<PAGE>
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
ON
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 19, 1995
(Date of earliest event reported)
CRYSTAL OIL COMPANY
(Exact name of registrant as specified in its charter)
Commission File Number: 1-8715
LOUISIANA 72-0163810
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
229 Milam Street, Shreveport, Louisiana 71101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (318) 222-7791
==============================================================================
<PAGE>
EXPLANATION
As discussed in its Current Report on Form 8-K filed with the Securities
and Exchange Commission on June 27, 1995, Crystal Oil Company (the
"Company") completed the acquisition (the "Acquisition") of all of the
capital stock of First Reserve Gas Company ("FRGC"), a natural gas storage
company located in Hattiesburg, Mississippi, for a cash consideration of
approximately $78 million, pursuant to a Stock Purchase Agreement dated May 2,
1995, between the Company and FRGC.
ITEM 7 of the Current Report on Form 8-K of the Company dated June 19,
1995, is hereby amended and restated in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Audited Consolidated Financial Statements of First Reserve Gas Company
Report of independent auditors.
Consolidated Balance Sheets for the years ended December 31,
1994 and 1993.
Consolidated Statements of Operations for the years ended
December 31, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1994 and 1993.
Notes to Consolidated Financial Statements for the years ended
December 31, 1994 and 1993.
Report of independent auditors.
Consolidated Balance Sheets for the years ended December 31,
1993 and 1992.
Consolidated Statements of Operations for the years ended
December 31, 1993 and 1992.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended
December 31, 1993 and 1992.
Notes to Consolidated Financial Statements for the years ended
December 31, 1993 and 1992.
Unaudited Consolidated Financial Statements of First Reserve
Gas Company
Consolidated Balance Sheets for the period ended March 31, 1995
and the year ended December 31, 1994.
Consolidated Statements of Operations for the three months ended
March 31, 1995 and 1994.
Consolidated Statements of Cash Flows for the three months ended
March 31, 1995 and 1994.
2
<PAGE>
(b) Pro forma unaudited financial information.
Pro forma financial introduction
Pro forma Unaudited Consolidated Condensed Statement of Operations
for the six months June 30, 1995.
Pro forma Unaudited Consolidated Statement of Operations for the
year ended December 31, 1994.
Notes to pro forma Unaudited Consolidated Condensed Financial
Statements.
(c) Exhibits.
2 Stock Purchase Agreement dated May 2, 1995, between Crystal Oil
Company and First Reserve Secured Energy Assets Fund, Limited
Partnership and First Reserve Fund V, Limited Partnership
(Reference is made to Exhibit 10.7 of the Quarterly Report on
Form 10-Q filed by the Company for the period ended March 31,
1995).
* 23.1 The Consent of Ernst & Young LLP.
99.1 Press Release of the Company dated June 19, 1995 (Reference is
made to Exhibit 99.1 of the Current Report on Form 8-K filed by
the Company dated June 19, 1995).
________________
* Filed herein
3
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
FIRST RESERVE GAS COMPANY
YEARS ENDED DECEMBER 31, 1994 AND 1993
WITH REPORT OF INDEPENDENT AUDITORS
4
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
Contents
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations. . . . . . . . . . . . . 3
Consolidated Statements of Stockholders' Equity. . . . . . . . 4
Consolidated Statements of Cash Flows. . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . 6
</TABLE>
5
<PAGE>
[Letterhead of Ernst & Young]
REPORT OF INDEPENDENT AUDITORS
Board of Directors
First Reserve Gas Company
We have audited the accompanying consolidated balance sheets of First Reserve
Gas Company (the Company) as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First Reserve
Gas Company at December 31, 1994 and 1993, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG
--------------------
ERNST & YOUNG
March 9, 1995
6
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
----------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,650 $ 4,200
Trade accounts receivable 167 253
Debt reserve 1,422 2,767
Other current assets 130 61
-------------------------------
Total current assets 5,369 7,281
Gas storage facilities, at cost 44,231 44,207
Accumulated depreciation 8,399 6,118
-------------------------------
35,832 38,089
Other assets 1,304 131
-------------------------------
Total assets $42,505 $45,501
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31 $ 242
Accrued interest payable 280 246
Accrued taxes payable 237 226
Notes payable 1,550 -
Current portion of finance lease
obligations 2,435 2,531
-------------------------------
Total current liabilities 4,533 3,245
Notes payable 2,145 -
Notes payable to stockholders 1,355 1,950
Finance lease obligations 24,348 28,201
Deferred income taxes 3,008 1,870
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 10,000
Issued and outstanding shares -
973 in 1994 and 1,100 in 1993 - -
Additional paid-in capital 4,221 4,221
Retained earnings 2,895 6,014
-------------------------------
Total stockholders' equity 7,116 10,235
===============================
Total liabilities and stockholders' equity $42,505 $45,501
===============================
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
--------------------------
(IN THOUSANDS)
<S> <C> <C>
Gas storage revenues $11,801 $11,554
Expenses:
Operating expenses 2,739 3,233
Depreciation and amortization 2,341 2,299
------------------------------
5,080 5,532
------------------------------
Operating income 6,721 6,022
Interest expense, net (3,048) (3,027)
------------------------------
Income before income tax provision 3,673 2,995
Income tax provision:
Current 764 531
Deferred 779 437
------------------------------
1,543 968
------------------------------
Net income $ 2,130 $ 2,027
==============================
</TABLE>
SEE ACCOMPANYING NOTES.
