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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
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( ) 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
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COMMISSION FILE NUMBER 1-5254
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MAPCO INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 73-0705739
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1800 SOUTH BALTIMORE AVENUE, TULSA, OKLAHOMA 74119
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (918) 581-1800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1.00 Par value New York Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
$400 million in Debt Securities None
($400 million designated as Medium-Term Notes,
$353 million of which have been issued (and
$10 million of which have matured and have been
paid) as of March 24, 1994, with maturities
from 9 months to 30 years)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO .
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THE AGGREGATE MARKET VALUE OF MAPCO INC.'S ("MAPCO") VOTING STOCK HELD BY
NON-AFFILIATES OF MAPCO, BASED ON THE LAST SALE PRICE OF MAPCO COMMON STOCK ON
THE NEW YORK STOCK EXCHANGE ON MARCH 24, 1994 WAS $1,796,021,449. ON THAT DATE,
29,975,207 SHARES OF MAPCO COMMON STOCK WERE OUTSTANDING, OF WHICH 29,382,764
SHARES WERE HELD BY NON-AFFILIATES.
DOCUMENTS INCORPORATED BY REFERENCE
LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE
PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED: PROXY STATEMENT
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION
14-A UNDER THE SECURITIES EXCHANGE ACT OF 1934 (TO THE EXTENT SET FORTH IN PART
I, ITEM 1 AND PART III, ITEMS 10, 11, 12 AND 13 OF THIS ANNUAL REPORT).
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business..................................................................... 1
BUSINESS OF MAPCO............................................................ 1
NATURAL GAS LIQUIDS.......................................................... 1
PETROLEUM.................................................................... 5
COAL......................................................................... 7
EXECUTIVE OFFICERS OF MAPCO INC.............................................. 12
EMPLOYEES.................................................................... 12
Item 2. Properties................................................................... 12
Item 3. Legal Proceedings............................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders.......................... 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........ 14
Item 6. Selected Financial Data...................................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 15
Item 8. Financial Statements and Supplementary Data.................................. 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................... 23
PART III
Item 10. Directors and Executive Officers of the Registrant........................... 23
Item 11. Executive Compensation....................................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and Management............... 23
Item 13. Certain Relationships and Related Transactions............................... 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............. 24
SIGNATURES.............................................................................. 28
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PART I
ITEM 1. BUSINESS.
BUSINESS OF MAPCO
MAPCO Inc. ("MAPCO" or the "Company") is a diversified energy company
which, through separate subsidiaries and affiliates, is engaged in the
production of natural gas liquids and coal; the transportation by pipeline of
natural gas liquids, anhydrous ammonia and refined petroleum products; the
refining of crude oil; the marketing of natural gas liquids, refined petroleum
products, coal, fertilizers and crude oil; the trading of crude oil, refined
petroleum products and natural gas liquids ("NGLs"); NGL storage; and the
marketing of motor fuel and merchandise through convenience store operations.
MAPCO was incorporated in Delaware in 1958 and has its principal executive
offices in Tulsa, Oklahoma. For convenience of reference and simplification of
this report, references herein to MAPCO or the Company include its subsidiaries
or affiliates, unless the context requires otherwise.
SEGMENT INFORMATION
The segment reporting structure for MAPCO is as follows:
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SEGMENT BUSINESS ACTIVITY INCLUDED WITHIN SEGMENT
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Natural Gas Liquids........... Liquid Petroleum Gas ("LPG") and Fertilizer Sales,
NGL Production and Processing, Pipeline Operations
and Underground Storage.
Petroleum..................... Refining, Retail and Wholesale Marketing, and Crude,
NGL and Refined Products Trading.
Coal.......................... Coal Production and Marketing.
</TABLE>
In 1992, MAPCO resegmented its operations from four segments into three by
combining certain operating units of the previous Gas Products and
Transportation segments, creating the Natural Gas Liquids segment. The
resegmentation also involved combining certain operating units of the Gas
Products segment into the Petroleum segment. The Natural Gas Liquids subsidiary
was created to capitalize on and provide added emphasis for MAPCO in the growing
natural gas liquids industry, an area identified for future growth and
expansion. All prior year amounts have been restated to reflect this
consolidation.
Financial information about these segments for each of the three years
ended December 31, 1993 is set forth in Note 8 to the consolidated financial
statements on pages F-13 and F-14 and Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 15 through 23.
NATURAL GAS LIQUIDS
GENERAL
During 1992, the Company combined certain operating units of its Gas
Products and Transportation segments into the MAPCO Natural Gas Liquids Segment.
The Natural Gas Liquids segment operations include the transportation and
processing of natural gas liquids ("NGLs") as well as pipeline transportation of
anhydrous ammonia, refined products and crude oil, fractionation, underground
storage and the wholesale and retail marketing of NGLs and fertilizers. The 1993
Natural Gas Liquids segment revenues were $465.2 million and operating profit
was $118.8 million compared to $453.5 million of revenues and $113.7 million of
operating profit in 1992.
NATURAL GAS LIQUIDS MARKETING
Propane is used principally as a fuel in various domestic, agricultural,
commercial, industrial and vehicle motor fuel applications. Residential
customers (generally in areas not served by natural gas) use propane for
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home heating, cooking and other domestic uses. The major portion of MAPCO's
propane sales is for domestic usage. Agricultural uses include crop drying, fuel
for tractors and irrigation engines and other agricultural heating purposes.
Commercial and industrial uses include fuel for shopping centers and industrial
plants.
The marketing of propane and related appliances is carried on primarily
under the trade name "Thermogas" through 140 Company-owned and operated retail
plants in states in the upper Midwest and the Southeast regions of the United
States. Propane is also supplied to dealers operating in the same area, as well
as to wholesale outlets and industrial accounts. Based upon published industry
data, Thermogas is currently the fourth largest retail propane marketer in the
United States. In 1993, MAPCO sold 232.4 million gallons of retail propane
compared to 218.5 million gallons in 1992.
Approximately 89% of the propane sold by MAPCO in 1993 was purchased from
outside sources. The largest propane supplier accounted for approximately 14% of
such outside purchases during 1993. MAPCO's propane supply arrangements are
standard for the industry with prices being subject to adjustment in accordance
with changes in industry-wide market price levels.
MAPCO, at 47 of its Thermogas retail plants, also blends, markets and
applies nitrogen solutions, fertilizers, mixed fertilizers and agricultural
chemicals. Fluid fertilizers are sold under the trade name "Thermogas Fluid
Fertilizer." In 1993, 139,393 tons of wholesale and retail fluid fertilizer
ingredients were sold in the Midwest and Southeast as compared to 166,631 tons
in 1992. Most of these sales were made during the Spring.
NGL AND GAS PROCESSING
MAPCO owns certain liquefiable hydrocarbons in natural gas under 234,000
acres in the West Panhandle gas field of Texas. MAPCO obtains its liquids
through the processing of the gas at three processing plants it owns and
operates in this field. Although only two of the plants are currently
operational, these plants have a combined processing capacity of 260 million
cubic feet of gas per day. In 1993, an average of 5,021 barrels per day of NGLs
was produced and sold from the West Panhandle field, compared to 6,026 barrels
per day in 1992. The extracted liquids are moved through MAPCO's Mid-America
pipeline system for sale in Midwestern and Gulf Coast markets.
Since 1991, MAPCO's West Panhandle field gas supplier has taken more than
its percentage ownership share of the field's production. The cumulative effect
of this acceleration in gas taken has resulted in the Westpan operations having
a 25.3 billion cubic feet and $23.7 million over-take position. This imbalance
will be adjusted by offsets from future field production. MAPCO uses the sales
method of accounting for its gas balancing arrangements which allows the
immediate recognition of all revenues on natural gas liquids sold. The
acceleration in gas taken contributed an estimated $4.3 million, $9.0 million
and $10.4 million to MAPCO's consolidated operating profit in 1993, 1992 and
1991, respectively.
MAPCO owns a 50% interest in and operates a 107,000 barrel per day
fractionator at Conway, Kansas. This fractionator receives mixed NGLs from the
gathering areas in the Overthrust Belt area of Wyoming and Utah, New Mexico,
West Texas, Western Oklahoma and Kansas for separation into ethane-propane mix,
propane, normal butane, iso-butane and natural gasoline. After separation, the
products are moved principally to markets in the Midwest and on the Texas Gulf
Coast. MAPCO also owns and operates a 5,000 barrel per day depropanizer at
Hobbs, New Mexico.
MID-AMERICA PIPELINE
Mid-America Pipeline Company ("Mid-America"), a wholly-owned subsidiary of
MAPCO Natural Gas Liquids Inc., owns and operates 7,150 miles of pipeline and
related storage facilities.
The Mid-America pipeline system transports NGLs which consist of: propane
used as fuel and petrochemical feedstock; butane and natural gasoline used as
refinery and petrochemical feedstock; ethane-propane mixtures and ethylene used
as petrochemical feedstock; and mixed natural gas liquids for further
fractionation. The pipeline system consists of 7,131 miles of pipe varying in
diameter from two to twelve inches. The main line of this pipeline system runs
from the Wyoming-Utah Overthrust Belt area through the northwestern New Mexico
portion of the Four Corners area to near Hobbs, New Mexico, and from Hobbs to
Conway, Kansas, where it branches into east and west legs. The west leg extends
to near Minneapolis,
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Minnesota, and the east leg leads to near Janesville, Wisconsin. Spurs from
these legs extend into southeast Kansas, Iowa and Illinois. Mid-America's Illini
II is a 116-mile pipeline connecting a chemical customer's plants in Illinois
and transports ethylene.
Mid-America also transports crude oil from St. James, Louisiana to Memphis,
Tennessee. This crude oil is transported in pipeline space leased by Mid-America
in the Capline Pipeline system, which extends from St. James to near
Collierville, Tennessee. Crude oil is then transported through a 32-mile
pipeline, operated and partially owned (19 miles only) by Mid-America to MAPCO
Petroleum's Memphis Refinery. Mid-America also transports jet fuel by pipeline
from the Memphis Refinery to the nearby Memphis International Airport.
MAPCO AMMONIA PIPELINE
MAPCO Ammonia Pipeline Inc. (the "Ammonia System") transports liquid
anhydrous ammonia for use as fertilizer. This system consists of 1,093 miles of
pipe varying from four to eight inches in diameter. It receives ammonia from
plants in the Texas Panhandle and near Enid and Tulsa, Oklahoma for delivery to
points principally in Kansas, Nebraska, Iowa and southern Minnesota.
LIQUID MOVEMENTS
The following table summarizes the Mid-America and Ammonia Systems' total
movements of liquids in millions of barrel miles (barrels of liquids times
number of miles transported) and revenue per 100 barrel miles for each of the
past five years:
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BARREL MILES (IN MILLIONS)
AND REVENUE PER 100 BARREL MILES
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1993 1992 1991 1990 1989
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Natural Gas Liquids................... 60,639 59,796 58,328 54,302 51,227
Anhydrous Ammonia..................... 3,587 3,976 3,743 3,692 3,411
Crude Oil and Refined Products........ 4,454 4,636 4,072 4,594 4,665
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Total....................... 68,680 68,408 66,143 62,588 59,303
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Revenue Per 100 Barrel Miles.......... 22.7(c) 23.2(c) 23.5(c) 23.9(c) 23.2(c)
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The Mid-America and Ammonia Systems operate as common carriers. The single
largest shipper accounted for approximately 18.6% of pipeline transportation
revenues during 1993. Total pipeline deliveries in 1993 were 236 million
barrels, compared with 218 million barrels in 1992.
SEMINOLE PIPELINE
Seminole Pipeline Company ("Seminole") owns 1,311 miles of pipeline,
predominantly fourteen inches in diameter, extending from Hobbs Station in West
Texas to the Mont Belvieu Terminal on the Texas Gulf Coast, together with
related pumping, metering and storage facilities. MAPCO owns 80% of the stock of
Seminole and operates and manages the pipeline.
Seminole operates as a batch system moving demethanized mix, ethane-propane
mix and specification liquid products. Products are received from gas processing
plants and from Mid-America Pipeline for delivery to various destinations along
the pipeline system. The Texas Gulf Coast market served by Seminole is
predominantly for petrochemical and refining feedstock.
During 1993, Seminole completed an expansion of the pipeline which consists
of an additional 544-mile, 14-inch pipeline from West Texas to Mont Belvieu,
Texas, increasing the potential capacity of the line to 300,000 barrels per day.
See "Legal Proceedings" Item 3 beginning on page 12 for information
concerning litigation proceedings connected with Seminole.
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LIQUIDS SUPPLY
The Department of Energy estimates of total proved reserves of NGLs for
Mid-America's and Seminole's source of supply areas in Texas, New Mexico,
Oklahoma, Kansas, Colorado, Wyoming and Utah are as follows:
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TOTAL INDUSTRY RESERVES
IN MILLIONS OF BARRELS
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December 31, 1989........................................ 4,487
December 31, 1990........................................ 4,437
December 31, 1991........................................ 4,316
December 31, 1992........................................ 4,351
December 31, 1993........................................ Not Available
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Mid-America's and Seminole's supply areas are also served by other
pipelines.
STORAGE
Underground storage facilities for NGLs are owned or operated by MAPCO at
locations along its pipeline system in the States of Iowa, Kansas, Nebraska,
Oklahoma and Texas. The capacity of these facilities on December 31, 1993 was
approximately 16 million barrels. Other storage operations compete with MAPCO
for storage leasing in the Conway and Hutchinson, Kansas areas. Competition is
intense in the storage business.
COMPETITIVE CONDITIONS
The marketing of NGLs and fertilizer and the transportation businesses in
which MAPCO operates are highly competitive. MAPCO competes with a number of
companies engaged in propane marketing, some of which are larger than MAPCO and
may have more significant financial resources. In addition, other pipelines,
tank cars, trucks, barges and local sources of supply (refineries, gasoline
plants and ammonia plants) and other sources of energy such as natural gas,
coal, oil and electricity, all provide competition for pipeline operations.
Propane competes with natural gas in areas served by natural gas distribution
systems and extension of natural gas service may result in the loss of
customers. Competition for retail and wholesale fertilizer customers is intense
in all of the areas served by MAPCO.
REGULATIONS AND ENVIRONMENTAL MATTERS
Federal, state and local environmental and safety laws and regulations
affect the Natural Gas Liquids segment's marketing of NGLs, nitrogen solution
fertilizers, mixed fertilizers and agricultural chemicals and the operation of
its natural gas processing plants. It is the policy of the Natural Gas Liquids
segment to comply with such laws and regulations. At this time, MAPCO cannot
accurately predict the effect which such laws and regulations may have on such
activities and future earnings. Pipeline operations are subject to the
provisions of the Interstate Commerce Act applicable to interstate common
carrier pipelines and the Hazardous Liquid Pipeline Safety Act. The Federal
Energy Regulatory Commission regulates tariff rates, shipping regulations and
other practices of Mid-America and Seminole. Tariff rates for liquid anhydrous
ammonia as transported by the Ammonia System are regulated by the Interstate
Commerce Commission. Under the Interstate Commerce Act, MAPCO is required to
file reasonable and nondiscriminatory tariff rates and is subject to certain
other regulations relating to, among other things, permissible depreciation
charges.
The United States Department of Transportation has prescribed safety
regulations for common carrier pipelines. The pipeline systems are subject to
various state laws and regulations concerning safety standards, exercise of
eminent domain and similar matters. Mid-America and Seminole also file tariff
rates covering intrastate movements with various state commissions.
The Natural Gas Liquids segment did not incur in 1993 and does not at this
time anticipate any material capital expenditures for environmental control
facilities in 1994.
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PETROLEUM
GENERAL
The Petroleum segment operates two refining and marketing systems: the
Alaska System and the Mid-South System. The Alaska System includes a refinery at
North Pole, Alaska, the wholesale marketing of refined petroleum products, and a
20-unit chain of retail motor fuel and convenience store outlets. The Mid-South
System includes a refinery at Memphis, Tennessee, the wholesale and spot
marketing of refined petroleum products and NGLs, a 222-store chain of retail
motor fuel convenience stores and interstate fuel stops in 9 Southeastern states
and 79 dealers in Florida.
The 1993 Petroleum segment revenues were $1,978.2 million, and operating
profit was $108.9 million compared to $2,028.0 million of revenues and $73.9
million of operating profit in 1992.
ALASKA SYSTEM
NORTH POLE REFINERY
MAPCO's refinery, located near Fairbanks at North Pole, Alaska ("North Pole
Refinery"), is the largest refinery in the State. The refinery is located
approximately two miles from its supply point for crude oil, the Trans-Alaska
Pipeline System ("TAPS"). The North Pole Refinery's processing capability is
approximately 125,000 barrels per day. At maximum crude throughput, 43,000
barrels per day of refined product can be produced. These products are gasoline,
commercial and military jet fuel, heating oil, diesel fuel, fuel oil, naphtha
and asphalt. MAPCO's principal market for these products in Alaska is to
governmental, wholesale, commercial and industrial customers and to MAPCO's
retail marketing operations. MAPCO's retail marketing operations, as described
below, accounted for about 10% of the North Pole Refinery's 1993 product sales
volume, and MAPCO Express' retail gasoline sales, as described below, accounted
for about 75% of the Refinery's gasoline production. In 1993, average throughput
at the North Pole Refinery was 124,971 barrels per day of crude oil which
resulted in the average production of 37,699 barrels per day of petroleum
products.
The North Pole Refinery's crude oil is purchased from the State of Alaska
or is purchased or received on exchanges from other crude oil producers. The
North Pole Refinery has an agreement with the State of Alaska for the purchase
of State royalty oil which is scheduled to expire on December 31, 2003. The
agreement provides for the purchase of up to 35,000 barrels per day of the
State's royalty share of crude oil produced from Prudhoe Bay, Alaska. These
volumes, along with crude oil either purchased or received under exchange
agreements, are utilized as throughput in the production of products at the
refinery. Approximately 28% of the throughput is refined and sold as finished
product and the remainder is returned to the TAPS and either delivered to repay
exchange obligations or sold.
Effective February 1, 1992, the North Pole Refinery discontinued its
receipt of crude oil under an assignment of rights of Golden Valley Electric
Association to purchase 5,000 barrels per day of State of Alaska royalty oil.
See "Legal Proceedings" Item 3 beginning on page 12 for information
concerning litigation connected with state royalty oil contracts.
RETAIL MARKETING
MAPCO, under the brand name "MAPCO Express," is engaged in the retail
marketing of gasoline, diesel fuel, other petroleum products, convenience
merchandise and deli snack foods at 20 stores primarily in Anchorage, Fairbanks
and Juneau, Alaska. In 1993, convenience merchandise and deli fast food
accounted for approximately 38% of MAPCO Express' gross margin. All of the motor
fuel sold by MAPCO Express stores is supplied either by exchanges or directly
from the North Pole Refinery.
In June 1993, the Company sold its retail heating fuel operation, "MAPCO
Express Fuels." MAPCO Express Fuels previously operated in the Fairbanks
residential and commercial heating fuels markets and in rural interior Alaska
and on the waterborne Yukon River and Norton Sound markets, selling primarily
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gasoline, heating fuels, diesel and lubricants. MAPCO Express Fuels operations
were not material to the operating results of the Petroleum segment.
MID-SOUTH SYSTEM
MEMPHIS REFINERY
MAPCO's refinery in Memphis, Tennessee ("Memphis Refinery") currently has a
throughput capacity of approximately 85,000 barrels per day. In 1993, the
Memphis Refinery processed an average 77,141 barrels per day. Products produced
by the Memphis Refinery are gasoline, low sulfur diesel fuel, jet fuel, K-1
kerosene, No. 6 fuel oil, propane and elemental sulfur. These products are
marketed primarily in the Mid-South region of the United States to wholesale
customers, such as industrial and commercial consumers, jobbers, independent
dealers, other refiner/marketers and MAPCO's retail marketing operations. Sales
to MAPCO's retail marketing operations accounted for about 27% of the Memphis
Refinery's 1993 sales volume, with no other single customer accounting for more
than 7% of total sales. During 1993, the Memphis Refinery's gasoline sales to
MAPCO's retail marketing operations were 50% of the refinery's gasoline
production.
The Memphis Refinery has access to crude oil from the Gulf Coast via common
carrier pipeline and by river barges. In addition to domestic crude oil, the
Memphis Refinery has the capability of receiving and processing certain foreign
crudes. During 1993, the majority of the crude oil processed at the Memphis
Refinery was purchased from various suppliers on a posted-plus price basis.
Although this method of purchase reduces the financial effect of volatile crude
oil markets, the financial results of the refinery may be significantly impacted
by changes in the market prices for crude oil and refined products. MAPCO cannot
with any assurance predict the future of crude oil and product prices or their
impact on the financial results of the Petroleum segment.
RETAIL MARKETING
MAPCO, primarily under the brand names "MAPCO Express" and "Shell," is
engaged in the retail marketing of gasoline, diesel fuel, other petroleum
products, convenience merchandise and deli fast food items at 222 stores in
Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Tennessee
and Texas.
MAPCO's stores have been designed to be modern neighborhood-type
facilities, attracting convenience-oriented customers with a variety of today's
most widely-used products and services. In 1993, convenience merchandise and
deli fast food accounted for approximately 47% of MAPCO's retail marketing
operations' gross margin. During 1993, MAPCO sold 15 stores in its Mid-South
System.
OTHER PETROLEUM OPERATIONS
CRUDE AND REFINED PRODUCTS SUPPLY AND TRADING
MAPCO buys, sells and exchanges domestic and foreign crude oil to supply
its refinery systems in Tennessee and Alaska. During 1993, in addition to
refinery supply, MAPCO purchased and sold an average of 17,012 barrels per day
of crude oil compared to 3,685 barrels per day in 1992. All of the 1992 activity
occurred during the fourth quarter. During that quarter MAPCO purchased and sold
an average of 14,659 barrels per day.
NGL PRODUCTS SUPPLY AND TRADING
MAPCO buys, sells and exchanges domestic and imported NGLs in the Midwest,
Gulf Coast and Rocky Mountain regions. Although some NGLs are produced by MAPCO,
the majority is purchased from outside sources and sold under both short and
long-term arrangements.
NGL sales for 1993 averaged 49,864 barrels per day, compared with 65,011
barrels per day in 1992. The supply of and demand for NGLs can materially affect
the volume of product available to MAPCO and also the market for such product.
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COMPETITIVE CONDITIONS
The petroleum industry is highly competitive in all phases from the
procurement of crude oil to the refining, distribution and marketing of refined
products. Many of MAPCO's competitors are large integrated oil companies, which,
because of their diverse operations, strong capitalization and recognized brand
names may be better able to withstand volatile industry conditions, shortages of
crude oil or intense price competition.
The principal competitive forces affecting MAPCO's refining businesses are
feedstock costs, refinery efficiency, refinery product mix, product distribution
and marketing costs. Some of MAPCO's larger competitors have refineries which
are larger and more efficient, and, as a result, may have lower per barrel costs
of operation. In addition, some of MAPCO's competitors in the refining business
can more easily process sour crudes, and accordingly, are more flexible in the
crudes which may be processed. Since MAPCO has no crude oil reserves and does
not engage in crude oil exploration, it must obtain its crude oil requirements
from unaffiliated sources. MAPCO 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 MAPCO's retail marketing
businesses are location, product price and quality, appearance and cleanliness
of stores and brand-name identification.
REGULATIONS AND ENVIRONMENTAL MATTERS
Federal, state and local pricing and environmental laws and regulations
affect MAPCO's refining and marketing operations. It is the policy of the
Petroleum segment to comply with such laws and regulations. MAPCO's refining
operations are subject to regulations relating to air emissions, water
discharges and soil and groundwater contamination which may result from spillage
or discharge of petroleum and hazardous materials at its refineries, terminals
and retail outlets. Groundwater remediation is ongoing at both refineries and at
various MAPCO retail outlets. Air and water pollution control equipment is
operating at both refineries to comply with applicable regulations.
The Clean Air Act Amendments of 1990 (the "CAAA") will impact the Petroleum
segment, particularly its refinery operations, through a number of programs and
provisions of the CAAA. The provisions impacting the Petroleum segment include
Maximum Achievable Control Technology (MACT) rules to be developed for the
refining industry, controls on individual chemical substances present at its
facilities and new operating permit rules which may be applicable to its
facilities. These provisions impact other companies in the industry in similar
ways and are not expected to adversely impact the Company's competitive
position.
MAPCO's retail petroleum operations are subject to federal, state and local
regulations regarding petroleum underground storage tanks ("USTs"). The United
States Environmental Protection Agency ("EPA") and several states in which MAPCO
conducts retail operations have adopted laws requiring owners and operators of
USTs used for petroleum products to register such tanks with state offices. In
addition, these UST regulations have imposed new technical standards, corrective
action and financial responsibility requirements relating to such tanks. The
regulations establish requirements for owners and operators of USTs, including
leak detection systems, corrosion protection systems, tank system repairs and
replacement, tank closure and corrective action for leaking tanks. EPA
regulations were issued in late 1988 and compliance is to be phased in over the
course of a ten (10) year period.
The Petroleum segment incurred approximately $15.7 million in capital
expenditures for environmental control facilities in 1993 and has budgeted $6.2
million in capital expenditures for environmental control facilities in 1994.
Such expenditures are not deemed by the segment to be material.
COAL
GENERAL
MAPCO's Coal Segment operations produce and market bituminous coal for
domestic and foreign markets from one surface and seven underground mining
complexes located in Kentucky, Maryland, Illinois
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and Virginia. MAPCO also operates a coal terminal on the Ohio River near Mt.
