<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................. to ..................
Commission file number 1-8715
CRYSTAL OIL COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-0163810
- ---------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
--------------------
NONE
- ----------------------------------------------------------------------
(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 (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Common Stock outstanding on May 9, 1996 2,662,042
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CRYSTAL OIL COMPANY
INDEX
Page No.
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Part I
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 1996 (Unaudited) and December 31, 1995 3
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 4
Consolidated Statement of Stockholders' Equity -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements
(Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
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CRYSTAL OIL COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in Thousands)
ASSETS
MARCH 31 DECEMBER 31
1996 1995
-------- -----------
(UNAUDITED) (1)
CURRENT ASSETS
Cash and cash equivalents $ 1,422 $ 10,812
Marketable securities available for sale 63,400 54,447
Accounts receivable - net 691 704
Prepaid expenses and other current assets 372 357
-------- --------
TOTAL CURRENT ASSETS 65,885 66,320
PROPERTY, PLANT AND EQUIPMENT - net 95,241 96,281
OTHER ASSETS
Deferred tax assets 7,408 7,398
Restricted marketable securities 1,950 1,476
Others 1,996 1,970
-------- --------
11,354 10,844
-------- --------
TOTAL ASSETS $172,480 $173,445
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term obligations $ 225 $ 294
Accounts payable 1,374 1,948
Other accrued expenses 575 634
-------- --------
TOTAL CURRENT LIABILITIES 2,174 2,876
LONG-TERM OBLIGATIONS 37,855 37,860
DEFERRED REVENUE FROM SALE OF
FUTURE CONTRACT RECEIVABLES 21,115 22,160
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Senior preferred stock 148 148
Common stock 27 27
Additional paid-in capital 96,946 96,902
Retained earnings - Since January 1, 1987 14,215 13,472
-------- --------
TOTAL STOCKHOLDERS' EQUITY 111,336 110,549
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $172,480 $173,445
-------- --------
-------- --------
(1) The balance sheet at December 31, 1995, has been taken from the audited
financial statements at that date, and condensed.
See accompanying notes to consolidated condensed financial statements.
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CRYSTAL OIL COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
($ in Thousands Except Shares and Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED
MARCH 31
--------------------
1996 1995
-------- ---------
NET REVENUES
Gas storage fees $ 3,418 $ -
Crude oil and natural gas 159 -
Net gain on sale of property, plant and equipment 35 827
Interest and investment income 880 1,346
Other income 14 18
--------- ---------
4,506 2,191
COST AND EXPENSES
Operating expense and taxes 489 111
General and administrative expense 821 1,154
Interest and debt expense 822 -
Amortization of discount on sale of future
contract receivables 410 -
Depreciation, depletion and amortization 761 59
--------- ---------
3,303 1,324
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,203 867
PROVISION FOR INCOME TAXES 460 339
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NET INCOME $ 743 $ 528
--------- ---------
--------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,654,375 2,603,209
--------- ---------
--------- ---------
NET INCOME PER COMMON SHARE $ .28 $ .20
--------- ---------
--------- ---------
See accompanying notes to consolidated condensed financial statements.
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CRYSTAL OIL COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($ IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
------------------
1996 1995
-------- -------
SENIOR PREFERRED STOCK
Balance at beginning and end of period $ 148 $ 148
-------- -------
COMMON STOCK
Balance at beginning and end of period 27 26
-------- -------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period 96,902 74,045
Issuance of Common Stock 44 646
Utilization of net operating loss carryforward
and recognition of deferred tax assets - 339
-------- -------
Balance at end of period 96,946 75,030
-------- -------
RETAINED EARNINGS
Balance at beginning of period 13,472 12,068
Net income 743 528
-------- -------
Balance at end of period 14,215 12,596
-------- -------
TOTAL STOCKHOLDERS' EQUITY $111,336 $87,800
-------- -------
-------- -------
See accompanying notes to consolidated condensed financial statements.