8
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
--------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ - $4,221 $ 3,987 $ - $ 8,208
Net income - - 2,027 - 2,027
------------------------------------------------------
Balance at December 31, 1993 - 4,221 6,014 - 10,235
Net income - - 2,130 - 2,130
Purchase of treasury stock - - - (5,249) (5,249)
Cancellation of treasury
stock - - (5,249) 5,249 -
======================================================
Balance at December 31, 1994 $ - $4,221 $ 2,895 $ - $ 7,116
======================================================
</TABLE>
SEE ACCOMPANYING NOTES.
9
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993
---------------------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,130 $ 2,027
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,341 2,299
Deferred income taxes 779 437
Changes in operating assets and
liabilities:
Accounts receivable 86 501
Other assets (230) 63
Accounts payable (211) 120
Accrued interest payable 34 (62)
Accrued taxes payable 11 (245)
------------------------------
Net cash provided by operating activities 4,940 5,140
INVESTING ACTIVITIES
Additions to gas storage facilities (24) 18
Proceeds from sale of fixed assets - 84
------------------------------
Net cash (used in) provided by investing
activities (24) 102
FINANCING ACTIVITIES
Financing costs (1,298) -
Proceeds from finance lease obligation 27,000 244
Repayment of finance lease obligations (30,949) (4,500)
Reduction in debt reserve 1,345 48
Purchase of treasury stock (1,564) -
------------------------------
Net cash used in financing activities (5,466) (4,208)
------------------------------
(Decrease) increase in cash and cash
equivalents (550) 1,034
Cash and cash equivalents at beginning
of year 4,200 3,166
------------------------------
Cash and cash equivalents at end of year $ 3,650 $ 4,200
==============================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 3,234 $ 3,267
Cash paid for income taxes 705 905
SIGNIFICANT NON-CASH TRANSACTION
Issuance of notes payable 3,100 -
Assets exchanged for treasury stock (3,685) -
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES
GENERAL
First Reserve Gas Company (the Company) was formed January 25, 1990, as a
Delaware corporation. The Company and Endevco Industrial Gas Sales Company
(EIGSC) were 50% partners in Hattiesburg Gas Storage Company (HGSC). EIGSC
was a subsidiary of Endevco Inc. (Endevco) until July 1, 1991, when the
Company purchased 100% of the outstanding stock of EIGSC from Endevco. EIGSC's
name was changed to Hattiesburg Industrial Gas Sales Company (HIGSC), and
it continued as managing partner and operator of HGSC.
The Company, through a subsidiary, acquired two existing salt dome liquid
petroleum gas storage caverns in Forrest County, Mississippi (Phase I), in
May 1990. The Company completed conversion of the Phase I caverns and
construction of related facilities to be used as natural gas storage for
Mississippi and Atlantic Coast local gas distribution companies in November
1990. The acquisition and construction costs were financed through a
$25,000,000 construction and term loan (Note 2). The initial capacity of
Phase I (2.5 billion cubic feet) has been totally contracted under 15-year
contracts with one gas marketing company and seven East Coast local gas
distribution companies. The storage contracts provide for monthly fees based
primarily on the storage capacity and deliverability available to the
customer. The contracts also provide for fees payable based upon volumes of
gas injected into and withdrawn from the storage facilities. Amounts
receivable from customers, although based on contractual arrangements, are
unsecured.
During 1991, the Company began converting an additional salt dome cavern
(Phase IA). In December 1990, the Company secured a commitment for
$14,500,000 in nonrecourse project financing for the estimated $15,200,000
project. The capacity of Phase IA (1.0 billion cubic feet) has been totally
contracted under 15-year contracts similar to the Phase I contracts.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries including HGSC. All intercompany transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
For purposes of financial reporting, the Company considers all highly liquid
investments with maturities of three months or less when purchased to be cash
equivalents. All cash and cash equivalents are deposited in the financial
institution that provides financing to the Company (Note 2).
11
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GAS STORAGE FACILITIES
Depreciation of gas storage facilities is provided using the straight-line
method over a 22-year estimated useful life.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income.