Vernon, Indiana, used for the transloading of coal. The 1993 Coal Segment
revenues were $414.4 million and operating profit was $46.9 million, compared to
$429.6 million in revenues and $36.0 million in operating profit in 1992.
Tonnage produced by the Coal Segment in 1993 was 13,151,820 tons(1),
compared with 13,351,512 tons in 1992. Tonnage sold in 1993 was 14,357,619 tons,
compared with 14,710,824 tons in 1992. Tonnage transloaded at the Mt. Vernon
coal terminal in 1993 was 3,213,978 compared with 3,197,030 in 1992. In 1993,
approximately 89% of MAPCO's production was mined by underground mining methods
and approximately 11% by surface mining methods. Of the total amount of tons
sold by MAPCO's Coal Segment, approximately 44% consisted of low sulfur coal
(27% steam and 17% metallurgical coal), 17% medium sulfur steam coal, and 39%
high sulfur steam coal.
The following table sets forth the volume of coal sold by MAPCO's Coal
Segment and the average sales price per ton for each of the five years ended
December 31, 1993:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(TONS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Produced Tons Sold............................ 13,209 13,520 13,791 13,183 10,905
Purchased Tons Sold........................... 1,149 1,191 1,063 767 523
------ ------ ------ ------ ------
Total Tons Sold............................... 14,358 14,711 14,854 13,950 11,428
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Average Sales Price Per Ton................... $28.44 $28.88 $29.28 $29.45 $27.55
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
COAL MARKETING
MAPCO's steam coal is sold primarily to electric utilities and industrial
and cogeneration customers located in the Eastern United States and, to a lesser
extent, in Europe. MAPCO's metallurgical coal is sold to steel and coke
producers located in the United States, South America, Japan, Europe and North
Africa. Of the 14.4 million tons sold during 1993, approximately 70.5% was to
domestic utilities, 14.9% to export customers, 8.2% to domestic industrial
users, 4.3% to cogeneration customers, and 2.1% to other coal-related entities.
During 1993, approximately 85% of the total tons marketed by MAPCO's Coal
Segment was sold under contracts having a term of more than one year ("long-term
contracts"), many of which contain price adjustment provisions designed to
reflect changes in market conditions, labor and other production costs and, when
the coal is sold other than FOB the mine, changes in railroad and/or barge
freight rates. The relevant provisions of such long-term contracts, however, are
not identical, and the selling price of the coal does not necessarily reflect
every change in production costs incurred by the producing coal mine. Certain of
MAPCO's long-term contracts may be reopened periodically for price
renegotiation. The remainder of MAPCO's coal production is sold under spot
market arrangements having terms of one year or less. In the case of
metallurgical coal sold in the domestic market and both metallurgical and steam
coal sold in the export market, such contracts are generally subject to
negotiation each year or have annual price renegotiation provisions if longer
than one year.
See "Legal Proceedings," Item 3 beginning on page 12 for information
concerning litigation connected with a coal sales contract at the Retiki Mine.
During 1993, total demand for coal produced in the U.S. was 958 million
tons as determined by the U.S. Department of Energy. This was 3.13% less than
the 1992 demand level of 989 million tons. While 1993 demand was down from 1992
levels, consumption increased slightly (i.e., .91%) during 1993. Consumption for
1993 was approximately 1,003 million tons while 1992 consumption was 994 million
tons. Domestic utility coal consumption, which represented approximately
eighty-seven percent (87%) of total domestic consumption, increased by
approximately 34 million tons compared to 1992, while domestic industrial and
coking coal
- ---------------
(1) As referred to throughout the description of the Coal Segment, "tons" are
defined as short tons of 2,000 pounds, unless otherwise indicated.
8
<PAGE> 11
consumption increased by 2 million tons. Domestic coal production was impacted
by the eight-month long selective United Mine Workers of America ("UMWA") strike
against certain member companies of the Bituminous Coal Operators' Association,
Inc. This action resulted in a 45 million ton draw-down in utility coal
stockpiles and decreased production by approximately 51 million tons from 1992
levels. As a result of the strike, spot coal prices increased nominally from the
1992 levels. International demand for U.S.-produced steam and metallurgical
coals declined approximately 26% with total deliveries of approximately 75
million tons. In general, demand for U.S. steam and metallurgical coals was
impacted by the slow economic recovery worldwide and availability of coals from
other lower-cost or government-subsidized coal-producing countries.
Consequently, there was a reduction in the sales price of coals placed in the
export market.
LABOR MATTERS
On February 1, 1993, the collective bargaining agreement between MC Mining,
Inc. ("MC Mining"), a wholly-owned subsidiary of MAPCO Inc., and the UMWA
expired. Previously, in December, 1992, MC Mining had given the UMWA notice of
its intention to enter into decision-and-effects bargaining concerning MAPCO's
decision to either sell MC Mining or contract out its operation. Collective
bargaining with the UMWA concerning the effects of the sale or contracting out
of MC Mining is ongoing.
In early June, 1993, the UMWA filed a petition with the National Labor
Relations Board ("NLRB") seeking an election to decide whether the UMWA should
represent hourly employees at MAPCO Coal's Pontiki Coal Corporation ("Pontiki").
On August 13, 1993, the NLRB conducted a representation election and the
unofficial vote count was 78 votes opposed to unionization, 101 votes supporting
the UMWA, and 23 votes challenged by the UMWA and consequently not counted. The
number of challenged ballots are determinative of the election. Presuming all of
the contested votes are "no" votes, the election would be a tie and the UMWA
would not be elected to represent Pontiki employees. In late August, 1993,
Pontiki filed formal objections with the NLRB against the UMWA for illegal
activities, including personal threats, illegal promises, and intimidation
during the organizing campaign. After a hearing before an investigatory agent of
the NLRB, the Board agent recommended that the 23 challenged ballots be allowed,
but the conduct of the UMWA was not sufficient to set aside the election. Both
the UMWA and Pontiki have taken exceptions to the Board agent's recommendations
to the NLRB, where the matter is currently pending. A dispositive ruling from
the NLRB is not expected until mid-1994.
RESERVES
The following table sets forth MAPCO's Coal Segment's estimated
economically recoverable coal reserves for 1992 and 1993:
<TABLE>
<CAPTION>
1992 1993
---------- ----------
<S> <C> <C>
MAPCO's Coal Reserves........................................ 372,337,000(2) 348,443,000(2)
---------- ----------
---------- ----------
</TABLE>
Estimated economically-recoverable coal reserves in 1993 for MAPCO's Coal
Segment by type of coal is set forth in the following table:
<TABLE>
<CAPTION>
TYPE OF COAL(3) MEASURED TONS INDICATED TONS TOTAL TONS
- --------------------------------------------------- ------------- -------------- -----------
<S> <C> <C> <C>
High Sulfur........................................ 49,651,000 50,456,000 100,107,000
Medium Sulfur...................................... 24,983,000 20,083,000 45,066,000
Low Sulfur......................................... 77,981,000 81,063,000 159,044,000
Low Sulfur/Metallurgical........................... 30,865,000 13,361,000 44,226,000
------------- -------------- -----------
Total Coal Reserves................................ 183,480,000 164,963,000 348,443,000
------------- -------------- -----------
------------- -------------- -----------
</TABLE>
- ---------------
(2) Included in MAPCO's coal reserve figures for 1992 and 1993 are 35,072,000
tons owned or controlled by MC Mining, an affiliate of MAPCO Coal Inc. In
the normal course, the Coal Segment continuously reviews its coal assets and
properties for the purpose of purchasing or disposing of coal assets and
businesses to optimize operating profit and cash flow potentials.
9
<PAGE> 12
(3) Definitions for low, medium and high sulfur coal are as follows: (a) low
sulfur coal means coal containing less than 1.0% sulfur; (b) medium sulfur
coal means coal containing between 1.0% and 2.0% sulfur; and (c) high sulfur
coal means coal containing in excess of 2.0% sulfur.
MAPCO's reserve base is estimated using guidelines defined by the U.S.
Geological Survey in its publication Circular 891 entitled "Coal Resource
Classification System of the U.S. Geological Survey" ("USGS 891"). The estimates
of economically-recoverable coal reserves are based upon MAPCO's analysis of
local seam conditions in keeping with USGS 891 and upon the operating experience
of the appropriate technical mining personnel. In general, such reserve
estimates are based on yearly evaluations made by the Coal Segment's
professional engineers and geologists. As discussed herein, MAPCO's Coal Segment
periodically modifies estimates of reserves owned or controlled by MAPCO which
may increase or decrease previously reported amounts. The annual reserve
evaluations are based on information developed by core hole drilling programs,
examination of outcrops, acquisitions, dispositions, actual production amounts,
changes in mining methods, abandonments and other relevant information.
All measured or indicated reserves referred to in the table above can be
mined by current mining practices and techniques. In addition, MAPCO's available
coal resources include incremental tons in excess of the noted indicated or
measured tons that may be mined in the future following potential improvements
in mining equipment and techniques. For economic and other operational reasons,
a portion of MAPCO's reserves described above may be mined only after the
construction of additional mining facilities and additional capital investment.
Nevertheless, the extent to which all of the coal in MAPCO's recoverable
reserves will eventually be mined will depend on a myriad of factors, including
but not limited to, future domestic and foreign economic and energy supply
conditions, coal mining practices and capabilities, and governmental
regulations. See Regulations and Environmental Matters at page 11.
The reserve classifications in the table referred to above have been
determined using the following criteria:
Measured -- Accessed and virgin coal that lies within a radius of 1/4
mile of a point of thickness of coal measurement. The sites for thickness
measurement are so closely spaced and the geologic character so well
defined that the average thickness, areal extent, size, shape and depth of
coal beds are well established. This classification has the highest degree
of geologic assurance.
Indicated -- Virgin coal that lies between 1/4 mile and 3/4 mile from
a point of thickness of coal measurement. The assurance, although lower
than for measured, is high enough to assume continuity between points of
measurement. There are no sample and measurement sites in areas of
indicated coal and the classification has a moderate degree of geologic
assurance.
COMPETITIVE CONDITIONS
The coal industry is highly competitive. MAPCO's Coal Segment competes with
many other large coal producers, several of which may have greater coal reserves
or more substantial financial resources, as well as the hundreds of small and
medium-sized producers in North America and abroad. Additionally, in the last
several years, a consolidation of the coal industry has been occurring as
evidenced by various mergers and/or reorganizations involving coal companies and
coal properties.
In many cases, the Coal Segment faces competitors, particularly in the
export market, which benefit from favorable exchange rates, government-supported
or subsidized coal production, lower costs by virtue of such factors as less
difficult mining conditions, less severe governmental regulation, and lower
transportation costs, all of which may provide a competitive advantage with
respect to price. Steam coal also competes with other fuels and energy sources,
including oil, natural gas hydroelectric power, solar and nuclear energy.
In addition to the factors of price, availability, and public acceptance of
alternative energy sources, the impact of Federal energy policies and taxation
may have an impact on MAPCO's Coal Segment. MAPCO is not able to predict at this
time the effect, if any, on the Coal Segment's operations of any changes in
Federal energy or tax policy and its concurrent impact or the particular pricing
levels of competing fuels (i.e., oil and
10
<PAGE> 13
natural gas). Nevertheless, any sustained and marked increase in the cost of
coal sold resulting from any governmental imposition, tax or other, could have a
material adverse effect on such business, both domestic and abroad.
In 1993, based upon data established by the U.S. Department of Labor's Mine
Safety and Health Administration, MAPCO ranked 24th in total production among
U.S. coal producers. While MAPCO's Coal Segment's annual production accounts for
only about 1.5% of the United States' coal production, MAPCO believes that it
will remain competitive due to its above-average productivity per man day and
sufficient financial resources, the latter of which enables MAPCO to employ
reasonably modern and efficient production equipment.
REGULATIONS AND ENVIRONMENTAL MATTERS
MAPCO's Coal Segment, as well as the domestic coal industry, is subject to
the U.S. Department of Labor's Mine Safety and Health Administration's
comprehensive regulatory requirements and guidelines. In addition, MAPCO's coal
mining operations are subject to regulation with respect to its environmental
effects, including air and water quality control, reclamation of disturbed
surface land, limitations on land use, solid waste and industrial waste
disposal, noise, aesthetics and other matters by various Federal, regional,
state and local authorities. In this connection, numerous permits are required
for construction projects and for the operation of existing facilities.
Additionally, such operations are subject to state and Federal health and safety
rules and regulations. In general, compliance with these health and safety laws
is a cost common to all producers to some extent. MAPCO believes that the Coal
Segment's competitive position has not been, nor should it be, adversely
impacted by these laws and regulations, except in the export market where
MAPCO's Coal Segment competes with various foreign producers subject to less
stringent health and safety regulations.
In 1990, Congress enacted the Clean Air Act Amendments of 1990 ("Clean Air
Act") which imposed, among other things, additional controls on the emissions of
sulfur dioxide ("SO(')") and nitrogen oxides from coal-fired power plants. About
two-thirds of the high sulfur coal produced from MAPCO's Illinois Basin
operations is sold pursuant to long-term agreements for use in electric utility
generating units which are currently fitted with flue gas desulfurization
systems for the removal of SO(') emissions. Since implementation of the
provisions of the Clean Air Act, these generating units have used, and MAPCO
believes they will continue to use, its Illinois Basin coals. The primary
utility customers for the medium sulfur coal produced at MAPCO's Mettiki Mine in
western Maryland have announced that they have decided to install scrubbers as
their compliance strategy. MAPCO does not believe that the market for these
coals will be adversely impacted. MAPCO's East Kentucky and Virginia operations
produce both low sulfur and compliance coals. Compliance coals are generally
coals that have SO(') content less than or equal to 1.20 lbs. per million BTU.
Since the Clean Air Act permits utilities to use low sulfur and compliance coals
in lieu of constructing expensive sulfur dioxide removal systems, implementation
of Phase 1 of this legislation in 1995 should have a favorable impact on the
marketability of and pricing for MAPCO's extensive reserves of low sulfur and
compliance coal. MAPCO cannot predict at this moment the timing or extent of
such favorable impact, if any.
MAPCO's Coal Segment is subject to various Federal, state, and local
environmental laws, including but not limited to, the Clean Water Act, the Clean
Air Act, and the Safe Drinking Water Act as well as mining and reclamation
standards of the Surface Mining Control and Reclamation Act of 1977 and the
regulations promulgated thereunder. It is the policy of the Coal Segment to
operate in compliance with such standards, laws and regulations. MAPCO believes
that this policy will not substantially affect its ability to compete with
similarly situated and complying competitors in the marketplace. Present
compliance is largely a result of capital expenditures made in prior years and
of current maintenance and monitoring activities conducted in the ordinary
course. Although the coal industry is subject to these numerous environmental
regulations, MAPCO's Coal Segment did not incur in 1993 any material capital
expenditures in order to comply with applicable Federal, state and local
environmental laws and regulations. No material capital expenditures are
anticipated for environmental control facilities for 1994 with respect to
MAPCO's Coal Segment's operations.
11
<PAGE> 14
EXECUTIVE OFFICERS OF MAPCO INC.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES PRESENTLY YEAR FIRST
NAME AGE HELD WITH REGISTRANT BECAME OFFICER
- ----------------------------- --- ------------------------------------------------ --------------
<S> <C> <C> <C>
James E. Barnes.............. 60 Chairman of the Board and Chief Executive 1983
Officer
Robert M. Howe............... 54 President and Chief Operating Officer 1984
Philip W. Baxter............. 45 Senior Vice President -- Strategic Planning 1985
David W. Bowman.............. 53 Senior Vice President, General Counsel and 1987
Secretary
Joseph W. Craft III.......... 43 Senior Vice President -- Coal 1982
Frank S. Dickerson, III...... 54 Senior Vice President, Chief Financial Officer 1987
and Treasurer
W. Jeffrey Hart.............. 52 Senior Vice President -- Petroleum 1983
David S. Leslie.............. 63 Senior Vice President -- Corporate Affairs and 1981
Assistant to the Chief Executive Officer
Jack D. Maynard.............. 50 Senior Vice President -- Human Resources 1984
Robert G. Sachse............. 45 Senior Vice President -- Natural Gas Liquids 1993
John E. Framel............... 58 Vice President, Process Development 1991
Rick J. Neal................. 46 Vice President -- Public and Government Affairs 1989
Donald R. Wellendorf......... 41 Vice President and Controller 1994
J. Chris Scalet.............. 35 Vice President -- Information Systems 1994
Gordon E. Schaechterle....... 39 Vice President and Tax Counsel 1994
</TABLE>
Each of the executive officers named above are elected annually by the
directors of MAPCO and serve at the directors' discretion. Each individual named
above has been an officer or employee of MAPCO for at least the past five years
except for Gordon E. Schaechterle, who, prior to joining MAPCO on August 6, 1990
as General Manager, Federal Income Taxes, was Tax Manager for Arthur Andersen &
Co. Messrs. Wellendorf, Scalet and Schaechterle were elected by the Board of
Directors as officers of the Company effective as of February 1, 1994.
There are no family relationships between or among any of the above-named
persons or between or among any of the above-named persons and any directors of
MAPCO.
EMPLOYEES
As of December 31, 1993, MAPCO and its subsidiaries had 5,677 employees. Of
the total number of employees, 1,418 were employed in the Coal segment; 1,507 in
the Natural Gas Liquids segment; 2,332 in the Petroleum segment; and 420 in the
general corporate area. Less than three percent of MAPCO's work force is
unionized and covered by collective bargaining agreements. Such agreements have
been entered into with the Oil Chemical and Atomic Workers Union covering 149
employees in the Petroleum segment and with United Mine Workers of America
covering 10 employees employed by a Company subsidiary in the Coal area.
ITEM 2. PROPERTIES.
All the various physical properties are discussed in PART I, Item 1, SUPRA,
pertaining to MAPCO's business.
ITEM 3. LEGAL PROCEEDINGS.
Retiki Mine Contract Litigation
The Coal Segment's Retiki Mine sells all of its production to Big Rivers
Electric Corporation ("Big Rivers") under a cost-plus management fee contract
that terminates in mid-January, 1996. The Retiki Mine
12
<PAGE> 15
is expected to close concurrently with contract expiration. Through December 31,
1993, MAPCO Coal has invoiced Big Rivers approximately $5.0 million for certain
costs associated with the operation of the Retiki Mine. Big Rivers has declined
to pay MAPCO the invoiced amount. A breach of contract and declaratory judgment
action was initiated by MAPCO against Big Rivers in mid-January, 1994, in order
to collect the invoiced amount as well as obtain a declaratory judgment by which
Big Rivers would be determined to be liable for other operating costs associated
with the Retiki Mine.
State Royalty Oil Claim
The refining and marketing arm of the Company, MAPCO Petroleum Inc.,
operates a refinery in Alaska through its subsidiary, MAPCO Alaska Petroleum
Inc. ("MAPI"). Since 1978, MAPI (and/or its predecessor) has had long-term
agreements with the State of Alaska (the "State") to purchase royalty oil from
the State at prices linked to amounts payable by North Slope oil producers in
satisfaction of their royalty obligations to the State. In 1977, the State
commenced suit against the producers (in an action entitled State of Alaska v.
Amerada Hess, et al.) alleging that they incorrectly calculated their royalty
payments.
As of April 1992, the State had settled its royalty oil claims against all
of the producers. On the basis of these settlements, the State billed MAPI for
retroactive increases in the prices paid by MAPI under all four of its royalty
oil purchase agreements. The State's claim against MAPI is based upon the
difference between the volume weighted average paid by the producers and the
revised royalty values adopted by the State. MAPI has been paying the State
under a contractual pricing formula which resulted in prices in excess of the
volume weighted average of the producers' past royalty reports.
On August 28, 1992, MAPI commenced suit against the State in an Anchorage
State Court seeking a declaratory judgment that MAPI is not liable to the State
for any retroactive price increase under its primary royalty oil purchase
agreement (the "1978 Agreement"). That same date, MAPI invoked the arbitration
provision of the agreement under which it had purchased the second largest
amount of State royalty oil (the "1977 Agreement"), again seeking a
determination that it is not liable for any retroactive price increase. On
February 5, 1993, MAPI filed suit in Anchorage State Court as to the remaining
two agreements (the "1984 and 1985 Agreements").
The State's claim, based upon invoices submitted to MAPI on October 1,
1992, is comprised of claims for retroactive price adjustments (including
interest through varying dates in October 1992) of $98 million, $9.2 million,
$2.9 million and $6.4 million under the 1978, 1977, 1984 and 1985 Agreements,
respectively. In addition, MAPI could be responsible for interest subsequent to
the billing dates.
MAPI is the only royalty-in-kind purchaser that has not settled the State's
retroactive billing claims. The Company believes that it has defenses of
considerable merit as to the State's claims and is vigorously litigating all
pending disputes but is not able to predict the ultimate outcome at this time.
The Company has accrued an estimate of certain amounts, including legal fees,
which it may incur in connection with the final resolution of these matters;
however, a resolution unfavorable to the Company could result in material
liabilities which have not been reflected in the accompanying consolidated
financial statements.
Texas Explosion Litigation
On April 7, 1992, a liquefied petroleum gas ("LPG") explosion occurred near
an underground salt dome storage facility located near Brenham, Texas and owned
by an affiliate of the Company, Seminole Pipeline Company ("Seminole"). The
matter was investigated by the National Transportation Safety Board ("NTSB") who
determined in a Pipeline Accident Report that the explosion was the result of
overfilling the storage facility and that the probable cause was the failure of
MAPCO Natural Gas Liquids Inc. ("MNGL") to incorporate fail-safe features in the
facility's wellhead safety system. The NTSB report further stated that (i) the
cause of the overfilling was the inadequacy of procedures for managing cavern
storage, (ii) contributing to the accident was the lack of federal and state
regulations governing the design and operation of underground storage systems
and (iii) contributing to the severity of the accident were inadequate emergency
response procedures.
13
<PAGE> 16
As a result of the investigation, the NTSB issued safety recommendations to
the Department of Transportation, the Research and Special Programs
Administration, MNGL, the State of Texas Department of Public Safety, Washington
County, the American Petroleum Institute, the American Gas Association and the
International Association of Fire Chiefs.
Seminole has responded to the NTSB's safety recommendations. The response
states that Seminole believes it has accomplished or is in the process of
accomplishing all of the NTSB recommendations. In addition, the response seeks
to clarify that it is Seminole, not MNGL, that is the owner and operator of the
facility, that Mid-America Pipeline Company ("Mid-America"), a subsidiary of
MNGL, is the contractor for the operator, and that the report contains mistaken
conclusions as to fault of one Mid-America employee.
The incident has also been investigated by the Texas Railroad Commission
(the "Commission"). In its investigation summary dated June 18, 1992, the
Commission stated that the probable cause of the incident was the overfilling of
the storage facility resulting in the escape of LPG which was subsequently
ignited by an unknown source, but that it would not issue a final report on its
investigation until all of the data had been received and analyzed.
The Company, as well as Seminole, Mid-America and other non-MAPCO entities
have been named as defendants in civil actions filed in state district courts in
Texas. During the first quarter of 1993, the Company received reimbursements
from its insurers for settlements which disposed of all of the death claims and
substantially all of the serious injury claims resulting from the incident. The
settlements resulted in an insurance premium penalty to the Company in 1992 of
approximately $19.6 million to be paid over a seven-year period beginning in
1993. The Company believes that complete resolution of this matter by litigation
or settlement, after reimbursement of insurance coverage, will not have a
material adverse effect on the Company's business, results of operations or
consolidated financial position.
General
The Company and its subsidiaries are involved in various other lawsuits,
claims and regulatory proceedings incidental to their businesses. In the opinion
of management, the outcome of such matters will not have a material adverse
effect on the Company's business, consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information regarding the market for MAPCO's common equity and related
stockholder matters is set forth herein at pages 22 and 23.
14
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA.
The following table contains selected consolidated financial data for the
five years indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales and Operating Revenues................ $2,715.3 $2,786.8 $2,782.8 $2,822.5 $2,113.2
Net Income.................................. $ 127.0 $ 100.7 $ 125.9 $ 130.0 $ 116.2
Earnings per Common Share................... $ 4.24 $ 3.37 $ 4.20 $ 4.13 $ 3.04
Cash Dividends Declared per Common Share.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ .875
Working Capital............................. $ 73.3 $ 65.3 $ 66.8 $ 39.2 $ 24.2
Total Assets................................ $1,940.8 $1,911.7 $1,702.3 $1,699.9 $1,480.6
Long-Term Debt (excluding current
maturities)............................... $ 585.5 $ 669.4 $ 638.8 $ 654.3 $ 504.4
Stockholders' Equity........................ $ 574.3 $ 477.5 $ 412.7 $ 330.1 $ 407.6
</TABLE>
During 1993, 1992, 1991, 1990 and 1989, MAPCO repurchased a total of
101,949, 288,100, 463,871, 4,651,647 and 7,823,600 shares, respectively, of its
common stock at a cost of approximately $6.2 million, $16.5 million, $20.2
million, $182.1 million and $290.8 million, respectively. At January 23, 1991,
MAPCO had the authority from its Board of Directors to repurchase 2.5 million
shares primarily for employee stock option and other benefit plans. As of March
24, 1994, 876,820 shares had been purchased at a cost of $44.3 million under
this authority.
Dividends paid per common share were restated in 1989 to reflect the
two-for-one common stock split declared in 1989.
