<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
---------------------------
Commission file number 1-5254
-------------------
MAPCO Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
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)
(918) 581-1800
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Changes
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
On August 1, 1997, 54,262,064 shares of MAPCO Inc. Common Stock, $1 par value,
were outstanding.
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MAPCO Inc.
Index
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. Financial Information:
Condensed Consolidated Statements of Income
for the three and six months ended June 30, 1997
and 1996 (Unaudited) 3
Condensed Consolidated Balance Sheets,
June 30, 1997 (Unaudited) and
December 31, 1996 4
Condensed Consolidated Statements of Cash
Flows for the six months ended June 30,
1997 and 1996 (Unaudited) 5
Notes to Condensed Consolidated Financial
Statements 6 - 14
Management's Discussion and Analysis of
Financial Condition and Results of Operations 15 - 30
PART II. Other Information:
Submission of Matters to a Vote of Security
Holders 31
Exhibits and Reports on Form 8-K 32
Signatures 33
</TABLE>
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<PAGE> 3
PART I
FINANCIAL INFORMATION
MAPCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In Millions
except per share amounts
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales and Operating Revenues (1) $ 854.3 $ 782.7 $ 1,785.5 $ 1,524.2
--------- --------- --------- ---------
Expenses:
Outside purchases and operating
expenses (1) 778.1 705.0 1,606.9 1,340.2
Selling, general and administrative 24.5 15.6 43.1 30.8
Depreciation and amortization 21.0 19.9 41.6 39.8
Interest and debt expense 14.6 14.6 26.7 29.6
Gain on sale of net assets held for
sale (Note 3) - - (66.0) (20.8)
Other income (2.0) (.9) (6.6) (.8)
--------- --------- --------- ---------
836.2 754.2 1,645.7 1,418.8
--------- --------- --------- ---------
Income from Continuing Operations before
Provision for Income Taxes and Minority
Interest 18.1 28.5 139.8 105.4
--------- --------- --------- ---------
Provision for Income Taxes:
Current (1.2) 8.2 47.7 34.7
Deferred 7.5 2.0 6.4 4.1
--------- --------- --------- ---------
6.3 10.2 54.1 38.8
--------- --------- --------- ---------
Income from Continuing Operations before
Minority Interest 11.8 18.3 85.7 66.6
Minority Interest in Earnings of Subsidiaries (1.1) (.5) (2.3) (1.4)
--------- --------- --------- ---------
Income from Continuing Operations 10.7 17.8 83.4 65.2
--------- --------- --------- ---------
Discontinued Operations (Note 2):
Income from discontinued Coal operations,
net of income taxes - 6.7 - 14.5
Loss on disposal of the Coal operations,
including operating income of $2.0
million during phase-out period, net of
income tax benefit - (45.5) - (45.5)
--------- --------- --------- ---------
Loss from Discontinued Operations - (38.8) - (31.0)
--------- --------- --------- ---------
Net Income (Loss) $ 10.7 $ (21.0) $ 83.4 $ 34.2
========= ========= ========= =========
Earnings (Loss) per Common Share:
Income from continuing operations $ .20 $ .31 $ 1.52 $ 1.13
Net income (loss) $ .20 $ (.36) $ 1.52 $ 0.59
Weighted Average Common Shares Outstanding 54.3 57.7 54.8 57.9
Cash Dividends per Common Share $ .15 $ .13 $ .30 $ .25
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(1) Includes consumer excise taxes of $39.2 million and $75.8 million for the
three and six months ended June 30, 1997, respectively, and $40.8 million
and $77.5 million for the three and six months ended June 30, 1996,
respectively.
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MAPCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In Millions
<TABLE>
<CAPTION>
June 30, 1997 December 31,
(Unaudited) 1996
------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 41.7 $ 104.8
Receivables 296.3 372.0
Inventories (Note 5) 153.2 109.6
Prepaid expenses 27.1 22.8
Other current assets 6.9 9.9
---------- ----------
Total current assets 525.2 619.1
---------- ----------
Property, Plant and Equipment, at cost 2,210.0 2,154.2
Less - accumulated depreciation and amortization (810.5) (797.3)
---------- ----------
1,399.5 1,356.9
---------- ----------
Intangible Assets (Note 8) 136.6 113.9
Other Assets (Note 8) 154.6 80.8
---------- ----------
291.2 194.7
---------- ----------
$ 2,215.9 $ 2,170.7
========== ==========
Current Liabilities:
Current maturities of long-term debt $ 28.6 $ 35.7
Accounts payable 323.3 411.9
Accrued taxes 43.2 60.8
Accrued payroll and related expenses 23.1 27.9
Other current liabilities 40.9 52.3
---------- ----------
Total current liabilities 459.1 588.6
---------- ----------
Long-Term Debt, excluding current maturities (Note 6) 757.9 608.4
---------- ----------
Other Liabilities 60.7 67.9
---------- ----------
Deferred Income Taxes 263.4 257.1
---------- ----------
Minority Interest 28.9 28.4
---------- ----------
Commitments and Contingencies (Note 10)
---------- ----------
Equity Put Options on Common Stock (Note 9) 24.0 16.7
---------- ----------
Stockholders' Equity (Notes 7 & 9):
Common stock 63.1 63.0
Capital in excess of par value 94.4 96.2
Retained earnings 786.4 719.0
---------- ----------
943.9 878.2
Cumulative foreign exchange translation adjustment (.1) -
Treasury stock, at cost (268.7) (221.4)
Loan to ESOP (53.2) (53.2)
---------- ----------
621.9 603.6
---------- ----------
$ 2,215.9 $ 2,170.7
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MAPCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In Millions
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Operating Activities:
Net income $ 83.4 $ 34.2
Reconciliation of net income to net cash
provided by continuing operations:
Loss from discontinued operations (Note 2) - 31.0
Depreciation and amortization 41.6 39.8
Provision for deferred income taxes 6.4 4.1
Other items not providing cash (Note 4) (58.5) (10.5)
Changes in operating assets and liabilities (Note 4) (87.9) (56.9)
------- -------
Net cash provided by (used in) continuing
operations (15.0) 41.7
Net cash provided by discontinued operations
(Note 2) - 30.3
------- -------
Net cash provided by (used in) operating
activities (15.0) 72.0
------- -------
Investing Activities:
Capital expenditures and acquisitions, net of
liabilities assumed:
Continuing operations -
Capital expenditures (60.6) (58.2)
Acquisitions (51.1) (4.9)
Discontinued operations (Note 2) - (17.2)
Proceeds from net assets held for sale (Note 3) 66.0 43.0
Proceeds from sales of property, plant and equipment .6 5.4
Investments in unconsolidated affiliates (Note 8) (78.9) (2.2)
------- -------
Net cash used in investing activities (124.0) (34.1)
------- -------
Financing Activities:
Purchase of common stock (50.2) (30.9)
Increase (Decrease) in borrowings (52.4) 19.6
Dividends paid (16.8) (15.0)
Issuance of long-term debt 208.6 3.8
Payments on long-term debt (13.9) (0.5)
Other .6 .6
------- -------
Net cash provided by (used in) financing
activities 75.9 (22.4)
------- -------
Increase (Decrease) in Cash and Cash Equivalents (63.1) 15.5
Cash and Cash Equivalents, January 1 104.8 33.3
------- -------
Cash and Cash Equivalents, June 30 $ 41.7 $ 48.8
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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MAPCO INC.
Notes to Condensed Consolidated Financial Statements
Note 1 - In the opinion of Management, the accompanying condensed consolidated
financial statements of MAPCO Inc. and its subsidiaries ("MAPCO" or the
"Company") contain all adjustments necessary to present fairly the financial
position as of June 30, 1997 (unaudited) and December 31, 1996, the results of
operations for the three and six months ended June 30, 1997 and 1996 (both
unaudited) and the cash flows for the six months ended June 30, 1997 and 1996
(both unaudited). Certain reclassifications have been made to prior year
amounts to conform to current year presentations. All significant intercompany
accounts and transactions have been eliminated.
In the first quarter of 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
per Share," which is effective for year-end 1997. In the second quarter of
1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
both of which are effective for year-end 1998. These statements are not
expected to have a material impact on the Company's financial statements.
Futures, swaps and option contracts are used to hedge against the risk of price
changes of crude oil, refined petroleum products, and natural gas liquids.
Contracts that are correlated to price movements of crude oil, refined
petroleum products and natural gas liquids inventories, or to price movements
of anticipated purchases and sales of such inventories, are treated as hedges
and accounted for under the deferral method, in which gains and losses from the
change in value of the contracts are deferred and recognized in conjunction
with the earnings on the hedged inventories or anticipated transactions.
Contracts which do not qualify as hedges are classified as speculative and are
marked-to-market at the end of each month. Gains or losses on contracts which
no longer qualify as hedges because the hedged item has been sold or the
anticipated transaction is no longer deemed likely to occur are recognized in
current earnings. When recognized in accordance with the above policies, gains
and losses on commodity contracts are reported as "outside purchases and other
operating expenses" in the consolidated statements of income.
The preparation of MAPCO's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2 - Discontinued Operations
In June 1996, the Company concluded it would sell substantially all of its Coal
business. In July 1996, the Company signed an agreement with Alliance Coal
Corporation, a corporation formed by The Beacon Group Energy
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Investment Fund L.P. to sell substantially all of the net assets of the Coal
business. The transaction was completed on September 10, 1996, with an
effective date of July 31, 1996. As a result, operations of the Coal business
for prior periods have been shown as discontinued in the condensed consolidated
financial statements. In connection with the sale, the Company made guarantees,
indemnifications and representations for certain specified matters. Management
of the Company does not expect these guarantees, indemnifications and
representations to have any material impact on the Company's results of
operations, financial position or cash flow.
Income from discontinued operations includes income tax expense of $2.5 million
and $4.8 million for the three and six months ended June 30, 1996,
respectively. The loss on disposal of the Coal business is net of an income tax
benefit of $29.5 million. The Coal segment's sales and operating revenues were
$113.0 million and $237.3 million for the three and six months ended June 30,
1996, respectively.
Note 3 - Gain on Net Assets Held for Sale
Effective January 1, 1997, MAPCO sold its interest in the natural gas liquids
and condensate in the West Panhandle Fields of Texas to Westpan NGL Company, a
subsidiary of MESA Operating Company, for $66.0 million. The Company recognized
a gain of $66.0 million on the transaction as the interest sold had no book
value. As part of the sales agreement, MAPCO was released from its liability
for its share of prior natural gas liquids over-takes.
In March 1996, the Company sold its Iowa propane and liquid fertilizer assets
as well as its remaining liquid fertilizer assets in Arkansas, Illinois,
Indiana, Minnesota, Ohio and Wisconsin, to CENEX Inc. ("CENEX"). The
transaction resulted in proceeds of $43.0 million and the Company recognized a
gain of $20.8 million on the transaction. Sales and operating revenues
attributable to these operations were $9.9 million and $23.8 million for the
three and six months ended June 30, 1996, respectively, and operating profit
was $0.7 million and $2.7 million for the three and six months ended June 30,
1996, respectively.
Note 4 - Statements of Cash Flows
Other items not requiring (providing) cash reported in cash flows from
operating activities consist of (in millions):
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<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Net periodic pension expense (credit) $ (.3) $ 1.8
Gain on sale of net assets held for sale (66.0) (20.8)
(Gain)/Loss on sales of property, plant and
equipment 1.2 (0.8)
Minority interest in earnings of subsidiaries 2.3 1.4
Litigation and environmental accruals 1.6 5.4
Refinery turnaround accrual 2.1 2.1
Other non-cash income and expense items - net 0.6 0.4
-------- --------
$ (58.5) $ (10.5)
======== ========
</TABLE>
Changes in operating assets and liabilities consist of (in millions):
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Decrease (increase) in:
Receivables $ 85.1 $ (36.0)
Inventories (36.4) (42.7)
Prepaid expenses (4.3) (1.7)
Other current assets 2.9 (3.7)
Other assets (2.0) (2.9)
Increase (decrease) in:
Accounts payable (102.5) 35.9
Accrued taxes (17.0) (0.6)
Accrued payroll and related expenses (4.7) 3.5
Other current liabilities (0.9) (5.5)
Other liabilities (8.1) (3.2)
-------- --------
$ (87.9) $ (56.9)
======== ========
</TABLE>
Income taxes paid were $67.5 million and $44.7 million for the six months ended
June 30, 1997 and 1996, respectively.
Interest paid, net of amounts capitalized, was $21.2 million and $31.0 million
for the six months ended June 30, 1997 and 1996, respectively.
During 1997, the Company issued 103,115 shares of treasury stock with a fair
value of $2.9 million in conjunction with its purchase of two retail propane
businesses.
Note 5 - Inventories
Inventories are recorded when purchased, produced or manufactured and are
stated at the lower of cost or market. As of June 30, 1997, and December 31,
1996, approximately 68% and 57% of inventories, respectively, were
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determined by the last-in first-out ("LIFO") method. The remaining inventories
were determined primarily on a weighted average cost basis.
Inventories consist of (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- -----------
<S> <C> <C>
Raw materials - crude oil $ 45.9 $ 22.1
-------- --------
Finished products:
Refined petroleum products 42.6 27.7
Natural gas liquids and other products 32.3 36.4
Retail merchandise 32.4 23.4
-------- --------
107.3 87.5
-------- --------
Inventories $ 153.2 $ 109.6
======== ========
</TABLE>
The cost to replace crude oil, refined petroleum products and retail
merchandise inventories in excess of their lifo carrying value was
approximately $17.3 million at June 30, 1997 and $37.1 million at December 31,
1996.
Note 6 - Long-term Debt
Long-term debt consists of (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
MAPCO Inc.
Commercial paper and bank money market lines $ 76.0 $ 128.4
8.43% ESOP Notes, payable in mortgage type
principal reductions annually through 2003 53.2 53.3
Medium Term Notes, various maturities through 2022 381.9 288.8
7.70% subordinated, non-redeemable debentures,
$100 face amount, due 2027 102.9 -
-------- --------
614.0 470.5
-------- --------
Subsidiaries
Senior Notes:
8.51% Notes, payable 2007 15.0 15.0
8.95% Notes, payable 2012 35.5 35.5
8.20% Notes, payable $2.5 annually 2007 through 2012 15.0 15.0
8.59% Notes, payable 2017 14.5 14.5
8.70% Notes, payable $2.0 annually 2018 through 2022 10.0 10.0
6.67% Notes, payable $15.0 annually 2001 through 2005 75.0 75.0
Other 7.5 8.6
-------- --------
172.5 173.6
-------- --------
786.5 644.1
Less - current maturities (28.6) (35.7)
-------- --------
Long-term debt $ 757.9 $ 608.4
======== ========
</TABLE>
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<PAGE> 10
Interest rates on commercial paper and bank money market lines ranged from
5.20% to 6.60% for the first six months of 1997 and from 5.18% to 6.15% during
the first six months of 1996. Commercial paper and bank money market lines
outstanding at June 30, 1997 and December 31, 1996, were classified as
long-term debt. MAPCO has the ability and the intent, if necessary, under a
bank credit agreement to refinance up to $400 million of commercial paper and
bank money market lines with long-term debt having maturities in excess of one
year.