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CRYSTAL OIL COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ in Thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31
------------------
1996 1995
-------- --------
Cash flows from operating activities:
Net income $ 743 $ 528
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred financing cost 63 -
Net accretion on investments in debt securities (703) (699)
Depreciation, depletion and amortization 761 59
Deferred income taxes 401 339
Net gain on sale of property, plant and equipment (35) (827)
Decrease in accounts receivable 13 3,791
Increase in prepaid expense and other
current assets (15) (6)
Decrease in other assets - 24
Decrease in accounts payable and accrued expenses (633) (2,899)
-------- --------
Net cash provided by operating activities 595 310
-------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 46 805
Capital expenditures (143) (270)
Purchases of marketable securities (20,308) (65,983)
Maturity of marketable securities 11,584 -
Reduction of restricted funds - 4,673
Investment in Russian joint venture - (103)
-------- --------
Net cash used in investing activities (8,821) (60,878)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 44 646
Reduction of long-term obligations (74) (16)
Reduction of deferred revenue from sale of
future contract receivables (1,045) -
Payment of costs for financing and sale
of future contract receivables (89) -
-------- --------
Net cash provided by (used in) financing activities (1,164) 630
-------- --------
Net decrease in cash and cash equivalents (9,390) (59,938)
Cash and cash equivalents at beginning of period 10,812 75,541
-------- --------
Cash and cash equivalents at end of period $ 1,422 $ 15,603
-------- --------
-------- --------
See accompanying notes to consolidated condensed financial statements.
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CRYSTAL OIL COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Continued)
($ in Thousands)
(Unaudited)
Supplemental disclosures of cash flow information:
THREE MONTHS ENDED
MARCH 31
------------------
1996 1995
---- ----
Cash paid during the period for:
Interest, net of amounts capitalized $866 $ -
---- ----
---- ----
Amortization of discount on sale of
future contract receivables $410 $ -
---- ----
---- ----
Income taxes $ 25 $350
---- ----
---- ----
See accompanying notes to consolidated condensed financial statements.
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CRYSTAL OIL COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed balance sheet of Crystal Oil Company and its
subsidiaries (the "Company") as of March 31, 1996, and the consolidated
condensed statements of operations and cash flows for the three months ended
March 31, 1996 and 1995, have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at March 31, 1996, and for all periods
presented have been made.
There have been no changes in the accounting policies from those set
forth in Note A of the Notes to Consolidated Financial Statements included in
the Company's 1995 Annual Report on Form 10-K, except as noted below.
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", during the first quarter of 1996. SFAS
121 establishes accounting standards for the impairment of long-lived assets
and certain identifiable intangibles related to those assets to be held and
used, and for long-lived assets and certain identifiable intangibles to be
disposed of. The effect of adoption of SFAS 121 did not affect the Company's
consolidated financial position or results of operations.
The Company will implement the disclosure provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation," in the financial statements for the year ending
December 31, 1996. SFAS 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. As allowed by SFAS
123, the Company plans to continue to measure compensation cost for employee
stock compensation plans using the method prescribed by Accounting Principles
Board Option No. 25, "Accounting for Stock Issued to Employees," and will
provide pro forma disclosures in the Notes to the Consolidated Financial
Statements at December 31, 1996, as required by SFAS 123.
Note 2. DEFERRED REVENUE FROM SALE OF FUTURE CONTRACT RECEIVABLES
In the fourth quarter of 1995, First Reserve Gas Company ("FRGC"),
through its wholly owned subsidiaries sold to a newly formed business trust
the right to receive payment on the firm natural gas storage contract
receivables to be generated by the subsidiaries through June 30, 2000, from
the operation of a natural gas storage facility near Hattiesburg, Mississippi
(the "Hattiesburg Sold Receivables"). The net proceeds from this sale were
approximately $22.5 million. As of March 31, 1996, the Company had
approximately $21.1 million in deferred revenue from the sale of future
contract receivables as net proceeds received by the Company from the
Hattiesburg Sold Receivables are to be recognized for accounting purposes
over the period during which the receivables are to be generated. The
discount between the net proceeds from the sale of the Hattiesburg Sold
Receivables and the scheduled
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payments thereunder is being amortized over the life of the Hattiesburg Sold
Receivables based on the discount rate (7.52%) applied in fixing the sale
price of the Hattiesburg Sold Receivables. The Company recorded an expense
of approximately $410 thousand for the amortization of discount on sale of
future contract receivables for the three month period ended March 31, 1996.