The significant decline in stockholders' equity in 1990 was attributable to
common stock repurchases.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis of MAPCO Inc.'s ("MAPCO") financial
condition and results of operations should be read in conjunction with the
financial statements and segment information on pages F-2 through F-20 of this
report.
FINANCIAL CONDITION
CASH GENERATION
Cash generation was as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Funds provided by operations................................ $ 243 $ 192 $ 224
Changes in operating assets and liabilities................. 10 38 (48)
----- ----- -----
Net cash provided by operating activities................... 253 230 176
Net cash used in investing activities....................... (123) (209) (129)
Net cash used in financing activities....................... (116) (17) (73)
----- ----- -----
Cash generation (usage)..................................... $ 14 $ 4 $ (26)
----- ----- -----
----- ----- -----
</TABLE>
Funds provided by operations in 1993 as compared to 1992 increased
primarily due to reduced operating costs, higher refinery margins and lower
interest expense. (See comments under Results of Operations for additional
information regarding segment operating results.)
Capital expenditures and acquisitions in 1993 were $144 million, of which
$52 million was for capital items necessary to maintain existing operations,
compared to capital expenditures and acquisitions of $214 million in 1992, of
which $67 million was for capital items necessary to maintain existing
operations. The
15
<PAGE> 18
1993 capital expenditures include $52 million for expansion of the Seminole
Pipeline and $18 million for environmental projects. 1992 capital expenditures
included $76 million for expansion of the Seminole Pipeline, $19 million for
environmental projects, $32 million for the acquisition of 34 retail propane
plants and $12 million for new longwall shields at the Mettiki Mine.
In 1993 cash was used in financing activities to reduce debt including a
reduction in short-term borrowings of $140 million, payment of a scheduled
maturity of a Medium Term Note of $10 million and the redemption of the Mt.
Vernon Economic Development Bonds for $7 million, partially offset by Seminole
Pipeline's issuance of $75 million of 6.67% Senior Notes. The Company also paid
$30 million of dividends and repurchased 101,949 shares of MAPCO common stock
for $6 million.
CAPITALIZATION
Capitalization, which includes long-term debt (excluding current
maturities) and stockholders' equity, increased from $1,147 million at December
31, 1992 to $1,160 million at December 31, 1993. MAPCO's long-term debt as a
percent of capitalization decreased to 50% at December 31, 1993 from 58% at
December 31, 1992, reflecting the favorable impact of 1993 operating results on
stockholders' equity and the utilization of increased cash flow from operations
to reduce commercial paper which is classified as long-term debt.
Various loan agreements contain restrictive covenants which, among other
things, limit the payment of advances or dividends by two Natural Gas Liquids'
subsidiaries to MAPCO. At December 31, 1993, $192 million of net assets were
restricted by such provisions.
LIQUIDITY AND CAPITAL RESOURCES
MAPCO's primary sources of liquidity are its cash and cash equivalents,
internal cash generation, and external financing. At December 31, 1993, MAPCO
had $70 million of cash and cash equivalents compared to $56 million at December
31, 1992.
MAPCO's external financing sources include its bank credit agreement, its
uncommitted bank credit lines, and its ability to issue public or private debt,
including commercial paper. MAPCO has amended its bank credit agreement to
reduce the committed line of credit from $400 million to $300 million and to
change a certain debt covenant. The total commitment under the bank credit
agreement reduces in quarterly amounts of $25 million commencing March 31, 1994.
This agreement serves as a back-up for outstanding commercial paper and bank
borrowings. As of December 31, 1993, no borrowings were outstanding under the
bank credit agreement.
In 1990, MAPCO filed a shelf registration statement with the Securities and
Exchange Commission providing for the issuance of up to $400 million of debt
securities. As of December 31, 1993, MAPCO had outstanding $343 million of
Medium Term Notes under this registration. MAPCO has the authorization to issue
up to an additional $47 million of Medium Term Notes. The proceeds from any debt
issued under the shelf registration statement have been and will continue to be
used for general corporate purposes, including working capital, capital
expenditures, reduction of other debt and acquisitions.
MAPCO's existing debt and credit agreements contain covenants which limit
the amount of additional indebtedness the Company can incur. Management
believes, however, that MAPCO has sufficient capacity to fund its anticipated
needs.
Capital expenditures in 1994 are expected to be approximately $181 million,
of which approximately $109 million will be for expansion projects and $7
million for environmental projects. MAPCO's long-term liquidity is expected to
increase since cash generated from operations is anticipated to exceed currently
projected capital expenditures, environmental projects, debt service and
dividends. MAPCO anticipates that future excess internal cash generation will be
used primarily to fund new capital projects.
16
<PAGE> 19
INFLATION
The impact of inflation on MAPCO has been less significant during the past
five years because of the relatively low rates of inflation experienced in the
United States. MAPCO's operating costs are influenced to a larger extent by
specific price changes in oil and gas and allied industries than by changes in
general inflation. Crude and NGL prices are particularly sensitive to OPEC
production levels and/or the attitudes of traders concerning the supply and
demand balance in the near future. These costs could increase, with a possible
adverse effect on MAPCO's profitability. Although every effort will be made to
do so, it is possible that MAPCO, like many other companies, may not be able to
adjust its sales prices to maintain parity with inflation-driven operating
costs.
The Company attempts to minimize the impact of inflation on operating costs
through on-going productivity improvements and cost reduction programs.
Significant volumes of MAPCO Coal's production are sold pursuant to long-term
contracts, many of which contain cost adjustment provisions which are generally
inflation related. Also, one mine's sales price is based upon actual costs plus
a per ton profit. MAPCO Petroleum uses the last-in, first-out method of
inventory valuation for crude oil, refined petroleum products and retail
merchandise inventories. This method of inventory valuation results in cost of
sales which more closely represent current costs.
OTHER
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 112, Employers' Accounting for
Postemployment Benefits. This standard will require accrual of estimated future
costs over premiums collected for individuals electing to continue benefits
coverage after employment under COBRA. Adoption of this standard in 1994 will
not materially affect MAPCO's financial position or annual expense for
postemployment benefits.
The FASB has also issued SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, and SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Adoption of these standards is not expected to
materially affect MAPCO's financial position, liquidity or results of
operations. MAPCO expects to adopt these standards in 1995 and 1994,
respectively.
MAPCO maintains property and liability insurance at limits believed to be
sufficient to cover estimated potential risks. Losses up to deductible amounts
of the various coverages would not have a material effect on MAPCO's financial
position.
RESULTS OF OPERATIONS
INCOME STATEMENT
1993 Results Compared to 1992
Net income in 1993 increased $26 million over the $101 million reported in
1992. Earnings per common share were a record $4.24 in 1993 compared to $3.37 in
1992. Net income and earnings per share in 1992 would have been $121 million and
$4.06, respectively, excluding $0.69 per share of mostly non-recurring charges.
Average common shares outstanding were 30.0 million in 1993 and 29.9 million in
1992.
Sales and operating revenues by segment were as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Natural Gas Liquids.................................... $ 465 $ 453 $ 409
Petroleum.............................................. 1,978 2,028 2,034
Coal................................................... 414 430 440
Eliminations........................................... (142) (124) (100)
------ ------ ------
$2,715 $2,787 $2,783
------ ------ ------
------ ------ ------
</TABLE>
17
<PAGE> 20
Sales and operating revenues decreased $72 million because of lower sales
in the Petroleum and Coal segments. The $50 million decline in sales for the
Petroleum segment was due principally to lower sales prices at both the Memphis
and North Pole Refineries. Coal revenues declined primarily because of slightly
lower sales volumes and a price decrease on 2.2 million tons under a contract
price reopener provision. Natural Gas Liquids' sales and operating revenues
increased because of additional propane sales volumes from operating more retail
plants, completion of the Seminole Pipeline Loop project and the negative impact
on last year's revenues of an explosion at Seminole's facilities near Brenham,
Texas ("Brenham explosion") in April, 1992. Natural Gas Liquids' revenues in
1992 included $7 million for the termination and buyout of a pipeline
transportation agreement.
Outside purchases and operating expenses by segment are provided below (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1993 1992 1991
----------------------- ----------------------- -----------------------
OUTSIDE OPERATING OUTSIDE OPERATING OUTSIDE OPERATING
PURCHASES EXPENSES PURCHASES EXPENSES PURCHASES EXPENSES
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas Liquids........ $ 34 $ 167 $ 33 $ 173 $ 29 $ 133
Petroleum.................. 1,614 164 1,703 161 1,724 162
Coal....................... 33 295 34 321 30 313
--------- --------- --------- --------- --------- ---------
$ 1,681 $ 626 $ 1,770 $ 655 $ 1,783 $ 608
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
Outside purchases and operating expenses in 1993 decreased $118 million
from 1992. Petroleum's outside purchases declined $89 million because of lower
average crude prices at both refineries. Operating expenses in Petroleum
increased $3 million due primarily to higher environmental costs and higher
maintenance costs on the fluid catalytic cracker at the Memphis Refinery. Coal's
operating expenses decreased $26 million because of the resolution of prior year
operational problems and the installation of new longwall shields in early 1993
at the Mettiki Mine, lower production levels at Pontiki and the Virginia Region
Mines in 1993, and legislatively imposed retiree medical obligations of $5.6
million which were included in 1992 expenses. Natural Gas Liquids' operating
expenses decreased $6 million in 1993; however, excluding a $19.6 million
insurance premium penalty charged against 1992 operations, as a result of the
Brenham explosion, operating expenses increased $14 million. The increase in
expense was primarily attributable to higher power, pension and benefit, and
property tax expenses in transportation, and higher operating costs from the
increased number of retail propane plants.
Depreciation, depletion and amortization was $97 million in both 1993 and
1992. Increases in depreciation expense from the Seminole Loop expansion project
and additional retail propane plants acquired in 1992 were largely offset by
lower Coal Segment depreciation expense. Coal's depreciation expense decreased
$3 million primarily because of changes in the estimated useful lives of certain
long lived assets.
Interest and debt expense was $47 million in 1993 compared to $54 million
in 1992. Lower interest rates and debt levels were the primary reasons for the
decrease. Also, 1992 expenses included $4 million of debt retirement expense.
Other income-net was $8 million higher than in 1992, primarily because of
$8 million received by the North Pole Refinery in settlement of a contract
dispute.
MAPCO's effective tax rate for 1993 was 36.7% compared to 31.1% in 1992.
The difference between the statutory Federal income tax rate of 35% in 1993 and
34% in 1992 and the effective tax rate for 1993 and 1992 was primarily due to
statutory depletion and state income taxes and, for 1993, the deferred tax
impact of the increase in the corporate income tax rate included in the Omnibus
Budget Reconciliation Act of 1993.
1992 Results Compared to 1991
Net income in 1992 was $101 million, compared to $126 million in 1991.
Earnings per share were $3.37 in 1992, compared to $4.20 in 1991. Average common
shares were 29.9 million in 1992 and 30.0 million in 1991.
18
<PAGE> 21
Sales and operating revenues increased $44 million in the Natural Gas
Liquids segment from 1991 to 1992. The increase was primarily attributable to
increased retail propane sales and transportation revenues. Retail propane sales
increased 61 million gallons primarily because of a strong crop drying season
and the retail stores acquired in late 1991 and 1992. Pipeline revenues
increased because of a strong 1992 crop drying season, an increase in home
heating demand, and $7 million from a contract termination and buyout. Petroleum
revenues declined slightly because of lower average refined product prices. Coal
revenues decreased $10 million principally because of a 1992 tonnage reduction
agreement with a large contract customer and the effect of a 1992 price decrease
on one million contract tons under a price reopener provision.
Outside purchases and operating expenses increased $34 million in 1992 over
1991. The increase was attributable to higher purchases and higher operating
expenses in the Natural Gas Liquids and Coal segments, partially offset by
decreased purchases and lower operating expenses in Petroleum. Natural Gas
Liquids' outside purchases increased primarily because of the increased volume
of retail propane sales, and operating expenses increased because of a $19.6
million insurance premium penalty accrued relative to the Brenham explosion and
an increased number of retail stores in operation. Coal's outside purchases
increased because of higher brokerage volumes, and operating expenses increased
primarily because of a $5.6 million charge in 1992 for legislatively imposed
retiree medical obligations. Petroleum's outside purchases decreased because of
lower average crude costs, lower North Pole Refinery volumes and lower purchases
of refined products in 1992 by the Memphis Refinery. Petroleum's average crude
costs were lower in 1992 compared to the Persian Gulf War-influenced prices of
1991. North Pole Refinery volumes decreased primarily due to a decline in demand
for jet fuels. Outside purchases of refined products at the Memphis Refinery
declined because purchases of refined products made during the turnaround and
expansion in 1991 were not required in 1992.
Depreciation, depletion and amortization increased $5 million primarily due
to: accelerating depreciation on equipment scheduled for replacement earlier
than anticipated in the Coal segment, retail plant acquisitions made in late
1991 and in 1992 in the Natural Gas Liquids segment, and the expansion of the
Memphis Refinery in 1991 in the Petroleum segment.
Interest and debt expense decreased $3 million because of lower interest
rates. Interest and debt expense was lower even though 1992 amounts included $4
million of debt retirement expense and average debt levels were 15% higher in
1992 as compared to 1991.
Other income-net decreased $5 million principally due to liability
provision increases in 1992 relative to a non-operating business unit, partially
offset by a $3.7 million business interruption insurance recovery.
MAPCO's effective income tax rate for 1992 was 31.1% compared to 29.7% in
1991. The difference between the statutory Federal income tax rate of 34% and
the effective tax rate for 1992 and 1991 was primarily due to statutory
depletion and state income taxes.
OPERATING PROFIT
Operating Profit Operating profit by segment was as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Natural Gas Liquids............................ $119 $114 $140
Petroleum...................................... 109 74 64
Coal........................................... 47 36 55
---- ---- ----
$275 $224 $259
---- ---- ----
---- ---- ----
</TABLE>
1993 Results Compared to 1992
Natural Gas Liquids Segment Results
The $5 million increase in 1993 operating profit is primarily attributable
to higher transportation and retail propane operating profits. Transportation
revenues increased because of the completion of the Seminole
19
<PAGE> 22
Loop project in May 1993, and because of the negative impact of the Brenham
explosion on 1992 revenues. Although revenues grew in 1993, volumes on the Rocky
Mountain Extension and Seminole Pipeline were negatively impacted as a result of
producers leaving ethane in the natural gas stream rather than extracting the
liquids for shipment to the Texas Gulf Coast. Transportation expenses were lower
in 1993 primarily because of the Brenham explosion which also negatively
impacted 1992 expenses. Retail propane operating profit increased because
volumes were higher in 1993; however, higher expenses and lower margins
partially offset the favorable impact of the higher volumes. The increases in
volumes and expenses were attributable primarily to additional retail plants in
operation. Lower margins were principally due to the intense price competition
faced throughout 1993.
The expansion of the 80-percent-owned Seminole Pipeline was completed at a
cost of $130 million. The expansion consists of an additional 544-mile, 14-inch
pipeline from West Texas to Mont Belvieu, Texas, and increases the potential
capacity of the line to over 300,000 barrels per day.
Petroleum Segment Results
Petroleum segment operating profit increased $35 million over 1992. The
increase was attributable to higher refinery margins, $8 million received in
1993 relative to a North Pole Refinery contract settlement, and higher Mid-South
Retail fuel margins and lower expenses, partially offset by higher Memphis
Refinery expenses.
The increase in refinery margins primarily reflects the effect of lower
average crude costs during 1993. Mid-South Retail fuel margins increased due to
lower average fuel costs in 1993. Mid-South Retail's lower expenses were
primarily attributable to fewer stores in operation and lower environmental
expenses. Expenses at the Memphis Refinery increased primarily due to operating
problems with the fluid catalytic cracker unit during the first quarter of 1993
and higher maintenance and environmental costs.
Coal Segment Results
Coal segment operating profit increased $11 million over 1992 primarily
because of lower production costs at both the Mettiki and Martiki Mines and the
negative impact on 1992 of a $5.6 million charge for legislatively imposed
retiree medical obligations. These factors were partially offset by lower
revenues in the current year. Aging longwall shields at Mettiki were replaced
and the other operational problems encountered in 1992 at the mine were
resolved, resulting in a 16% decrease in per ton production costs. Overburden
stripping ratios at the Martiki Mine were lower in 1993 which is the primary
reason for Martiki's lower per ton production costs. Revenues for the Coal
Segment decreased primarily as a result of a price reopener on a long-term sales
contract with a major customer.
1992 Results Compared to 1991
Natural Gas Liquids Segment Results
The $26 million decrease in operating profit for the Natural Gas Liquids
segment was primarily attributable to an increase in transportation operating
expenses, partially offset by higher revenues. The higher transportation
operating expenses were principally due to the Brenham explosion, higher power,
outside services and materials and supply costs. Revenues increased in 1992 over
1991 despite the negative impact on 1992 revenues from the Brenham explosion
primarily because of $7 million from the termination and buyout of a pipeline
transportation agreement and increased demand in the Midwest propane markets.
Petroleum Segment Results
The Petroleum segment's operating profit increased $10 million in 1992. The
increase was primarily attributable to higher refined product margins and lower
expenses at the Memphis Refinery, and higher Mid-South Retail fuel and
merchandise margins, partially offset by lower North Pole Refinery volumes and
margins. Margins at the Memphis Refinery in 1992 were higher because 1991
margins were negatively impacted by the turnaround and expansion project and a
fluid catalytic cracker blower failure. The higher
20
<PAGE> 23
1992 Mid-South Retail fuel margins were attributable to decreased fuel costs,
and merchandise margins were higher in 1992 because sales price increases
outpaced increases in merchandise costs. North Pole Refinery's margins declined
in 1992 because of the positive impact of the Persian Gulf War on 1991 margins.
North Pole Refinery volumes declined because of weak jet fuel demand in the
Alaskan markets.
Coal Segment Results
The Coal segment's operating profit decreased $19 million due primarily to
a $5.6 million charge in 1992 relating to legislatively imposed retiree medical
obligations, increased per ton expenses due to continued operating problems at
the Mettiki Mine and lower per ton sales prices reflecting a contract price
reopener.
ENVIRONMENTAL ISSUES
Estimated liabilities for environmental costs, primarily in the Petroleum
segment, were determined without consideration of possible recoveries from third
parties; however, where recoveries from state funds are involved and management
assesses that the recovery of state funds is probable (i.e., the state is
required by law to reimburse MAPCO for the Company's expenditures), the
liability is recorded at its net amount. Estimated liabilities for environmental
matters were $33.7 million and $34.3 million at December 31, 1993 and December
31, 1992, respectively. Of these amounts, $20.3 million at December 31, 1993,
and $21.6 million at December 31, 1992, has been recognized as recoverable from
state funds in connection with laws requiring reimbursement by the states of
certain expenses associated with underground storage tank failures and repairs.
OTHER ISSUES
Natural Gas Liquids Segment
Since 1991, MAPCO's West Panhandle field gas supplier has taken more than
its percentage ownership share of the field's production. The cumulative effect
of this acceleration in gas taken has resulted in the Westpan operations having
a 25.3 billion cubic feet and $23.7 million over-take position. This imbalance
will be adjusted by offsets from future field production. MAPCO uses the sales
method of accounting for its gas balancing arrangements which allows the
immediate recognition of all revenues on natural gas liquids sold. The
acceleration in gas taken contributed an estimated $4.3 million, $9.0 million
and $10.4 million to MAPCO's consolidated operating profit in 1993, 1992 and
1991, respectively.
On April 7, 1992, a liquefied petroleum gas explosion occurred near an
underground salt dome storage facility located near Brenham, Texas and owned by
an affiliate of the Company, Seminole Pipeline Company. The matter was
investigated by the National Transportation Safety Board and the Texas Railroad
Commission. A discussion of this matter and its effect on MAPCO and its
affiliate is contained in Note 10 to the consolidated financial statements
contained herein.
Petroleum Segment
Since 1978, MAPCO Alaska Petroleum Inc. (and/or its predecessor) has had
long-term agreements with the State of Alaska (the "State") to purchase royalty
oil from the State at prices linked to amounts payable by North Slope oil
producers in satisfaction of their royalty obligations to the State. In 1977,
the State commenced suit against the producers (in an action entitled State of
Alaska v. Amerada Hess, et al.) alleging that they incorrectly calculated their
royalty payments. A discussion of this dispute as it relates to MAPCO is
contained in Note 10 to the consolidated financial statements included herein.
Coal Segment
The Coal segment has significant volumes of coal committed under long-term
contracts which provide for sales prices in excess of current spot market
prices. Long-term contracts for 1.4 million annual tons, 0.5 million annual tons
and 3.1 million annual tons will expire during 1994, 1995 and 1996,
respectively. In addition, an extension on one million annual tons originally
scheduled to expire on December 31, 1994, has been extended through December 31,
1996, at a slightly lower sales price.
21
<PAGE> 24
The Retiki Mine sells all of its production to Big Rivers Electric
Corporation ("Big Rivers") under a cost-plus management fee contract that
expires in January 1996. The mine is expected to close following expiration of
the contract. Operations at the Retiki Mine have contributed less than 2% of
MAPCO's consolidated operating profit during the past three years. As of
December 31, 1993, Retiki had invoiced Big Rivers approximately $5.0 million for
certain costs associated with the operation of the mine, which costs Big Rivers
has disputed. Retiki will continue to invoice Big Rivers for similar costs
through the contract termination date. Retiki has initiated litigation with
respect to this matter and management believes that substantially all of the
receivable will ultimately be collected.
During 1993 the United Mine Workers Association ("UMWA") filed a petition
with the National Labor Relations Board ("NLRB") seeking an election to decide
whether the UMWA should represent hourly employees at MAPCO Coal's Pontiki mine.
In August 1993 the NLRB conducted a representation election and the unofficial
vote count was 78 opposed to unionization, 101 votes supporting the UMWA and 23
votes challenged by the UMWA. The challenged votes are determinative of the
election. Presuming all of the contested votes are "no" votes, the election
would be a tie and the UMWA would not be elected to represent Pontiki employees.
The matter is pending with the NLRB and a dispositive ruling is not expected
until mid-1994. Management believes that an unfavorable ruling relative to this
matter would not have a material impact on MAPCO's overall costs and
profitability.
The Clean Air Act is expected to alter the pattern of U.S. coal consumption
resulting in a general decrease of demand for higher sulfur coals and increase
of demand for lower sulfur coals. Legislation of this type is not expected to
materially impact the Coal Segment's future operating profit results primarily
because most of MAPCO Coal's higher sulfur coals are sold to customers with
scrubbers, or to customers that have indicated their intentions to install
scrubbers. Additionally, MAPCO Coal management believes the anticipated
favorable impact of the marketability and pricing for low sulfur and compliance
coal should offset the financial impact, if any, of the Clean Air Act.
GENERAL MANAGEMENT DISCUSSION
The consolidated financial statements of MAPCO have been prepared by
management, which is responsible for the integrity and objectivity of the
statements. These financial statements, which include amounts that are based on
management's best estimates and judgments, have been prepared in accordance with
generally accepted accounting principles. The consolidated financial statements
have been audited by the Company's independent auditors, Deloitte & Touche,
whose report appears on page F-1.
MAPCO maintains a system of internal controls that is designed to provide
reasonable assurance that the financial records are accurate, assets are
protected, and the consolidated financial statements fairly present the
financial position and results of operations of the Company. This system is
augmented by the selection and training of qualified personnel, management
oversight, proper division of responsibilities, the dissemination of written
policies and procedures, and an internal audit program to monitor the system's
effectiveness. In the opinion of management, the system of internal controls is
effective and provides the assurance described above.
The Board of Directors, through its Audit Committee (comprised of four
outside Directors), monitors management's financial reporting responsibilities.
The Audit Committee meets periodically with representatives of management, the
independent auditors, and the Company's internal auditors to discuss specific
accounting, reporting, internal control and regulatory compliance matters.
Deloitte & Touche and the Company's internal auditors have full and free access
to meet with the Audit Committee.
Approximately 16% of MAPCO stockholders participate in the voluntary
Dividend Investment Plan whereby cash dividends are used to purchase additional
MAPCO common stock as directed by the participating stockholder. There is no
charge to stockholders for this service. The plan is administered by Harris
Trust Company of New York and stockholders having questions about their accounts
may contact Harris Bank, Dividend Reinvestment, P.O. Box A-3309, Chicago,
Illinois 60690-9939.
22
<PAGE> 25
During 1993 and 1992, MAPCO declared quarterly dividends of $0.25 per
share. Dividends were payable in March, June, September and December. The annual
dividend in 1993 and 1992 was $1.00 per share.
MAPCO common stock is traded on the New York, Chicago, and Pacific Stock
Exchanges under the symbol MDA. MAPCO has approximately 5,900 stockholders of
record.
The high and low closing prices of MAPCO's common stock on the New York
Stock Exchange during the quarterly periods of 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
----------------- -----------------
QUARTER HIGH LOW HIGH LOW
----------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First.......................................... $54.00 $48.88 $61.88 $56.63
Second......................................... 57.75 51.00 60.63 53.75
Third.......................................... 64.25 56.38 60.63 54.88
Fourth......................................... 65.25 57.38 58.50 52.50
</TABLE>
The closing price of MAPCO's common stock on the New York Stock Exchange on
March 24, 1994 was $61.125.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of MAPCO Inc., together with the
report thereon of Deloitte & Touche dated February 1, 1994 and the supplementary
financial data specified by Item 302 of Regulation S-K are set forth on pages
F-1 through F-20 hereof. (See Item 14 for Index).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of MAPCO is incorporated by reference
herein from MAPCO's Proxy Statement to be filed for its 1994 Annual Meeting of
Stockholders. (See "Executive Officers of MAPCO Inc." in PART I, Item 1, SUPRA,
regarding executive officers of MAPCO).