The bank credit agreement for $400 million expires in March, 2002, and 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 agreement serves as a back-up for outstanding
commercial paper and for borrowings against bank money market lines. As of June
30, 1997, no borrowings were outstanding under the bank credit agreement.
MAPCO had $288.8 million of Medium Term Notes outstanding as of December 31,
1996. These notes mature at various times through 2022 and bear interest at
rates ranging from 7.60% to 8.87%. In March 1997, the Company issued senior
subordinated, non-redeemable Medium Term Notes with a face amount of $100
million, bearing interest at 7.25%, and maturing in 2009. The effective
interest rate at issuance on these notes was 6.97%.
Also, in March 1997, the Company issued senior subordinated, non-redeemable
debentures with a face amount of $100 million, bearing interest at 7.70% and
maturing in the year 2027. The effective interest rate at time of issuance was
7.54%.
MAPCO had unamortized debt issuance cost of $3.7 million as of June 30, 1997,
and $1.6 million as of December 31, 1996.
Various loan agreements contain restrictive covenants which, among other
things, limit the payment of advances or dividends by two of Natural Gas
Liquids' subsidiaries to MAPCO. At June 30, 1997, $190 million of net assets
held by such subsidiaries were restricted by such provisions.
Note 7 - Employee Benefit Plans
MAPCO offers the MAPCO Inc. and Subsidiaries Profit Sharing and Savings Plan
("PSSP") which includes an employee stock ownership feature to eligible
employees. With respect to the PSSP, MAPCO recognized compensation expense of
$0.9 million and $0.8 million for the three months ended June 30, 1997 and
1996, respectively, and $1.9 million and $1.6 million for the six months ended
June 30, 1997 and 1996, respectively. Interest expense on PSSP related debt was
$1.1 million and $1.2 million
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<PAGE> 11
for the three months ended June 30, 1997 and 1996, respectively, and $2.2
million and $2.4 million for the six months ended June 30, 1997 and 1996,
respectively. Dividends on both the allocated and unallocated MAPCO common
stock held by the PSSP were $0.5 million for the three months ended June 30,
1997 and 1996. Dividends on the allocated and unallocated MAPCO common stock
held by the PSSP were $1.0 million and $1.1 million for the six months ended
June 30, 1997, and 1996, respectively. Dividends on the allocated and
unallocated MAPCO common stock held by the PSSP are used for PSSP debt service.
At June 30, 1997, and December 31, 1996, respectively, the PSSP held 1.2
million and 1.1 million allocated shares, 2.0 million and 2.0 million
unallocated shares, and 0.2 million and 0.3 million shares pending to be
allocated. The fair market value of the unallocated shares held by the PSSP at
June 30, 1997, and December 31, 1996, was $64.4 million and $69.5 million,
respectively.
Note 8 - Intangible Assets and Other Assets
At June 30, 1997, intangible assets included goodwill of $127.2 million and
other assets included investments in unconsolidated affiliates of $104.8
million. At December 31, 1996, intangible assets included goodwill of $109.9
million and other assets included investments in unconsolidated affiliates of
$25.9 million.
Note 9 - Stockholders' Equity
On September 10, 1996, MAPCO's Board of Directors authorized a two-for-one
stock split effected in the form of a stock dividend from shares held as
treasury stock, which was distributed on September 30, 1996, to shareholders of
record on September 16, 1996. All references in the condensed consolidated
financial statements to number of shares and per share amounts of the Company's
common stock prior to the split have been restated to reflect the increased
number of shares outstanding.
As part of its share repurchase program, the Company has sold equity put
options that entitle the holder, at the expiration date, to sell shares of
common stock to the Company at a specified price. In 1996, put options for
550,000 shares, with an aggregate exercise value of $16.7 million, were issued
for $595,500 in premiums, which have been accounted for as capital in excess of
par value. As of June 30, 1997, the Company had outstanding equity put options
on 750,000 shares of MAPCO common stock with an aggregate exercise value of
$24.0 million at strike prices ranging from $29.00 to $32.63 per share and
expiration dates ranging from July 1997 to December 1997. The put options
issued in 1997 were sold for $540,000 in premiums which were accounted for as
capital in excess of par value. In the event the outstanding options are
exercised, the Company
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<PAGE> 12
may elect to pay the holder in cash the difference between the exercise price
and the market price of the Company's shares in lieu of repurchasing the stock.
Note 10 - Commitments and Contingencies
Leases
On December 11, 1996, the Company entered into a seven-year operating lease
arrangement to accommodate the acquisition and construction of certain assets.
Payments under the lease are based on the amounts spent for acquisition or
construction of assets and the applicable interest rate. After the lease term,
the arrangement may be extended by agreement of the parties or the Company may
purchase or arrange for the sale of the assets. As of June 30, 1997, all of the
$100 million commitment remained available under the lease.
Texas Explosion Litigation
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 ("Seminole"). The
Company, as well as Seminole, Mid-America Pipeline Company, MAPCO Natural Gas
Liquids Inc. and other non-MAPCO entities were named as defendants in civil
actions filed in state district courts located in four Texas counties. Seminole
and the related MAPCO entities have settled in excess of 1,600 claims in these
lawsuits. The lawsuits remaining include two in Washington County and the
DALLMEYER lawsuit which was tried before a jury in Harris County. The
Washington County lawsuits each essentially involve house damage claims, which
the Company regards as having no merit. In DALLMEYER, the judgment rendered in
March 1996 against defendants Seminole and MAPCO-related entities totaled
approximately $72 million which included nearly $65 million of punitive damages
awarded to the 21 plaintiffs.
Both plaintiffs and defendants have appealed the DALLMEYER judgment to the
Court of Appeals for the Fourteenth District of Texas in Harris County. The
defendants seek to have the judgment modified in many respects, including the
elimination of punitive damages as well as a portion of the actual damages
awarded. If the defendant's motions are granted, it will result in an award
significantly less than the judgment, or alternatively, retrial of the case.
The plaintiffs have cross appealed and seek to
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<PAGE> 13
modify the judgment to increase the total award plus interest to exceed $155
million.
Management believes that it has defenses of considerable merit and will
vigorously litigate the DALLMEYER appeal and other remaining lawsuits and/or
seek settlements satisfactory to the Company, but is not able to predict the
ultimate outcome of these matters at this time. The Company has accrued a
liability representing an estimate of amounts it may incur to finally resolve
all litigation and has also recorded a receivable which corresponds to the
remainder of its insurance coverage to be reimbursed by its insurance carrier.
Management is unable to estimate a range of loss beyond the amount accrued.
Resolutions unfavorable to the Company could result in liabilities and charges
materially in excess of the amount accrued.
Seminole Loop/Aquila-LaGrange Line Litigation
In May 1993, Seminole completed its Seminole loop pipeline expansion project
and in January 1994, completed the Aquila-LaGrange line project. As frequently
occurs in the pipeline industry, several lawsuits were filed against Seminole
by landowners primarily for rescission of pipeline easements or appeal of
eminent domain awards which are pending in five Texas counties.
The Company believes that complete resolution of the Seminole loop/Aquila-
LaGrange line litigation will not have a material adverse effect on the
Company's business, results of operations, financial position or cash flows.
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, results of operations, financial position or cash
flows.
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<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Cash Generation
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997 1996 Var.
-------- -------- --------
<S> <C> <C> <C>
Net cash provided by (used in) continuing operations $ (15) $ 42 $ (57)
Net cash provided by discontinued operations - 30 (30)
-------- -------- --------
Net cash provided by (used in) operating activities (15) 72 (87)
Net cash provided by (used in) investing activities (124) (34) (90)
Net cash provided by (used in) financing activities 76 (22) 98
-------- -------- --------
Cash generation (usage) $ (63) $ 16 $ (79)
======== ======== ========
</TABLE>
The $57 million decrease in funds provided by continuing operations in 1997 was
primarily attributable to changes in operating assets and liabilities. Accounts
payable decreased $138 million because of paying off higher-cost, year-end
crude and propane purchases. Partially offsetting these uses of cash was a
decrease in accounts receivable of $121 million and a decrease in inventories
of $6 million. The decrease in receivables was primarily attributable to lower
product sales prices and the decrease in inventories was due to lower crude and
product sale prices.
The decrease in cash provided by discontinued operations reflects the sale of
the Coal business in 1996.
Cash flows from investing activities in 1997 included capital expenditures and
acquisitions of $112 million, of which $30 million was for capital items
necessary to maintain existing operations. Capital expenditures in 1997 (see
the Liquidity and Capital Resources section of this report for additional
details regarding the following acquisitions) included $18 million for the
acquisition of various propane marketing businesses, $12 million for the
acquisition of 19 stores from EZ-Serve Inc., $12 million for the expansion of
the alkalization unit, replacement of the fluid catalytic cracker blower and an
additional storage tank at the Mid-South Refinery, $10 million for the
acquisition of ACS DATA LTD., $7 million for the acquisition of Gas Supply
Inc., $4 million for a gasoline expansion project at the Alaska Refinery, $3
million for a new hand-held computer system in the Propane Marketing business
unit, and $1 million for propane tanks. Expenditures for investments in
unconsolidated affiliates during the first half of 1997 included $74 million
for the Discovery pipeline project and $3 million for the Rio Grande pipeline
project. Cash flows
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<PAGE> 15
from investing activities also included proceeds of $66 million from the sale
of MAPCO's interest in the natural gas liquids and condensate in the West
Panhandle field. Cash flows from investing activities during the first six
months of 1996 included $43 million of proceeds from Thermogas' sale of its
Iowa propane assets and its liquid fertilizer assets to CENEX. Also included in
the 1996 investing activities were $63 million of capital expenditures for
continuing operations, of which $15 million was for capital items necessary to
maintain existing operations. Significant capital expenditures in 1996 included
$9 million for a saturated gas plant expansion at the Mid- South Refinery, $7
million for the expansion of the Hobbs Station in west Texas and $6 million for
the acquisition of a propane company in Colorado.
Cash from financing activities in 1997 included the use of $52 million in cash
to reduce variable-rate borrowings, $50 million to purchase 1.6 million shares
of the Company's common stock and $17 million for cash dividends. In the first
quarter of 1997, MAPCO issued $100 million of senior subordinated notes with a
coupon rate of 7.25% that are due in 2009 and $100 million of senior
subordinated debentures with a coupon rate of 7.70% that are due in 2027. Cash
used in financing activities for the first six months of 1996 included the
repurchase of 554,850 shares of MAPCO common stock for $31 million and the
payment of $15 million of dividends, partially offset by a net increase in
short-term debt of $20 million.
Various loan agreements contain restrictive covenants which, among other
things, limit the payment of advances or dividends by two of Natural Gas
Liquids' ("NGL") subsidiaries to MAPCO. At June 30, 1997 and 1996, $190 million
of net assets held by such subsidiaries 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 June 30, 1997, MAPCO's
cash and cash equivalents were $42 million compared to $105 million at December
31, 1996.
MAPCO's external financing sources include its bank credit agreements, its
uncommitted bank credit lines, its ability to issue public or private debt,
including commercial paper and its leasing arrangement. MAPCO's bank credit
agreements represent a total committed line of credit of $400 million. The bank
credit agreement serves as a back-up for outstanding commercial paper and for
borrowings against bank money market lines. As of June 30, 1997, no borrowings
were outstanding under the bank credit agreement.
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<PAGE> 16
On December 11, 1996, the Company entered into a seven-year operating lease
arrangement to accommodate the acquisition and construction of certain assets.
Payments under the lease are based on the amounts spent for acquisition or
construction of assets and the applicable interest rate. After the lease term,
the arrangement may be extended by agreement of the parties or the Company may
purchase or arrange for the sale of the assets. As of June 30, 1997, there were
no outstanding advances against the lease agreement and the full $100 million
commitment was available. The Company currently expects to utilize $26 million
of the commitment by December 31, 1997.
As of June 30, 1997, MAPCO had outstanding $279 million of Medium Term Notes
issued pursuant to a 1990 shelf registration statement. The aggregate principal
amount of $47 million remaining on the 1990 shelf registration statement was
de-registered on March 4, 1997. On January 31, 1997, MAPCO filed another shelf
registration statement with the Securities and Exchange Commission providing
for the issuance of up to $500 million of debt and equity securities. During
the first quarter of 1997, the Company issued $200 million of senior
subordinated notes and debentures under this registration statement. The
proceeds from this debt issuance were used for general corporate purposes,
including funding working capital requirements, capital expenditures,
investments in unconsolidated affiliates, share repurchases and reduction of
other debt.
At December 31, 1996, the Company was a party to various interest rate swap
agreements with financial institutions which effectively changed the Company's
interest rate exposure from variable rates to fixed rates on $100 million of
debt. In the first quarter of 1997, the Company recognized a $4.3 million gain
upon termination of the interest rate swap agreements, which was done
concurrently with the pay off of the related debt.
As of June 30, 1997, the Company had sold put options on 1.1 million shares of
MAPCO common stock with strike prices ranging from $29.00 to $32.63 per share.
In the current quarter, put options on 350,000 shares expired and extensions on
200,000 shares were granted. As of June 30, 1997, options on 750,000 shares of
MAPCO common stock were outstanding with expiration dates ranging from July
1997 to December 1997. MAPCO's Board of Directors have authorized Management to
issue put options on up to 1.5 million shares of MAPCO's common stock.
Effective January 1, 1997, MAPCO sold its interest in the natural gas liquids
and condensate in the West Panhandle field to Westpan NGL Company, a subsidiary
of MESA Operating Company, for $66 million. The Company recognized a gain of
$66 million on the transaction in the first quarter of 1997 as the interest
sold had no book basis. As part
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<PAGE> 17
of the sales agreement, MAPCO was released from its liability for its share of
prior natural gas liquids over-takes.
