of alternative remediation strategies, changes in
environmental remediation requirements, the number and strength of other
potentially responsible parties at multi-party sites, and the
identification of new environmental sites.
On January 13, 2000, the Company received a Notice of Enforcement (NOE)
from the TNRCC regarding alleged state and federal air quality
violations, some of which include sulfur exceedances, arising out of a
June and July 1999 state inspection. The Company believes it has valid
legal defenses to 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.
During the first quarter of 2000, the Company received notice from the
United States Department of Justice that the government is again
considering filing a civil action against the Company for the alleged
sulfur violations already addressed by an August 31, 1998 TNRCC Agreed
Order and for additional alleged violations not covered by that Order.
The Company does not believe that the government will prevail if it files
such a complaint as the Company already has paid a $1.05 million fine for
most of the sulfur violations. Additionally, the Company believes it has
valid defenses to the other alleged violations, that the alleged
violations are DE MINIMIS in nature, or 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.
In May 1999, the Company received a notice that the United States
Department of Justice planned to bring a civil action against the Company
for a Clean Water Act violation arising out of a June 1998 oil spill at a
Wyoming exploration and production property. The Company has shut-in all
of the wells on the Wyoming leases and no longer operates those
properties. The Department of Justice demanded payment of a penalty in
the amount of $262,000. The Company has been negotiating with the EPA
and the Department of Justice. Environmental remediation of the leases
is being completed and the Department of Justice has not yet filed suit.
On October 14, 1999, the Company received a notice of violation from the
United States Environmental Protection Agency for alleged noncompliance
in 1998 with Clean Air Act reformulated gasoline specifications at the
Company's Newington and Richmond, Virginia terminals. EPA proposed a
penalty of $282,600. The Company believes the allegations have little or
no merit and is vigorously defending this enforcement action.
It is possible that the ultimate cost, which cannot be determined at this
time, could exceed the Company's recorded liability. As a result,
charges to income for environmental liabilities could have a material
effect on the results of operations in a particular quarter or year as
assessments and remediation efforts proceed or as new claims arise. In
addition, the Company has been named by the Environmental Protection
Agency and by several state environmental agencies as a potentially
responsible party at various federal and state Super fund sites.
Management is not aware of any environmental matters which would
reasonably be expected to have a material adverse effect on the Company.
<PAGE>
NOTE J--NONCANCELLABLE LEASE COMMITMENTS
The Company has noncancellable operating lease commitments for refinery,
computer, office and other equipment, transportation equipment, service
station and convenience store properties, and office space. Lease terms
range from three to ten years for refinery, computer, office and other
equipment and four to eight years for transportation equipment. The
majority of service station properties have lease terms of 20 years. The
average lease term for convenience stores is approximately 13 years. The
Corporate Headquarters office lease expires on December 31, 2003.
Certain of these leases have renewal provisions.
Future minimum rental payments under noncancellable operating lease
agreements as of December 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 11,997
2001 10,583
2002 8,990
2003 7,661
2004 6,658
After 2004 10,435
--------
Total Minimum Rental Payments $ 56,324
========
</TABLE>
Rental expense for the years ended December 31, 1999, 1998 and 1997 was
$13,543,000, $13,426,000 and $12,927,000, respectively.
NOTE K--INVESTMENTS AND DEFERRED CHARGES
Investments and deferred charges consist of the following:
<TABLE>
<CAPTION>
December 31
1999 1998
-------- --------
(thousands of dollars)
<S> <C> <C>
Deferred turnarounds $ 10,738 $ 12,570
Loan expense 7,438 8,486
Long-term notes receivable 1,518 1,955
Goodwill 552 953
Investments 15 929
Intangible pension asset 726 688
Other 679 3,053
-------- --------
INVESTMENTS AND DEFERRED CHARGES $ 21,666 $ 28,634
======== ========
</TABLE>
Accumulated amortization of goodwill was $6,039,000 and $5,638,000 at
December 31, 1999 and 1998, respectively.
NOTE L--FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers cash and cash equivalents, accounts receivable,
investments in subsidiaries, long-term notes receivable, accounts payable
and long-term debt to be its financial instruments. The carrying amount
reported in the balance sheet for cash and cash equivalents, accounts
receivable and accounts payable, represent their fair values. The fair
value of the Company's long-term notes receivable at December 31, 1999
and 1998 was estimated using a discounted cash flow analysis, based on
the assumed interest rates for similar types of arrangements. The
approximate fair value of the Company's Long-Term Debt at December 31,
1999 and 1998 was estimated using a discounted cash flow analysis, based
on the Company's assumed incremental borrowing rates for similar types of
borrowing arrangements. The fair value of its investments in
subsidiaries is not determinable since these investments do not have
quoted market prices.
The following summarizes the carrying amounts and related approximate
fair values as of December 31, 1999 and 1998, respectively, of the
Company's financial instruments whose carrying amounts do not equal its
fair value:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Carrying Approximate Carrying Approximate
Amount Fair Value Amount Fair Value
-------- -------- -------- --------
(thousands of dollars)
<S> <C> <C> <C> <C>
Assets
Long-Term Notes
Receivable $ 1,518 $ 1,365 $ 1,955 $ 1,325
Liabilities
Long-Term Debt $ 129,180 $ 128,002 $ 129,899 $ 128,544
</TABLE>
<PAGE>
NOTE M--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 on page 24 of this Annual Report on Form 10-K. Certain prior
year balances have been reclassified to conform to the 1999 presentation.
Intersegment sales and transfers are recorded at market prices. Income
or loss on intersegment sales is eliminated in consolidation.
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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999:
Refinery Retail
Operations Marketing Totals
---------- --------- ----------
<S> <C> <C> <C>
(thousands of dollars)
Revenues from external customers $ 806,274 $ 465,336 $1,271,610
Intersegment revenues 362,640 362,640
Depreciation and amortization
expense 22,319 10,917 33,236
Operating (loss) income (19,202) 11,809 (7,393)
Capital expenditures 11,446 10,128 21,574
Total assets 326,371 147,263 473,634
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998:
Refinery Retail
Operations Marketing Totals
---------- --------- ----------
<S> <C> <C> <C>
(thousands of dollars)
Revenues from external customers $ 831,133 $ 434,349 $1,265,482
Intersegment revenues 349,997 349,997
Depreciation and amortization
expense 22,303 9,419 31,722
Operating (loss) income (20,090) 12,820 (7,270)
Capital expenditures 12,408 21,458 33,866
Total assets 302,829 146,579 449,408
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997:
Refinery Retail
Operations Marketing Totals
---------- --------- ----------
<S> <C> <C> <C>
(thousands of dollars)
Revenues from external customers $1,097,327 $ 511,490 $1,608,817
Intersegment revenues 648,535 648,535
Depreciation and amortization
expense 21,074 9,104 30,178
Operating (loss) income 49,361 17,319 66,680
Capital expenditures 9,725 17,368 27,093
Total assets 363,272 137,176 500,448
</TABLE>
<PAGE>
SALES AND OPERATING REVENUES RECONCILIATION:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
----------- ----------- -----------
(thousands of dollars)
<S> <C> <C> <C>
Total external revenues
for reportable segments $ 1,271,610 $ 1,265,482 $ 1,608,817
Intersegment revenues for
reportable segments 362,640 349,997 648,535
Other revenues 107 231 898
Other adjustments (1,536) (1,396) (632)
Elimination of intersegment
revenues (362,640) (349,997) (648,535)
----------- ----------- -----------
Sales and operating revenues $ 1,270,181 $ 1,264,317 $ 1,609,083
=========== =========== ===========
</TABLE>
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.
Depreciation and amortization expense reconciliation:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- --------
(thousands of dollars)
<S> <C> <C> <C>
Depreciation and amortization expense
for reportable segments $ 33,236 $ 31,722 $ 30,178
Other depreciation and amortization
expense 3,759 2,295 1,445
-------- -------- --------
Depreciation and amortization expense $ 36,995 $ 34,017 $ 31,623
======== ======== ========
</TABLE>
Profit (loss) reconciliation:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- --------
(thousands of dollars)
<S> <C> <C> <C>
Total (loss) income for reportable
segments $ (7,393) $ (7,270) $ 66,680
Other income (loss) 684 1,018 (1,852)
Unallocated amounts:
Corporate (expenses) (23,432) (27,091) (21,988)
Net interest (expense) (14,560) (12,402) (11,482)
-------- -------- --------
(Loss) income before income taxes $(44,701) $(45,745) $ 31,358
======== ======== ========
</TABLE>
Capital expenditures reconciliation:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- --------
(thousands of dollars)
<S> <C> <C> <C>
Capital expenditures for
reportable segments $ 21,574 $ 33,866 $ 27,093
Other capital expenditures 4,348 2,295 4,831
-------- -------- --------
Total capital expenditures $ 25,922 $ 36,161 $ 31,924
======== ======== ========
</TABLE>
<PAGE>
Total assets reconciliation:
<TABLE>
<CAPTION>
December 31
1999 1998 1997
-------- -------- --------
(thousands of dollars)
<S> <C> <C> <C>
Total assets for reportable segments $ 473,634 $ 449,408 $ 500,448
Other assets 1,681,376 1,068,875 927,689
Elimination of intercompany
receivables (1,444,701) (806,072) (636,542)
Elimination of investment in
consolidated subsidiaries (187,201) (194,201) (194,201)
---------- ---------- ---------
Total assets $ 523,108 $ 518,010 $ 597,394
========== ========== =========
</TABLE>
Assets dedicated to a particular segment operation are included in that
segment's total assets. Assets that benefit both segments or are
considered corporate assets are not allocated.