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference herein from MAPCO's Proxy Statement to be filed
for its 1994 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference herein from MAPCO's Proxy Statement to be filed
for its 1994 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference herein from MAPCO's Proxy Statement to be filed
for its 1994 Annual Meeting of Stockholders.
23
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
<TABLE>
<CAPTION>
PAGE
-----------------
<S> <C>
Independent Auditors' Report......................................... F-1
Consolidated Statements of Income for the years ended December 31,
1993, 1992 and 1991................................................ F-2
Consolidated Balance Sheets as of December 31, 1993 and 1992......... F-3
Consolidated Statements of Cash Flows for the years ended December
31, 1993, 1992 and 1991............................................ F-4
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1993, 1992 and 1991....................... F-5
Notes to Consolidated Financial Statements........................... F-6 through F-20
</TABLE>
(a) 2. Financial Statement Schedules.
<TABLE>
<S> <C>
Schedule III -- Condensed financial information of registrant........ S-1
Schedule V -- Property, plant and equipment for the years ended
December 31, 1993, 1992 and 1991................................... S-5
Schedule VI -- Accumulated depreciation, depletion and amortization
of property, plant and equipment for the years ended December 31,
1993, 1992 and 1991................................................ S-6
Schedule VIII -- Valuation and qualifying accounts for the years
ended December 31, 1993, 1992 and 1991............................. S-7
Schedule X -- Supplementary income statement information for the
years ended December 31, 1993, 1992 and 1991....................... S-8
</TABLE>
Other schedules of MAPCO Inc. and its subsidiaries are omitted because of
the absence of the conditions under which they are required or because the
required information is included in the Financial Statements or Notes thereto.
(a) 3. Exhibits.
<TABLE>
<CAPTION>
ITEM
------
<S> <C>
3.(a) -- Restated Certificate of Incorporation, as amended (Exhibit 3.(a)
to Report on Form 10-K for the fiscal year ended December 31,
1989*)
3.(b) -- MAPCO Inc. By-Laws, as amended April 16, 1989 (Exhibit 4.2 to
registrant's Registration Statement on Form S-8, (Registration
No. 33-28722)*)
4.(a) -- Specimen of Common Stock Certificate (Exhibit 4(a) to Report on
Form 10-K for the fiscal year ended December 31, 1989*)
4.(b) -- Note Agreement between Mid-America Pipeline Company and The
Prudential Insurance Company of America dated as of April 30,
1992 (a copy of this Agreement will be furnished to the
Commission on request as provided in sec.229.601(b) (4) (iii)
(A) of Regulation S-K)
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
ITEM
------
<S> <C>
4.(c) -- Note Agreement between Mid-America Pipeline Company and The
Prudential Insurance Company of America dated as of May 20, 1992
(a copy of this Agreement will be furnished to the Commission on
request as provided in sec.229.601(b) (4) (iii) (A) of
Regulation S-K)
4.(d) -- Note Agreement between Mid-America Pipeline Company and The
Prudential Insurance Company of America dated as of July 13,
1992 (a copy of this Agreement will be furnished to the
Commission on request as provided in sec.229.601(b) (4) (iii)
(A) of Regulation S-K)
4.(e) -- Note Agreement between Mid-America Pipeline Company and The
Prudential Insurance Company of America dated as of July 20,
1992 (a copy of this Agreement will be furnished to the
Commission on request as provided in sec.229.601(b) (4) (iii)
(A) of Regulation S-K)
4.(f) -- Note Agreement between Mid-America Pipeline Company and The
Prudential Insurance Company of America dated as of November 20,
1992 (a copy of this Agreement will be furnished to the
Commission on request as provided in sec.229.601(b) (4) (iii)
(A) of Regulation S-K)
4.(g) -- Competitive Advance and Revolving Credit Facility Agreement
dated as of December 20, 1989 among MAPCO Inc., Chemical Bank,
as Agent and the Banks named therein (Exhibit 4.5 to
registrant's Registration Statement on Form S-8 (Registration
No. 33-33217)*)
4.(h) -- Amendment No. 1 dated as of June 19, 1992, to the Competitive
Advance and Revolving Credit Facility dated as of December 20,
1989, among MAPCO Inc., Chemical Bank, as Agent for the Banks,
and the Banks named therein (Exhibit 4.(g).1 to Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1993*)
4.(i) -- Amendment No. 2 dated as of May 1, 1993, to the Competitive
Advance and Revolving Credit Facility dated as of December 20,
1989, among MAPCO Inc., Chemical Bank, as Agent for the Banks,
and the Banks named therein (Exhibit No. 4.(g).2 to Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1993*)
4.(j) -- Rights Agreement dated as of June 12, 1986 between MAPCO Inc.
and Harris Trust Company of New York, as amended (Exhibit 1 to
Current Report on Form 8-K dated June 30,1986 and Exhibit 28(a)
to Current Report on Form 8-K filed October 12, 1989*)
4.(k) -- Note Agreement dated as of June 16, 1989 between MAPCO Inc. and
IDS Life Insurance Company of New York, American Enterprise Life
Insurance Company, et al. (Exhibit 4.(h) to Report on Form 10-K
for the fiscal year ended December 31, 1989*)
4.(l) -- Note Agreement dated as of December 1, 1993 between Seminole
Pipeline Company and Principal Mutual Life Insurance Company, et
al. (a copy of this Agreement will be furnished to the
Commission on request as provided in sec.229.601(b) (4) (iii)
(A) of Regulation S-K)
4.(m) -- Indenture dated as of March 31, 1990 between MAPCO Inc. and
Bankers Trust, Trustee (Exhibit 4.0 to Current Report on Form
8-K dated February 19, 1991*)
</TABLE>
25
<PAGE> 28
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS OR ARRANGEMENTS
<TABLE>
<S> <C>
10.(a) -- MAPCO Inc. Annual Incentive Compensation Plan, effective January
1, 1984, as amended (Exhibit 10.(a) to Report on Form 10-K for
the fiscal year ended December 31, 1990*)
10.(b) -- 1981 Stock Appreciation Rights and Stock Option Rights Plan for
Key Employees of MAPCO Inc. and its Subsidiaries (as amended to
provide for Incentive Stock Options) (Exhibit 10.(b) to Report
on Form 10-K for the fiscal year ended December 31, 1990*)
10.(c) -- Form of Agreement between MAPCO Inc. and Directors relating to
indemnification (Exhibit 10.(c) to Report on Form 10-K for the
fiscal year ended December 31, 1992*)
10.(d) -- Form of Agreement between MAPCO Inc. and certain officers and
key employees relating to indemnification (Exhibit 10.(d) to
Report on Form 10-K for the fiscal year ended December 31,
1989*)
10.(e) -- MAPCO Inc. Retirement Plan for Directors (Exhibit 10.(f) to
Report on Form 10-K for the fiscal year ended December 31,
1989*)
10.(f) -- MAPCO Inc. 1986 Retirement Plan for Directors (Exhibit 10.(g) to
Report on Form 10-K for the fiscal year ended December 31,
1989*)
10.(g) -- Form of Agreement between MAPCO Inc. and certain officers
relating to employment dated December 20, 1989, effective
January 1, 1990 (Exhibit 10.(h) to Report on Form 10-K for the
fiscal year ended December 31, 1989*)
10.(h) -- Form of Amendment Letter to Agreement Dated December 20, 1989
between MAPCO Inc. and certain officers relating to employment
dated March 14, 1990 (Exhibit 10.(i) to Report on Form 10-K for
the fiscal year ended December 31, 1989*)
10.(h).1 -- Amendments to Letter Agreement relating to employment dated
December 18, 1991 between MAPCO Inc. and James E. Barnes and
Robert M. Howe (Exhibit 10.(h).1 to Report on Form 10-K for the
fiscal year ended December 31, 1991*)
10.(i) -- Supplemental Retirement Agreement, as amended and restated, as
of December 12, 1991 between MAPCO Inc. and James E. Barnes
(Exhibit 10.(i) to Report on Form 10-K for the fiscal year ended
December 31, 1991*)
10.(j) -- Supplemental Retirement Agreement, as amended and restated, as
of December 12, 1991 between MAPCO Inc. and Robert M. Howe
(Exhibit 10.(j) to Report on Form 10-K for the fiscal year ended
December 31, 1991*)
10.(k) -- Amendment effective December 31, 1993, to Supplemental
Retirement Agreement, as amended and restated, effective
December 1, 1984, between MAPCO Inc. and Robert M. Howe (Filed
herewith)
10.(l) -- MAPCO Inc. 1986 Stock Option Plan, effective January 1,
1986 (Exhibit 10.(k) to Report on Form 10-K for the fiscal year
ended December 31, 1992*)
10.(m) -- MAPCO Inc. 1986 Performance Bonus Plan, effective January 1,
1986 (Exhibit 10.(l) to Report on Form 10-K for the fiscal year
ended December 31, 1991*)
10.(n) -- MAPCO Inc. Supplemental Executive Retirement Plan effective
January 1, 1986 (Filed Herewith)
</TABLE>
26
<PAGE> 29
<TABLE>
<S> <C>
10.(o) -- MAPCO Inc. 1989 Stock Incentive Plan (Exhibit 4.9 to
registrant's Registration Statement on Form S-8, (Registration
No. 33-33217)*)
10.(p) -- MAPCO Inc. 1989 Outside Director Stock Option Plan (Exhibit
10.(p) to Report on Form 10-K for the fiscal year ended December
31, 1989*)
10.(q) -- MAPCO Inc. Long-Term Investment Savings Plan, effective January
1, 1994 (Filed herewith)
10.(r) -- MAPCO Inc. Long-Term Investment Savings Trust, effective January
10, 1994 (Filed herewith)
11. -- Statement re: computation of per share earnings
12. -- Computation of Ratio of Earnings to Fixed Charges
21. -- List of Subsidiaries
23. -- Independent Auditors' Consent
24. -- Power of Attorney, included as part of the signature page of
this report
</TABLE>
- ---------------
* Incorporated herein by reference
All other schedules and exhibits are omitted because they are not required
or are not applicable.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1993.
27
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, MAPCO Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MAPCO INC.
Dated: March 24, 1994 By /s/ JAMES E. BARNES
JAMES E. BARNES
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
We, the undersigned officers and directors of MAPCO Inc. hereby severally
constitute James E. Barnes and Frank S. Dickerson, III, and each of them singly,
our true and lawful attorneys with full power to them, and each of them singly,
to sign for us and in our names in the capacities indicated below, any and all
amendments to this report, and generally to do all such things in our names and
behalf in our capacities as officers and directors to enable MAPCO Inc. to
comply with the provisions of the Securities Exchange Act of 1934, as amended,
and all requirements of the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by our said attorneys, or
either of them, to any and all amendments to this report.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------
<S> <C> <C>
/s/ JAMES E. BARNES Chairman of the Board and March 24, 1994
(James E. Barnes) Chief Executive Officer
/s/ FRANK S. DICKERSON, III Senior Vice President, Chief March 24, 1994
(Frank S. Dickerson, III) Financial Officer and
Treasurer
/s/ DONALD R. WELLENDORF Vice President and March 24, 1994
(Donald R. Wellendorf) Controller (Principal
Accounting Officer)
/s/ HARRY A. FISCHER, JR. Director March 24, 1994
(Harry A. Fischer, Jr.)
/s/ WAYNE K. GOETTSCHE Director March 24, 1994
(Wayne K. Goettsche)
Director March 24, 1994
(Donald Paul Hodel)
/s/ MALCOLM T. HOPKINS Director March 24, 1994
(Malcolm T. Hopkins)
/s/ ROBERT M. HOWE Director March 24, 1994
(Robert M. Howe)
/s/ PHILIP C. LAUINGER, JR. Director March 24, 1994
(Philip C. Lauinger, Jr.)
/s/ DONALD L. MELLISH Director March 24, 1994
(Donald L. Mellish)
/s/ ROBERT L. PARKER Director March 24, 1994
(Robert L. Parker)
/s/ HERMAN J. SCHMIDT Director March 24, 1994
(Herman J. Schmidt)
/s/ SAMUEL F. SEGNAR Director March 24, 1994
(Samuel F. Segnar)
</TABLE>
28
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
MAPCO Inc., its Directors and Stockholders:
We have audited the accompanying consolidated financial statements of MAPCO
Inc. and subsidiaries, listed at Item 14(a)1 herein. Our audits also included
the financial statement schedules listed at Item 14(a)2. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of MAPCO Inc. and subsidiaries at
December 31, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed in Note 10 to the consolidated financial statements, the
Company is involved in litigation relating to retroactive increases in prices
paid to the State of Alaska under its royalty oil purchase agreements. The
ultimate outcome of the litigation cannot presently be determined. The Company
has accrued an estimate of certain amounts which it may incur in connection with
the final resolution of the dispute.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1991,
1990 and 1989, and the related consolidated statements of income, cash flows,
and changes in stockholders' equity for the years ended December 31, 1990 and
1989 (none of which are presented herein); and we expressed unqualified opinions
on those consolidated financial statements. In our opinion, the information set
forth in the selected financial data for each of the five years in the period
ended December 31, 1993, appearing in Item 6 herein, is fairly stated, in all
material respects, in relation to the consolidated financial statements from
which it has been derived.
Deloitte & Touche
Tulsa, Oklahoma
February 1, 1994
F-1
<PAGE> 32
MAPCO INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
-------- -------- --------
- -------- -------- (DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Sales and Operating Revenues(1).............................. $2,715.3 $2,786.8 $2,782.8
Expenses:
Outside purchases and operating expenses(1)................ 2,307.4 2,424.6 2,391.2
Selling, general and administrative........................ 72.8 70.7 69.7
Depreciation, depletion and amortization................... 97.3 96.5 91.1
Interest and debt expense.................................. 46.5 54.4 57.1
Other income -- net........................................ (11.6) (4.0) (8.9)
------- ------- -------
2,512.4 2,642.2 2,600.2
------- ------- -------
Income Before Provision for Income Taxes..................... 202.9 144.6 182.6
Provision for Income Taxes (Note 5).......................... 74.5 45.0 54.2
------- ------- -------
Income Before Minority Interest.............................. 128.4 99.6 128.4
Minority Interest in Earnings of Subsidiary.................. (1.4) 1.1 (2.5)
------- ------- -------
Net Income................................................... $ 127.0 $ 100.7 $ 125.9
------- ------- -------
------- ------- -------
Earnings per Common Share (Notes 6 & 7)...................... $ 4.24 $ 3.37 $ 4.20
------- ------- -------
------- ------- -------
</TABLE>
- ---------------
(1) Includes consumer excise taxes of $148.7 million, $146.5 million and $140.3
million in 1993, 1992 and 1991, respectively.
See notes to consolidated financial statements.
F-2
<PAGE> 33
MAPCO INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
(DOLLARS AND SHARES
IN MILLIONS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 69.8 $ 55.7
Receivables, less allowance for doubtful accounts (1993 -- $3.3;
1992 -- $3.0)...................................................... 228.8 236.2
Inventories (Note 3).................................................. 113.4 120.0
Prepaid expenses...................................................... 27.3 30.5
Other current assets.................................................. 16.9 16.0
-------- --------
Total current assets.......................................... 456.2 458.4
-------- --------
Property, Plant and Equipment, at cost:
Natural Gas Liquids................................................... 1,170.3 1,093.3
Petroleum............................................................. 566.3 543.8
Coal.................................................................. 571.2 573.1
Corporate............................................................. 34.0 33.6
-------- --------
2,341.8 2,243.8
Less -- Accumulated depreciation and depletion........................ (974.5) (913.4)
-------- --------
1,367.3 1,330.4
Other Assets............................................................ 117.3 122.9
-------- --------
$1,940.8 $1,911.7
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.................................. $ 12.8 $ 14.6
Accounts payable...................................................... 247.1 266.9
Accrued taxes......................................................... 47.3 41.5
Accrued payroll and related expenses.................................. 21.2 16.3
Other current liabilities............................................. 54.5 53.8
-------- --------
Total current liabilities..................................... 382.9 393.1
-------- --------
Long-Term Debt, excluding current maturities (Note 4)................... 585.5 669.4
-------- --------
Other Liabilities....................................................... 101.6 90.5
-------- --------
Deferred Income Taxes (Note 5).......................................... 273.5 259.6
-------- --------
Minority Interest....................................................... 23.0 21.6
-------- --------
Commitments and Contingencies (Note 10)
-------- --------
Stockholders' Equity (Notes 6, 7 and 9)
Capital stock:
Preferred Stock, without par value, 1 shares authorized; no shares
issued
Series A Junior Participating Preferred Stock, without par value,
.2 shares authorized; no shares issued
Common Stock, $1 par value, 75 shares authorized; 62.7 shares
issued -- 1993; 62.6 shares issued -- 1992........................ 62.7 62.6
Capital in excess of par value........................................ 200.0 199.0
Retained earnings..................................................... 1,306.7 1,209.1
-------- --------
1,569.4 1,470.7
Treasury Stock, at cost, 32.8 shares in 1993; 32.7 shares in 1992..... (926.9) (920.7)
Loan to ESOP.......................................................... (68.2) (72.5)
-------- --------
574.3 477.5
-------- --------
$1,940.8 $1,911.7
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 34
MAPCO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1992 1991
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 127.0 $ 100.7 $ 125.9
Reconciliation of net income to net cash provided
by operating activities:
Depreciation, depletion and amortization............... 97.3 96.5 91.1
Provision for deferred income taxes.................... 12.5 (9.1) 2.8
Other items not requiring cash (Note 2)................ 6.0 4.1 4.3
------- ------- -------
Funds provided by operations......................... 242.8 192.2 224.1
Changes in operating assets and liabilities (Note 2)... 10.4 37.7 (47.9)
------- ------- -------
Net cash provided by operating activities......... 253.2 229.9 176.2
------- ------- -------
Cash Flows from Investing Activities:
Capital expenditures and acquisitions, net of liabilities
assumed (Note 2)....................................... (144.3) (213.9) (141.4)
Proceeds from sales of property, plant and equipment...... 18.5 4.6 11.6
Other..................................................... 2.7 .1
------- ------- -------
Net cash used in investing activities............. (123.1) (209.3) (129.7)
------- ------- -------
Cash Flows from Financing Activities:
Purchase of common stock.................................. (6.2) (16.5) (20.2)
Decrease in borrowings.................................... (139.5) (67.8) (137.1)
Dividends................................................. (30.0) (29.9) (30.0)
Issuance of long-term debt................................ 75.4 246.1 199.1
Payments on long-term debt................................ (17.3) (147.5) (84.5)
Exercise of stock options................................. 1.0 .4 .9
Other..................................................... .6 (1.3) (1.1)
------- ------- -------
Net cash used in financing activities............. (116.0) (16.5) (72.9)
------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents............ 14.1 4.1 (26.4)
Cash and Cash Equivalents, January 1........................ 55.7 51.6 78.0
------- ------- -------
Cash and Cash Equivalents, December 31...................... $ 69.8 $ 55.7 $ 51.6
------- ------- -------
------- ------- -------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 35
MAPCO INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
$1 PAR VALUE CAPITAL IN TREASURY STOCK LOAN
--------------- EXCESS OF RETAINED ----------------- TO
SHARES AMOUNT PAR VALUE EARNINGS SHARES AMOUNT ESOP
------ ------ ---------- ---------- ------ ------- ------
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990........ 62.3 $62.3 $193.5 $ 1,042.4 (32.1) $(888.1) $(80.0)
Net income...................... 125.9
Dividends ($1.00 per share)..... (30.0)
Purchase of common stock........ (.5) (20.2)
ESOP loan repayments............ 3.6
Exercise of stock options....... .2 .2 .7
Other........................... 1.3 .1 1.1
------ ------ ---------- ---------- ------ ------- ------
Balance, December 31, 1991........ 62.5 62.5 195.5 1,138.3 (32.5) (907.2) (76.4)
Net income...................... 100.7
Dividends ($1.00 per share)..... (29.9)
Purchase of common stock........ (.3) (16.5)
ESOP loan repayments............ 3.9
Exercise of stock options....... .1 .1 .3
Other........................... 3.2 .1 3.0
------ ------ ---------- ---------- ------ ------- ------
Balance, December 31, 1992........ 62.6 62.6 199.0 1,209.1 (32.7) (920.7) (72.5)
Net income...................... 127.0
Dividends ($1.00 per share)..... (30.0)
Purchase of common stock........ (.1) (6.2)
ESOP loan repayments............ 4.3
Exercise of stock options....... .1 .1 1.3
Other........................... (.3) .6
------ ------ ---------- ---------- ------ ------- ------
Balance, December 31, 1993........ 62.7 $62.7 $200.0 $ 1,306.7 (32.8) $(926.9) $(68.2)
------ ------ ---------- ---------- ------ ------- ------
------ ------ ---------- ---------- ------ ------- ------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 36
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Consolidation --
The consolidated financial statements include the accounts of MAPCO Inc.
and its subsidiaries. Certain reclassifications have been made to prior year
amounts to conform to current year presentations. All significant intercompany
accounts and transactions have been eliminated.
Cash and Cash Equivalents --
Cash equivalents consist of short-term, highly liquid investments which are
readily convertible into cash. All investments classified as cash equivalents
have original maturities of three months or less.
Inventories --
Inventories include crude oil, refined petroleum products, natural gas
liquids, coal, fertilizer and retail merchandise. Inventories are valued at the
lower of cost or market. Crude oil, refined petroleum products and retail
merchandise inventories in the Petroleum segment are determined on a last-in,
first-out basis. Appliances, chemicals, fertilizer and other inventories related
to fertilizer in the Natural Gas Liquids segment are determined on an average
cost basis. All other inventories are determined on a first-in, first-out basis.
Net exchange balances are classified as inventory.
Advance Royalties --
Rights to leased coal lands are often acquired through royalty payments.
Royalty payments recoupable against future production are deferred, and amounts
expected to be recouped within one year are classified as a current asset. As
mining occurs on those leases, the prepayment is amortized and included in the
cost of mined coal. Amounts estimated to be nonrecoupable are expensed.
Depreciation and Depletion --
Depreciation and depletion is computed on the straight-line method at rates
based upon estimated useful lives or, if applicable, on the units-of-production
method based on estimated recoverable reserves. Maintenance, repairs and minor
replacements are expensed. Costs of replacements constituting improvements are
capitalized. Gains or losses arising from retirements are included in income
currently.
Excess of Purchase Price over Net Assets of Companies Acquired --
Amounts applicable to acquisitions prior to 1971 ($4.7 million) are not
amortized. Amounts applicable to acquisitions after 1970 are amortized on a
straight-line basis over periods not exceeding forty years. MAPCO continually
evaluates the periods of amortization to determine whether subsequent events and
circumstances warrant revision of the estimated useful lives of acquired assets.
Revenue Recognition --
MAPCO's revenue recognition policies provide that revenues are recognized
at the point of sale (i.e. transfer of title) or delivery.
Environmental Expenditures --
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations that do not contribute to current or future
revenue generation are expensed. Environmental liabilities are recorded
independently of any potential claim for recovery, except in cases where
reimbursements of remediation costs are available from
F-6
<PAGE> 37
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
state funds and the realization of those funds is considered probable. Accruals
related to environmental matters are generally determined based on site-specific
plans for remediation, taking into account prior remediation experience of MAPCO
and other companies.
Debt Discount and Expense --
Debt discount and expense arising from the issuance of debt securities are
capitalized and amortized using the principal outstanding method.
Gas Balancing Arrangements --
MAPCO uses the sales method of accounting for its gas balancing
arrangements. Under the sales method, MAPCO recognizes revenues on all West
Panhandle gas field gas liquids sold to its customers. Imbalances resulting from
any under/over-take position with MAPCO's gas supplier will be adjusted by
future field production.
Treasury Stock --
Common stock purchased is recorded as treasury stock, at cost.
Income Taxes --
Deferred income tax expense is recognized based on the net change for the
year in the deferred income tax liability, except for changes resulting from
differences between the assigned values and tax basis of assets acquired and
liabilities assumed in purchase business combinations. Deferred income tax
assets and liabilities are based on enacted tax laws and the expected reversal
of the temporary differences between the book and tax bases of assets and
liabilities.
Earnings Per Common Share --
Earnings per common share are based on the weighted average number of
common shares outstanding. Average common shares outstanding were 30.0 million
in 1993, 29.9 million in 1992 and 30.0 million in 1991.
ESOP --
MAPCO's loan to its Employee Stock Ownership Plan ("ESOP") is recorded as a
reduction of stockholders' equity in MAPCO's Consolidated Balance Sheets.
Compensation and interest expense are recognized based on MAPCO's cash
contributions to the ESOP.
Nature of Business --
Natural Gas Liquids segment operations include the transportation,
processing and underground storage of natural gas liquids ("NGLs"), the pipeline
transportation of anhydrous ammonia, refined products and crude oil and the sale
of liquid propane gas and fertilizer. The pipeline main line runs from the
Wyoming-Utah Overthrust Belt to Hobbs, New Mexico and from Hobbs through the
Midwest into Minnesota and Wisconsin. The main line also runs from Hobbs across
Texas to the Gulf Coast. Tariff charges for pipeline operations are made on
account to shippers who are engaged in energy or energy-related businesses.