Effective January 1, 1997, MAPCO acquired the assets of Gas Supply, Inc., ("Gas
Supply") an independent wholesale propane company based in Minneapolis,
Minnesota, for approximately $7 million, plus working capital. The acquisition
has been used to expand MAPCO's current wholesale propane marketing activities
under the trade name "Gas Supply." Gas Supply marketed approximately 120
million gallons of propane in the Central and Northeastern United States in
1996. MAPCO also acquired Gas Supply's related product sales, a construction
company, a 40,000-barrel storage facility and a rail car and truck terminal in
Rosemont, Minnesota.
In April 1997, TouchStar acquired ACS Data, Ltd. ("ACS"), a company with
headquarters in Manchester, England, at a cost of approximately $10 million.
ACS designs and manufactures hand-held computers and peripherals.
Effective May 21, 1997, MAPCO acquired 19 retail convenience stores located
primarily in the Nashville, Tennessee market from EZ-Serve Inc.
at a cost of $12 million.
On April 30, 1997, MAPCO purchased a 5% ownership in the Alliance pipeline
project. The Alliance pipeline will construct a 1,900 mile, 36-inch diameter,
natural gas pipeline transmission system to carry natural gas and natural gas
liquids from Western Canada to the Midwest United States for marketing
throughout North America. Alliance's delivery points near Chicago include a
natural gas liquids extraction facility proposed by Aux Sable Liquids Products
LP, which is adjacent to the northern end of MAPCO's 10,000 mile NGL pipeline
network. Construction of the pipeline is expected to begin in the second
quarter of 1998 with completion anticipated by year-end 1999.
During May and June 1997, MAPCO acquired five propane companies at a cost of
approximately $18 million. These companies, with combined sales during 1996 of
over 12.7 million gallons of propane and other related product sales, have
market areas in Oklahoma, Alabama, Indiana, and Missouri.
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 1997 are currently expected to be about $345 million
and investments in unconsolidated affiliates are projected to
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<PAGE> 18
be approximately $135 million. Capital expenditures in 1997 are currently
expected to include $90 million for capital items necessary to maintain existing
operations, $53 million for propane marketing acquisitions and expansions, $53
million for convenience store construction and acquisitions, $51 million for
refinery expansion projects and $25 million for pipeline loops and connections.
MAPCO expects to utilize cash from operations, short-term funding sources,
proceeds from the sale of assets and proceeds from additional borrowings and/or
equity securities under the shelf registration statement filed with the SEC in
1997 to meet anticipated 1997 capital expenditures and equity investments.
MAPCO anticipates that any future excess internal cash generation will be used
primarily for debt reduction and to fund new capital projects.
Other Developments
On July 22, 1997, MAPCO announced plans to construct a splitter at the
Mid-South Refinery that will increase the refinery's capacity for propylene
production from the current 2,000 barrels per day to 6,000 barrels per day of
the high margin product. The project is expected to be complete by the end of
the first quarter of 1998 at an anticipated cost of $20 million.
MAPCO also announced plans to construct a third crude unit at the North Pole
Refinery that will produce an additional 17,000 barrels per day of refined
products, including 14,000 barrels per day of jet fuel. The project is expected
to be completed in the fourth quarter of 1998 at a cost of $70 million.
On August 1, 1997, MAPCO announced that it had reached an understanding with
Enterprise Products Company to form a joint venture for the development of a
natural gas liquids transportation and distribution system. It is anticipated
this system will be capable of distributing product from key NGL sources in
southern Louisiana with direct connections to major NGL markets, including the
Louisiana river markets, Lake Charles, Louisiana and Mont Belvieu, Texas. The
joint venture will be a limited liability company in which MAPCO and Enterprise
will each have a 50 percent interest.
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<PAGE> 19
RESULTS OF OPERATIONS
SECOND QUARTER
Sales and operating revenues were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997 1996 Variance
-------- -------- --------
<S> <C> <C> <C>
Natural Gas Liquids $ 149.8 $ 136.8 $ 13.0
Propane Marketing 61.2 64.3 (3.1)
Petroleum Refining 525.2 473.8 51.4
Retail Petroleum 188.7 189.3 (0.6)
Other 18.0 - 18.0
Eliminations (88.6) (81.5) (7.1)
-------- -------- --------
$ 854.3 $ 782.7 $ 71.6
======== ======== ========
</TABLE>
The $71.6 million increase in sales and operating revenues was due to increased
sales in the Natural Gas Liquids and Petroleum Refining business units,
partially offset by decreases in Propane Marketing and Retail Petroleum.
Natural Gas Liquids' sales increased by $13.0 million due to increased trading
sales and pipeline revenues, partially offset by the loss of Westpan sales and
operating revenues. Trading sales increased $13.8 million due primarily to
higher volumes. Despite moderate ethane rejection in May 1997 compared to three
strong months of ethane recovery last year, pipeline revenues increased $0.4
million, primarily due to increased Four Corners deliveries. The Westpan
operations, which were shut down after MAPCO sold its interest in the liquids
and condensate in the West Panhandle field on January 1, 1997, generated $1.9
million of revenues during the second quarter of 1996. Overall, $8.4 million of
Natural Gas Liquids' sales increase was due to higher prices and $4.6 million
was due to increased volumes.
Propane Marketing sales decreased $3.1 million, primarily because the loss of
fertilizer sales in the current quarter more than offset the impact of
increased wholesale propane sales. Fertilizer operations were phased-out during
the second and third quarters of 1996, which resulted in the loss of $9.5
million of sales. Wholesale propane sales increased $7.3 million primarily due
to increased volumes relating to the acquisition of Gas Supply Inc. in January
1997. Overall, $4.2 million of the $3.1 million sales decrease was due to lower
volumes, partially offset by a $1.1 million increase in sales prices.
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<PAGE> 20
Petroleum Refining sales increased $51.4 million primarily due to increased
sales by the Mid-South Refinery. Sales at the Mid-South Refinery increased
$50.9 million as volumes increased 31,065 barrels per day, partially offset by
a 5.1% decrease in average product prices. The increase in sales volume was due
to increased demand for high- octane gasoline, increased jet fuel sales, and
increased spot sales in the Ohio Valley. Sales at the Alaska Refinery increased
$0.5 million as volumes increased 2,463 barrels per day, partially offset by a
4.6% decrease in sales prices. The increased volumes were due primarily to
continued strong demand for jet and diesel fuel. Overall, Petroleum Refining's
$79.0 million volume increase was offset by a $27.6 million price decrease for
a net sales increase of $51.4 million.
Retail Petroleum sales decreased $0.6 million due to decreased sales of diesel
fuel, partially offset by higher merchandise sales. Gasoline revenues were
essentially even with the prior year reflecting 3.6% higher volumes and a 4.0%
decrease in average selling price per gallon. Diesel revenue decreased $3.6
million, principally as a result of decreased volumes caused by the loss of the
Rising Fawn travel center which closed due to a fire in the fall of 1996.
Construction to rebuild the Rising Fawn travel center is underway and is
expected to be completed during the third quarter of 1997. Retail Petroleum's
overall sales decrease of $0.6 million was due to a $4.3 million decrease in
fuel sales, partially offset by a $3.7 million increase in merchandise sales.
Lower sales prices accounted for $3.8 million of the $4.3 million decrease in
fuel sales and decreased volumes accounted for the remaining $0.5 million.
Other sales by MAPCO's newly formed companies MAPCO Canada Energy, Inc. and
TouchStar Technologies LLC were $14.7 million and $3.3 million, respectively.
Outside purchases and operating expenses increased $73 million in the second
quarter of 1997 as compared to 1996. Details by business unit are as follows
(in millions):
<TABLE>
<CAPTION>
Three months ended June 30:
----------------------------------------------------------------------------
1997 1996 Variance
----------------------- ----------------------- ------------------------
Outside Operating Outside Operating Outside Operating
Purchases Expense Purchases Expense Purchases Expense
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas Liquids $ 87.0 $ 26.9 $ 66.3 $ 29.7 $ 20.7 $ (2.8)
Propane Marketing 18.9 22.9 32.7 19.1 (13.8) 3.8
Petroleum Refining 464.7 27.6 429.2 23.0 35.5 4.6
Retail Petroleum 89.1 23.0 83.2 21.8 5.9 1.2
Other 16.5 1.5 - - 16.5 1.5
---------- ---------- ---------- ---------- ---------- ----------
$ 676.2 $ 101.9 $ 611.4 $ 93.6 $ 64.8 $ 8.3
========== ========== ========== ========== ========== ==========
</TABLE>
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<PAGE> 21
Natural Gas Liquids' outside purchases increased $20.7 million primarily as a
result of increased trading purchases. The $20.6 million increase in trading
purchases was the result of increased sales volumes. Operating expenses
decreased $2.8 million due to decreased pipeline and Westpan expenses. Pipeline
expenses decreased due to a reduction in materials and supplies, outside
services and other general expenses, partially offset by an increase in power
costs. The increase in power costs reflects the volume increase over last
year's second quarter. Westpan expenses decreased because those operations were
shut down after MAPCO sold its interest in the liquids and condensate in the
West Panhandle field in January of this year.
Propane Marketing's outside purchases decreased $13.8 million. Propane
purchases decreased $5.2 million, reflecting a $6.2 million decrease in prices,
partially offset by a $1.0 million increase in volumes. The increase in propane
volumes was primarily due to the retail propane acquisitions finalized during
the last 12 months. Supply spot purchases decreased $2.0 million due to both
decreased volumes and prices. Fertilizer and chemical purchases decreased $7.7
million because the fertilizer operations were phased out during the second and
third quarters of 1996. Operating expenses increased $3.8 million primarily due
to increased salary and benefit costs and supplies and vehicle expenses
associated with acquisitions and new development, and accruals associated with
contingent liabilities.
Petroleum Refining's outside purchases increased $35.5 million. The Mid-South
Refinery's purchases increased $32.9 million due to increased crude throughput
volumes, partially offset by an 8.7% decrease in crude prices. The Alaska
Refinery's outside purchases increased $2.6 million reflecting increased
purchases of finished products, partially offset by a 2.4% decrease in crude
prices and lower crude throughput volumes. Crude throughput declined because of
contaminated crude receipts during the current quarter. Jet fuel purchases
increased in the current quarter to meet sales contracts when production was
curtailed by the contaminated crude. Operating expenses increased $4.6 million
due to increased power and other volume-related expenses at the Mid-South
Refinery and a mini-turnaround on the Alaska Refinery's sulfolane unit.
Retail Petroleum's outside purchases increased $5.9 million. Including the more
significant amounts of products purchased from the Petroleum Refining business
unit, which are not reflected in the above table due to eliminations, total
purchases increased $1.3 million. Total gasoline purchases increased $1.0
million due to an increase in volumes of 2.8 million gallons, partially offset
by a 1.9% decrease in wholesale prices. Total diesel purchases decreased $3.7
million due to a decrease of 3.5 million gallons purchased because of decreased
sales volumes as well as a slight decrease in the wholesale cost per gallon.
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<PAGE> 22
Operating expenses increased $1.2 million principally because of the increase
in the number of stores in operation.
Other outside purchases of $16.5 million include crude and NGL purchases by
MAPCO Canada Energy Inc. in the amount of $14.7 million and computer product
purchases by TouchStar Technologies LLC in the amount of $1.8 million.
Selling, general and administrative expenses increased $8.9 million primarily
due to establishing, in August 1996, the Marketing and Business Development
department to develop new business opportunities for the Company and increased
legal and outside services expenses.
Other income for the three months ended June 30 increased $1.1 million due to
investment income from a portion of the proceeds from the Coal and Westpan
sales and increased earnings from unconsolidated entities accounted for as
equity investments.
The effective income tax rate for the second quarter of 1997 was 34.8% compared
to 35.8% in the second quarter of 1996. The difference between the statutory
Federal income tax rate of 35% and the effective income tax rate was primarily
due to state income taxes.
Operating profit for the three months ended June 30, 1997 and 1996 is detailed
below (in millions):
<TABLE>
<CAPTION>
1997 1996 Variance
-------- -------- --------
<S> <C> <C> <C>
Natural Gas Liquids $ 24.9 $ 29.4 $ (4.5)
Propane Marketing (8.4) (2.2) (6.2)
Petroleum Refining 23.3 12.4 10.9
Retail Petroleum 5.0 9.2 (4.2)
Other (3.7) - (3.7)
-------- -------- --------
$ 41.1 $ 48.8 $ (7.7)
======== ======== ========
</TABLE>
Natural Gas Liquids' current quarter operating profit decreased $4.5 million
primarily due to the loss of profit from the Westpan operations, which were
shut down after MAPCO sold its interest in the liquids and condensate in the
West Panhandle field in January 1997. Operating profit from pipeline operations
increased but was offset by higher trading losses.
Propane Marketing's operating profit decreased $6.2 million. The decrease was
the result of increased operating expenses from acquisitions and lower sales
volumes due to warmer weather.
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<PAGE> 23
Petroleum Refining's operating profit increased $10.9 million, reflecting a
$13.4 million increase from the Mid-South Refinery, partially offset by a $2.5
million decrease from the Alaska Refinery. Profits at the Mid-South refinery
increased due to an increase in sales volumes for the quarter of 31,065 barrels
per day over 1996 and a 71% increase in the gross profit margin on processed
barrels sold. The decrease in the Alaska Refinery's profits was due to a 12.3%
decline in margin per barrel sold for the quarter, partially offset by a 2,463
barrel per day increase in sales volumes. The margin decline was due to general
market conditions and decreased throughput at the refinery caused by receipts
of low quality crude shipped through the TransAlaska Pipeline and a
mini-turnaround on the refinery's Sulfolane unit. The lower throughput volumes
resulted in replacing sales of higher-margin produced products with sales of
lower-margin purchased products.
Retail Petroleum's operating profit decreased $4.2 million primarily because of
increased expenses and lower gasoline profits. Expenses increased primarily
because of general increases in a number of expense categories and the impact
of the additional stores from the EZ-Serve acquisition on operating costs. The
lower gasoline profits reflect a 3.1 cent per gallon decrease from last year's
exceptionally high margins, partially offset by a 3.6% increase in gasoline
sales volumes. Diesel profits were static as a 1.0 cent per gallon increase in
margins was offset by decreased sales volumes. Merchandise profits were also
essentially unchanged from last year as lower profit margins offset the impact
of increased sales.
Income from continuing operations was $10.7 million or $0.20 per share in the
1997 second quarter compared to $17.8 million or $0.31 per share in the 1996
quarter. Average common shares outstanding were 54.3 million in the 1997
quarter and 57.7 million in the 1996 quarter.