2. FINANCE LEASE OBLIGATIONS
Effective December 1, 1991, the Company entered into sale-leaseback
agreements with Forrest County, Mississippi. The transactions are accounted
for using the financing method, which requires that the Company record the
sales proceeds as a liability, report the gas storage facilities as an asset,
and depreciate the gas storage facilities. Since the sales proceeds were
equal to the Company's outstanding debt and the lease payment arrangements
are identical to the Company's previous debt agreements, this method of
accounting does not significantly affect the Company's consolidated financial
statements.
Effective August 1, 1994, the Company refinanced its finance lease
obligations. The refinancing converted the entirety of the finance lease
obligations to variable rate financing and resulted in a nonrecurring charge
to operations of $645,000.
The Company's interest rate on the finance lease obligation is capped at
8.25% under an interest rate protection agreement effective August 1994
through October 2005. Other assets includes $865,000 for the cost of this
agreement. The cost of the agreement will be amortized over the life of the
agreement.
12
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. FINANCE LEASE OBLIGATIONS (CONTINUED)
Finance lease obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
--------------------------
(IN THOUSANDS)
<S> <C> <C>
Refinanced finance lease payable in quarterly
installments of $608,700 through October
2005; variable interest at the bank's reference
rate, bank's certificate of deposit rate adjusted
for the bank's reserve and deposit insurance
requirements plus 1.5% or LIBOR, adjusted for
the bank's reserve requirements (Adjusted
LIBOR) plus 1.25%, at the option of the
Company. At December 31, 1994 the Company
has elected to pay Adjusted LIBOR plus 1.25%
(7.23% at December 31, 1994); secured by
substantially all of the Company's assets. $26,783 $ -
Phase I financing payable in quarterly
installments of $416,667 through November
2005; interest at the bank's prime rate within
the range of 9% to 12.75%, pursuant to an
interest rate protection agreement; payable
monthly beginning February 1991 through
February 1996; secured by substantially all of
the Company's Phase I assets - 20,000
Phase IA financing payable in quarterly
installments of $216,000 through May 2006;
interest varies according to the bank's
certificate of deposit rate plus 2% but is fixed
at 8.62% subject to an interest rate swap
agreement effective April 1992 through
February 1997; payable quarterly; secured by
substantially all of the Company's Phase IA
assets - 10,732
--------------------------
26,783 30,732
Less current portion 2,435 2,531
--------------------------
$24,348 $28,201
==========================
</TABLE>
13
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. FINANCE LEASE OBLIGATIONS (CONTINUED)
The Company is required to maintain an interest-bearing debt reserve account
at the financial institution in an amount equal to the sum of $1,400,000 and
the Excess Cash Flow as calculated by the debt agreement. Additionally, the
Company is required to maintain its operating bank accounts at the financial
institution and maintain a minimum working capital balance.
Aggregate maturities of the finance lease obligations at December 31, 1994,
are as follows (in thousands):
1995 $2,435
1996 2,435
1997 2,435
1998 2,435
1999 2,435
Thereafter 14,608
3. TRANSACTIONS WITH RELATED PARTIES
In July 1991, in connection with the purchase of HIGSC, the Company borrowed
$7,796,000 from its stockholders under 15-year promissory notes that accrue
interest at 12% per annum and 1-year promissory notes that accrue interest at
9% per annum.
During 1994 and 1993, the Company paid Merrimack Energy, a stockholder,
$77,000 and $344,000, respectively, for consulting and professional services.
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company's
deferred tax liabilities and assets at December 31, 1994 and 1993, are as
follows (in thousands):
1994 1993
------------------------------
Deferred tax liabilities $(3,419) $(2,405)
Deferred tax assets 845 535
Valuation allowance (434) -
==============================
Net deferred tax liability $(3,008) $(1,870)
==============================
14
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
Deferred tax liabilities result principally from different depreciation
methods and estimated useful lives on gas storage facilities and equipment
for financial reporting and income tax purposes. Deferred tax assets result
from alternative minimum tax credit and long-term capital loss carryforwards.
The reconciliation of income tax expense to the amount computed by applying
domestic federal statutory tax rates to income before income tax provision is:
DECEMBER 31
1994 1993
-----------------------
Tax at U.S. statutory rate $1,249 $1,018
State taxes (net of federal benefit) 294 (50)
=======================
Income tax expense $1,543 $ 968
=======================
The effect of the valuation allowance recorded against the capital loss tax
benefit on the exchange of Wild Goose stock (Note 7) was recorded as part of
the basis in the treasury stock acquired in that exchange.
5. OPERATING LEASE COMMITMENTS
The Company leases office space under an operating lease that will expire in
1995. The minimum lease payments required in 1995 are $48,540.
Rent expense included in operating expenses was $72,000 and $64,000 for the
years ended December 31, 1994 and 1993, respectively.
6. SIGNIFICANT CUSTOMERS
The Company's revenues are generated primarily from 15-year contracts with 13
customers, expiring in 2005. Two of the customers accounted for 18% and 16%,
respectively, of total revenues during the year ended December 31, 1994; two
of the customers each accounted for 11% of total revenues during the year
ended December 31, 1994. No other customer accounted for more than 10% of
total revenues during the year ended December 31, 1994. The Company believes
that the loss of any of these customers would not have a material impact on
the consolidated financial position or consolidated results of operation of
the Company.