Operations at three gas processing plants in the West Panhandle gas field in
Texas produce natural gas liquids which are sold in the Midwestern and Gulf
Coast markets. Propane and fertilizer are marketed through retail plants to
residential, agricultural and industrial customers located in the upper Midwest
and the Southeast regions of the United States. Sales are generally made on
account.
F-7
<PAGE> 38
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Petroleum segment operations include two refining and marketing systems:
the Alaska System and the Mid-South System. The Alaska System includes a
refinery at North Pole, Alaska, whose non-affiliated customers include
wholesale, commercial, governmental and industrial consumers. Sales are
generally made on account. The Alaska system also includes retail convenience
stores in Fairbanks, Anchorage and Juneau, Alaska. The Mid-South system includes
a refinery at Memphis, Tennessee, whose non-affiliated customers include
industrial and commercial consumers, jobbers, independent dealers and other
refiner/marketers who are primarily located in the Mid-South region of the
United States. Sales are generally made on account. The Mid-South system also
includes retail convenience store operations and commission and tank wagon
dealerships located throughout the Southeastern United States. Dealer sales are
generally made on account. MAPCO buys, sells and exchanges crude oil to supply
its refinery systems. These transactions are with companies engaged in energy or
energy-related businesses and sales are generally made on account.
Coal segment operations produce and market steam and metallurgical coal for
sale in domestic and foreign markets. Steam coal is sold primarily to electric
utilities located in the Eastern United States and, to a lesser extent, Europe.
Metallurgical coal is sold to steel and coke producers located primarily in the
United States, South America, Japan, Europe and North Africa. Sales are
generally made on account. Export shipments are generally secured by letters of
credit or other similar guarantees prior to the coal being delivered to the
customer.
NOTE 2. CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES
Other items not requiring (providing) cash reported in cash flows from
operating activities consist of (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Net periodic pension income......................... $(1.1) $(2.0) $(2.2)
(Gain) loss on sales of property.................... (5.4) 2.1 (1.1)
Minority interest................................... 1.4 (1.1) 2.5
Refinery turnaround accrual......................... 3.2 3.5
Litigation and environmental accrual................ 5.7 (.5) 1.1
Other non-cash income and expense items, net........ 2.2 2.1 4.0
----- ----- -----
$ 6.0 $ 4.1 $ 4.3
----- ----- -----
----- ----- -----
</TABLE>
Changes in operating assets and liabilities consist of (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
----- ------ ------
<S> <C> <C> <C>
Decrease (increase) in:
Receivables..................................... $ 7.7 $(31.8) $ 32.3
Inventories..................................... 6.5 (40.8) (18.1)
Prepaid expenses................................ 3.9 (5.6) (2.7)
Other current assets............................ .6 (.8) 1.3
Other assets.................................... (2.3) (6.1) (5.3)
Increase (decrease) in:
Accounts payable and accrued expenses........... (5.2) 78.5 (48.1)
Accrued taxes................................... (2.7) 3.6 (7.1)
Other liabilities............................... 1.9 40.7 (.2)
----- ------ ------
$10.4 $ 37.7 $(47.9)
----- ------ ------
----- ------ ------
</TABLE>
F-8
<PAGE> 39
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes paid were $64.8 million, $49.2 million and $55.2 million
during 1993, 1992 and 1991, respectively.
Interest paid, net of amounts capitalized, was $47.3 million, $54.1 million
and $59.4 million during 1993, 1992 and 1991, respectively.
Total accrued interest costs were $49.3 million, $56.4 million and $58.3
million during 1993, 1992 and 1991, respectively. Interest capitalized during
1993, 1992 and 1991 amounted to $2.8 million, $2.0 million and $1.2 million,
respectively.
Included in capital expenditures and acquisitions in 1992 is $6.0 million
for MAPCO common stock issued in connection with acquisitions in which MAPCO
received assets with a fair value of $11.9 million and assumed liabilities of
$5.9 million.
NOTE 3. INVENTORIES
Inventories consist of (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------ ------
<S> <C> <C>
Raw materials -- Crude oil................................ $ 25.6 $ 33.2
------ ------
Finished products:
Refined petroleum products.............................. 24.9 40.3
Fertilizer and natural gas liquids...................... 46.0 24.6
Retail merchandise...................................... 12.1 15.6
Coal.................................................... 4.8 6.3
------ ------
87.8 86.8
------ ------
Total Inventories......................................... $113.4 $120.0
------ ------
------ ------
</TABLE>
The cost to replace crude oil, refined petroleum products and retail
merchandise inventories in excess of last-in, first-out (LIFO) carrying values
was approximately $6.5 million and $16.0 million at December 31, 1993 and 1992,
respectively.
NOTE 4. LONG-TERM DEBT
Long-term debt consists of (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------ ------
<S> <C> <C>
MAPCO INC.
Commercial paper, bankers' acceptances, bank borrowings
and money market funds.................................. $ 20.0 $159.5
8.43% ESOP Notes, payable in mortgage type principal
reductions annually through 2003........................ 68.2 72.5
Medium Term Notes, various maturities through 2022........ 342.8 352.8
------ ------
431.0 584.8
------ ------
</TABLE>
F-9
<PAGE> 40
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------ ------
<S> <C> <C>
SUBSIDIARIES
Senior Notes:
8.51% Notes, payable $15.0 million in 2007.............. 15.0 15.0
8.95% Notes, payable $35.5 million in 2012.............. 35.5 35.5
8.20% Notes, payable $2.5 million annually 2007 through
2012................................................. 15.0 15.0
8.59% Notes, payable $14.5 million in 2017.............. 14.5 14.5
8.70% Notes, payable $2.0 million annually 2018 through
2022................................................. 10.0 10.0
6.67% Notes, payable $15.0 million annually 2001 through
2005................................................. 75.0
Other..................................................... 2.3 9.2
------ ------
167.3 99.2
------ ------
598.3 684.0
Less -- current maturities................................ (12.8) (14.6)
------ ------
Long-term debt............................................ $585.5 $669.4
------ ------
------ ------
</TABLE>
Interest rates on commercial paper, bankers' acceptances, bank borrowings
and money market funds ranged from 3.10% to 4.27% and from 3.70% to 4.27% at
December 31, 1993 and 1992, respectively. Commercial paper, bankers'
acceptances, bank borrowings and money market funds outstanding at December 31,
1993 and 1992 were classified as long-term debt. MAPCO has the ability and the
intent, if necessary, under a bank credit agreement to refinance commercial
paper, bankers' acceptances, bank borrowings and money market funds with
long-term debt having maturities in excess of one year.
MAPCO has a bank credit agreement for a line of credit of $300 million. The
bank credit agreement provides for reduction of the total commitment in
quarterly increments of $25 million commencing March 31, 1994 and continuing
through December 31, 1996. Interest on borrowings under the bank credit
agreement would be at rates generally less than the prime interest rate. MAPCO
must pay a commitment fee to maintain the bank credit agreement. The bank credit
agreement serves as a back-up for MAPCO's outstanding commercial paper, bankers'
acceptances, bank borrowings and money market funds. To date, MAPCO has not
borrowed under the bank credit agreement.
The ESOP Notes' interest rate is subject to revision in the event there is
a change in Internal Revenue Service regulations regarding taxability of the
interest to the lenders. Effective January 1, 1993 the interest rate changed
from 8.51% to 8.43%.
MAPCO had $342.8 million of Medium Term Notes outstanding as of December
31, 1993. The Notes mature at various times through 2022 and bear interest at
rates ranging from 7.00% to 8.87%. $10 million of previously issued Medium Term
Notes matured during 1993.
On August 10, 1993, the Company redeemed all the outstanding variable rate
Mt. Vernon Economic Development Bonds due May 10, 2012 in the principal amount
of $6.5 million plus accrued interest.
In December 1993, Seminole Pipeline Company issued $75 million of 6.67%
Senior Notes in the private placement market. These notes are payable at $15
million annually from 2001 through 2005.
The scheduled amounts to be paid on long-term debt during the next five
years are: 1994 -- $13 million, 1995 -- $31 million, 1996 -- $26 million,
1997 -- $31 million, and 1998 -- $36 million.
Various loan agreements contain restrictive covenants which, among other
things, limit the payment of advances or dividends by two Natural Gas Liquids'
subsidiaries to MAPCO. At December 31, 1993, $192 million of net assets were
restricted by such provisions.
F-10
<PAGE> 41
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. INCOME TAXES
MAPCO adopted Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," effective January 1, 1993. This Statement
supersedes SFAS No. 96, "Accounting for Income Taxes," which was adopted by the
Company in 1987. The cumulative effect of adopting SFAS No. 109 on the Company's
financial statements was to increase 1993 net income by $.4 million.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's net deferred tax liability at
December 31, 1993, are as follows (in millions):
<TABLE>
<S> <C>
Deferred tax liabilities:
Differences between book and tax basis of property................ $295.4
Other............................................................. 19.2
------
314.6
------
Deferred tax assets:
Accrued expenses not currently deductible......................... 30.2
Reserves not currently deductible................................. 17.8
Other............................................................. 7.6
------
55.6
------
Net deferred tax liability.......................................... 259.0
Net current deferred tax asset...................................... 14.5
------
Deferred income taxes............................................... $273.5
------
------
</TABLE>
Income before provision for income taxes is substantially all derived from
domestic operations. Significant components of the provision for income taxes
are as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Current:
Federal......................................... $58.0 $49.5 $46.1
Enacted change in Federal tax rate.............. 1.7
State........................................... 2.3 4.6 5.3
----- ----- -----
Total current................................ 62.0 54.1 51.4
----- ----- -----
Deferred:
Federal......................................... 5.1 (9.8) 8.3
Enacted change in Federal tax rate.............. 6.9
State........................................... .5 .7 (3.9)
Foreign......................................... (1.6)
----- ----- -----
Total deferred............................... 12.5 (9.1) 2.8
----- ----- -----
Provision for income taxes........................ $74.5 $45.0 $54.2
----- ----- -----
----- ----- -----
</TABLE>
F-11
<PAGE> 42
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the statutory U.S. Federal income tax rate and MAPCO's
effective income tax rate is as follows (in percents):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate....................................... 35.0 34.0 34.0
Increase (decrease) resulting from:
Excess of tax over book depletion.................. (3.1) (4.0) (4.2)
State income taxes, net of Federal benefit......... 1.0 2.4 .5
Deferred tax impact of change in the Federal tax
rate............................................ 3.4
Other.............................................. .4 (1.3) (.6)
---- ---- ----
Effective income tax rate............................ 36.7 31.1 29.7
---- ---- ----
---- ---- ----
</TABLE>
At December 31, 1993, MAPCO had Federal income tax net operating loss and
tax credit carryforwards of $7.0 million which expire in various years through
2003.
NOTE 6. STOCK RIGHTS
Under a Rights Agreement (as amended in 1989), MAPCO has one Right
outstanding for each outstanding share of MAPCO common stock. Under certain
limited conditions as defined in the Rights Agreement, each Right entitles the
registered holder to purchase from MAPCO one two-hundredth of a share of Series
A Junior Participating Preferred Stock ("Preferred Stock") at $175 subject to
adjustment. At December 31, 1993, there were 30.0 million Rights outstanding
that, if exercised, would result in the issuance of 149,935 shares of Preferred
Stock.
The Rights are not exercisable until the Distribution Date (as defined in
the Rights Agreement) which will occur upon the earlier of (i) ten days
following a public announcement that an Acquiring Person (as defined in the
Rights Agreement) has acquired beneficial ownership of 15% or more of MAPCO's
outstanding common stock or (ii) ten business days following the commencement of
a tender offer or exchange offer that would result in a person or group owning
15% or more of MAPCO's outstanding common stock.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire MAPCO without
conditioning the offer on a substantial number of Rights being acquired. Upon
exercise and the occurrence of certain events as defined in the Rights
Agreement, each holder of a Right, except the Acquiring Person, will have the
right to receive MAPCO common stock or common stock of the acquiring company
having a value equal to two times the exercise price of the Right.
The Rights should not interfere with any merger or other business
combination approved by MAPCO since the Board of Directors may, at its option,
at any time prior to the close of business on the earlier of the tenth day
following the Stock Acquisition Date (as defined in the Rights Agreement) or
July 7, 1996, redeem all but not less than all of the then outstanding Rights at
$.05 per Right. The Rights expire on July 7, 1996, and do not have voting power
or dividend privileges.
NOTE 7. STOCK INCENTIVE PLANS
Under the MAPCO Inc. 1989 Stock Incentive Plan (the "Plan"), stock options,
stock appreciation rights, restricted stock, phantom stock and stock purchase
rights may be issued to key employees. At December 31, 1993, only stock options
and restricted stock had been awarded under the Plan. Each stock option entitles
the holder to purchase from MAPCO one share of Common Stock at the option price,
which is determined by the closing sales price of MAPCO Common Stock on the
grant date. Options must be exercised within ten years from the date of the
grant. One-third of the options granted in 1993 will vest under the Plan in
1997, one-third in 1998 and one-third in 1999.
F-12
<PAGE> 43
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options granted under the Plan contain a Replacement Option feature which
is triggered when an optionee uses stock, rather than cash, to exercise an
option. Upon exercise by an exchange of stock, Replacement Options are granted
equal to the number of shares tendered for the exercise of the option plus the
number of shares of stock withheld for income tax purposes. The exercise price
per share for any Replacement Option is equal to the fair market value of a
share of common stock on the date the Replacement Option is granted. A
Replacement Option is not exercisable for at least six months from the grant
date for those granted prior to January 22, 1992 and twelve months for those
granted after January 22, 1992.
In May 1992, MAPCO stockholders approved an amendment to the Plan which
increased the number of gross shares (i.e., the number of shares issuable,
including shares forfeited for tax withholding and shares surrendered to
exercise an option) which may be issued under the Plan to 7 million; however,
the maximum number of actual net shares which may be issued under the Plan
remained at 2 million (plus a small number of shares from prior plans). The
number of gross shares available for future grants under the Plan was 4,631,194
at December 31, 1993. The cumulative number of actual net shares issued under
the Plan was 165,254 at December 31, 1993.
A summary of employee stock option activity for options issued pursuant to
the Plan and prior plans is as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE NUMBER EXERCISE
OUTSTANDING PRICE EXERCISABLE PRICE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
At December 31, 1990.......... 1,381,051 $13.38-$46.50 355,541 $13.38-$44.25
Granted..................... 662,404 $39.63-$63.63
Exercised................... (498,329) $13.38-$42.00
Canceled.................... (35,222) $20.75-$45.38
----------- ------------- ----------- -------------
At December 31, 1991.......... 1,509,904 $18.94-$63.63 132,259 $18.94-$55.75
Granted..................... 826,656 $52.88-$61.75
Exercised................... (621,704) $18.94-$55.00
Canceled.................... (89,855) $27.69-$61.63
----------- ------------- ----------- -------------
At December 31, 1992.......... 1,625,001 $18.94-$63.63 269,475 $18.94-$63.63
Granted..................... 653,191 $49.25-$64.25
Exercised................... (413,600) $18.94-$60.13
Canceled.................... (50,835) $37.00-$61.63
----------- ------------- ----------- -------------
At December 31, 1993.......... 1,813,757 $18.94-$64.25 677,144 $18.94-$63.63
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
NOTE 8. SEGMENT INFORMATION
MAPCO's operations are organized into three segments -- Natural Gas
Liquids, Petroleum and Coal. Natural Gas Liquids includes the movement by
pipeline of natural gas liquids, refined products, crude oil, and anhydrous
ammonia, and includes the retail and wholesale marketing of natural gas liquids
including propane, ethane, butane and natural gasolines, and fertilizer, and the
operation of natural gas processing plants and underground storage facilities;
Petroleum includes the refining of crude oil and refined petroleum products, the
wholesale and retail marketing of refined petroleum products, the retail
marketing of merchandise and deli fast food, and the trading of crude oil, NGLs
and refined petroleum products; Coal includes the production and
F-13
<PAGE> 44
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
marketing of coal. Intersegment sales and operating revenues are generally made
at prevailing market prices. Segment information is as follows (in millions):
<TABLE>
<CAPTION>
ADDITIONS
SALES AND OPERATING REVENUES TO RANGE OF
------------------------------------------ PROPERTY DEPRECIATION % RATES FOR
UNAFFILIATED OPERATING IDENTIFIABLE PLANT AND DEPLETION & DEPRECIATION/
CUSTOMERS INTERSEGMENT TOTAL PROFIT ASSETS EQUIPMENT AMORTIZATION DEPLETION
------------ ------------ ------------ --------- ------------ --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended
December 31,
1993
Natural Gas
Liquids...... $ 426.3 $ 38.9 $ 465.2 $ 118.8 $ 833.7 $ 97.4 $32.5 1-33
Petroleum...... 1,874.6 103.6 1,978.2 108.9 599.1 28.6 32.1 2-50
Coal........... 414.4 414.4 46.9 428.2 17.4 29.6 4-50
Eliminations... (142.5) (142.5) (.9)
------------ ------------ ------------ --------- ------------ --------- -----
Total
segments.... 2,715.3 2,715.3 274.6 1,860.1 143.4 94.2
General
corporate.... (25.4) 80.7 .7 3.1 2-33
Interest and
debt
expense...... (46.5)
Other
income -- net.. .2
------------ ------------ ------------ --------- ------------ --------- -----
$2,715.3 $ 2,715.3 $ 202.9 $1,940.8 $ 144.1 $97.3
------------ ------------ ------------ --------- ------------ --------- -----
------------ ------------ ------------ --------- ------------ --------- -----
Year Ended
December 31,
1992
Natural Gas
Liquids...... $ 416.7 $ 36.8 $ 453.5 $ 113.7 $ 803.9 $ 139.9 $28.8 1-33
Petroleum...... 1,940.5 87.5 2,028.0 73.9 618.6 37.8 32.0 2-50
Coal........... 429.6 429.6 36.0 432.9 35.4 32.1 4-50
Eliminations... (124.3) (124.3) (1.0)
------------ ------------ ------------ --------- ------------ --------- -----
Total
segments.... 2,786.8 2,786.8 223.6 1,854.4 213.1 92.9
General
corporate.... (23.2) 57.3 1.7 3.6 2-33
Interest and
debt
expense...... (54.4)
Other
income -- net.. (1.4)
------------ ------------ ------------ --------- ------------ --------- -----
$2,786.8 $ 2,786.8 $ 144.6 $1,911.7 $ 214.8 $96.5
------------ ------------ ------------ --------- ------------ --------- -----
------------ ------------ ------------ --------- ------------ --------- -----
Year Ended
December 31,
1991
Natural Gas
Liquids...... $ 374.6 $ 34.5 $ 409.1 $ 140.5 $ 661.0 $ 52.5 $26.4 1-33
Petroleum...... 1,968.6 64.9 2,033.5 63.6 537.3 61.3 31.5 2-50
Coal........... 439.6 439.6 54.6 431.5 20.4 30.0 4-50
Eliminations... (99.4) (99.4) (1.0)
------------ ------------ ------------ --------- ------------ --------- -----
Total
segments.... 2,782.8 2,782.8 258.7 1,628.8 134.2 87.9
General
corporate.... (22.5) 73.5 1.3 3.2 2-33
Interest and
debt
expense...... (57.1)
Other
expense -- net. 3.5
------------ ------------ ------------ --------- ------------ --------- -----
$2,782.8 $ 2,782.8 $ 182.6 $1,702.3 $ 135.5 $91.1
------------ ------------ ------------ --------- ------------ --------- -----
------------ ------------ ------------ --------- ------------ --------- -----
</TABLE>
In 1992, MAPCO resegmented its operations from four segments into three by
combining certain operating units of the previous Gas Products and
Transportation segments, creating the Natural Gas Liquids segment. The
resegmentation also involved combining certain operating units of Gas Products
into the Petroleum segment. All prior year amounts have been restated to reflect
the resegmentation.
F-14
<PAGE> 45
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. EMPLOYEE BENEFIT PLANS
MAPCO has two defined benefit plans covering substantially all employees.
One of the plans is the MAPCO Inc. and Subsidiaries Pension Plan which has two
separate benefit structures. The benefit formula for the MAPCO Inc. and
subsidiaries (except Coal) structure is a step rate plan formula based on final
average pay and years of service, while the benefit formula for the Coal
structure is a flat dollar unit formula based on years of service. The second
plan, for employees of South Atlantic Coal Company, has a career average pay
formula based on years of service. MAPCO's funding policy for both of these
plans is to make the minimum annual contributions required by the Employee
Retirement Income Security Act. No contributions were required for 1993 due to
the current favorable funded status of these plans. The assets in these plans
are primarily comprised of equity securities, but also include fixed income
securities, guaranteed investment contracts and equity real estate investments.
Net periodic pension income from MAPCO's defined benefit pension plans
includes the following components (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Service Cost............................................. $ (5.4) $(5.0) $(4.6)
Interest cost on projected benefit obligation............ (9.8) (8.8) (8.4)
Actual return on plan assets............................. 27.6 13.0 18.0
Net amortization and deferral............................ (11.3) 2.8 (2.8)
------ ----- -----
Net periodic pension income.............................. $ 1.1 $ 2.0 $ 2.2
------ ----- -----
------ ----- -----
</TABLE>
The funded status of MAPCO's defined benefit pension plans and the amounts
recognized in MAPCO's Consolidated Balance Sheets are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
<S> <C> <C>
Vested benefit obligation...................................... $(119.3) $ (93.3)
------- -------
------- -------
Accumulated benefit obligation................................. $(126.6) $ (99.7)
------- -------
------- -------
Projected benefit obligation................................... $(143.3) $(115.2)
Plan assets at fair value...................................... 158.0 134.9
------- -------
Plan assets in excess of projected benefit obligation.......... 14.7 19.7
Unrecognized net actuarial loss................................ 18.3 15.0
Unrecognized prior service cost................................ 5.6 6.4
Remaining unrecognized net asset existing at date of initial
application.................................................. (10.7) (14.3)
------- -------
Prepaid pension cost........................................... $ 27.9 $ 26.8
------- -------
------- -------
</TABLE>
The rates used in determining the funded status of the two pension plans on
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
SOUTH
MAPCO INC. ATLANTIC
AND COAL
SUBSIDIARIES COMPANY
---------- -------
<S> <C> <C>
Discount rate............................................... 7.5% 7.5%
Rate of increase in compensation............................ 5.0% 4.0%
Long-term rate of return on plan assets..................... 10.0% 10.0%
</TABLE>
F-15
<PAGE> 46
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The rates used in determining pension income for the two pension plans for
the years 1993 and 1992 and the funded status of the plans on December 31, 1992
are as follows:
<TABLE>
<CAPTION>
SOUTH
MAPCO INC. ATLANTIC
AND COAL
SUBSIDIARIES COMPANY
---------- -------
<S> <C> <C>
Discount rate............................................... 8.5% 8.5%
Rate of increase in compensation............................ 6.0% 4.0%
Long-term rate of return on plan assets..................... 10.0% 10.0%
</TABLE>
The rates used in determining pension income for the two pension plans for
1991 are as follows:
<TABLE>
<CAPTION>
SOUTH
MAPCO INC. ATLANTIC
AND COAL
SUBSIDIARIES COMPANY
---------- -------
<S> <C> <C>
Discount rate............................................... 9.0% 9.0%
Rate of increase in compensation............................ 7.0% 4.0%
Long-term rate of return on plan assets..................... 10.0% 10.0%
</TABLE>
The excess of the assets in the MAPCO Pension Plan over the projected
benefit obligation at the date MAPCO changed its method of accounting for its
pension plan is being amortized on a straight line basis over the average
remaining service period of plan participants.
The Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act") imposed
obligations for certain retiree medical costs on MAPCO. The undiscounted
liability at December 31, 1993, relative to MAPCO's obligations under the Coal
Act was $25.2 million. The expected payments under the Coal Act are $.3 million
in 1994, $.3 million in 1995, $.4 million in 1996, $.4 million in 1997, $.4
million in 1998 and $23.4 million thereafter. MAPCO's liability relative to the
Coal Act as of December 31, 1993, was $5.8 million. The difference between the
expected aggregate undiscounted liability of $25.2 million and the liability
reflected in the financial statements is the result of discounting the expected
payments, which span more than 35 years.
Effective December 31, 1993, MAPCO terminated its Retiree Group Health Plan
(the "Retiree Plan"), which was entirely funded by participants' contributions.
MAPCO did not incur any material liabilities by terminating the Retiree Plan.
MAPCO has an ESOP that includes substantially all employees through
voluntary participation. Allocation of the MAPCO common stock held by the ESOP
to individual employees is based on the employee's eligible contribution to the
ESOP and the number of shares of common stock available for allocation. The
common stock available for allocation will be released in quarterly installments
over the term of the ESOP's loan from MAPCO.
MAPCO's cash contributions to the ESOP will equal the ESOP's principal and
interest payments on its loan from MAPCO reduced by the dividends the ESOP
receives on the MAPCO common stock held by the ESOP. Dividends of $2.5 million
in 1993 and $2.4 million in both 1992 and 1991 on the MAPCO common stock owned
by the ESOP were used for debt service. MAPCO made cash contributions to the
ESOP of $7.8 million in 1993 and $8.0 million in both 1992 and 1991. MAPCO
recognized compensation expense in connection with the ESOP of $1.7 million,
$1.5 million and $1.2 million and interest expense of $6.1 million, $6.5 million
and $6.8 million in 1993, 1992 and 1991, respectively.