The obligations under the agreement relating to the sale of the
Hattiesburg Sold Receivables are secured by substantially all of the assets
of FRGC and its subsidiaries and are without recourse to Crystal Oil Company,
except for certain amounts in the event of bankruptcy of FRGC and its
subsidiaries. As of March 31, 1996, restricted funds of approximately $539
thousand also secured the obligations with respect to the Hattiesburg Sold
Receivables.
Note 3. PROVISION FOR INCOME TAXES
As a result of the Company's quasi-reorganization accounting treatment
and the expected generation of future taxable income following the
acquisition of FRGC, during 1995 the Company recorded a deferred tax asset
and an increase in additional paid-in capital to account for the expected
realization of benefits from the Company's utilization of its net operating
loss carryforwards and other tax benefits generated prior to the Company's
reorganization. The recognition of certain benefits generated subsequent to
the reorganization were recorded as a reduction in the carrying value of the
storage facility. In 1996, an additional $411 thousand of tax credit
carryforwards were recognized by a further reduction in the carrying value of
the storage facility. The Company's provision for income taxes includes
deferred tax expense and a corresponding reduction in deferred tax assets of
approximately $401 thousand as a result of utilization of such tax benefits
during the three month period ended March 31, 1996.
Note 4. COMMITMENTS AND CONTINGENCIES
The Company currently has outstanding approximately $4.7 million in
standby letters of credit that relate to certain tax benefits transferred
pursuant to safe harbor lease transactions. The Company's obligations with
respect to these letters of credit are secured by approximately $1.4 million
in marketable securities, which have been classified as non-current assets on
the consolidated balance sheet of the Company at March 31, 1996.
In 1995, the Company was advised by Atlantic Richfield Corporation
("ARCO") of the existence of a potential environmental cleanup of a mining
site in Colorado that was sold by a subsidiary of the Company to ARCO. The
mining assets were owned by the Company's subsidiary for approximately eight
years during the 1970s and were sold by the subsidiary to ARCO in 1980. The
Company has filed a declaratory action in the Federal District Court for the
Northern District of Louisiana, Shreveport Division, seeking a determination
that the Company has no liability to ARCO with respect to this site due to,
among other things, a contractual agreement between the subsidiary of the
Company that sold the property to ARCO's predecessor by merger in which such
predecessor agreed that the Company's subsidiary would have no further
liability with respect to the properties other than for certain expressed
items. ARCO is currently seeking a transfer of the declaratory action to
Colorado, which the Company is vigorously contesting. The Company is
currently reviewing the scope of the potential
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cleanup and the cost thereof. Although no specific cost estimates have been
made by the Company to date, the Company has been advised by ARCO that the
total cost of cleanup could exceed $20 million. The Company intends to
vigorously defend this matter.
In 1991, the Company was named, among others, as a potentially
responsible party ("PRP"), for environmental cleanup by the Indiana
Department of Environmental Management and received an informational request
concerning the Company's activities at a site located in Indiana. A now
dissolved subsidiary of the Company owned a refinery on this site for a
period of approximately four years during the 1970s. Other parties have
owned and operated this site since the construction of the refinery in 1946.
Presently, no environmental-related cost have been assessed for remediation
of this site.
As previously reported, the State of Louisiana through the Department of
Environmental Quality ("the State of Louisiana") notified the Company by
letter dated January 19, 1996, that the Company had potential liability under
a Louisiana environmental act on account of certain alleged activity on a 30
acre site while the Company was "owner/operator" of a fuel oil refinery from
1920 until 1940. Such property was sold by the Company in 1965.
Independently, the State of Louisiana notified the Company by letter dated
December 29, 1995, that the Company had potential liability under a Louisiana
environmental act on account of certain activity while the Company was
"owner/operator and/or owner" of a particular facility located in Caddo
Parish, Louisiana, from 1926 until 1935. Such property was sold by the
Company in 1935. In regard to the latter environmental matter, the State of
Louisiana is seeking $4.5 million from all potentially responsible parties.