15
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SALE OF SUBSIDIARY/TREASURY STOCK PURCHASE
On November 1, 1994, the Company exchanged its interest in Wild Goose Gas
Storage Company (Wild Goose) along with $1,400,000 in cash and $3,100,000 in
notes payable with three stockholders in the Company in return for the
assumption of approximately $1,300,000 in intercompany balances due to the
Company, as well as 126.5 shares of Company stock owned by the three
stockholders. Repayment of the intercompany balances assumed by the
purchasers of Wild Goose is contingent upon commencement of construction and
commercial operations of gas storage facilities at a depleted gas field which
Wild Goose holds the rights to develop, within three years of the disposal
date. This debt is forgiven if construction or commercial operations of gas
storage facilities do not commence within three years of the disposal date.
The Company has placed no value on this contingent receivable in the balance
sheet as of December 31, 1994. The disposal of Wild Goose generated a capital
loss for federal income tax purposes of approximately $1,300,000, and a
deferred tax asset of approximately $434,000, for financial reporting
purposes. This loss will be carried forward and is available to offset future
taxable capital gains of the Company. The Company has placed a valuation
allowance of $434,000 on the deferred tax asset associated with the capital
loss carryforward.
16
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
FIRST RESERVE GAS COMPANY
YEARS ENDED DECEMBER 31, 1993 AND 1992
WITH REPORT OF INDEPENDENT AUDITORS
17
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1992
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . . . . . 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations . . . . . . . . . . . . . . . 3
Consolidated Statements of Stockholders' Equity . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6
18
<PAGE>
[LETTERHEAD OF ERNST & YOUNG]
REPORT OF INDEPENDENT AUDITORS
Board of Directors
First Reserve Gas Company
We have audited the accompanying consolidated balance sheets of First Reserve
Gas Company (the Company) as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First Reserve
Gas Company at December 31, 1993 and 1992, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG
--------------------
ERNST & YOUNG
February 9, 1994
19
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
1993 1992
----------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,200 $ 3,166
Accounts receivable:
Trade 253 424
Affiliate - 330
Debt reserve 2,767 2,815
Other current assets 61 124
-----------------------
Total current assets 7,281 6,859
Gas storage facilities, at cost 44,207 44,146
Accumulated depreciation 6,118 3,819
-----------------------
38,089 40,327
Other assets 131 294
-----------------------
Total assets $45,501 $47,480
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 242 $ 122
Accrued interest payable 246 307
Accrued taxes payable 226 471
Current portion of finance lease obligations 2,531 2,531
-----------------------
Total current liabilities 3,245 3,431
Notes payable to stockholders (NOTE 3) 1,950 3,675
Finance lease obligations (NOTE 2) 28,201 30,732
Deferred income taxes (NOTE 4) 1,870 1,434
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 10,000
Issued and outstanding shares - 1,100 - -
Additional paid-in capital 4,221 4,221
Retained earnings 6,014 3,987
-----------------------
Total stockholders' equity 10,235 8,208
-----------------------
Total liabilities and stockholders' equity $45,501 $47,480
=======================
</TABLE>
SEE ACCOMPANYING NOTES.
20
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992
----------------------
(IN THOUSANDS)
<S> <C> <C>
Gas storage revenues $11,554 $11,528
Expenses:
Operating expenses (NOTE 3) 3,233 2,178
Depreciation and amortization 2,299 2,308
----------------------
5,532 4,486
----------------------
Operating income 6,022 7,042
Other income (expense):
Interest income 179 238
Interest expense (3,206) (3,732)
-----------------------
(3,027) (3,494)
-----------------------
Income before income tax provision 2,995 3,548
Income tax provision (NOTE 4):
Current 531 505
Deferred 437 799
----------------------
968 1,304
----------------------
Net income $ 2,027 $ 2,244
======================
</TABLE>
SEE ACCOMPANYING NOTES.
21
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
----------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $ - $4,221 $1,743 $ 5,964
Net income - - 2,244 2,244
----------------------------------------------
Balance at December 31, 1992 - 4,221 3,987 8,208
Net income - - 2,027 2,027
----------------------------------------------
Balance at December 31, 1993 $ - $4,221 $6,014 $10,235
==============================================
</TABLE>
SEE ACCOMPANYING NOTES.