F-16
<PAGE> 47
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. COMMITMENTS AND CONTINGENCIES
MAPCO leases land, buildings and equipment under lease agreements which
provide for the payment of both minimum and contingent rentals. The annual
rental expense under operating leases is not significant to MAPCO's results of
operations.
Future minimum payments under operating leases are $118 million in total
and during the next five years are: 1994 -- $15 million, 1995 -- $14 million,
1996 -- $12 million, 1997 -- $11 million and 1998 -- $10 million.
STATE ROYALTY OIL CLAIM
The refining and marketing arm of the Company, MAPCO Petroleum Inc.,
operates a refinery in Alaska through its subsidiary, MAPCO Alaska Petroleum
Inc. ("MAPI"). Since 1978, MAPI (and/or its predecessor) has had long-term
agreements with the State of Alaska (the "State") to purchase royalty oil from
the State at prices linked to amounts payable by North Slope oil producers in
satisfaction of their royalty obligations to the State. In 1977, the State
commenced suit against the producers (in an action entitled State of Alaska v.
Amerada Hess, et al.) alleging that they incorrectly calculated their royalty
payments.
As of April 1992, the State had settled its royalty oil claims against all
of the producers. On the basis of these settlements, the State billed MAPI for
retroactive increases in the prices paid by MAPI under all four of its royalty
oil purchase agreements. The State's claim against MAPI is based upon the
difference between the volume weighted average paid by the producers and the
revised royalty values adopted by the State. MAPI has been paying the State
under a contractual pricing formula which resulted in prices in excess of the
volume weighted average of the producers' past royalty reports.
On August 28, 1992, MAPI commenced suit against the State in an Anchorage
State Court seeking a declaratory judgment that MAPI is not liable to the State
for any retroactive price increase under its primary royalty oil purchase
agreement (the "1978 Agreement"). That same date, MAPI invoked the arbitration
provision of the agreement under which it had purchased the second largest
amount of State royalty oil (the "1977 Agreement"), again seeking a
determination that it is not liable for any retroactive price increase. On
February 5, 1993, MAPI filed suit in Anchorage State Court as to the remaining
two agreements (the "1984 and 1985 Agreements").
The State's claim, based upon invoices submitted to MAPI on October 1,
1992, is comprised of claims for retroactive price adjustments (including
interest through varying dates in October 1992) of $98 million, $9.2 million,
$2.9 million and $6.4 million under the 1978, 1977, and 1984 and 1985
Agreements, respectively. In addition, MAPI could be responsible for interest
subsequent to the billing dates.
MAPI is the only royalty-in-kind purchaser that has not settled the State's
retroactive billing claims. The Company believes that it has defenses of
considerable merit as to the State's claims and is vigorously litigating all
pending disputes, but is not able to predict the ultimate outcome at this time.
The Company has accrued an estimate of certain amounts, including legal fees,
which it may incur in connection with the final resolution of these matters;
however, a resolution unfavorable to the Company could result in material
liabilities which have not been reflected in the accompanying consolidated
financial statements.
TEXAS EXPLOSION LITIGATION
On April 7, 1992, a liquefied petroleum gas ("LPG") explosion occurred near
an underground salt dome storage facility located near Brenham, Texas and owned
by an affiliate of the Company, Seminole Pipeline Company ("Seminole"). The
matter was investigated by the National Transportation Safety Board ("NTSB") who
determined in a Pipeline Accident Report that the explosion was the result of
overfilling the storage facility and that the probable cause was the failure of
MAPCO Natural Gas Liquids Inc. ("MNGL")
F-17
<PAGE> 48
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to incorporate fail-safe features in the facility's wellhead safety system. The
NTSB report further stated that (i) the cause of the overfilling was the
inadequacy of procedures for managing cavern storage, (ii) contributing to the
accident was the lack of federal and state regulations governing the design and
operation of underground storage systems and (iii) contributing to the severity
of the accident were inadequate emergency response procedures.
As a result of the investigation, the NTSB issued safety recommendations to
the Department of Transportation, the Research and Special Programs
Administration, MNGL, the State of Texas Department of Public Safety, Washington
County, the American Petroleum Institute, the American Gas Association and the
International Association of Fire Chiefs.
Seminole has responded to the NTSB's safety recommendations. The response
states that Seminole believes it has accomplished or is in the process of
accomplishing all of the NTSB recommendations. In addition, the response seeks
to clarify that it is Seminole, not MNGL, that is the owner and operator of the
facility, that Mid-America Pipeline Company ("Mid-America"), a subsidiary of
MNGL, is the contractor for the operator, and that the report contains mistaken
conclusions as to fault of one Mid-America employee.
The incident has also been investigated by the Texas Railroad Commission
(the "Commission"). In its investigation summary dated June 18, 1992, the
Commission stated that the probable cause of the incident was the overfilling of
the storage facility resulting in the escape of LPG which was subsequently
ignited by an unknown source, but that it would not issue a final report on its
investigation until all of the data had been received and analyzed.
The Company, as well as Seminole, Mid-America and other non-MAPCO entities
have been named as defendants in civil actions filed in state district courts in
Texas. During the first quarter of 1993, the Company received reimbursements
from its insurers for settlements which disposed of all the death claims and
substantially all of the serious injury claims resulting from the incident. The
settlements resulted in an insurance premium penalty to the Company in 1992 of
approximately $19.6 million to be paid over a seven-year period beginning in
1993. The Company believes that complete resolution of this matter by litigation
or settlement, after reimbursement of insurance coverage, will not have a
material adverse effect on the Company's business, results of operations or
consolidated financial position.
GENERAL LITIGATION
The Company and its subsidiaries are involved in various other lawsuits,
claims and regulatory proceedings incidental to their businesses. In the opinion
of management, the outcome of such matters will not have a material adverse
effect on the Company's business, consolidated financial position or results of
operations.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair value
amounts have been determined by the Company, using available market information
and appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
F-18
<PAGE> 49
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and cash equivalents, receivables and accounts payable: The
carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, receivables and accounts payable approximate their fair
value.
Advance royalties: The fair value of the Company's advance royalty
payments, which represents royalty payments paid in advance of mining by a
subsidiary of the Company and recovered as actual mining takes place, is
estimated based on discounted cash flow analyses using the Company's
incremental borrowing rate as the discount rate.
Long and short-term debt: The carrying amounts of commercial paper and
other variable-rate debt instruments approximate their fair value. The fair
values of fixed-rate long-term debt are estimated using discounted cash
flow analyses, based on the Company's incremental borrowing rates for
similar types of borrowing arrangements.
Retiree medical payments and supplemental benefits: The carrying
amounts reported in the consolidated balance sheets for retiree medical
payments and supplemental benefits approximate their fair value.
Insurance accruals: The fair value of the insurance accruals, which
represent contractual obligations to pay cash in the future, is estimated
based on a discounted cash flow analyses using the Company's incremental
borrowing rate as the discount rate.
The carrying amounts and fair values of the Company's and its subsidiaries'
financial instruments at December 31, 1993 and 1992, are as follows (in
millions):
<TABLE>
<CAPTION>
1993 1992
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents...................... $ 69.8 $ 69.8 $ 55.7 $ 55.7
Receivables (less allowance for doubtful
accounts).................................... 228.8 228.8 236.2 236.2
Long-term receivables.......................... 6.9 6.9 5.2 5.2
Advance royalties.............................. 43.0 28.0 45.2 27.5
Accounts payable............................... 247.1 247.1 266.9 266.9
Long and short-term debt....................... 598.3 640.2 684.0 686.2
Retiree medical benefits....................... 5.8 5.8 5.6 5.6
Supplemental benefits.......................... 8.2 8.2 7.6 7.6
Insurance accruals............................. 34.6 32.2 39.1 35.3
</TABLE>
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and 1992. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
The assumed incremental borrowing rates used to determine fair value are
provided below. Different rates were used to match the incremental borrowing
rates associated with the various maturities of the financial instruments.
<TABLE>
<S> <C>
Advanced royalties -- 5.9%
Long-term debt -- 7.0% to 7.81%
Insurance accruals -- 6.5%
</TABLE>
F-19
<PAGE> 50
MAPCO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. ENVIRONMENTAL MATTERS
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations that do not contribute to current or future
revenue generation are expensed. Environmental liabilities are determined
without consideration of possible recoveries from third parties and are recorded
independently of any potential claim for recovery, except in cases where
reimbursements of remediation costs are available from state funds and the
realization of those funds is considered probable. Accruals related to
environmental matters are generally determined based on site-specific plans for
remediation, taking into account prior remediation experience of MAPCO and other
companies. Environmental liabilities are discounted only if the aggregate
obligation of a specific matter and the amount and timing of the related cash
payments are fixed or reliably determinable. The effect of discounting
environmental liabilities is not material to MAPCO's financial statements.
Estimated liabilities for environmental costs, primarily in the Petroleum
segment, at December 31, 1993 and 1992 were $33.7 million and $34.3 million,
respectively. Offsetting these amounts are $20.3 million and $21.6 million,
respectively, which have been recognized as recoverable from state funds in
connection with laws requiring reimbursement by the states of certain expenses
associated with underground storage tank failures and repairs.
NOTE 13. SUPPLEMENTAL QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------
1 2 3 4
------- ------- ------- -------
(DOLLARS IN MILLIONS EXPECT PER SHARE DATE)
<S> <C> <C> <C> <C>
1993
Sales and operating revenues................. $ 691.7 $ 663.3 $ 665.6 $ 694.7
Operating profit............................. $ 63.0 $ 65.6 $ 73.4 $ 72.6
Net income................................... $ 33.9 $ 31.3 $ 26.9 $ 34.9
Earnings per share........................... $ 1.13 $ 1.04 $ .90 $ 1.17
1992
Sales and operating revenues................. $ 669.1 $ 674.9 $ 703.7 $ 739.1
Operating profit............................. $ 69.5 $ 56.3 $ 60.8 $ 37.0
Net income................................... $ 34.7 $ 23.2 $ 30.8 $ 12.0
Earnings per share........................... $ 1.16 $ .78 $ 1.03 $ .40
</TABLE>
In the fourth quarter of 1992, net income was reduced by approximately $21
million primarily from charges associated with: an insurance premium penalty
made in connection with claims arising from the Brenham explosion; liabilities
imposed by the Coal Industry Retiree Health Benefit Act of 1992; the realignment
and consolidation of certain business lines, and anticipated divestiture of
non-strategic assets; and environmental and litigation issues.
F-20
<PAGE> 51
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Expenses:
Selling, general and administrative............................ $ 14.5 $ 17.0 $ 19.8
Depreciation and amortization.................................. 3.1 3.6 3.2
Interest and debt expense...................................... 40.0 46.6 48.2
Other income -- net............................................ (10.7) (9.1) (3.0)
------ ------ ------
Loss Before Provision for Income Taxes........................... (46.9) (58.1) (68.2)
Provision for Income Taxes....................................... 15.8 23.9 22.8
Equity in Net Income of Subsidiaries............................. 158.1 134.9 171.3
------ ------ ------
Net Income....................................................... $127.0 $100.7 $125.9
------ ------ ------
------ ------ ------
</TABLE>
See notes to condensed financial statements.
S-1
<PAGE> 52
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 52.1 $ 24.5
Receivables........................................................... .5 .1
Prepaid expenses and other............................................ 5.6 3.6
------- -------
Total current assets.......................................... 58.2 28.2
------- -------
Property, Plant and Equipment, at cost.................................. 13.3 15.3
------- -------
Other Assets:
Receivables from and investments in subsidiaries...................... 982.8 1,066.5
Other assets.......................................................... 4.5 1.5
------- -------
Total other assets............................................ 987.3 1,068.0
------- -------
$1,058.8 $1,111.5
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.................................. $ 12.6 $ 14.2
Accounts payable...................................................... 22.0 20.6
Other current liabilities............................................. 16.7 22.7
------- -------
Total current liabilities..................................... 51.3 57.5
------- -------
Long-Term Debt, excluding current maturities............................ 418.4 570.5
------- -------
Other Liabilities....................................................... 15.0 7.9
------- -------
Deferred Income Taxes................................................... (.2) (1.9)
------- -------
Stockholders' Equity:
Common stock.......................................................... 62.7 62.6
Capital in excess of par value........................................ 200.0 199.0
Retained earnings..................................................... 1,306.7 1,209.1
------- -------
1,569.4 1,470.7
Treasury Stock, at cost............................................... (926.9) (920.7)
Loan to ESOP.......................................................... (68.2) (72.5)
------- -------
574.3 477.5
------- -------
$1,058.8 $1,111.5
------- -------
------- -------
</TABLE>
See notes to condensed financial statements.
S-2
<PAGE> 53
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.................................................. $ 127.0 $ 100.7 $ 125.9
Reconciliation of net income to cash provided
by operating activities:
Depreciation and amortization............................ 3.1 3.6 3.2
Provision for deferred income taxes...................... (1.2) (1.9) 2.4
Equity in net income of subsidiaries..................... (158.1) (134.9) (171.3)
Other items not requiring cash........................... 1.3 2.5 2.0
Changes in operating assets and liabilities.............. (3.0) 1.8 (22.8)
------- ------- -------
Net cash used in operating activities............... (30.9) (28.2) (60.6)
------- ------- -------
Cash Flows from Investing Activities:
Capital expenditures........................................ (.6) 4.4 (2.1)
Reissues of treasury stock.................................. -- -- 2.0
Proceeds from sales of property, plant and equipment........ 1.4 -- --
Decrease in investments..................................... -- -- 2.1
Other....................................................... -- -- .1
Accounts with subsidiaries.................................. 241.8 37.3 102.2
------- ------- -------
Net cash provided by investing activities........... 242.6 41.7 104.3
------- ------- -------
Cash Flows from Financing Activities:
Purchase of common stock.................................... (6.2) (16.5) (20.2)
Decrease in borrowings...................................... (139.5) (67.8) (137.1)
Dividends................................................... (30.0) (29.9) (30.0)
Issuance of long-term debt.................................. -- 154.8 198.0
Payments on long-term debt.................................. (10.0) (67.4) (72.1)
Exercise of stock options................................... 1.0 .4 .9
Other....................................................... .6 (1.4) 2.2
------- ------- -------
Net cash used in financing activities............... (184.1) (27.8) (58.3)
------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents.............. 27.6 (14.3) (14.6)
Cash and Cash Equivalents, January 1,......................... 24.5 38.8 53.4
------- ------- -------
Cash and Cash Equivalents, December 31,....................... $ 52.1 $ 24.5 $ 38.8
------- ------- -------
------- ------- -------
</TABLE>
See notes to condensed financial statements.
S-3
<PAGE> 54
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Consolidation -- The financial statements of MAPCO Inc. reflect the
investment in subsidiaries using the equity method.
Statements of Cash Flow -- MAPCO Inc. made cash payments for interest of
$41.3 million, $48.2 million and $52.6 million in 1993, 1992 and 1991,
respectively.
Income Taxes -- MAPCO Inc. files a consolidated Federal income tax return
with its subsidiaries. Members of the consolidated group are allocated income
tax expense or benefit based upon their results as reflected in the consolidated
Federal income tax return.
NOTE 2. CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements and related
notes of MAPCO Inc. and subsidiaries for additional information.
NOTE 3. DEBT AND GUARANTEES
Information on the long-term debt of MAPCO Inc. is disclosed in Note 4 to
the Consolidated Financial Statements. MAPCO Inc. has guaranteed certain trade
payable obligations and performance guarantees arising in the ordinary course of
business. The scheduled amounts to be paid on long-term debt during the next
five years are: 1994 -- $12.6 million, 1995 -- $31.0 million, 1996 -- $25.4
million, 1997 -- $30.9 million, and 1998 -- $36.4 million.
NOTE 4. DIVIDENDS RECEIVED
Subsidiaries of MAPCO Inc. do not make formal cash dividend declarations
and distributions to the parent. MAPCO Inc. receives and disburses cash on
behalf of its subsidiaries. Any restrictions in debt agreements on the transfer
of cash to MAPCO Inc. by its subsidiaries did not have any impact during 1993,
1992 or 1991.
S-4
<PAGE> 55
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------ ---------- -------- ----------- --------------- ----------
BALANCE AT OTHER CHANGES BALANCE AT
BEGINNING ADDITIONS --------------- END
CLASSIFICATION OF PERIOD AT COST RETIREMENTS ADD DEDUCT OF PERIOD
- ------------------------------ ---------- -------- ----------- ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Natural Gas Liquids......... $1,093.3 $ 97.4(2) $20.4(3) $ $ $1,170.3
Petroleum................... 543.8 28.6 6.1 566.3
Coal........................ 573.1 17.4 19.3(4) 571.2
Corporate................... 33.6 .7 .3 34.0
---------- -------- ----------- ----- ------ ----------
Total............... $2,243.8 $144.1 $46.1 $ $ $2,341.8
---------- -------- ----------- ----- ------ ----------
---------- -------- ----------- ----- ------ ----------
Year Ended December 31, 1992
Natural Gas Liquids......... $ 959.4 $139.9(2) $ 6.0 $ $ $1,093.3
Petroleum................... 521.6 37.8 15.6 543.8
Coal........................ 567.0 35.4 29.3(5) 573.1
Corporate................... 32.0 1.7 .1 33.6
---------- -------- ----------- ----- ------ ----------
Total............... $2,080.0 $214.8 $51.0 $ $ $2,243.8
---------- -------- ----------- ----- ------ ----------
---------- -------- ----------- ----- ------ ----------
Year Ended December 31, 1991
Natural Gas Liquids......... $ 912.2 $ 52.5(6) $ 5.3 $ $ $ 959.4
Petroleum................... 501.8 61.3(7) 41.5(8) 521.6
Coal........................ 549.9 20.4 3.3 567.0
Corporate................... 30.7 1.3 -- 32.0
---------- -------- ----------- ----- ------ ----------
Total............... $1,994.6 $135.5 $50.1 $ $ $2,080.0
---------- -------- ----------- ----- ------ ----------
---------- -------- ----------- ----- ------ ----------
</TABLE>
- ---------------
(1) Depreciation and depletion methods and rates are disclosed in Notes 1 and 8
respectively, of the notes to the Consolidated Financial Statements on
pages F-6 through F-14.
(2) Primarily includes the expansion of the Seminole Pipeline Company and retail
plant acquisitions.
(3) Primarily consists of the sale of retail propane plants.
(4) Primarily consists of scrapped continuous miners from the Pontiki mine and
the retirement of the old longwall shields and conveyor and stageloader
equipment at the Mettiki mine.
(5) Primarily consists of scrapped equipment from the Mettiki mine.
(6) In January 1991, MAPCO acquired an additional 10% interest in the common
stock of Seminole Pipeline Company for $14.8 million, bringing its
ownership interest to 80%.
(7) Primarily includes expansion of the Memphis Refinery.
(8) Primarily consists of the sale of foreign properties and convenience stores.
S-5
<PAGE> 56
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------- ---------- ---------- ----------- -------------------- ----------
ADDITIONS
BALANCE AT CHARGED TO OTHER CHARGES BALANCE AT
BEGINNING COSTS AND -------------------- END
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS ADD DEDUCT OF PERIOD
- ---------------------------------------- ---------- ---------- ----------- ----------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Natural Gas Liquids................... $398.2 $ 31.0 $ 8.0 $421.2
Petroleum............................. 214.1 29.2 4.0 239.3
Coal.................................. 282.8 29.6 19.1 293.3
Corporate............................. 18.3 2.7 .3 20.7
---------- ---------- ----------- ----------- ------ ----------
Total......................... $913.4 $ 92.5 $31.4 $ $ $974.5
---------- ---------- ----------- ----------- ------ ----------
---------- ---------- ----------- ----------- ------ ----------
Year Ended December 31, 1992
Natural Gas Liquids................... $376.3 $ 27.5 $ 5.6 $398.2
Petroleum............................. 196.2 28.8 10.9 214.1
Coal.................................. 279.7 32.1 29.0 282.8
Corporate............................. 15.8 2.6 .1 18.3
---------- ---------- ----------- ----------- ------ ----------
Total......................... $868.0 $ 91.0 $45.6 $ $ $913.4
---------- ---------- ----------- ----------- ------ ----------
---------- ---------- ----------- ----------- ------ ----------
Year Ended December 31, 1991
Natural Gas Liquids................... $355.8 $ 25.5 $ 5.0 $376.3
Petroleum............................. 199.0 28.4 31.2 196.2
Coal.................................. 252.9 30.0 3.2 279.7
Corporate............................. 13.3 2.5 15.8
---------- ---------- ----------- ----------- ------ ----------
Total......................... $821.0 $ 86.4 $39.4 $ $ $868.0
---------- ---------- ----------- ----------- ------ ----------
---------- ---------- ----------- ----------- ------ ----------
</TABLE>
S-6
<PAGE> 57
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN C
-------------------------
COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E
- --------------------------------- ---------- ------------------------- ------------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) PERIOD
- --------------------------------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Allowance for doubtful
accounts -- Receivables..... $3.0 $1.3 $ $ 1.0 $3.3
----- ----- ---------- ----- -----
----- ----- ---------- ----- -----
Allowance for doubtful
accounts -- Other assets.... $1.9 $ $ $ 1.9 $
----- ----- ---------- ----- -----
----- ----- ---------- ----- -----
Year Ended December 31, 1992
Allowance for doubtful
accounts -- Receivables..... $1.9 $2.8 $ $ 1.7 $3.0
----- ----- ---------- ----- -----
----- ----- ---------- ----- -----
Allowance for doubtful
accounts -- Other Assets.... $1.9 $ $ $ $1.9
----- ----- ---------- ----- -----
----- ----- ---------- ----- -----
Year ended December 31, 1991
Allowance for doubtful
accounts -- Receivables..... $1.8 $1.2 $ (.1) $ 1.0 $1.9
----- ----- ---------- ----- -----
----- ----- ---------- ----- -----
Allowance for doubtful
accounts -- Other assets.... $ .9 $1.0 $ $ $1.9
----- ----- ---------- ----- -----
----- ----- ---------- ----- -----
</TABLE>
- ---------------
(1) Bad debts written off, less recoveries (net).
S-7
<PAGE> 58
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN MILLIONS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B
- --------------------------------------------------------------- ----------------------------
CHARGED TO COSTS AND
EXPENSES
----------------------------
ITEM 1993 1992 1991
- --------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs........................................ $ 58.2 $ 78.9 $ 84.7
------ ------ ------
------ ------ ------
Depreciation and amortization of intangible assets............. (1) (1) (1)
------ ------ ------
------ ------ ------
Taxes, other than payroll and income taxes:
Consumer excise taxes........................................ $148.7 $146.5 $140.3
Property and other taxes..................................... 55.3 56.2 52.6
------ ------ ------
$204.0 $202.7 $192.9
------ ------ ------
------ ------ ------
Royalties...................................................... (1) (1) (1)
------ ------ ------
------ ------ ------
Advertising.................................................... (1) (1) (1)
------ ------ ------
------ ------ ------
</TABLE>
- ---------------
(1) Less than 1% of sales and operating revenues.
S-8
<PAGE> 59
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.(k) --Amendment effective December 31, 1993, to Supplemental Retirement Agreement as amended
and restated, effective December 1, 1984, between MAPCO Inc. and Robert M. Howe . . . . . . . .
10.(n) --MAPCO Inc. Supplemental Executive Retirement Plan effective January 1, 1986 . . . . . . . . .
10.(q) --MAPCO Inc. Long-Term Investment Savings Plan, effective January 1, 1994 . . . . . . . . . . .
10.(r) --MAPCO Inc. Long-Term Investment Savings Trust, effective January 10, 1994 . . . . . . . . . .
11. --Statement re: Computation of Per Share Earnings . . . . . . . . . . . . . . . . . . . . . . .
12. --Computation of Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . . . . .
21. --List of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23. --Independent Auditors' Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
EXHIBIT 10-(k)
AMENDMENT
The Robert M. Howe Supplemental Retirement Agreement, as Amended and
Restated effective as of December 1, 1984, is hereby amended effective December
31, 1993, to amend and restate Section 3.1(b) in its entirety as follows:
"(b) "Early Retirement Date", which is December 31, 1993 or the
first day of any month following December 31, 1993, and prior
to his reaching his Normal Retirement Date."
IN WITNESS WHEREOF, MAPCO Inc. has caused this amendment to be
executed by an authorized officer on this 30th day of December, 1993.
ATTEST: MAPCO Inc.
/s/ JAMES N. CUNDIFF /s/ JACK D. MAYNARD
_____________________ By: _________________________
James N. Cundiff Jack D. Maynard
Assistant Secretary Senior Vice President -
Human Resources
Accepted by:
/s/ ROBERT M. HOWE
________________________
Robert M. Howe
<PAGE> 1
EXHIBIT 10.(n)
MAPCO INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
INTRODUCTION
The Supplemental Executive Retirement Plan (the "SERP") of MAPCO Inc.
("MAPCO") has been adopted to provide supplemental benefits to selected
officers and key employees of a Participating Company in excess of those
provided by the MAPCO Qualified Plans (as defined below). The purpose of the
SERP is to attract and retain in the employ of MAPCO and its participating
subsidiaries officers and key employees of superior ability. This SERP is an
amendment, restatement, and continuation of the MAPCO Inc. Retirement Benefit
Replacement Plan and is generally effective as of January 1, 1986 (the
"Effective Date") but the provisions of Article V shall be effective as of June
15, 1987.