YEAR-TO-DATE
Sales and operating revenues were as follows (in millions):
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997 1996 Variance
-------- -------- --------
<S> <C> <C> <C>
Natural Gas Liquids $ 350.1 $ 302.1 $ 48.0
Propane Marketing 217.8 204.0 13.8
Petroleum Refining 994.3 819.3 175.0
Retail Petroleum 365.0 345.7 19.3
Other 35.3 - 35.3
Eliminations (177.0) (146.9) (30.1)
-------- -------- --------
$1,785.5 $1,524.2 $ 261.3
======== ======== ========
</TABLE>
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<PAGE> 24
The $261.3 million increase in sales and operating revenues was due to
increased sales by all of MAPCO's operating units.
Natural Gas Liquids' sales increased $48.0 million due to increased trading
sales and pipeline revenues, partially offset by the loss of Westpan revenues
as those operations were shut down after MAPCO sold its interest in the liquids
and condensate in the West Panhandle field on January 1, 1997. Trading sales
increased $45.9 million due primarily to higher prices for NGL's in the first
quarter of 1997 as compared to 1996 and increased volumes in the second
quarter. Pipeline revenues improved due to increased deliveries from Four
Corners origins reflecting the Chaco plant connection that was not operational
in the second quarter of 1996 and favorable ethane recoveries. Partially
offsetting these increases were reduced pipeline revenues from the home heating
markets as warmer weather in the first six months of the year resulted in
reduced shipments of propane. Overall, $41.3 million of Natural Gas Liquids'
sales increase was due to higher prices and $6.7 million was due to increased
volumes.
Propane Marketing sales increased $13.8 million; however, excluding the Iowa
retail operations, which were sold at the end of the 1996 first quarter, sales
increased $27.1 million. Wholesale propane sales increased $24.4 million
primarily due to the acquisition of Gas Supply in January 1997. Spot sales
increased $5.8 million, the result of higher product sales prices. Retail
propane sales increased $4.3 million due to higher sales prices, which more
than offset the impact of decreased volumes. The lower retail propane sales
volumes reflect this year's warmer weather patterns. Partially offsetting these
sales increases was the loss of $10.3 million of fertilizer sales. The
fertilizer operations were phased-out during the second and third quarters of
1996. Overall, $35.4 million of the $27.1 million sales increase was
attributable to increased sales prices, partially offset by an $8.3 million
decrease in volumes.
Petroleum Refining sales increased $175.0 million reflecting increased sales by
both the Mid-South and Alaska Refineries. Sales at the Mid- South Refinery
increased $146.3 million as volumes increased 27,488 barrels per day and
average product prices increased 3.5%. The volume increase was attributable to
the expansion of Mid-South's marketing area into the Ohio River Valley and more
aggressive marketing in the Memphis area. Sales at the Alaska Refinery
increased $28.7 million as volumes increased 3,091 barrels per day and average
sales prices increased 6.9%. The increased volumes primarily reflect strong
demand for jet and diesel fuel. Overall, $40.8 million of Petroleum Refining's
$175.0 million sales increase was attributable to increased prices while $134.2
million was attributable to increased volumes.
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<PAGE> 25
Retail Petroleum's sales increased $19.3 million due to increased sales of
gasoline and diesel fuel. Gasoline revenues increased $12.4 million as prices
increased 3% and volumes increased 6.9 million gallons. The increase in
gasoline volumes is due to sales from two additional stores added in the first
quarter of 1997 and 19 stores added during the current quarter as a result of
the EZ-Serve acquisition. Diesel revenues increased $3.0 million as prices
increased 7%, partially offset by a decrease in volumes of 1.8 million gallons.
Overall, Retail Petroleum's $19.3 million sales increase was due to a $15.4
million increase in fuel sales and a $3.9 million increase in merchandise
sales. Merchandise sales increased primarily due to the higher store count.
Higher sales prices contributed $8.9 million of the fuel sales increase and
increased volumes contributed the remaining $6.5 million.
Other sales of $35.3 million included $32.0 million in trading sales of crude
and NGLs by one of MAPCO's newly-formed companies, MAPCO Canada Energy Inc.,
and $3.3 million in computer product sales by TouchStar Technologies LLC.
Outside purchases and operating expenses increased $266.7 million in the first
six months of 1997 as compared to 1996. Details by business unit are as follows
(in millions):
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------------------------------------------------------
1997 1996 Variance
----------------------- ----------------------- -----------------------
Outside Operating Outside Operating Outside Operating
Purchases Expense Purchases Expense Purchases Expense
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas Liquids $ 205.9 $ 58.2 $ 157.4 $ 54.3 $ 48.5 $ 3.9
Propane Marketing 118.1 45.4 107.4 41.9 10.7 3.5
Petroleum Refining 880.7 51.5 732.2 47.9 148.5 3.6
Retail Petroleum 167.8 43.9 158.2 40.9 9.6 3.0
Other 33.6 1.8 - - 33.6 1.8
---------- ---------- ---------- ---------- ---------- ----------
$ 1,406.1 $ 200.8 $ 1,155.2 $ 185.0 $ 250.9 $ 15.8
========== ========== ========== ========== ========== ==========
</TABLE>
Natural Gas Liquids' outside purchases increased $48.5 million primarily as a
result of increased trading purchases which reflect higher NGL market prices in
the first quarter and increased volumes in the second quarter. Operating
expenses increased $3.9 million due to increased pipeline and fractionation
expenses, partially offset by the absence of Westpan expenses, as those
operations were shut down after MAPCO sold its interest in the liquids and
condensate in the West Panhandle field in January 1997. The increase in
pipeline and fractionation expenses was primarily due to increased power costs
reflecting increased volumes and higher natural gas prices.
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<PAGE> 26
Propane Marketing's outside purchases increased $10.7 million; however,
excluding the Iowa operations, outside purchases increased $19.6 million.
Propane purchases increased $16.5 million and spot supply purchases increased
$9.3 million, partially offset by an $8.2 million decrease in fertilizer
purchases. The increase in propane purchases was attributable to increased
volumes, primarily the result of the Gas Supply acquisition. The increase in
spot sales was mainly attributable to increased product prices. Fertilizer
purchases declined, reflecting the sale of those operations in 1996. Operating
expenses increased $3.5 million; however, excluding the Iowa operations,
operating expenses increased $6.2 million. The increase was primarily due to
increased salary and benefit costs and increased supplies and outside services
attributable to acquisitions, and retail plant development and accruals
associated with contingent liabilities.
Petroleum Refining's outside purchases increased $148.5 million. The Mid-South
Refinery's purchases increased $122.1 million due primarily to increased crude
purchases as well as additional purchases of refined product to meet sales
demand during a two-week shut-down of the refinery in the first quarter to
expand the alkalization unit and replace the air blower on the fluid catalytic
cracker unit. Crude purchases increased because throughput barrels increased
6,956 barrels per day, despite the two-week shut-down, and crude prices
increased 2.1%. Alaska's outside purchases increased $26.4 million due to
increased crude costs, which accounted for $15.6 million of the increase,
and increased jet fuel purchases. Purchases of jet fuel increased during the
current quarter to meet increased sales contracts. Operating expenses increased
$3.6 million at the refineries due to increased operating costs associated with
increased throughput volumes.
Retail Petroleum's outside purchases increased $9.6 million. Including the more
significant amounts purchased from the Petroleum Refining business unit, which
are not reflected in the above table due to eliminations, purchases increased
$19.4 million. Gasoline purchases increased $14.3 million due to a 5% increase
in wholesale prices and an increase of 6.9 million gallons purchased. This
increase in purchases was attributable to increased sales volumes, partially
reflecting the 19 additional stores from the EZ-Serve acquisition in the second
quarter. Diesel purchases increased $2.2 million due to a 6.1% increase in
wholesale prices, partially offset by a decrease of 1.7 million gallons
purchased, reflecting the decreased sales volumes. Operating expenses increased
$3.0 million principally because of general increases in several expense
categories as a result of the addition of two stores in the first quarter and
the EZ-Serve acquisition in the second quarter.
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<PAGE> 27
Other outside purchases of $33.6 million reflect $31.8 million of crude and NGL
purchases by MAPCO Canada Energy Inc. and $1.8 million of computer product
purchases by TouchStar Technologies LLC.
Selling, general and administrative expenses increased $12.3 million due to
establishing, in August 1996, the Marketing and Business Development department
to develop new business opportunities for the Company, as well as increased
legal and outside service expenses.
Interest expense was $26.7 million in the first six months of 1997 compared to
$29.6 million in 1996. The $2.9 million decrease primarily reflects lower
variable rate debt expense which was reduced by the proceeds from the sale of
the Coal Segment and MAPCO's interest in the liquids and condensate in the West
Panhandle field.
The $66.0 million gain on the sale of net assets held for sale in 1997 reflects
the gain on sale of MAPCO's interest in the liquids and condensate in the West
Panhandle field in the first quarter. The $20.8 million gain in 1996 was the
gain on sale of the fertilizer and Iowa propane operations.
Other income in the first six months of 1997 includes a $4.3 million gain on
the termination of interest rate swap agreements and investment income from a
portion of the proceeds from the Coal and Westpan sales.
The effective income tax rate for the first half of 1997 was 38.7% compared to
36.8% in the first half of 1996. The difference between the statutory Federal
income tax rate of 35% and the effective income tax rate was primarily due to
state income taxes.
Operating profit for the six months ended June 30, 1997 and 1996 is detailed
below (in millions):
<TABLE>
<CAPTION>
1997 1996 Variance
-------- -------- --------
<S> <C> <C> <C>
Natural Gas Liquids $ 130.1 $ 65.1 $ 65.0
Propane Marketing 4.5 47.0 (42.5)
Petroleum Refining 39.7 20.4 19.3
Retail Petroleum 8.9 14.3 (5.4)
Other (3.9) - (3.9)
-------- -------- --------
$ 179.3 $ 146.8 $ 32.5
======== ======== ========
</TABLE>
Natural Gas Liquids' operating profit for the first six months includes a $66.0
million gain on the sale of MAPCO's interest in the liquids and condensate in
the West Panhandle field. Excluding this gain, operating profit decreased $1.0
million, primarily as a result of decreased profits from the Westpan
operations, partially offset by increased
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<PAGE> 28
profits from the pipeline operations. The improvement in pipeline profits
reflects strong revenues resulting from favorable ethane recoveries and a full
six months of operations on the Rocky Mountain extension compared to last
year's first quarter start-up of that line.
Propane Marketing's operating profit in the first six months of 1996 included a
$20.8 million gain on the sale of the Iowa propane operations and $2.7 million
of profit from operating those assets. Excluding this gain and the income from
those divested assets, operating profit decreased $19.0 million. The decrease
in operating profit was primarily due to the volatility of propane market
prices during the first quarter of 1997 and decreased sales volumes
attributable to the warmer weather conditions in the first six months compared
to record cold temperatures last year.
Petroleum Refining's operating profit increased $19.3 million as profits from
both the Mid-South and Alaska Refineries have increased over last year. Profits
at the Mid-South Refinery increased $18.0 million due to increased sales
volumes of 27,488 barrels per day and a $0.40 per barrel increase in gross
margins. Sales volumes increased due to increased demand for high-octane
gasoline and jet fuel and increased spot sales in the Ohio Valley market area.
Gross margin increased because crude prices decreased more than product prices.
Profits at the Alaska Refinery increased $1.3 million because sales increases
more than offset the impact of decreased margins and increased expenses.
Margins decreased $0.13 per barrel sold as sales prices increased less than the
increase in overall costs per barrel sold. In addition, margins were negatively
impacted by lower throughput volumes which resulted in replacing sales of
higher-margin produced products with sales of lower-margin purchased products.
Retail Petroleum's operating profit decreased $5.4 million primarily because of
increased expenses and lower gasoline profits. Expenses increased primarily
because of general increases in a number of expense categories and the impact
on operating costs of the additional stores from the EZ-Serve acquisition. The
lower gasoline profits reflect a 2.2 cent per gallon decrease from last year's
exceptionally high margins, partially offset by a 5.0% increase in gasoline
sales volumes. Diesel profits increased slightly as increased margins were
mostly offset by lower sales volumes. Merchandise profits were also essentially
equal to last year as lower profit margins offset the impact of increased
sales.
Income from continuing operations was $83.4 million or $1.52 per share in the
first six months of 1997 compared to $65.2 million or $1.13 per
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<PAGE> 29
share in the first six months of 1996. Excluding the impact of the
Westpan gain on the first six months of operations and the gain on the sale of
Iowa propane operations on the first six months of 1996, income from continuing
operations was $43.5 million or $0.80 per share in the first six months of 1997
and $51.8 million or $0.90 per share in the first six months of 1996. Average
common shares outstanding were 54.8 million in 1997 and 57.9 million in 1996.
OTHER MATTERS
In the first quarter of 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
per Share," which is effective for year-end 1997. In the second quarter of
1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
both of which are effective for year-end 1998. These statements are not
expected to have a material impact on the Company's financial statements.
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<PAGE> 30
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on Wednesday, May
28, 1997, at the offices of the Company, 1800 South Baltimore Avenue, Tulsa,
Oklahoma. In connection with the election of four nominees for Directors to
Class III Directorships, 49,559,481 votes were cast as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------------------
NAME FOR WITHHOLD AUTHORITY
---- ---------- ------------------
<S> <C> <C>
Donald Paul Hodel 48,745,544 813,937
---------- -------
Malcolm T. Hopkins 48,747,977 811,504
---------- -------
Frank A. McPherson 48,736,441 823,040
---------- -------
John L. Whitmire 48,737,371 822,110
---------- -------
</TABLE>
Stockholders were asked to ratify the appointment of Deloitte & Touche LLP as
independent auditors for the year ended December 31, 1997. Of the 49,559,481
votes cast, the number of shares voting FOR this proposal was 49,423,500;
61,041 votes were cast AGAINST the proposal and 74,940 abstentions were
tabulated.
Stockholders were requested to consider and act upon a proposal to approve an
amendment to the Restated Certificate of Incorporation of the Company to
increase the authorized capital stock of the Company. Of the 49,559,481 votes
cast, the number of shares voting FOR this proposal was 47,132,105; 2,257,907
votes were cast AGAINST the proposal and 169,469 abstentions were tabulated.
Stockholders were also requested to consider and act upon a proposal to approve
an amendment to the 1989 Stock Incentive Plan. Of the 49,559,481 votes cast,
the number of shares voting FOR this proposal was 47,222,204; 1,984,292 votes
were cast AGAINST the proposal and 352,985 abstentions were tabulated.
In addition to these items, Stockholders were also asked to consider and act
upon a proposal to ratify the Company's 1997 Employee Stock Purchase Plan. Of
the 49,559,481 votes cast, the number of shares voting FOR this proposal was
48,683,804; 640,098 votes were cast AGAINST the proposal and 235,579
abstentions were tabulated.