Believing that such potential claims by the State of Louisiana were barred by
reason of the Company's bankruptcy proceeding as to which a plan of
reorganization was confirmed on December 31, 1986 (which plan of
reorganization was consummated on January 30, 1987), the Company filed a
motion in April 1996 to reopen the 1986 bankruptcy proceeding for the sole
purpose of enforcing the previous confirmation order and other orders in the
bankruptcy proceeding to establish that the claims by the State of Louisiana
are barred and can no longer be brought against the Company. The motion to
reopen was granted for such purpose and the reopened case is now pending in
the United States Bankruptcy Court for the Western District of Louisiana,
Shreveport Division. The Company intends vigorously to prosecute its
position that the claims by the State of Louisiana are barred by reason of
orders entered in its previous bankruptcy proceeding. At this time, the
Company has not given any substantial consideration to the merits of the
claims since a favorable ruling, if one is obtained, on the bankruptcy bar
issue would obviate the need to defend the potential claims on the merits
thereof.
Under federal and state environmental laws providing for joint and
several liability for environmental cleanup, a governmental plaintiff could
seek to recover all remediation costs at a waste disposal site from any one
of the PRPs for such site, including the Company, despite the involvement of
other PRPs. The Company's policy is to accrue environmental remediation costs
if it is probable that a liability has been incurred and an amount is
reasonably estimable. In light of the foregoing matters, the Company has
accrued approximately $1.4 million as of March 31, 1996, for defense and
related costs of such matters. Such accrual will be reviewed periodically
and adjusted, if necessary, to reflect any additional charges that the
Company believes will be probable.
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In July 1979, a suit styled "AGB Oil Company et al vs. The Charter
Company, Charter Oil Company, and Crystal Exploration and Production
Company", was filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida, Cause No. 79-12012-CA-07. Plaintiff, the
limited partner of Caloosa 1974 Limited Partnership, a Colorado limited
partnership, of which Crystal Exploration and Production Company, formerly
Charter Exploration and Production Company, is the general partner, claims
compensatory damages of $10 million, punitive damages in an undetermined
amount, interest and costs of litigation. The suit alleges breach of
contract, breach of fiduciary duty, mismanagement and fraud in connection
with the operation of Caloosa 1974 Limited Partnership. In recent years, the
suit has been generally inactive. The Company, however, was recently
notified that the case has been set for trial in September 1996. The Company
believes that the likelihood of a recovery, if any, by Plaintiff in a
material amount is remote.
Note 5. EARNINGS PER SHARE
Earnings per common share were computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during the
periods presented. The Senior Preferred Stock, all classes of the Company's
warrants and the stock options have been considered to be the equivalent of
Common Stock for all periods presented; however, such securities were not
assumed converted because the dilution effect is less than 3%. No warrants
were assumed converted during the periods presented because the effective
exercise prices were greater than the average market price of the Common
Stock. Earnings per common share, assuming full dilution, was determined on
the same basis as primary earnings per common share for the three months
ended March 31, 1996 and 1995, except that the closing market price of the
Common Stock was utilized to purchase treasury shares with proceeds from the
assumed exercise of the stock options, because such market price was higher
than the 90-day average market price.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following should assist in a further understanding of the Company's
financial condition as of March 31, 1996, as well as changes in the Company's
operating results. The notes to the Company's Consolidated Condensed
Financial Statements included in this report, as well as the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, should be read in
conjunction with this discussion.
General
After the disposition of substantially all of its domestic crude oil and
natural gas properties for approximately $98 million and the prepayment of
all of its outstanding indebtedness in the fourth quarter of 1994, the
Company embarked on an acquisition program aimed at identifying assets that
would generate income for the Company on a current basis and would benefit
from the Company's tax position as well as present the opportunity for
capital appreciation. The initial step under this program was the
acquisition of First Reserve Gas Company ("FRGC") for approximately $78.5
million in June 1995. FRGC's principal asset was a natural gas storage
facility near Hattiesburg, Mississippi (the "Hattiesburg Facility").
The acquisition of FRGC was funded with the Company's available cash and
permanent financing of $58 million. The Company's financing of the
acquisition was structured through the sale to a newly formed business trust
of approximately five years of accounts receivable to be generated through
June 30, 2000, from the operations of the Hattiesburg Facility (the
"Hattiesburg Sold Receivables") and $36.5 million in debt, the recourse of
which is primarily limited to FRGC and the Hattiesburg Facility.