22
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992
--------------------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,027 $ 2,244
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on disposition of fixed assets - 161
Depreciation and amortization 2,299 2,308
Deferred income taxes 437 799
Changes in operating assets and liabilities:
Accounts receivable 501 (689)
Other current assets 63 5
Accounts payable 120 (166)
Accrued interest payable (62) 24
Accrued taxes payable (245) 70
--------------------------
Net cash provided by operating activities 5,140 4,756
INVESTING ACTIVITIES
Additions to gas storage facilities 18 (74)
Proceeds from sale of fixed assets 84 227
--------------------------
Net cash used in investing activities 102 (54)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 244 -
Repayment of long-term debt (4,500) (6,780)
Reduction in debt reserve 48 992
--------------------------
Net cash used in financing activities (4,208) (5,788)
--------------------------
Increase (decrease) in cash and cash equivalents 1,034 (1,086)
Cash and cash equivalents at beginning of year 3,166 4,252
--------------------------
Cash and cash equivalents at end of year $ 4,200 $ 3,166
==========================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 3,267 $ 3,692
Cash paid for income taxes 905 646
</TABLE>
SEE ACCOMPANYING NOTES.
23
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES
GENERAL
First Reserve Gas Company (the Company), formerly First Reserve Gas Storage
Inc., was formed January 25, 1990, as a Delaware corporation. The Company and
Endevco Industrial Gas Sales Company (EIGSC) were 50% partners in Hattiesburg
Gas Storage Company (HGSC). EIGSC was a subsidiary of Endevco Inc. (Endevco)
until July 1, 1991, when the Company purchased 100% of the outstanding stock
of EIGSC from Endevco. EIGSC's name was changed to Hattiesburg Industrial Gas
Sales Company (HIGSC), and it continued as managing partner and operator of
HGSC.
The Company, through a subsidiary, acquired two existing salt dome liquid
petroleum gas storage caverns in Forrest County, Mississippi (Phase I), in
May 1990. The Company completed conversion of the Phase I caverns and
construction of related facilities to be used as natural gas storage for
Mississippi and Atlantic Coast local gas distribution companies in November
1990. The acquisition and construction costs were financed through a
$25,000,000 construction and term loan (Note 2). The initial capacity of
Phase I (2.5 billion cubic feet) has been totally contracted under 15-year
contracts with one gas marketing company and seven East Coast local gas
distribution companies. The storage contracts provide for monthly fees based
primarily on the storage capacity and deliverability available to the
customer. The contracts also provide for fees payable based upon volumes of
gas injected into and withdrawn from the storage facilities. Amounts
receivable from customers, although based on contractual arrangements, are
unsecured.
During 1991, the Company began converting an additional salt dome cavern
(Phase IA). In December 1990, the Company secured a commitment for
$14,500,000 in nonrecourse project financing for the estimated $15,200,000
project. The capacity of Phase IA (1.0 billion cubic feet) has been totally
contracted under 15-year contracts similar to the Phase I contracts.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All intercompany transactions have been eliminated.
CASH AND CASH EQUIVALENTS
For purposes of financial reporting, the Company considers all highly liquid
investments with maturities of three months or less when purchased to be cash
equivalents. All cash and cash equivalents are deposited in the financial
institution that provides financing to the Company (Note 2).
24
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GAS STORAGE FACILITIES
Depreciation of gas storage facilities is provided using the straight-line
method over a 22-year estimated useful life.
CHANGE IN THE ACCOUNTING FOR INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
No. 109, "Accounting for Income Taxes" (Statement No. 109). Statement No. 109
requires an asset and liability approach in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax laws and rates
that apply to the periods in which they are expected to affect taxable income.
Prior to the adoption of Statement No. 109, income tax expense was determined
using the deferred method. Deferred tax expense was based on items of income
and expense that were reported in different years in the financial statements
and tax returns and were measured at the tax rate in effect in the year the
difference originated.
The Company adopted the provisions of the new standard in its consolidated
financial statements for the year ended December 31, 1992. The effect of
adopting Statement No. 109 on 1992 income from continuing operations was
immaterial.
RECLASSIFICATIONS
Certain amounts in the prior year have been reclassified to conform with the
current year presentation.
2. FINANCE LEASE OBLIGATIONS
Effective December 1, 1991, the Company entered into sale-leaseback
agreements with Forrest County, Mississippi. The transactions are accounted
for using the financing method, which requires that the Company record the
sales proceeds as a liability, report the gas storage facilities as an asset,
and depreciate the gas storage facilities. Since the sales proceeds were
equal to the Company's outstanding debt and the lease payment arrangements
are identical to the Company's previous debt agreements, this method of
accounting does not significantly affect the Company's consolidated financial
statements.