Sales and operating revenues by major product:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------- ---------- ----------
(thousands of dollars)
<S> <C> <C> <C>
Petroleum Products $1,141,599 $1,140,153 $1,487,067
Convenience store merchandise
and services 118,888 112,441 103,679
</TABLE>
The Company sells all of its products in the United States.
NOTE N--SUBSEQUENT EVENTS
During 1999, the Company engaged Credit Suisse First Boston (CSFB) to act
as financial advisor. CSFB is providing the Company with financial
advice and assistance in evaluating strategic alternatives to maximize
the Company's assets in both the refining and retail businesses. The
primary objective is to assure that Crown pursues those opportunities
which best enhance shareholder value. CSFB is actively engaged in the
project and meets regularly with the Company's Board of Directors. On
March 6, 2000, the Company received a letter from Rosemore, Inc.
(Rosemore), a Maryland corporation that owns approximately 49% of the
Company's outstanding Class A common stock and 11% of the Class B common
stock, proposing that Rosemore would acquire all of the outstanding
common stock not owned by Rosemore for $8.35 per share, payable in cash.
Rosemore is controlled by the family of Henry A. Rosenberg, Jr., the
Company's Chairman, President and Chief Executive Officer. The Board of
the Company established a committee of its independent directors (the
Independent Committee) to review all strategic alternatives. During the
Independent Committees consideration of Rosemore's offer, the Company
received an offer from Apex Oil Company, Inc., (Apex Oil) on March 9,
2000 to acquire all of the outstanding common stock of the Company not
owned by Apex Oil for $9.20 per share, payable in cash, subject to the
satisfactory completion of certain terms and conditions. Apex Oil owns
approximately 15% of the Company's outstanding Class A common stock and
approximately 4% of Class B common stock. The Independent Committee,
with the assistance of CSFB and outside counsel, is considering all
offers received in the course of its review of strategic alternatives to
enhance shareholder value. Both offers are currently scheduled to expire
on April 17, 2000 unless either an offer is otherwise accepted or
rejected prior to that date.
[This space intentionally left blank]
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
Crown Central Petroleum Corporation
We have audited the accompanying consolidated balance sheets of Crown
Central Petroleum Corporation and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, changes
in common stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Crown Central Petroleum Corporation and subsidiaries at
December 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/---Ernst & Young LLP
Baltimore, Maryland
February 24, 2000
Except for Note N,
as to which the date
is March 28, 2000
<PAGE>
UNAUDITED
QUARTERLY RESULTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
Yearly
--------- --------- --------- --------- -------
- ----
<S> <C> <C> <C> <C> <C>
1999
- ----
Sales and operating revenues $ 225,165 $ 281,413 $ 359,899 $ 403,704 $
1,270,181
Gross profit 20,597 20,965 30,011 34,308
105,881
Net loss (11,830) (11,029) (6,018) (1,149)
(30,026)
Net loss per share (1.20) (1.12) (0.61) (0.12)
(3.04)
Net loss per share -
assuming dilution (1.20) (1.12) (0.61) (0.12)
(3.04)
1998
- ----
Sales and operating revenues $ 327,639 $ 339,154 $ 312,461 $ 285,063 $
1,264,317
Gross profit 13,144 36,908 44,250 14,821
109,123
Net (loss) income (13,743) (2,151) 3,083 (16,569)
(29,380)
Net (loss) income per share (1.40) (.22) .31 (1.68)
(2.99)
Net (loss) income per share -
assuming dilution (1.40) (.22) .31 (1.68)
(2.99)
</TABLE>
To conform to the presentation for the year ended December 31, 1999 and
1998, Sales and operating revenues and Gross profit amounts for the first
quarter of 1998 have been restated from those amounts originally
reported. This restatement had no effect on the Net loss or the Net loss
per share amounts previously reported.
Gross profit is defined as Sales and operating revenues less Costs and
operating expenses (including applicable property and other operating
taxes).
Per share amounts are based upon the weighted average number of common
shares outstanding at the end of each quarter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not filed a Form 8-K within the last twenty-four (24)
months reporting a change of independent auditors or any disagreement
with the independent auditors.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Following is a list of Crown Central Petroleum Corporation's directors
and executive officers, their ages and their positions and offices as of
March 1, 2000:
<TABLE>
<CAPTION>
DIRECTORS
- ---------
NAME AND AGE ON PRINCIPAL OCCUPATION FOR LAST 5 YEARS
DIRECTOR
MARCH 1, 2000 DIRECTORSHIPS IN PUBLIC CORPORATIONS
SINCE
- --------------- -------------------------------------
- --------
<S> <C>
<C>
JACK AFRICK (71) President and Chief Operating Officer,
1991
North Atlantic Trading Company, Inc.
since January 1998; Formerly, Vice
Chairman, UST, Inc. Also a director
of Tanger Factory Outlet Centers, Inc.
and Transmedia Network, Inc.
GEORGE L. BUNTING (59) Present and Chief Executive Officer,
1992
Bunting Management Group since July 1991.
Also a director of Baltimore Equitable
Society, Guilford Pharmaceuticals Inc.
and Mercantile Bankshares Corporation.
MICHAEL F. DACEY (55) President, The Evolution Consulting Group,
1991
Inc. since March 1995; Formerly, Executive
Vice President, The Chase Manhattan Bank,
N.A.
THOMAS M. GIBBONS (74) Retired. Formerly, Chairman of the Board,
1988
Chesapeake and Potomac Telephone
Companies,
part of Bell Atlantic Corporation.
PATRICIA A. GOLDMAN (57) Retired. Formerly, Senior Vice President
- - 1989
Corporate Communications, USAir, Inc.
Also a director of Erie Family Life
Insurance Company and Erie Indemnity
Company.
WILLIAM L. JEWS (48) President and Chief Executive Officer,
1992
CareFirst, Inc. since January 1998;
President and Chief Executive Officer,
Blue Cross and Blue Shield of Maryland
from April 1993 through December 1997.
Also a director of EcoLab, Inc.; Municipal
Mortgage and Equity, L.L.C. and the Ryland
Group, Inc.
THE REVEREND HAROLD RIDLEY, S.J. (60) President, Loyola College in Maryland
since 1995
July 1994.
HENRY A. ROSENBERG, JR. (70) Chairman of the Board and Chief Executive
1955
Officer of the Company since May 1975 and
President since March 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
- ------------------
NAME AND AGE ON
MARCH 1, 2000 PRINCIPAL OCCUPATION FOR LAST 5
YEARS
- --------------- ------------------------------------------
- -------------
<S> <C>
HENRY A. ROSENBERG, JR. (70) Director since 1955, Chairman of the Board
and Chief
Executive Officer since May 1975 and also
President
since March 1, 1996.
RANDALL M. TREMBLY (53) Executive Vice President since April 1996;
Senior Vice
President - Refining from July 1995 to
March 1996; Vice
President - Refining from December 1991 to
June 1995.
JOHN E. WHEELER, JR. (47) Executive Vice President - Chief Financial
Officer since
April 1998; Executive Vice President -
Chief Financial
Officer and Treasurer from February 1998
to April 1998;
Senior Vice President - Finance and
Treasurer from
October 1996 to January 1998; Senior Vice
President -
Finance from April 1996 to September 1996;
Senior Vice
President - Treasurer and Controller from
June 1994 to
March 1996.
THOMAS L. OWSLEY (59) Senior Vice President - Legal since May
1998; Vice
President - Legal from April 1983 to May
1998.
J. MICHAEL MIMS (51) Senior Vice President - Human Resources
since May 1998;
Vice President - Human Resources from June
1992 to
May 1998.
FRANK B. ROSENBERG (41) Senior Vice President - Marketing since
April 1996;
Vice President - Marketing from January
1993
to March 1996.
WILLIAM A. WOLTERS (53) Senior Vice President - Supply and
Transportation
since December 1988; Vice President -
Supply and
Logistics and Assistant Secretary from
February
1998 to December 1998; General Manager -
Raw
Material Supply and Assistant Secretary
from
September 1985 to January 1998.
PAUL J. EBNER (42) Vice President - Shared Services since
April 1996;
Vice President - Marketing Support
Services from
December 1991 to March 1996.
JAMES R. EVANS (53) Vice President - Retail Marketing since
June 1996;
General Manager of Retail Operations from
February
1995 to May 1996; General Manager of
Direct
Operations from November 1993 to January
1995.
DENNIS W. MARPLE (51) Vice President - Wholesale Sales and
Terminals since
January 1996; General Manager - Wholesale
Sales from
February 1995 to December 1995; Vice
President -
LaGloria Supply, Trading and
Transportation from
October 1989 to January 1995.
PHILLIP A. MILLINGTON (46) Vice President - Treasurer since April
1998; Chief
Financial Officer U.S. Corrections
Corporation from
May 1997 to November 1997; Chief Financial
Officer
Builders' Supply and Lumber Company, Inc.,
from
June 1995 to May 1997; Treasurer Lafarge
Corporation
November 1987 to May 1995.
DOLORES B. RAWLINGS (62) Vice President - Secretary since April
1996; Secretary
from November 1990 to March 1996.
JAN L. RIES (51) Corporate Controller since November 1996;
Marketing
Division Controller from January 1992 to
October
1996.