Prior to the Company's acquisition of FRGC, the Company's sources of
revenue and income for 1995 were primarily limited to income from government
and other marketable securities. With the acquisition of FRGC, the principal
source of the Company's income is currently the revenue from the operation of
the Hattiesburg Facility. Further, while the Company will be recognizing
income for accounting purposes in respect of the Hattiesburg Sold Receivables
over the life of those receivables as if the Company continued to own the
receivables, actual payments in respect of the Hattiesburg Sold Receivables
are being made to the purchasing trust and are not actually received by the
Company.
As of March 31, 1996, the Company had $64.8 million in cash, cash
equivalents and marketable securities that could be utilized for future
acquisitions. In addition, the Company had no debt other than the debt
directly associated with and recourse primarily limited to FRGC and the
Hattiesburg Facility.
Future acquisitions will focus on income generating businesses and
assets without limitation on the type of business or industry. Future
acquisitions will likely involve a combination of the use of a portion of the
Company's available cash and debt or other financing. To the extent
possible, the Company will seek to limit the recourse of any financing to the
business and assets acquired. The Company may also seek to finance future
acquisitions with additional equity if desirable.
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Results of Operations
General
The Company recorded net income for the three months ended March 31,
1996, of $743 thousand, $.28 per share, compared to net income of $528
thousand, $.20 per share, for the comparative period in 1995. First quarter
1996 results included $3.4 million in revenues and $2.4 million in operating
income from the natural gas storage activities. In addition, the revenues
for the first quarter of 1996 included interest and investment income of
approximately $.9 million and sales of crude oil and natural gas of $159
thousand resulting primarily from the Company's participation in drilling
activities during the fourth quarter of 1995. First quarter 1995 results
included a gain of approximately $.8 million from the sale of fixed assets
and interest and investment income of approximately $1.3 million. The
Company did not reflect any sales of crude oil and natural gas during the
three months ended March 31, 1995, due to the 1994 disposition of its crude
oil and natural gas properties.
Included in gas storage revenues for the quarter ended March 31, 1996,
was approximately $2.8 million attributable to the Hattiesburg Sold
Receivables. The remaining gas storage revenues were derived from winter and
interruptible storage services, injection and withdrawal charges and other
fees relating to services provided in connection with the storage and
delivery of natural gas at the Hattiesburg Facility.
The Company's operating income from natural gas storage activities
reflected operational expenses of $358 thousand and depreciation and
amortization of $665 thousand during the first quarter of 1996. The results
for 1996 are expected to continue benefitting from the natural gas storage
activities as the operations of FRGC are consolidated with those of the
Company.
Interest and Investment Income
The Company's interest and investment income for the three month period
ended March 31, 1996, was approximately $.9 million compared to approximately
$1.3 million for the comparative period in 1995. The decrease in interest
and investment income reflected a decline in the average investment in debt
securities from $81.9 million in the first quarter of 1995 to $64.4 million
in the first quarter of 1996 as a result of the utilization of available
liquid assets to partially fund the acquisition of FRGC during the second
quarter of 1995. In addition, the average interest rate received by the
Company decreased from 6.3% in the first quarter of 1995 to 5.3% in the first
quarter of 1996. The Company's investments of its liquid assets are currently
in short term government securities.
Gain on Sale of Fixed Assets
The gain on sale of fixed assets in the first quarter of 1995 included
$827 thousand from the disposition of the Company's proportionate share of
the net proceeds of asset sales from the Company's partnerships, the sale of
an exploratory prospect and the final liquidation and disposition of various
surplus equipment and inventory. The gain on sale of fixed assets in the
first quarter of 1996 was $35 thousand.
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Depreciation, Depletion and Amortization
Depreciation, depletion and amortization increased substantially in the
three month period ended March 31, 1996, to $761 thousand from $59 thousand
for the comparative period in 1995. The increase was attributable to the
Company's acquisition of the Hattiesburg Facility and its related assets in
June 1995.
Interest and Debt Expense
The Company's interest and debt expense for the three month period ended
March 31, 1996, was $822 thousand and reflected the effect of debt financing
$36.5 million of FRGC's purchase price. The Company had no interest and debt
expense for the three month period ended March 31, 1995, due to the
repayment of substantially all of its outstanding debt at year end 1994.