25
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. FINANCE LEASE OBLIGATIONS (CONTINUED)
Finance lease obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1993 1992
-------------------------
(IN THOUSANDS)
<S> <C> <C>
Phase I financing payable in quarterly
installments of $416,667 through
November 2005; interest at the bank's
prime rate within the range of 9% to
12.75% pursuant to an interest rate
protection agreement; payable monthly
beginning February 1991 through February
1996; secured by substantially all
of the Company's Phase I assets $20,000 $21,667
Phase IA financing payable in quarterly
installments of $216,000 through May
2006; interest varies according to the
bank's certificate of deposit rate
plus 2% but is fixed at 8.62% subject
to an interest rate swap agreement
effective April 1992 through February
1997; payable quarterly; secured by
substantially all of the Company's
Phase IA assets 10,732 11,596
-------------------------
30,732 33,263
Less current portion 2,531 2,531
-------------------------
$28,201 $30,732
=========================
</TABLE>
The Company is required to maintain an interest-bearing debt reserve account
at the financial institution in an amount equal to the sum of two quarterly
principal and six of the preceding months' interest payments. Additionally,
the Company is required to maintain its operating bank accounts at the
financial institution and maintain a minimum working capital balance.
Aggregate maturities of the finance lease obligations at December 31, 1993,
are as follows:
1994 $ 2,531,000
1995 2,531,000
1996 2,531,000
1997 2,531,000
1998 2,531,000
Thereafter 18,077,000
26
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH RELATED PARTIES
In July 1991, in connection with the purchase of HIGSC, the Company borrowed
$7,796,000 from its stockholders under 15-year promissory notes that accrue
interest at 12% per annum and 1-year promissory notes that accrue interest at
9% per annum.
During 1993 and 1992, the Company paid Merrimack Energy, a stockholder,
$344,000 and $82,000, respectively, for consulting and professional services.
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
Company's deferred tax liabilities and assets at December 31, 1993, are as
follows (in thousands):
Deferred tax liabilities $(2,405)
Deferred tax assets 535
----------
Net deferred tax liability $(1,870)
==========
Deferred income taxes result principally from different methods used for
financial reporting and income tax reporting purposes of depreciation and
estimated useful lives for gas storage facilities and equipment. Deferred tax
assets result from alternative minimum tax credit carryforwards.
The difference between the income tax provision and the amount that would
result from applying domestic federal statutory tax rates to income before
income tax provisions results from state and local taxes.
5. OPERATING LEASE COMMITMENTS
The Company leases office space under an operating lease that will expire in
1994. The minimum lease payments required in 1994 and 1995 are $58,249 and
$43,687, respectively.
Rent expense included in operating expenses was $64,000 and $56,000 for the
years ended December 31, 1993 and 1992, respectively.
27
<PAGE>
FIRST RESERVE GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SIGNIFICANT CUSTOMERS
The Company's revenues are generated primarily from 15-year contracts with 13
customers. Two of the customers accounted for 19% and 17% of total revenues
during the year ended December 31, 1993; three of the customers each
accounted for 11% of total revenues during the year ended December 31, 1993.
No other customer accounted for more than 10% of total revenues during the
year ended December 31, 1993. The Company believes that the loss of any of
these customers would not have a material impact on the consolidated
financial position or consolidated results of operation of the Company.
28
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED AUDITED
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,235 $ 3,650
Trade accounts receivable 170 167
Debt reserve 1,436 1,422
Other current assets 24 130
------- -------
Total current assets 5,865 5,369
Gas storage facilities, at cost 44,231 44,231
Accumulated depreciation 8,965 8,399
------- -------
35,266 35,832
Other assets 1,556 1,304
------- -------
Total assets $42,687 $42,505
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14 $ 31
Accrued interest payable 277 280
Accrued taxes payable 463 237
Notes payable 1,163 1,550
Current portion of finance lease obligations 2,435 2,435
------- -------
Total current liabilities 4,352 4,533
Notes payable 2,145 2,145
Notes payable to stockholders 1,355 1,355
Finance lease obligations 23,739 24,348
Deferred income taxes 3,173 3,008
------- -------
Total long-term obligations 30,412 30,856
Total liabilities 34,764 35,389
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 10,000
Issued and outstanding - 973 shares - -
Additional paid-in capital 4,221 4,221
Retained earnings 3,702 2,895
------- -------
Total stockholders' equity 7,923 7,116
------- -------
Total liabilities and stockholders' equity $42,687 $42,505
======= =======
</TABLE>
29