</TABLE>
Frank B. Rosenberg, Senior Vice President - Marketing, is the son
of Henry A. Rosenberg, Jr., Chairman of the Board, President and Chief
Executive Officer. There are no other family relationships among the
directors and the executive officers, and there is no arrangement or
understanding between any director or officer and any other person
pursuant to which the director was elected or the officer was selected.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation
of the ability and integrity of any Director or Executive Officer during
the past five years.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Chief Executive Officer and the other four most highly
compensated executive officers for all services rendered in all
capacities to the Company and its subsidiaries during the last three
fiscal years. The positions shown on the table are those held by the
officers on December 31, 1999:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND
PRINCIPAL POSITION YEAR SALARY BONUS
- ------------------------- ---- ------- -------
<S> <C> <C> <C>
Henry A. Rosenberg, Jr. 1999 $600,000
Chairman of the Board, 1998 600,000
President and Chief 1997 591,000 $321,390
Executive Officer
Randall M. Trembly 1999 $260,000
Executive Vice President 1998 255,008
1997 236,680 $163,391
John E. Wheeler, Jr. 1999 $255,004
Executive Vice President- 1998 241,671
Chief Financial Officer 1997 201,672 $ 79,868
Thomas L. Owsley 1999 $220,008
Senior Vice President- 1998 210,008
Legal 1997 188,008 $ 55,514
Frank B. Rosenberg 1999 $195,000
Senior Vice President- 1998 185,000
Marketing 1997 160,000 $ 56,983
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (CONTINUED)
LONG-TERM
COMPENSATION AWARDS
OTHER SECURITIES ALL
NAME AND ANNUAL UNDERLYING OTHER
PRINCIPAL POSITION COMPENSATION (a) OPTIONS/SARS (b) COMPENSATION (c)
- ------------------------ ---------------- ---------------- ------------
<S> <C> <C> <C>
Henry A. Rosenberg, Jr. $ 21,093 148,000 $ 23,975
Chairman of the Board, 21,659 43,900 19,847
President and Chief 20,519 50,000 20,799
Executive Officer
Randall M. Trembly $ 18,600 55,000 $ 12,130
Executive Vice President 18,600 16,400 12,837
17,250 17,600 12,170
John E. Wheeler, Jr. $ 20,817 55,000 $ 12,407
Executive Vice President- 21,761 15,500 10,607
Chief Financial Officer 18,913 7,800 9,974
Thomas L. Owsley $ 18,798 25,000 $ 11,905
Senior Vice President- 18,891 7,300 11,641
Legal 17,112 5,800 10,455
Frank B. Rosenberg $ 18,537 23,000 $ 10,007
Senior Vice President- 19,880 6,500 9,507
Marketing 18,363 6,300 8,228
</TABLE>
[FN]
- --------------
(a) These amounts include automobile allowances, gasoline
allowances, and the tax gross-ups applicable to the gasoline allowances.
Perquisites below the required reporting levels are not included in this
table.
(b) The 1999 grants are Appreciation Units, and the 1998 and the
1997 grants are stock options for the purchase of shares of Class B
Common Stock.
(c) These amounts include imputed income related to excess life
insurance, payments for executive medical insurance and the Company's
matching payments under the Savings Plans. In 1999, the imputed income
for Mr. Henry A. Rosenberg, Jr. was $12,768; for Mr. Trembly, $552 and
for Mr. Owsley, $898. The executive medical payments for each of the
officers listed in the table were $2,207. The Company's matching
payments under the Savings Plans were for Mr. Henry A. Rosenberg, Jr.,
$9,000; for Mr. Trembly, $9,371; for Mr. Wheeler, $10,200; for Mr.
Owsley, $8,800 and for Mr. Frank B. Rosenberg, $7,800.
</FN>
[This space intentionally left blank]
<PAGE>
<TABLE>
<CAPTION>
SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------
% OF TOTAL
NUMBER OF SARs
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
SARs IN FISCAL BASE EXPIRATION
NAME GRANTED(A) YEAR PRICE DATE
- ----------------------- ---------- ---------- ------ -------------
<S> <C> <C> <C> <C>
Henry A. Rosenberg, Jr. 148,000 29.51 $14.91 Dec. 31, 2001
Randall M. Trembly 55,000 10.96 14.91 Dec. 31, 2001
John E. Wheeler, Jr. 55,000 10.96 14.91 Dec. 31, 2001
Thomas L. Owsley 25,000 4.98 14.91 Dec. 31, 2001
Frank B. Rosenberg 23,000 4.59 14.91 Dec. 31, 2001
</TABLE>
[FN]
- ---------------------
(a) All of the securities shown are for Appreciation Units granted under
the Company's 1999 Long-Term Incentive Plan. The value of the Appreciation
Unit is equal to the excess of the average fair market value of the
Company's Class B Common Stock during the last thirty days of the
performance period which began on January 1, 1999 and ends on December 31,
2001 over the fair market value of the stock in the three calendar years
preceding the performance period which was $14.91 per share. There is no
potential realizable value of the Appreciation Units at assumed annual rate
of stock price appreciation of either 5% per year or 10% per year for the
three year term of the 1999 Long-Term Incentive Plan.
</FN>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(a)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARs AT FY-END
EXERCISABLE UNEXERCISABLE
---------------- ----------------
NAME OPTIONS SARS OPTIONS SARS
- ----------------------- ------- ---- ------- --------
<S> <C> <C> <C> <C>
Henry A. Rosenberg, Jr. 192,126 -- 45,934 148,000
Randall M. Trembly 55,669 -- 16,801 55,000
John E. Wheeler, Jr. 45,046 -- 12,934 55,000
Thomas L. Owsley 37,319 -- 6,801 25,000
Frank B. Rosenberg 35,346 -- 6,434 23,000
</TABLE>
[FN]
- ---------------
(a) The Options are for the purchase of Class B Common Stock. There were
no unexercised in-the-money Options or SARs at fiscal year end.
</FN>
<PAGE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR(a)
<TABLE>
<CAPTION>
NAME NUMBER OF UNITS PERFORMANCE PERIOD
- ----------------------- ---------------- ------------------
<S> <C> <C>
Henry A. Rosenberg, Jr. 148,000 January 1, 1999
December 31, 2001
Randall M. Trembly 55,000 January 1, 1999
December 31, 2001
John E. Wheeler, Jr. 55,000 January 1, 1999
December 31, 2001
Thomas L. Owsley 25,000 January 1, 1999
December 31, 2001
Frank B. Rosenberg 23,000 January 1, 1999
December 31, 2001
</TABLE>
[FN]
- -------------
(a) All of the units listed are Appreciation Units granted under the
Company's 1999 Long Term Incentive Plan. The value of the Appreciation
Unit is equal to the excess of the average fair market value of the
Company's Class B Common Stock during the last thirty days of the
performance period which began on January 1, 1999 and ends on December 31,
2001 over the fair market value of the stock in the three calendar years
preceding the performance period which was $14.91 per share.
</FN>
<TABLE>
<CAPTION>
PENSION PLAN TABLE (a)
----------------------
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 40
45
- ------------ -------- -------- -------- -------- -------- -------- --
- ------
<S> <C> <C> <C> <C> <C> <C>
<C>
$ 150,000 $ 54,000 $ 72,000 $ 94,500 $117,000 $139,500 $162,000
$184,500
200,000 72,000 96,000 126,000 156,000 186,000 216,000
246,000
250,000 90,000 120,000 157,500 195,000 232,500 270,000
307,500
300,000 108,000 144,000 189,000 234,000 279,000 324,000
369,000
400,000 144,000 192,000 252,000 312,000 372,000 432,000
492,000
500,000 180,000 240,000 315,000 390,000 465,000 540,000
615,000
600,000 216,000 288,000 378,000 468,000 558,000 648,000
738,000
</TABLE>
[FN]
- ------------------
(a) The table above reflects the retirement benefits (life annuity with
60 months certain) which would be payable under the Company's Retirement
Plan at various base salary levels and years of service projected to normal
retirement. The table assumes that the participant has earned the annual
remuneration shown in the table in every year of credited service. The
Retirement Plan is a career average plan with benefits based on taxable
compensation. Limitations imposed by the Internal Revenue Code or any
other statute are not reflected in the table since the Company's
Supplemental Retirement Income Plan for Senior Executives is designed to
provide or restore to participants the benefits that would have been
received under the Retirement Plan if calculated without regard to such
limitations. All officers at the Vice President level and above
participate in the Supplemental Retirement Income Plan. Mr. Henry A.
Rosenberg, Jr.'s normal retirement date was December 1, 1994. His credited
service at that time was 42 years and 4 months. The estimated credited
service projected to normal retirement for the other current executives
listed in the Summary Compensation Table is: Mr. Trembly, 27 years and 10
months; Mr. Wheeler, 41 years and 8 months; Mr. Owsley, 23 years and 6
months and Mr. Frank B. Rosenberg, 38 years and 7 months.
</FN>
<PAGE>
COMPENSATION OF DIRECTORS. Each director who is not an employee of the
Company or a subsidiary of the Company is paid $12,000 per year for
serving as a director and a meeting fee of $750, plus travel expenses, for
attendance at each meeting. Each non-employee director who is a member of
any standing committee of the Board of Directors other than the Executive
Committee is paid $3,000 per year for serving on each such committee. The
chairman of any committee other than the Executive Committee is paid a fee
of $1,000 for serving in that capacity. Directors who are employees
receive no separate compensation for serving on the Board, on any Board
committee or as chairman of any committee.
CONSULTING AGREEMENT. Effective November 1, 1993, Mr. Africk became a
general business adviser and consultant to the Company for which he is
paid a consultancy fee of $3,000 per month. His work in this capacity is
in addition to his service as a director, and as a member of the
Executive, the Executive Compensation and Bonus and the Nominating
Committees.