49,559,481 votes were cast on the proposal to transact other business which may
properly come before the meeting or any adjournment thereof. 49,559,295 were
voted in favor of the proposal and the remaining 186 votes were abstentions.
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<PAGE> 31
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 10(i) - MAPCO Inc. 1989 Stock Incentive Plan, as
amended and restated effective June 1, 1997.
Exhibit 10(ii) - MAPCO Inc. 1997 Employee Stock Purchase Plan
effective as of June 1, 1997.
Exhibit 11 - Statement Regarding Computation of per Share
Earnings.
Exhibit 12 - Computation of Ratio of Earnings to Fixed
Charges.
Exhibit 27 - Financial Data Schedule.
(b). Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the
second quarter of 1997.
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<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAPCO Inc.
Date: August 11, 1997 /s/ PHILIP W. BAXTER
----------------- ------------------------------------
Philip W. Baxter
Executive Vice President and
Chief Financial Officer
Date: August 11, 1997 /s/ GORDON E. SCHAECHTERLE
----------------- ------------------------------------
Gordon E. Schaechterle
Vice President, Controller
and Tax Counsel
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<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
Exhibit 10(i) MAPCO Inc. 1989 Stock Incentive Plan,
as amended and restated effective
June 1, 1997. 34-45
Exhibit 10(ii) MAPCO Inc. 1997 Employee Stock Purchase
Plan effective as of June 1, 1997. 46-60
Exhibit 11 Statement Regarding Computation of per
Share Earnings. 61-62
Exhibit 12 Computation of Ratio of Earnings to Fixed
Charges. 63
Exhibit 27 Financial Data Schedule. 64
</TABLE>
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<PAGE> 1
EXHIBIT 10(i)
MAPCO INC.
1989 STOCK INCENTIVE PLAN
As Amended and Restated, effective June 1, 1997
Section 1. Purpose
1.1. The purpose of the "MAPCO INC. 1989 STOCK INCENTIVE PLAN"
(the "Plan") is to foster and promote the long-term financial success of the
Company and materially increase shareholder value by (a) motivating superior
performance by means of performance-related incentives, (b) encouraging and
providing for the acquisition of an ownership interest in the Company by
Employees, and (c) enabling the Company to attract and retain the services of
an outstanding management team upon whose judgment, interest, and special
effort the successful conduct of its operations is largely dependent.
Section 2. Definitions
2.1. Definitions. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Award" means any Stock Option, Stock Appreciation
Right, share of Restricted Stock, share of Phantom
Stock, Stock Purchase Right, or any combination
thereof, including Awards combining two or more types
of Awards in a single grant.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means the first to occur of the
following events:
(i) the members of the Board 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 the Company's
stockholders, of each new director was
approved by a vote of at least
seventy-five percent of the members of
such Board then still in office who were
members of such Board at the beginning
of such twenty-four calendar month
period; or
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<PAGE> 2
(ii) any "person," including a "group" (as
such terms are used in Sections 13(d)
and 14(d)(2) of the Act, but excluding
the Company, any of its subsidiaries or
any employee benefit plan of the Company
or any of its subsidiaries) is or
becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Act),
directly or indirectly, of securities of
the Company representing twenty-five
percent or more of the combined voting
power of the Company's then outstanding
securities; or
(iii) the stockholders of the Company shall
approve a definitive agreement (1) for
the merger or other business combination
of the Company with or into another
corporation a majority of the directors
of which were not directors of the
Company immediately prior to the merger
and in which the stockholders of the
Company 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 the Company.
(e) "Change in Control Price" means the highest price per
share of Stock offered in conjunction with any
transaction resulting in a Change in Control (as
determined in good faith by the Committee if any part of
the offered price is payable other than in cash) or, in
the case of a Change in Control occurring solely by
reason of a change in the composition of the Board, the
highest Fair Market Value of the Stock on any of the 30
trading days immediately preceding the date on which a
Change in Control occurs.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Committee" means the Compensation Committee of the Board
of Directors, which shall consist of two or more members.
Each member of the Committee shall be a "Non-Employee
Director" within the meaning of Rule 16b-3 as promulgated
under the Act, or meet any other applicable standard for
administrators under that or any similar rule which may
be in effect from time to time. No member of the
Committee shall be entitled to participate in the Plan.
(h) "Company" means MAPCO Inc., a Delaware corporation, and
any successor thereto.
(i) "Disability" means total disability as determined in
accordance with the terms of the Company's long-term
disability plan, as in effect from time to time.
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<PAGE> 3
(j) "Employee" means any officer or other key employee of the
Company or any of its majority owned subsidiaries.
(k) "Executive Officer" means those persons who are officers
of the Company within the meaning of Rule 16a-1(f) of the
Act.
(l) "Fair Market Value" on any date means the closing price
of the Stock as reported by the consolidated tape of the
New York Stock Exchange (or on such other recognized
quotation system on which the trading prices of the Stock
are quoted at the relevant time) on such date. In the
event that there are no Stock transactions reported on
such tape (or such other system) on such date, Fair
Market Value shall mean the closing price on the
immediately preceding date on which Stock transactions
were so reported.
(m) "Option" means the right to purchase Stock at a stated
price for a specified period of time. For purposes of the
Plan, an Option may be either (i) an "Incentive Stock
Option" (ISO) within the meaning of Section 422A of the
Code or (ii) a "Nonstatutory Stock Option" (NSO).
(n) "Participant" means any Employee designated by the
Committee to participate in the Plan.
(o) "Phantom Stock" means a contractual right to receive a
payment from the Company in cash, in Stock or in a
combination thereof in an amount equal to the Fair Market
Value of a share of Stock.
(p) "Period of Restriction" means the period during which
shares of Restricted Stock or Phantom Stock are subject
to forfeiture and restrictions on transfer pursuant to
Section 8.2 of the Plan.
(q) "Prior Plans" means the 1981 Stock Appreciation Rights
and Stock Option Rights Plan for Key Employees of MAPCO
Inc. and its Subsidiaries and the MAPCO Inc. 1986 Stock
Option Plan.
(r) "Restricted Stock" means Stock granted to a Participant
subject to restrictions on transferability pursuant to
Section 8 of the Plan.
(s) "Retirement" means termination of employment in
accordance with the retirement provisions of any
retirement plan maintained by the Company or any of its
subsidiaries.
(t) "Stock" means the common stock of the Company, par value
$1.00 per share.
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<PAGE> 4
(u) "Stock Appreciation Right" and "SAR" mean the right to
receive a payment from the Company in cash, in Stock or
in a combination thereof equal to the excess of the Fair
Market Value of a share of Stock at the date of exercise
over a specified price fixed by the Committee, but
subject to such maximum amounts as the Committee may
impose.
(v) "Stock Purchase Right" means a right to purchase shares
of Stock in accordance with the provisions of Section 9
of the Plan.
2.2. Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
Section 3. Eligibility and Participation
Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan.
Section 4. Powers of the Committee
4.1. Power to Grant. The Committee shall determine the
Participants to whom Awards shall be granted, the type or types of Awards to be
granted and the terms and conditions of any and all such Awards. The Committee
may establish different terms and conditions for different types of Awards, for
different Participants receiving the same type of Award and for the same
Participant for each Award such Participant may receive, whether or not granted
at different times.
4.2. Substitute Awards. The Committee shall have the right to
grant Awards in substitution for or upon the cancellation of previously made
Awards or options that had been granted under the Prior Plans, and such new
Awards may contain terms more favorable to the recipient than the Awards or
options they replace, including, without limitation, a lower exercise price for
Options or the exchange of Restricted Stock or Phantom Stock for Options or
options granted under the Prior Plans.
4.3. Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions and assurances deemed necessary or
advisable to protect the interests of the Company, and to make all other
determinations necessary or advisable for the administration and interpretation
of the Plan in order to carry out its provisions and purposes. Determinations,
interpretations, or other actions made or taken by the Committee pursuant to
the provisions of the Plan shall be final, binding, and conclusive for all
purposes and upon all persons.
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<PAGE> 5
Section 5. Stock Subject to Plan
5.1. Number. Subject to the provisions of Section 5.3, the number
of shares of Stock subject to Awards under the Plan may not exceed 2,000,000
shares (after giving effect to the two-for-one stock split declared April 16,
1989), plus that number of shares which are available for grants under the
Prior Plans on the date the Plan is adopted, but which were not subject to
outstanding options ("Net Shares"). In addition, although only Net Shares may
actually be issued to Participants under the Plan, up to 7 million gross
shares, in the aggregate, may be represented by stock options and awards
granted under the Plan. There shall also be available under the Plan that
number of shares of Stock subject to all options outstanding under the Prior
Plans on the date the Plan is adopted (as such number of shares may hereafter
be adjusted in accordance with the terms of the Prior Plans) which are
canceled, terminated or otherwise settled without the issuance of Stock in
accordance with the terms of such options or a direct payment of cash in
exchange therefor. Without limiting the foregoing, the Committee may grant
Awards under the Plan which are conditioned on the cancellation or termination
of options granted under the Prior Plans, including Awards which are payable
solely in cash. In order to maintain stockholder value in the Company's shares,
shares must be purchased by the Company from time-to-time in the open market
equivalent to the shares issued or expected to be issued under the Plan.
5.2. Canceled, Terminated, or Forfeited Awards. Except as
provided in Section 7.2 with respect to the cash settlement of a Stock
Appreciation Right that had been granted in tandem with an Option, any shares
of Stock subject to an Award which for any reason is canceled, terminated or
otherwise settled without the issuance of any Stock shall again be available
for Awards under the Plan.
5.3. Adjustment in Capitalization. In the event of any Stock
dividend or Stock split, recapitalization (including, without limitation, the
payment of an extraordinary dividend), merger, consolidation, combination,
spin-off, distribution of assets to stockholders, exchange of shares, or other
similar corporate change, the aggregate number of shares of Stock available for
Awards under Section 5.1 or subject to outstanding Awards and the respective
prices, limitations, and/or performance criteria applicable to outstanding
Awards may be appropriately adjusted by the Committee, whose determination
shall be conclusive; provided, however, that any fractional shares resulting
from any such adjustment shall be disregarded.
Section 6. Stock Options
6.1. Grant of Options. Options may be granted to Participants at
such time or times as shall be determined by the Committee. The Committee shall
have complete discretion in determining the number of Options, if any, to be
granted to a Participant; provided that, in no event may the number of shares
subject to Options granted to any single Participant within any 12 month period
exceed 350,000 shares, as such number may be adjusted pursuant to Section 5.3.
Each Option shall be evidenced by an Option agreement that shall specify the
type of Option granted, the exercise price, the duration of the Option, the
number of shares of Stock to which the Option pertains, and such other terms
not inconsistent with the Plan as the Committee shall determine.
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<PAGE> 6
6.2. Option Price. Options granted pursuant to the Plan shall
have an exercise price that is no less than the Fair Market Value of the Stock
on the date the Option is granted.
6.3. Exercise of Options. Options awarded under the Plan shall be
exercisable at such times and shall be subject to such restrictions and
conditions, including the performance of a minimum period of service or the
satisfaction of performance goals, as the Committee may impose, either at or
after the time of grant of such Options; provided that no Option shall be
exercisable for more than 10 years after the date on which it is granted.
Notwithstanding anything in the Plan to the contrary, to the extent required by
the Code, the aggregate Fair Market Value (determined as of the date the Option
is granted) of the shares of Stock with respect to which ISO's are exercisable
for the first time by any Participant during any calendar year (under all plans
of the Company and its subsidiaries) shall not exceed $100,000 or such other
amount as may subsequently be specified under the Code; provided that any
Options granted having a value in excess of such amount shall be deemed to be
Nonstatutory Stock Options.
6.4. Payment. The Committee shall establish procedures governing
the exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or cash equivalents,
including by personal check, at the time of exercise. The Committee may, in its
discretion, permit a Participant to make payment in Stock already owned by him,
valued at its Fair Market Value on the date of exercise, as partial or full
payment of the exercise price. As soon as practicable after receipt of a
written exercise notice and full payment of the exercise price, the Company
shall deliver to the Participant a certificate or certificates representing the
acquired shares of Stock.
Section 7. Stock Appreciation Rights
7.1. Grant of Stock Appreciation Rights. Stock Appreciation
Rights may be granted to Participants at such time or times as shall be
determined by the Committee and shall be subject to such terms and conditions
as the Committee may impose. A grant of a SAR shall be made pursuant to a
written agreement containing such provisions not inconsistent with the Plan as
the Committee shall approve.
7.2. Exercise of SARs. SARs may be exercised at such times or
subject to such conditions, including the performance of a minimum period of
service or the satisfaction of performance goals, as the Committee shall
impose, either at or after the time of grant. Option shares with respect to
which a tandem SAR shall have been exercised for cash shall not again be
available for an Award under this Plan. Notwithstanding any other provision of
the Plan, the Committee may impose such conditions on the exercise of a SAR
(including, without limitation, the right of the Committee to limit the time of
exercise to specified periods) as may be required to satisfy the applicable
provisions of Rule 16b-3 as promulgated under the Act or any successor rule.
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<PAGE> 7
7.3. Payment of SAR Amount. Upon exercise of a SAR, the holder
shall be entitled to receive payment of an amount determined by multiplying:
(a) any increase in the Fair Market Value of a share of Stock
at the date of exercise over the price fixed by the
Committee at the date of grant, by
(b) the number of shares with respect to which the SAR is
exercised;
provided, however, that at the time of grant, the Committee may establish, in
its sole discretion, a maximum amount per share which will be payable upon
exercise of a SAR.
Section 8. Restricted Stock and Phantom Stock
8.1. Grant of Restricted Stock or Phantom Stock. The Committee
may grant shares of Restricted Stock or Phantom Stock to such Participants at
such times and in such amounts, and subject to such other terms and conditions
not inconsistent with the Plan as it shall determine. Notwithstanding anything
else contained in the Plan to the contrary, if any award of Restricted Stock or
Phantom Stock (a "Performance Award") is to be made to an Executive Officer and
the vesting of such award is contingent upon the Committee's determination that
performance objectives established by the Committee over a measurement period
or periods established by the Committee have been achieved, in whole or in
part, such performance objectives shall be related to at least one of the
following criteria, which may be determined solely by reference to the
performance of (i) the Company, (ii) a subsidiary, (iii) an affiliate, (iv) a
division or unit of any of the foregoing or based on comparative performance of
any of the foregoing relative to other companies: (A) total return to
shareholders, (B) return on equity, (C) operating revenues, (D) net income,
whether before or after taxes, (E) earnings per share, and (F) changes in the
value of the Company's Common Stock. The maximum number of shares of Stock that
may be subject to such Performance Awards granted to any single Participant in
any 12 month period shall not exceed 100,000 shares, as such number may be
adjusted pursuant to Section 5.3. Notwithstanding anything else contained in
the Plan to the contrary, to the extent required to so qualify any Performance
Award as other performance based compensation within the meaning of Section
162(m)(4)(C) of the Code, the Committee shall not be entitled to exercise any
discretion otherwise authorized under the Plan (such as the right to accelerate
vesting without regard to the achievement of the relevant performance
objectives) with respect to such Performance Award if the ability to exercise
such discretion (as opposed to the exercise of such discretion) would cause
such award to fail to qualify as other performance based compensation. Each
grant of Restricted Stock or Phantom Stock shall be evidenced by a written
agreement setting forth the terms of such Award.