Amortization of Discount on Sale of Future Contract Receivables
As noted above, the net proceeds received by the Company from the
Hattiesburg Sold Receivables are being recognized for accounting purposes
over the period during which the receivables are to be generated. However,
because the Hattiesburg Sold Receivables were disposed of by the Company at a
discount to reflect their then present value, the discount between the net
proceeds from the sale of the Hattiesburg Sold Receivables and the scheduled
payments thereunder is being amortized over the life of the Hattiesburg Sold
Receivables based on the discount rate (7.52%) applied in fixing the sale
price of the Hattiesburg Sold Receivables. The Company recorded an expense
of approximately $410 thousand for the amortization of discount on sale of
future contract receivables for the three month period ended March 31, 1996.
General and Administrative Expense
The Company's general and administrative expense for the three month
period ended March 31, 1996, decreased approximately $333 thousand as
compared to the same period in 1995. The decrease in general and
administrative expenses primarily reflected the reduction in the Company's
staff following the disposition of its crude oil and natural gas properties
in late 1994 and early 1995.
Taxes and Quasi-Reorganization Adjustment
The results for the three month periods ended March 31, 1996 and 1995,
included a provision for income taxes of $460 thousand and $339 thousand,
respectively. For 1995, the provision for income taxes includes a noncash
accounting charge required by virtue of the Company's quasi-reorganization in
1986 in an amount equal to the deferred income taxes that the Company would
have recognized had it not been able to utilize its net operating loss
carryforwards against such income taxes. As a result of the Company's
quasi-reorganization accounting treatment and the expected generation of
future taxable income following the acquisition of FRGC, during 1995 the
Company recorded a deferred tax asset and an increase to additional paid-in
capital to account for the expected realization of benefits from the
Company's utilization of its net operating loss carryforwards and other tax
benefits generated prior to the Company's reorganization. The Company's
provision for income taxes for 1996 includes deferred tax expense and a
corresponding reduction in deferred
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tax assets of approximately $401 thousand as a result of utilization of such
tax benefits during the three month period ended March 31, 1996.
Liquidity Capital Resources
At March 31, 1996, the Company had cash and cash equivalents of
approximately $1.4 million and marketable securities of approximately $65.4
million, which included approximately $2.0 million in restricted funds
securing the Company's contingent obligations with respect to outstanding
letters of credit and the Hattiesburg Sold Receivables. In addition, the
Company had no debt other than the debt directly associated with and recourse
limited to FRGC and the Hattiesburg Facility.
The Company generated net cash flow from operating activities of
approximately $595 thousand and $310 thousand for the three month periods
ended March 31, 1996 and March 31, 1995, respectively. Such net cash flow
from operations in each of the periods was net of approximately $.7 million
for the accretion on investments in debt securities, which amounts are
realized at maturity of investments. The cash flow from operations for the
first quarter of 1995 related primarily to the collection of accounts
receivables generated prior to the disposition of crude oil and natural gas
properties in late 1994. The Company's working capital was approximately
$63.7 million at March 31, 1996, and approximately $63.4 million at December
31, 1995.
At March 31, 1996, the Company had outstanding approximately $36.5
million in 8.12% Secured Guaranteed Notes Due 2005 (the "Notes") requiring
payment of interest only through June 30, 2000, at which time principal is to
be amortized over the remaining life of the Notes. At March 31, 1996, the
Company also had approximately $21.1 million in deferred revenue from the
sale of future contract receivables as net proceeds received by the Company
in 1995 from the Hattiesburg Sold Receivables are to be recognized for
accounting purposes over the period during which the receivables are to be
generated. Deferred revenue is recorded net of the Company's minority
interest in the trust that acquired the Hattiesburg Sold Receivables. During
the first quarter of 1996, the Company recognized approximately $2.8 million
of deferred revenue from the Hattiesburg Sold Receivables, which included
approximately $.4 million for the accretion of the discount on the sale of
the receivables and approximately $1.4 million attributable to the Company's
interest in the trust. The Notes and obligations under the agreement of the
Hattiesburg Sold Receivables are secured by substantially all of the assets
of FRGC and its subsidiaries and are without recourse to Crystal Oil Company,
except for certain amounts in the event of bankruptcy of FRGC and its
subsidiaries. As of March 31, 1996, restricted funds of approximately $539
thousand consisting of distributions from the trust that acquired the
Hattiesburg Sold Receivables also secure the obligations with respect to the
Hattiesburg Sold Receivables.