CHANGE OF CONTROL ARRANGEMENTS. All current officers at the Vice
President level and above have been designated as participants in the
Executive Severance Plan (the "Severance Plan"); however, Mr. Henry A.
Rosenberg, Jr. voluntarily withdrew from the Severance Plan in 1998.
Under the Severance Plan, as amended, if a participant is terminated
without good reason within two years of a change of control, as defined in
the Severance Plan, the participant receives credit for enhanced age and
service under the Supplemental Retirement Plan for Senior Executives (the
"SRI Plan") and the immediate payment of SRI Plan benefits. In
addition, the participant receives a payment of three times the
executive's annual salary, full payment under the annual Performance
Incentive Plan, an additional contribution equal to a three-year Company
match for participants in the Savings Plans, the continuation of certain
welfare benefits for a three-year period, a payment equal to the excise
tax on the basic severance benefits and certain other miscellaneous
benefits. The Board of Directors adopted the Severance Plan, which it
views as a typical executive benefit, to help insure stability and
continuity of employment of key management personnel at the time of a
proposed or threatened change of control, if any.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Mr. Gibbons
serves as Chairman and Ms. Goldman and Messrs. Africk and Jews are members
of the Executive Compensation and Bonus Committee. As previously noted,
Mr. Africk has a consulting agreement with the Company. There are no
Compensation Committee Interlocks.
[This space intentionally left blank]
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
OWNERS OF MORE THAN FIVE PERCENT. The following table sets forth the class
of shares of the Company's stock, and the amount and percentage of that
class, owned by all persons known by the Company to be the beneficial
owners of more than 5% of the shares of any class of the Company's stock on
December 31, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT
OF BENEFICIAL OWNER TITLE OF CLASS AMOUNT OF CLASS
- -------------------------- --------------- ---------- --------
<S> <C> <C> <C>
Rosemore "Group" (a) Class A Stock 2,401,232 49.85
One North Charles Street Class B Stock 917,051 16.73
Suite 2300
Baltimore, MD 21201
Novelly "Group" (b) Class A Stock 708,375 14.70
8182 Maryland Avenue Class B Stock 182,800 3.48
St. Louis, MO 63105
Dimensional Fund Advisors Inc.(c) Class A Stock 288,850 6.00
1299 Ocean Avenue, 11th Floor Class B Stock 291,100 5.54
Santa Monica, California 90401
Heartland Advisors, Inc. (c) Class B Stock 900,000 17.24
789 North Water Street
Milwaukee, WI 53202
Franklin Resources, Inc. (c) Class B Stock 309,600 5.89
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, CA 94403
</TABLE>
[FN]
- ---------------
(a) See Part III, Item 13 "Certain Relationships and Related
Transactions" for a description of the Rosemore "Group".
Rosemore Holdings is the holder of 2,366,526 shares of Class A
Common Stock and 591,629 shares of Class B Common Stock, and other
members of the Rosemore Group are the holders of 34,706 shares of
Class A Common Stock and 325,422 shares of Class B Common Stock.
The Class B Common Stock shown in the table includes 82,270 shares
of stock granted to members of the Rosemore Group as PVR Stock
under the 1994 Long-Term Plan and 227,472 shares that members of
the Rosemore Group have a right to acquire pursuant to Options
granted under the 1994 Long-Term Plan that vested on or before
March 1, 2000 ("Vested Options"). The percentage calculation is
based on the shares outstanding plus the shares that may be
acquired pursuant to Vested Options granted to members of the
Rosemore Group.
(b) This information was obtained from a report on Schedule 13D
dated January 14, 1983 and Amendment No. 11 dated November 8, 1999,
which were filed with the Securities and Exchange Commission (the
"Commission"). The Novelly Exempt Trust and others acknowledge
that they are a "group" as that term is used in Section 13(d)(3)
of the Exchange Act.
(c) Information concerning the stock holdings of Dimensional
Fund Advisors Inc., Heartland Advisors, Inc., and Franklin
Resources, Inc. was obtained from reports on Schedule 13G and
amendments to those schedules that have been filed with the
Commission. Each of these three entities reports that it is
registered as an investment adviser. The percentage calculation
for each is based on the shares outstanding as shown on the
Company's financial statements for the fiscal year ended December
31, 1999.
See Part II, Item 8. Financial Statements and Supplementary Data,
Notes to Consolidated Financial Statements. Note N - Subsequent
Events for a description of proposals by Rosemore, Inc. and by Apex
Oil Company, Inc., an affiliate of the Novelly Group, to acquire
the Company.
</FN>
<PAGE>
DIRECTORS AND OFFICERS. The following table sets forth the number
of shares of each class of the Company's stock and the percentage
of each class owned by each of the directors, by certain executive
officers and by all directors and officers as a group on December
31, 1999:
<TABLE>
<CAPTION>
SHARES OF SECURITIES BENEFICIALLY OWNED
ON DECEMBER 31, 1999 (a)
CLASS A COMMON STOCK CLASS B COMMON STOCK
NAME AMOUNT % AMOUNT %
- --------------------- ---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Jack Africk -- -- 500 (b)
George L. Bunting, Jr. -- -- 1,000 (b)
Michael F. Dacey 1,000 (b) -- --
Thomas M. Gibbons 200 (b) -- --
Patricia A. Goldman 100 (b) -- --
William L. Jews -- -- 200 (b)
Thomas L. Owsley 100 (b) 48,105(c) (b)
Rev. Harold Ridley, S.J. -- -- 100 (b)
Frank B. Rosenberg 1,863 (b) 47,790(c) (b)
Henry A. Rosenberg, Jr. (d) 2,399,369 49.81 869,261 16.55
Randall M. Trembly 11,774 (b) 90,184(c) 1.70
John E. Wheeler, Jr. 3,264 (b) 64,413(c) 1.22
All Directors, and 2,423,896 50.32 1,280,739(e) 22.31
Officers as a group
including those listed
above (19 individuals)
</TABLE>
[FN]
- ----------------------
(a) Each director holds sole voting and investment power over the
shares listed except for Mr. Dacey who hold his stock jointly with his
wife; however, in one or more cases the stock may be registered in the
name of a trust or retirement fund for the benefit of the director.
In the case of officers of the Company, the table includes interest in
shares held by the trustee under the Savings Plans, the Class B Common
Stock granted as PVR Stock under the 1994 Long-Term Plan (but not
shares of PVR stock granted but subsequently forfeited) and shares
subject to Options. See footnote(c).
(b) Represents less than one percent of the shares outstanding.
(c) Includes Vested Options as follows: Mr. Owsley, 37,319;
Mr. Frank B. Rosenberg, 35,346 shares; Mr. Trembly, 55,669 shares and
Mr. Wheeler, 45,046 shares. The percentage calculations are based on
the shares outstanding plus the shares that may be acquired pursuant
to the Vested Options granted to the executive.
(d) Mr. Henry A. Rosenberg, Jr. is Chairman of the Board of
Rosemore, Inc. The shares listed are the shares owned by the Rosemore
Group other than shares reported separately in the table as owned by
Frank B. Rosenberg. Of the shares listed above, Mr. Rosenberg holds
22,525 shares of Class A Common Stock and 273,070 shares (including
PVR Stock) of Class B Common Stock individually and in the Company's
Savings Plans. The Class B Common Stock shown on the table also
includes 192,126 shares that may be acquired by Mr. Rosenberg upon the
exercise of Vested Options granted under the Long-Term Plan. The
percentage calculation is based on the shares outstanding plus the
shares that may be acquired pursuant to Vested Options granted to
members of the Rosemore Group other than Frank B. Rosenberg.
(e) Includes 485,759 shares that may be acquired pursuant to
Vested Options granted under the 1994 Long-Term Plan or under the 1995
Management Stock Option Plan. The percentage calculation is based on
the shares outstanding plus the shares that may be acquired pursuant
to Vested Options.
</FN>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ROSEMORE. Rosemore Holdings, Inc. ("Rosemore Holdings"), a Maryland
corporation and a wholly owned subsidiary of Rosemore, Inc., a
Maryland corporation, owns directly over 49% of the Company's Class A
Common Stock and over 11% of the Company's Class B Common Stock.
Trusts for the benefit of Henry A. Rosenberg, Jr. and for members of
his immediate family and for the benefit of his sisters, Ruth R.
Marder and Judith R. Hoffberger and for members of their immediate
families, hold all of the Rosemore stock. Rosemore, Rosemore Holdings
and various individuals who are beneficial owners of Rosemore stock
are a "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act"); and
accordingly, the Rosemore Group has filed Schedule 13D's to report
their holdings of Class A and Class B Common Stock.
In early 1999 Rosemore agreed to participate in the Company's working
capital and letter of credit facility established pursuant to a Loan
and Security Agreement by and among Congress Financial Corporation, as
Administrative Agent for First Union National Bank and Congress
Financial Corporation, as Lenders, and Crown and various Crown
subsidiaries, as Borrowers. Rosemore's participation resulted in an
increased credit limit under this facility. Rosemore is compensated
at competitive rates for its participation in the facility.
The Company terminated its aircraft lease with General Electric
Capital Corporation in early 1999. Rosemore subsequently entered into
an aircraft lease with General Electric Capital Corporation. Crown
then assigned its lease with the Maryland Aviation Administration of
hangar space at Martin State Airport to Rosemore, and Rosemore has
purchased from the Company the leasehold improvements, furniture and
various supplies and spare parts formerly used by the Company in
connection with its operation of the aircraft and the related charter
activities.