ARTICLE II
DEFINITIONS
2.1 Change in Control. For purposes of this SERP, a "Change in
Control" shall be deemed to have occurred if (i) the members of the Board of
Directors of MAPCO at the beginning of any consecutive twenty-four calendar
month period cease for any reason to constitute at least seventy-five percent
of the members of such Board, unless the election, or the nomination for
election by MAPCO's stockholders, of each new director was approved by a vote
of at least seventy-five percent of the members of such Board then
<PAGE> 2
still in office who were members of such Board at the beginning of such
twenty-four calendar month period; or (ii) any "person", including a "group"
(as such terms are used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), but excluding MAPCO, any of its
subsidiaries or any employee benefit plan of MAPCO or any of its subsidiaries)
is or becomes without the prior approval of the Board of Directors of MAPCO,
the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act),
directly or indirectly, of securities of MAPCO representing twenty-five percent
or more of the combined voting power of MAPCO's then outstanding securities; or
(iii) the stockholders of MAPCO shall approve a definitive agreement (1) for
the merger or other business combination of MAPCO with or into another
corporation a majority of the directors of which were not directors of MAPCO
immediately prior to the merger and in which the stockholders of MAPCO
immediately prior to the effective date of such merger own less than 50% of the
voting power in such corporation or (2) for the sale or other disposition of
all or substantially all of the assets of MAPCO.
2.2 Compensation Committee means that particular committee which
is appointed by the Board of Directors of MAPCO from among their own members,
and to which has been delegated authority to adopt and amend certain executive
compensation plans and perform certain other functions,
2
<PAGE> 3
including functions relating to the compensation of officers and employees of
MAPCO and its subsidiary companies.
2.3 Deferral of Compensation Form means the form used by each
Participant to indicate the percentage of his Salary Compensation to be
deferred during the next calendar year (or shorter period if applicable) as
described in Article V.
2.4 Employee means any person who is employed by a Participating
Company as a common law employee.
2.5 MAPCO Qualified Plans means the MAPCO Pension Plan, the MAPCO
Employees' Profit Sharing Plan, the MAPCO Inc. and Subsidiaries Profit Sharing
and Savings Plan (the "Savings Plan") and the MAPCO Employees' Stock Ownership
Plan (the "ESOP"), all of which are intended to be "qualified plans" under the
Internal Revenue Code.
2.6 Participant means an Employee of a Participating Company who
meets the eligibility requirements of this SERP as stated in Section 3.1.
2.7 Participating Company means MAPCO and each direct or indirect
subsidiary that MAPCO's Chief Executive Officer designates as participating in
the SERP.
2.8 Plan Administrator means MAPCO, as provided in Section 7.1.
2.9 Salary Compensation means the basic salary or wage which a
Participant is paid for the performance of duties during or properly allocable
to such portion of the calendar year as he is a Participant hereunder,
including pre-tax contributions to the MAPCO Inc. and Subsidiaries Profit
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Sharing and Savings Plan ("Savings Plan"), salary reduction amounts contributed
to any cafeteria plan established by a Participating Company in accordance with
Section 125 of the Internal Revenue Code, holiday and vacation pay and any
payments to a Participant under the off-time benefits plan or the short-term
disability plan of a Participating Company, but excluding any other payments
such as bonuses, overtime payments, Participating Company payments or
reimbursements of business or personal expenses, transportation allowances,
insurance premiums, taxable fringe benefits, severance pay and all other
extraordinary compensation or amounts allocated to his account from
Participating Company contributions to the Savings Plan or this SERP or
contributed by such company to any other welfare, deferred compensation or
pension benefit plan.
2.10 SERP Pensionable Earnings means the average earnings of a
Participant determined in the same way average earnings are determined under
the MAPCO Pension Plan for application of the benefit formula of such plan,
being referred to in the MAPCO Pension Plan by the defined terms "Compensation"
and "Monthly Rate" (the latter term being applicable only with respect to a
participant in such plan who, on December 31, 1975, was a participant in the
MidAmerica Pipeline Company Pension Plan); provided, however, that for such
purposes (i) the period of consecutive calendar years used to determine such
average earnings may differ from the period of consecutive calendar years used
under the
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MAPCO Pension Plan, (ii) amounts of compensation deferred by a Participant as
permitted under Article V with respect to a completed calendar year of
employment shall be counted, (iii) amounts paid or made available to, and
deferred by, a Participant under MAPCO's Annual Incentive Compensation Plan in
any completed calendar year of employment commencing on or after January 1,
1986 shall also be counted, and (iv) any Tax Law Limitation on the amount of
compensation which may be taken into account in determining eligible
compensation shall be disregarded.
2.11 Tax Law Limitations means the limitations on the maximum
amounts which can be contributed to, or paid from, and any limitation on the
amount of compensation which may be taken into account under, a pension, profit
sharing, savings, or employee stock ownership plan which is qualified under
Section 401(a) of the Internal Revenue Code (the "Code") and exempt from
taxation under Section 501(a) of the Code, by reason of Section 401(a)(17),
401(k), 401(m), 402(g), 409, 415 and any other similar or successor provisions
of such Code which similarly limit contributions to, benefits payable from, or
compensation which may be taken into account under such qualified plans.
ARTICLE III
PARTICIPATION
3.1 Eligibility. Each Employee of a Participating Company who is a
participant in any of the MAPCO Qualified Plans and who is also a participant
in MAPCO's Annual
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Incentive Compensation Plan shall become a Participant in this SERP.
3.2 Vesting. Each Participant in this SERP shall be immediately
fully vested in amounts credited on behalf of such Participant under Section
4.1 and shall vest in the benefits made available under Section 4.2 at the same
time and under the same circumstances as apply to the retirement plan benefits
supplemented thereunder.
ARTICLE IV
DETERMINATION OF SUPPLEMENTAL BENEFITS
4.1 Defined Contribution Plan Make-up. Each Participant in the
MAPCO Employees' Profit Sharing Plan or the MAPCO Employees' Stock Ownership
Plan shall be credited with an amount equal to that amount which would have
been contributed on behalf of or allocated to such Participant under such
respective qualified plan with respect to a calendar year but for Tax Law
Limitations, as described in (a) and (c) respectively, below. Each Participant
in the MAPCO Inc. and Subsidiaries Profit Sharing and Savings Plan with
respect to a calendar year shall be credited with the amounts described in (b)
below. A book entry account shall be established on behalf of each Participant
and such account shall be credited from time to time in a consistent manner
determined by the Plan Administrator with amounts which supplement each of the
qualified defined contribution plans determined as follows:
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(a) MAPCO Employees' Profit Sharing Plan: An amount equal
to the amount of Employer contributions and forfeitures which would
have been allocated to such Participant under such Plan with respect
to a calendar year without regard to the Tax Law Limitations, reduced
by the actual allocation for such Participant under such Plan.
(b) MAPCO Inc. and Subsidiaries Profit Sharing and
Savings Plan: (i) An amount equal to the amount of salary deferred by
a Participant under the SERP with respect to a calendar year (or
shorter period, if applicable) pursuant to Section 5.1; (ii) an
amount equal to a dollar for dollar matching contribution by the
Participating Company with respect to the amount of salary so deferred
by such Participant, limited to an amount required to ensure that the
matching contribution made to the SERP for the Participant in any
month (or such other period as the Plan Administrator may determine)
when added to the matching contribution made to the Savings Plan for
the Participant for that month (or such other period mentioned above)
shall not exceed the matching contribution which could have been made
for the Participant under the Savings Plan for that month (or such
other period mentioned above) if the Tax Law Limitations were not
taken into account; and (iii) an amount equal to the amount of
Employer contributions and forfeitures which would have been allocated
to such
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Participant under such Savings Plan with respect to a calendar year
without regard to the Tax Law Limitations, reduced by the actual
allocation for such Participant under such Savings Plan.
(c) MAPCO Employees' Stock Ownership Plan: An amount
equal to the amount of Employer contributions which could have been
allocated to such Participant under the ESOP with respect to a
calendar year had the Tax Law Limitations not applied, including such
Employer contributions as would have been required to match the
additional Employee contributions which the Participant could have
elected had such limitations not applied, reduced by the actual
allocation for such Participant under such Plan.
4.2 Defined Benefit Plan Replacement Benefit. Subject to Section
6.3, each Participant (or his spouse, contingent pensioner or beneficiary, if
applicable) shall be entitled to receive at retirement, death or other
separation from employment an amount equal to the pension benefit which would
have been payable under the MAPCO Pension Plan (if the Participant participated
in such plan) based on SERP Pensionable Earnings and without regard to the Tax
Law Limitations, reduced by the actual pension benefit payable to such person
under such Plan after applying the Tax Law Limitations.
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ARTICLE V
DEFERRAL OF COMPENSATION
5.1 Excess Salary Deferrals. Subject to the requirement that the
aggregate of his deferrals to the Savings Plan and the SERP shall not exceed
one hundred percent of his Salary Compensation, each Participant may, prior to
the beginning of each calendar year (or, in the case of an Employee who first
becomes a Participant during a calendar year or in the calendar year in which
this Article V first becomes effective, prior to such shorter period as is
designated by the Plan Administrator), make an election designating a
percentage of Salary Compensation (or a dollar amount) to be deferred during
the next calendar year (or shorter period if applicable) under the SERP. This
deferral of Salary Compensation shall be in addition to, and independent of,
any deferral of compensation made by the Participant to the Savings Plan. A
Deferral of Compensation Form shall be completed by each Participant reflecting
the deferral election.
ARTICLE VI
COMPANY-MAINTAINED ACCOUNTS
6.1 Defined Contribution Accounts. The amounts credited to a
Participant pursuant to Section 4.1 shall be maintained in an account
established for the benefit of such Participant. Each such account shall be
adjusted annually or more frequently if the Plan Administrator shall so
determine, by crediting interest on the balance in such
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account. The per annum interest to be applied to the balance shall be equal to
the one-year Treasury Bill rate, as quoted on the last business day preceding
March 15 of each year. The balance shall be credited with said interest
annually on a pro rata basis until such balance is paid to the Participant. The
annual interest credit will be made on the earlier of the date such balance is
paid to the Participant or the last business day preceding March 15 of each
year on the balance assumed to have been invested prior to that date.
6.2 Payment of Account. The full value of a Participant's
supplemental benefits under the account described in Section 6.1 shall be
payable to such Participant (or his beneficiary, if applicable) if such
Participant retires, becomes disabled, dies before retirement, or ceases for
any reason to be in the employ of a Participating Company. When a Participant
is entitled to a payout from the SERP under this Section (and subject to prior
approval by the Plan Administrator), such Participant can choose to have the
amount credited to such account paid as a single sum or in substantially equal
annual installments (not to exceed 15 years). If a Participant chooses to have
such account paid in annual installments, such election must be made not later
than in the calendar year preceding the calendar year in which he retires or
otherwise terminates employment. Otherwise, the account will be paid as
directed by the Plan Administrator and payment of such benefits will commence
as
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soon as possible after the end of the month following a Participant's
retirement, termination of employment, disability or death.
6.3 Retirement Plan Benefit. Amounts payable to a Participant in
accordance with Section 4.2 shall be paid to such Participant at the same time,
in the same manner and subject to the same reductions as the benefits payable
to such Participant under the MAPCO Pension Plan.
6.4 No Rights to Specific Assets. Except as otherwise expressly
provided in Section 6.5, the provisions of this Section 6.4 shall govern the
rights of Participants with respect to the assets of any Participating Company
or any funding vehicle established under this SERP. Benefits payable under the
SERP to any person shall be paid directly by the Participating Company which
employed such Participant. Nothing contained in this SERP and no action taken
pursuant to the provisions of this SERP shall create or be construed to create
a trust or separate fund of any kind or a fiduciary relationship between any
Participating Company and any Employee, any designated beneficiary or any other
person. Any funds representing amounts credited to a Participant's account
hereunder shall at all times remain the property of the Participating Company
which employs such Participant and such funds shall continue for all purposes
to be a part of the general funds of such Participating Company, and be used by
such Participating Company for any corporate purpose. No person other than such
Participating
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Company shall by virtue of the provisions of this SERP have any interest
whatsoever in any specific assets of the Participating Company including any
such funds. TO THE EXTENT THAT ANY PERSON ACQUIRES A RIGHT TO RECEIVE PAYMENTS
FROM A PARTICIPATING COMPANY UNDER THIS SERP SUCH RIGHT SHALL BE NO GREATER
THAN THE RIGHT OF ANY UNSECURED GENERAL CREDITOR OF SUCH PARTICIPATING COMPANY.
6.5 Trust. Notwithstanding the provisions of section 6.4, MAPCO at
its discretion, by resolution of its Board of Directors, may establish one or
more trusts with such trustees or adopt such other funding vehicles as the
Compensation Committee of MAPCO's Board of Directors may recommend for the
purpose of providing for the payment of the supplemental benefits. Any such
trust or trusts may be irrevocable. The assets of any such trust shall be
subject to the claims of the Participating Company's creditors, unless the
Compensation Committee shall amend such trust to cause its assets to be
insulated from such claims. To the extent any benefits provided under the SERP
are actually paid from any such trust or by any other third party pursuant to
any such vehicle, a Participating Company shall have no further obligation with
respect thereto but to the extent not so paid such benefits shall remain the
obligation of and shall be paid by such Participating Company. Any trust or
trusts or any other vehicle shall be funded to the extent determined by MAPCO.
However, in the case of a Change in Control, any such trust or trusts or any
other vehicle shall be
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immediately funded by the Participating Companies to the full extent necessary
to pay the benefits of Participants accrued to the date of such Change in
Control. For purposes of funding the benefits accrued under Section 4.2, the
present value of such benefits shall be determined on an actuarial basis using
the actuarial assumptions and the actuarial method then in effect for purposes
of funding benefits under the MAPCO Pension Plan.
6.6 Hardship Withdrawals. Notwithstanding anything else in this
SERP to the contrary, with the consent of the Compensation Committee a
Participant may make on account of Hardship a withdrawal from his account
established under Section 6.1. For purposes of this Section 6.6, Hardship
shall mean a financial need of the Participant occasioned by requirements for
the education of the Participant's dependents, the purchase of a principal
residence, an illness of the Participant or one of his dependents, or such
other purpose of an emergency or long-range nature as may be approved by the
Compensation Committee. Any withdrawal on account of Hardship shall not exceed
that amount determined by the Compensation Committee to be required to
alleviate the Hardship. The Compensation Committee may in its discretion limit
any hardship withdrawals to amounts credited to a Participant's account
pursuant to Section 5.1 or impose additional conditions on any withdrawals of
any other amounts. A Participant seeking to make a withdrawal under this
Section 6.6 shall complete such forms and provide the
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Compensation Committee with such documents as the Compensation Committee may
reasonably request.
ARTICLE VII
GENERAL PROVISIONS
7.1 Administration. The Plan Administrator of the SERP shall be
MAPCO. The Plan Administrator may delegate responsibility for the day-to-day
administration and operation of the SERP to such employees of MAPCO or any
Participating Company as it may designate from time to time. The Plan
Administrator shall have the authority to interpret and construe any and all
provisions of the SERP. Any determination made by the Plan Administrator shall
be final and conclusive. Neither MAPCO, the Board of Directors or any committee
thereof nor any member of the Board of Directors, any employee of MAPCO or any
Participating Company shall be liable for any act, omission, interpretation,
construction or determination made in connection with the SERP in good faith
and the members of the Board of Directors and the employees of MAPCO or any
Participating Company shall be entitled to indemnification and reimbursement by
MAPCO to the maximum extent permitted by law in respect of any claim, loss,
damage or expense (including counsel's fees) arising from their acts, omissions
and conduct in their official capacity with respect to the SERP.
7.2 Beneficiary. Each Participant under the SERP may designate a
beneficiary or beneficiaries (which may be other than a natural person) to
receive all supplemental benefits
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which may be payable under this SERP at the Participant's death, subject,
however, to the rights of any spouse or contingent pensioner as described in
the MAPCO Pension Plan with respect to the benefits payable hereunder which
supplement such MAPCO Pension Plan. Such beneficiary designation shall be made
on a form furnished by the Plan Administrator, and may at any time and from
time to time be changed or revoked without notice to any beneficiary, but such
change or revocation shall not be effective unless and until filed with the
Plan Administrator. In the absence of a beneficiary designation, and subject to
the rights of any contingent pensioner as provided in Section 4.2, the
supplemental benefits shall be paid to the Participant's spouse, if such spouse
shall survive the Participant, or otherwise to the Participant's estate.
7.3 Non-Guarantee of Employment. Nothing contained in this SERP
shall be construed as a contract of employment between a Participating Company
and any Employee, or as a right of any Employee to be continued in the
employment of a Participating Company, or to affect the right of a
Participating Company to discharge any of its Employees, with or without cause.
7.4 Interests Not Transferable. Except as to withholding of any
tax under the laws of the United States or any state or locality, no
supplemental benefits payable at any time under the SERP shall be subject in
any manner to alienation, sale, transfer, assignment, pledge, attachment
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<PAGE> 16
or other legal process, or encumbrance of any kind. Any attempt to alienate,
sell, transfer, assign, pledge or otherwise encumber any such benefits, whether
currently or thereafter payable, shall be void. No supplemental benefit shall,
in any manner, be liable for or subject to the debts or liabilities of any
person entitled to such benefits. If any person shall attempt to, or shall
alienate, sell, transfer, assign, pledge or otherwise encumber his supplemental
benefits under the SERP, or if by any reason of his bankruptcy or other event
happening at any time, such benefits would devolve upon any other person or
would not be enjoyed by the person entitled thereto under the SERP, then the
Plan Administrator, in its discretion, may terminate the interest in any such
benefits of the person entitled thereto under the SERP and hold or apply them
to or for the benefit of such person entitled thereto under the SERP, his
spouse, children, other dependents or designated beneficiary, or any of the
above, in such manner as the Plan Administrator may deem proper.
7.5 Facility of Payment. Any amounts payable hereunder to any
person under legal disability or who, in the judgment of the Plan
Administrator, is unable to properly manage his financial affairs, may be paid
to the legal representative of such person, or may be applied for the benefit
of such person in any manner which the Plan Administrator may select.
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7.6 Gender and Number. Words in the masculine gender shall include
the feminine gender, the plural shall include the singular and the singular
shall include the plural.
7.7 Controlling Law. To the extent not superseded by the law of
the United States, the law of the State of Oklahoma shall be controlling in all
matters relating to the SERP.
7.8 Successors. This SERP is binding on MAPCO and each other
Participating Company and will inure to the benefit of any successor of any
such Participating Company, whether by purchase, merger, consolidation or
otherwise.
7.9 MAPCO Guarantee. In its discretion, MAPCO may elect to
guarantee the obligations of any Participating Company to any Participant under
this SERP.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 Amendment of the SERP; Termination by MAPCO. The right to
amend the SERP from time to time or to terminate the SERP is reserved to the
Compensation Committee, provided however, that in no event shall any
Participant's supplemental benefits accrued to the date of any such amendment
or termination be modified or reduced by such action. Upon delivery to any
Participating Company of an executed copy of an amendment or a notice of
termination properly authorized and adopted by the Compensation Committee, the
SERP as to such Participating Company shall be thereupon amended or terminated
in accordance therewith.
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8.2 Termination of Participation by a Participating Company. Any
Participating Company may at any time, by adoption of a resolution by its board
of directors, terminate the SERP with respect to its Employees, provided
however, that in no event shall its Participants' supplemental benefits, if
any, accrued to the date of such termination, be modified or reduced by said
termination. Said supplemental benefits shall constitute an irrevocable
obligation of said Participating Company.
The board of directors of a Participating Company which intends to
terminate its participation in the Plan shall give ninety (90) days' notice in
writing of its intention to MAPCO unless a shorter notice is agreed to by
MAPCO.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising the Supplemental Executive Retirement Plan,
MAPCO Inc. has caused its corporate seal to be affixed hereto and these
presents to be duly executed in its name and behalf by its proper officers
thereunder authorized this 12th day of July, 1988.
ATTEST: MAPCO INC.
By /s/ ROYSE M. PARR /s/ JAMES E. BARNES
_____________________ By ________________________
Secretary James E. Barnes
Chairman of the Board of
Directors; President and
Chief Executive officer
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EXHIBIT 10.(q)
MAPCO INC.
LONG-TERM INVESTMENT SAVINGS PLAN
(Effective as of January 1, 1994)
ARTICLE I
The Company hereby adopts the Plan effective January 1, 1994 both to restore to
selected officers and key employees the profit sharing and savings plan
contributions in excess of tax law limits applicable under any certain Defined
Contribution Plans maintained by the Company and its Subsidiaries and to permit
deferral by Participants of Salary and Bonuses earned after December 31, 1993
on a pre-tax basis.
ARTICLE II
DEFINITIONS
2.1 Account means the separate recordkeeping account established for a
Participant under the Plan to which amounts deferred pursuant to
Article III are credited and Deemed Return on such Account is credited
or debited, as the case may be.
2.2 Administrator means the Company or its delegate.
2.3 Bonus means the amount, if any, awarded under the MAPCO Inc. Annual
Incentive Compensation Plan reduced by any applicable employment,
withholding or other taxes.
2.4 Code means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
2.5 Company means MAPCO Inc. and any successor thereto whether by merger
or otherwise.
2.6 Compensation Committee means the committee which is appointed by the
Board of Directors of the Company from among its own members.
2.7 Deemed Investment Options means the deemed investment options made
available by the Administrator for election by a Participant in
accordance with Article IV.
2.8 Deemed Return means the amount of earnings or losses that would have
been credited or debited to a Participant's Account during the
relevant period, assuming that amounts deferred under the terms of the
Plan had been entirely invested (with
<PAGE> 2
earnings reinvested) in one or more investment funds designated by the
Administrator and selected by the Participant. The Deemed Return
shall be calculated as though each investment election by a
Participant, including any changes thereto, is executed within five
business days of the beginning of the month following receipt of such
properly completed election by the Administrator or its delegate for
such purpose.
2.9 Defined Contribution Plans means the MAPCO Inc. and Subsidiaries
Profit Sharing and Savings Plan, any predecessor of or successor to
such Plan and any other qualified defined contribution plan maintained
by the Company or a Subsidiary and designated as a Defined
Contribution Plan by the Administrator.
2.10 Effective Date means January 1, 1994.
2.11 Executive means an employee of the Company or a Subsidiary employed in
an executive or managerial capacity who (i) is a participant in the
Annual Incentive Compensation Plan or (ii) is otherwise expressly
designated by the Administrator in writing as eligible to participate
in the Plan.
2.12 Participant means an Executive who elects deferrals of Salary or Bonus
pursuant to Section 3.1 or 3.2, and any Executive or former Executive
who has any amount credited to his Account.
2.13 Plan means the MAPCO Inc. Long-term Investment Savings Plan, as
amended from time to time.
2.14 Salary means the basic Salary or wage which an Executive is entitled
to be paid for the performance of duties during, or properly allocable
to, the period during which he is eligible to participate hereunder,
including any holiday and vacation pay and any payments to an
Executive under any off-time benefits plan or short-term disability
plan of the Company or a Subsidiary, and reduced by any applicable
employment, withholding or other taxes, any pre-tax contributions to a
Defined Contribution Plan, salary reduction amounts contributed to any
cafeteria plan established by the Company or a Subsidiary in
accordance with Section 125 of the Code and any authorized payroll
deductions, and excluding any Bonuses, other bonuses or incentive
compensation, overtime payments, payments or reimbursements of
business or personal expenses, transportation allowances, insurance
premiums, taxable fringe benefits, severance pay and all other
extraordinary compensation or amounts allocated to his account from
employer contributions to any of the Defined Contribution Plans, this
Plan or contributed by such company to any other welfare, deferred
compensation or pension benefit plan.
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<PAGE> 3
2.15 Subsidiary means any corporation in which the Company owns, directly
or indirectly, at least 50% of the voting power of all classes of
stock in such corporation.
2.16 Tax Law Limitations means the limitations on the maximum amounts which
can be contributed to, or paid from, and any limitation on the amount
of compensation which may be taken into account under, the Defined
Contribution Plans, by reason of Sections 401(a)(17), 401(k), 401(m),
402(g), 415 and any other similar or successor provisions of the Code
which similarly limit contributions to, benefits payable from, or
compensation which may be taken into account under such Defined
Contribution Plans.
2.17 Trust means the grantor trust, if any, established by the Company
under Article VIII.
2.18 Valuation Date means the last day of each month and such other date or
dates as shall be established by the Administrator, in its sole
discretion.
ARTICLE III
BENEFITS
3.1 Participant Deferrals.
(a) Salary Deferrals. A Participant may elect to defer under the
Plan all or any portion of his monthly Salary. Such election
may be changed or revoked no more frequently than once per
calendar quarter, and shall remain in effect until changed or
revoked.
(b) Bonus Deferrals. A Participant may elect to defer under the
Plan all or any portion of any Bonus.
(c) Time for Election. Any election to make deferrals under this
Section 3.1 from compensation paid in any calendar quarter
must be received by the Administrator (i) in the case of
deferrals pursuant to Section 3.1(a), not later than the
twentieth day of the month prior to the month in which the
election is to be effective (or such other date or dates as
the Administrator may establish from time to time) and (ii) in
the case of deferrals pursuant to Section 3.1(b), not later
than the December 31 prior to the calendar year in which
services are performed with respect to which the Bonus is
payable to such Participant.