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Gas storage revenues $2,904 $2,957
Expenses:
Operating expenses 460 768
Depreciation and amortization 608 567
------ ------
1,068 1,335
------ ------
Operating income 1,836 1,622
Interest expense, net (576) (694)
------ ------
Income before income tax provision 1,260 928
Income tax provision:
Current 288 165
Deferred 165 105
------ ------
453 270
------ ------
Net income $ 807 $ 658
====== ======
</TABLE>
30
<PAGE>
FIRST RESERVE GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Operating Activities
Net income $ 807 $ 658
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred financing cost 42 -
Depreciation 566 567
Deferred income taxes 165 105
Changes in operating assets and liabilities:
Accounts receivable (3) (49)
Others assets (188) (108)
Accounts payable (17) 77
Accrued interest payable (3) (16)
Accrued taxes payable 226 38
------- ------
Net cash provided by operating activities 1,595 1,272
Cash flows from investing activities - additions to
gas storage facilities - (7)
------- ------
Financing Activities
Repayment of notes payable (387) -
Repayment of finance lease obligations (609) (632)
Reduction (increase) in debt reserve (14) 21
------- ------
Net cash used in financing activities (1,010) (611)
------- ------
Increase in cash and cash equivalents 585 654
Cash and cash equivalents at beginning of year 3,650 4,200
------- ------
Cash and cash equivalents at end of year $ 4,235 $4,854
======= ======
Supplemental Cash Flow Information
Cash paid for interest $ 644 $ 749
Cash paid for income taxes 62 127
</TABLE>
31
<PAGE>
PRO FORMA UNAUDITED FINANCIAL INFORMATION
The following pro forma unaudited financial information is based on the
historical consolidated condensed financial statements of the Company and
FRGC and reflects the effects of the acquisition of FRGC on June 19, 1995,
and the disposition (the "Disposition") of substantially all of the Company's
crude oil and natural gas properties on December 30, 1994, and in the first
quarter of 1995 as if such transactions had occurred on January 1, 1994. The
pro forma unaudited financial statements should be read in conjunction with
the notes accompanying such pro forma financial information. The Pro Forma
Unaudited Consolidated Condensed Financial Statements are intended for
informational purposes only and are not necessarily indicative of the results
of operations of the Company that would actually have occurred had FRGC been
acquired and substantially all of the Company's crude oil and natural gas
properties been sold as of January 1, 1994, or of the future results of
operations that will be obtained from the acquisition.
The Pro Forma Unaudited Consolidated Condensed Statement of Operations of
the Company for the year ended December 31, 1994, is derived from the Audited
Consolidated Financial Statements of the Company and FRGC and is condensed.
The Pro Forma Unaudited Consolidated Condensed Statement of Operations of the
Company for the six months ended June 30, 1995, is derived from the Unaudited
Consolidated Financial Statements included herein. The acquisition of FRGC
has been accounted in the Unaudited Consolidated Financial Statements of the
Company at June 30, 1995, under the "purchase method" of accounting, and
accordingly, the results of operations of FRGC from the acquisition date are
included in the historical information for the six months ended June 30,
1995. Accordingly, a pro forma Consolidated Condensed Balance Sheet of the
Company is not included herein.
The following Pro Forma Unaudited Financial Statements should be read in
conjunction with the Audited Consolidated Financial Statements (including the
notes thereto) and the Unaudited Consolidated Financial Statements (including
the notes thereto).
32
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DISPOSITION ACQUISITION PRO FORMA
COMPANY FRGC PRO FORMA PRO FORMA ADJUSTED
HISTORICAL HISTORICAL ADJUSTMENT ADJUSTMENT BALANCE
---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Crude oil and natural gas $ - $ - $ - $ - $ -
Gas storage 351 5,381 - - 5,732
Investment income 2,674 131 - (131)(c) 2,674
Other 472 - (426)(a) - 46
------ ------ ------ ------ ------
3,497 5,512 (426) (131) 8,452
COSTS AND EXPENSES
Operating expense and taxes 271 980 - - 1,251
General and administrative
expenses 2,183 724 - - 2,907
Interest and debt expense 177 1,364 - 636 (c) 2,177
Exploration cost - - - - -
Depreciation, depletion and
impairment 231 1,070 - 289 (d) 1,590
------ ------ ------ ------ ------
2,862 4,138 - 925 7,925
------ ------ ------ ------ ------
INCOME (LOSS) BEFORE
PROVISION IN LIEU OF
INCOME TAXES 635 1,374 (426) (1,056) 527
PROVISION IN LIEU OF INCOME
TAXES (BENEFIT) 246 429 (166)(e) (412)(e) 97
------ ------ ------ ------ ------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 389 $ 945 $ (260) $ (644) $ 430
====== ====== ====== ====== ======
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 2,687 2,687
====== ======
NET INCOME BEFORE
EXTRAORDINARY ITEM PER
SHARE OF COMMON AND
COMMON STOCK EQUIVALENT
SHARE $ 0.14 $ 0.16
====== ======
</TABLE>
See notes to pro forma unaudited consolidated condensed financial statements.