During the first quarter of 2000, the Company negotiated agreements
with Rosemore whereby Rosemore will provide up to $66 million in
performance guarantees relative to the Company's purchase of crude
oil, feedstock and other petroleum products and up to $10 million in
cash borrowing availability. Rosemore will be compensated at
competitive rates for its performance guarantees and cash borrowing
availability.
Consulting Agreement. Mr. Africk's Consulting Agreement with the
Company is described in Item 11. Executive Compensation.
[This space intentionally left blank]
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) LIST OF FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Crown Central
Petroleum Corporation and Subsidiaries, are included in Item 8 on pages
19 through 40 of this report:
- Consolidated Statements of Operations -- Years ended December 31,
1999, 1998 and 1997
- Consolidated Balance Sheets -- December 31, 1999 and 1998
- Consolidated Statements of Changes in Common Stockholders'
Equity -- Years ended December 31, 1999, 1998 and 1997
- Consolidated Statements of Cash Flows -- Years ended December 31,
1999, 1998 and 1997
- Notes to Consolidated Financial Statements -- December 31, 1999
(a) (2) LIST OF FINANCIAL STATEMENT SCHEDULES
The schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore, have
been omitted.
(a) (3) and (c) LIST OF EXHIBITS
EXHIBIT
NUMBER
- -------
3 ARTICLES OF INCORPORATION AND BYLAWS
(a) Amended and Restated Charter of Crown Central Petroleum
Corporation was previously filed with the Registrants' Proxy
Statement dated March 15, 1996 for the Annual Meeting of
Shareholders held on April 25, 1996 as Exhibit A of Appendix A,
herein incorporated by reference.
(b) Bylaws of Crown Central Petroleum Corporation as amended and
restated at July 30, 1998 was previously filed with the
Registrant's Form 10-Q for the quarter ended June 30, 1998 as
Exhibit 3, herein incorporated by reference.
(c) 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.
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
(a) Loan and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation, herein
incorporated by reference.
(b) Amendment No. 1, effective as of March 29, 1999, to the Loan and
Security Agreement effective as of December 10, 1998 between the
Registrant and Congress Financial Corporation previously filed
with the Registrant's Form 10-Q for the quarter ended March 31,
1999 as Exhibit 10(a), herein incorporated by reference.
(c) Second Amendment, effective as of August 1, 1999, to the Loan and
Security Agreement effective as of December 10, 1998 between the
Registrant and Congress Financial Corporation previously filed
with the Registrant's Form 10-Q for the quarter ended
September 30, 1999 as Exhibit 10, herein incorporated by
reference.
(d) Third Amendment, effective as of March 16, 2000, to the Loan and
Security Agreement effective as of December 10, 1998 between the
Registrant and Congress Financial Corporation
<PAGE>
(e) Form of Indenture for the Registrant's 10 7/8% Senior Notes due
2005 filed on January 17, 1995 as Exhibit 4.1 of Amendment No. 3
to Registration Statement on Form S-3, Registration No. 33-56429,
herein incorporated by reference.
(f) First Supplemental Indenture, effective as of December 2, 1998,
to the Indenture for the Registrant's 10 7/8% Senior Notes due
2005, was previously filed as Exhibit 4(f) with the Registrant's
Form 10-K for the year ended December 31, 1998, herein
incorporated by reference.
(g) Rights Agreement dated as of February 1, 2000 between the Company
and First Union National Bank, as Rights Agent, 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.
10 MATERIAL CONTRACTS
(a) Crown Central Petroleum Corporation Retirement Plan effective as
of July 1, 1993, was previously filed with the Registrant's Form
10-K for the year ended December 31, 1993 as Exhibit 10(a),
herein incorporated by reference.
(b) First Amendment effective as of January 1, 1994 to the Crown
Central Petroleum Corporation Retirement Plan was previously
filed with the Registrant's Form 10-K for the year ended
December 31, 1997 as Exhibit 10(b), herein incorporated by
reference.
(c) Second Amendment effective as of June 29 1995 to the Crown
Central Petroleum Corporation Retirement Plan was previously
filed with the Registrant's Form 10-K for the year ended
December 31, 1997 as Exhibit 10(c), herein incorporated by
reference.
(d) Third Amendment effective as of December 18, 1997 to the Crown
Central Petroleum Corporation Retirement Plan was previously
filed with the Registrant's Form 10-K for the year ended
December 31, 1997 as Exhibit 10(d), herein incorporated by
reference.
(e) Supplemental Retirement Income Plan for Senior Executives as
Restated effective September 26, 1996 was previously filed with
the Registrant's Form 10-Q for the quarter ended September 30,
1996 as Exhibit 10(b), herein incorporated by reference.
(f) Employee Savings Plan as amended and restated effective
January 1, 1987 was previously filed with the Registrant's Form
10-K for the year ended December 31, 1995 as Exhibit 10(c),
herein incorporated by reference.
(g) Amendment effective as of September 26, 1996 to the Crown Central
Petroleum Employees Savings Plan was previously filed with the
Registrant's Form 10-Q for the quarter ended September 30, 1996
as Exhibit 10(c), herein incorporated by reference.
(h) Amendment effective as of June 26, 1997 to the Crown Central
Employees Savings Plan was previously filed with the Registrant's
Form 10-K for the year ended December 31, 1997 as Exhibit 10(h),
herein incorporated by reference.
(i) Fourth Amendment, effective as of June 25, 1998, to the Crown
Central Petroleum Corporation Employees Savings Plan was
previously filed with the Registrant's Form 10-Q for the quarter
ended June 30, 1998 as Exhibit 10, herein incorporated by
reference.
(j) Crude oil processing agreement between the Registrant and Statoil
Marketing and Trading (US) Inc. was previously filed with the
Registrant's Form 10-Q for the quarter ended September 30, 1998
as Exhibit 10, herein incorporated by reference. Certain
portions of the Agreement have been omitted because of their
confidential nature, and have been filed separately with the
Securities and Exchange Commission marked "Confidential
Treatment".
(k) Directors' Deferred Compensation Plan adopted on August 25, 1983
was previously filed with the Registrant's Form 10-Q for the
quarter ended September 30, 1983 as Exhibit 19(b), herein
incorporated by reference.
(l) The 1994 Long-Term Incentive Plan, as amended and restated
effective as of December 17, 1998, was previously filed as
Exhibit 10(l) with the Registrant's Form 10-K for the year
ended December 31, 1998, herein incorporated by reference.
(m) Amendment, effective as of March 25, 1999 to the Crown Central
Petroleum Corporation 1994 Long-Term Incentive Plan, as amended
and restated, was previously filed as Exhibit 10(m) with the
Registrant's Form 10-K for the year ended December 31, 1998,
herein incorporated by reference.
(n) Executive Severance Plan, as amended and restated effective as of
December 17, 1998, was previously filed as Exhibit 10(n) with the
Registrant's Form 10-K for the year ended December 31, 1998,
herein incorporated by reference.
(o) The 1995 Management Stock Option Plan filed on April 28, 1995 as
Exhibit 4 of Registration Statement on Form S-8, Registration No.
33-58927, herein incorporated by reference.
(p) Advisory and Consultancy Agreement dated October 28, 1993 between
Jack Africk, Director and Crown Central Petroleum Corporation was
previously filed with the Registrant's Form 10-Q for the quarter
ended September 30, 1994 as Exhibit 99, herein incorporated by
reference.
(q) Employees Supplementary Savings Plan filed on February 27, 1995
as Exhibit 4 of Registration Statement on Form S-8, Registration
No. 33-57847, herein incorporated by reference.
(r) 1999 Long-term Incentive Plan
<PAGE>
21 SUBSIDIARIES OF THE REGISTRANT
Exhibit 21 is included on page 54 of this report.
23 CONSENT OF INDEPENDENT AUDITORS
Exhibit 23 is included on page 55 of this report.
24 POWER OF ATTORNEY
Exhibit 24 is included on page 56 of this report.
27 FINANCIAL DATA SCHEDULE
(a) December 31, 1999
(b) December 31, 1998 - as revised
99 Form 11-K will be filed under cover of Form 10-K/A by June 29,
2000.
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the three months ended
December 31, 1999. Reports filed on Form 8-K during the period
from January 1, 2000 to March 28, 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.
NOTE: Certain exhibits listed on pages 51 through 53 of this report and
filed with the Securities and Exchange Commission, have been omitted.
Copies of such exhibits may be obtained from the Company upon written
request, for a prepaid fee of 25 cents per page.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
1. SUBSIDIARIES AS OF DECEMBER 31, 1999, WHICH ARE CONSOLIDATED IN THE
FINANCIAL STATEMENTS OF THE REGISTRANT; EACH SUBSIDIARY IS 100%
OWNED EITHER DIRECTLY OR THROUGH A SUBSIDIARY (EXCEPT FOR DIRECTOR
QUALIFYING SHARES) AND IS QUALIFIED TO DO BUSINESS UNDER ITS OWN
NAME.