Pending the redeployment of the Company's available funds, the Company
is investing its cash primarily in short term United States government
securities having maturities of up to one year. The Company believes that
these securities do not present any material risks with respect to its
liquidity, operations or financial position.
-15-
<PAGE>
Other Matters
The Company is currently subject to various claims regarding
environmental matters, which will require the expenditure of funds for
defense costs and could require additional expenditure of funds for
remediation if it is determined that the Company is responsible for such
remediation or otherwise agrees to contribute to the cost of such
remediation. It is the Company's policy to accrue for environmental
remediation costs if it is probable that a liability has been incurred and an
amount is reasonably estimable. The resolution of the known environmental
matters affecting the Company will be subject to various factors, including
the discovery of additional information with respect to the nature of
contamination at the known sites, the legal responsibility of various parties
for any cleanup obligations, the financial capability of responsible parties
and other actions by governmental agencies and private parties. Although the
cost of cleanup of sites in which the Company has been notified of potential
liability is currently estimated to involve the expenditure of funds by all
potentially responsible parties in excess of $25 million, based on
information known to the Company, the Company does not believe that its
ultimate payment obligations with respect to such matters will have a
material adverse impact on the Company's financial position.
-16-
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
In 1995, the Company was advised by Atlantic Richfield Corporation
("ARCO") of the existence of a potential environmental cleanup of a mining
site in Colorado that was sold by a subsidiary of the Company to ARCO. The
mining assets were owned by the Company's subsidiary for approximately eight
years during the 1970s and were sold by the subsidiary to ARCO in 1980. The
Company has filed a declaratory action in the Federal District Court for the
Northern District of Louisiana, Shreveport Division, seeking a determination
that the Company has no liability to ARCO with respect to this site due to,
among other things, a contractual agreement between the subsidiary of the
Company that sold the property to ARCO's predecessor by merger in which such
predecessor agreed that the Company's subsidiary would have no further
liability with respect to the properties other than for certain expressed
items. ARCO is currently seeking a transfer of the declaratory action to
Colorado, which the Company is vigorously contesting. The Company is
currently reviewing the scope of the potential cleanup and the cost thereof.
Although no specific cost estimates have been made by the Company to date,
the Company has been advised by ARCO that the total cost of cleanup could
exceed $20 million. The Company intends to vigorously defend this matter.
As previously reported, the State of Louisiana through the Department of
Environmental Quality ("the State of Louisiana") notified the Company by
letter dated January 19, 1996, that the Company had potential liability under
a Louisiana environmental act on account of certain alleged activity on a 30
acre site while the Company was "owner/operator" of a fuel oil refinery from
1920 until 1940. Such property was sold by the Company in 1965.
Independently, the State of Louisiana notified the Company by letter dated
December 29, 1995, that the Company had potential liability under a Louisiana
environmental act on account of certain activity while the Company was
"owner/operator and/or owner" of a particular facility located in Caddo
Parish, Louisiana, from 1926 until 1935. Such property was sold by the
Company in 1935. In regard to the latter environmental matter, the State of
Louisiana is seeking $4.5 million from all potentially responsible parties.
Believing that such potential claims by the State of Louisiana were barred by
reason of the Company's bankruptcy proceeding as to which a plan of
reorganization was confirmed on December 31, 1986 (which plan of
reorganization was consummated on January 30, 1987), the Company filed a
motion in April 1996 to reopen the 1986 bankruptcy proceeding for the sole
purpose of enforcing the previous confirmation order and other orders in the
bankruptcy proceeding to establish that the claims by the State of Louisiana
are barred and can no longer be brought against the Company. The motion to
reopen was granted for such purpose and the reopened case is now pending in
the United States Bankruptcy Court for the Western District of Louisiana,
Shreveport Division. The Company intends vigorously to prosecute its
position that the claims by the State of Louisiana are barred by reason of
orders entered in its previous bankruptcy proceeding. At this time, the
Company has not given any substantial consideration to the merits of the
claims since a favorable ruling, if one is obtained, on the bankruptcy bar
issue would obviate the need to defend the potential claims on the merits
thereof.