8.2. Restrictions on Transferability. Except as provided in
Section 13.1, shares of Restricted Stock or Phantom Stock may not be sold,
transferred, pledged, assigned, or otherwise
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<PAGE> 8
alienated or hypothecated until such time or until the satisfaction of such
conditions, including without limitation, the satisfaction of performance goals
or the occurrence of such event as shall be determined by the Committee either
at or after the time of grant.
8.3. Rights as a Shareholder. Unless otherwise determined by the
Committee at the time of grant, Participants holding shares of Restricted Stock
granted hereunder may exercise full voting rights and other rights as a
stockholder with respect to those shares during the Period of Restriction.
Holders of shares of Phantom Stock shall not be considered as shareholders and,
except to the extent provided in accordance with the Plan, shall have no rights
related to any shares of Stock.
8.4. Dividends and Other Distributions. Unless otherwise
determined by the Committee at the time of grant, Participants holding shares
of Restricted Stock shall be entitled to receive all dividends and other
distributions paid with respect to those shares, provided that if any such
dividends or distributions are paid in shares of Stock, such shares shall be
subject to the same forfeiture restrictions and restrictions on transferability
as apply to the Restricted Stock with respect to which they were paid. Unless
otherwise determined by the Committee at the time of grant, Participants
holding shares of Phantom Stock shall be entitled to receive cash payments
equal to any dividends and other distributions paid with respect to a
corresponding number of shares of Stock; provided that if any such dividends or
distributions are paid in shares of Stock, the Participant will be credited
with additional shares of Phantom Stock in lieu of a cash payment, which shares
shall be subject to the same forfeiture restrictions and restrictions on
transferability as apply to the shares of Phantom Stock in respect of which
they are payable.
8.5. Deferral Election. A Participant may elect, prior to the
date of grant (or such later date permitted by the Committee) and subject to
such restrictions as may be imposed by the Committee, to defer any payment on,
or in respect of, shares of Phantom Stock beyond the date at which such payment
would otherwise have been made. The Committee may provide for growth additions
to be added to the deferred amount over such deferral period. The Participant
shall elect the period of deferral and the method of distribution, subject to
the Committee's approval.
Section 9. Stock Purchase Rights
9.1. Grant of Stock Purchase Rights. The Committee may grant an
Employee Stock Purchase Right which shall enable such Employee to purchase
Stock at not less than its Fair Market Value on the date of grant. The
Committee shall impose such terms and conditions as it shall determine on such
Stock Purchase Right or the exercise hereof, and may, in its sole discretion,
require the exercise of a Stock Purchase Right as a condition of receiving an
option, Restricted Stock and/or Phantom Stock under the Plan. In its sole
discretion, the Committee may also provide for forfeiture of all or part of any
such Award in the event of a disposal of the shares purchased pursuant to a
Stock Purchase Right prior to a designated date or dates.
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<PAGE> 9
9.2. Loans. With the consent of the Committee, the Company, in
its sole discretion, may make, or arrange for, a loan to a Participant with
respect to the exercise of a Stock Purchase Right. The Committee shall have
full authority to decide whether to make a loan hereunder and to determine the
amount, term and provisions of any such loan, including the interest rate to be
charged in respect of any such loan, whether the loan is to be with or without
recourse against the Participant to whom such loan is made, the terms on which
the loan is to be repaid and the conditions, if any, under which it may be
forgiven. However, no loan hereunder shall have a term (including extensions)
exceeding ten years in duration or be in an amount exceeding 90% of the total
purchase price to be paid by the Participant.
Section 10. Termination of Employment
10.1. Termination of Employment Due to Retirement. Unless
otherwise determined by the Committee at the time of grant, in the event a
Participant's employment terminates by reason of Retirement, any Option or
Stock Appreciation Rights granted to such Participant which are then
outstanding may be exercised at any time prior to the expiration of the term of
the Options or Stock Appreciation Rights or within three (3) years (or such
shorter period as the Committee shall determine at the time of grant) following
the Participant's termination of employment, whichever period is shorter, and
any shares of Restricted Stock or Phantom Stock then outstanding shall become
nonforfeitable and shall become transferable or payable, as the case may be, as
though the Period of Restriction had expired.
10.2. Termination of Employment Due to Death or Disability.
Unless otherwise determined by the Committee at the time of grant, in the event
a Participant's employment is terminated by reason of death or Disability, any
Options or Stock Appreciation Rights granted to such Participant which are then
outstanding may be exercised by the Participant or the Participant's legal
representative at any time prior to the expiration date of the term of the
Options or Stock Appreciation Rights or within one (1) year (or such shorter
period as the Committee shall determine at the time of grant) following the
Participant's termination of employment, whichever period is shorter, and any
shares of Restricted Stock or Phantom Stock then outstanding shall become
nonforfeitable and shall become transferable or payable, as the case may be, as
though the Period of Restriction had expired.
10.3. Termination of Employment for Any Other Reason. Unless
otherwise determined by the Committee at the time of grant, in the event the
employment of the Participant shall terminate for any reason other than one
described in Section 10.1 or 10.2, any Options or Stock Appreciation Rights
granted to such Participant which are then outstanding shall be canceled and
any shares of Restricted Stock or Phantom Stock then outstanding as to which
the Period of Restriction has not lapsed shall be forfeited.
Section 11. Change in Control
11.1. Accelerated Vesting and Payment. Unless the Committee shall
otherwise determine in the manner set forth in Section 11.2 below, in the event
of a Change in Control,
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each Option shall be canceled in exchange for a payment in cash of an amount
equal to the excess of the Change in Control Price over the exercise price for
such Option, each SAR shall be fully exercisable for a period of 60 days using
the Change in Control Price instead of Fair Market Value to determine the
amount payable upon the exercise of such SAR (except that the Change in Control
Price shall not apply to SARs granted in tandem with ISOs) and all shares of
Restricted Stock and Phantom Stock shall become nonforfeitable and be
immediately transferable or payable, as the case may be.
11.2. Alternative Awards. Notwithstanding Section 11.1, no
cancellation, acceleration of exercisability or vesting or cash settlement or
other payment shall occur with respect to any Award or any class of Awards if
the Committee reasonably determines in good faith prior to the occurrence of a
Change in Control that such Award or Awards shall be honored or assumed, or new
rights substituted therefor (such honored, assumed or substituted award
hereinafter called an "Alternative Award"), by a Participant's employer (or the
parent or a subsidiary of such employer) immediately following the Change in
Control, provided that any such Alternative Award must:
(i) be based on stock which is traded on an established
securities market, or which will be so traded within 30 days of the Change
in Control;
(ii) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or
better than the rights, terms and conditions applicable under such Award,
including, but not limited to, an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;
(iii) have substantially equivalent economic value to such Award
(determined at the time of the Change in Control);
(iv) have terms and conditions which provide that in the event
that the Participant's employment is involuntarily terminated or
constructively terminated:
(A) any conditions on a Participant's rights under, or
any restrictions on transfer or exercisability applicable to,
each such Alternative Award shall be waived or shall lapse, as
the case may be; or
(B) each Participant shall have the right to surrender
such Alternative Award within 30 days following such termination
in exchange for a payment in cash equal to the excess of the fair
market value of the stock subject to the Alternative Award over
the price, if any, that a Participant would be required to pay to
exercise such Alternative Award.
For this purpose, a constructive termination shall mean a
termination by a Participant following a material reduction in the
Participant's compensation, a material reduction in the
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Participant's responsibilities or the relocation of the Participant's principal
place of employment to another location, in each case without the Participant's
written consent.
Section 12. Amendment, Modification, and
Termination of Plan
The Board at any time may terminate or suspend the Plan, and from
time to time may amend or modify the Plan. No amendment, modification, or
termination of the Plan shall in any manner adversely affect any Award
theretofore granted under the Plan, without the consent of the Participant.
Section 13. Miscellaneous Provisions
13.1. Nontransferability of Awards. No Awards granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
All rights with respect to Awards granted to a Participant under the Plan shall
be exercisable during his lifetime only by such Participant.
13.2. Beneficiary Designation. Each Participant under the Plan
may from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to or exercised by the Participant's
surviving spouse, if any, or otherwise to or by his estate.
13.3. No Guarantee of Employment or Participation. Nothing in the
Plan shall interfere with or limit in any way the right of the Company or any
subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
subsidiary or affiliate. No Employee shall have a right to be selected as a
Participant, or, having been so selected, to receive any future Awards.
13.4. Tax Withholding. The Company shall have the power to
withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local withholding tax requirements on
any Award under the Plan, and the Company may defer payment of cash or issuance
of Stock until such requirements are satisfied. The Committee may, in its
discretion, permit a Participant to elect, subject to such conditions as the
Committee shall impose, (i) to have shares of Stock otherwise issuable under
the Plan withheld by the Company or (ii) to deliver to the Company previously
acquired shares of Stock having a Fair Market Value sufficient to satisfy all
or part of the Participant's estimated total Federal, state, and local tax
obligation associated with the transaction.
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13.5. Indemnification. Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party or
in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satisfaction
of any judgment in any such action, suit, or proceeding against him, provided
he shall give the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or By-laws, by
contract, as a matter of law, or otherwise.
13.6. No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees, in cash or property, in a manner which is not
expressly authorized under the Plan.
13.7. Requirements of Law. The granting of Awards and the
issuance of shares of Stock shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
13.8. Term of Plan. The Plan shall be effective upon its adoption
by the Board, subject to approval by the Company's stockholders at their next
annual meeting. The Plan shall continue in effect, unless sooner terminated
pursuant to Section 12, until the tenth anniversary of the date on which it is
adopted by the Board.
13.9. Governing Law. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
Delaware.
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<PAGE> 1
EXHIBIT 10(ii)
MAPCO INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
Effective June 1, 1997
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Statement of Purpose . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Internal Revenue Code Considerations . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Continuous Service . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.6 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Eligible Employee . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7.1 Employee . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7.2 Length of Service . . . . . . . . . . . . . . . . . . . . . 2
2.8 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.9 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.10 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.12 Exercise Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.13 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.14 Offering Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.15 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.17 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.18 Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.19 Purchase Period . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.20 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.21 Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.22 Stock Purchase Account . . . . . . . . . . . . . . . . . . . . . . . 3
2.23 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. ADMISSION TO PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Initial Participation . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Discontinuance of Participation . . . . . . . . . . . . . . . . . . 4
3.3 Involuntary Withdrawal; Termination of Eligible Employee Status . . 4
3.4 Readmission to Participation . . . . . . . . . . . . . . . . . . . . 4
3.5 Restrictions on Participation . . . . . . . . . . . . . . . . . . . 4
4. STOCK PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Maximum Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Shares Available for Purchase . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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<TABLE>
<S> <C> <C>
4.3 Purchase Price of Shares . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Exercise of Purchase Privilege . . . . . . . . . . . . . . . . . . . 6
4.5 Establishment of Stock Purchase Account . . . . . . . . . . . . . . 6
4.5.1 Payroll Deductions . . . . . . . . . . . . . . . . . . . . 6
4.5.2 Additional Contribution . . . . . . . . . . . . . . . . . . 7
4.6 Payment for Stock . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Share Ownership; Issuance of Stock; Dividend reinvestment . . . . . 7
4.7.1 Rights as Stockholder . . . . . . . . . . . . . . . . . . . 7
4.7.2 Issuance of Shares . . . . . . . . . . . . . . . . . . . . 7
4.7.3 Dividend Reinvestment . . . . . . . . . . . . . . . . . . . 8
5. SPECIAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Shares Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Adjustment Upon Change of Status . . . . . . . . . . . . . . . . . . 8
5.3 Effect of Certain Transactions . . . . . . . . . . . . . . . . . . . 8
6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Nonalienation . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Administrative Costs . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Employee Stock Purchase Plan Administration . . . . . . . . . . . . 9
6.4 Amendments to the Plan . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Expiration and Termination of the Plan . . . . . . . . . . . . . . . 10
6.6 Repurchase of Stock . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Headings, Captions, Gender . . . . . . . . . . . . . . . . . . . . . 10
6.10 Severability of Provisions; Prevailing Law . . . . . . . . . . . . . 10
6.11 Implementation of the Plan . . . . . . . . . . . . . . . . . . . . . 11
6.12 Investment Representations . . . . . . . . . . . . . . . . . . . . . 11
6.13 Additional Incentive Arrangements . . . . . . . . . . . . . . . . . 11
6.14 No Right of Employment . . . . . . . . . . . . . . . . . . . . . . . 11
6.15 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.16 Indemnification of Committee . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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MAPCO INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1.
INTRODUCTION
1.1 STATEMENT OF PURPOSE. The purpose of the MAPCO Inc. 1997 Employee
Stock Purchase Plan is to provide eligible employees of the Company
and its Subsidiaries, who wish to become stockholders, an opportunity
to purchase Stock of the Company. The Board of Directors of the
Company believes that employee participation in ownership will be to
the mutual benefit of the employees and to the Company and its
Subsidiaries.
1.2 INTERNAL REVENUE CODE CONSIDERATIONS. The Plan is intended to
constitute an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended.
ARTICLE 2.
DEFINITIONS
2.1 BOARD OF DIRECTORS. The term "Board of Directors" means the Board of
Directors of the Company.
2.2 CODE. The term "Code" means the Internal Revenue Code of 1986, as
amended to the Effective Date hereof, as the same may thereafter be
amended, and any successor statute of similar nature. References to
specific sections of the Code shall be taken to be references to
corresponding sections of any successor statute.
2.3 COMMITTEE. The term "Committee" means the Compensation Committee of
the Board of Directors which shall administer the Plan.
2.4 COMPANY. The term "Company" means MAPCO Inc., a Delaware corporation,
or any successor thereto.