<TABLE>
<CAPTION>
SUBSIDIARY NATION OR STATE
OF INCORPORATION
<S> <C>
Continental American Corporation Delaware
Crown Central Holding Corporation Maryland
Crown Central International (U.K.), Limited United Kingdom
Crown Central Pipe Line Company Texas
Crown Gold, Inc. Maryland
The Crown Oil and Gas Company Maryland
Crown-Rancho Pipe Line Corporation Texas
Crown Stations, Inc. Maryland
Crowncen International N.V. Netherlands Antilles
Fast Fare, Inc. Delaware
F Z Corporation Maryland
Health Plan Administrators, Inc. Maryland
La Gloria Oil and Gas Company Delaware
Locot, Inc. Maryland
McMurrey Pipe Line Company Texas
Mollies Properties, Inc. Maryland
Tiara Insurance Company Vermont
T. B. & Company, Inc. Maryland
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 24, 2000, except for
Note N, as to which the date is March 28, 2000, with respect to the
consolidated financial statements of Crown Central Petroleum Corporation
and Subsidiaries for the year ended December 31, 1999 included in this
Form 10-K/A.
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-53457) pertaining to the 1994 Long-Term
Incentive Plan and Employees Savings Plan and the Registration Statement
(Form S-8 No. 33-57847) pertaining to the Employees Supplemental Savings
Plan and the Registration Statement (Form S-8 No. 33-58927) pertaining
to the 1995 Management Stock Option Plan of Crown Central Petroleum
Corporation and Subsidiaries of our report dated February 24, 2000,
except for Note N, as to which the date is March 28, 2000, with respect
to the consolidated financial statements of Crown Central Petroleum
Corporation and Subsidiaries included in this Form 10/KA for the year
ended December 31, 1999.
/s/--ERNST & YOUNG LLP
Baltimore, Maryland
April 20, 2000
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Crown Central Petroleum
Corporation hereby severally constitute Henry A. Rosenberg, Jr., John
E. Wheeler, Jr., Jan L. Ries and Thomas L. Owsley, and each of them
singly, our true and lawful attorneys with full power to them and each
of them to sign for us in our names and in the capacities indicated
below this Report on Form 10-K for the fiscal year ended December 31,
1999 pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 and all amendments thereto.
<TABLE>
<CAPTION>
SIGNATURE TITLE
DATE
<S> <C> <C>
/s/---Henry A, Rosenberg, Jr. Chairman of the Board, President
2/24/00
Henry A. Rosenberg, Jr. and Chief Executive Officer
(Principal Executive Officer)
/s/---Jack Africk Director
2/24/00
Jack Africk
/s/---George L. Bunting, Jr. Director
2/24/00
George L. Bunting, Jr.
/s/---Michael F. Dacey Director
2/24/00
Michael F. Dacey
/s/---Thomas M. Gibbons Director
2/24/00
Thomas M. Gibbons
/s/---Patricia A. Goldman Director
2/24/00
Patricia A. Goldman
/s/---William L. Jews Director
2/24/00
William L. Jews
/s/---Harold E. Ridley, Jr. Director
2/24/00
Reverend Harold E. Ridley, Jr., S.J.
/s/---John E. Wheeler, Jr. Executive Vice President -
2/24/00
John E. Wheeler, Jr. Chief Financial Officer
(Principal Financial Officer)
/s/---Jan L. Ries Controller
2/24/00
Jan L. Ries (Chief Accounting Officer)
<PAGE>
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment on Form
10-K/A to its Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
By: /s/---Jan L. Ries
-----------------------------
Jan L. Ries
Controller and Chief Accounting
Officer
Date: April 20, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 20, 2000 by the following persons on
behalf of the registrant and in the capacities indicated:
* *
- -------------------------------- ----------------------------------
Jack Africk, Director Patricia A. Goldman, Director
* *
- -------------------------------- ----------------------------------
George L. Bunting, Jr., Director William L. Jews, Director
* *
- -------------------------------- ----------------------------------
Michael F. Dacey, Director Rev. Harold E. Ridley, Jr., S.J.,
Director
* *
- -------------------------------- ----------------------------------
Thomas M. Gibbons, Director Henry A. Rosenberg, Jr., Director
Chairman of the Board, President
and Chief Executive Officer
*By Power of Attorney (Jan L. Ries)
EXHIBIT 4(d)
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT`
----------------------------------------------
This Third Amendment to Loan and Security Agreement is made this 16th
day of March, 2000 by and among Congress Financial Corporation, and First
Union National Bank (individually and collectively, "Lender") Congress
Financial Corporation, as Administrative Agent for Lender (in such capacity
"Agent") and Crown Central Petroleum Corporation ("Crown"), Continental
American Corporation, Crown Central Holding Corporation, Crown Central Pipe
Line Company, Crown-Rancho Pipe Line Corporation, Crown Stations, Inc., FZ
Corporation, Fast Fare, Inc., La Gloria Oil and Gas Company, Locot, Inc.,
McMurrey Pipe Line Company, Mollie's Properties, Inc. and Crowncen
International N.V. (each of such parties, including Crown, being referred
to herein, individually and collectively, as "Borrower").
RECITALS
--------
WHEREAS, Borrower, Agent and Lender entered into a certain Loan and
Security Agreement dated December 10, 1998 (together with all amendments,
modifications, addenda and supplements, the "Loan Agreement") and related
documents, evidencing certain financing arrangements as more particularly
described therein.
WHEREAS, Borrower, Agent and Lender entered into an Amendment No. 1 to
Loan and Security Agreement on March 29, 1999, to reflect certain
modifications to the terms and conditions of the Loan Agreement.
WHEREAS, Borrower, Agent and Lender entered into an Amendment No. 2 to
Loan and Security Agreement on August 1, 1999, to make certain technical
corrections to the terms and conditions of the Loan Agreement.
WHEREAS, The parties wish to make certain additional modifications to
the Loan Agreement and subject to the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Capitalized terms used herein, which are not otherwise defined
herein, shall have the respective meanings ascribed thereto in the Loan
Agreement.
2. Section 3.1(d) of the Loan Agreement is hereby deleted in its
entirety and there shall be substituted in lieu thereof the following:
"(d) Interest shall be payable to Agent, for the account of
Lender: (i) in the case of Base Rate Loans, monthly in arrears on the last
day of each calender month, (ii) in the case of LIBOR Rate Loans, on each
monthly anniversary of the first day of the applicable LIBOR Interest
Period and (iii) in the case of any Loan, when such Loan shall be due
(whether at maturity, by reason of notice of prepayment or acceleration, or
otherwise) or converted, but only to the extent then accrued on the amount
then so due or converted."
3. Section 9.12 of the Loan Agreement is hereby deleted in its
entirety and there shall be substituted in lieu thereof the following:
"9.12 MINIMUM NET ADJUSTED WORKING CAPITAL. Borrowers shall
cause Adjusted Current Assets to exceed consolidated current liabilities by
(a) $10,000,000 at the end of each fiscal quarter, commencing with the
fiscal quarter ending March 31, 2000, and (b) $25,000,000 at the end of
each fiscal quarter thereafter."
4. Section 9.13 of the Loan Agreement is hereby deleted in its
entirety and there shall be substituted in lieu thereof the following:
"9.13 MINIMUM FIFO TANGIBLE NET WORTH. Borrowers shall cause
FIFO Tangible Net Worth to be at least (a) $150,000,000 at the end of each
fiscal quarter, commencing with the fiscal quarter ending March 31, 2000,
and (b) $140,000,000 at the end of each fiscal quarter thereafter."
5. In consideration of this Amendment, Borrower shall pay to
Lender an amendment fee in the amount of $25,000, which shall fully be
earned and due and payable on the date hereof.
6. Borrower represents, warrants and covenants with and to Lender
as follows, which representations, warranties and covenants are continuing
and shall survive the execution and delivery hereof, and the truth and
accuracy of, or compliance with each, together with the representations,
warranties and covenants in the other Financing Agreements, being a
continuing condition of the making of Loans by Lender to Borrower:
(a) No Event of Default or act, condition or event which with
notice or passage of time or both would constitute an Event of Default
exists or has occurred as of the date of this Amendment (after giving
effect to the amendments to the Loan Agreement made by this Amendment).
(b) This Amendment has been duly executed and delivered by
Borrower and is in full force and effect as of the date hereof and the
agreements and obligations of Borrower contained herein constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
7. The effectiveness of the amendments contained herein shall be
subject to the satisfaction of each of the following conditions, in a
manner satisfactory to Agent and its counsel:
(a) Agent shall have received this Third Amendment to the
Loan Agreement duly authorized, executed and delivered by the parties
hereto;
(b) Agent shall have received the consents to this Amendment
from each Lender and from Rosemore; and
(c) No Event of Default, or event, act or condition which
with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred.
8. Except as expressly amended herein, the terms and conditions of
the Loan Agreement are hereby reaffirmed and ratified in all respects, and
Borrower reaffirms each of the representations and warranties under the
Loan Agreement made by it, as if said representations and warranties were
made and given on and as of the date hereof.
9. The parties hereto shall execute and deliver such additional
documents and take such additional action as may be reasonably necessary or
desirable to effectuate the provisions and purposes of this Amendment.
10. The validity, interpretation and enforcement of this Amendment
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity
or otherwise, shall be governed by the internal laws of the State of New
York (without giving effect to principles of conflicts of laws).
11. This Amendment shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors and assigns.
12. The headings listed herein are for convenience only and do not
constitute matters to be construed in interpreting this Amendment.
13. The Amendment may be executed in any number of counterparts
and by different parties on separate counterparts (including by facsimile
transmission of executed signature pages hereto), each of which
counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute
but one and the same Amendment. This Amendment shall become effective upon
the execution and delivery of a counterpart hereof by each of the parties
hereof.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be duly executed the date and year first above written.
CROWN CENTRAL PETROLEUM CORPORATION
By:--/s/ John E. Wheeler, Jr.
-------------------------------
John E. Wheeler, Jr., Executive
Vice President and Chief Financial
Officer
CONTINENTAL AMERICAN CORPORATION
By: --/s/ John E. Wheeler, Jr.