-17-
<PAGE>
In July 1979, a suit styled "AGB Oil Company et al vs. The Charter
Company, Charter Oil Company, and Crystal Exploration and Production
Company", was filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida, Cause No. 79-12012-CA-07. Plaintiff, the
limited partner of Caloosa 1974 Limited Partnership, a Colorado limited
partnership, of which Crystal Exploration and Production Company, formerly
Charter Exploration and Production Company, is the general partner, claims
compensatory damages of $10 million, punitive damages in an undetermined
amount, interest and costs of litigation. The suit alleges breach of
contract, breach of fiduciary duty, mismanagement and fraud in connection
with the operation of Caloosa 1974 Limited Partnership. In recent years, the
suit has been generally inactive. The Company, however, was recently
notified that the case has been set for trial in September 1996. The Company
believes that the likelihood of a recovery, if any, by Plaintiff in a
material amount is remote.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*11 Computation of Earnings Per Common Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
_____________________
* Filed herein
-18-
<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, on the 9th day of May 1996.
CRYSTAL OIL COMPANY
BY: /s/ J. N. AVERETT, JR.
---------------------------------------
J. N. Averett, Jr.
President
and Director
(Principal Executive Officer)
BY: /s/ J. A. BALLEW
---------------------------------------
J. A. Ballew
Senior Vice President,
Treasurer, and
Chief Financial Officer
BY: /s/ PAUL E. HOLMES
---------------------------------------
Paul E. Holmes
Vice President/Controller
(Principal Accounting Officer)
-19-
<PAGE>
Exhibit 11
CRYSTAL OIL COMPANY
COMPUTATION OF INCOME PER COMMON SHARE
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED
MARCH 31
---------------------------
1996 1995
---------- ----------
Earnings per common share:
Income from operations $ 743 $ 528
---------- ----------
---------- ----------
Weighted average of common
shares outstanding 2,654,375 2,603,209
---------- ----------
---------- ----------
Earnings per common share $ .28 $ .20
---------- ----------
---------- ----------
Primary: (Including dilutive
Common Stock equivalents)
Income from operations $ 743 $ 528
Adjustments to income
(net of income tax): - -
---------- ----------
Adjusted net income $ 743 $ 528
---------- ----------
---------- ----------
Weighted average of common and
common equivalent shares:
Outstanding 2,654,375 2,603,209
Assuming conversion or exercise of:
Stock options, net of treasury
shares 25,931 39,764
Remaining senior
preferred stock 33,274 33,274
---------- ----------
2,713,580 2,676,247
---------- ----------
---------- ----------
Per share amount:
Net income $ .27 $ .20
---------- ----------
---------- ----------
-20-
<PAGE>
Exhibit 11
(continued)
CRYSTAL OIL COMPANY
COMPUTATION OF INCOME PER COMMON SHARE
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED
MARCH 31
---------------------------
1996 1995
---------- ----------
Fully-diluted:
Income from operations $ 743 $ 528
Adjustments to income
(net of income tax): - -
---------- ----------
Adjusted net income $ 743 $ 528
---------- ----------
---------- ----------
Weighted average of
common shares:
Outstanding 2,654,375 2,603,209
Assuming conversion or exercise of:
Stock options, net of
treasury shares 28,929 42,225
Remaining senior
preferred stock 33,274 33,274
---------- ----------
2,716,578 2,678,708
---------- ----------
---------- ----------
Per share amount:
Net income $ .27 $ .20
---------- ----------
---------- ----------
NOTE: See Note 5 of Notes to Consolidated Condensed Financial Statements.
-21-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,422
<SECURITIES> 63,400
<RECEIVABLES> 979
<ALLOWANCES> 288
<INVENTORY> 0
<CURRENT-ASSETS> 65,885
<PP&E> 98,618
<DEPRECIATION> 3,377
<TOTAL-ASSETS> 172,881
<CURRENT-LIABILITIES> 2,174
<BONDS> 58,970
0
148
<COMMON> 27
<OTHER-SE> 111,562
<TOTAL-LIABILITY-AND-EQUITY> 172,881
<SALES> 3,577
<TOTAL-REVENUES> 4,506
<CGS> 0
<TOTAL-COSTS> 1,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 1,232
<INCOME-PRETAX> 1,203
<INCOME-TAX> 460
<INCOME-CONTINUING> 743
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 743
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