2.5 CONTINUOUS SERVICE. The term "Continuous Service" means the period of
time immediately preceding the Offering Date during which the Employee
has been employed by the Employer or a predecessor business acquired
by the Employer or a predecessor company merged or consolidated with
or into the Employer and during which there has been no interruption
of Employee's employment by the Employer or such predecessor employer.
For this purpose, periods of Excused Absence shall not be considered
to be interruptions of Continuous Service.
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2.6 EFFECTIVE DATE. The term "Effective Date" means July 1, 1997, if
within twelve (12) months of that date, the Plan is, or has been,
approved at a meeting of the stockholders of the Company by the
affirmative vote of the holders of a majority of the outstanding
shares of Stock of the Company present, by person or by proxy, and
entitled to vote on the approval of the Plan.
2.7 ELIGIBLE EMPLOYEE. The term "Eligible Employee" means each person who,
on an Offering Date, meets all of the following requirements:
2.7.1 Employee. The person is an Employee of the Employer; and
2.7.2 Length of Service. The person has completed at least six (6)
months of Continuous Service.
2.8 EMPLOYEE. The term "Employee" means each person customarily employed
by the Company on the Offering Date, except for those whose customary
employment is for either (a) not more than twenty (20) hours per week,
or (b) not more than five (5) months during any calendar year.
2.9 EMPLOYER. The term "Employer" means the Company and each Subsidiary of
the Company that adopts the Plan.
2.10 EXCHANGE ACT. The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended, and as the same may hereafter be amended.
2.11 EXCUSED ABSENCE. The term "Excused Absence" means absence pursuant to
a leave of absence granted by an Employer, such as absence due to
disability or illness, absence by reason of a layoff, or absence by
reason of active duty in the armed forces of the United States. In no
event may an Excused Absence exceed ninety (90) days in length (or, if
longer and if applicable, the period that the individual's
reemployment with an Employer is guaranteed either by statute or
contract, including but not limited to military leave).
2.12 EXERCISE DATE. The term "Exercise Date" means the last day of each
Purchase Period.
2.13 OFFERING. The term "Offering" means the offering made by the Company
in accordance with the terms and conditions of the Plan permitting
Eligible Employees to purchase Stock from the Company under the Plan.
The Committee shall have the power to change the duration and/or the
frequency of Offerings with respect to future offerings without
shareholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering to be
affected. Eligible Employees may not participate in more than one
Offering at a time.
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2.14 OFFERING DATE. The term "Offering Date" means the first day of
September 1997 (or such earlier date selected by the Committee) and
the first day of each January and July thereafter during which the
Plan is in effect (unless the Committee selects other dates pursuant
to Section 6.4).
2.15 PARTICIPANT. The term "Participant" means each Eligible Employee who,
pursuant to Article 3 hereof, elects to participate in the Plan, and
has not withdrawn or been terminated from participation under the
Plan.
2.16 PLAN. The term "Plan" means this MAPCO Inc. 1997 Employee Stock
Purchase Plan, as the same may be amended, modified or supplemented
from time to time.
2.17 PLAN YEAR. The term "Plan Year" means the calendar year.
2.18 PURCHASE AGREEMENT. The term "Purchase Agreement" means the document
prescribed by the Committee from time to time pursuant to which an
Eligible Employee has enrolled to be a Participant.
2.19 PURCHASE PERIOD. The term "Purchase Period" means the period beginning
on an Offering Date and ending on the last day of the sixth (6th)
month following the Offering Date (unless the Committee selects other
dates pursuant to Section 6.4).
2.20 PURCHASE PRICE. The term "Purchase Price" means such term as it is
defined in Section 4.3 hereof.
2.21 STOCK. The term "Stock" means the common stock, par value $1.00 per
share, of MAPCO Inc.
2.22 STOCK PURCHASE ACCOUNT. The term "Stock Purchase Account" means a
noninterest bearing account consisting of all amounts withheld from an
Employee's compensation (or otherwise paid into the Plan) for the
purpose of purchasing shares of Stock for such Employee under the
Plan, increased by any amounts contributed by such Employee pursuant
to Section 4.5.2 hereof, and reduced by all amounts applied to the
purchase of Stock for such Employee under the Plan, provided, such
account may be monitored as an accounting entry on the books and
records of the Company, and no actual physical segregation of amounts
credited to such account, from the assets of the Company, shall be
required.
2.23 SUBSIDIARIES. The term "Subsidiaries" means any corporation more than
fifty percent (50%) of whose outstanding voting securities are owned
by the Company or by one or more of the Company's other Subsidiaries,
whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
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ARTICLE 3.
ADMISSION TO PARTICIPATION
3.1 INITIAL PARTICIPATION. Any Eligible Employee may elect to be a
Participant and may become a Participant by executing and filing with
the Company on or before the fifteenth (15th) of the month preceding
the next Offering Date a Purchase Agreement prepared in such form as
the Committee shall approve from time to time. The effective date of
an Eligible Employee's participation shall be the Offering Date next
following the date on which the Company receives from the Eligible
Employee a properly executed and timely filed Purchase Agreement.
3.2 DISCONTINUANCE OF PARTICIPATION. Any Participant may voluntarily
withdraw from the Plan by filing a Notice of Withdrawal with the
Company prior to the first (1st) business day of the last month in a
Purchase Period. Upon such withdrawal, there shall be paid to the
Participant the amount, if any, standing to the Participant's credit
in the Participant's Stock Purchase Account.
3.3 INVOLUNTARY WITHDRAWAL; TERMINATION OF ELIGIBLE EMPLOYEE STATUS. If a
Participant's Continuous Service terminates for any reason, or if a
Participant ceases to be an Eligible Employee, the entire amount
standing to the Participant's credit in the Participant's Stock
Purchase Account on the effective date of such occurrence shall be
paid to the Participant.
3.4 READMISSION TO PARTICIPATION. Any Eligible Employee who has previously
been a Participant, who has discontinued participation (whether by
interruption of Continuous Service or otherwise), and who wishes to be
reinstated as a Participant may again become a Participant by
executing and filing with the Company, not later than the fifteenth
(15th) of the month preceding the Offering Date of any succeeding
Purchase Period, a new Purchase Agreement on forms prepared in such
form as the Committee shall approve from time to time. Reinstatement
to Participant status shall be effective as of the Offering Date next
following the date on which the Company receives from the Eligible
Employee the properly executed and timely filed Purchase Agreement.
Notwithstanding the foregoing terms of this Section 3.4, any executive
officer of the Company (as determined under Section 16 of the Exchange
Act) who has discontinued participation in the Plan may not again
become a Participant in the Plan for at least six (6) months from the
date such officer discontinued participation in the Plan.
3.5 RESTRICTIONS ON PARTICIPATION. Notwithstanding any provisions of the
Plan to the contrary, no Employee shall be granted an option to
participate in the Plan:
(a) if, immediately after the grant, such
Employee would own stock, and/or hold outstanding options to
purchase stock, possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company
or any
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of the Subsidiaries (for purposes of this paragraph, the rules
of Section 424(d) of the Code shall apply in determining stock
ownership of any Employee); or
(b) which permits the rights of a Participant to
purchase stock under all Code Section 423 employee stock
purchase plans of the Company and the Subsidiaries to accrue
at a rate which exceeds $25,000 in fair market value of the
stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding.
ARTICLE 4.
STOCK PURCHASE
4.1 MAXIMUM SHARES. The maximum number of shares of the Company's Stock
which shall be made available for sale under the Plan shall be one and
one-half million (1,500,000) shares, subject to adjustment upon
changes in capitalization of the Company as provided in Sections 5.2
and 5.3.
4.2 SHARES AVAILABLE FOR PURCHASE. Subject to the limits set forth in this
Section 4.2 and in Section 3.5 (which prohibits the stock purchase
rights of a Participant from accruing at a rate in excess of $25,000
per calendar year), each Participant shall have the right to purchase
on each Offering Date the number of shares of Stock determined by
dividing twenty-five thousand dollars ($25.000) by the fair market
value of the Company's Stock on such Offering Date. Such fair market
value shall be based on the closing price on the New York Stock
Exchange of the Stock on such Offering Date (or the nearest prior
business day on which trading occurred). If the Stock of the Company
is not admitted to trading on any of the aforesaid dates for which
closing prices of the stock are to be determined, then reference shall
be made to the fair market value of the Stock on that date, as
determined on such basis as shall be established or specified for the
purpose by the Committee. The maximum number of shares of Stock that
may be purchased for each Participant on an Exercise Date is the
lesser of (a) the number of shares of Stock that can be purchased by
applying the full balance of the Participant's Stock Purchase Account
to such purchase of shares at the Purchase Price (as hereinafter
determined), or (b) the Participant's proportionate part of the
aggregate number of such shares of Stock available within the
limitation established by the maximum aggregate number of such shares
reserved for the Plan, as stated in Section 4.1 hereof.
Notwithstanding the foregoing, if any person entitled to purchase
shares pursuant to any offering hereunder would be deemed for the
purposes of Section 423(b)(3) of the Code to own Stock (including any
number of shares that such person would be entitled to purchase
hereunder) possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company, the
maximum number of shares that such person shall be entitled to
purchase pursuant to the Plan shall be reduced to that number which,
when added to the
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number of shares of Stock that such person is so deemed to own
(excluding any number of shares that such person would be entitled to
purchase hereunder) is one less than such five percent (5%). Any
portion of a Participant's Stock Purchase Account that cannot be
applied by reason of the limitations set forth in this Section 4.2
shall remain in the Participant's Stock Purchase Account for
application to the purchase of Stock on the next Offering Date (unless
withdrawn by the Participant before that Offering Date).
4.3 PURCHASE PRICE OF SHARES. The Purchase Price per share of the Stock
sold to Participants pursuant to any Offering under this Plan shall be
the lesser of: (a) eighty-five percent (85%) of the closing price on
the New York Stock Exchange of each such share on the Offering Date
for such Offering (or the nearest prior business day on which trading
occurred); or (b) eighty-five percent (85%) of the closing price on
the New York Stock Exchange of each such share on the Exercise Date
for such Offering (or the nearest prior business day on which trading
occurred). If the Stock of the Company is not admitted to trading on
any of the aforesaid dates for which closing prices of the stock are
to be determined, then reference shall be made to the fair market
value of the Stock on that date, as determined on such basis as shall
be established or specified for the purpose by the Committee. In
addition, the Participant shall be required to pay transfer, excise
and similar taxes, if any, imposed on the transaction pursuant to
which such share of Stock is purchased. If the Exercise Date with
respect to the purchase of Stock is a day on which the stock is
selling ex-dividend on or before the record date of such dividend,
then for Plan purposes the Purchase Price per share will be increased
by an amount equal to the dividend per share. In no event shall the
Purchase Price per share be less than the par value per share of the
Stock.
4.4 EXERCISE OF PURCHASE PRIVILEGE. Subject to the provisions of Section
4.2 and Section 3.5, if on the date of the last paycheck of a
Participant issued prior to any Exercise Date of any Offering there is
a credit balance in the Participant's Stock Purchase Account, there
shall be purchased from the Company's authorized and unissued or
treasury shares of Stock for the Participant at the Purchase Price for
the Purchase Period that expires on such Exercise Date the largest
number of whole and fractional shares of Stock as can be purchased
with the entire amount in the Participant's Stock Purchase Account on
such paycheck issue date. Each such purchase shall be deemed to have
occurred on the Exercise Date occurring at the close of the Offering
for which the purchase was made.
4.5 ESTABLISHMENT OF STOCK PURCHASE ACCOUNT.
4.5.1 Payroll Deductions. In the Purchase Agreement, each
Participant shall authorize payroll deductions and each
Participant shall be permitted to make one (1) lump sum
payment pursuant to Section 4.5.2 hereof for the purposes of
funding the Participant's Stock Purchase Account (effective
for payroll periods beginning on or after September 1, 1997
(or such earlier date selected by the Committee)). The number
of shares of Stock that may be purchased from a Participant's
Stock
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<PAGE> 10
Purchase Account shall be subject to the limitations of
Section 4.2. Subject to the provisions of Section 3.2, a
Participant may not change the Participant's payroll deduction
rate during any Purchase Period. However, a Participant may
change the deduction to any permissible level for any
subsequent Offering by filing notice thereof on or before the
fifteenth (15th) of the month preceding the Offering Date on
which such subsequent Offering commences.
4.5.2 Additional Contribution. The Purchase Agreement shall permit
each Participant, who has agreed to payroll deductions, to
make one lump sum payment per Purchase Period for the purpose
of funding their respective Stock Purchase Accounts, subject
to the following rules:
4.5.2.1 All such additional contributions shall be made with
respect to any Offering no later than the first
business day of the last month in the Purchase
Period;
4.5.2.2 Only one such additional contribution shall be
accepted from any Participant in any Purchase Period;
and
4.5.2.3 Such additional contributions shall be in the amount
of twenty-five dollars ($25.00), or any multiple
thereof, to a maximum of five thousand dollars
($5,000), but in no event in excess of the limits of
Section 3.5.
4.6 PAYMENT FOR STOCK. The Purchase Price for all shares of Stock
purchased by a Participant under the Plan shall be paid out of the
Participant's Stock Purchase Account. As of each Exercise Date, the
entire amount standing to the credit of each Participant in the
Participant's Stock Purchase Account on the date of the last paycheck
issued to the Participant prior to such Exercise Date in the Purchase
Period that expires on such Exercise Date shall be charged with the
aggregate Purchase Price of the shares of Stock purchased by such
Participant on the Exercise Date. No interest shall be paid or payable
with respect to any amount held in the Participant's Stock Purchase
Account.
4.7 SHARE OWNERSHIP; ISSUANCE OF STOCK; DIVIDEND REINVESTMENT.
4.7.1 Rights as Stockholder. The shares of Stock purchased by a
Participant on an Exercise Date shall, for all purposes, be
deemed to have been issued and/or sold to the Participant on
such Exercise Date. Prior to that time, none of the rights or
privileges of a stockholder of the Company shall inure to the
Participant with respect to such shares.
4.7.2 Issuance, Delivery and Sale of Shares. The shares of Stock
purchased by a Participant pursuant to Sections 4.4 and 4.7.3
shall be issued by the Company by
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<PAGE> 11
using book entry systems that reflect the issuance of such
shares. A Participant shall have the right, upon written
request, to have the number of whole shares purchased by such
Participant issued in the form of a certificate and any
fractional shares paid in cash. In addition, within sixty (60)
days after the earlier of the termination of a Participant's
employment or termination of the Plan, a Participant may
instruct the Committee (or its designee) to cause the shares
of Stock held on behalf of such Participant either: (i) to be
sold and a check issued to the Participant in the amount of
the proceeds from the sale less any applicable expenses
incurred in selling the Stock; or (ii) to be issued in the
form of a certificate with any fractional shares paid in cash.