-------------------------------
John E. Wheeler, Jr., President
CROWN CENTRAL HOLDING CORPORATION
By: --/s/ John E. Wheeler, Jr.
--------------------------------
John E. Wheeler, Jr., President
CROWN CENTRAL PIPE LINE COMPANY
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
CROWN-RANCHO PIPE LINE CORPORATION
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
CROWN STATIONS, INC
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
F Z CORPORATION
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
FAST FARE, INC.
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
LA GLORIA OIL AND GAS COMPANY
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
LOCOT, INC.
By: --/s/ John E. Wheeler, Jr.
----------------------------------
John E. Wheeler, Jr., President
MCMURREY PIPE LINE COMPANY
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., President
MOLLIE'S PROPERTIES, INC.
By: --/s/ John E. Wheeler, Jr.
------------------------------------
John E. Wheeler, Jr., Vice President
CROWNCEN INTERNATIONAL N.V.
By: --/s/ John E. Wheeler, Jr.
---------------------------------
John E. Wheeler, Jr., Supervisory
Director
<PAGE>
AGREED AND ACCEPTED:
CONGRESS FINANCIAL CORPORATION,
as Agent
By:--/s/ David Stair
- --------------------
Name: David Stair
Title: First Vice President
CONSENTED TO:
ROSEMORE HOLDINGS, INC.
By:--/s/ Kenneth H. Trout
- ---------------------------
Name: Kenneth H. Trout
Title: Executive Vice President and COO
CONGRESS FINANCIAL CORPORATION
as Lender
By:--/s/ David Stair
- --------------------
Name: David Stair
Title: First Vice President
FIRST UNION NATIONAL BANK
as Lender
By: --/s/ Will Fee
- ----------------------
Name: William J. Fee
Title: Senior Vice President
K:\RENBAUM\Congress Financial\Crown Central\Third Amendment to LSA.wpd
EXHIBIT 10(r)
CROWN CENTRAL PETROLEUM CORPORATION
1999 LONG-TERM INCENTIVE PLAN
SECTION 1: ESTABLISHMENT AND PURPOSE
The purpose of the Crown Central Petroleum Corporation 1999 Long-Term
Incentive Plan (the "Plan") is to benefit the Corporation and its
Subsidiaries. The Plan is also intended to (i) attract and retain
persons eligible to participate in the Plan; (ii) encouraging high levels
of performance by individuals who are key to the success of the
Corporation and its Subsidiaries, by means of appropriate incentives;
(iii) provide incentive compensation opportunities that are competitive
with those of other similar companies; and (iv) further identify
Participants' interests with those of the Company through compensation
that is based on the Company's financial performance; and thereby promote
the long-term financial interest of the Company and its shareholders.
SECTION 2: DEFINITIONS
The following terms, as used herein, shall have the meaning specified:
A. APPRECIATION UNIT. An Award that is based on the future
appreciation in the Fair Market Value of the Company's Common Stock
during a specified time.
B. AWARD. Any award or benefit granted under the Plan, including,
without limitation, Appreciation Units.
C. AWARD AGREEMENT. An agreement described in Section 5 hereof
entered into between the Corporation and a Participant, setting forth the
terms and conditions applicable to the Award granted to the Participant.
D. BOARD OF DIRECTORS. The Board of Directors of the Corporation as
it may be comprised from time to time.
E. CAUSE. An act that constitutes cause for termination of
employment under the Corporation or Subsidiary's normal personnel
practices.
F. CODE. The Internal Revenue Code of 1986, as amended, and any
successor statute, and the regulations promulgated thereunder, as it or
they may be amended from time to time.
G. COMMITTEE. The Committee as defined in Section 8 hereof.
H. CORPORATION. Crown Central Petroleum Corporation, and any
successor corporation.
I. EMPLOYEE. Officers and other key Employees of the Corporation or
a Subsidiary, but excluding directors who are not also officers or
Employees of the Corporation.
J. EXCHANGE ACT. The Securities Exchange Act of 1934, and any
successor statute, as it may be amended from time to time.
K. FAIR MARKET VALUE. The average of the highest and lowest sale
price of the Stock as reported on the American Stock Exchange on the
relevant date, or if no sale of the Stock is reported for such date, the
next preceding day for which there is a reported sale.
L. PARTICIPANT. Any Employee who has been granted an Award pursuant
to this Plan.
M. PERFORMANCE PERIOD. A specified period of time over which the
payment of an Award is contingent on the achievement of performance or
other objectives.
N. STOCK. Shares of Class B Common Stock of the Corporation, par
value $5 per share, or any security of the Corporation issued in
substitution, exchange or lieu thereof.
O. SUBSIDIARY. Any corporation in which the Corporation, directly or
indirectly, controls 50% or more of the total combined voting power of
all classes of such corporation's stock.
SECTION 3: PARTICIPATION
Persons eligible for Awards shall consist of Employees who hold positions
of significant responsibility with the Corporation and/or a Subsidiary or
whose performance or potential contribution, in the judgment of the
Committee, will benefit the future success of the Corporation and/or a
Subsidiary.
SECTION 4: AWARDS
a. The Committee may grant Awards such as, but not limited to,
Appreciation Units, which are contingent on the achievement of
performance or other objectives during a specified time.
b. Subject to the terms and conditions of the Plan, the Committee
shall determine and designate, from time to time, from among the eligible
Employees, those persons who will be granted one or more Awards under the
Plan. In the discretion of the Committee, a Participant may be granted
more than one Award.
SECTION 5: AWARD AGREEMENTS
a. Each Award under the Plan shall be subject to such terms and
conditions, not inconsistent with the Plan, as the Committee shall, in
its sole discretion, prescribe. The terms and conditions of any Award to
any Participant shall be reflected in such form of written document as is
determined by the Committee.
A copy of such document shall be provided to the Participant, and the
Committee may require that the Participant shall sign a copy of such
document. Such document is referred to in the Plan as an
"Award Agreement."
B. AWARD AGREEMENTS MAY INCLUDE THE FOLLOWING TERMS:
1. NON-ASSIGNABILITY. A provision that no Award shall be assignable
or transferable except by will or by laws of descent and distribution and
that, during the lifetime of a Participant, any Award shall be payable
only to the Participant or to his or her guardian or legal
representative.
2. TERMINATION OF EMPLOYMENT.
a. A provision describing the treatment of an Award in the event of
the retirement, disability, death or other termination of a Participant's
employment with the Corporation or a Subsidiary, including but not
limited to terms relating to the vesting, forfeiture or cancellation of
an Award in such circumstances. Participants who terminate employment
due to retirement, permanent disability, or death prior to the
satisfaction of applicable conditions and restrictions associated with
their Award(s) may be entitled to a prorated Award(s) as and to the
extent determined by the Committee.
b. A provision that for purposes of the Plan, (i) a transfer of an
Employee from the Corporation to a Subsidiary or affiliate of the
Corporation, whether or not incorporated, or vice versa, or from one
Subsidiary or affiliate of the Corporation to another, and (ii) a leave
of absence, duly authorized in writing by the Corporation, shall not be
deemed a termination of employment.
<PAGE>
c. A provision describing the effect of an event of Cause on an
Award.
3. WITHHOLDING. A provision requiring the withholding of applicable
taxes required by law from all amounts paid in satisfaction of an Award.
4. EXECUTION. A provision stating that no Award is enforceable until
the Award Agreement or a receipt has been signed by the Participant and
the Corporation or a Subsidiary. By executing the Award Agreement or
receipt, a Participant shall be deemed to have accepted and consented to
any action taken under the Plan by the Committee, the Board of Directors
or their delegates.
5. REPLACEMENT AND SUBSTITUTION. Any provisions (i) permitting the
surrender of outstanding Awards held by the Participant in order to
exercise or realize rights under other Awards, or in exchange for the
grant of new Awards under similar or different terms or (ii) requiring
holders of Awards to surrender outstanding Awards as a condition
precedent to the grant of new Awards under the Plan.
6. OTHER TERMS. Such other terms as the Committee may determine are
necessary and appropriate to effect an Award to the Participant,
including, but not limited to, the term of the Award, vesting provisions,
any requirements for continued employment with the Corporation or a
Subsidiary, any other restrictions or conditions (including performance
goals) on the Award and the method by which or conditions lapse, the
effect on the Award of a change in control of the Corporation, the amount
or value of Awards, and the terms, if any, pursuant to which a
Participant may elect to defer the receipt of compensation under an
Award.
SECTION 6: AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, suspend or discontinue the
Plan, in whole or in part. The Committee may at any time alter or amend
any or all Award Agreements under the Plan to the extent permitted by
law, but no such alteration or amendment shall impair the rights of any
holder of an Award without the holder's written consent.
SECTION 7: PAYMENT OF AWARDS
All Award settlements are made as lump sum cash payments, such payments
to be delivered as soon as practicable after the end of the Performance
Period. Any Award settlement, including payment deferrals, may be
subject to such conditions, restrictions and contingencies, as the
Committee shall determine. The Committee may permit or require the
deferral of any Award payment, subject to such rules and procedures as it
may establish, which may include provisions for the payment or crediting
of interest.