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3.2 Automatic Deferrals Due to Tax Law Limitations. From and after the
Effective Date, at or about the same time as the Company or a
Subsidiary would have made a contribution to the Defined Contribution
Plans, the Administrator shall credit to the Account of each Executive
affected by the Tax Law Limitations the sum of (i) and (ii) below:
(i) if the amount described in (y) below is deferred under the
Plan, an amount equal to the product of
(x) two and
(y) the portion of the amount of Salary the Executive
would have been permitted to contribute based on his
current election to any of the Defined Contribution
Plans on a pre-tax basis but for the Tax Law
Limitations with respect to which matching
contributions would have been made had such portion
been contributed,
(ii) an amount equal to the total amount of any contributions,
other than those described in (i), which would have been made
to any of the Defined Contribution Plans on behalf of the
Executive but for the Tax Law Limitations.
3.3 Limitation on Deferrals. Notwithstanding anything else in this
Article III to the contrary, the Administrator may in its sole
discretion, at any time and from time to time, establish a minimum
level of deferrals for purposes of any or all Sections of this Article
III.
3.4 Form of Election. Any elections to be made under this Article III
shall be made on such form and in such manner as the Administrator
shall require.
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ARTICLE IV
DEEMED INVESTMENTS
4.1 Deemed Investment Options. The Administrator shall determine the
Deemed Investment Options to be available to a Participant under the
Plan for purposes of determining the Deemed Return on the
Participant's Account pursuant to this Article IV. The Administrator
shall make available under the Plan such Deemed Investment Options as
the Administrator, in its sole discretion, shall deem appropriate, but
in no event shall the Administrator make available any investment
which will require that the Plan or the Trust be registered under the
Securities Exchange Act of 1933, the Investment Company Act of 1940 or
any other applicable federal or state securities laws.
4.2 Participant Elections.
(a) Deferrals. Subject to Section 4.2(c) and 4.2(d), each
Participant shall elect the manner in which deferrals shall be
invested among the Deemed Investment Options. Once each
calendar quarter and at such other time or times as the
Administrator shall determine, a Participant may change the
manner in which future deferrals to his Account shall be
invested.
(b) Account Balance. Subject to Section 4.2(c) and 4.2(d), each
Participant shall have the right once each calendar quarter
and at such other time or times as the Administrator, in its
sole discretion, shall determine to change the manner in which
the amount credited to his Account is allocated among the
Deemed Investment Options.
(c) Minimum Levels of Investment. Notwithstanding anything else
in this Article IV to the contrary, the Administrator may, at
any time and from time to time, establish minimum levels of
deferrals and other restrictions and limitations for new
deferrals and for a Participant's prior Account balance, and,
to the extent that any deferrals or the amount in the
Participants' Account are below such minimum amounts, require
that such Account be allocated, at Administrator's discretion,
in any short term Deemed Investment Option permitted under the
Plan.
(d) Timing of Elections. Any election to change the manner in
which deferrals to, or the amount credited to, a Participant's
Account are allocated among Deemed Investment Options must be
received by the Administrator not later than the twentieth day
of the month prior to the month in which the change is to be
effective (or such other date or dates as the Administrator,
in its sole discretion, may from time to time establish). If
a properly completed election form is received by the
Administrator on a timely basis, an election
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<PAGE> 6
(i) which changes the investment of future contributions
shall be effective with respect to the first payroll
period in the next following month, and
(ii) which changes the selection or allocation Deemed
Investment Options of a Participant's Account shall
be effective within five business days of the
beginning of the next following month.
(e) Form of Election. Any election regarding the investment of
any deferrals to, or the amount credited to, a Participant's
Account shall be made on such form and in such manner as the
Administrator shall require.
ARTICLE V
DISTRIBUTIONS UPON TERMINATION
5.1 In General. Each Participant shall be fully vested at all times in
all amounts credited to his Account under the Plan. The Participant's
entire Account shall be paid to him (or, if applicable, to his
designated beneficiary) in cash as soon as practicable (or when
otherwise provided in this Article) following the earliest to occur of
the date such Participant (i) dies or (ii) is no longer in the employ
of the Company or any of its Subsidiaries.
5.2 Timing and Manner of Payment. In the event of the Participant's
termination of employment with the Company (and any of its
Subsidiaries) for any reason, including death, the amount credited to
a Participant's Account shall be paid as follows:
(a) in a single sum as soon as practicable, if the Account balance
is less than $50,000 as of the date of such termination, or
(b) in the manner elected by the Participant pursuant to Section
5.3, if the Account balance is equal to or greater than
$50,000 as of the date of such termination.
5.3 Installment Payment Election. The amount credited to the Account of a
Participant shall be paid in a single sum payment unless the
Participant elects payment in substantially equal annual installments
over either five or ten years. In no event shall such election be
considered valid and binding by the Administrator unless it is
properly completed and delivered to the Administrator prior to the
later of (i) the date the Participant commenced participation in the
Plan, or (ii) five years prior to the Participant's death or
termination of employment with the Company (and any of its
Subsidiaries).
6
<PAGE> 7
ARTICLE VI
WITHDRAWALS
6.1 Hardship Withdrawal. Notwithstanding anything else in the Plan to the
contrary, a Participant may make a withdrawal from his Account in cash
which is needed to meet an unforeseeable emergency. "Unforeseeable
emergency" means a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the
Participant or a dependent (as defined in Code Section 152(a)) of the
Participant, loss of the Participant's property due to casualty, or
other similar extraordinary and unforeseen circumstances arising as a
result of events beyond the control of the Participant. Any
withdrawal on account of Hardship shall not exceed that amount
determined by the Administrator, in its sole discretion, to be
required to alleviate the Hardship.
6.2 Procedures for Withdrawal. The Administrator shall establish the
procedures for effecting a withdrawal under the Plan, including
establishing the form by which such withdrawals must be requested,
determining the documentation required to substantiate the basis for
any such withdrawal and providing for any appropriate tax withholding
required with respect to such withdrawal.
ARTICLE VII
CLAIMS PROCEDURE
7.1 Initial Claim for Benefits.
(a) The Administrator, through its Retirement Plans Department,
shall contact any Participant, beneficiary, or other person
who, according to its best information, has a claim to
benefits, and from whom additional information is needed so
that payment in full may be made. If no additional
information is needed, payment shall be made automatically.
However, any Participant, beneficiary, or other person, or
legal representative of any such person, who at any time
believes he is entitled to receive a benefit from the Plan may
write a letter stating his claim for benefits to the
Retirement Plans Department, MAPCO Inc., P. O. Box 21628,
Tulsa, Oklahoma 74121-1628.
(b) The Administrator, through its Retirement Plans Department,
shall reply in writing within 90 days to any claim for
benefits, received as provided in subsection (a) above, either
allowing or denying the claim in its sole discretion, or
advising that additional time is needed for a decision. If
additional time is needed, the reply shall advise the claimant
or his legal
7
<PAGE> 8
representative of the reason additional time is needed, and
state the date by which the decision will be furnished, which
shall not be later than 90 days after expiration of the
initial 90 day period. The written decision shall be
furnished no later than the stated date, either allowing or
denying the claim.
7.2 Content of Denial of Claim. A denial of a claim shall be written in a
manner calculated to be understood by the claimant and shall include:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the
denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(d) an explanation of the Plan's claim review procedure.
7.3 Review Procedure.
(a) A claimant (or his duly authorized representative) whose claim
is denied may, no later than 60 days after receipt of the
denial, appeal the denied claim by submitting a letter to the
Retirement Plans Department. The claimant (or his
representative) may include in the letter a statement of the
issues and his comments on these issues. In addition, he
shall have full opportunity to review all documents which
compose the Plan, or which are pertinent to his claim.
(b) The Administrator, through its Retirement Plans Department,
shall make its decision no later than 60 days after receipt of
a request for review unless a longer period is required by
special circumstances. In such case the Administrator shall,
within the 60-day period, notify the claimant of the reason a
longer period is required, and shall make its decision no
later than 120 days after receipt of the request for review.
The decision on review shall be in writing, including specific
reasons for the decision, and shall be written in a manner
calculated to be understood by the claimant with specific
references to the pertinent Plan provisions on which the
decision is based. Any decision by the Administrator on a
review of a claim denial shall be the final decision of the
Administrator. After a final decision by the Administrator, a
Participant or beneficiary may seek payment directly from the
trustee of the trust, if any, described in Article VIII
hereof.
8
<PAGE> 9
ARTICLE VIII
ESTABLISHMENT OF TRUST
The Company may establish a trust which is a grantor trust solely
owned by the Company for purposes of satisfying its obligations under the Plan
and from which Plan benefits may be paid. The assets of such trust shall be
subject to the claims of creditors of the Company in the event of its
insolvency (as defined in such trust). The Participants shall have no
preferred claim on, nor any beneficial ownership interest in, the assets held
under the Trust.
ARTICLE IX
AMENDMENT AND TERMINATION
The Compensation Committee shall have the right to amend the Plan from
time to time or to terminate the Plan, provided that in no event shall any such
amendment or termination reduce the amount credited to any Participant's
Account.
ARTICLE X
GENERAL PROVISIONS
10.1 Administration. The Plan shall be administered by the Administrator.
10.2 Interpretation. The Administrator shall have the power, in its
absolute discretion, to interpret and construe the Plan, to establish
rules for its operation and to make any and all determinations
regarding the rights of Participants hereunder.
10.3 Beneficiary Designation. Each Participant may designate a beneficiary
or beneficiaries (which may be other than a natural person) to receive
all amounts which may be payable upon the Participant's death. If
Participant is married at the time of his death, the Participant's
spouse shall be the Participant's beneficiary unless such spouse shall
have consented, in writing and witnessed by a notary public, to the
designation of another beneficiary with respect to all or a portion of
the Participant's Account. Prior to giving any such consent, the
Participant's spouse shall be given a written notice explaining the
effect of such consent and the right of the spouse to not grant such
consent. Any beneficiary designation shall be made in such form as
shall be required by the Administrator, and, subject to a spouse's
right to consent, may at
9
<PAGE> 10
any time and from time to time be changed or revoked without notice to
any beneficiary, but any such change or revocation shall not be
effective unless and until filed with the Administrator. In the
absence of an effective beneficiary designation, a Participant's
Account shall be paid to his spouse, if such spouse shall survive him,
or otherwise to the Participant's estate.
10.4 Non-Guarantee of Employment. Nothing contained in this Plan shall be
construed as a contract of employment between the Company or a
Subsidiary and any Executive, or as a right of any Executive to be
continued in the employment of the Company or a Subsidiary, or to
affect the right of the Company or a Subsidiary to discharge any
Executive, with or without cause.
10.5 Interests Not Transferable. A Participant's Account shall not be
subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment or other legal process, or encumbrance of any kind.
Any attempt to alienate, sell, transfer, assign, pledge or otherwise
encumber any such benefits, whether currently or thereafter payable,
shall be void.
10.6 Facility of Payment. Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Administrator,
is unable to properly manage his financial affairs, may be paid to the
legal representative of such person, or may be applied for the benefit
of such person in any manner which the Administrator may select.
10.7 Claims. The Administrator shall establish a procedure consistent with
applicable law whereby a Participant may pursue a review of any denial
of benefits or eligibility under the Plan.
10.8 Gender and Number. Words in the masculine gender shall include the
feminine gender, the plural shall include the singular and the
singular shall include the plural.
10.9 Controlling Law. The Plan shall be governed by the law of the State of
Oklahoma.
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<PAGE> 11
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing instrument comprising the Plan, the Company has caused this Plan to
be duly executed in its name and behalf by its proper officers thereunder
authorized this 30TH day of December, 1993.
MAPCO INC.
By: /s/ JACK D. MAYNARD
_________________________
Title: SENIOR VICE PRESIDENT,
_________________________
HUMAN RESOURCES
_________________________
ATTEST:
By: /s/ JAMES N. CUNDIFF
________________________________
Title: ASSISTANT SECRETARY
________________________________
11
<PAGE> 1
EXHIBIT 10.(r)
MAPCO INC. LONG-TERM INVESTMENT SAVINGS TRUST
TRUST AGREEMENT effective as of the date indicated below is by and
between MAPCO Inc., a corporation duly organized and existing under the laws of
the State of Delaware and having its principal place of business in Tulsa,
Oklahoma (hereinafter referred to as the "Company"), and Bank of Oklahoma,
N.A., a national banking association (the "Trustee").
W I T N E S S E T H:
WHEREAS, Company has adopted the Long-term Investment Savings Plan
(hereinafter the "Plan"); and
WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
and
WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the MAPCO Inc.
Long-term Investment Savings Trust (hereinafter the "Trust") and agree that the
Trust shall be comprised, held and disposed of as follows:
<PAGE> 2
Section 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust $10, which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on, nor any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan participants and
their beneficiaries against Company. Any assets held by the Trust will be
subject to the claims of Company's general creditors under federal and state
law in the event of Insolvency, as defined in Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time
to time, make additional deposits of cash or other property in trust with
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan
participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to Trustee for determining the amounts so payable, the
form in which such amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the Plan participants
and their beneficiaries in accordance with such Payment Schedule. The Trustee
shall make provision for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.
2
<PAGE> 3
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by Company or such
party as it shall designate under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. Company shall notify Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such payment as it
falls due. Trustee shall notify Company where principal and earnings are not
sufficient.
Section 3. TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of
Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent and,
pending such determination, Trustee shall discontinue payment of
benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming
to be a creditor alleging that Company is Insolvent, Trustee shall
have no duty to inquire whether Company is Insolvent. Trustee may in
all events rely on such evidence concerning Company's solvency as may
be furnished to Trustee and that provides Trustee with a reasonable
basis for making a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the
benefit of Company's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Plan participants or
3
<PAGE> 4
their beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of
this Trust Agreement only after Trustee has determined that Company is
not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof, Company shall have no right or
power to direct Trustee to return to Company or to divert to others any of the
Trust assets before all payment of benefits have been made to Plan participants
and their beneficiaries pursuant to the terms of the Plan.
Section 5. INVESTMENT AUTHORITY.
The Trustee shall invest the funds of the Trust as directed by the
Company. In addition, Trustee may, at the Company's direction, invest in
securities (including stock or rights to acquire stock) or obligations issued
by Company. All rights, except voting rights, associated with assets of the
Trust shall be exercised by Trustee or the person designated by Trustee, and
shall in no event be exercisable by or rest with Plan participants.
Company shall have the right at any time, and from time to time in its
sole discretion, to substitute assets of equal fair market value for any asset
held by the Trust. This right is exercisable by Company in a nonfiduciary
capacity without the approval or consent of any person in a fiduciary capacity.
Section 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
4
<PAGE> 5
Section 7. ACCOUNTING BY TRUSTEE.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon from time to time
between Company and Trustee. Within 90 days following the close of each
calendar year and within 120 days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
Section 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust and is given in writing
by Company. In the event of a dispute between Company and a Plan participant,
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) Notwithstanding any other provision of this Trust Agreement or
any provision of the Plan, the Company agrees, to the extent permitted by law,
to indemnify and hold the Trustee harmless from and against any liability that
it may incur to be subjected to in serving as Trustee under this Trust
Agreement, unless arising from the Trustee's own negligent or willful breach of
the provisions of this Trust Agreement. The term "liability" in the preceding
sentence shall include, but not be limited to, all reasonable expenses incurred
by the Trustee either in its defense or in its recovery of any amount for which
it is indemnified, including reasonable attorney fees. In addition, in the
event that the Company refuses or fails to fulfill the indemnification provided
in the foregoing sentence the Trustee, to the extent permitted by law, shall
also be entitled to indemnification from assets held under the Trust Agreement.
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder.
(d) Trustee may hire agents, accountants, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder.
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<PAGE> 6
(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. COMPENSATION AND EXPENSES OF TRUSTEE.
The Trustee shall be entitled to reasonable compensation for its
services hereunder, and the Company shall reimburse it for any and all
reasonable expenses incurred by it. Any such compensation or expenses,
including reasonable attorney's fees incurred by the Trustee in the
administration of the Trust, and any taxes shall, to the extent not paid by the
Company, be paid by the Trustee from the assets of the Trust.
Section 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company,
which shall be effective 30 days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days notice or upon
shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may not
be removed by Company for two years.
(d) If Trustee resigns or is removed within two years of a Change
of Control, as defined herein, Trustee shall select a successor Trustee in
accordance with the provisions of Section 11(b) hereof prior to the effective
date of Trustee's resignation or removal.
(e) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 60 days after
receipt of notice of resignation, removal or transfer, unless Company extends
the time limit.
(f) If Trustee resigns or is removed under paragraphs 10(a) or (b)
of this Section, a successor shall be appointed, in accordance with Section 11
hereof, by the effective date of resignation or removal. If no such appointment
has been made, Trustee may apply to a
6
<PAGE> 7
court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of Trustee in connection with the preceding shall
be allowed as administrative expenses of the Trust.
Section 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) If Trustee resigns or is removed pursuant to the provisions of
Section 10(d) hereof and selects a successor Trustee, Trustee may appoint any
third party such as a bank trust department or other party that may be granted
corporate trustee powers under state law. The appointment of a successor
Trustee shall be effective when accepted in writing by the new Trustee. The
new Trustee shall have all the rights and powers of the former Trustee,
including ownership rights in Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by the successor Trustee to
evidence the transfer.
(c) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject
to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for
and Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes
successor Trustee.
Section 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon termination of the Trust any assets
remaining in the Trust shall be returned to the Company.
7
<PAGE> 8
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plan, Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to
Company.
(d) Section 2, 4, 10 or 11 of this Trust Agreement may not be
amended by Company for five years following a Change of Control, as defined
herein.
Section 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of Oklahoma.
(d) For purposes of this Trust, Change of Control shall mean:
(1) any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
25% or more of the combined voting power of the Company's then
outstanding securities eligible to vote; or
(2) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
of Directors of the Company, and any new director (other than a
director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (1), (2) or
(4) of this Section) whose election by the Board of Directors of the
Company or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof; or
8
<PAGE> 9
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) in combination with the
ownership of any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, more than 75% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 50%
of the combined voting power of the Company's then outstanding
securities shall not constitute a Change in Control of the Company; or
(4) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
(e) Any notice, advice, direction or report required or given by
the Company to the Trustee pursuant to this Trust Agreement shall be effective
only if in written form and delivered to the party to whom addressed.
(f) The titles of the Sections and Paragraphs hereof are included
for convenience only and shall not be construed as a part of this Trust
Agreement or in any respect affecting or modifying its provisions.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be executed and effective this 10TH day of January, 1994, in
counterpart originals.
ATTEST: MAPCO Inc.
/s/ JAMES N. CUNDIFF By: /s/ JACK D. MAYNARD
__________________________ ______________________________
Assistant Secretary Jack D. Maynard
Title: Senior Vice President,
Human Resources
ATTEST: Bank of Oklahoma, N.A.
/s/ VALERIE M. BEHNKEN By: /s/ GAYLE ROLLINS
__________________________ ______________________________
ASSISTANT CASHIER Title: VICE PRESIDENT AND
SENIOR TRUST OFFICER
9
<PAGE> 1
EXHIBIT 11
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Computation for Consolidated Statements of Income
Net income(a)................................................... $127.0 $100.7 $125.9
------ ------ ------
------ ------ ------
Weighted average common shares outstanding...................... 30.0 29.9 30.0
Common stock equivalents (stock options)........................
------ ------ ------
Average common shares outstanding............................... 30.0 29.9 30.0
------ ------ ------
------ ------ ------
Primary earnings per common share(a)............................ $ 4.24 $ 3.37 $ 4.20
------ ------ ------
------ ------ ------
Additional Primary Computations
Net income(a)................................................... $127.0 $100.7 $125.9
------ ------ ------
------ ------ ------
Average common shares outstanding............................... 30.0 29.9 30.0
Dilutive effect of outstanding options.......................... .2 .4 .5
------ ------ ------
Average common shares outstanding, as adjusted.................. 30.2 30.3 30.5
------ ------ ------
------ ------ ------
Primary earnings per common share, as adjusted(b)............... $ 4.20 $ 3.32 $ 4.13
------ ------ ------
------ ------ ------
FULLY DILUTED EARNINGS PER COMMON SHARE
Additional Fully Diluted Computation
Net income(a)................................................... $127.0 $100.7 $125.9
------ ------ ------
------ ------ ------
Average common shares outstanding............................... 30.0 29.9 30.0
Dilutive effect of outstanding options.......................... .2 .4 .5
------ ------ ------
Assumed common shares outstanding............................... 30.2 30.3 30.5
------ ------ ------
------ ------ ------
Fully diluted earnings per common share(b)...................... $ 4.20 $ 3.32 $ 4.13
------ ------ ------
------ ------ ------
</TABLE>
- ---------------
(a) These figures agree with the related amounts in the Consolidated Statements
of Income.
(b) This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083, although not required by footnote 2 to paragraph 14
of APB Opinion No. 15 because it results in dilution of less than 3%.
<PAGE> 1
EXHIBIT 12
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings as defined:
Income before provision for income taxes.... $202.9 $144.6 $182.6 $185.7 $172.2
Fixed charges............................... 55.3 60.1 63.9 67.3 45.7
Capitalized interest included in fixed
charges.................................. (2.8) (2.0) (1.2) (1.1) (.8)
Amortization of capitalized interest........ 3.5 3.5 3.3 3.6 3.1
Minority interest in earnings of
subsidiary............................... (2.2)
Distributed income of affiliate accounted
for
by the equity method..................... 4.5 2.1
------ ------ ------ ------ ------
Total............................... $256.7 $206.2 $248.6 $260.0 $222.3
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Fixed charges as defined:
Interest and debt expense (included
amortization of debt expense and
discount)................................ $ 46.9 $ 51.7 $ 55.5 $ 59.3 $ 37.5
Capitalized interest........................ 2.8 2.0 1.2 1.1 .8
Interest expense on guaranteed debt of
affiliate accounted for by the equity
method................................... .6 2.1
Portion of rentals representative of the
interest factor.......................... 5.6 6.4 7.2 6.3 5.3
------ ------ ------ ------ ------
Total............................... $ 55.3 $ 60.1 $ 63.9 $ 67.3 $ 45.7
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges............ 4.6 3.4 3.9 3.9 4.9
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
<PAGE> 1
EXHIBIT 21
Subsidiaries of Registrant
<TABLE>
<CAPTION>
State or Other
Jurisdiction In
Subsidiaries of MAPCO Inc. Which Incorporated
-------------------------- ------------------
<S> <C> <C>
MAPCO Alaska Inc. Alaska
MAPCO Alaska Petroleum Inc. Alaska
MAPCO Ammonia Pipeline Inc. Delaware
MAPCO Coal Inc. Delaware
MAPCO Coal International Inc. Barbados
MAPCO Express Inc. Alaska
MAPCO Fertilizer Inc. Delaware
MAPCO Florida, Inc. Delaware
MAPCO Inc. Nevada
MAPCO Indonesia Inc. Delaware
MAPCO International Inc. Delaware
MAPCO Land & Development Corporation Delaware
MAPCO Land Corporation Delaware
MAPCO Minerals Corporation Delaware
MAPCO Natural Gas Liquids Inc. Delaware
MAPCO Oil & Gas Company Delaware
MAPCO Petroleum Inc. Delaware
MAPCO Purchasing Company Delaware
(1) Cari International Mining Corporation Delaware
Denali Pipeline Company Alaska
Flat Gap Mining Company Delaware
Garrett County Coal Corporation Delaware
Gibson County Coal Corporation Delaware
Martiki Coal Corporation Delaware
MC Mining, Inc. Delaware
Mettiki Coal Corporation Delaware
Mid-America Pipeline Company Delaware
Mt. Vernon Coal Transfer Company Delaware
(2) Permac, Inc. Virginia
Pontiki Coal Corporation Delaware
Posey County Coal Corporation Delaware
(2) Race Fork Coal Corporation Virginia
REP Sales, Inc. West Virginia
Scotts Branch Co. Delaware
(3) Seminole Pipeline Company Delaware
(4) South Atlantic Coal Company, Inc. Virginia
Toptiki Coal Corporation Delaware
Valley Towing Service, Inc. Tennessee
Webster County Coal Corporation Kentucky
White County Coal Corporation Delaware
</TABLE>
____________________________
(1) 80% stock ownership by Garrett County Coal Corporation.
(2) 100% stock ownership by South Atlantic Coal Company, Inc.
(3) A consolidated affiliate with 80% ownership effective as of 1/91.
(4) 50% stock ownership by MAPCO Coal Inc. and 50% stock ownership by REP
Sales, Inc.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
MAPCO Inc.:
We consent to the incorporation by reference of MAPCO Inc.'s Post-Effective
Amendment No. 1 to Registration Statement No. 33-13090 on Form S-8,
Post-Effective Amendment No. 2 to Registration Statement No. 2-77050 on Form
S-8, Post-Effective Amendment No. 1 to Registration Statement No. 33-28722 on
Form S-8, Post-Effective Amendment No. 1 to Registration Statement No. 33-29043
on Form S-8, Post-Effective Amendment No. 1 to Registration Statement No.
33-29044 on Form S-8, Registration No. 33-33217 on Form S-8 and Registration
Statement No. 33-34044 on Form S-3 of our report dated February 1, 1994 (which
expresses an unqualified opinion and includes an explanatory paragraph on
litigation relating to retroactive increases in prices paid to the State of
Alaska under its royalty oil purchase agreements), appearing in the Annual
Report on Form 10-K of MAPCO Inc. for the year ended December 31, 1993.
Deloitte & Touche
Tulsa, Oklahoma
March 29, 1994