If the Participant fails to provide any instructions within
sixty (60) days after the termination of the Plan, the shares
of Stock held on behalf of such Participant shall be issued in
the form of a certificate with any fractional shares paid in
cash.
4.7.3 Dividend Reinvestment. Dividends on all shares issued pursuant
to the Plan shall be applied to purchase shares of Stock in
the open market at the then current market price. To the
extent the dividend is not sufficient to purchase an
additional whole share, the Participant will be credited with
a fractional share. Within a reasonable period after the
earlier of the termination of a Participant's employment or
the termination of the Plan, a dividend reinvestment shall
cease.
ARTICLE 5.
SPECIAL ADJUSTMENTS
5.1 SHARES UNAVAILABLE. If, on any Exercise Date, the aggregate funds
available for the purchase of Stock would purchase a number of shares
in excess of the number of shares then available for purchase under
the Plan, the following events shall occur: (i) the number of shares
that would otherwise be purchased by each Participant shall be
proportionately reduced on the Exercise Date in order to eliminate
such excess; (ii) the Plan shall automatically terminate immediately
after the Exercise Date as of which the supply of available shares of
Stock is exhausted, and (iii) any amount remaining in the Stock
Purchase Account of each of the Participants shall be repaid to such
Participants.
5.2 ADJUSTMENT UPON CHANGE OF STATUS. Subject to any required action by
the shareholders of the Company, the number of shares of Stock
reserved for purchase under the Plan, as hereinabove provided, and the
calculation of the Purchase Price per share may be appropriately
adjusted to reflect any increase or decrease in the number of issued
shares of Stock resulting from a subdivision or consolidation of such
shares or the payment of a stock dividend (but only on the Stock) or
any other increase or decrease in the number of outstanding shares of
Stock effected without receipt of consideration by the Company. To the
extent that the foregoing adjustments relate to the shares of the
Company issued under
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<PAGE> 12
the Plan, such adjustments shall be made by the Committee. Except as
hereinbefore expressly provided in this Section 5.2, the terms of the
Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
5.3 EFFECT OF CERTAIN TRANSACTIONS. Subject to any required action by the
stockholders, if the Company shall be the surviving or resulting
corporation in any merger or consolidation, or if the Company shall be
merged for the purpose of changing the jurisdiction of its
incorporation, any Offering hereunder shall pertain and apply to the
shares of stock of the Company or the survivor. In the event of a
dissolution or liquidation of the Company, or of a merger or
consolidation in which the Company is not the surviving or resulting
corporation, the Plan shall terminate upon the effective date of such
dissolution, liquidation, merger or consolidation; however, the
Purchase Period for the Offering in effect shall be shortened to a
date prior to such effective date, as selected by the Committee, to
permit the purchase of Stock with amounts held in the Stock Purchase
Accounts.
ARTICLE 6.
MISCELLANEOUS
6.1 NONALIENATION. The right to purchase shares of Stock under the Plan is
personal to the Participant, is exercisable only by the Participant
during the Participant's lifetime, except as hereinafter set forth,
and may not be assigned or otherwise transferred by the Participant,
other than by will or the laws of descent and distribution. There
shall be delivered to the executor, administrator or other personal
representative of a deceased Participant such shares of Stock and such
residual balance as may remain in the Participant's Stock Purchase
Account as of the Exercise Date occurring at the close of the period
in which the Participant's death occurs, including shares of Stock
purchased as of that date, or prior thereto, with monies deposited by
the Participant and/or withheld from the Participant's Compensation.
6.2 ADMINISTRATIVE COSTS. The Company shall pay all administrative
expenses associated with the operation of the Plan. No administrative
charges shall be levied against the Stock Purchase Accounts of the
Participants.
6.3 EMPLOYEE STOCK PURCHASE PLAN ADMINISTRATION. The Committee shall
administer the Employee Stock Purchase Plan and shall make, adopt,
construe, and enforce rules and regulations not inconsistent with the
provisions of the Plan. The Committee shall adopt and prescribe the
contents of all forms required in connection with the administration
of the Plan, including, but not limited to, the Purchase Agreement,
payroll withholding
57 of 64
<PAGE> 13
authorizations, withdrawal documents, and all other notices required
hereunder. The Committee shall have the fullest discretion permissible
under law in the discharge of its duties. The Committee's
interpretations and decisions in respect of the Plan, the rules and
regulations pursuant to which it is operated, and the rights of
Participants hereunder shall be final and conclusive.
6.4 AMENDMENTS TO THE PLAN. The Board of Directors may amend or modify,
from time to time, any of the provisions of the Plan; provided,
however, that no such amendment shall be effective unless and until it
has been duly approved by the shareholders of the outstanding shares
of Common Stock if (i) such amendment materially increases the
benefits accruing to Participants under the Plan; (ii) such amendment
materially increases the number of securities which may be issued
under the Plan; (iii) such amendment materially modifies the
requirements as to eligibility for participation in the Plan; or, (iv)
the failure to obtain such approval would adversely affect the
compliance of the Plan with the requirements of Rule 16b-3 under the
Exchange Act, or with the requirements of any other applicable law,
rule or regulation. Without shareholder consent and without regard to
whether any Participant rights may be considered to have been
adversely affected, the Committee shall be entitled to change the
number of Offerings, the Offering Dates, the Offering Periods and the
Purchase Periods, limit the frequency and/or number of changes in the
amount withheld during an Offering, permit payroll withholding in
excess of the amount designated by a Participant in order to adjust
for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Stock for each
Participant properly correspond with amounts withheld from the
participant's compensation, and establish such other limitations or
procedures as the Committee determines in its sole discretion
advisable which are consistent with the Plan.
6.5 EXPIRATION AND TERMINATION OF THE PLAN. The Plan shall continue in
effect until all shares of Stock reserved for issuance under the Plan
have been purchased, unless terminated prior thereto pursuant to the
provisions of the Plan or pursuant to action by the Board of
Directors, which shall have the right to terminate or suspend the Plan
at any time without prior notice to any Participant and without
liability to any Participant. Upon the expiration, suspension or
termination of the Plan, the balance, if any, then standing to the
credit of each Participant in the Participant's Stock Purchase Account
shall be refunded to the Participant.
6.6 REPURCHASE OF STOCK. The Company shall not be required to purchase or
repurchase from any Participant any of the shares of Stock that the
Participant acquired under the Plan.
6.7 NOTICE. A Purchase Agreement and any notice that a Participant files
pursuant to the Plan shall be on the form prescribed by the Committee
and shall be effective when received by
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<PAGE> 14
the Committee. Delivery of such forms may be made by hand or by
certified mail, sent postage prepaid, to MAPCO Inc., 1717 South
Boulder, Tulsa, OK 74119, Regarding: Employee Stock Purchase Plan.
Delivery by any other mechanism shall be deemed effective at the
option and discretion of the Committee.
6.8 GOVERNMENT REGULATION. The Company's obligation to sell and to deliver
the Stock under the Plan is at all times subject to all approvals of
any governmental authority required in connection with the
authorization, issuance, sale or delivery of such Stock.
6.9 HEADINGS, CAPTIONS, GENDER. The headings and captions herein are for
convenience of reference only and shall not be considered as part of
the text. The masculine shall include the feminine, and vice versa.
6.10 SEVERABILITY OF PROVISIONS; PREVAILING LAW. The provisions of the Plan
shall be deemed severable. In the event any such provision is
determined to be unlawful or unenforceable by a court of competent
jurisdiction or by reason of a change in an applicable statute, the
Plan shall continue to exist as though such provision had never been
included therein (or, in the case of a change in an applicable
statute, had been deleted as of the date of such change). The Plan
shall be governed by the laws of the State of Delaware, to the extent
such laws are not in conflict with, or superseded by, federal law.
6.11 IMPLEMENTATION OF THE PLAN. The Board of Directors may implement the
Plan at any time within twelve (12) months of the date of approval of
the Plan at a meeting of stockholders by the affirmative vote of the
holders of shares of Stock of the Company present, by person or by
proxy, and entitled to vote on the approval of the Plan.
6.12 INVESTMENT REPRESENTATIONS. The Board of Directors may require each
person acquiring shares of Common Stock pursuant to an award under the
Plan to represent to and agree with the Company in writing that the
holder is acquiring the shares for investment without a view to
distribution thereof.
6.13 ADDITIONAL INCENTIVE ARRANGEMENTS. Nothing contained in the Plan shall
prevent the Board of Directors from adopting such other or additional
incentive arrangements as it may deem desirable, including, but not
limited to, the granting of stock options and the awarding of stock
and cash otherwise than under the Plan; and such arrangements may be
either generally applicable or applicable only in specific cases.
6.14 NO RIGHT OF EMPLOYMENT. Nothing contained in the Plan or in any
Offering hereunder shall be deemed to confer upon any employee of the
Company or any Subsidiary any right to continued employment with the
Company or any Subsidiary, nor shall it interfere in any way with the
right of the Company or any Subsidiary to terminate the employment of
any of its employees at any time.
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<PAGE> 15
6.15 CONFLICTS. If any of the terms or provisions of the Plan conflict with
the requirements of Rule 16b-3 under the Exchange Act, or with the
requirements of any other applicable law, rule or regulation, then
such terms or provisions shall be deemed inoperative to the extent
they so conflict with the requirements of said Rule 16b-3.
6.16 INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees
actually and necessarily incurred in connection with the defense of
any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or
any award granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided
that within sixty (60) days after institution of any such action, suit
or proceeding a Committee member shall in writing offer the Company
the opportunity, at its own expense, to handle and defend the same.
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<PAGE> 1
EXHIBIT 11
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Computation for Consolidated Statements of Income
Net income (loss)(a) $ 10.7 $ (21.0) 83.4 $ 34.2
======== ======== ======== ========
Weighted average common shares outstanding 54.3 57.7 54.8 57.9
Common stock equivalents (stock options) -- --
-------- -------- -------- --------
Weighted average common shares outstanding (a) 54.3 57.7 54.8 57.9
======== ======== ======== ========
Primary earnings (loss) per common share (a)(c) $ .20 $ (.36) $ 1.52 $ .59
======== ======== ======== ========
Additional Primary Computation
Net income (loss) (a) $ 10.7 $ (21.0) $ 83.4 $ 34.2
======== ======== ======== ========
Weighted average common shares outstanding (a) 54.3 57.7 54.8 57.9
Dilutive effect of outstanding options (d) .6 -- .7 .2
-------- -------- -------- --------
Weighted average common shares outstanding,
as adjusted 54.9 57.7 55.5 58.1
======== ======== ======== ========
Primary earnings (loss) per common share, as
adjusted (b) $ .20 $ (.36) $ 1.50 $ .59
======== ======== ======== ========
FULLY DILUTED EARNINGS PER COMMON SHARE
Additional Fully Diluted Computation
Net income (loss) (a) $ 10.7 $ (21.0) $ 83.4 $ 34.2
======== ======== ======== ========
Weighted average common shares outstanding (a) 54.3 57.7 54.8 57.9
Dilutive effect of outstanding options (d) .6 -- .7 .3
-------- -------- -------- --------
Weighted average common shares outstanding,
as adjusted 54.9 57.7 55.5 58.2
======== ======== ======== ========
Fully diluted earnings (loss) per common share,
as adjusted (b) $ .20 $ (.36) $ 1.50 $ .59
======== ======== ======== ========
</TABLE>
61 of 64
<PAGE> 2
EXHIBIT 11
(a) These figures agree with the related amounts in the condensed
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%.
(c) In 1997 and 1996, stock options are not included in the earnings per
share computation included in MAPCO's condensed consolidated statements
of income because the dilutive effect is less than 3%.
(d) On September 10, 1996, the Board of Directors authorized a two-for-
one stock split effected in the form of a stock dividend from
shares held as treasury stock, which was distributed on September
30, 1996, to shareholders of record on September 16, 1996. All
references in this Exhibit 11 to number of shares and per share
amounts of the Company's common stock have been retroactively
restated to reflect the increased number of shares outstanding.
The dilutive impact of outstanding options was not considered for
the three months ended June 30, 1996, because the loss for the
quarter would make these calculations anti-dilutive.
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<PAGE> 1
EXHIBIT 12
MAPCO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 1996 1995 1994 1993 1992
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings as defined:
Income from continuing operations before provision
for income taxes and minority interest ........... $ 139.8 $ 214.4 $ 105.9 $ 80.9 $ 156.2 $ 109.3
Fixed charges ...................................... 31.6 63.1 65.7 59.6 54.9 58.8
Capitalized interest included in fixed charges ..... (1.3) (.5) (1.7) -- (2.8) (2.0)
Amortization of capitalized interest ............... 1.0 2.1 2.5 2.5 2.4 2.3
-------- -------- -------- -------- -------- --------
Total ...................................... $ 171.1 $ 279.1 $ 172.4 $ 143.0 $ 210.7 $ 168.4
======== ======== ======== ======== ======== ========
Fixed charges as defined:
Interest and debt expense (includes amortization
of debt expense and discount) .................... $ 27.8 $ 57.5 $ 58.4 $ 53.5 $ 46.7 $ 51.1
Capitalized interest ............................... 1.3 .5 1.7 -- 2.8 2.0
Portion of rentals representative of the interest
factor ........................................... 2.5 5.1 5.6 6.1 5.4 5.7
-------- -------- -------- -------- -------- --------
Total ...................................... $ 31.6 $ 63.1 $ 65.7 $ 59.6 $ 54.9 $ 58.8
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges ................... 5.4 4.4 2.6 2.4 3.8 2.9
======== ======== ======== ======== ======== ========
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAPCO INC.'S
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997, AND MAPCO INC.'S
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 41,700
<SECURITIES> 0
<RECEIVABLES> 298,300
<ALLOWANCES> 2,000
<INVENTORY> 153,200
<CURRENT-ASSETS> 525,200
<PP&E> 2,210,000
<DEPRECIATION> 810,500
<TOTAL-ASSETS> 2,215,900
<CURRENT-LIABILITIES> 459,100
<BONDS> 757,900
0
0
<COMMON> 63,100
<OTHER-SE> 558,800
<TOTAL-LIABILITY-AND-EQUITY> 2,215,900
<SALES> 1,785,500
<TOTAL-REVENUES> 1,785,500
<CGS> 0
<TOTAL-COSTS> 1,691,600
<OTHER-EXPENSES> (72,600)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,700
<INCOME-PRETAX> 139,800
<INCOME-TAX> 54,100
<INCOME-CONTINUING> 83,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,400
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.50
</TABLE>