SECTION 8: ADMINISTRATION
a. The Plan and all Awards granted pursuant thereto shall be
administered by a Committee of the Board of Directors. The members of
the Committee shall be designated by the Board of Directors. Unless the
Board provides otherwise, the Committee shall be the Executive
Compensation and Bonus Committee of the Board of Directors. A majority
of the members of the Committee shall constitute a quorum. The vote of a
majority of a quorum shall constitute action by the Committee.
b. The Committee shall have the power to interpret and administer the
Plan. All questions of interpretation with respect to the Plan, or
rights granted and the terms of any Award Agreements, including the
timing, pricing, and amounts of Awards, shall be determined by the
Committee, and its determination shall be final and conclusive upon all
parties in interest. The Committee's determinations under the Plan need
not be uniform and may be made by it selectively among Employees who
receive, or are eligible to receive, Awards under the Plan, whether or
not such persons are similarly situated.
c. In the event of any conflict between an Award Agreement and this
Plan, the terms of this Plan shall govern.
d. The Committee may delegate to the officers or Employees of the
Corporation and its Subsidiaries the authority to execute and deliver
such instruments and documents, to do all such acts and things, and to
take all such other steps deemed necessary, advisable or convenient for
the effective administration of the Plan in accordance with its terms and
purpose, except that the Committee may not delegate any discretionary
authority with respect to substantive decisions or functions regarding
the Plan or Awards including, but not limited to, decisions regarding the
timing, eligibility, pricing, amount or other material terms of such
Awards. Any such delegation may be revoked by the Committee at any time.
e. The Company and Subsidiaries shall furnish the Committee with such
data and information as it determines may be required for it to discharge
its duties. The records of the Company and Subsidiaries as to an
employee's or Participant's employment, termination of employment, leave
of absence, reemployment and compensation shall be conclusive on all
persons unless determined to be incorrect. Participants and other
persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information, as the Committee considers desirable
to carry out the terms of the Plan.
SECTION 9: ADJUSTMENT PROVISIONS
a. In the event of any change in the outstanding shares of Stock by
reason of a stock dividend or split, recapitalization, merger or
consolidation (whether or not the Corporation is a surviving
corporation), reorganization, combination or exchange of shares or other
similar corporate changes or an extraordinary dividend payback in cash or
property, the Committee may adjust Awards to preserve the benefits or
potential benefits of the Awards.
b. The Committee shall make any further adjustments as it deems
necessary to ensure equitable treatment of any holder of an Award as the
result of any other transaction affecting the Plan not described in (a),
or as is required or authorized under the terms of any applicable Award
Agreement.
c. The existence of the Plan and the Awards granted hereunder shall
not affect or restrict in any way the right or power of the Board of
Directors or the shareholders of the Corporation to make or authorize any
adjustment, recapitalization, reorganization or other capital structure
of its business, any merger or consolidation of the Corporation, any
issue of bonds, debentures, preferred or prior preference stock ahead of
or affecting the Stock or the rights thereof, the dissolution or
liquidation of the Corporation or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding.
SECTION 10: CHANGE OF CONTROL
a. In the event of a change of control of the Corporation, in
addition to any action required or authorized by the terms of an Award
Agreement, the Committee may, in its sole discretion unless otherwise
provided in an Award Agreement, take any of the following actions as a
result, or in anticipation, of any such event:
1. accelerate time periods for purposes of vesting in, or realizing
gain from, any outstanding Award made pursuant to this Plan;
2. make adjustments or modifications to outstanding Awards, as the
Committee deems appropriate to maintain and protect the rights and
interests of Participants following such change of control.
Any such action approved by the Committee shall be conclusive and binding
on the Corporation and all Participants.
b. For purposes of this Section, a change of control shall mean the
following:
<PAGE>
1. A tender offer or exchange offer is made whereby the effect of
such offer is to take over and control the affairs of the Corporation,
and such offer is consummated for the ownership of securities of the
Corporation representing twenty percent (20%) or more of the combined
voting power of the Corporation's then outstanding voting securities.
2. The Corporation is merged or consolidated with another corporation
and, as a result of such merger or consolidation, less than seventy-five
percent (75%) of the combined voting power of the surviving or resulting
corporation shall then be owned in the aggregate by the former stock
holders of the Corporation.
3. The Corporation transfers substantially all of its assets to
another corporation or entity that is not a wholly owned subsidiary of
the Corporation.
4. Any person (as such term is used in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act) other than a person included within the definition
of Rosenberg Shareholder in Section II.6, Stock Not Subject to the
Control Share Act, of the Corporation's Bylaws (or any group controlled
by or consisting of persons included within the definition of Rosenberg
Shareholder) is or becomes the beneficial owner, directly or indirectly,
of securities of the Corporation representing twenty percent (20%) or
more of the combined voting power of the Corporation's then outstanding
securities.
5. As the result of a tender offer, merger, consolidation, sale of
assets, or contested election, or any combination of such transactions,
the persons who were members of the Board of Directors of the Corporation
immediately before the transaction, cease to constitute at least a
majority thereof.
6. As the result of any sale, exchange, business combination, joint
venture or other transaction with a third party or any combination of
such transactions: (A) the Corporation's refining capacity is reduced to
less than 80,000 barrels per day, (B) for a period in excess of two
years, the refining capacity over which the Corporation will have
operational control and market risk is less than 80,000 barrels per day,
or (C) the Corporation has less than 175 company operated and dealer
retail units.
SECTION 11: UNFUNDED PLAN
a. The Plan shall be unfunded. No provision of the Plan or any Award
Agreement will require the Corporation or its Subsidiaries, for the
purpose of satisfying any obligations under the Plan, to purchase assets
or place any assets in a trust or other entity to which contributions are
made or otherwise to segregate any assets, nor will the Corporation or
its Subsidiaries maintain separate bank
<PAGE>
accounts, books, records or other evidence of the existence of a
segregated or separately maintained or administered fund for such
purposes.
b. Participants will have no rights under the Plan other than as
unsecured general creditors of the Corporation and its Subsidiaries,
except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they will have the
same rights as other employees under generally applicable law.
SECTION 12: LIMITS OF LIABILITY
a. Any liability of the Corporation or a Subsidiary to any
Participant with respect to an Award shall be based solely upon
contractual obligations created by the Plan and the Award Agreement.
b. Neither the Corporation nor a Subsidiary, nor any member of the
Board of Directors or of the Committee, nor any other person
participating in any determination of any question under the Plan, or in
the interpretation, administration or application of the Plan, shall have
any liability to any party for any action taken or not taken in good
faith under the Plan.
SECTION 13: RIGHTS OF EMPLOYEES
a. Status as an eligible Employee shall not be construed as a
commitment that any Award will be made under this Plan to such eligible
Employee or to eligible Employees generally.
b. Nothing contained in this Plan or in any Award Agreement (or in
any other documents related to this Plan or to any Award or Award
Agreement) shall confer upon any Employee or Participant any right to
continue in the employ or other service of the Corporation or a
Subsidiary or constitute any contract or limit in any way the right of
the Corporation or a Subsidiary to change such person's compensation or
other benefits or to terminate the employment or other service of such
person with or without cause.
SECTION 14: TERM
The Plan shall be adopted by the Board of Directors effective as of
January 1, 1999 and shall remain in effect until suspended or terminated
by them.
SECTION 15: REQUIREMENTS OF AND GOVERNING LAW
The Plan, the Award Agreements and all actions taken hereunder or
thereunder shall be governed by, and construed in accordance with, the
laws of the state of Maryland without regard to the conflict of law
principles thereof.
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
EXHIBIT 27 (a)
Crown Central Petroleum Corporation and Subsidiaries
Financial Data Schedule
(In thousands, except per share amounts)
Year ended
December 31, 1999
-----------------
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> $ 9,652
<SECURITIES> 2,795
<RECEIVABLES> 104,884
<ALLOWANCES> (552)
<INVENTORY> 69,195
<CURRENT-ASSETS> 187,402
<PP&E> 690,423
<DEPRECIATION> 376,383
<TOTAL-ASSETS> 523,108
<CURRENT-LIABILITIES> 202,525
<BONDS> 129,180
0
0
<COMMON> 50,356
<OTHER-SE> 98,945
<TOTAL-LIABILITY-AND-EQUITY> 523,108
<SALES> 1,270,181
<TOTAL-REVENUES> 1,270,181
<CGS> 1,164,299
<TOTAL-COSTS> 1,164,199
<OTHER-EXPENSES> 138,198
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 15,015
<INCOME-PRETAX> (44,701)
<INCOME-TAX> (14,675)
<INCOME-CONTINUING> (30,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,026)
<EPS-BASIC> (3.04)
<EPS-DILUTED> (3.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
EXHIBIT 27 (b)
Crown Central Petroleum Corporation and Subsidiaries
Financial Data Schedule
(In thousands, except per share amounts)
Year ended
December 31, 1998
-----------------
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> $ 6,930
<SECURITIES> 7,540
<RECEIVABLES> 60,966
<ALLOWANCES> 739
<INVENTORY> 80,104
<CURRENT-ASSETS> 168,828
<PP&E> 684,264
<DEPRECIATION> 363,716
<TOTAL-ASSETS> 518,010
<CURRENT-LIABILITIES> 150,253
<BONDS> 129,899
0
0
<COMMON> 50,268
<OTHER-SE> 128,505
<TOTAL-LIABILITY-AND-EQUITY> 518,010
<SALES> 1,264,317
<TOTAL-REVENUES> 1,264,317
<CGS> 1,155,194
<TOTAL-COSTS> 1,155,194
<OTHER-EXPENSES> 142,857
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 14,740
<INCOME-PRETAX> (45,745)
<INCOME-TAX> (16,365)
<INCOME-CONTINUING> (29,380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,380)
<EPS-BASIC> (2.99)
<EPS-DILUTED> (2.99)
</TABLE>