33
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DISPOSITION ACQUISITION PRO FORMA
COMPANY FRGC PRO FORMA PRO FORMA ADJUSTED
HISTORICAL HISTORICAL ADJUSTMENT ADJUSTMENT BALANCE
---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Crude oil and natural gas $28,819 $ - $(28,819)(a) $ - $ -
Gas storage - 11,801 - - 11,801
Investment income 742 223 - (223)(c) 742
Gain on sale of property,
plant and equipment 12,524 - (12,524)(a) - -
Other 1,438 - (1,342)(a) - 96
-------- ------- --------- ------- -------
43,523 12,024 (42,685) (223) 12,639
COSTS AND EXPENSES
Operating expense and taxes 11,756 1,563 (11,312)(a) - 2,007
General and administrative
expenses 5,157 1,176 - - 6,333
Interest and debt expense 2,773 3,271 (2,760)(b) 64 (c) 3,348
Exploration cost 2,351 - (2,231)(a) - 120
Depreciation, depletion
and impairment 14,220 2,341 (13,980)(a) 618 (d) 3,199
-------- ------- --------- ------- -------
36,257 8,351 (30,283) 682 15,007
-------- ------- --------- ------- -------
INCOME (LOSS) BEFORE
PROVISION IN LIEU OF
INCOME TAXES AND
EXTRAORDINARY ITEM 7,266 3,673 (12,402) (905) (2,368)
PROVISION IN LIEU OF INCOME
TAXES (BENEFIT) 2,840 1,543 (4,837)(e) (353)(e) (807)
-------- ------- --------- ------- -------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 4,426 $ 2,130 $ (7,565) $(552) $(1,561)
======== ======= ========= ======= ========
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 2,635 2,562
======== ========
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM PER
SHARE OF COMMON AND
COMMON STOCK EQUIVALENT
SHARE $ 1.68 $ (0.61)
======== ========
</TABLE>
See notes to pro forma unaudited consolidated condensed financial statements.
34
<PAGE>
CRYSTAL OIL COMPANY
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
The pro forma adjustments to the Unaudited Consolidated Condensed Statements
of Operations of the Company for the six months ended June 30, 1995, and for
the year ended December 31, 1994, reflect the effects of the acquisition of
FRGC as if the Acquisition had occurred at January 1, 1994, and as if the
disposition of substantially all of the Company's crude oil and natural gas
properties (which occurred on December 30, 1994, and during the first quarter
of 1995) had occurred as of January 1, 1994, in order to aid in the
comparability of the pro forma information. The pro forma adjustments are
described below:
(a) Reflects the exclusion of crude oil and natural gas revenues, gains and
other revenues and expenses associated with the disposition of
substantially all of the Company's crude oil and natural gas producing
properties.
(b) Reflects the exclusion of interest expense, amortization of deferred
financing costs and accretion of discount as a result of the repayment of
bank indebtedness and the redemption of the Company's Non-Interest Bearing
Convertible Subordinated Notes due 1997 in connection with the disposition
of crude oil and natural gas properties.
(c) Reflects an adjustment to interest income in that FRGC utilized all of its
available cash and cash equivalents for the repayment of its indebtedness
prior to the effective date of the Acquisition. In addition, interest
expense includes an adjustment for FRGC's repayment of its indebtedness
and the Company's funding of the acquisition of FRGC with cash and debt.
The Company's debt financing presently consists of a short-term loan with
a variable rate based on the Eurodollar Rate plus 1%. The effect of 1/8
variance in interest rates would result in a change in interest expense of
approximately $35 thousand and $75 thousand in the pro forma statement of
operations for the six months ended June 30, 1995, and for the year ended
December 31, 1994, respectively. The Company currently intends to refinance
this loan on a long term basis utilizing non recourse or other similar
financing.
(d) Reflects an adjustment to depreciation expense in that the fixed assets of
FRGC include a revaluation based on the estimated fair value and the
remaining life of the acquired assets as of the effective date of the
Acquisition in accordance with the "purchase method" of accounting.
(e) Reflects the cumulative tax effect of the transactions in the notes above
for the periods presented. Because of the Company's quasi-reorganization
accounting treatment, such taxes do not reflect taxes to be paid or
received by the Company.
(f) For pro forma purposes, general and administrative expenses do not reflect
an adjustment for cost savings that would have been realized from
reductions in staff and other expenses as a result of the assets disposed
and the consolidation of corporate operations following the acquisition
of FRGC.
(g) The pro forma statement of operations for the year ended December 31, 1994,
does not include an adjustment to interest income for earnings on the
temporary investment of available cash received from the disposition of
crude oil and natural gas properties.
35
<PAGE>
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.
CRYSTAL OIL COMPANY
---------------------------------------
(Registrant)
Dated: August 30, 1995 /s/ PAUL E. HOLMES
---------------------------------------
Paul E. Holmes
Vice President/Controller
(Principal Accounting Officer)
36
<PAGE>
EXHIBIT 23.1
[Letterhead of Ernst & Young]
Consent of Independent Auditors
We consent to the use of our reports dated February 9, 1994, and March 9,
1995 with respect to the consolidated financial statements of First Reserve
Gas Company included in the current report of Crystal Oil Company on
Form 8-K/A dated August 30, 1995, filed with the Securities and Exchange
Commission, and the incorporation by reference of such report in the Crystal
Oil Company Registration Statement No. 33-61114 dated April 15, 1993, and
No. 33-66628 dated July 28, 1993, on Form S-8 filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
---------------------------
ERNST & YOUNG LLP
Dallas, Texas
August 29, 1995
